Chong Hing Bank : 2020 Annual Report

April 14, 2021 at 02:05 pm IST

CONTENTS

2 Financial Summary

4 Corporate Information

6 Biographical Details of Directors and Senior Management

13 Abridged Corporate Structure

14 Shareholders' Calendar

15 Chairman's Statement

18 Chief Executive's Statement

35 Directors' Report

51 Corporate Governance Report

77 Independent Auditor's Report

82 Financial Statements - Contents

84 Consolidated Income Statement

85 Consolidated Statement of Comprehensive Income

86 Consolidated Statement of Financial Position

87 Consolidated Statement of Changes in Equity

89 Consolidated Statement of Cash Flows

91 Notes to the Consolidated Financial Statements

221 Unaudited Supplementary Financial Information

233 Head Office, Branches, Sub-Branches, Principal Subsidiaries and Associates

Chong Hing Bank Limited

FINANCIAL SUMMARY

LOANS AND ADVANCES TO CUSTOMERS / DEPOSITS FROM CUSTOMERS / TOTAL ASSETS

HK$ Million

250,000

200,000

150,000

100,000

50,000

TOTAL EQUITY

HK$ Million

30,000

25,000

20,000

15,000

	232,900
	212,768
190,576	183,228

	163,747	162,665

137,772		143,690

	118,759
102,881
		142,382
		118,079
	86,698	101,825
70,689

2016	2017	2018	2019	2020
Loans and advances to customers	Deposits from customers	Total assets

10,000

5,000

15,914

27,934

24,863

22,542

17,434

2016

2017

2018

2019

2020

2020 Annual Report

FINANCIAL SUMMARY

PROFIT ATTRIBUTABLE TO EQUITY OWNERS

HK$ Million

20,000

15,000

10,000

		1,901
		1,760
1,420	1,565	1,480

5,000

2016

2017

2018

2019

2020

FINANCIAL SUMMARY

	2016	2017	2018	2019	2020
	HK$ Million	HK$ Million	HK$ Million	HK$ Million	HK$ Million
Loans and advances to customers	70,689	86,698	101,825	118,079	142,382
Deposits from customers	102,881	118,759	143,690	162,665	183,228
Total assets	137,772	163,747	190,576	212,768	232,900
Total liabilities	121,858	146,313	168,033	187,905	204,965
Total equity	15,914	17,434	22,542	24,863	27,934
Profit attributable to equity owners	1,420	1,565	1,760	1,901	1,480

Chong Hing Bank Limited

CORPORATE INFORMATION

as of 4 March 2021

BOARD OF DIRECTORS

EXECUTIVE DIRECTORS

Mr ZONG Jianxin (Deputy Chairman and Chief Executive) Mr LAU Wai Man (Deputy Chief Executive)

NON-EXECUTIVE DIRECTORS

Mr ZHANG Zhaoxing (Chairman)

Mr LI Feng

Mr CHOW Cheuk Yu Alfred BBS, JP

Ms CHEN Jing

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr CHENG Yuk Wo

Mr MA Chiu Cheung Andrew

Mr LEE Ka Lun

Mr YU Lup Fat Joseph

BOARD COMMITTEES

AUDIT COMMITTEE

Mr CHENG Yuk Wo (Chairman)

Mr CHOW Cheuk Yu Alfred BBS, JP

Ms CHEN Jing

Mr LEE Ka Lun

Mr YU Lup Fat Joseph

CONNECTED PARTY TRANSACTIONS COMMITTEE

Mr MA Chiu Cheung Andrew (Chairman)

Mr CHOW Cheuk Yu Alfred BBS, JP

Mr CHENG Yuk Wo

Mr CHAN Kam Ki Vincent

Mr WOO Pak Kin Clement

INFORMATION TECHNOLOGY STRATEGY COMMITTEE

Mr LEE Ka Lun (Chairman)

Mr LI Feng

Mr ZONG Jianxin

Mr LAU Wai Man

Mr WONG Kwok Leung Arthur

NOMINATION AND REMUNERATION COMMITTEE

Mr YU Lup Fat Joseph (Chairman)

Mr ZHANG Zhaoxing

Mr CHOW Cheuk Yu Alfred BBS, JP

Mr CHENG Yuk Wo

Mr MA Chiu Cheung Andrew

Mr LEE Ka Lun

RISK COMMITTEE

Mr LEE Ka Lun (Chairman)

Mr LI Feng

Mr CHENG Yuk Wo

Mr YU Lup Fat Joseph

SENIOR MANAGEMENT

Mr TANG Xianqing (Deputy Chief Executive)

Mr CHIU Tak Wah Edward (Chief Operating Officer and Alternate Chief Executive)

Mr CHAN Kam Ki Vincent (Chief Financial Officer) Mr WOO Pak Kin Clement (Chief Risk Officer)

Ms CHAN Yun Ling (Head of Treasury and Markets) Mr SIN Tat Wo (Head of Mainland Corporates Division

and Acting Head of Hong Kong Corporates Division) Ms LAM Pik Ha Eliza

(Head of Financial Institutions Division) Ms NG Sau Wai Sylvia

(Head of Personal Banking Division) Mr WONG Kwok Leung Arthur

(Chief Information Officer)

Ms LAI Wing Nga (Company Secretary)

2020 Annual Report

CORPORATE INFORMATION

REGISTERED OFFICE

Address	: Ground Floor, Chong Hing Bank Centre
	24 Des Voeux Road Central, Hong Kong
Telephone	: (852) 3768 1111
Facsimile	: (852) 3768 1888
SWIFT BIC	: LCHB HK HH
Website	: www.chbank.com
E-mail	: info@chbank.com

as of 4 March 2021

Chong Hing Bank's website access code

PRINCIPAL LEGAL ADVISERS

Deacons

Kwan & Chow

Mayer Brown JSM

AUDITOR

PricewaterhouseCoopers

Certified Public Accountants

Registered Public Interest Entity Auditor

SHARE REGISTRAR AND TRANSFER OFFICE

Computershare Hong Kong Investor Services Limited

STOCK CODES AND SHORT NAMES

The Stock Exchange of Hong Kong Limited's Stock Codes and Short Names in respect of the Bank's (1) shares, (2) tier 2 subordinated notes due 2027, (3) US$400,000,000 5.70 per cent. undated non-cumulative subordinated additional tier 1 capital securities and (4) US$300,000,000 5.50 per cent. undated non- cumulative subordinated additional tier 1 capital securities are (1) 01111 (CHONG HING BANK), (2) 05249 (CH BANK N2707), (3) 04419 (CH BANK NCSCS) and (4) 40329 (CH BANK NCSCSB) respectively.

Chong Hing Bank Limited

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

as of 4 March 2021

BOARD OF DIRECTORS

Front (from left to right): CHOW Cheuk Yu Alfred, LAU Wai Man, ZHANG Zhaoxing, ZONG Jianxin, YU Lup Fat Joseph

Back (from left to right): CHEN Jing, MA Chiu Cheung Andrew, LI Feng, CHENG Yuk Wo, LEE Ka Lun

EXECUTIVE DIRECTORS

Mr ZONG Jianxin

aged 54, was appointed Deputy Managing Director and Head of Mainland Business Division of the Bank in May 2015 and ceased to act as Deputy Managing Director in May 2018. Mr Zong has been appointed an Executive Director, the Chief Executive and the Deputy Chairman of the Bank since September 2015, April 2017 and May 2018, respectively. He also acted as Alternate Chief Executive of the Bank from May 2016 to April 2017. Mr Zong has been appointed an Executive Director of Yuexiu Financial Holdings Limited (the immediate holding company of the Bank) ("Yuexiu Financial Holdings") since November 2015 and the Deputy Chairman and the Chief Executive of Yuexiu Financial Holdings since May 2018. He acted as Alternate Chief Executive of Yuexiu Financial Holdings from June 2016 to May 2018. He has been a Director and the Chief Executive of Chong Hing Finance Limited (a wholly-owned subsidiary of the Bank) since August 2017. Mr Zong has more than 20 years of banking experience, specialising in corporate banking, international business and investment banking business. He was an Executive Director and Alternate Chief Executive of Industrial and Commercial Bank of China (Asia) Limited ("ICBC Asia") from October 2010 to May 2015, and was also a Director of various subsidiaries of ICBC Asia from December 2010 to May 2015. Mr Zong held various positions in Industrial and Commercial Bank of China Limited, Shenzhen Branch from October 1999 to December 2009, with his last position as the Vice President. Mr Zong holds a Master Degree in Business Administration awarded by Shanghai Jiao Tong University.

2020 Annual Report

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

as of 4 March 2021

Mr LAU Wai Man

aged 62, has been appointed an Executive Director of the Bank since August 2001 and was appointed as Deputy Managing Director in May 2016, and such title was changed to Deputy Chief Executive of the Bank in May 2018. Mr Lau also acts as Alternate Chief Executive of the Bank and Chong Hing Finance Limited (a wholly-owned subsidiary of the Bank). He has been an Executive Director and Alternate Chief Executive of Yuexiu Financial Holdings Limited (the immediate holding company of the Bank) since February 2014 and appointed as Deputy Chief Executive since May 2018. Mr Lau is also a Director of various subsidiaries of the Bank. Mr Lau holds a Bachelor of Law degree and a Master of Business Administration degree. He is a Vice President of the Council of the Hong Kong Institute of Bankers, a Certified Financial PlannerCM and a member of the Hong Kong Institute of Certified Public Accountants. He was a fellow of the Association of Chartered Certified Accountants and a senior associate of the Australian Institute of Bankers. Mr Lau joined the Bank as the Chief Auditor in 1988, and was Deputy Chief Executive Officer from July 2007 to March 2013 and Chief Executive Officer from March 2013 to May 2016. Before joining the Bank, he had worked for an international bank and a global accounting firm.

NON-EXECUTIVE DIRECTORS

Mr ZHANG Zhaoxing

aged 57, has been appointed the Chairman and a Non-executive Director of the Bank since February 2014. Mr Zhang is the Chairman of 廣州越秀集團股份有限公司 (formerly known as 廣州越秀集團有限公司) (Guangzhou Yue Xiu Holdings Limited*) and Yue Xiu Enterprises (Holdings) Limited ("YX Enterprises"). Mr Zhang holds an Executive Master of Business Administration degree awarded by Huazhong University of Science and Technology and possesses the qualification of senior accountant in China. He has extensive experience in the financial management, industrial operation, capital operation and corporate culture development of large enterprises. Prior to joining YX Enterprises in 2008, Mr Zhang was the Director and General Manager of Guangzhou Radio Group Co., Ltd., Chairman and General Manager of Haihua Electronics Enterprise (China) Corporation, Chairman of Guangzhou Guangdian Real Estate Development Co., Ltd. and a Director of GRG Banking Equipment Co., Ltd. (Stock Code: 002152), a company listed on the Shenzhen Stock Exchange. Mr Zhang was also an Executive Director, the Vice Chairman and the Chairman (appointed since July 2013) of Yuexiu Property Company Limited (Stock Code: 00123) from July 2008 to August 2018, a company listed on the Stock Exchange, and General Manager from July 2008 to March 2014. Mr Zhang is a deputy to the 12th National People's Congress of the People's Republic of China.

Mr LI Feng

aged 52, has been a Non-executive Director of the Bank since February 2014. Mr Li is the Chief Capital Officer of 廣州越秀集團股份有限公司 (formerly known as 廣州越秀集團有限公司)(Guangzhou Yue Xiu Holdings Limited*)("GZYX Holdings") and Yue Xiu Enterprises (Holdings) Limited ("YX Enterprises"), managing the Capital Department, Customer Resource Management and Synergy Department and Information Centre of GZYX Holdings and YX Enterprises. Mr Li is mainly responsible for formulating and implementing major capital management plans, organizing and coordinating the investor relationship of listed companies, optimizing and synergizing the customer resources, and enhancing the development of information technology system, etc. Mr Li is also the Chairman and a Non-executive Director of Yuexiu Financial Holdings Limited (the immediate holding company of the Bank), the Chairman of Yue Xiu Securities Holdings Limited and a Director of Guangzhou City Construction & Development Co., Ltd. He is an Executive Director of Yuexiu Property Company Limited (Stock Code: 00123), the Chairman and an Executive Director of Yuexiu Transport Infrastructure Limited (Stock Code: 01052), both of which are listed on the Stock Exchange; a Non-executive Director of Yuexiu REIT Asset Management Limited (the Manager of Yuexiu Real Estate Investment Trust (Stock Code: 00405), which is listed on the Stock Exchange);

Chong Hing Bank Limited

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

as of 4 March 2021

and a Director of Guangzhou Yuexiu Financial Holdings Group Co., Ltd. (廣州越秀金融控股集團股份有限公司), a company listed on the Shenzhen Stock Exchange (Stock Code: 000987). Mr Li graduated from the Faculty of Naval Architecture and Ocean Engineering of South China University of Technology majoring in Naval Architecture, and obtained a Master of Business Administration degree from Jinan University. He holds the qualification of a Senior Engineer in China and the certificate in Major Administrative Decision-Making and Argumentation (廣州市重大行政決策論證專家) conferred by the Guangzhou Municipal Government. Mr Li is also the President of the Association of Guangzhou Belt and Road Investment Enterprises, Member of Guangzhou Housing Provident Fund Management Committee, a Director of the Guangzhou People's Association for Friendship with Foreign Countries and the Vice-president of the Listed Companies Council, Hong Kong Chinese Enterprises Association. Mr Li joined YX Enterprises in December 2001 and has successively held positions in GZYX Holdings and YX Enterprises, including the Assistant to General Manager, General Manager of Capital Department, Assistant Manager of Corporate Management Department, Assistant to General Manager of Supervision and Auditing Department, and Deputy General Manager of Yue Xiu International Development Limited. Mr Li is familiar with business of listed companies and the operations of capital markets. Since 2008, he has participated in all of the major capital operation projects of GZYX Holdings and YX Enterprises; before that, he was also involved in the successful listing of Yuexiu Real Estate Investment Trust, and has extensive practical experience in capital operations.

Mr CHOW Cheuk Yu Alfred BBS, JP

aged 70, has been a Board member of the Bank since February 2003, and was re-designated from Independent Non- executive Director to Non-executive Director of the Bank in September 2004. Mr Chow has been a Non-executive Director of Yuexiu Financial Holdings Limited (the immediate holding company of the Bank) since February 2014. He is also the Chairman and a Non-executive Director of Chong Hing Insurance Company Limited (a wholly-owned subsidiary of the Bank). He graduated from The University of Hong Kong with a Bachelor of Laws degree and a Master of Social Sciences (Public Administration) degree. With 17 years' working experience in the civil service and over 35 years as a solicitor, Mr Chow is presently the senior partner of Kwan & Chow, Solicitors in Hong Kong. He is also a China-Appointed Attesting Officer. Mr Chow is a director and legal advisor of Hong Kong Chiu Chow Chamber of Commerce Limited and Federation of HK Chiu Chow Community Organizations Limited; and legal advisor to Jao Tsung-I Petite Ecole Fan Club and various community bodies. He was the Chairman of the HKSAR Passports Appeal Board and Chief Adjudicator of the Registration of Persons Tribunal.

Ms CHEN Jing

aged 49, has been a Non-executive Director of the Bank since August 2018. Ms Chen is the Chief Financial Officer and General Manager of the Finance Department of 廣州越秀集團股份有限公司 (formerly known as 廣州越秀集團有限公司) (Guangzhou Yue Xiu Holdings Limited*) ("Guangzhou Yue Xiu Holdings") and Yue Xiu Enterprises (Holdings) Limited. Ms Chen is an Executive Director and Chief Financial Officer of Yuexiu Property Company Limited (Stock Code: 00123) and an Executive Director of Yuexiu Transport Infrastructure Limited (Stock Code: 01052). She is also a Non-executive Director of Yuexiu Financial Holdings Limited (the immediate holding company of the Bank).

Ms Chen graduated from the Xi'an Jiaotong University with a major in auditing, and holds a Master of Business Administration Degree from the School of Management and Economics of the Beijing Institute of Technology and the qualifications of auditor and certified internal auditor. Ms Chen joined Guangzhou Yue Xiu Holdings in July 2004 and was the Deputy General Manager of the Supervisory (Audit) Office and the General Manager of the Audit Department. Ms Chen has participated in building systems to monitor the major risks and finance of Guangzhou Yue Xiu Holdings. Ms Chen is well versed in risk management and internal control management, financial management of listed companies and has extensive experience in establishing a sound system for risk management and internal control, financial management for enterprises. Prior to joining Guangzhou Yue Xiu Holdings, Ms Chen worked in the School of Business of Hubei University and Hisense Kelon Electrical Holdings Company Limited.

2020 Annual Report

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

as of 4 March 2021

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr CHENG Yuk Wo

aged 60, has been an Independent Non-executive Director of the Bank since September 2004. He has also been an Independent Non-executive Director of Yuexiu Financial Holdings Limited (the immediate holding company of the Bank) since February 2014. Mr Cheng has been an Independent Non-executive Director of Chong Hing Insurance Company Limited (a wholly-owned subsidiary of the Bank) since May 2017. Mr Cheng, a co-founder of a Hong Kong merchant banking firm, is currently the proprietor of a certified public accountant practice in Hong Kong. Mr Cheng obtained a Master of Science (Economics) degree in Accounting and Finance from the London School of Economics, England and a Bachelor of Arts (Honours) degree in Accounting from the University of Kent, England. He is a fellow of the Institute of Chartered Accountants in England and Wales, the Hong Kong Institute of Certified Public Accountants and the Institute of Chartered Professional Accountants of Canada. Mr Cheng has more than 30 years of expertise in financial and corporate advisory services in mergers, acquisitions and investments. He had worked at Coopers and Lybrand (now known as PricewaterhouseCoopers) in London and Swiss Bank Corporation (now known as UBS AG) in Toronto, and held senior management positions in a number of Hong Kong listed companies.

In addition to his directorship in the Bank, Mr Cheng is also an Independent Non-executive Director of a number of companies listed on the Stock Exchange, including CSI Properties Limited (Stock Code: 00497), HKC (Holdings) Limited (Stock Code: 00190), Goldbond Group Holdings Limited (Stock Code: 00172), CPMC Holdings Limited (Stock Code: 00906), Top Spring International Holdings Limited (Stock Code: 03688), Liu Chong Hing Investment Limited (Stock Code: 00194), Chia Tai Enterprises International Limited (Stock Code: 03839), Miricor Enterprises Holdings Limited (Stock Code: 01827), Somerley Capital Holdings Limited (Stock Code: 08439), Kidsland International Holdings Limited (Stock Code: 02122) and C.P. Pokphand Co. Ltd. (Stock Code: 00043). Besides, Mr Cheng was an Independent Non-executive Director of C.P. Lotus Corporation (previous stock code: 00121) from September 2004 to October 2019, shares of which were withdrawn from listing on the Stock Exchange with effect from 28 October 2019, and DTXS Silk Road Investment Holdings Company Limited (formerly known as UDL Holdings Limited) (Stock Code: 00620), a company listed on the Stock Exchange, from November 2015 to May 2020.

Mr MA Chiu Cheung Andrew

aged 79, has been an Independent Non-executive Director of the Bank since August 2007. Mr Ma has also been an Independent Non-executive Director of Yuexiu Financial Holdings Limited (the immediate holding company of the Bank) since February 2014. He has been an Independent Non-executive Director of Chong Hing Insurance Company Limited (a wholly-owned subsidiary of the Bank) since January 2018. Mr Ma is a founder and former director of AMA CPA Limited (formerly known as Andrew Ma DFK (CPA) Limited). He is presently a Director of Mayee Management Limited and also a Director of several other private companies. Mr Ma has more than 40 years' experience in the fields of accounting, auditing and finance. He received his Bachelor's degree in Economics from The London School of Economics and Political Science (University of London) in England. Mr Ma is a fellow member of the Institute of Chartered Accountants in England and Wales, the Hong Kong Institute of Certified Public Accountants, The Hong Kong Institute of Directors and The Taxation Institute of Hong Kong.

In addition to his directorship in the Bank, Mr Ma is also an Independent Non-executive Director of a number of companies listed on the Stock Exchange, including China Resources Power Holdings Company Limited (Stock Code: 00836), Asiaray Media Group Limited (Stock Code: 01993), C-MER Eye Care Holdings Limited (Stock Code: 03309) and S.A.I. Leisure Group Company Limited (Stock Code: 01832). In addition, he was an Independent Non-executive Director of Asia Financial Holdings Limited (Stock Code: 00662) from September 2004 to May 2019 and C.P. Pokphand Co. Ltd. (Stock Code: 00043) from September 2005 to June 2020, all of which are listed on the Stock Exchange.

Chong Hing Bank Limited

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

as of 4 March 2021

Mr LEE Ka Lun

aged 65, has been an Independent Non-executive Director of the Bank since February 2014. Mr Lee has been an Independent Non-executive Director of Yuexiu Financial Holdings Limited (the immediate holding company of the Bank) since November 2013. He is also an Independent Non-executive Director of Yuexiu Property Company Limited (Stock Code: 00123), Chow Sang Sang Holdings International Limited (Stock Code: 00116), Medicskin Holdings Limited (Stock Code: 08307), Ever Harvest Group Holdings Limited (Stock Code: 01549) and Best Mart 360 Holdings Limited (Stock Code: 02360), all of which are listed on the Stock Exchange. He was an Independent Non-executive Director of REXLot Holdings Limited (Stock Code: 00555), a company listed on the Stock Exchange, from April 2007 to June 2018. Mr Lee is an accountant by profession and is a Fellow of the Association of Chartered Certified Accountants in the UK. He has over 20 years of experience in banking and auditing.

Mr YU Lup Fat Joseph

aged 73, has been an Independent Non-executive Director of the Bank since August 2015. Mr Yu has been an Independent Non-executive Director of Yuexiu Financial Holdings Limited (the immediate holding company of the Bank) since August 2015. He is also an Independent Non-executive Director of Yuexiu Property Company Limited (Stock Code: 00123), a company listed on the Stock Exchange. Mr Yu holds a Master Degree in Applied Finance from Macquarie University in Australia, a Diploma of Management Studies from The University of Hong Kong and a Diploma from the Association of International Bond Dealers. Mr Yu was the Founding President of the Hong Kong Forex Club from 1974 to 1975. Mr Yu was also the Founding Deputy Chairman of the Hong Kong Capital Markets Association and Asia Chairman of the Association of International Bond Dealers. Mr Yu has held numerous senior managerial and advisory positions and has more than 40 years of experience in investment, banking and finance.

for identification purpose only

Note: The directorships held by the Directors in the subsidiaries of the Bank (where applicable) are set out in the "List of names of the directors of Chong Hing Bank Limited and its subsidiaries" posted on the Bank's website (www.chbank.com/en/personal/footer/about-ch-bank/investor-relations/ directors-list/index.shtml).

SENIOR MANAGEMENT

Mr TANG Xianqing

aged 56, has been the Deputy Chief Executive of the Bank since November 2019. Mr Tang graduated from the Hunan University of Science and Engineering and obtained a Master Degree in Economics (with research focus on International Finance) from Sichuan University. Mr Tang has 21 years of experience in business operations and management of Mainland commercial banks. He held senior positions in the head office and branches of three Mainland banks and possesses extensive experience in business operations, marketing, risk control, strategic planning and other aspects of the banking sector in Mainland China. Prior to joining the Bank, Mr Tang was a senior executive of a Hong Kong subsidiary of a state-owned enterprise, which is listed among Fortune Global 500 Enterprises.

2020 Annual Report

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

as of 4 March 2021

Mr CHIU Tak Wah Edward

aged 58, Executive Vice President, has been the Chief Operating Officer of the Bank since May 2017 and Alternate Chief Executive of the Bank, Yuexiu Financial Holdings Limited (the immediate holding company of the Bank) and Chong Hing Finance Limited (a wholly-owned subsidiary of the Bank) since December 2019. He is also a Director of various subsidiaries of the Bank. Mr Chiu holds a Bachelor of Science degree at the King's College London, University of London and a Master of Science degree at The London School of Economics and Political Science, University of London. Mr Chiu has more than 30 years of experience in banking, financial services and management consultancy in the Asia Pacific region, Europe and China while working for several leading financial institutions. Prior to joining the Bank, he was a General Manager, Head of Operations of a leading Chinese bank, and held different senior positions in major financial institutions.

