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“刊發發行通函 – Soar Wise Limited的3, 500,000,000 美元擔保中期票據及永續資本證券計劃”
時間:2022-05-17 16:38

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong

Limited take no responsibility for the contents of this announcement, make no representation

as to its accuracy or completeness and expressly disclaim any liability whatsoever for any

loss howsoever arising from or in reliance upon the whole or any part of the contents of this

announcement.

This announcement is for information purposes only and does not constitute an invitation or

offer to acquire, purchase or subscribe for securities.

This announcement does not constitute or form a part of any offer or solicitation to purchase

or subscribe for securities in the United States. The securities have not been, and will not

be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”) or

with any securities regulatory authority of any state of the United States or other jurisdiction.

The securities are being offered and sold outside the United States in reliance on Regulation

S under the Securities Act and may not be offered or sold within the United States absent

registration or an exemption from registration under the Securities Act. No public offering of

the securities will be made in the United States or in any other jurisdiction where such an

offering is restricted or prohibited.

This announcement and the listing document referred to herein have been

published for information purposes only as required by the Rules Governing the

Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing

Rules”) and do not constitute an offer to sell nor a solicitation of an offer to buy any

securities. Neither this announcement nor anything referred to herein (including the

listing document referred to herein) forms the basis for any contract or commitment

whatsoever. For the avoidance of doubt, the publication of this announcement and the

listing document referred to herein shall not be deemed to be an offer of securities made

pursuant to a prospectus issued by or on behalf of the Issuer (as defined below) for the

purposes of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.

32 of the Laws of Hong Kong) nor shall it constitute an advertisement, invitation or

document containing an invitation to the public to enter into or offer to enter into an

agreement to acquire, dispose of, subscribe for or underwrite securities for the purposes

of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong).

Notice to Hong Kong investors: The Issuer and the Guarantor (as defined below) confirm

that the Instruments (as defined in the offering circular appended hereto) are intended for

purchase by Professional Investors (as defined in Chapter 37 of the Listing Rules) only and

will be listed on The Stock Exchange of Hong Kong Limited on that basis. Accordingly, the

Issuer and the Guarantor confirm that the Instruments are not appropriate as an investment

for retail investors in Hong Kong. Investors should carefully consider the risks involved.

Soar Wise Limited

(the “Issuer”)

(a company incorporated in the Cayman Islands with limited liability)

U.S.$3,500,000,000

Guaranteed Medium Term Note and Perpetual Capital Securities Programme

Unconditionally and Irrevocably Guaranteed by

AVIC International Leasing Co., Ltd.

(the “Guarantor”)

(a company incorporated in the People’s Republic of China with limited liability)

This announcement is issued pursuant to Rule 37.39A of the Listing Rules.

Please refer to the offering circular dated 16 May 2022 (the “Offering Circular”) appended

hereto in relation to the Programme. As disclosed in the Offering Circular, the Instruments are

intended for purchase by Professional Investors (as defined in Chapter 37 of the Listing Rules)

only and will be listed on The Stock Exchange of Hong Kong Limited on that basis.

The Offering Circular does not constitute a prospectus, notice, circular, brochure or

advertisement offering to sell any securities to the public in any jurisdiction, nor is it an

invitation to the public to make offers to subscribe for or purchase any securities, nor is it

circulated to invite offers by the public to subscribe for or purchase any securities.

The Offering Circular must not be regarded as an inducement to subscribe for or purchase

any securities, and no such inducement is intended. No investment decision should be made

based on the information contained in the Offering Circular.

17 May 2022

As at the date of this announcement, the directors of the Issuer are Zhou Yong, Tom Geary

and Laura Morgan.

As at the date of this announcement, the directors of the Guarantor are Zhou Yong, Zhou

Qinye, Cai Mingsheng, Zhao Zhuping, Li Tianshu, Wu Liang and Liu Xinfeng.

TABLE OF CONTENTS

APPENDIX – OFFERING CIRCULAR DATED 16 MAY 2022

APPENDIX – OFFERING CIRCULAR DATED 16 MAY 2022

IMPORTANT NOTICE

NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES OR TO ANY U.S. PERSON

OR ANY PERSON ACTING FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON (AS DEFINED IN

REGULATION S UNDER THE U.S. SECURITIES ACT OF 1993, AS AMENDED (THE “SECURITIES ACT”)).