Mr CHAN Kam Ki Vincent

aged 58, Executive Vice President, has been the Chief Financial Officer of the Bank since April 2017. Mr Chan graduated from The Chinese University of Hong Kong and obtained a Master Degree in Applied Finance from Macquarie University, Australia. He is a fellow of the Hong Kong Institute of Certified Public Accountants, a member of the American Institute of Certified Public Accountants, a designation holder of the Chartered Institute of Management Accountants and a Certified Internal Auditor of The Institute of Internal Auditors. Mr Chan has more than 30 years of auditing and financial controllership experience in the financial services industry. He worked for an international accounting firm and held regional roles in major cities of several international banks and senior positions in regional and local banks prior to joining the Bank.

Mr WOO Pak Kin Clement

aged 45, Executive Vice President, has been the Chief Risk Officer of the Bank since September 2019. Mr Woo holds a Bachelor Degree in Business Administration from The Chinese University of Hong Kong and a Bachelor Degree in Applied Accounting from Oxford Brookes University. He is a Fellow Chartered and Certified Accountant and a Chartered Financial Analyst. Mr Woo has more than 20 years of experience in the banking industry covering enterprise risk, credit risk, market risk and operational risk management, and possesses sound knowledge in formulating bank-wide risk management framework. Prior to joining the Bank, he was the Risk Management Director and Head of Risk Management of a leading Chinese bank.

Ms CHAN Yun Ling

aged 54, Executive Vice President, Head of Treasury and Markets. She joined the Bank in April 2015. She holds a Bachelor of Arts degree from The Chinese University of Hong Kong, and had pursued studies in France and the United Kingdom. Specialising in financial markets business, Ms Chan has worked in major financial hubs including Hong Kong, Tokyo, Singapore, Shanghai and Taiwan, in charge of financial markets related activities in various financial institutions.

Mr SIN Tat Wo

aged 50, Executive Vice President, Head of Mainland Corporates Division and Acting Head of Hong Kong Corporates Division. Mr Sin joined the Bank in December 2015. He graduated from Hong Kong Baptist University with a Bachelor degree in Business Administration. He has over 25 years of experience in the banking industry in Hong Kong and Mainland. He worked for a number of major Chinese banks in their corporate, commercial and investment banking departments.

Chong Hing Bank Limited

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

as of 4 March 2021

Ms LAM Pik Ha Eliza

aged 59, Executive Vice President, has been the Head of Financial Institutions Division since September 2018. Ms Lam has over 30 years of experience in corporate and institutional banking business and has held different senior positions with various international banks in managing corporate and institutional clients in the Asia Pacific region. Ms Lam obtained a postgraduate diploma in international marketing of the Society of Business Practitioner (U.K.).

Ms NG Sau Wai Sylvia

aged 53, Executive Vice President, has been the Head of Personal Banking Division of the Bank since October 2020. Ms Ng obtained a Bachelor of Social Sciences degree from The University of Hong Kong. Ms Ng possesses over 20 years of working experience in the financial services industry, and has worked in various Chinese and foreign banks in Hong Kong overseeing retail banking business and marketing.

Mr WONG Kowk Leung Arthur

aged 54, Executive Vice President, has been the Chief Information Officer of the Bank since September 2019. Mr Wong graduated and obtained a Master Degree in Business Administration from The University of Warwick (UK). Mr Wong has more than 30 years of experience in the banking and technology industry in Hong Kong. Prior to joining the Bank, Mr Wong was the Chief Information Officer/Head of Information Technology of Hong Kong Interbank Clearing Limited, as well as a number of major Chinese banks and financial institutions.

Ms LAI Wing Nga

aged 56, Executive Vice President, has been appointed the Company Secretary of the Bank since August 2015. Ms Lai has over 25 years of working experience in the corporate secretarial and governance areas of sizable listed companies and financial institutions. Prior to joining the Bank, Ms Lai was the group company secretary of AIA Group Limited from April 2010 to July 2015, which is a company listed on the Stock Exchange (Stock Code: 01299). She was the company secretary of Standard Chartered Bank (Hong Kong) Limited from April 2005 to March 2010 and before that was the company secretary of Industrial and Commercial Bank of China (Asia) Limited from April 2000 to April 2005. Ms Lai obtained a master of business degree from The University of Newcastle in Australia. She also obtained a postgraduate diploma in corporate finance from The Hong Kong Polytechnic University. Ms Lai is a fellow member of The Hong Kong Institute of Chartered Secretaries and The Chartered Governance Institute in the U.K.

Note: The directorships held by the Senior Management in the subsidiaries of the Bank (where applicable) are set out in the "List of names of the directors of Chong Hing Bank Limited and its subsidiaries" posted on the Bank's website (www.chbank.com/en/personal/footer/about-ch-bank/investor-

relations/directors-list/index.shtml).

2020 Annual Report

ABRIDGED CORPORATE STRUCTURE

as of 4 March 2021

廣州越秀集團股份有限公司1

(GUANGZHOU YUE XIU HOLDINGS LIMITED*)

100%

YUE XIU ENTERPRISES (HOLDINGS) LIMITED

100%


YUEXIU FINANCIAL HOLDINGS LIMITED		OTHERS


75%	25%

CHONG HING BANK LIMITED2

100%	100%	100%	100%


Chong Hing Commodities	Chong Hing	Chong Hing	Chong Hing Insurance	Other
and Futures Limited3	Securities Limited4	Finance Limited5	Company Limited6	companies


					100%

Chong Hing Insurance

Brokers Limited7

State-ownedenterprise under the supervision of the State-owned Assets Supervision and Administration Commission of the Guangzhou Municipal People's Government
Listed on The Stock Exchange of Hong Kong Limited
Registered with The Hong Kong Futures Exchange Limited as a participant
Registered with The Stock Exchange of Hong Kong Limited as a participant
Licensed under the Hong Kong Banking Ordinance as a deposit-taking company
Licensed under the Hong Kong Insurance Ordinance as an insurance company
Licensed under the Hong Kong Insurance Ordinance as an insurance broker company

* for identification purpose only

Chong Hing Bank Limited

SHAREHOLDERS' CALENDAR

as of 4 March 2021

2020	Interim results for the first half of 2020 announced

AUGUST

2020	Interim cash dividend for 2020 of HK$0.11 per share paid

OCTOBER

2021	Final results for the year of 2020 announced

MARCH

2021	Register of Members will be closed for the purpose of ascertaining entitlements to attend

MAY	and vote at the 2021 Annual General Meeting
11-14

(both days inclusive)

2021

MAY

2021

MAY

24-25

2021 Annual General Meeting will be held

Register of Members will be closed for the purpose of ascertaining entitlements to receive the final cash dividend for 2020

(both days inclusive)

2021

JUNE

If approved by the Shareholders at the 2021 Annual General Meeting, the final cash dividend for the financial year of 2020 of HK$0.23 per share will be payable to the Shareholders whose names appear on the Register of Members of the Bank on 25 May 2021

2020 Annual Report

CHAIRMAN'S STATEMENT

Mr Zhang Zhaoxing

Chairman

2020 was an eventful and difficult year. COVID-19 has spread all over the world, resulting in unprecedented pressures on the global economy and making a tremendous impact on a wide variety of industries. Amid the massive changes in the macro-environment, Chong Hing Bank Limited (the "Bank" or "Chong Hing Bank") upheld its strategies and actively addressed the fallout from the pandemic. The Bank prevented and controlled different types of risks in order to maintain its sound operations, and boosted its digital transformation. It also implemented a series of relief measures as well as devoting itself to its mission of providing quality products and services.

In the "Top 1000 World Banks" list compiled by the British magazine "The Banker", Chong Hing Bank's ranking climbed from 722nd in 2013 to 381st in 2020, placing it among the top 400 in the global banking industry and a record high for the Bank.

In 2020, major global economies implemented monetary-easing policies to relieve the impact of the pandemic. The continuous downward trend of HK dollar and US dollar interest rates led to significantly narrowing of net interest margins amid emerging uncertainties in credit risks in the market. In accordance with the accounting principles of the Hong Kong Financial Reporting Standard 9 Financial Instruments (HKFRS 9), the Bank has progressively increased forward-looking impairment allowances for financial assets. Operating profit before impairment allowances amounted to HK$2,147 million, a decrease of 10.03% compared to the previous year. Profits attributable to equity owners amounted to HK$1,480 million, a decrease of 22.13% compared to the previous year, and earnings per share were HK$1.34. In view of the highly uncertain economic outlook and extremely challenging operating environment, and our regulator has advised that banks should reserve sufficient capital to meet future challenges, the Board of Directors of the Bank (the "Board") has recommended payment of a final cash dividend of HK$0.23 per share for 2020. The total dividend payout for the year accounted for 24.54% (2019: 32.42%) of this adjusted profit attributable to equity owners, less the distribution paid on additional equity instruments.

Chong Hing Bank Limited

CHAIRMAN'S STATEMENT

The major financial ratios for 2020 are as follows:

Return on shareholders' equity: 6.01%
Average liquidity maintenance ratio: 44.98%
Total capital ratio as of 31 December 2020: 16.79%
Tier 1 capital ratio as of 31 December 2020: 14.36%
Loan to deposit ratio as of 31 December 2020: 73.65%

In the past year, the continuous tensions between China and the US, intensifying geopolitical risks, persistent monetary- easing policies and the worldwide pandemic scourge further worsened global economies that were already under pressure. Governments around the world faced the simultaneous challenges of combating the pandemic, stabilising the economy and protecting people's livelihoods. With its effective and remarkable control over the pandemic, Mainland China's economy made a steady recovery. Its Gross Domestic Product (GDP) for the year increased by 2.3%, making it the first country among major economies to achieve growth and also enabling it to reach the milestone of totalling RMB100 trillion for the first time. On the other hand, Hong Kong has suffered continuously from the pandemic, putting severe pressure on its economy. Nevertheless, Hong Kong has managed to maintain the strong stability of its financial system and demonstrated once again its solid position as an international financial hub.

Against the backdrop of an accelerated establishment of a new development pattern based on domestic macro-circulation together with the mutual promotion of international and domestic dual-circulation in China, Hong Kong will join in the development of the Guangdong-HongKong-Macao Greater Bay Area (the "Greater Bay Area"). It will actively take the role as a participant in domestic circulation and as the facilitator of international circulation in order to fully utilise Hong Kong's unique advantages and further strengthen financial connectivity between Hong Kong and the Mainland. With the tremendous opportunities offered by the national policy, Chong Hing Bank proactively leverages the synergies with its controlling shareholder Yuexiu Group and strategic shareholder Guangzhou Metro. The Bank also reinforces regional strategic integration, emphasises the development of cross-border finance and conducts operations in major cities in the Greater Bay Area. The goal of these policies is to gradually develop into an integrated commercial bank with cross-border expertise.

2020 Annual Report

CHAIRMAN'S STATEMENT

The pandemic has stimulated inspiration and opportunity in the field of fintech as well as boosted the digital transformation of the banking industry. To cope with the competitive landscape in this new normal, Chong Hing Bank has proactively recruited IT talents in Hong Kong and the Mainland, accelerated system digitisation and reform of its operation, upgraded electronic channels, and established a service model focusing on customer experience and integrating traditional and digital banking. As always, the aim is to satisfy customers' needs for both online and offline bank services and to drive the business development of Chong Hing Bank.

The year 2021 is the opening year of China's "14th Five-Year Plan", as well as the first year of Chong Hing Bank's five- year development plan. Under the uncertain development of the pandemic and global economic instabilities, the Bank will continue its operation in a prudent and pragmatic manner, actively monitor and overcome the pandemic and other risks, optimise its business structure and accelerate its digital transformation. By that means it will improve its capability in comprehensive financial services for thriving in circumstances where both opportunities and challenges exist, laying the basis for a high-quality development when the pandemic is over. Given the promising prospect of China's economic development based on solid foundation, and the Bank's gradual expansion in its network of outlets across the Mainland, as well as its continued steady progress towards establishing a wholly-owned banking subsidiary in Mainland China, Chong Hing Bank's development is set to scale new heights.

Following the particularly difficult year of 2020, I would like to express my heartfelt gratitude to all our directors and shareholders for their valuable guidance, also our appreciation to customers and business partners for their long- lasting support, and our full acknowledgement to the management team and the entire staff of Chong Hing Bank for their dedication and hard work during the pandemic. Hope always exists where there are difficulties. With our firm commitment to "Exceed‧Excel", we will continue to strive for high-quality development and resolutely forge ahead.

Zhang Zhaoxing

Chairman

Hong Kong, 4 March 2021

Chong Hing Bank Limited

CHIEF EXECUTIVE'S STATEMENT

Mr Zong Jianxin

Chief Executive

ECONOMIC ENVIRONMENT

In 2020, the global economy was hit hard by the COVID-19 pandemic. The Gross Domestic Product (GDP) of the US decreased 3.5% year-on-year, the first negative record since 2009. The severe pandemic in the US, together with the unknown diplomatic and economic policies of the new administration, created uncertainty in relations between China and the US and in the global economy. The US Federal Reserve announced at the last FOMC meeting of 2020 that the benchmark interest rate would remain unchanged and that its bond-buying programme would be maintained until there were indications of a stable recovery in the economy. The economic prospects of the Eurozone are also gloomy due to the lockdown measures implemented to tackle the pandemic, with its GDP in 2020 shrinking 6.8% year-on-year. The European Central Bank launched an emergency package in December 2020 to ease the impact of the pandemic, and mitigate risks of the downward trend in the economy. The UK and EU reached a trade agreement in December last year to avoid the economic and financial market chaos that would have resulted from a "No-deal Brexit".

With the rapid containment of the pandemic and the effectiveness of its macroeconomic measures, Mainland China's economy has shown a stable recovery since the second quarter of last year, with GDP growth of 2.3% for 2020. The Central Economic Work Conference held at the end of the year stressed the need to maintain continuity, stability and sustainability in macro policies this year in order to maintain the necessary support for economic recovery. The People's Bank of China emphasised the need to make monetary policy flexible and appropriate in order to maintain reasonable and adequate liquidity. At the same time, it encouraged the deepening of market-based reform of interest rates on a continuous basis in order to keep the RMB exchange rate at a reasonable and balanced level. The RMB's exchange rate trended down initially but then moved up during the year, with the central parity rate of the RMB against the US dollar rising by 6.47%. For the

2020 Annual Report

CHIEF EXECUTIVE'S STATEMENT

Mainland cities where Chong Hing Bank's major business operates, the recovery momentum remained stable last year. Guangzhou's GDP rose by 2.7% year-on-year as the city's economic growth improved steadily and all major economic indicators rebounded; Shenzhen's GDP rose by 3.1% year-on-year as the city's advanced manufacturing and high-tech industries grew rapidly and imports and exports continued to reach new highs; and Shanghai's GDP rose by 1.7% year-on- year as industrial production continued to pick up and the information services and financial sectors accelerated.

The prolonged pandemic has dealt a severe blow to Hong Kong's economy, with its GDP dropping by 6.1% year-on- year. In its foreign trade, goods exports decreased slightly by 0.3%, mainly due to the recovery in the Mainland economy. Total services exports declined by 36.8% as a result of the ban on inbound tourism and a weak global economy. Private consumption expenditures and overall investment spending fell by 10.2% and 11.6% respectively due to weak local demand, social distancing measures, negative consumer sentiment caused by a difficult situation in the labour market, and an uncertain business environment. The labour market was further hit by the fourth wave of the COVID-19 outbreak starting in November 2020. Unemployment was at a 16-year high of 6.6% in the fourth quarter. As for the property market, the private residential price index remained stable, while sales of new residential properties slowed as a result of the pandemic, with potential buyers shifting to the secondary market. Overall, the number of transactions in the property market was similar to that in 2019. The pandemic led to volatility in the global financial markets in 2020, and so did the Hong Kong stock market. The Hang Seng Index fell to a more than three-year low in March and closed at 27,231 points on the last trading day of 2020, representing a cumulative loss of 3.4% for the year.

RESULTS ANNOUNCEMENT AND PROFIT ANALYSIS

The results for the financial year of 2020 of Chong Hing Bank Limited (the "Bank" or "Chong Hing Bank"), on a consolidated basis, are summarised below:

KEY FINANCIAL DATA

		31 December (12 months)

		2020	2019
		HK$'000	HK$'000	Variance
1.	Operating profit before impairment allowances	2,147,413	2,386,842	-10.03%
2.	Profit attributable to equity owners	1,479,978	1,900,642	-22.13%
3.	Net interest income	2,926,552	3,259,860	-10.22%
4.	Net fee and commission income	434,327	325,657	+33.37%
5.	Net income from trading and investments	258,453	241,293	+7.11%
6.	Other operating income	189,385	184,461	+2.67%
7.	Operating expenses	1,661,304	1,624,429	+2.27%
8.	Net impairment losses on financial assets	422,003	137,881	+206.06%


		As of	As of
		31 December	31 December
		2020	2019
		HK$'000	HK$'000	Variance
9.	Loans and advances to customers	142,381,617	118,078,914	+20.58%
10.	Deposits from customers	183,228,291	162,664,648	+12.64%
11.	Investments in securities	52,853,752	57,534,593	-8.14%
12.	Total assets	232,899,647	212,768,034	+9.46%

Chong Hing Bank Limited

CHIEF EXECUTIVE'S STATEMENT

KEY FINANCIAL DATA

		31 December (12 months)
		2020	2019	Variance
				(Note 4)

13.	Return on shareholders' equity (Note 1)	6.01%	8.31%	-2.30p.p
14.	Earnings per share (Note 2)	HK$1.34	HK$1.80	-25.56%
15.	Net interest margin	1.34%	1.62%	-0.28p.p
16.	Cost to income ratio	43.62%	40.50%	+3.12p.p
17.	Average liquidity maintenance ratio	44.98%	46.27%	-1.29p.p


		As of	As of
		31 December	31 December
		2020	2019	Variance

18.	Non-performing loan ratio	0.65%	0.33%	+0.32p.p
19.	Loan to deposit ratio	73.65%	69.46%	+4.19p.p

20. Net assets value per share (excluding additional equity

	instruments and before the final dividend)	HK$23.14	HK$22.37	+3.44%
21.	Total capital ratio (Note 3)	16.79%	17.51%	-0.72p.p
22.	Tier 1 capital ratio (Note 3)	14.36%	14.32%	+0.04p.p
23.	Common Equity Tier 1 capital ratio (Note 3)	11.27%	12.28%	-1.01p.p

Notes:

Return on shareholders' equity took into consideration the distribution paid on the additional equity instruments relevant for the period.
Earnings per share were calculated after deducting the distribution paid on the additional equity instruments in the relevant year.
The ratio is calculated on a consolidated basis in accordance with the Banking (Capital) Rules.
p.p means percentage point.

ANALYSIS OF KEY FINANCIAL DATA

In 2020, profit attributable to equity owners of the Bank amounted to HK$1,480 million, representing a decrease of 22.13% compared to 2019. The operating profit after impairment allowances amounted to HK$1,725 million, representing a decrease of 23.28% from 2019. The decrease in consolidated profit for the year was mainly attributable to the decrease in net interest income and the increase in impairment allowances for financial assets.

Net interest income was HK$2,927 million, a decrease of 10.22% over the same period in 2019, which was driven mainly by the surge of market interest rates due to substantial rates cut policies. The net interest margin of the Bank was 1.34% in 2020, decreased by 28 basis points from 2019.

Net fee and commission income increased by 33.37% to HK$434 million, mainly due to the increase in fee income from securities dealings, wealth management and loan-related businesses.

Foreign exchange and other treasury customer activities remained stable. Net income from trading and investments recorded a gain of HK$258 million, which was mainly derived from trading income, foreign currency funding swap activities and foreign currency transactions with customers.

2020 Annual Report

CHIEF EXECUTIVE'S STATEMENT

In 2020, impairment allowance losses on financial assets increased by HK$284 million to HK$422 million when compared with the previous year, due to the growth in loans and advances, changes in macroeconomic factors in the risk model and provisions for specific loans.

The Bank prudently managed costs and devoted efforts to improve processes and thus efficiency, and at the same time continued to strengthen its professional team and IT systems to support business growth and expansion in Hong Kong and the Mainland. The operating expenses were HK$1,661 million, slightly increased by 2.27% from the previous year.

Loans and advances to customers recorded a marked increase of 20.58% to HK$142.4 billion. Given the rapid increase in loans and advances, the Bank continued to maintain prudent management of its credit risk exposure with sound asset quality of loans and advances.

Deposits from customers grew by 12.64% to HK$183.2 billion. The stable deposit base achieved by the Bank allowed a balanced loan growth and the development of wealth management as well as cross-border financial businesses.

Total assets increased by 9.46% to HK$232.9 billion. As at 31 December 2020, 73.02% of the Bank's assets were based in Hong Kong.

Due to the proactive management of its assets as well as the maturity profile of its liabilities, the Bank's liquidity remained stable. The loan to deposit ratio was at 73.65%, and the average liquidity maintenance ratio was 44.98%.

Total capital ratio was at 16.79%, the Tier 1 capital ratio was at 14.36% and the Common Equity Tier 1 capital ratio was at 11.27%.

Overall, under the adverse business environment in 2020, the Bank's core business lines, financial positions and asset quality were strong, while the capital adequacy ratio and liquidity maintenance ratio were above the relevant statutory requirements.

DIVIDEND

To properly maintain the balance between sharing our success and preserving capital for future growth, the Board has recommended the payment of the final cash dividend of HK$0.23 per share for the financial year of 2020 (2019 final cash dividend: HK$0.41 per share). Subject to the approval of shareholders at the forthcoming annual general meeting of the Bank, the final cash dividend will be paid on Wednesday, 2 June 2021 to the shareholders whose names appear on the register of members of the Bank on Tuesday, 25 May 2021. Total dividends for the financial year of 2020, including the interim cash dividend of HK$0.11 per share paid on Thursday, 15 October 2020 (2019 interim cash dividend: HK$0.17 per share), amounted to HK$0.34 per share (2019 total dividends: HK$0.58 per share). The total dividend payout for the year as a percentage of adjusted profit attributable to equity owners less distribution paid on the additional equity instruments will be 24.54% (2019: 32.42%).

SUCCESSFUL ISSUANCE OF US$300 MILLION 5.50 PER CENT. ADDITIONAL TIER 1 CAPITAL SECURITIES

The Bank successfully issued US$300 million 5.50% Undated Non-Cumulative Subordinated Additional Tier 1 Capital Securities (the "Securities") in July 2020 under the existing US$2 billion Medium Term Note and Perpetual Capital Securities Programme, and its completion took place on 3 August. The Securities are qualified as Basel III-compliant additional tier 1 capital. The proceeds will serve to strengthen the Bank's capital base and support the implementation of its strategic plans.

Chong Hing Bank Limited

CHIEF EXECUTIVE'S STATEMENT

Amid the economic turmoil, the coupon rate of this batch of Securities was 20 basis points lower than the rate 5.70% of the same type of securities issued by the Bank in 2019 due to its effective issuance strategies and mechanism. This coupon rate was better than that of the securities issued by other industry peers during the same period, reflecting the Bank's competitiveness. The successful issuance demonstrated once again the recognition from international bonds investors and Yuexiu Group, its controlling shareholder, and their support for and trust in the development of the Bank.

BUSINESS REVIEW

CORPORATE BANKING

Chong Hing Bank endeavours to provide a full range of banking products and professional services to its corporate customers in Hong Kong and the Mainland, including lending, trade finance, cash management, cross-border business solutions and financial market products. The Bank constantly expands its target customer base, focusing on providing diversified and comprehensive financial services to its customers in the Guangdong-HongKong-Macao Greater Bay Area (the "Greater Bay Area").

To support local SMEs, apart from backing the HKSAR Government's "SME Loan Guarantee Scheme" and "SME Financing Guarantee Scheme" offered by HKMC Insurance Limited, the Bank has launched and enhanced other SME relief measures in response to the pandemic. These include delaying implementation of the clean-up clause of revolving loans and overdraft facilities, extending expired term loan repayments or instalment payments, and extending principal repayment period for trade financing facilities. The Bank also fully supports the "Pre-approved Principal Payment Holiday Scheme" launched by the Hong Kong Monetary Authority together with the "Banking Sector SME Lending Coordination Mechanism", and provides support for the "Special 100% Loan Guarantee" under the "SME Financing Guarantee Scheme". By this means, the Bank aims to alleviate cash flow pressures on its customers and help local SMEs cope with the challenging business environment. Meanwhile, the Bank strengthens its internal cross marketing and offers corporate customers more value-added services such as financial management for employees, MPF services and wealth management, facilitating corporate customers to access its one-stop banking services platform.

As for the syndicated loan business in 2020, the Bank offered 32 loans in total, for seven of which the Bank acted as the lead arranger and bookrunner, while 12 of the loans were club loans. The number of transactions and amount of handling fee income both reached a record high since the Bank's establishment of the syndicated loan business in 2017. To further strengthen the platform for all-round development of the syndication loan business, the Bank set up a syndication agency team and was successfully awarded with two mandates. Meanwhile, the Bank proactively enhanced the quality of the loan asset portfolio and improved relevant returns via secondary market transactions. The Bank also seized the cross-border business opportunities brought about by the Greater Bay Area development and offered 24 cross-border structured finance transactions totalling HK$6.5 billion.

Being an integrated commercial bank offering cross-border expertise and leveraging on its competitive edge in network interaction between Hong Kong and the Mainland, the Bank provided a variety of cross-border financial products and services. These are designed to accommodate customers' funding requirements in the Greater Bay Area and effectively manage their interest rate and exchange rate risks through the Bank's treasury product portfolio.

2020 Annual Report

CHIEF EXECUTIVE'S STATEMENT

PERSONAL BANKING

The COVID-19 outbreak has depressed global and local economies and negatively affected the branch operations and business development of retail banks. To protect the health and safety of its customers and employees, the Bank adopted a series of special arrangements and measures throughout its branch operations. These included the temporary shortening of branch business hours, checking the temperature of every person upon entering branches, and providing pandemic prevention supplies. The Bank's marketing communications with customers shifted to online and to telephone conversations, while customers were encouraged to use internet banking service channels. These measures enabled the Bank to continue providing quality banking services during the pandemic.

In response to the COVID-19 outbreak, the Bank introduced various anti- pandemic measures and guidelines.

To protect the health and safety of its customers

Supporting the Cash Payout Scheme of the HKSAR Governmentand employees, the Bank provides pandemic prevention supplies at branches and ensures

temperature checking of every person upon entering branches.

In the challenging environment, the Bank strived to establish a customer-oriented business model of comprehensive wealth management as well as to provide one-stop personal banking services to customers in Hong Kong and the Mainland. In 2020, the personal banking business continued to develop in a stable manner:

In keeping with its "customer-centric" mission and to help customers cope with the economic challenges, the Bank launched a series of loan relief measures for personal banking customers and supported the HKSAR Government's Cash Payout Scheme.
Total income from the investment business grew by approximately 10% in the year due to the development of the wealth management business, coupled with the promotion of wealth management, an improvement of processes and diversified investment products, and an enhanced wealth management platform. Following the"Finance + Technology" development strategy which aims at providing better wealth management services to customers, the number of bond transactions via electronic channels increased substantially during the year. The Bank has started preparations for the launch of the "Wealth Management Connect" service in the Greater Bay Area by adding choices to its investment products, and strengthening and upgrading the ancillary systems, in order to provide an easily accessed investment channel for cross-border investors.

Chong Hing Bank Limited

CHIEF EXECUTIVE'S STATEMENT

The Bank continued to optimise its life insurance services. With the policy of actively enriching life insurance products and promoting financing business, the Bank provided customers with appropriate life insurance/wealth management solutions to meet their demand for protection, and the commission income during the period increased substantially. Going forward, the Bank is set to develop its online platform for life insurance products.
For interest income, after the Bank launched the "Cloud Rate" service, customers could set up time deposits electronically without visiting branches in person. This service is fast and convenient, enhancing the customer experience. As for the retail loans business, the Bank focused on promoting its premium and insurance policies financing business and providing a wide range of secured loan products in order to boost the wealth management products financing business, increase the comprehensive income and optimise its loan portfolio.
The overall income from the credit card business, including customer spending and acquiring business, was affected by a weak local retail market. In view of the change in consumer behaviour during the pandemic, the Bank accelerated the transformation of its business model towards digitisation and contactless payment. In the third quarter of the year, the Bank launched the "All-In-One" model for its acquiring business, supporting all kinds of payment methods through one single terminal, including Visa, Master, UnionPay, WeChat Pay, AliPay, UnionPay App, ApplePay, GooglePay and HuaweiPay. This not only satisfies customers' demand for different payment methods but also enhances the merchants' efficiency and reduces their manpower requirements. The Bank will strengthen cooperation with the facilitators of e-commerce payment and expand its local and global online payment business to achieve diversified development and raise income.

Looking ahead, the Bank will continue to enhance its wealth management business and optimise its electronic service platforms, in order to improve customer experience and provide efficient and professional banking services to its customers.

The Bank actively drives its wealth management business and optimises its electronic service platform, so as to improve customer experience and provide efficient and professional services to its customers.

2020 Annual Report

CHIEF EXECUTIVE'S STATEMENT

FINANCIAL MARKETS BUSINESS

The Bank is committed to developing its financial market business as an important profit centre. During the year, the Bank secured significant growth in areas such as treasury business, customer selling and product development. The Bank has established its proprietary trading business and, while keeping risks under control, enhanced its ability to provide quotations and expanded its market share, thereby continuing to increase revenue.

Regarding its treasury business, the Bank aims to optimise its balance sheet by effectively applying a variety of financial instruments while complying with established risk appetites and risk limits to ensure a safe liquidity level. The Bank has continued to leverage on its dynamic investment strategies and to capture potential treasury business opportunities to diversify revenue sources.

As part of its strategic planning, the Bank has progressively strengthened its product and marketing team by hiring well- experienced financial experts, enriched its financial products, and offered pertinent advice and services that cater to the needs of different customer segments, thereby increasing its market competitiveness and fee income.

MAINLAND OPERATIONS

In 2020, the Bank's Mainland branches and sub-branches actively responded to the COVID-19 pandemic and the severe and complex external economic situation, maintaining a good momentum of steady but progressive overall operations. Throughout the year, the Bank's assets and liabilities grew steadily, with enhanced profitability, a consolidated customer base, improved products and services, more efficient internal processes, good asset quality and upgraded risk resilience.

The business advantages of the Bank's Mainland institutions continued to strengthen. Based on the financial business secured in Guangdong, Guangzhou and Hengqin, the Shantou Branch successfully won the tender for the value-added and value preservation project of the local social security fund. Meanwhile the Guangzhou Branch successfully achieved a breakthrough in financial business at the regional level, and the deposit scale of Mainland institutions reached a new high.

The Bank's corporate business in the Mainland continued to achieve comprehensive development. By strengthening the marketing of key customers and the management of lending customers, increasing the settlement ratio of existing customers and handling cross-border business, the Bank maintained good growth in corporate deposits. At the same time, it broadened the sources of credit customers, actively adjusted the investment of loans and continuously optimised the loan structure, accelerated the progress of product development, enhanced professional service capabilities and increased fee income.

The Bank's Mainland institutions closely tracked financial market updates, carefully followed the progress of bond investment, continued to optimise the investment structure and enriched the product portfolio. By this means, it effectively enhanced its financial market business and revenue while achieving a number of financial market business breakthroughs. In early 2020, the Guangzhou Branch, as the branch of a foreign bank in China, completed the first underwriting and issuance of local government bonds. At the same time, the Guangzhou Branch received regulatory approval for its derivatives trading business and was admitted to the interbank foreign exchange market as a derivatives member. In addition, the Shenzhen Branch and Guangzhou Branch gained approval to join the bond market of the stock exchange, with the Shenzhen Branch being the first branch of a foreign bank in China admitted to the exchange bond market.

Chong Hing Bank Limited

CHIEF EXECUTIVE'S STATEMENT

Mainland institutions of the Bank have improved the quality of their electronic services, as reflected in faster growth in online banking transactions and transaction amounts, steady growth in direct connections between banks and enterprises, and the successful launch of the bank-enterprise reconciliation system. Meanwhile, the Bank also launched the "financial services platform for supply chain" in December, providing comprehensive financial services to core corporate customers and their upstream and downstream suppliers, such as placing orders, transferring, financing and withdrawal.

The Bank actively leveraged its strengths in integrated finance and cross-border financial services to meet the cross- border needs of its customers. During the year, the Bank launched a loan service for Hong Kong and Macau residents who were purchasing properties in the Mainland. The Nansha Sub-branch was the first to set up a "full electronic commercial registration service zone" in the region to provide effective services to Nansha investment customers.

The Bank further improved its network in the Greater Bay Area with the opening of the Foshan Chancheng Sub-branch and the Dongguan Sub-branch in February and December 2020 respectively. The Bank has ten institutions in the Mainland now, achieving a presence in major core cities in the Pearl River Delta and Yangtze River Delta. The Bank was also on track in preparing for the establishment of a wholly-owned banking subsidiary in Mainland China.

Foshan Chancheng Sub-branch and Dongguan Sub-branch were officially opened in 2020. The Bank now has ten institutions in the Mainland.

The opening of the Foshan Chancheng Sub-branch

The opening of the Dongguan Sub-branch

CHONG HING SECURITIES LIMITED

With the global financial markets and economy severely hit by the pandemic in 2020, the governments of various countries went all out to rescue their economies and launched a number of stimulus measures, resulting in a significant increase in market capitalisation and a vibrant investment atmosphere in the securities market. This, coupled with the entry of various new economy stocks and the return of China concept stocks into the IPO market, led to a continuous increase in trading volume in the Hong Kong stock market, resulting in a 75% growth in trading volume and a 62% increase in commission income for Chong Hing Securities compared to the same period in 2019. In November 2020, Chong Hing Securities launched a new "Chong Hing Securities Mobile App" to provide customers with more comprehensive and faster access to stock market information and investment opportunities. In addition, Chong Hing Securities will collaborate with Chong Hing Bank to launch a mobile banking application for remote securities account opening. This new service will help to attract new customers and generate business growth for Chong Hing Securities.

2020 Annual Report

CHIEF EXECUTIVE'S STATEMENT

CHONG HING INSURANCE COMPANY LIMITED

The unexpected pandemic has brought pressures to the business operations of many sectors in Hong Kong, and also affected the development of the general insurance market. However, driven by its prudent operations, Chong Hing Insurance's gross premiums and pre-tax earnings remained stable during the year, and its performance was good overall.

Given the availability of COVID-19 vaccines, economic activities are likely to resume and the general insurance market will also improve. In respect of non-insurance income, while Chong Hing Insurance strives to maintain stable interest income in the persistent low interest rate environment, it will also explore investment opportunities in order to achieve better business performance.

CHONG HING INSURANCE BROKERS LIMITED

Chong Hing Insurance Brokers Limited, a subsidiary of the Bank, was incorporated in September 2019, and officially opened in July 2020 to engage in the Hong Kong regulated insurance brokerage business.

Being the agent of the "Proposed Policy Owner", Chong Hing Insurance Brokers searches for suitable insurance solutions from different insurance companies according to customers' insurance and financial needs. Chong Hing Insurance Brokers will make every effort to expand its service to middle/high-end individual and corporate customers in Hong Kong and the Greater Bay Area, and assist them in buying long-term life insurance in Hong Kong.

TRANSFORMATION OF BUSINESS DEVELOPMENT

Fintech

In line with the market trend, the Bank actively carried out the digitisation of banking services to meet customers' needs for financial technology products and services. During the pandemic, the Bank was prompt in arranging remote and cross-border digital banking services. It also launched a number of online application services, such as online submission of applications for dual authentication, third-party transfer accounts and change of transaction limits, helping customers to use banking services from home. In addition, the Bank launched Chong Hing Mobile Banking for opening investment accounts and online fund account access to facilitate fund transactions. Furthermore, the Bank established "Cloud Rate" for online time deposits, with online time deposit transactions increasing by more than 200% year-on-year during the period.

The Bank introduces various digital banking services to meet customers' needs for financial technology products and services.

Chong Hing Bank Limited

CHIEF EXECUTIVE'S STATEMENT

Through a series of operational initiatives and promotions, the Bank is able to analyse customer data, focus on target customers, and provide targeted products and services. This has resulted in a 28% year-on-year growth in digital banking customers and a 63% year-on-year increase in the number of financial transactions conducted through digital channels. The Bank is further enhancing its online banking services and expects to roll out a number of enhancements in 2021 to provide an even better and more convenient digital experience.

Operational Optimisation

For the fourth year in a row, the Bank has committed itself to enhancing its operations and has successfully completed 28 process enhancement projects. These include streamlining the process for SMEs and start-ups to open accounts, and simplifying the process of opening new accounts for existing corporate customers. In addition, the Bank's centralised operations have been implemented to cover investment transaction settlement, corporate banking services, retail banking services and credit card transactions. During the pandemic, the Bank has used off-site and online channels to support its corporate banking services, allowing customers to send transaction instructions directly to the Bank. It has also added a customer experience team to capture and assess frontline customer service levels through a "mystery customer service survey". The business transformation initiatives have helped the Bank to continuously improve the customer experience and raise business efficiency.

In its digitisation of operations, the Bank has implemented an "end-to-end" robotic process automation project across the front, middle and back offices and has successfully implemented nine automated processes during the year, saving up to 80% in time for some processes. Currently, the Bank is in the process of automating its regulatory processes. These include information-assisted screening of the Mainland's anti-money laundering system, risk monitoring and online banking remittance processes, and accelerating the implementation of RegTech to enhance regulatory and compliance efficiency.

CORPORATE CULTURE

In 2020, the Bank further promoted its corporate culture among its employees by carrying out various cultural activities to raise their awareness and recognition. Staff members were motivated to put the corporate culture values into practice so that the atmosphere of "Exceed ‧ Excel" of Chong Hing Bank could be further reinforced.

The "Chong Hing People's Charter" was introduced to encourage employees to adopt the desired work practices and demonstrate the enterprise spirit and management concepts of the Bank's corporate culture.
"The 2nd Corporate Culture Ambassador Programme" was launched, in which 26 ambassadors were appointed to promote the corporate culture; 40 corporate cultural events with over 1,400 participants were held.
Employees were encouraged to make innovative suggestions for driving the sustainable development of the Bank. A number of ideas covering administration, system upgrading and corporate culture have been implemented.
Through collaboration with a third-party research team, the third corporate culture survey was conducted to gauge staff perceptions of corporate culture and their behavioural changes. The results will help Chong Hing Bank to formulate its future culture promotion strategy.
The Staff Compliment Platform was launched to promote a corporate culture of mutual encouragement and appreciation, thereby enhancing employees' sense of belonging and strengthening team spirit.

2020 Annual Report

CHIEF EXECUTIVE'S STATEMENT

CORPORATE RESPONSIBILITY

In order to fulfil its corporate mission of "To benefit the community", alongside its business development, the Bank continues to care for the community and help the underprivileged. It has actively supported and participated in the activities of social welfare organisations and environmental groups, performing its corporate social responsibility and contributing to the creation of a harmonious and inclusive community.

CARING FOR THE COMMUNITY AND THE ENVIRONMENT

In March, the Bank participated in the "Earth Hour 2020" environmental protection activity organised by World Wide Fund for Nature.
In May, the management team, together with the volunteers' team, donated face masks and hand sanitisers to Baptist Oi Kwan Social Service, Senior Citizen Home Safety Association and Hong Kong Association of the Deaf, providing pandemic prevention support to underprivileged families, the elderly and people with disabilities.

In September, the Bank joined the Mid-Autumn Festival Home Visit organised by Senior Citizen Home Safety Association and visited some elderly people who were living alone; the Bank's volunteers brought them seasonal food, pandemic prevention materials, as well as warm greetings.

The Bank once again joined the "Child Development Fund" organised by the Labour and Welfare Bureau by providing matching donations to the participating children of the Baptist Oi Kwan Social Service programme. The Fund aims to provide support to children so that they can develop savings habits, identity their long-term vision and achieve personal growth.

Chong Hing Bank Limited

CHIEF EXECUTIVE'S STATEMENT

During the year, the Bank continued to support the fundraising activities of charities such as The Community Chest of Hong Kong, Tung Wah Group of Hospitals, Yan Chai Hospital, Po Leung Kuk and Yan Oi Tong through the Bank's branch network. These activities included selling raffle tickets, collecting donations from flag days, and setting up donation boxes in branches. In addition, the Bank also arranged to attach the promotional leaflets of charities to the Bank's mailings to customers to help raise funds for the charities.

ACHIEVEMENTS UNDER CORPORATE RESPONSIBILITY

To fulfill its corporate social responsibility, the Bank has continued to implement policies and measures to care for its employees, invest in staff training and development, as well as actively participate in charitable activities such as environmental protection, financial education and concern for the well-being of the underprivileged. The Bank's commitment to staff welfare and community service has been recognised by various sectors of the community in 2020:

The "Best Reward & Recognition Strategy Award (Grand)" and the "Best Innovation L&D Initiative Award (Gold)" in the "Best HR Awards 2020" awarded by CTgoodjobs in recognition of the Bank's outstanding performance in motivating and developing its staff.
The "Good MPF Employer Award" for 2019 - 2020, and the "e-Contribution Award" and the "MPF Support Award" presented by the Mandatory Provident Fund Schemes Authority.

The "Green Office" and "Eco-Healthy Workplace" labels presented by the World Green Organisation.

The "Social Capital Builder Logo Award 2020" presented by the "Community Investment and Inclusion Fund" under the Labour and Welfare Bureau.

The "Happy Company" logo presented by the Hong Kong Productivity Council and the Promoting Happiness Index Foundation.
Signed "Joyful@Healthy Workplace" charter promoted by the Department of Health, the Labour Department and the Occupational Safety and Health Council.

Participated in the "Jockey Club 'Age-friendly City Partnership' Scheme 2020" and recognised with their logo.

2020 Annual Report

CHIEF EXECUTIVE'S STATEMENT

Chong Hing Bank Limited

CHIEF EXECUTIVE'S STATEMENT

The 10 Years plus Caring Company Logo awarded by the Hong Kong Council of Social Service.

The "Second Runner-up Award in the Industrial and Commercial Institutions and Group of the Charity Raffle Competition" and the "Raffle Sales Award" presented by the Tung Wah Group of Hospitals.

CORPORATE GOVERNANCE

The Bank fully recognises the importance of compliance with relevant regulations and regulatory requirements and the maintenance of good corporate governance standards to the sustainable development of the Bank. Hence the Bank adopts and implements corresponding measures to ensure compliance with relevant regulations and regulatory requirements in order to maintain high-quality corporate governance.

For details of the Bank's corporate governance practices, please refer to the section entitled "Corporate Governance Report" of this Annual Report.

2020 Annual Report

CHIEF EXECUTIVE'S STATEMENT

AWARDS AND RECOGNITION

The Bank is committed to providing quality banking services and improving operational efficiency. In 2020, it received the following awards and recognition from professional bodies:

Selected among the Top 1000 World Banks by the British magazine The Banker, Chong Hing Bank's ranking rose from the 722nd in 2013 to 381st in 2020, placing it among the top 400 in the global banking industry.
Received for the 12th time the "Best SME's Partner Award" presented by the Hong Kong General Chamber of Small and Medium Business, and once again received the "Best SME's Partner Gold Award".

The "One-stop Portal for Shenzhen-Hong Kong Commercial Services" setup in the Shenzhen Branch of the Bank was awarded the Third Prize in the Shenzhen "Financial Innovation Awards" 2019 by Shenzhen Municipal Financial Regulatory Bureau.

Chong Hing Bank Limited

CHIEF EXECUTIVE'S STATEMENT

FUTURE DEVELOPMENT

The global economy was in recession in 2020 due to the COVID-19 outbreak. Hong Kong's economic outlook is facing a high degree of uncertainty, with persisting risks of a downward economy and deterioration of credit conditions. Thus, the banking industry is experiencing a tough and challenging time.

The year 2020 was the year for concluding the Bank's current five-year strategic plan, and formulating the next one. Over the past five years the Bank underwent a smooth development with a rising industry ranking. Laying the groundwork for the "14th Five-Year Plan" (2021-2025), the Bank has consolidated and strengthened its corporate governance and operational control. It has also significantly enhanced its middle and back office support, products and services, as well as its financial technology capabilities, and has steadily expanded its business network and value customer base.

In the face of the rapid changes and challenges in the external environment, Chong Hing Bank, with the support of its controlling shareholder Yuexiu Group, will adopt in its new five-year plan the guiding principle of "seeking progress in a stable manner and aiming high". It will fully capitalise on its advantage of being based in the financial centre of Hong Kong, and actively seize the opportunities arising from the national strategic development to achieve stable and long-term development. The Bank will treat the Mainland business as its core operation, focus on the Greater Bay Area in its strategic development, improve the network of its Mainland institutions, strive for the establishment of a wholly-owned banking subsidiary in Mainland China, and make strategic breakthroughs in cross-border business and digital transformation. The goal is to build the Bank into a national bank with sound and efficient risk control, enhanced management quality, continuously improved service standards and strengthened professional development, forming a dual core business structure in Hong Kong and the Mainland.

APPRECIATION

In the past year, the pandemic brought unprecedented challenges to the world. The Bank has responded with a series of measures to protect the health and safety of its customers and employees. It has also launched relief programmes for customers affected by the pandemic and provided donations of pandemic prevention materials to the needy.

I would like to express my gratitude to the Board of Directors for their guidance and support during this challenging period, which have enabled the Bank to pursue its business in accordance with the established development strategy. Heartfelt thanks also go to our shareholders, business partners and customers who have consistently supported and trusted the Bank. I am also grateful to the excellent management team and staff for their hard work and dedication in overcoming the difficulties and fighting the pandemic. The Bank will continue to pay close attention to the development of the pandemic and the market situation, and respond appropriately with measures to ensure the continued business operation of the Bank. We will also strive to fully implement our strategic plan for the next five years, continue to strengthen overall risk control, improve operational efficiency, provide professional financial services to customers, and create greater value for our shareholders.

Zong Jianxin

Chief Executive

Hong Kong, 4 March 2021

2020 Annual Report

DIRECTORS' REPORT

The Directors of Chong Hing Bank Limited (the "Bank") are pleased to present their report together with the audited consolidated financial statements of the Bank and its subsidiaries (collectively the "Group") for the year ended 31 December 2020.

PRINCIPAL ACTIVITIES AND BUSINESS REVIEW

The Group is engaged in provisions of banking and related financial services. Details of the principal activities and other particulars of the Bank's principal subsidiaries are set out in note 23 to the consolidated financial statements.

A discussion and analysis of the activities as required by Schedule 5 to the Hong Kong Companies Ordinance (Chapter 622 of the Laws of Hong Kong) (the "Companies Ordinance"), including a fair review of the business and a description of the principal risks and uncertainties facing the Group, particulars of important events affecting the Group that have occurred since the end of the financial year 2020 (if any), as well as indication of likely future development in the Group's business are set out in the sections headed "Financial Summary" on pages 2 to 3, "Chairman's Statement" on pages 15 to 17, "Chief Executive's Statement" on pages 18 to 34 and note 7 to the consolidated financial statements on pages 120 to 170 in this Annual Report. Discussions on the environmental policies and performance, compliance by the Group with the relevant laws and regulations that have a significant impact on the Group and an account of the key relationships of the Group with its stakeholders are contained in the "2020 Environmental, Social and Governance Report", which is an online report available on the websites of Hong Kong Exchanges and Clearing Limited ("HKEX") and the Bank. The discussion referred to the above form part of this report.

BUSINESS PERFORMANCE

The Group's total operating income (net of interest expense and fee and commission expense) is analysed and reported by significant business classes as follows:

	2020	2019
	HK$'000		HK$'000
Corporate and personal banking	2,901,024	3,037,316
Financial markets activities	557,083	519,751
Securities business	169,877	114,384
Others	180,733	339,820

	3,808,717	4,011,271

The corporate and personal banking services provided by the Group are principally lending and trade finance facilities, auto financing, consumer financing, overdraft facilities, mandatory provident fund services, provision of fixed deposits, current and savings accounts, credit cards and personal wealth management services. The Group also provides fully automated telephone and internet banking services to its customers. Other banking services offered include remittance and money exchange, safe deposit boxes, autopay and direct debit services.