IMPORTANT: You must read the following disclaimer before continuing. The following disclaimer applies to the

attached offering circular (the “Offering Circular”). You are therefore advised to read this disclaimer carefully before

accessing, reading or making any other use of the attached Offering Circular. In accessing the attached Offering Circular, you

agree to be bound by the following terms and conditions, including any modifications to them from time to time, each time

you receive any information from the company as a result of such access. In order to review the attached Offering Circular

or make an investment decision with respect to the securities, you must be located outside the United States and not be a

U.S. person or acting for the account or benefit of a U.S. person.

Confirmation of Your Representation: The attached Offering Circular is being sent to you at your request and by accepting

the e-mail and accessing the attached Offering Circular, you shall be deemed to represent to Soar Wise Limited (the

Issuer”), AVIC International Leasing Co., Ltd. (the “Guarantor”) and each of Agricultural Bank of China Limited Hong

Kong Branch, Bank of China Limited, BNP Paribas, BOCI Asia Limited, DBS Bank Ltd., Haitong International Securities

Company Limited, ICBC International Securities Limited, Industrial and Commercial Bank of China (Asia) Limited and

Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch (together the “Arrangers” or “Dealers”, each an

Arranger” or a “Dealer”) that (1) you are not in the United States and are not a U.S. person nor acting for the account or

benefit of a U.S. person, (2) the e-mail address that you gave us and to which this e-mail has been delivered is not located

in the United States, its territories or possessions, and (3) you consent to delivery of the attached Offering Circular and any

amendments or supplements thereto by electronic transmission.

Except with respect to eligible investors in jurisdictions where such offer or invitation is permitted by law, nothing in this

electronic transmission constitutes an offer or an invitation by or on behalf of the Issuer, the Guarantor, the Arrangers, the

Dealers, the Trustee or the Agents or any of their respective directors, officers, employees, representatives, agents, affiliates

or advisers or any person who controls any of them to subscribe for or purchase any of the securities described therein, and

access has been limited so that it shall not constitute in the United States or elsewhere a general solicitation or general

advertising (as those terms are used in Regulation S under the Securities Act) or directed selling efforts (within the meaning

of Regulation S under the Securities Act). If a jurisdiction requires that the offering be made by a licensed broker or dealer

and the Dealers or any affiliate of the Dealers is a licensed broker or dealer in that jurisdiction, the offering shall be deemed

to be made by such Dealer or such affiliate on behalf of the Issuer and the Guarantor in such jurisdiction.

The attached Offering Circular has been made available to you in electronic form. You are reminded that documents

transmitted via this medium may be altered or changed during the process of transmission and, consequently, none of the

Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the Agents (each as defined in the attached Offering Circular)

or any of their respective directors, officers, employees, representatives, agents, affiliates or advisers or any person who

controls any of them accepts any liability or responsibility whatsoever in respect of any discrepancies between the document

distributed to you in electronic format and the hard copy version available to you upon request from any of the Issuer, the

Guarantor, the Arrangers or the Dealers.

Restrictions: The attached Offering Circular is being furnished in connection with an offering exempt from registration

under the Securities Act solely for the purpose of enabling a prospective investor to consider the purchase of the securities

described herein.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN

ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES AND THE GUARANTEE

DESCRIBED IN THE ATTACHED OFFERING CIRCULAR HAVE NOT BEEN, AND WILL NOT BE, REGISTERED

UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR

OTHER JURISDICTION AND THE SECURITIES ARE SUBJECT TO U.S. TAX LAW REQUIREMENTS. THE

SECURITIES MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, WITHIN THE UNITED STATES,

OR TO, OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS EXCEPT PURSUANT TO AN EXEMPTION

FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE

SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THIS OFFERING IS MADE

SOLELY IN OFFSHORE TRANSACTIONS PURSUANT TO THE SECURITIES ACT.

You are reminded that you have accessed the attached Offering Circular on the basis that you are a person into whose

possession the attached Offering Circular may be lawfully delivered in accordance with the laws of the jurisdiction in which

you are located and you may not nor are you authorised to deliver or forward this document, electronically or otherwise, to

any other person. If you have gained access to this transmission contrary to the foregoing restrictions, you are not allowed

to purchase any of the securities described in the attached Offering Circular.