Financial markets activities mainly comprise inter-bank placement and deposit transactions, management of overall interest rate risk and liquidity of the Group and centralised cash management. Income from foreign exchange activities is generated from services provided to customers in the form of foreign exchange trading and forward contracts, and from the Bank's cash management activities through foreign currency funding swaps.

Chong Hing Bank Limited

DIRECTORS' REPORT

Securities business of the Group includes securities trading, stockbroking and futures broking.

Others comprise investment holding, insurance, other investment advisory services and property investments.

An analysis of the Group's performance for the year by operating and geographical segments is set out in note 6 to the consolidated financial statements.

MAJOR CUSTOMERS

The Directors believe that the five largest customers of the Group accounted for less than 30% of the total of interest income and other operating income of the Group for the year.

RESULTS AND APPROPRIATIONS

The results of the Group for the year ended 31 December 2020 are set out in the consolidated income statement and the consolidated statement of comprehensive income on pages 84 and 85.

An interim cash dividend of HK$0.11 (2019: HK$0.17 per share) per share was paid to the shareholders during the year. The board of Directors of the Bank (the "Board") has recommended the payment of a final cash dividend for the year ended 31 December 2020 of HK$0.23 per share (2019: HK$0.41 per share). Subject to the shareholders' approval at the forthcoming annual general meeting of the Bank to be held on 14 May 2021 (the "2021 AGM"), the final cash dividend will be paid on 2 June 2021 to the shareholders whose names appear on the register of members of the Bank as at the close of business on 25 May 2021.

FINANCIAL SUMMARY

A summary of the results for the year and of the assets and liabilities of the Group as at 31 December 2020 and for the last four financial years is set out on pages 2 and 3 of this Annual Report.

DISTRIBUTABLE RESERVES

Distributable reserves of the Bank as at 31 December 2020, calculated under the provisions of sections 291, 297 and 299 of the Companies Ordinance, amounted to HK$9,055,117,000 (2019: HK$7,876,893,000).

SHARES ISSUED

Details of the issued share capital of the Bank during the year ended 31 December 2020 are set out in note 31 to the consolidated financial statements. There was no share issued by the Bank during the year.

DEBENTURES ISSUED

The Bank issued US$300 million 5.50% Undated Non-cumulative Subordinated Additional Tier 1 Capital Securities on 3 August 2020 (the "New Securities") under its US$2 billion Medium Term Note and Perpetual Capital Securities Programme. After deducting the issuance costs, the Bank received net consideration of HK$2,316,681,000 from the issuance of the New Securities. The net proceeds enabled the Bank to strengthen its capital base and support the implementation of its strategic plans. The New Securities are listed on The Stock Exchange of Hong Kong Limited (the "Stock Exchange").

Details of the debentures issued during the year ended 31 December 2020 are set out in note 32 to the financial statements.

2020 Annual Report

DIRECTORS' REPORT

PURCHASE, SALE OR REDEMPTION OF THE BANK'S LISTED SECURITIES

The Bank has redeemed all the outstanding 6.000% subordinated notes due 2020 in an aggregate principal amount of US$204,024,000 ("2020 Due Subordinated Notes") at maturity on 4 November 2020. The 2020 Due Subordinated Notes were then cancelled and delisted from the Stock Exchange.

Save as disclosed above, neither the Bank nor any of its subsidiaries has purchased, sold or redeemed any of the Bank's listed securities during the year ended 31 December 2020.

DIRECTORS

The Directors of the Bank during the year and up to the date of this report are:

EXECUTIVE DIRECTORS

Mr ZONG Jianxin	(Deputy Chairman and Chief Executive)
Mr LAU Wai Man	(Deputy Chief Executive)

NON-EXECUTIVE DIRECTORS

Mr ZHANG Zhaoxing	(Chairman)
Mr LI Feng
Mr CHOW Cheuk Yu Alfred BBS, JP
Ms CHEN Jing

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr CHENG Yuk Wo

Mr MA Chiu Cheung Andrew

Mr LEE Ka Lun

Mr YU Lup Fat Joseph

In accordance with article 100 of the Bank's articles of association (the "Articles of Association") and pursuant to the code provision A.4.2 of the Corporate Governance Code and Corporate Governance Report set out in Appendix 14 of the Rules Governing the Listing of Securities on the Stock Exchange (the "Listing Rules"), Messrs. Li Feng, Cheng Yuk Wo and Ma Chiu Cheung Andrew shall retire by rotation at the 2021 AGM. Except for Mr Ma Chiu Cheung Andrew who will not seek for re-election after his retirement at the conclusion of the 2021 AGM, all other retiring directors, being eligible, offer themselves for re-election at the 2021 AGM.

Mr Cheng Yuk Wo has served as an Independent Non-executive Director of the Bank for more than nine years. During his tenure, Mr Cheng has not engaged in any executive management of the Bank and has demonstrated his ability to provide an independent view to the Bank's matters. In addition, Mr Cheng has declared his independence by submitting the annual confirmation of independence to the Bank pursuant to rule 3.13 of the Listing Rules. The Board believes that he is independent and complies with the independence requirements under rule 3.13 of the Listing Rules.

Details of the retiring Directors to be re-elected at the 2021 AGM are set out in the circular to the shareholders sent together with this Annual Report.

Chong Hing Bank Limited

DIRECTORS' REPORT

DIRECTORS OF SUBSIDIARIES

Listed below are the names of all the directors who have served on the boards of directors of the Bank's subsidiaries during the year and up to the date of this report:

Mr CHAN Kam Ki Vincent	Mr LAI Kwok Wai Paul(3)
Mr CHAN Man Mei	Mr LAU Wai Man
Mr CHAN Tai On	Mr LEUNG Chan Keung
Mr CHENG Yuk Wo	Mr MA Chiu Cheung Andrew
Mr CHIU Tak Wah Edward	Mr MA Wai Leung
Ms CHIU Yau Sim(1)	Mr SEI Wing Keen
Mr CHOW Cheuk Yu Alfred	Mr WONG Wan Hong
Mr CHU Shiu Man	Mr WOO Pak Kin Clement(2)
Mr CHUN Ka Wing	Mr ZONG Jianxin

Notes:

Retired as a Director of the relevant subsidiary of the Bank on 1 January 2020.
Appointed as a Director of the relevant subsidiaries of the Bank on 2 January 2020 and 24 March 2020 respectively.
Resigned as a Director of the relevant subsidiary of the Bank on 7 April 2020.

A list of names of all the directors who have served on the boards of directors of the subsidiaries of the Bank during the year ended 31 December 2020 and up to the date of this report is available on the Bank's website (www.chbank.com/en/ personal/footer/about-ch-bank/investor-relations/directors-list/index.shtml).

DIRECTORS' SERVICE CONTRACTS

No Directors proposed for re-election at the 2021 AGM has a service contract with the Bank and/or any of its subsidiaries which is not determinable by the Bank within one year without payment of compensation (other than statutory compensation).

INDEPENDENCE OF INDEPENDENT NON-EXECUTIVE DIRECTORS

The Bank has received from each of the Independent Non-executive Directors an annual confirmation of his independence pursuant to rule 3.13 of the Listing Rules. The Nomination and Remuneration Committee has duly reviewed the independence of each of these directors. The Bank considered that all the Independent Non-executive Directors meet the independent guidelines set out in rule 3.13 of the Listing Rules and are independent in accordance with the terms of the guideline.

2020 Annual Report

DIRECTORS' REPORT

DIRECTORS' INTERESTS IN TRANSACTIONS, ARRANGEMENTS AND CONTRACTS OF SIGNIFICANCE

Saved as disclosed in the section headed "CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS" of this report, no transactions, arrangements and contracts of significance in relation to the Group's business to which the Bank or any of its holding companies, its subsidiaries or its fellow subsidiaries was a party and in which a Director of the Bank or an entity connected with a Director (within the meaning of section 486 of the Companies Ordinance) had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

DIRECTORS' INTERESTS IN COMPETING BUSINESS

None of the Directors is interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Bank.

DISCLOSURE OF CHANGES IN DIRECTORS' INFORMATION

After having made all reasonable enquiry, the Bank is not aware of any information which is required to be disclosed by Directors pursuant to rule 13.51B(1) of the Listing Rules since the date of the Bank's 2020 interim report for the six months ended 30 June 2020 and up to 4 March 2021 (being the date of approval of this Annual Report).

DIRECTORS' REMUNERATION

The emoluments of the Directors of the Bank on a named basis are set out in note 42 to the consolidated financial statements. During the year ended 31 December 2020, the annual fees for the Chairman and members of the Audit Committee, Connected Party Transactions Committee (the "CPT Committee"), Nomination Committee*, Remuneration Committee*, Risk Committee and Information Technology Strategy Committee (formerly known as Special Board Committee (for an Information Technology Project)) (the "ITSC")) are as follows:

	Audit	CPT	Nomination	Remuneration	Risk
	Committee	Committee	Committee*	Committee*	Committee	ITSC
Chairman	HK$100,000	HK$80,000	HK$80,000	HK$80,000	HK$80,000	HK$100,000
Member	HK$20,000	HK$20,000(1)	HK$20,000	HK$20,000	HK$20,000	HK$20,000(2)

The Nomination Committee and the Remuneration Committee have been re-organized into the Nomination and Remuneration Committee with effect from 1 January 2021.

Notes:

Chief Financial Officer and Chief Risk Officer of the Bank, who also serve as members of the CPT Committee, are not entitled to receive the abovementioned membership fee.
Executive Directors and Chief Information Officer of the Bank, who also serve as members of the ITSC, are not entitled to receive the abovementioned membership fee. The remaining members of the ITSC are Mr LEE Ka Lun (being the Chairman of the ITSC) and Mr LI Feng.

Chong Hing Bank Limited

DIRECTORS' REPORT

PERMITTED INDEMNITY PROVISION

Pursuant to the Articles of Association, every Director or other officer of the Bank shall be entitled to be indemnified out of the assets of the Bank against any liability (to the extent permitted by the Companies Ordinance) incurred by them or any of them as the holder of any such office or appointment to a person other than the Bank or any of its holding companies, its subsidiaries or its fellow subsidiaries. The Bank has taken out insurance against any liability associated with defending any proceedings which may be brought against the Directors and other officers of the Bank.

DIRECTORS' (INCLUDING THE CHIEF EXECUTIVE'S) INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As of 31 December 2020, the interests and short positions of the Directors (including the Chief Executive) of the Bank in the shares, underlying shares and debentures of the Bank or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the "SFO")) as recorded in the register required to be kept under section 352 of the SFO (the "Register"), or as otherwise notified to the Bank and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers under Appendix 10 to the Listing Rules (the "Model Code"), were as follows:

INTERESTS IN SHARES AND/OR UNDERLYING SHARES OF THE BANK

		Number of underlying shares held,
		nature and capacity of interests
			Family
		Personal	interests	Corporate
		interests	(interest of	interests
		(held as	spouse	(interest of		Approximate
	Long/short	beneficial	or child	controlled	Total	percentage
Name of Director	position	owner	under 18)	corporation)	interests	of interests(1)
Zong Jianxin	Long position	168,659(2)	-	-	168,659	0.017%
Lau Wai Man	Long position	77,031(2)	-	-	77,031	0.008%

Notes:

The approximate percentage of interests held was calculated on the basis of 972,526,094 ordinary shares of the Bank in issue as at 31 December 2020.
These represent the interests of award shares granted to the Directors under the Share Award Scheme adopted by the Bank on 27 February 2020. Details of award shares are set out under the sub-section headed "Share Award Scheme" in this report.

2020 Annual Report

DIRECTORS' REPORT

INTERESTS IN SHARES AND/OR UNDERLYING SHARES IN THE ASSOCIATED CORPORATION OF THE BANK

			Number of shares held,
			nature and capacity of interests
				Family
			Personal	interests	Corporate
			interests	(interest of	interests
			(held as	spouse	(interest of		Approximate
		Long/short	beneficial	or child	controlled	Total	percentage
Name of Director	Associated Corporation	position	owner)	under 18)	corporation)	interests	of interests(1)
Li Feng	Yuexiu Property	Long position	172,900	-	-	172,900	0.001%
	Company Limited
Lee Ka Lun	Yuexiu Property	Long position	3,200,000	-	-	3,200,000	0.021%
	Company Limited
Yu Lup Fat Joseph	Yuexiu Property	Long position	4,000,000	-	-	4,000,000	0.026%
	Company Limited

Note:

The approximate percentage of interests held was calculated on the basis of 15,482,280,438 ordinary shares of Yuexiu Property Company Limited in issue as at 31 December 2020.

Save as disclosed above, as of 31 December 2020, to the knowledge of the Bank, none of the Directors (including the Chief Executive) of the Bank had any other interests or short positions in any shares, underlying shares or debentures of the Bank or any of its associated corporations (within the meaning of Part XV of the SFO) as recorded in the Register, or as otherwise notified to the Bank and the Stock Exchange pursuant to the Model Code.

DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Saved as disclosed above and in the sections headed "EQUITY-LINKED AGREEMENTS" in this report and "SHARE BASED PAYMENT" in note 34 to the consolidated financial statements, at no time during the year ended 31 December 2020, was the Bank or its subsidiaries a party to any arrangement to enable the Directors (including the Chief Executive) of the Bank and their spouses or children under the age of 18 to acquire benefits by an acquisition of shares or underlying shares in, or debentures of the Bank or any of its associated corporations (within the meaning of Part XV of the SFO); or was the Bank or any of its holding companies, its subsidiaries or its fellow subsidiaries a party to any arrangement to enable the Directors of the Bank to acquire benefits by means of the acquisition of shares in or debentures of the Bank or any other body corporate.

Chong Hing Bank Limited

DIRECTORS' REPORT

SUBSTANTIAL SHAREHOLDERS' AND OTHER PERSONS' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

As of 31 December 2020, the following parties, other than the Directors or the Chief Executive of the Bank, had interests or short positions in the shares and underlying shares of the Bank as recorded in the register required to be kept under section 336 of the SFO:

			Number of	Approximate
	Long/short	Nature and	ordinary	percentage of
Name	position	capacity of interests	shares held	interests(1)
Yuexiu Financial Holdings Limited(2)	Long position	Direct interests/	729,394,500	75%
		Beneficial owner
Yue Xiu Enterprises (Holdings) Limited	Long position	Corporate interests/	729,394,500	75%
("YX Enterprises")		Interest of controlled
		corporation
Guangzhou Yue Xiu Holdings Limited*	Long position	Corporate interests/	729,394,500	75%
(廣州越秀集團股份有限公司)		Interest of controlled
("GZYX Holdings")		corporation
Guangzhou Metro Group Co., Ltd.*	Long position	Corporate interests/	70,126,000	7.21%
(廣州地鐵集團有限公司)(3)		Interest of controlled
		corporation

Notes:

The approximate percentage of interests held was calculated on the basis of 972,526,094 ordinary shares of the Bank in issue as at 31 December 2020.
Yuexiu Financial Holdings Limited is wholly-owned by YX Enterprises, and YX Enterprises is wholly-owned by GZYX Holdings.
Pursuant to the SFO, 廣州地鐵集團有限公司 (Guangzhou Metro Group Co., Ltd.*) is deemed to be interested in 70,126,000 ordinary shares of the Bank as a result of its indirect holding of such shares through its wholly-owned subsidiary, details of which were as follows:

Name	Long position in shares
Guangzhou Metro Investment Finance (HK) Limited (Note (i))	70,126,000

1. 70,126,000 ordinary shares of the Bank were held by Guangzhou Metro Investment Finance (HK) Limited, which is wholly-owned by 廣州地鐵集團有限公司 (Guangzhou Metro Group Co., Ltd.*). Guangzhou Metro Investment Finance (HK) Limited and 廣州地鐵集團有限公司 (Guangzhou Metro Group Co., Ltd.*) are legally and beneficially owned as to 7.21% by 70,126,000 ordinary shares of the Bank respectively.
for identification purpose only

Save as disclosed above, as at 31 December 2020, no other person, other than the Directors or the Chief Executive of the Bank whose interests are set out in the above section headed "Directors' (including the Chief Executive's) interests and short positions in shares, underlying shares and debentures", had any interests or short positions in the shares or underlying shares of the Bank as recorded in the register required to be kept under section 336 of the SFO.

2020 Annual Report

DIRECTORS' REPORT

EQUITY-LINKED AGREEMENTS

Save as disclosed below and "SHARE BASED PAYMENT" in note 34 to the consolidated financial statements, no equity- linked agreements was entered into by the Bank during the year or subsisted at the end of the year.

The Bank operates two equity-settledshare-based compensation schemes including a share option scheme (the "Share Option Scheme") and a share award scheme (the "Share Award Scheme"). Details of which are set out in the paragraphs below.

SHARE OPTION SCHEME

The Bank has no outstanding share options at the beginning and at the end of the year. During the year, no share options have been granted under the Share Option Scheme adopted by the Bank pursuant to a resolution passed on 9 May 2012 and there is no change in any terms of the Share Option Scheme. Details of the Share Option Scheme are set out in note 34 to the consolidated financial statements.

SHARE AWARD SCHEME

The Bank adopted the Share Award Scheme on 27 February 2020 (the "Adoption Date") and, subject to any early termination as may be determined by the Board pursuant to the rules governing the Share Award Scheme adopted by the Board, as amended from time to time (the "Scheme Rules"), shall be valid and effective for a term of 10 years commencing on the Adoption Date.

The specific objectives of the Share Award Scheme are (i) to synchronize the employees' perspectives with shareholders through continuous shares incentives; (ii) to ensure that the interests returned to the employees in key positions are related to the shareholders; (iii) to attract the right talents for promoting the future development of the Group; (iv) to reduce the turnover of the employees in key positions, to strengthen the Group's performance; and (v) to reward the employees who have made outstanding contributions in driving the continuous business operation and development of the Group.

Pursuant to the Scheme Rules, the Board may, from time to time, at its absolute discretion select any eligible participant(s) to participate in the Share Award Scheme as selected employee(s) and to grant the award shares, and determine the amount of award shares to be awarded as well as the terms and conditions to be complied with by any selected employee. A selected employee shall be entitled to receive the new shares of the Bank on the vesting dates in accordance with vesting schedule and upon the selected employee has satisfied all other vesting conditions as determined by the Board in its absolute discretion, if any.

According to the Scheme Rules, the award shares shall be vested in four tranches of which 25% of the award shares shall be vested in each of the first, the second, the third and the fourth calendar year of continuous service with the Group after the grant date.

The Board shall not make any further grant of award shares under the Share Award Scheme such that the total number of award shares granted under the Share Award Scheme will not exceed 10% of the total number of issued shares of the Bank as at the grant date. During the year ended 31 December 2020, a total of 1,447,397 award shares were granted under the Share Award Scheme and 91,466 award shares had been forfeited before vesting. No award shares have been vested during the year. Further details of the Share Award Scheme are set out in note 34 to the consolidated financial statements.

Chong Hing Bank Limited

DIRECTORS' REPORT

During the year ended 31 December 2020, the movements of the award shares of the Bank are set out as follows:

				Number of Award Shares
		As at		Granted		Vested		Forfeited		As at
Category of Participants/		1 January		during		during		during	31 December
Name	Date of grant	2020		the year		the year		the year	2020	Vesting Period
Directors
Zong Jianxin	16 March 2020	-	168,659		-		-	168,659	16 March 2021 to
											16 March 2024
Lau Wai Man	16 March 2020	-	77,031		-		-	77,031	16 March 2021 to
											16 March 2024

Sub-total		-	245,690		-		-	245,690
Eligible Participants

In aggregate	16 March 2020	-	1,201,707		-	91,466	1,110,241	16 March 2021 to
											16 March 2024
Total
	-	1,447,397		-	91,466	1,355,931

CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS

During the year, the Group conducted certain connected transaction and continuing connected transactions with certain connected persons (as defined in the Listing Rules) which are required to be disclosed pursuant to rules 14A.49 and14A.71 of the Listing Rules.
CONNECTED TRANSACTION
On 16 March 2020, the Board resolved that 255,802 Award Shares be granted to three Connected Grantees who are connected persons of the Bank, including two Executive Directors of the Bank and one director of the Bank's significant subsidiaries pursuant to the Share Award Scheme adopted by the Bank on 27 February 2020, in order to recognize the contributions of the Connected Grantees and in driving the continuous business operation and development of the Group. The Award Shares to three Connected Grantees shall be satisfied by way of allotment and issue of 255,802 new Shares pursuant to a Specific Mandate. The Specific Mandate and the allotment and issue of new Shares to the Connected Grantees under the Share Award Scheme were approved by the independent shareholders of the Bank at the annual general meeting of the Bank held on 15 May 2020.
Further details of the Share Award Scheme are set out under the sub-section headed "Share Award Scheme" of this report, the announcement of the Bank dated 16 March 2020 and the circular of the Bank dated 14 April 2020. The capitalized terms set out in this paragraph shall have the same meanings as defined in the circular of the Bank dated 14 April 2020 unless the context otherwise requires.

2020 Annual Report

DIRECTORS' REPORT

CONTINUING CONNECTED TRANSACTIONS

On 25 August 2020, the Bank and Guangzhou Yuexiu Financial Technology Co., Ltd.* (廣州越秀金融科技有限公司) ("Yuexiu Financial Technology") (an associate of GZYX Holdings) entered into an Information Technology Framework Agreement (the "2020 IT Framework Agreement") to renew the arrangements under the Information Technology Framework Agreement dated 25 October 2017 (the "2017 IT Framework Agreement") entered into between the Bank and Yuexiu Financial Technology which governs the provision of various information technology related services (the "IT Services") by Yuexiu Financial Technology and its subsidiaries (the "Yuexiu Financial Technology Group") to the Group. The term of the 2017 IT Framework Agreement commenced on 25 October 2017 and ended on 31 August 2020 (both dates inclusive); the term of the 2020 IT Framework Agreement commenced on 1 September 2020 and shall end on 31 August 2023 (both dates inclusive).
Mr Li Feng, being common director of the Bank and Guangzhou Yuexiu Financial Holdings Group Co., Ltd., being the immediate holding company of Yuexiu Financial Technology, on the date of execution of the 2020 IT Framework Agreement, abstained from voting on the resolutions approving the 2020 IT Framework Agreement (including the annual caps). Save as disclosed above, none of the Directors has any material interest in the 2020 IT Framework Agreement (including the annual caps).
The fees charged by the Yuexiu Financial Technology Group for the IT Services to be supplied to the Group under the 2017 IT Framework Agreement and 2020 IT Framework Agreement were/will be determined with reference to the expected costs to be incurred in the course of provision of the IT Services to the Group, volume and duration of the IT Services required, and the prevailing market prices of the same or similar services offered by independent third parties.
The total fees incurred in respect of the IT Services provided by the Yuexiu Financial Technology Group to the Group under the 2017 IT Framework Agreement during the period from 1 January 2020 to 31 August 2020 were HK$13,713,589, which was within the annual cap of HK$87,540,000 as announced on 25 October 2017.
The total fees incurred in respect of the IT Services provided by the Yuexiu Financial Technology Group to the Group under the 2020 IT Framework Agreement during the period from 1 September 2020 to 31 December 2020 were HK$5,599,397, which was within the annual cap of HK$10,000,000 as announced on 25 August 2020.

Chong Hing Bank Limited

DIRECTORS' REPORT

On 29 March 2018, Guangzhou Tianhe Sub-Branch of the Bank ("Guangzhou Tianhe Sub-Branch") and Guangzhou Jiayao Real Estate Company Limited* (廣州佳耀置業有限公司) ("Guangzhou Jiayao") (an associate of YX Enterprises) entered into a Tenancy Agreement (the "YX Financial Tower Tenancy Agreement") for the lease of Units 102-01, 201 and 301, Yuexiu Financial Tower, 28 Zhujiang East Road, Tianhe District, Guangzhou, the People's Republic of China ("PRC") (the "YX Financial Tower Property")# at a monthly rent (inclusive of 5% VAT) of RMB166,576.20 from 1 April 2018 to 30 April 2018, RMB166,577.25 from 1 May 2018 to 31 May 2018, RMB333,153.45 from 1 June 2018 to 31 March 2019, RMB166,576.20 from 1 April 2019 to 30 April 2019, RMB166,577.25 from 1 May 2019 to 31 May 2019, RMB333,153.45 from 1 June 2019 to 31 March 2020, RMB166,576.20 from 1 April 2020 to 30 April 2020, RMB166,577.25 from 1 May 2020 to 31 May 2020 and RMB333,153.45 from 1 June 2020 to 31 March 2021. Guangzhou Tianhe Sub-Branch was entitled to a rent concession in an aggregate amount of RMB333,153.45 (inclusive of tax) for the first two months of each year of the lease period. If the YX Financial Tower Tenancy Agreement is terminated before its expiry date for reasons not related to Guangzhou Jiayao, Guangzhou Tianhe Sub-Branch will no longer be entitled to such rent concession and will be required to immediately repay Guangzhou Jiayao the difference between the rents payable during the aforesaid rent concession period and the actual rents paid.
On 29 March 2018, Guangzhou Tianhe Sub-Branch and Guangzhou Yue Xiu City Construction Jones Lang LaSalle Property Services Co., Ltd.* (廣州越秀城建仲量聯行物業服務有限公司) ("GZYX Jones Lang") (an associate of YX Enterprises) entered into a Property Management Agreement for the provision of management services in relation to the YX Financial Tower Property at a monthly management fee of RMB48,743.
On 29 March 2018, Guangzhou Branch of the Bank ("Guangzhou Branch") and Guangzhou Yuyao Real Estate Company Limited* (廣州譽耀置業有限公司) ("Guangzhou Yuyao") (an associate of YX Enterprises) entered into a Site Agreement for the lease of the rooftop of Yuexiu Financial Tower, 28 Zhujiang East Road, Tianhe District, Guangzhou, PRC (the "Site") for display of the Bank's logo at the rooftop of the Site at an annual rental fee (inclusive of tax) of RMB800,000.
The total rents, management fees and rental fees of the Site incurred during the financial year 2020 were RMB5,049,603.95, which were within the annual cap of RMB5,173,000 as announced on 29 March 2018.
On 30 November 2018, Guangzhou Branch and Guangzhou Jingyao Real Estate Company Limited* (廣州景耀置業有限公司) (an associate of YX Enterprises) entered into a new Tenancy Agreement for the lease renewal of Rooms 01-16, 50/F, Yuexiu Financial Tower, 28 Zhujiang East Road, Tianhe District, Guangzhou, PRC (the "YX Tower Property") at a monthly rent (inclusive of 5% VAT) of RMB714,486.15 from 1 December 2018 to 30 November 2020 and RMB757,355.55 from 1 December 2020 to 30 November 2021.
On 30 November 2018, Guangzhou Branch and GZYX Jones Lang entered into a new Property Management Agreement for the provision of management services in relation to the YX Tower Property at a monthly management fee of RMB100,761.
The total rents and management fees incurred during the financial year 2020 were RMB9,825,835.20, which were within the annual cap of RMB10,080,000 as announced on 30 November 2018.

2020 Annual Report

DIRECTORS' REPORT

On 17 May 2019, the Bank and GZYX Holdings entered into a Foreign Exchange and Financial Markets Transactions Framework Agreement (the "2019 Framework Agreement") to renew the arrangements under the framework agreement dated 17 June 2016 entered into between the Bank and GZYX Holdings which governs the foreign exchange transactions and financial markets transactions (the "FX and FM Transactions") to be entered into between the Group and GZYX Holdings and its non-listed subsidiaries (the "Yuexiu Holdings Private Group"). The term of the 2019 Framework Agreement commenced on 1 January 2019 and shall end on 31 December 2021 (both dates inclusive). The FX and FM Transactions between the Group and the Yuexiu Holdings Private Group adopted the prevailing market prices or rates normally applicable to similar transactions conducted with independent third parties.
Mr Zhang Zhaoxing, being common director of the Bank and GZYX Holdings on the date of execution of the 2019 Framework Agreement, abstained from voting on the resolutions approving the 2019 Framework Agreement and the FX and FM Transactions contemplated thereunder (including the annual caps). Save as disclosed above, none of the Directors has any material interest in the 2019 Framework Agreement and the FX and FM Transactions contemplated thereunder (including the annual caps).
From 1 January 2020 to 31 December 2020, the aggregate absolute amount of fair value at inception of the FX and FM Transactions recorded as assets/liabilities was HK$2,023,182, which was within the annual cap of HK$30 million for the financial year 2020 as announced on 17 May 2019.
On 21 August 2019, the Bank and Yuexiu Property Company Limited (listed on the Stock Exchange, Stock Code: 00123) ("Yuexiu Property") (an associate of YX Enterprises) entered into a Foreign Exchange Transactions Framework Agreement (the "2019 FX Framework Agreement") to renew the arrangements under the framework agreement dated 29 November 2016 entered into between the Bank and Yuexiu Property which governs the foreign exchange transactions (the "FX Transactions") to be entered into between the Group and Yuexiu Property and its subsidiaries (the "Yuexiu Property Group"). The term of the 2019 FX Framework Agreement commenced on 1 January 2019 and shall end on 31 December 2021 (both dates inclusive). The FX Transactions between the Group and the Yuexiu Property Group adopted the prevailing market prices or rates normally applicable to similar transactions conducted with independent third parties.
Mr Li Feng, Ms Chen Jing, Mr Lee Ka Lun and Mr Yu Lup Fat Joseph, being common directors of the Bank and Yuexiu Property on the date of execution of the 2019 FX Framework Agreement, abstained from voting on the resolutions approving the 2019 FX Framework Agreement and the FX Transactions contemplated thereunder (including the annual caps). Save as disclosed above, none of the Directors has any material interest in the 2019 FX Framework Agreement and the FX Transactions contemplated thereunder (including the annual caps).
From 1 January 2020 to 31 December 2020, the aggregate absolute amount of fair value at inception of the FX Transactions recorded as assets/liabilities was HK$608,386, which was within the annual cap of HK$40 million for the financial year 2020 as announced on 21 August 2019.

Chong Hing Bank Limited

DIRECTORS' REPORT

Details of the above continuing connected transactions have been disclosed in accordance with Chapter 14A of the Listing Rules and are set out in the respective announcements of the Bank which are available at the websites of the Bank and HKEX.

for identification purpose only

- The address of YX Financial Tower Property as set out in the Bank's announcement dated 29 March 2018 was Units 101-01, 201 and 301, Yuexiu Financial Tower, 28 Zhujiang East Road, Tianhe District, Guangzhou, PRC, which was subsequently corrected as Units 102-01, 201 and 301, Yuexiu Financial Tower, 28 Zhujiang East Road, Tianhe District, Guangzhou, PRC.
EXEMPT CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS
During the year, the Bank entered into transactions with GZYX Holdings and its associates (as defined under Chapter 14A of the Listing Rules) and the Bank's directors and their associates. Such transactions included but not limited to cheque clearing, accepting deposits, extending credit facilities, foreign exchange transactions, remittances and other banking and financial services, which were conducted on normal commercial terms and in the ordinary and usual course of business of the Bank, and are exempt from the relevant disclosure requirements under Chapter 14A of the Listing Rules.
ANNUAL REVIEW OF CONTINUING CONNECTED TRANSACTIONS
The Bank's external auditor, was engaged to report on the Group's continuing connected transactions in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" and with reference to Practice Note 740 "Auditor's Letter on Continuing Connected Transactions under the Hong Kong Listing Rules" issued by the Hong Kong Institute of Certified Public Accountants. The auditor has issued an unqualified letter containing its findings and conclusions in respect of the continuing connected transactions disclosed in the paragraphs above in accordance with rule 14A.56 of the Listing Rules. A copy of the auditor's letter has been provided by the Bank to the Stock Exchange.
In accordance with rule 14A.55 of the Listing Rules, the Independent Non-executive Directors of the Bank reviewed the continuing connected transactions disclosed in the paragraphs above and the auditor's letter and confirmed that those transactions were conducted and entered into (i) in the ordinary and usual course of business of the Group, (ii) on normal commercial terms, and (iii) in accordance with the respective agreements governing such transactions on terms that are fair and reasonable and in the interests of shareholders of the Bank as a whole.
RELATED PARTY TRANSACTIONS
Certain related party transactions (the "RPT Transactions") as disclosed under note 39 to the consolidated financial statements constituted connected transactions or continuing connected transactions under the Listing Rules. Such RPT Transactions are either disclosed in the above sub-sections headed "Connected Transaction" and "Continuing Connected Transactions" or exempt from the disclosure requirements under Chapter 14A of the Listing Rules.

2020 Annual Report

DIRECTORS' REPORT

SUPPLEMENTAL INFORMATION REGARDING CONNECTED TRANSACTIONS ON THE RENEWAL OF TENANCY AGREEMENT AND SITE AGREEMENT
As announced on 26 February 2021, Guangzhou Tianhe Sub-Branch and Guangzhou Jiayao entered into a new Tenancy Agreement for the lease renewal of the YX Financial Tower Property as well as Guangzhou Branch and Guangzhou Yuyao entered into a new Site Agreement for the lease renewal of the Site for display of the Bank's logo at the rooftop of the Site.

Both Guangzhou Jiayao and Guangzhou Yuyao are subsidiaries of Yuexiu Property. Guangzhou Jiayao and Guangzhou Yuyao are principally engaged in the leasing and management of properties and Yuexiu Property is principally engaged in property development and investment, focusing on property development in Guangdong-HongKong-Macau Greater Bay Area, Eastern China Region, Central China Region, Northern China Region and Western China Region.

EMPLOYEE AND REMUNERATION POLICIES

As at 31 December 2020, the Group had approximately 1,758 employees (2019: 1,792 employees). Total staff cost for the

year was approximately HK$1,031,530,000 (2019: approximately HK$1,020,196,000). Details of the staff cost (including Directors' emoluments) for the year are set out in note 13 to the consolidated financial statements.

The Bank has set up the Remuneration Committee (the Nomination Committee and the Remuneration Committee have been re-organized into the Nomination and Remuneration Committee with effect from 1 January 2021), responsibilities of which include reviewing the Group's remuneration policies by reference to the Bank's corporate goals and objectives. Details of the remuneration policies for employees are set out in section headed "Nomination and Remuneration Committee" under "Corporate Governance Report" of this Annual Report.

The Group operates two retirement schemes including defined benefit scheme and a Mandatory Provident Fund Scheme. Particular of these retirement schemes are set out in note 38 to the consolidated financial statements.

SIGNIFICANT CONTRACTS

During the year, the Bank entered into deposit transactions with GZYX Holdings, the ultimate holding company, and the related interest expenses accounted for approximately 2% of the Bank's profits before tax and loan transactions with Guangzhou Yuexiu Financial Leasing Co., Ltd., a fellow subsidiary, and the related interest income accounted for approximately 1% of the Bank's profits before tax. Such transactions were conducted on normal commercial terms and in the ordinary and usual course of business of the Bank, and fallen within the exemption for financial assistance under rule 14A.87 of the Listing Rules.

Saved as disclosed above and in the section headed "CONNECTED TRANSACTIONS AND CONTINUING CONNECTED TRANSACTIONS" of this report, the Group and the Bank's controlling shareholder or its subsidiaries had not entered into any other contracts of significance or contract of significance of provision of service during the year.

MANAGEMENT CONTRACTS

Save for the service contracts, no other contracts concerning the management and/or administration of the whole or any substantial part of the business of the Bank were entered into or subsisting during the year.

Chong Hing Bank Limited

DIRECTORS' REPORT

DONATIONS

During the year, the Group made charitable and other donations amounting to approximately HK$149,000 (2019: HK$125,000).

PUBLIC FLOAT

Based on the information that is publicly available to the Bank and within the knowledge of the Directors of the Bank, as at the date of this report, the Bank has maintained the prescribed public float as required under the Listing Rules.

CORPORATE GOVERNANCE

Details of the corporate governance practices of the Bank are set out in the "Corporate Governance Report" in this Annual Report.

AUDITOR

The consolidated financial statements of the Group for the year ended 31 December 2020 have been audited by PricewaterhouseCoopers who shall retire and, being eligible, offer itself for re-appointment as the Bank's auditor at the 2021 AGM.

On behalf of the Board

Zhang Zhaoxing

Chairman

Hong Kong, 4 March 2021

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

CORPORATE GOVERNANCE PRACTICES

Chong Hing Bank Limited (the "Bank") is an authorized institution supervised by the Hong Kong Monetary Authority (the "HKMA") under the Hong Kong Banking Ordinance (the "Banking Ordinance"). The Bank is committed to maintaining high standards of corporate governance, with a view to safeguarding the interests of shareholders, customers, employees and other stakeholders.

The Bank has applied the principles in the Corporate Governance Code (the "CG Code") set out in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and the module on "Corporate Governance of Locally Incorporated Authorized Institutions" ("CG-1") under the Supervisory Policy Manual ("SPM") issued by the HKMA to its corporate governance structure and practices.

Throughout the year ended 31 December 2020, the Bank has complied with all applicable code provisions set out in the CG Code, except for deviation from the code provision A.4.1. Under the code provision A.4.1, non-executive directors should be appointed for a specific term, subject to re-election. Currently, all Non-executive Directors of the Bank are not appointed for a specific term but are subject to retirement by rotation and re-election at the annual general meeting of the Bank in accordance with the Bank's articles of association (the "Articles of Association").

DIRECTOR' SECURITIES TRANSACTIONS

The Bank has adopted its own code for securities transactions by Directors on terms no less exacting than those set out in the Model Code for Securities Transactions by Directors of Listed Issuers under Appendix 10 to the Listing Rules (the "Model Code"). All Directors confirmed, following specific enquiry by the Bank, that they have complied with the required standards set out in the Model Code and the Bank's own code for securities transactions by Directors throughout the year ended 31 December 2020.

BOARD OF DIRECTORS

ROLES AND RESPONSIBILITIES

The board of Directors of the Bank (the "Board") is ultimately responsible for the sustainable performance of the Bank and its subsidiaries (the "Group"), including the consistent achievement of business plans and compliance with statutory and corporate obligations. It is the ultimate decision-making body for all matters considered material to the Group and operates under defined terms of reference. The Board is also responsible for laying down strategic directions of the Group and overseeing their implementation by senior management, reviewing the operational and financial performance, and providing oversight to ensure that effective systems of risk management and internal control of the Group are in place. In addition, the Board also plays a leading role in establishing the Group's culture and behavioural standards that promote prudent risk-taking and fair treatment of customers.

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

While the Board delegates the day-to-day management of the Group's business to senior management, specific matters are reserved for the Board's consideration and decision under its terms of reference including, but not limited to, the Group's long-term objectives and strategies, annual business plan and budget, capital planning and management policies, annual and interim financial reporting, major capital projects and investments, major acquisitions and disposals, overall risk management strategy and framework, share award scheme adopted by the Bank, oversee and lead the formulation of the Group's development strategies and goals of environmental, social and governance ("ESG") (including, without limitation, climate change, green and sustainable banking) as well as the governance framework of its related risk management functions and other significant ESG related issues, and corporate governance matters covering the development, implementation and monitoring of the corporate governance policies and practices.

During the year, the Board conducted a robust review of the Group's corporate governance framework and updated its terms of reference and other Board Committees' terms of reference to reflect best practices. The Board also adopted various policies as recommended by the Risk Committee, Remuneration Committee and Executive Committee and reviewed the Bank's compliance with the CG Code and the SPMs issued by the HKMA including the necessary disclosures in its reports to the shareholders of the Bank (the "Shareholders").

CHAIRMAN AND CHIEF EXECUTIVE

The roles of the Chairman and the Chief Executive of the Bank are separate, with a clear division of responsibilities as set out in the Board's terms of reference.

The Chairman of the Board, who is a Non-executive Director, is responsible for the leadership and effective running of the Board and for ensuring that decisions of the Board are taken on a sound and well-informed basis and in the best interest of the Group. With the support of the Executive Directors and the Company Secretary, the Chairman also ensures that all key and appropriate issues are discussed by the Board in a timely manner.

The Chief Executive, who is an Executive Director, leading the Group's management, is accountable to the Board for the overall implementation of the Bank's objectives, policies, major strategies and initiatives adopted by the Board. With the support of other Executive Director and senior management, he is also in charge of all day-to-day operations and administration, within the framework of the Group's policies, reserved powers and routine reporting requirements.

BOARD COMPOSITION

As of 31 December 2020, there are ten Board members comprising two Executive Directors, four Non-executive Directors and four Independent Non-executive Directors. There is a strong independent element on the Board that ensures the independence and objectivity of the decisions of the Board, as well as the thoroughness and impartiality of the Board's oversight of the management.

The composition of the Board is well balanced with each Director having sound board level experience and a diverse range of business, banking and professional expertise relevant to the business operations and development of the Group. Biographies of the Directors and relevant relationships (including financial, business, family or other material relationship) among the Directors, senior management and substantial shareholders (as defined in the Listing Rules) of the Bank are set out in the section headed "Biographical Details of Directors and Senior Management" on pages 6 to 12 of this Annual Report.

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

All Directors are expressly identified by reference to their roles and functions and whether they are Executive Directors, Non-executive Directors and Independent Non-executive Directors in all corporate communications of the Bank that disclose their names. An updated list of the Directors (including their roles and functions) of the Bank is available on the websites of Hong Kong Exchanges and Clearing Limited ("HKEX") and the Bank.

During the year ended 31 December 2020, the Board at all times met the requirements of the Listing Rules relating to the appointment of at least three independent non-executive directors, representing one-third of the Board, with at least one of them possessing appropriate professional qualifications or accounting or related financial management expertise as required under rule 3.10(1) and (2), and rule 3.10A of the Listing Rules. The Bank has received from each of the Independent Non-executive Directors an annual confirmation of his independence. Following the assessment of the independence of the Independent Non-executive Directors in accordance with the guidelines set out in rule 3.13 of the Listing Rules, the Board confirmed that all Independent Non-executive Directors continue to be independent.

APPOINTMENT AND RE-ELECTION OF DIRECTORS

The Bank adopts a formal procedure in the selection of new Directors and nomination of retiring Directors for re-election by the Shareholders at general meetings.

The Nomination and Remuneration Committee identifies individual(s) suitably qualified to become director(s), having due regard to the strategic needs of the Bank and succession planning of the Board. The prospective director will first be assessed by the Nomination and Remuneration Committee, taking into account the balance of skills, knowledge, experience and diversity on the Board. Upon receiving the recommendation from the Nomination and Remuneration Committee, the proposed appointment will be considered and approved by the Board after due deliberation.

In accordance with the requirement under the Banking Ordinance, approval from the HKMA will be obtained for the appointment of new Directors.

All new Directors are subject to re-election by the Shareholders at the following annual general meeting after the appointment. None of the Non-executive Directors of the Bank were appointed for a specific term; however, all Directors are subject to retirement by rotation at the annual general meeting at least once every three years in accordance with the Articles of Association. The retiring Directors shall be eligible for re-election. The appointment of an Independent Non- Executive Director who has served on the Board for more than nine years will be subject to a separate resolution to be approved by shareholders. The Board will provide in the circular accompanying that resolution sent to shareholders the reason why the Board considers the Independent Non-Executive Director is still independent and its recommendation to shareholders to vote in favour of the re-election of such Independent Non-executive Director.

BOARD PROCESS

Board meetings shall be held at least four times a year and no less than once every quarter. Additional Board meetings will be held as and when warranted.

Notice of meetings will be given to all Directors at least 14 days before each regular meeting to give them an opportunity to include matters for discussion in the agenda. Meeting agenda and accompanying Board papers are normally sent to all Directors at least a week before the intended date of a Board meeting.

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

The Board has a standing agenda of items to ensure that matters relating to overall strategies, business plans, interim and annual results, corporate governance review, risk management and compliance are covered in its meetings at appropriate intervals.

Apart from those regular financial and business performance reports submitted to the Board for deliberation at the regular meetings, the management provides monthly updates to the Board members with information on the Bank's latest financial performance and any material variance from its annual business plan to enable them to discharge their responsibilities. Management also submits to the Board members regular reports regarding auditor's and regulators' findings and recommendations as well as loans and advances to connected parties for regular review and monitoring, where appropriate.

During the year, there were five Board meetings, all of which were convened in accordance with the Articles of Association and attended by the Directors either in person or through electronic means of communication. In addition to the formal Board meetings, the Chairman has regular communications with Directors, occasionally without the presence of the Executive Directors and senior management, to consider issues in an informal setting. During 2020, the Chairman held a meeting that was attended only by Independent Non-executive Directors.

During the year, the Board also had a telephone conference with the representatives of HKMA to maintain a regular dialogue with the regulator where HKMA shared with the Board about HKMA's overall supervisory assessment of the Bank and their key supervisory focuses on the banking industry in general.

All Directors are entitled to have access to board papers and related materials. Where queries are raised by Directors, steps will be taken to respond as promptly and fully as possible. Any concerns raised or dissenting views expressed by the Directors in respect of any matter discussed at a Board meeting will be reflected clearly in the minutes. Full minutes are being kept by the Company Secretary and such minutes are open for inspection at any time during office hours on reasonable notice by any Director.

All Directors are entitled to seek independent professional advice for the purpose of discharging their duties at the Bank's expense.

All Directors have devoted sufficient time and attention to the affairs of the Bank.

The Bank has put in place procedures to deal with Directors' conflict of interest. Directors are required to declare their direct/indirect interests, if any, in any proposed transactions to be considered by the Board and, where appropriate, they should abstain from voting on the proposed transactions and should not be counted in the quorum.

Appropriate Directors' and Officers' liability insurance cover has been arranged to indemnify the Directors and Officers against liabilities arising out of corporate activities. The coverage and the sum insured for 2020/2021 was reviewed and renewed.

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

ATTENDANCE RECORDS

The attendance records of individual Directors at the Board, Board Committee meetings and annual general meeting held in 2020 are as follows:

					2020
			Number of Meetings Attended/Required Meetings to Attend
			Connected					Information
			Party					Technology	Annual
		Audit	Transactions	Executive	Nomination	Remuneration	Risk	Strategy	General
Names of Directors	Board	Committee	Committee	Committee	Committee(2)	Committee(2)	Committee	Committee(3)	Meeting
Chairman and Non-executive
Director
Mr ZHANG Zhaoxing	5/5	-	-	-	1/1	2/2	-	-	1/1
Executive Directors
Mr ZONG Jianxin	5/5	-	-	16/19	-	-	-	2/2	1/1
Mr LAU Wai Man	5/5	-	-	18/19	-	-	-	2/2	1/1
Non-executive Directors
Mr LI Feng	5/5	-	-	-	-	-	4/4	2/2	1/1
Mr CHOW Cheuk Yu Alfred	5/5	4/4	Nil(1)	-	-	2/2	-	-	1/1
Ms CHEN Jing	4/5	3/4	-	-	-	-	-	-	1/1
Independent Non-executive
Directors
Mr CHENG Yuk Wo	5/5	4/4	Nil(1)	-	1/1	-	4/4	-	1/1
Mr MA Chiu Cheung Andrew	5/5	-	Nil(1)	-	1/1	2/2	-	-	1/1
Mr LEE Ka Lun	5/5	4/4	-	-	-	2/2	4/4	2/2	1/1
Mr YU Lup Fat Joseph	5/5	4/4	-	-	1/1	2/2	4/4	-	1/1

Notes:

During the year, the Connected Party Transactions Committee has, by way of written resolutions, reviewed and recommended to the Board for approval of various connected transactions of the Group.
With effect from 1 January 2021, the Nomination Committee and the Remuneration Committee have been re-organized into the Nomination and Remuneration Committee.
With effect from 15 May 2020, the Special Board Committee (for an Information Technology Project) has been upgraded to the Information Technology Strategy Committee. The Special Board Committee (for an Information Technology Project) had held 3 meetings in 2020 before the upgrade.

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

BOARD EFFECTIVENESS

During the year ended 31 December 2020, the Board conducted an annual review of its effectiveness by way of an evaluation survey (the "Survey") and received responses from all Directors. The scope of the Survey required Directors to consider the performance and effectiveness of the Board and its Board Committees including the composition, structure, dynamics, operation and diversity. The overall feedback was positive and encouraging. The evaluation revealed that the Board and all the Board Committees continue to perform well with a strong composition and operate to a high standard.