Actions that You May Not Take: If you receive this document by e-mail, you should not reply by e-mail to this electronic

transmission, and you may not purchase any securities by doing so. Any reply e-mail communications, including those you

generate by using the “Reply” function on your e-mail software, will be ignored or rejected.

YOU ACKNOWLEDGE THAT THE ATTACHED OFFERING CIRCULAR AND THE INFORMATION CONTAINED

THEREIN ARE STRICTLY CONFIDENTIAL AND INTENDED FOR YOU ONLY. YOU ARE NOT AUTHORISED

TO AND YOU MAY NOT FORWARD OR DELIVER THE ATTACHED OFFERING CIRCULAR,

ELECTRONICALLY OR OTHERWISE, TO ANY OTHER PERSON OR REPRODUCE SUCH OFFERING

CIRCULAR IN ANY MANNER WHATSOEVER. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF

THE ATTACHED OFFERING CIRCULAR IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY

WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE

LAWS OF OTHER JURISDICTIONS.

You are responsible for protecting against viruses and other destructive items. If you receive this document by e-mail,

your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses

and other items of a destructive nature.

Strictly Confidential

Soar Wise Limited

(a company incorporated in the Cayman Islands with limited liability)

unconditionally and irrevocably guaranteed by

AVIC International Leasing Co., Ltd.

(a company incorporated in the People’s Republic of China with limited liability)

U.S.$3,500,000,000

Guaranteed Medium Term Note and Perpetual Capital Securities Programme

Under the U.S.$3,500,000,000 Guaranteed Medium Term Note and Perpetual Capital Securities Programme described in this Offering Circular (the “Programme”), Soar Wise Limited (the “Issuer”), subject to

compliance with all relevant laws, regulations and directives, may from time to time issue medium term notes (the “Notes”) or perpetual capital securities (the “Perpetual Capital Securities” and, together with the

Notes, the “Instruments”) unconditionally and irrevocably guaranteed (the “Guarantee”) by AVIC International Leasing Co., Ltd. (the “Guarantor”). The Issuer is a wholly-owned subsidiary of the Guarantor. The

aggregate nominal amount of Instruments outstanding will not at any time exceed U.S.$3,500,000,000 (or the equivalent in other currencies), subject to increase as further described in “Summary of the Programme”.

Application has been made to The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) for the listing of the Programme under which Instruments may be issued by way of debt issues to

professional investors (as defined in Chapter 37 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“Professional Investors”)) only during the 12-month period after

the date of this Offering Circular on the Hong Kong Stock Exchange. This document is for distribution to Professional Investors only.

Notice to Hong Kong investors: The Issuer and the Guarantor confirm that the Instruments are intended for purchase by Professional Investors only and, with respect to Instruments to be listed on the Hong Kong

Stock Exchange, will be listed on the Hong Kong Stock Exchange on that basis. Accordingly, the Issuer and the Guarantor confirm that the Instruments are not appropriate as an investment for retail investors in

Hong Kong. Investors should carefully consider the risks involved.

The Hong Kong Stock Exchange has not reviewed the contents of this document, other than to ensure that the prescribed form disclaimer and responsibility statements and a statement limiting distribution

of this document to Professional Investors only have been reproduced in this document. Listing of the Programme and the Instruments on the Hong Kong Stock Exchange is not to be taken as an indication

of the commercial merits or credit quality of the Programme, the Instruments or the Issuer or the Guarantor or the Group or quality of disclosure in this document. Hong Kong Exchanges and Clearing

Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for

any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

Notice of the aggregate nominal amount of Instruments, interest (if any) payable in respect of Instruments, the issue price of Instruments and any other terms and conditions not contained herein which are applicable

to each Tranche (as defined in “Terms and Conditions of the Notes” and “Terms and Conditions of the Perpetual Capital Securities” and each term therein, a “Condition”) of Instruments will be set out in a pricing

supplement (each a “Pricing Supplement”) which, with respect to Instruments to be listed on the Hong Kong Stock Exchange, will be delivered to the Hong Kong Stock Exchange on or before the date of issue

of the Instruments of such Tranche.