INDUCTION AND ONGOING DEVELOPMENT

The Bank provides each Director with personalized induction, training and development. On appointment, each new Director receives a comprehensive and tailored induction covering, among others, information about the Group's operations and business, the roles and responsibilities of the Board and its key Board Committees, the Bank's governance structure and practices, and the ambit of the internal audit and risk management functions.

On an ongoing basis, all Directors are provided with briefings and trainings in order to keep them continually updated on the Group's business and the latest developments of the Listing Rules and other applicable laws, rules and regulations to ensure the continued enhancement of their knowledge and skills. Such briefings and trainings are provided at the Bank's expense.

During the year, the Bank had organized a one and a half day of "Board Strategy Meeting" and had provided a number of trainings and briefings to the Directors which covered topics on the Bank's corporate culture, latest governance and regulatory updates and risk management.

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

All Directors are required to provide their training records to the Bank on an annual basis. The training received by the Directors during the year under review is summarized as follows:

		Articles/Seminars/
		Conferences relevant to
		the Bank's business and
Names of Directors	Regulatory Updates	corporate governance
Chairman and Non-executive Director
Mr ZHANG Zhaoxing		
Executive Directors
Mr ZONG Jianxin		
Mr LAU Wai Man		
Non-executive Directors
Mr LI Feng		
Mr CHOW Cheuk Yu Alfred		
Ms CHEN Jing		
Independent Non-executive Directors
Mr CHENG Yuk Wo		
Mr MA Chiu Cheung Andrew		
Mr LEE Ka Lun		
Mr YU Lup Fat Joseph		

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

POLICY STATEMENT ON BOARD DIVERSITY

The Bank recognizes and embraces the benefits of having a Board composed of a diverse range of experience, which is an essential element in supporting the attainment of the Bank's strategic objectives and achieving sustainable commercial success of the Bank.

Board diversity has been considered from various aspects in designing the Board's composition, including gender, age, cultural and educational background, industry or related experience, ethnicity, professional experience, skills, knowledge and length of service (the "Diversity Aspects"). All Board members' appointments will be based on meritocracy, and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board. During the year, the Nomination Committee had reviewed the Board diversity based on the Diversity Aspects and considered that it had a balanced diversity. As at 31 December 2020, the composition of the Board was as follows:

No. of Directors

10
	ED	Female	40-49	Below 5			Below 5
9

8			50-59	5-14		Professional
				Accountant

7
6	NED						5-14
		15-24

5					Chinese	Lawyer
		Male
4

3			60 or
			above	25 or
2	INED			above		Others
				15 or

1							above

0
	Designation	Gender	Age group	Banking	Ethnicity	Professional	Length of
				Industry or		experience	service
				related			(year)
				experience,
				skills and
				knowledge
				(year)

The diverse culture helps promote critical thinking and foster constructive debate, thereby enabling the Board to provide strategic direction to the management and to ensure the decision-making process is fair and balanced. All of these are essential in achieving a sustainable and balanced development of the Group.

This policy statement is not intended to, and does not, either enlarge or diminish the responsibilities of the Directors under the Articles of Association and such other relevant laws, rules, regulations, codes, guidelines, practice notes, circulars and the like. This policy statement is, however, intended to serve as a source of guiding principles for Directors to take appropriate actions to achieve the aims of board diversity as outlined above. The Board will review and, where appropriate, revise from time to time this policy statement in light of experience, evolving standards of corporate governance and any other changing circumstances.

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

COMPANY SECRETARY

All Directors have access to the advice and services of the Company Secretary. The Company Secretary is responsible for ensuring the Board policies and procedures are followed and for facilitating information flows and communications among Directors as well as with Shareholders and Management.

The Company Secretary's biography is set out in the "Biographical Details of Directors and Senior Management" section on page 12 of this Annual Report. During the year of 2020, the Company Secretary undertook over 15 hours of professional training to update her skills and knowledge.

BOARD COMMITTEES

The Board has delegated its authorities to various committees, namely the Audit Committee, the Connected Party Transactions Committee, the Executive Committee, the Nomination and Remuneration Committee*, the Risk Committee and the Information Technology Strategy Committee** which operate under defined Terms of Reference. Composition and Terms of Reference of the Board Committees are reviewed and updated regularly by the Board to ensure that they remain appropriate and in line with the Group's business and changes in governance practices.

Terms of Reference of the respective Board Committees are available on the websites of HKEX and the Bank.

Each Board Committee has been provided with sufficient resources to discharge its duties.

With effect from 1 January 2021, the Nomination Committee and the Remuneration Committee have been re-organised into the Nomination and Remuneration Committee.
With effect from 15 May 2020, the Special Board Committee (for an Information Technology Project) has been upgraded to the Information Technology Strategy Committee.

AUDIT COMMITTEE

The Audit Committee currently consists of five members, including three Independent Non-executive Directors and two Non-executive Directors.

Under its Terms of Reference, the Audit Committee is required, among other things, to make recommendations to the Board on the appointment, reappointment and removal of the external auditor, to review and monitor the external auditor's independence and objectivity and the effectiveness of the audit process in accordance with the applicable standards, to review any engagement of external auditor for the provision of non-audit services, to review the half- year and annual reports and accounts before submission to the Board, to receive audit reports and review the external auditor's management letter, to review audit and/or investigation reports submitted by the Chief Auditor, to review the HKMA's on-site examination reports and bring major findings to the attention of the Board, and to assess and consider the adequacy and effectiveness of the Group's systems of internal control, financial reporting and controls, risk management and regulatory compliance.

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

Four committee meetings were held in 2020 and the attendance records of the Audit Committee members are set out on page 55 of this Annual Report. The major work performed by the Audit Committee during the year included:

met with the external auditor and the Bank's senior executives in charge of Finance and Capital Management function to discuss the financial statements for the year ended 31 December 2019 and for the six months ended 30 June 2020;
reviewed and discussed with the external auditor to ensure that the Group's financial statements had been prepared in accordance with the accounting principles generally accepted in Hong Kong;
reviewed the re-appointment of the Bank's external auditor, including its independence and objectivity, and the scope of audit services;
reviewed the audit fees payable to the external auditor and recommended to the Board for approval, and reviewed the annual non-audit services provided by the external auditor to the Group and the related fees;
reviewed the external auditor's audit strategy and plan of the Group for the year of 2020 and the assessment of the sufficiency of the internal control of the Group for the year of 2019;
reviewed the report for the year 2019 and the report for the six months ended 30 June 2020 issued from the external auditor to the Audit Committee;
reviewed the internal control issues and the internal audit function of the Group, covering the annual internal audit plan, revision on the amendment of internal audit procedure, staffing, resources and performance of Internal Audit Division, audit findings and recommendations raised in the internal audits undertaken, and the implementation status of related audit recommendations;
approved the internal audit plan for 2020;
reviewed and adopted the advice provided by external quality independent assurance consultant to further enhance the effectiveness of the Audit Committee and the internal audit function, approved the revised Internal Audit Policy and recommended amendments to its Terms of Reference to the Board for approval;
reviewed the independent auditor's report of "Commercial Credit Risk Management" of the Bank;
reviewed the amendment on the Bank's procedure for implementing the quarterly regulatory disclosure pursuant to the Banking (Disclosure) Rules and recommended to the Board for adopting the procedure;
reviewed the Bank's progress for the adoption of HKFRS 9 (Financial Instruments); and
reviewed the structure, scope of work, qualification and experience of employee and employee's training course of the Bank's Finance and Capital Management Division, and confirmed that the Bank has sufficient resources in accounting and financial reporting to deal with the daily work.

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

REVIEW OF FINANCIAL RESULTS

The Audit Committee had reviewed the Group's financial statements for the year ended 31 December 2020 in conjunction with the Bank's external auditor. Based on this review and discussions with the Management, the Audit Committee was satisfied that the Group's financial statements for the year ended 31 December 2020 were prepared in accordance with applicable accounting standards and fairly present the Group's financial position and results for the year ended 31 December 2020. The Audit Committee therefore recommended the Group's financial statements for the year ended 31 December 2020 be approved by the Board.

AUDITORS' REMUNERATION

The remuneration paid and payable to the Group's auditor, PricewaterhouseCoopers, for 2020 amounted to:

	HK$'000

Audit services and interim review	8,418
Tax service	372
Other service	1,120

Total	9,910

CONNECTED PARTY TRANSACTIONS COMMITTEE

The Connected Party Transactions Committee currently consists of five members, including one Non-executive Director, two Independent Non-executive Directors, the Chief Financial Officer and the Chief Risk Officer of the Bank.

Under its Terms of Reference, the Connected Party Transactions Committee is responsible for reviewing the robustness of the Bank's control framework to ensure proper compliance with all legal and regulatory requirements, Listing Rules together with accounting requirements (promulgated in Hong Kong and other jurisdictions) as may be applicable and approving significant connected transactions.

During the year, no physical committee meeting was held while the Connected Party Transactions Committee, by written resolutions, had reviewed and recommended to the Board for approval of various connected transactions between the Group and the members of 廣州越秀集團股份有限公司 (Guangzhou Yue Xiu Holdings Limited*), including the granting of credits and loans and the renewal of Information Technology Framework Agreement.

for identification purpose only

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

EXECUTIVE COMMITTEE

The Executive Committee currently consists of nine members, including two Executive Directors and other senior executives of the Bank.

The Executive Committee exercises its powers, authorities and discretions as delegated by the Board to manage the day-to-day operations of the Group in accordance with its Terms of Reference and such other policies and directives as the Board may determine from time to time. The Executive Committee demonstrates its commitment and conviction in implementation of proper bank culture and values at all level of the Group, sets appropriate "tone from the top" and leads by example.

The Executive Committee has established the Asset and Liability Management Committee, the Expenses Control Committee, the New Product Approval Committee, the Disciplinary Committee, the Information Technology Committee, the Risk Management Committee, IT Project Steering Committee and the Interest Rate Benchmarks Reform Project Steering Committee with defined Terms of Reference that are in line with best practices. The above specialized sub-committees report directly to the Executive Committee and are responsible for overseeing assets and liabilities management, expenses control, approval of new products and services, staff disciplinary-related issues, overall information technology strategy, major risk and compliance issues as well as specific projects of the Group.

19 Executive Committee meetings were held in 2020 and the attendance records of the Executive Directors are set out on page 55 of this Annual Report.

NOMINATION AND REMUNERATION COMMITTEE

The Nomination Committee and the Remuneration Committee of the Bank have been re-organised into the Nomination and Remuneration Committee with effect from 1 January 2021 (the "Re-organisation") which currently consists of six members, including four Independent Non-executive Directors and two Non-executive Directors.

Nomination Committee before the Re-organisation

Prior to the Re-organisation, the Nomination Committee consisted of four members, including three Independent Non- executive Directors and one Non-executive Director.

Under its Terms of Reference, the Nomination Committee is responsible for, among others, reviewing and making recommendations to the Board on the structure, size and composition of the Board and identifying potential candidate suitably qualified to become director of the Bank.

One committee meeting was held in 2020 and the attendance records of the Nomination Committee members are set out on page 55 of this Annual Report. The primary duties performed by the Nomination Committee during the year included:

made recommendation to the Board on the extension of the employment contract of Mr Lau Wai Man as Executive Director and Deputy Chief Executive of the Bank and his retirement age;
made recommendation to the Board on the appointment of independent non-executive director of the Bank;
made recommendation to the Board on the promotion of the Head of Legal and Compliance Division of the Bank;

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

reviewed the structure, size and composition (including skills, knowledge, experience and diversity) of the Board and its committees and made recommendations to the Board;
reviewed the efficiency and effectiveness of the functioning of the Board and its committees;
assessed and confirmed the independence of the Independent Non-executive Directors of the Bank;
made recommendation on the nomination of Directors for the Board to recommend to the Shareholders for re- election at the annual general meeting held on 15 May 2020 ("2020 AGM"); and
approved the updated Senior Management Succession Policy and reported to the Board.

Remuneration Committee before the Re-organisation

Prior to the Re-organisation, the Remuneration Committee consisted of five members, including three Independent Non- executive Directors and two Non-executive Directors.

Authority and Responsibility

Under its Terms of Reference, the Remuneration Committee is responsible for, among others, making recommendation and reviewing the Remuneration Policy of the Group by taking into account the pay and conditions across the Group's individual remuneration packages for Directors, Senior Management and Key Personnel as well as those in positions of significant influence and those having an impact on the Group's risk profile; ensuring that the remuneration frameworks and decisions shall be developed in a manner that is in line with the Group's risk appetite, risk culture and long-term interests; ensuring that no individual Director, Chief Executive or any of their associates will be involved in deciding his/ her own remuneration; and assisting the Board in carrying out the Bank's Corporate Culture-related duties.

Remuneration Structure

The remuneration system of the Group is composed mainly of fixed remuneration (cash-based) with performance based variable remuneration (discretionary cash bonus and/or other incentives in form of award shares (where applicable)) which does not only conform with the risk appetite, align with the long-term value creation and time horizon of risk of the Group to grow steadily and prudently by encouraging long-term performance rather than short-term risk taking, but also motivates, recognizes and rewards both outstanding individual contribution, sound team performance and positive behaviors. The proportion and amount of fixed and variable remuneration shall vary according to an employee's seniority, role and responsibilities within the Group, also the market benchmarking and trend.

Performance Management

The Group uses a Balanced Scorecard ("Scorecard") approach to measure and manage performance at the levels of the Group, business/functional units and individual employees. With reference to corporate goals and objectives at the beginning of financial year and when necessary, the Remuneration Committee reviews the Key Performance Indicators ("KPIs") and the corresponding target levels of the Group and recommends to the Board for approval. The targets of the Group will be cascaded down under the Scorecard Framework whereby the performance would be assessed from the four key quadrants of "financial", "customer", "internal process" and "people management".

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

Each key quadrant of the Scorecard is comprised of a set of KPIs to assess the performance according to the specific areas of responsibility of the Group, business/functional units and individual employees; both financial and non-financial performance indicators are required to ensure a balanced evaluation. To ensure independence, financial KPIs should not be applicable to those risk control unit/personnel whose performance should be evaluated by their performance objectives and independent of the performance of the business areas which they oversee.

To put the principle of aligning performance and remuneration with risk into practice, on top of the mentioned KPIs, a "Compliance and Risk Control" dimension is in place in the Scorecard to take into account any risk factors, control, ethics and compliance event, also its severity and impact to be fully reflected on the performance rating of the Group, business/ functional units and individual employees.

In the respect of risk management, the Bank has developed a complete Risk Appetite Statement and Key Risk Indicators as the basis for monitoring, assessing and controlling the Group's risk profile. In the Risk Modifier Framework of the Corporate Scorecard for 2020, six major areas including credit risk, liquidity risk, operational risk, information technological risk, compliance risk and risk culture are taken into account as a Corporate Scorecard Risk Modifier.

The Compliance and Risk Control assessment at individual level covers the employee's compliance, risk control and ethical standard. This includes, but is not limited to, the performance of the assessed employee in controlling various risks (e.g. credit, compliance, operations and reputation, etc.), the risk management ratings, compliance reports or audit reports related to the performance of the assessed employee, verbal or written warnings, etc.

Compliance and Risk Control Modifier can be applied to adjust the annual performance score in response to any relevant performance. Poor performance can result in a deduction of the total performance score, which in turn affects the magnitude and amount of variable remuneration.

Since 2018, under the current performance management system, apart from evaluating individuals' KPIs in the Scorecard, there is a separate assessment of adherence to "Corporate Culture and Values". The assessment indicators are designed and matched with reference to the Group's "Management Concepts" and "Enterprise Spirit" and the six "Core Competencies" and their related behavioral indicators, so as to ensure employees and appraising managers clearly understand the required behaviors and attitude to achieve the defined corporate culture and core values of the Group.

The final performance rating of the staff (including the "Balanced Scorecard" and "Corporate Culture and Values") will be a major consideration factor of their salary review and variable remuneration (if applicable).

Award of Variable Remuneration

The Bank's variable remuneration structure consists of discretionary cash bonus and/or other incentives in form of award shares (where applicable).

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

The size of the overall variable remuneration pool of the Group is determined according to the compliance/risk adjusted performance of the Group together with the consideration of all necessary factors (including capital position, market and peers business conditions, market competitiveness, material or potential risks involved in the business, and the extent to which the risks affect the Group as a whole), as recommended by the Remuneration Committee to the Board for approval and is subject to the Board's discretion.

The subsequent allocated quota of variable remuneration to each business/functional unit is based on the overall performance of the relevant business/functional unit; while the performance assessment of the employees is based on the final compliance/risk-adjusted performance rating in the individual Scorecards and the Corporate Culture and Values rating.

Poor performance (either financial or non-financial) will result in a reduction or elimination of discretionary variable remuneration at any level. Adverse performance in non-financial factors, where appropriate, should override outstanding financial achievements. The overall performance of a business/functional unit or an individual employee could be thoroughly assessed (taking into account compliance and risk factors), rather than solely relying on its/his/her financial performance. This ultimately helps mitigating the Group's risk exposure and aligns with its long-term value creation.

To ensure independence, the variable remuneration of risk control personnel is determined in accordance with their performance objectives and commensurate with their key role in the Group. To avoid possible undue influence from business units, risk control personnel are compensated in a manner that is independent of the performance of the business unit which they oversee.

Share Award Scheme

The Bank has adopted the Share Award Scheme on 27 February 2020 and, subject to any early termination as may be determined by the Board pursuant to the rules governing the Share Award Scheme adopted by the Board, as amended from time to time, shall be valid and effective for a term of 10 years commencing on the Adoption Date.

Pursuant to the rules governing the Share Award Scheme, the Board may, from time to time, at its absolute discretion select any eligible participant(s) to participate in the Share Award Scheme as selected employee(s) and to grant the award shares, and determine the amount of award shares to be granted as well as the terms and conditions to be complied with by any selected employee. A selected employee shall be entitled to receive new shares of the Bank on the vesting dates in accordance with the vesting schedule and upon the selected employee has satisfied all other vesting conditions as determined by the Board in its absolute discretion, if any.

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

Deferral Arrangements

The award of variable remuneration to employee is subject to deferment in such a manner as determined by the Remuneration Committee. Deferral of the payment of a portion of variable remuneration will allow employees' performance, including the associated risks, to be observed and validated over a period of time before the payment is actually made. In general, when the overall level of their variable remuneration exceeds a certain multiple of their fixed salary or a certain amount, a pre-defined portion is subject to deferment. Deferral period can last for 4 years the longest.

The award of deferred portion is subject to a minimum vesting period and pre-defined vesting conditions as determined by the Remuneration Committee and communicated to all relevant employees. Deferred portion is awarded in such a manner so as to align the relevant employees' variable awards with long-term value creation and the time horizons of risk. The future performance (both financial and non-financial) of the Group, relevant business/functional units, and individual employees is taken into consideration when approving the vesting arrangement. In circumstances where it is later established that any performance measurement for a pre-defined year was based on data that is later proven to have been manifestly misstated, or it is later established that the relevant employee has committed fraud, malfeasance, or a violation of internal control policies, any unvested portions of the deferred variable portion (relating to that particular year in question) should be forgone, either in part or in whole, as determined by the Remuneration Committee.

External Remuneration Consultant

The Remuneration Committee is authorised by the Board to seek professional advice as it deems appropriate and is responsible for the selection and appointment of consultants to advise it on all aspects of remuneration.

With the objective to motivate and retain key talents, the Group has appointed PricewaterhouseCoopers (PwC) as the professional consultant to provide advice and the associated consulting services for the Group's consideration on the Share Award Scheme's design framework.

PwC is appointed by the Group to conduct an independent review of the remuneration system and practices of the Group for 2020 against "Guideline on a Sound Remuneration System" ("CG-5") under the SPM issued by the HKMA.

Summary of Work

Two Committee meetings were held in 2020 and the attendance records of the Remuneration Committee members are set out on page 55 of this Annual Report. The major works performed by the Remuneration Committee during the year included:

reviewed the salary adjustment proposal for 2020 and the variable remuneration for 2019 for the Executive Directors, Senior Management and Key Personnel, and recommended to the Board;
proposed the remuneration packages for a number of Key Personnel, and recommended to the Board;
reviewed the Bank-level 2018 deferred variable remuneration vesting arrangement and recommended to the Board;
reviewed the performance indicators of the Corporate Balanced Scorecard of the Bank for 2020 and 2021 and the estimated achievement of targets for 2020; reviewed the proposal for the 2020 discretionary variable remuneration pool and Mainland relationship managers' incentive framework;

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

reviewed the Bank-level 2021 annual salary review proposal;
reviewed the proposal of the Share Award Scheme and the adoption of the Scheme for performance year 2019 and recommended to the Board; reviewed the proposed list of eligible participants and the amount of award shares to be granted to eligible participants under the Share Award Scheme for 2019 and recommended to the Board; also reviewed the proposed list of eligible participants of the Scheme for 2020;
reviewed the proposal of the 「開門紅」incentive plan for 2021 and recommended to the Board;
reviewed the update of the Remuneration Policy and its appendix with regards to the new Share Award Scheme and the restructuring of the Bank, and recommended to the Board;
received the report on Independent Review of the Group for 2019 against CG-5 by Internal Audit Division; and
reviewed the progress updates and the implementation of Chong Hing Bank Corporate Culture and reported to the Board.

The emolument payable to the Directors will depend on their respective contractual terms under employment contracts, if any, and the recommendations made by the Remuneration Committee. Details of the Directors' emolument are set out in note 42 to the Consolidated Financial Statements. According to the module on CG-5 and the Remuneration Policy of the Group, Senior Management refers to Executive Directors, Chief Executive, Deputy Chief Executives and chief functional officers; Key Personnel refers to individual positions whose duties or activities involve the assumption of material risk or the taking on of material exposures on behalf of the Group and Heads of control functions. There are currently 6 and 12 employees categorised as Senior Management and Key Personnel respectively. The aggregate payouts for these senior executives for 2019 and 2020 are shown in the tables below in accordance with the disclosure requirement under paragraph 3.2.3 of CG-5 issued by the HKMA on 12 March 2015.

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

The remuneration for the Senior Management and Key Personnel for the years ended 31 December 2019 and 2020 is as follows:

	Year ended 31 December 2020	Year ended 31 December 2019
Senior Management	HK$'000		HK$'000
	Non-deferred	Deferred	Non-deferred	Deferred
Fixed remuneration:	33,278	-	30,031	-
- Cash	33,278	-	30,031	-
- Shares	N/A	N/A	N/A	N/A
- Others	N/A	N/A	N/A	N/A
Number of beneficiaries	7	-	9	-
Variable remuneration:	3,455	3,892	7,060	876
- Cash	3,455	-	7,026	876
- Shares	-	3,892	N/A	N/A
- Others	-	-	34	-
Number of beneficiaries	7	6	7	4

Vested
- Cash	-	876	-	3,205
- Shares	-	-	N/A	N/A
Unvested
- Cash	-	-	-	-
- Shares	-	-	N/A	N/A
Reduced through performance adjustments
- Cash	-	-	-	-
- Shares	-	-	N/A	N/A

Remarks:

The above disclosed figures of vested cash bonus for 2019 and 2020 relate to 2018 and 2019 variable remuneration respectively.
The above disclosed figure of vested cash bonus for 2020 includes the vested amount of a former Senior Management who left the Group in January 2020.
There was an additional position categorized as Senior Management in 2019. The above disclosed figures for 2019 consist of the remuneration of this additional position.
There was a transition of Deputy Chief Executive ("DCE") and Chief Risk Officer ("CRO") in the Group in November and May 2019 respectively. The above disclosed figures for 2019 consist of the total remuneration of the former and current DCEs & CROs of their service tenures.

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

	Year ended 31 December 2020	Year ended 31 December 2019
Key Personnel	HK$'000		HK$'000
	Non-deferred	Deferred	Non-deferred	Deferred
Fixed remuneration:	32,052	-	36,834	-
- Cash	32,052	-	36,834	-
- Shares	N/A	N/A	N/A	N/A
- Others	N/A	N/A	N/A	N/A
Number of beneficiaries	14	-	13	-
Variable remuneration:	4,661	5,795	8,680	1,930
- Cash	4,661	659	8,582	1,930
- Shares	-	5,136	N/A	N/A
- Others	-	-	98	-
Number of beneficiaries	9	11	13	5

Vested
- Cash	-	2,493	-	3,380
- Shares	-	-	N/A	N/A
Unvested
- Cash	-	-	-	655
- Shares	-	-	N/A	N/A
Reduced through performance adjustments
- Cash	-	-	-	-
- Shares	-	-	N/A	N/A

Remarks:

The above disclosed figure of deferred shares of variable remuneration for 2020 includes the shares grant of two former Key Personnel who left the Group in September and December 2020.
There was a transition of the Head of Personal Banking Division in the Group in 2020. The above disclosed figures for 2020 consist of the total remuneration of the former and current Head of their service tenures.
The above disclosed figure of vested cash bonus for 2019 includes the vested amount of a former Key Personnel who left the Group in November 2018.
The above disclosed figure of vested cash bonus for 2019 relate to 2018 variable remuneration; and the figure of vested cash bonus for 2020 relate to 2018 and 2019 variable remuneration.
The above disclosed figure of unvested cash bonus for 2019 relates to 2018 variable remuneration.

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

	Year ended	Year ended
	31 December 2020	31 December 2019
	HK$'000	HK$'000
Guaranteed Bonus	-	-
Number of beneficiaries	-	-
Sign-on Awards	-	720
Number of beneficiaries	-	1
Severance Payment/Long Service Payment	-	-
Number of beneficiaries	-	-

The Remuneration Committee will continue to review and enhance the Group's Remuneration Policy in accordance with the principles and spirit of CG-1 and CG-5, with particular attention paid to risk adjustments to performance assessment; also alongside with the development of labor market, especially in the development of financial services sector, to evaluate and refine the remuneration provision of the Group so as to ensure that the rewards are competitive for the retention of talents.

RISK COMMITTEE

The Risk Committee currently consists of four members, including three Independent Non-executive Directors and one Non-executive Director.

Under its Terms of Reference, the Risk Committee is required, among other things, to advise the Board on the overall risk appetite/tolerance and risk management strategies of the Group, and to oversee senior management's implementation of those strategies that are established and approved by the Board and aligned with the Bank's overall business objectives. In performing its role, the Risk Committee is supported by the Bank's Risk Management Committee and its specialized sub-committees.

Four committee meetings were held in 2020 and the attendance records of the Risk Committee members are set out on page 55 of this Annual Report. The major duties performed by the Risk Committee during the year included:

reviewed the overall risk management strategies and risk appetite/tolerance statement(s) of the Group and made recommendation to the Board for approval, and received regularly the risk level rating for each risk type;
reviewed and assessed regularly the adequacy and effectiveness of the Group's risk management framework, internal control systems and risk management policies, procedures and systems, and monitored their effective operation, implementation and maintenance;
monitored the implementation progress of the risk management module under the substantial upgrade of the Bank's information technology system;

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

monitored the implementation progress of the rectification measures taken by the Bank in response to the findings of the thematic examinations or meetings on risk-related matters conducted by the HKMA and China Banking and Insurance Regulatory Commission;
reviewed and discussed the independent auditor's report of "Commercial Credit Risk Management" of the Bank;
reviewed the governance structure of the Bank;
approved the Stress Testing Policy, the Internal Stress-Test Methodology and the quarterly report of the stress- testing, and reviewed the Capital Management Policy, the Capital Contingency Plan, the Recovery Plan and the internal capital adequacy assessment process (ICAAP) of the Bank and made recommendation for the Board's approval;
reviewed the process updates of the risk culture related programmes of the Bank;
provided oversight on the independence of staff members responsible for implementing risk management systems and controls;
reviewed the Compliance Policy, Business Continuity Planning Policy and the Policy for Counterparty Credit Risk Management of the Bank and made recommendation for the Board's approval;
reported significant risk management issues to the Board as set out in its Terms of Reference; and
reviewed its Terms of Reference and recommended amendments to the Board for approval.

During the year under review, the Risk Committee held meeting with the Bank's Chief Risk Officer without the Executive Directors present.

INFORMATION TECHNOLOGY STRATEGY COMMITTEE

The Board established the Special Board Committee (for an Information Technology Project) in May 2015 to oversee the Bank's information technology project. Since 15 May 2020, the Special Board Committee (for an Information Technology Project) has been upgraded to the Information Technology Strategy Committee which currently consists of five members, including one Independent Non-executive Director, one Non-executive Director, two Executive Directors and the Chief Information Officer of the Bank.

The Committee implements the Bank's "14th Five-Year" information technology strategy blueprint and goals as approved by the Board, and is responsible for supervising the Bank to drive forward-looking financial technology thinking in order to foster the Group's strategies on information technology infrastructure and digital development, as well as to enhance the Bank's overall capability on information technology and operational efficiency in an orderly manner. The Committee regularly examines and receives reports from the Bank's Chief Information Officer in respect of the progress of the Group's information technology strategies and initiatives, and assists the Board in evaluating the implementation and execution of the Bank's information technology strategies and makes recommendations to the Board.

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

In 2020, the former Special Board Committee (for an Information Technology Project) held three committee meetings and the Information Technology Strategy Committee held two committee meetings after the upgrade. The attendance records of the Information Technology Strategy Committee members are set out on page 55 of this Annual Report. The major duties performed by the Information Technology Strategy Committee during the year included:

reviewed and oversaw the implementation progress of the Bank's new Core Banking System (Phase 2);
discussed the establishment of Information Technology Strategy Committee and endorsed its Terms of Reference;
discussed the Bank's information technology strategy for 2021 - 2025 and made recommendation to the Board for approval;
discussed the annual work plan and budget for the Bank's major information technology development for 2021 and made recommendation to the Board for approval; and
reviewed its Terms of Reference and recommended amendments to the Board for approval.

ACCOUNTABILITY AND AUDIT

FINANCIAL REPORTING

The Board is responsible for presenting a balanced, clear and comprehensible assessment of the Group's performance, financial results and prospects to Shareholders and other stakeholders in a timely manner. The annual and interim results and other discloseable financial information of the Bank are published in accordance with the requirements of the Listing Rules and other applicable regulations and industry best practice.

Management provides the Board with sufficient explanation and information to enable it to make an informed assessment of the Group's financial and other information put before it for approval.

The Directors also receive monthly financial and business updates with information on the Bank's latest financial performance and any material variance from its annual business plan to enable them to discharge their duties and responsibilities.

The Directors acknowledge their responsibility for preparing the Bank's consolidated financial statements and ensuring that the preparation of the Bank's consolidated financial statements is in accordance with the relevant requirements and applicable standards. As at 31 December 2020, the Directors were not aware of any material uncertainties relating to events or conditions that may cast significant doubt on the Bank's ability to continue as a going concern.

The statement of the Bank's external auditor concerning its reporting responsibilities on the Bank's consolidated financial statements and the key audit matters identified in its audit are set out in the "Independent Auditor's Report" on pages 77 to 81 of this Annual Report.

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

RISK MANAGEMENT AND INTERNAL CONTROL

The Board acknowledges that it is responsible for the Group's risk management and internal control systems and reviewing their effectiveness. Although such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and to provide reasonable but not absolute assurance against material misstatement or loss, the Bank is committed to establishing and maintaining appropriate and effective risk management and internal control systems so as to safeguard Shareholders' investment and the Bank's assets.

The Bank's risk governance framework is substantiated by the clearly defined three lines of defence which are independent from each other. In short, the first line of defence is provided by the business units where risks are taken. The second line of defence is provided by the risk management and compliance functions that are responsible for overseeing the Bank's risk-taking activities and ensuring compliance with laws and regulations. The third line of defence is provided by the Internal Audit Division which is responsible for providing assurance on the effectiveness of the Bank's risk management framework.

The risk management and internal control systems of the Group comprise comprehensive policies and standards under a well-established organisational structure:

Policies and procedures have been designed for safeguarding assets against unauthorized use or disposition; for maintaining proper accounting records; for ensuring the reliability of financial information used within the business or for publication; and for ensuring compliance with applicable laws, rules and regulations. Systems and procedures are also in place to identify, evaluate, manage and report on the major types of risks, including credit, liquidity, market, operational, legal and reputational risks. All these policies and systems are regularly reviewed to reflect changes in markets, products and best practices.
Areas of responsibilities of each business/functional unit are clearly defined to ensure effective checks and balances. Each unit is responsible for the assessment of individual types of risks arising under its areas of responsibilities, the management of the risks in accordance with the established risk management procedures, and the reporting on such risk management issues.
Specialised committees are established for the oversight and monitoring of major risk areas. Regular risk management reports prepared by relevant business and functional units are submitted to the Asset and Liability Management Committee, the Risk Management Committee, the Executive Committee and the Risk Committee, and ultimately to the Board for oversight and monitoring of the respective types of risks on an ongoing basis. The Bank's risk management policies and major control limits are reviewed and recommended by the relevant specialised committees to the Board for approval, and are monitored and reviewed regularly according to established policies and procedures.

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

The Internal Audit Division's role as the third line of defence is independent of the first and second lines of defence, with the Bank's Chief Auditor reporting directly to the Audit Committee. Pursuant to a risk-based approach, the Internal Audit Division conducts independent and objective assessment of the design and implementation of the risk management and control mechanisms of the Bank's business and functional units in order to identify any inadequacy. Results of audit work are reported regularly to the Audit Committee. In 2020, the Bank has engaged an external consultant Protiviti to perform an external quality assurance review of the Internal Audit Division. The review report concluded that the Internal Audit Division has complied with the HKMA SPM IC-2 Internal Audit Function requirements, and the International Standards for the Professional Practice of Internal Auditing.
The Bank has established a whistleblowing policy which encourages employees to raise concerns, in confidence, about possible improprieties in any matter related to the Bank. The Bank treats all information received confidentially and protects the identity and the interests of all whistleblowers.

The Board has, through the Audit Committee and the Risk Committee, monitored the performance of the Group's risk management and internal control systems on an ongoing basis and also completed the 2020 annual review of their effectiveness, which covered such material aspects as financial, operational and compliance controls. The Board has received a confirmation from management on the effectiveness of the Group's risk management and internal control systems and is satisfied that such systems, including the resources, staff qualifications and experience, training programmes and budget of the Group's accounting, internal audit and financial reporting functions, are effective and adequate.

COMMUNICATIONS WITH SHAREHOLDERS

EFFECTIVE COMMUNICATION

The Bank recognizes the importance of communication and undertakes to maintain an ongoing dialogue with the Shareholders through general meetings, press releases, announcements and corporate communications such as annual report, interim report and circulars. The Board is committed to the timely disclosure of information. The latest information regarding the Bank's activities, announcements, circulars, press releases and corporate communications is made available on the Bank's website at www.chbank.com in a timely manner. The Shareholders' calendar containing important dates for Shareholders is set out on page 14 of this Annual Report for the Shareholders' reference.

A Shareholders' Communication Policy was adopted by the Board and such policy will be reviewed on a regular basis to ensure its effectiveness. Shareholders and other stakeholders may at any time send their enquires and concerns to the Board by addressing them to the Chief Financial Officer by post to the Bank's registered office at Ground Floor, Chong Hing Bank Centre, 24 Des Voeux Road Central, Hong Kong or by email to info@chbank.com.

GENERAL MEETINGS

The Bank aims at maintaining an ongoing dialogue with the Shareholders and, in particular, using annual general meetings or other general meetings as a forum for effective communication with the Shareholders. The Chairman of the Board and Chairmen of the Board Committees are available to answer questions from the Shareholders in relation to the performance of the Bank at the annual general meetings. In addition, the external auditor of the Bank is invited to attend the annual general meetings to answer questions about the conduct of the audit, the preparation and content of the auditor's report, the accounting policies and the auditor's independence. Separate resolutions are proposed at general meetings on each substantial issue, including the election and re-election (as the case may be) of individual Directors.

2020 Annual Report

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

Poll results in respect of the resolutions proposed at the 2020 AGM were published on the websites of HKEX and the Bank on the same day.

The 2021 annual general meeting will be held on 14 May 2021, and the relevant details are set out in the circular to the Shareholders sent together with this Annual Report.

DIVIDEND POLICY

The Board has established a comprehensive Dividend Policy for the purpose of ensuring the dividend distributions of the Bank are conducted in accordance with the Articles of Association, applicable laws and regulations and also meet the expectation of relevant regulatory bodies. The Dividend Policy will be reviewed regularly in accordance with changes in regulatory requirements, economic and commercial environment. The Bank is dedicated to striking the right balance between reinvesting capital in the Bank's operations and providing returns to Shareholders.

VOTING PROCEDURES AT GENERAL MEETINGS

All resolutions put to vote at the general meetings of the Bank (other than on procedural and administrative matters) must be taken by poll. At each general meeting, an explanation of the detailed procedures of conducting a poll will be provided to the Shareholders, and questions from the Shareholders regarding voting by poll will also be answered to ensure that Shareholders are familiar with such procedures. The poll results will be posted on the websites of the HKEX and the Bank on the same day following the general meeting.

SHAREHOLDERS' RIGHTS

1. General Meeting

Shareholder(s) may request to call a general meeting. If such request is made by Shareholder(s) representing 5% of the total voting rights of all the Shareholders having a right to vote at general meetings, such general meeting must be called. Such request, either in hard copy form or in electronic form and being authenticated by the person or persons making it, must be deposited at the registered office of the Bank at Ground Floor, Chong Hing Bank Centre, 24 Des Voeux Road Central, Hong Kong or sent by email to info@chbank.com for the attention of the Company Secretary. Shareholder(s) shall make reference to the provisions under Sections 566 to 568 of the Companies Ordinance for requesting to call a general meeting.

2. Putting Forward a Resolution at an Annual General Meeting ("AGM")

Pursuant to Section 615 of the Companies Ordinance, a request to put forward a resolution which may properly be moved at an AGM may be submitted by Shareholder(s) representing at least 2.5% of the total voting rights of all the Shareholders who have a right to vote on the resolution at the AGM to which the request relates, or by at least 50 Shareholders who have a right to vote on the resolution at the AGM to which the request relates. Such request must identify the resolution of which notice is to be given, be either in hard copy form or in electronic form, be authenticated by the person or persons making it, and be received by the Bank not later than six weeks before the AGM to which the request relates or, if later, the time at which notice is given of that AGM. The request must be deposited at the registered office of the Bank at Ground Floor, Chong Hing Bank Centre, 24 Des Voeux Road Central, Hong Kong or sent by email to info@chbank.com for the attention of the Company Secretary. Shareholder(s) should make reference to Sections 580 and 615 of the Companies Ordinance for the relevant procedures to put forward a resolution at an AGM.

Chong Hing Bank Limited

CORPORATE GOVERNANCE REPORT

as of 4 March 2021

3. Proposing a Person for Election as a Director

Shareholders can propose a person (other than a retiring Director or himself/herself) for election as a director at a general meeting of the Bank. Relevant procedures are available on the Bank's website at www.chbank.com.

INVESTOR RELATIONS AND INFORMATION DISCLOSURE

The Bank has put in place a Disclosure Policy for the disclosure of material information (including inside information) relating to its businesses, state of affairs, profit or loss and capital adequacy ratio to its stakeholders and the public in compliance with the disclosure obligations required by the Listing Rules, the Banking Ordinance, the Securities and Futures Ordinance and other applicable laws, rules and regulations.

The Disclosure Policy sets out the procedures and internal controls for the handling and dissemination of such information in a timely manner so as to enable the stakeholders and the public to appraise the latest position of the Group. The Disclosure Policy and its effectiveness are subject to review on a regular basis according to the established procedures.

CONSTITUTIONAL DOCUMENTS

During the year ended 31 December 2020, no change was made to the Articles of Association of the Bank, the latest version of which is available on the websites of HKEX and the Bank.

By Order of the Board

Lai Wing Nga

Company Secretary

Hong Kong, 4 March 2021

2020 Annual Report

INDEPENDENT AUDITOR'S REPORT

To the Members of Chong Hing Bank Limited (incorporated in Hong Kong with limited liability)

OPINION

What we have audited

The consolidated financial statements of Chong Hing Bank Limited (the "Bank") and its subsidiaries (the "Group") set out on pages 84 to 220, which comprise:

the consolidated statement of financial position as at 31 December 2020;
the consolidated income statement for the year then ended;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the consolidated statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of significant accounting policies.

Our opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and have been properly prepared in compliance with the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the HKICPA's Code of Ethics for Professional Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Chong Hing Bank Limited

INDEPENDENT AUDITOR'S REPORT

Key audit matter identified in our audit is related to Measurement of impairment allowances of advances to customers.

Key Audit Matter	How our audit addressed the Key Audit Matter
Measurement of impairment allowances of advances to
customers
As at 31 December 2020, the Group recorded gross advances to	We performed the following procedures:
customers of HK$142,382 million and impairment allowances
of HK$879 million, with HK$537 million as stage 1 and stage	-	Obtained an understanding of the end-to-end process
2 impairment allowances and HK$342 million as stage 3		and relevant internal controls through walk-through
impairment allowances.		meetings with key departments and performed testing on
The Group uses expected credit losses ("ECL") models based on		key controls including review and approval of ECL results,
	ECL model validation and management assumptions by
the Group's experience of the correlations between defaults and		the ECL committee;
losses for estimating impairment allowances on advances to
customers. Governance processes and controls are also in place	-	Assessed the appropriateness of the management's
for the measurement of impairment allowances of advances to		identification of significant increase in credit risk,
customers.
	defaults and credit-impaired loans by considering

Key management judgements used in the ECL models, including		financial information and non-financial information of the
	borrowers, relevant external evidence and other factors
the following:
	of the selected samples;

-	Application of set criteria to determine any significant	-	Assessed major modelling methodologies and
	increase in credit risk, or a default or impairment loss has
		assumptions including the reasonableness of portfolio
	incurred;
		segmentation and use of statistical methods, and

-	Selection of economic indicators for forward-looking		evaluated model validation reports with the assistance of
	our modelling specialists;
	measurement, and the application of economic scenarios
	and respective probability weightings, including	-	Tested the accuracy and completeness of critical ECL
	consideration of forward looking economic impacts of		model data inputs through testing the critical data input
	COVID 19; and
		controls, tracing a sample population of critical data to

-	Provisions for impairment of Stage 3 loans that are		their source documents and data records maintained in
	various systems involved in the ECL computation;
	individually assessed by the Group. These provisions
	are established based on the expected future cash	-	Assessed management's analysis of their selection of
	repayments and estimated proceeds from the value of		economic indicators and economic scenarios including
	the collateral held by the Group in respect of those loans
		forward looking COVID 19 considerations, and performed
	under multiple weighted scenario outcomes, including a
		an assessment of their sensitivity analysis of probability
	scenario for consideration of COVID 19.
		weightings;

The impairment allowances of advances to customers are	-	Evaluated, on a sample basis, the level of stage 3
detailed in notes 7, 14 and 22 to the consolidated financial
	impairment allowances recorded for specific loans by
statements.
	challenging management on the judgements applied in

			the expected future cash flows estimation for multiple
			weighted scenario outcomes and re-performed the
			mathematical accuracy of management's discounted cash
			flow calculation.
		-	Assessed the adequacy of disclosures in relation to ECL
			on advances to customers in the consolidated financial
			statements.

2020 Annual Report

INDEPENDENT AUDITOR'S REPORT

OTHER INFORMATION

The directors of the Bank are responsible for the other information. The other information comprises the information included in the annual report (but does not include the consolidated financial statements and our auditor's report thereon), which we obtained prior to the date of this auditor's report, and the Unaudited Supplementary Financial Information and the Regulatory Disclosure for the year ended 31 December 2020, which are expected to be made available to us after that date.

Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the Unaudited Supplementary Financial Information and the Regulatory Disclosure for the year ended 31 December 2020, if we conclude that there is a material misstatement therein, we are required to communicate the matter to Audit Committee and take appropriate action considering our legal rights and obligations.

RESPONSIBILITIES OF DIRECTORS AND THE AUDIT COMMITTEE FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The directors of the Bank are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

The Audit Committee is responsible for overseeing the Group's financial reporting process.

Chong Hing Bank Limited

INDEPENDENT AUDITOR'S REPORT

AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. We report our opinion solely to you, as a body, in accordance with Section 405 of the Hong Kong Companies Ordinance and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

2020 Annual Report

INDEPENDENT AUDITOR'S REPORT

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Antoinette Hoon.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 4 March 2021

Chong Hing Bank Limited

FINANCIAL STATEMENTS - CONTENTS

Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity

89 Consolidated Statement of Cash Flows

91 Notes to the Consolidated Financial Statements

91 1. General

2. Application of new and revised Hong Kong Financial Reporting Standards ("HKFRSs")
3. New and revised HKFRSs issued but not yet effective
4. Significant accounting policies

5. Critical accounting judgements and key sources of estimation uncertainty
6. Segment information

120 7. Financial risk management

171 8. Financial assets and financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements

9. Net interest income
10. Net fee and commission income
11. Net income from trading and investments
12. Other operating income
13. Operating expenses
14. Net impairment losses on financial assets

15. Taxation
16. Dividends
17. Earnings per share - basic and diluted

184 18. Cash and short-term funds

184 19. Derivative financial instruments

187 20. Investments in securities

21. Transfer of financial assets
22. Advances and other accounts

23. Subsidiaries
24. Interests in associates
25. Investment properties

196 26. Property and equipment

2020 Annual Report

FINANCIAL STATEMENTS - CONTENTS

197 27. Financial assets sold under repurchase agreements

197 28. Deposits from customers

29. Certificates of deposit
30. Loan capital
31. Share capital

32. Additional equity instruments
33. Deferred taxation
34. Share based payment

35. Intangible assets
36. Other accounts and accruals
37. Contingent liabilities and commitments
38. Retirement benefits scheme

210 39. Related party transactions

40. Capital management
41. Statement of financial position and reserve movement of the Bank

217 42. Benefits and interests of directors

220 43. Immediate and ultimate holding companies

Unaudited Supplementary Financial Information

1. Major specialised committees
2. Management of risks
3. Capital adequacy ratios, leverage ratio and liquidity ratios
4. Other financial information

5. Segmental information
6. Advances to customers - by industry sectors
7. Advances to customers - by geographical areas
8. International claims
9. Currency risk
10. Overdue and rescheduled assets
11. Mainland activities exposures

232 12. Basis of consolidation

Chong Hing Bank Limited

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2020

		2020	2019
	Notes	HK$'000		HK$'000
Interest income		5,565,742	6,492,027
Interest expense		(2,639,190)	(3,232,167)

Net interest income	9	2,926,552	3,259,860

Fee and commission income		513,217	448,854
Fee and commission expenses		(78,890)	(123,197)

Net fee and commission income	10	434,327	325,657
Net income from trading and investments	11	258,453	241,293
Other operating income	12	189,385	184,461
Operating expenses	13	(1,661,304)	(1,624,429)

Operating profit before impairment allowances		2,147,413	2,386,842
Net impairment losses on financial assets	14	(422,003)	(137,881)

Operating profit after impairment allowances		1,725,410	2,248,961
Net losses on disposal of equipment		(573)	(344)
Net losses on fair value adjustments on investment properties	25	(10,300)	(4,431)
Share of profits of associates	24	42,229	37,191

Profit before taxation		1,756,766	2,281,377
Taxation	15	(276,788)	(380,735)
Profit for the year
- Attributable to equity owners of the Bank		1,479,978	1,900,642
Earnings per share - basic and diluted	17	HK$1.34		HK$1.80

The notes on pages 91 to 220 form an integral part of these consolidated financial statements.

2020 Annual Report

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2020

	2020	2019
	HK$'000		HK$'000
Profit for the year	1,479,978	1,900,642
Other comprehensive income
Items that may not be reclassified subsequently to profit or loss:
Net (losses) gains on investments in equity instruments measured at
fair value through other comprehensive income ("FVOCI")	(10,005)	4,979
Remeasurements of retirement benefit	10,220		-
Income tax effect relating to retirement benefit	(1,686)		-
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation	339,164	(57,666)
Net (losses) gains on investments in debt instruments measured at FVOCI	(404,342)	527,219
Amount reclassified to profit or loss upon disposal of
debt securities measured at FVOCI	(57,416)	(40,899)
Income tax effect relating to disposal of financial assets
measured at FVOCI	9,474	6,748
Income tax effect relating to fair value change of financial assets
measured at FVOCI	59,806	(79,403)
Share of other comprehensive income of associates	6,180	18,233

Other comprehensive income for the year (net of tax)	(48,605)	379,211

Total comprehensive income for the year	1,431,373	2,279,853
Total comprehensive income attributable to:
Equity owners of the Bank	1,431,373	2,279,853

The notes on pages 91 to 220 form an integral part of these consolidated financial statements.