Instruments may be issued in bearer or registered form. The Instruments of each Series (as defined in “Terms and Conditions of the Notes” and “Terms and Conditions of the Perpetual Capital Securities”) issued

in bearer form (“Bearer Instruments”) will be represented on issue by a temporary global instrument in bearer form (each a “Temporary Global Instrument”) or a permanent global instrument in bearer form (each

a “Permanent Global Instrument”) (collectively, the “Global Instruments”). Instruments in registered form (“Registered Instruments”) will be represented by registered certificates (each a “Certificate”), one

Certificate being issued in respect of each Noteholder’s (as defined in “Terms and Conditions of the Notes”) or Perpetual Capital Securityholder’s (as defined in “Terms and Conditions of the Perpetual Capital

Securities”) (each, an “Instrumentholder’s”) entire holding of Registered Instruments of one Series. The Instruments of each Series in registered form will initially be represented by a global certificate (each a “Global

Certificate”). Global Instruments and Global Certificates may be deposited on the relevant issue date with a common depositary on behalf of Euroclear Bank SA/NV (“Euroclear”) and/or Clearstream Banking S.A.

(“Clearstream”), or with a sub-custodian for the Central Moneymarkets Unit Service operated by the Hong Kong Monetary Authority (the “CMU”). In relation to Global Instruments issued in compliance with TEFRA

D as indicated in the relevant Pricing Supplement, interests in the Temporary Global Instrument will be exchangeable for interests in a Permanent Global Instrument or, if so provided in the relevant Pricing Supplement,

for Definitive Instruments (as defined in “Summary of Provisions Relating to the Instruments while in Global Form”), on or after a date which is expected to be the first day following the period of 40 days from

the issue date of the relevant tranche of Instruments upon certification as to non-U.S. beneficial ownership. The provisions governing the exchange of interests in Global Instruments for other Global Instruments

or Definitive Instruments or Global Certificates for Certificates are described in “Summary of Provisions Relating to the Instruments while in Global Form”.

The Instruments and the Guarantee have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold or, in case of Bearer

Instruments, delivered, in the United States or to, or for the account or benefit of, U.S. persons, subject to certain exceptions. There will be no public offer of securities in the United States. The Instruments are being

offered to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act (“Regulation S”). Bearer Instruments are subject to U.S. tax law requirements. See “Subscription and Sale”.

Where the Circular on Promoting the Reform of the Administrative System on the Issuance by Enterprises of Foreign Debt Filings and Registrations (國家發展改革委關於推進企業發行外債備案登記制管理改革的

通知(發改外資[2015] 2044)) issued by the National Development and Reform Commission of the PRC or its local counterparts (“NDRC”) and which came into effect on 14 September 2015, and any implementation

rules or applicable policies in relation thereto as issued by NDRC from time to time (the “NDRC Circular”) apply, for the benefit of the Instruments to be issued in accordance with the Terms and Conditions of

the Notes (in relation to Notes) and the Terms and Conditions of the Perpetual Capital Securities (in relation to Perpetual Capital Securities), with respect to the offering of a particular tranche of Instruments, the

Guarantor undertakes to make the required filing with NDRC within the period prescribed in the NDRC Circular and provide the Trustee (as defined in “Terms and Conditions of the Notes” and “Terms and Conditions

of the Perpetual Capital Securities”) with the relevant certificate of any registration or amended registration (where applicable) with respect to the offering of the Instruments.

PRIIPS/IMPORTANT – EEA RETAIL INVESTORS – If the Pricing Supplement in respect of any Instruments includes a legend entitled “Prohibition of Sales to EEA Retail Investors”, the Instruments are not

intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (the “EEA”). For these purposes, a “retail

investor” means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; (ii) a customer within the meaning of Directive (EU) 2016/97 (the “Insurance Distribution

Directive”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (the “Prospectus

Regulation”). Consequently no key information document required by Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Instruments or otherwise making them available

to retail investors in the EEA has been prepared and therefore offering or selling the Instruments or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

IMPORTANT – UK RETAIL INVESTORS – If the Pricing Supplement in respect of any Instruments includes a legend entitled “Prohibition of Sales to UK Retail Investors”, The Instruments are not intended to

be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom (“UK”). For these purposes, a “retail investor” means a person

who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”);

(ii) a customer within the meaning of the provisions of the Financial Services and Markets Act 2000 (“FSMA”) and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that

customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA; or (iii) not a qualified investor

as defined in Article 2 of Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the EUWA. Consequently no key information document required by Regulation (EU) No 1286/2014 as it forms

part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”) for offering or selling the Instruments or otherwise making them available to retail investors in the UK has been prepared and therefore

offering or selling the Instruments or otherwise making them available to any retail investor in the UK may be unlawful under the UK PRIIPs Regulation.

Singapore SFA Product Classification: In connection with Section 309B of the Securities and Futures Act 2001 of Singapore (the “SFA”) and the Securities and Futures (Capital Markets Products) Regulations 2018

of Singapore (the “CMP Regulations 2018”), unless otherwise specified before an offer of Instruments, the Issuer has determined and hereby notifies all relevant persons (as defined in Section 309A(1) of the SFA),

that the Instruments are “prescribed capital markets products” (as defined in the CMP Regulations 2018) and are Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment

Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

The Instruments may be issued on a continuing basis to one or more of the Dealers specified under “Summary of the Programme” and any additional Dealer appointed under the Programme from time to time by

the Issuer (each a “Dealer” and together the “Dealers”), which appointment may be for a specific issue or on an ongoing basis. References in this Offering Circular to the “relevant Dealer” shall, in the case of

an issue of Instruments being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe such Instruments.

Investing in Instruments issued under the Programme involves certain risks and may not be suitable for all investors. Investors should have sufficient knowledge and experience in financial and business

matters to evaluate the information contained in this Offering Circular and in the relevant Pricing Supplement and the merits and risks of investing in a particular issue of Instruments in the context of

their financial position and particular circumstances. Investors also should have the financial capacity to bear the risks associated with an investment in Instruments. Investors should not purchase

Instruments unless they understand and are able to bear risks associated with Instruments. Prospective investors should have regard to the factors described under the section headed “Risk Factors” in

this Offering Circular. Investors should be aware that the Perpetual Capital Securities are perpetual and have no fixed redemption date, and there are various other risks relating to the Perpetual Capital

Securities, the Issuer, the Guarantor, the Group and their respective business and jurisdiction of operations which investors should familiarise themselves with before making an investment in the Perpetual

Capital Securities. See “Risk Factors” in relation to the perpetual features of the Perpetual Capital Securities beginning on page 28 of this Offering Circular.

The Programme is rated “A-” by Fitch Ratings Ltd. (“Fitch”). The rating assigned to the Programme is applicable to the senior unsecured notes issued under the Programme; ratings in respect of the Perpetual Capital

Securities issued may be separately obtained. This rating is only correct as at the date of this Offering Circular. Tranches of Instruments to be issued under the Programme will be rated or unrated. Where a Tranche

of Instruments is to be rated, such rating will not necessarily be the same as the ratings assigned to the Programme. A rating is not a recommendation to buy, sell or hold securities and may be subject to suspension,

reduction, revision or withdrawal at any time by the assigning rating agency.

Arrangers

Agricultural Bank of China

Limited Hong Kong Branch

Haitong International

Bank of China

ICBC International

BNP PARIBAS

ICBC (Asia)

DBS Bank Ltd.

Shanghai Pudong Development

Bank Hong Kong Branch

Dealers

Agricultural Bank of China

Limited Hong Kong Branch

Haitong International

Bank of China

ICBC International

BNP PARIBAS

ICBC (Asia)

DBS Bank Ltd.

Shanghai Pudong Development

Bank Hong Kong Branch

Offering Circular dated 16 May 2022

NOTICE TO INVESTORS

Each of the Issuer and the Guarantor, having made all reasonable enquiries, confirms that (i) this

Offering Circular contains all information with respect to the Issuer, the Guarantor and the

Guarantor’s subsidiaries and associated companies taken as a whole (the “Group”) and to the

Guarantee and the Instruments which is material in the context of the issue and offering of the

Instruments (including the information which is required by applicable laws of the Cayman Islands,

Hong Kong or the PRC and according to the particular nature of the Issuer, the Guarantor, the

Guarantee and the Instruments, is necessary to enable investors to make an informed assessment of

the assets and liabilities, financial position, profits and losses, and prospects of the Issuer and the