Chong Hing Bank Limited

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 31 December 2020

		2020	2019
	Notes	HK$'000		HK$'000
Assets
Cash and short-term funds	18	21,800,643	20,404,505
Placements with banks maturing between one to twelve months		1,478,103	5,525,049
Derivative financial instruments	19	1,645,450	705,930
Investments in securities	20	52,853,752	57,534,593
Advances and other accounts	22	152,283,092	125,982,796
Tax recoverable		168,841		-
Interests in associates	24	399,553	377,244
Investment properties	25	299,513	306,610
Property and equipment	26	1,095,218	1,124,251
Deferred tax assets	33	32,109	28,767
Intangible assets	35	843,373	778,289

Total assets		232,899,647	212,768,034
Liabilities
Deposits and balances of banks		8,229,574	6,949,921
Financial assets sold under repurchase agreements	27	786,540	4,253,852
Deposits from customers	28	183,228,291	162,664,648
Derivative financial instruments	19	3,775,482	1,902,951
Other accounts and accruals	36	3,241,808	3,172,687
Current tax liabilities		21,852	486,528
Certificates of deposit	29	2,551,530	3,749,075
Loan capital	30	3,033,178	4,579,912
Deferred tax liabilities	33	96,932	145,247

Total liabilities		204,965,187	187,904,821
Equity attributable to owners of the Bank
Share capital	31	9,977,060	9,977,060
Additional equity instruments	32	5,427,996	3,111,315
Reserves		12,529,404	11,774,838

Total equity		27,934,460	24,863,213

Total liabilities and equity		232,899,647	212,768,034

The notes on pages 91 to 220 form an integral part of these consolidated financial statements.

Approved and authorised for issue by the Board of Directors on 4 March 2021 and signed on its behalf by:

Zhang Zhaoxing	Zong Jianxin
Chairman	Executive Director, Deputy Chairman and Chief Executive

2020 Annual Report

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2020

												Land and
				Additional			Share-based	Investment		building
		Share		equity				payment	revaluation	revaluation		General	Translation	Regulatory		Retained
		capital	instruments		Goodwill		reserve		reserve		reserve		reserve		reserve		reserve		profits		Total
	Note	HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000
At 1 January 2020		9,977,060	3,111,315	(182)		-	443,969	179,633	1,388,500	(171,599)	1,039,000	8,895,517	24,863,213
Profit for the year		-		-		-		-		-		-		-		-		-	1,479,978	1,479,978
Other comprehensive income		-		-		-		-	(396,303)		-		-	339,164		-	8,534	(48,605)
Total comprehensive income for the year		-		-		-		-		(396,303)		-		-		339,164		-		1,488,512		1,431,373
Issue of additional equity instruments
(Note 1)	32	-	2,316,681		-		-		-		-		-		-		-		-	2,316,681
Redemption of additional equity
instruments		-		-		-		-		-		-		-		-		-		-		-
Equity settled share-based transaction		-		-		-	6,023		-		-		-		-		-		-	6,023
Distribution payment for additional
equity instruments		-	(177,116)		-		-		-		-		-		-		-		-	(177,116)
Transfer from retained profits		-	177,116		-		-		-		-		-		-		-	(177,116)		-
Interim dividend paid	16	-		-		-		-		-		-		-		-		-	(106,978)	(106,978)
Final dividend paid	16	-		-		-		-		-		-		-		-		-	(398,736)	(398,736)
Earmark of retained profits
as regulatory reserve		-		-		-		-		-		-		-		-	(436,000)	436,000		-

At 31 December 2020		9,977,060		5,427,996		(182)		6,023		47,666		179,633		1,388,500		167,565		603,000	10,137,199	27,934,460

Note 1: During the year, the Bank issued US$300,000,000 (2019: US$400,000,000) (equivalent to HK$2,325,030,000 (2019: HK$3,123,280,000)) undated non- cumulative subordinated Additional Tier 1 capital securities ("AT1"). Direct issuance costs of HK$8,349,000 (2019: HK$11,965,000) are accounted for as a deduction from the equity instrument.

The notes on pages 91 to 220 form an integral part of these consolidated financial statements.

Chong Hing Bank Limited

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2020

												Land and
				Additional			Share-based	Investment		building
		Share		equity				payment	revaluation	revaluation		General	Translation	Regulatory		Retained
		capital	instruments		Goodwill		reserve		reserve		reserve		reserve		reserve		reserve		profits		Total
	Note	HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000		HK$'000

At 1 January 2019		9,977,060	2,312,030	(182)		-	7,092	179,633	1,388,500	(113,933)	912,000	7,880,129	22,542,329
Profit for the year		-		-		-		-		-		-		-		-		-	1,900,642	1,900,642
Other comprehensive income		-		-		-		-	436,877		-		-	(57,666)		-		-	379,211

Total comprehensive income for the year		-		-		-		-	436,877		-		-	(57,666)		-	1,900,642	2,279,853
Issue of additional equity instruments
(Note 1)	32	-	3,111,315		-		-		-		-		-		-		-		-	3,111,315
Redemption of additional
equity instruments (Note 2)	32	-	(2,312,030)		-		-		-		-		-		-		-	(41,174)	(2,353,204)
Equity settled share-based transaction		-		-		-		-		-		-		-		-		-		-		-
Distribution payment for additional
equity instruments		-	(153,015)		-		-		-		-		-		-		-		-	(153,015)
Transfer from retained profits		-	153,015		-		-		-		-		-		-		-	(153,015)		-
Interim dividend paid	16	-		-		-		-		-		-		-		-		-	(165,329)	(165,329)
Final dividend paid	16	-		-		-		-		-		-		-		-		-	(398,736)	(398,736)
Earmark of retained profits as
regulatory reserve		-		-		-		-		-		-		-		-	127,000	(127,000)		-
At 31 December 2019
	9,977,060	3,111,315	(182)		-	443,969	179,633	1,388,500	(171,599)	1,039,000	8,895,517	24,863,213

Note 2: During the year ended 31 December 2019, the Bank redeemed US$300,000,000 (after deduction relevant issuing cost, equivalent to HK$2,312,030,000) AT1 issued in 2014, the difference of HK$41,174,000 paid in excess of the carrying amount was charged to retained profits.

The retained profits of the Group included retained profits of HK$183,524,000 (2019: retained profits of HK$169,951,000) retained by the associates of the Group.

The regulatory reserve is set up in compliance with the Hong Kong Monetary Authority's requirements and is distributable to shareholders of the Bank subject to consultation with the Hong Kong Monetary Authority (the "HKMA").

The general reserve comprises transfers from previous years' retained profits.

The notes on pages 91 to 220 form an integral part of these consolidated financial statements.

2020 Annual Report

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31 December 2020

		2020	2019
	Note	HK$'000		HK$'000
OPERATING ACTIVITIES
Profit before taxation		1,756,766	2,281,377
Adjustments for:
Net interest income	9	(2,926,552)	(3,259,860)
Net impairment losses on financial assets	14	422,003	137,881
Net losses on disposal of equipment		573	344
Net gains on disposal of financial assets measured at FVOCI		(57,416)	(40,899)
Net losses on fair value adjustments on investment properties		10,300	4,431
Share of profits of associates	24	(42,229)	(37,191)
Net gains on fair value hedge		(7,003)	(2,727)
Dividend received from investments	12	(11,969)	(12,767)
Depreciation and amortisation	13	283,264	248,048
Equity settled share-based payment expenses		6,023		-
Exchange adjustments		690,903	(77,875)
Operating cash flows before movements in operating
assets and liabilities		124,663	(759,238)
(Increase) decrease in operating assets:
Money at call and short notice with original maturity
over three months		94,656	192,993
Placements with banks with original maturity over three months		3,222,479	(390,612)
Financial assets at fair value through profit or loss		16,543	(24,659)
Advances to customers		(24,410,970)	(16,268,634)
Advances to banks		(266,134)	(502,380)
Other accounts		(2,265,834)	(2,337,062)
Increase (decrease) in operating liabilities:
Deposits and balances of banks		1,279,653	1,333,968
Financial assets sold under repurchase agreements		(3,467,312)	(2,317,844)
Deposits from customers		20,563,643	18,974,354
Certificates of deposit		(1,197,545)	1,060,689
Derivative financial instruments		(664,771)	170,328
Other accounts and accruals		554,318	(26,925)

Cash used in operations		(6,416,611)	(895,022)
Hong Kong profits tax paid		(808,898)	(121)
Overseas tax paid		(86,408)	(89,850)
Interest received		4,634,053	4,937,008
Interest paid		(2,957,532)	(2,446,967)

NET CASH (USED IN) GENERATED FROM OPERATING ACTIVITIES		(5,635,396)	1,505,048

Chong Hing Bank Limited

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 31 December 2020

		2020	2019
	Note	HK$'000		HK$'000
INVESTING ACTIVITIES
Interest received from investments in securities		1,246,921	1,340,810
Dividends received on investments in securities	12	11,969	12,767
Dividends received from associates		26,100	25,500
Purchase of financial assets measured at amortised cost		(2,400,044)	(375,874)
Purchase of financial assets measured at FVOCI		(117,800,913)	(76,437,888)
Purchase of property and equipment		(94,136)	(82,898)
Purchase of intangible assets		(66,213)	(231,622)
Proceeds from redemption of financial assets
measured at amortised cost		388,354	383,506
Proceeds from sale and redemption of financial assets
measured at FVOCI		125,382,102	67,611,524
Proceeds from disposal of equipment		2,037	2,757

NET CASH GENERATED FROM (USED IN) INVESTING ACTIVITIES		6,696,177	(7,751,418)
FINANCING ACTIVITIES
Net proceeds from issue of additional equity instruments		2,316,681	3,111,315
Redemption of additional equity instruments		-	(2,353,204)
Redemption of loan capital		(1,629,378)		-
Interest paid on loan capital	30	(213,627)	(210,804)
Interest paid on debt securities issued		-	(62,103)
Redemption of debt securities issued		-	(1,708,650)
Payment of lease liabilities	36	(185,300)	(209,297)
Dividends paid to ordinary shareholders		(505,714)	(564,065)
Distribution paid on additional equity instruments	32	(177,116)	(153,015)

NET CASH USED IN FINANCING ACTIVITIES		(394,454)	(2,149,823)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		666,327	(8,396,193)
CASH AND CASH EQUIVALENTS AT 1 JANUARY		22,298,698	30,694,891

CASH AND CASH EQUIVALENTS AT 31 DECEMBER		22,965,025	22,298,698
Represented by:
Cash and balances with central bank and banks		17,202,817	5,703,209
Money at call and short notice with original maturity
of less than three months		4,571,826	14,580,640
Placements with banks maturing between one to twelve months
with original maturity of less than three months		1,190,382	2,014,849

		22,965,025	22,298,698

The notes on pages 91 to 220 form an integral part of these consolidated financial statements.

2020 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2020

1. GENERAL

Chong Hing Bank Limited (the "Bank") is a public limited company incorporated in Hong Kong and its shares are listed on The Stock Exchange of Hong Kong Limited.

The Bank is engaged in the provision of banking and related financial services. The address of the registered office of the Bank is Ground Floor, Chong Hing Bank Centre, 24 Des Voeux Road Central, Hong Kong.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS ("HKFRSs")

The following amendments to accounting standards are applicable for reporting periods commencing after 1 January 2020:

Interest Rate Benchmark Reform - Phase 1, amendments to HKFRS 9 "Financial Instruments", HKAS 39 "Financial Instruments: Recognition and Measurement" and HKFRS 7 "Financial Instruments: Disclosure"
Interest rate benchmark reform is the market-wide initiative to replace or reform interbank offered rates ("IBORs") with alternatively risk-free interest rates ("RFRs"). The amendments modify the some specific hedge accounting requirements to provide relief from potential effects of the uncertainties caused by the interest rate benchmark reform.
Significant judgement will be required in determining when uncertainty is expected to be resolved and when the temporary exceptions will cease to apply. As at 31 December 2020, there is still uncertainty on the IBORs and the Group has applied the temporary exceptions on the all of the hedge accounting relationships that reference benchmarks subject to reform or replacement. The Group has closely monitored the market progress on the transition of IBORs to RFRs.
The Group designated certain interest rate swaps, exposed to different IBORs, predominantly US Dollar LIBOR, as fair value hedge of investments in debt instruments measured at FVOCI, amortised cost and subordinated note issued. The notional amounts of interest rate swaps designated in hedge accounting relationship impacted by the exception as at 31 December 2020 is approximately HK$31 billion.
There are no other HKFRSs or interpretations that are effective from 1 January 2020 that would be expected to have a material impact on the Group.

Chong Hing Bank Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2020

3. NEW AND REVISED HKFRSs ISSUED BUT NOT YET EFFECTIVE

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2021, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:

Interest Rate Benchmark Reform - Phase 2, amendments to HKAS 39, HKFRS 4 "Insurance Contracts", HKFRS 7, HKFRS 9 and HKFRS 16 "Leases"
The amendments address issues that might affect financial reporting as a result of the interest rate benchmark reform and relate to:
1. changes to contractual cash flows - financial instruments will not be derecognised or the carrying amount of financial instruments will not be adjusted for changes required by the reform, but the effective interest rate will be updated to reflect the change to the alternative benchmark rate;
2. hedge accounting - hedge accounting will not be discontinued solely because changes are made required by the reform, if the hedge meets other hedge accounting criteria; and
3. disclosures -disclose information will be required about new risks arising from the reform and how the transition to alternative benchmark rates is managed.

2020 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and by the Hong Kong Companies Ordinance.

The consolidated financial statements have been prepared on the historical cost basis except for certain properties and financial instruments, which are measured at fair values, as explained in the accounting policies set out below.

The principal accounting policies are set out below. These policies have been consistently applied in all years presented. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period.

BASIS OF CONSOLIDATION

The consolidated financial statements incorporate the financial statements of the Bank and entities controlled by the Bank and its subsidiaries. Control is achieved when the Bank:

has power over the investee;
is exposed, or has rights, to variable returns from its involvement with the investee; and
has the ability to use its power to affect its returns.

The Bank reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Bank obtains control over the subsidiary and ceases when the Bank loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated income statement from the date the Bank gains control until the date when the Bank ceases to control the subsidiary.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

Chong Hing Bank Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

FINANCIAL INSTRUMENTS

Measurement methods

Amortised cost and effective interest rate

The amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its amortised cost before any impairment allowance) or to the amortised cost of a financial liability. The calculation does not consider expected credit losses and includes transaction costs, premiums or discounts and fees and points paid or received that are integral to the effective interest rate, such as origination fees. For purchased or originated credit-impaired ("POCI") financial assets - assets that are credit-impaired at initial recognition - the Group calculates the credit-adjusted effective interest rate, which is calculated based on the amortised cost of the financial asset instead of its gross carrying amount and incorporates the impact of expected credit losses in estimated future cash flows.

When the Group revises the estimates of future cash flows, the carrying amount of the respective financial assets or financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate. Any changes are recognised in profit or loss.

Interest income

Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for:

POCI financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of the financial asset.
Financial assets that are not POCI but have subsequently become credit-impaired (or "Stage 3"), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e. net of the expected credit loss allowance).

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset.

At initial recognition, the Group measures a financial asset or financial liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an ECL allowance is recognised for financial assets measured at amortised cost and investments in debt instruments measured at FVOCI which results in an accounting loss being recognised in profit or loss when an asset is newly originated.

2020 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

FINANCIAL INSTRUMENTS (Continued)

Measurement methods (Continued)

Initial recognition and measurement (Continued)

When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity recognises the difference as follows:

When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1 input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a gain or loss.
In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It is either amortised over the life of the instrument, deferred until the instrument's fair value can be determined using market observable inputs, or realised through settlement.

Financial assets

Classification and subsequent measurement
The Group classifies its financial assets in the following measurement categories:
- Fair value through profit or loss ("FVPL");
- Fair value through other comprehensive income ("FVOCI"); or
- Amortised cost.

The classification requirements for debt and equity instruments are described below:

Debt instruments

Debt instruments are those instruments that meet the definition of a financial liability from the issuer's perspective, such as loans, government and corporate bonds and trade receivables purchased from clients in factoring arrangements without recourse.

Classification and subsequent measurement of debt instruments depend on:

the Group's business model for managing the asset; and
the cash flow characteristics of the asset.

Based on these factors, the Group classifies its debt instruments into one of the following three measurement categories:

Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest ("SPPI"), and that are not designated at FVPL, are measured at amortised cost. The carrying amount of these assets is adjusted by any expected credit loss allowance recognised and measured. Interest income from these financial assets is included in 'Interest income' using the effective interest rate method.

Chong Hing Bank Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

FINANCIAL INSTRUMENTS (Continued)

Financial assets (Continued)

Classification and subsequent measurement (Continued) Debt instruments (Continued)
- Fair value through other comprehensive income: Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets' cash flows represent solely payments of principal and interest, and that are not designated at FVPL, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument's amortised cost which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in 'Net income from trading and investments'. Interest income from these financial assets is included in 'Interest income' using the effective interest rate method.
- Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented in the profit or loss statement within 'Net income from trading and investments' in the period in which it arises.
  Business model: the business model reflects how the Group manages the assets in order to generate cash flows. That is, whether the Group's objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for trading purposes), then the financial assets are classified as part of 'other' business model and measured at FVPL. Factors considered by the Group in determining the business model for a group of assets include past experience on how the cash flows for these assets were collected, how the asset's performance is evaluated and reported to key management personnel, how risks are assessed and managed and how managers are compensated.
  SPPI: Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Group assesses whether the financial instruments' cash flows represent solely payments of principal and interest (the 'SPPI test'). In making this assessment, the Group considers whether the contractual cash flows are consistent with a basic lending arrangement i.e. interest includes only consideration for the time value of money, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at fair value through profit or loss.

2020 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

FINANCIAL INSTRUMENTS (Continued)

Financial assets (Continued)

Classification and subsequent measurement (Continued) Debt instruments (Continued)
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.
The Group reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification takes place from the start of the first reporting period following the change. Such changes are expected to be very infrequent and none occurred during the period.
Equity instruments
Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets.
The Group subsequently measures all equity investments at fair value through profit or loss, except where the Group's management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. The Group's policy is to designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns. When this election is used, fair value gains and losses are recognised in OCI and are not subsequently reclassified to profit or loss, including on disposal. Dividends, when representing a return on such investments, continue to be recognised in profit or loss as other income when the Group's right to receive payments is established.
Gains and losses on equity investments at FVPL are included in the 'Net income from trading and investments' line in the income statement.
Impairment
The Group assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at amortised cost and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Group recognises a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
- An unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;
- The time value of money; and
- Reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

Chong Hing Bank Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

FINANCIAL INSTRUMENTS (Continued)

Financial assets (Continued)

Modification of financial assets
If the terms of a financial asset are modified, the Group evaluates whether the cash flows of the modified asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value.
Derecognition other than on a modification
Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either (i) the Group transfers substantially all the risks and rewards of ownership, or (ii) the Group neither transfers nor retains substantially all the risks and rewards of ownership and the Group has not retained control.
The Group enters into transactions where it retains the contractual rights to receive cash flows from assets but assumes a contractual obligation to pay those cash flows to other entities and transfers substantially all of the risks and rewards. These transactions are accounted for as 'pass through' transfers that result in derecognition if the Group:
1. Has no obligation to make payments unless it collects equivalent amounts from the assets;
2. Is prohibited from selling or pledging the assets; and
3. Has an obligation to remit any cash it collects from the assets without material delay.

Collateral (shares and bonds) furnished by the Group under standard repurchase agreements and securities lending and borrowing transactions are not derecognised because the Group retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met. This also applies to certain securitisation transactions in which the Group retains a subordinated residual interest.

When the contractual rights to receive the cash flows from the assets have been transferred, and the Group neither transfers nor retains substantially all the risks and rewards of ownership, and the Group has retained control of the transferred assets, the Group applies continuing involvement approach.

Under this approach, the Group continues to recognise the transferred asset to the extent of its continuing involvement and recognise the associated liability, to reflect the rights and obligations retained by the Group. The net carrying amount of the transferred asset and associated liability is: (a) the amortised cost of the rights and obligations retained by the Group, if the transferred asset is measured at amortised cost; or (b) equal to the fair value of the rights and obligations retained by the Group when measured on a stand-alone basis, if the transferred asset is measured at fair value.

2020 Annual Report

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 31 December 2020

4. SIGNIFICANT ACCOUNTING POLICIES (Continued)

FINANCIAL INSTRUMENTS (Continued)

Financial assets (Continued)

Write off policy
The Group writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded there is no reasonable expectation of recovery. Indications that there is no reasonable expectation of recovery include (i) ceasing enforcement activity and (ii) where the Group's recovery method is foreclosing on collateral and the value of the collateral is such that there is no reasonable expectation of recovering in full.

Financial liabilities

Classification and subsequent measurement
In both the current and prior period, financial liabilities are classified as subsequently measured at amortised cost, except for:
- Financial liabilities at fair value through profit or loss: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in the trading booking) and other financial liabilities designated as such at initial recognition. Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to changes in market conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit risk of the liability are also presented in profit or loss;
- Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition or when the continuing involvement approach applies. When the transfer of financial asset did not qualify for derecognition, a financial liability is recognised for the consideration received for the transfer. In subsequent periods, the Group recognises any expense incurred on the financial liability; when continuing involvement approach applies (see Note 4(iv)); and
- Financial guarantee contracts and loan commitments.

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Chong Hing Bank : $657 Million Privatization Nears Completion as Shareholders Approve Deal	31/21/31	MT
Chong Hing Bank : $657 Million Privatization Wins Support from Shareholder Cosco Shipping	24/21/24	MT
Chong Hing Bank : Shareholders to Vote Aug. 30 on $657 Million Go-Private Deal	16/21/16	MT
Chong Hing Bank Limited Declares Interim Cash Dividend for the Six Months Ended 30 June 2021, Payable on October 7, 2021	13/21/13	CI
Chong Hing Bank Limited Reports Earnings Results for the Half Year Ended June 30, 2021	13/21/13	CI
Hang Seng : Hong Kong Stocks Snap Three-Day Rally; Chong Hing Bank Soars 48% on $657 Million Go-Private Offer	20/21/20	MT
Chong Hing Bank : Gets $657 Million Go-Private Offer from Controlling Shareholder; Shares Rally 48%	20/21/20	MT
Chong Hing Bank Limited Approves to Declare Final Cash Dividend for the Year Ended 31 December 2020	14/21/14	CI
Chong Hing Bank Limited Announces Retirement of MA Chiu Cheung Andrew as Independent Non-Executive Director	14/21/14	CI
Chong Hing Bank Limited Proposes a Final Cash Dividend for the Year Ended 31 December 2020	14/21/14	CI
Chong Hing Bank : Reports Lower Profit, Dividend for 2020	05/21/05	MT
Ma Chiu Cheung Andrew to Retire as Independent Non-Executive Director of Chong Hing Bank Limited, Effective on 14 May 2021	04/21/04	CI
Chong Hing Bank Limited Recommends Final Cash Dividend, Payable on 2 June 2021	04/21/04	CI
Chong Hing Bank Limited Announces Consolidated Earnings Results for the Year Ended December 31, 2020	04/21/04	CI

	1st Jan change	Capi.
AGRICULTURAL BANK OF CHINA LIMITED	+24.25%	208B
PT BANK CENTRAL ASIA TBK	-0.27%	71.94B
ANZ GROUP HOLDINGS LIMITED	+12.23%	57.69B
CRÉDIT AGRICOLE S.A.	+20.21%	50.35B
INDUSTRIAL BANK CO., LTD.	+5.31%	49.08B
CHINA CITIC BANK CO., LTD.	+32.07%	46.89B
JAPAN POST BANK CO., LTD.	+10.86%	36.93B
QATAR NATIONAL BANK (Q.P.S.C.)	-15.79%	35.32B
INVEST BANK	-96.60%	32.24B

Chong Hing Bank Limited

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