Guarantor); (ii) the statements contained in this Offering Circular relating to the Issuer, the Guarantor

and to the Group are in every material particular true and accurate and not misleading; (iii) the

opinions and intentions expressed in this Offering Circular with regard to the Issuer, the Guarantor

and the Group are honestly held, have been reached after considering all relevant circumstances and

are based on reasonable assumptions; (iv) there are no other facts in relation to the Issuer, the

Guarantor, the Group, the Guarantee or the Instruments the omission of which would, in the context

of the issue and offering of the Instruments make any statement in this Offering Circular misleading

in any material respect; and (v) all reasonable enquiries have been made by the Issuer and the

Guarantor to ascertain such facts and to verify the accuracy of all such information and statements.

This Offering Circular includes particulars given in compliance with the Rules Governing the Listing

of Securities on The Stock Exchange of Hong Kong Limited for the purpose of giving information

with regard to the Issuer, the Guarantor and the Group. The Issuer and the Guarantor accept full

responsibility for the accuracy of the information contained in this Offering Circular and each

confirms, having made all reasonable enquiries, that to the best of its knowledge and belief there are

no other facts the omission of which would make any statement herein misleading.

Admission to the Hong Kong Stock Exchange and quotation of any Instruments on the Hong Kong

Stock Exchange is not to be taken as an indication of the merits of the Programme, the Instruments,

the Issuer, the Guarantor or the Group. In making an investment decision, investors must rely on their

own examination of the Issuer, the Guarantor, the Group and the terms of the offering, including the

merits and risks involved. Please see “Risk Factors” for a discussion of certain factors to be

considered in connection with an investment in the Instruments.

Each Tranche of Instruments will be issued on the terms set out under the Terms and Conditions of

the Notes or the Terms and Conditions of the Perpetual Capital Securities, as the case may be, as

amended and/or supplemented by a Pricing Supplement. This Offering Circular must be read and

construed together with any amendments or supplements hereto and with any information

incorporated by reference herein (see “Information Incorporated by Reference and Financial

Information”) and, in relation to any Tranche of Instruments, must be read and construed together

with the relevant Pricing Supplement. This Offering Circular shall be read and construed on the basis

that such documents are incorporated in and form part of this Offering Circular.

The distribution of this Offering Circular and any Pricing Supplement and the offering, sale and

delivery of the Instruments in certain jurisdictions may be restricted by law. Persons into whose

possession this Offering Circular comes are required by the Issuer, the Guarantor, each of

Agricultural Bank of China Limited Hong Kong Branch, Bank of China Limited, BNP Paribas, BOCI

Asia Limited, DBS Bank Ltd., Haitong International Securities Company Limited, ICBC

International Securities Limited, Industrial and Commercial Bank of China (Asia) Limited and

Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch (together the “Arrangers” or

– i –

Dealers”, each an “Arranger” or a “Dealer”), the Trustee and the Agents (as defined in “Terms and

Conditions of the Notes” and “Terms and Conditions of the Perpetual Capital Securities”) to inform

themselves about and to observe any such restrictions. None of the Issuer, the Guarantor, the

Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors,

officers, employees, representatives, advisers or agents or any person who controls any of them

represents that this Offering Circular or any Pricing Supplement may be lawfully distributed, or that

any Instruments may be lawfully offered, in compliance with any applicable registration or other

requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assumes

any responsibility for facilitating any such distribution or offering. No action is being taken to permit

a public offering of any of the Instruments or the distribution of this Offering Circular or any Pricing

Supplement in any jurisdiction where action would be required for such purposes. Accordingly, no

Instruments may be offered or sold, directly or indirectly, and none of this Offering Circular, any

Pricing Supplement or any advertisement or other offering material may be distributed or published

in any jurisdiction, except under circumstances that will result in compliance with any applicable

laws and regulations.

No prospectus is required in accordance with Directive 2003/71/EC in relation to offers of

Instruments under the Programme.

There are restrictions on the offer and sale of the Instruments, and the circulation of documents

relating thereto, in certain jurisdictions including the United States, the EEA, the United Kingdom,

the PRC, Hong Kong, Singapore, Japan and Taiwan, and to persons connected therewith. For a

description of certain further restrictions on offers, sales and resales of the Instruments and

distribution of this Offering Circular and any Pricing Supplement, see “Subscription and Sale”.

PRIIPS/Important – EEA Retail Investors: If the Pricing Supplement in respect of any Instruments

includes a legend entitled “Prohibition of Sales to EEA Retail Investors”, the Instruments are not

intended to be offered, sold or otherwise made available to and should not be offered, sold or

otherwise made available to any retail investor in the EEA. For these purposes, a “retail investor”

means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of

MiFID II; (ii) a customer within the meaning of the Insurance Distribution Directive, where that

customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID

II; or (iii) not a qualified investor as defined in the Prospectus Regulation. Consequently no key

information document required by the PRIIPs Regulation for offering or selling the Instruments or

otherwise making them available to retail investors in the EEA has been prepared and therefore

offering or selling the Instruments or otherwise making them available to any retail investor in the

EEA may be unlawful under the PRIIPs Regulation.

IMPORTANT – UK RETAIL INVESTORS – If the Pricing Supplement in respect of any

Instruments includes a legend entitled “Prohibition of Sales to UK Retail Investors”, The Instruments

are not intended to be offered, sold or otherwise made available to and should not be offered, sold

or otherwise made available to any retail investor in the UK. For these purposes, a “retail investor”

means a person who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 of

Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the EUWA; (ii) a customer

within the meaning of the provisions of the FSMA and any rules or regulations made under the FSMA

to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client,

as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic

law by virtue of the EUWA; or (iii) not a qualified investor as defined in Article 2 of Regulation (EU)

2017/1129 as it forms part of domestic law by virtue of the EUWA. Consequently no key information

– ii –

document required by the UK PRIIPs Regulation for offering or selling the Instruments or otherwise

making them available to retail investors in the UK has been prepared and therefore offering or

selling the Instruments or otherwise making them available to any retail investor in the UK may be

unlawful under the UK PRIIPs Regulation.

Singapore SFA Product Classification – In connection with Section 309B of the SFA and the

CMP Regulations 2018, unless otherwise specified before an offer of Instruments, the Issuer has

determined, and hereby notifies all relevant persons (as defined in Section 309A(1) of the SFA), that

the Instruments are “prescribed capital markets products” (as defined in the CMP Regulations 2018)

and are Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of

Investment Products and MAS Notice FAA-N16: Notice on Recommendation on Investment Products).

No person has been or is authorised to give any information or to make any representation concerning

the Issuer, the Guarantor, the Group or the Instruments other than as contained in this Offering

Circular or any other document entered into in relation to the Programme and the sale of Instruments

and, if given or made, any such other information or representation should not be relied upon as

having been authorised by the Issuer, the Guarantor, any Arranger, any Dealer, the Trustee or any

Agent or any of their respective affiliates, directors, officers, employees, representatives, advisers or

agents or any person who controls any of them. Neither the delivery of this Offering Circular or any

Pricing Supplement nor any offering, sale or delivery made in connection with the issue of the

Instruments shall, under any circumstances, constitute a representation that there has been no change

or development reasonably likely to involve a change in the affairs of the Issuer, the Guarantor or the

Group since the date hereof, or if later, the date upon which this Offering Circular has been most

recently amended or supplemented or create any implication that the information contained herein is

correct as at any date subsequent to the date hereof or, as the case may be, the date upon which this

Offering Circular has been most recently amended or supplemented or that any other information

supplied in connection with the Programme is correct as at any time subsequent to the date on which

it is supplied or, if different, the date indicated in the document containing the same. The Arrangers,

the Dealers, the Trustee and the Agents and each of their respective affiliates, directors, officers,

employees, representatives, advisers and agents and each person who controls any of them expressly

do not undertake to review the financial condition or affairs of the Issuer, the Guarantor or the Group

during the life of the Programme or to advise any investor in the Instruments of any information

coming to their attention. Investors should review, inter alia, the most recent documents incorporated

by reference into this Offering Circular when deciding whether or not to purchase any Instruments.

Neither this Offering Circular nor any Pricing Supplement constitutes an offer of, or an invitation by

or on behalf of any of the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the Agents

or any of their respective affiliates, directors, officers, employees, representatives, advisers or agents

or any person who controls any of them to subscribe for or purchase any Instruments and may not

be used for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any

circumstances in which such offer or solicitation is not authorised or is unlawful. Each recipient of

this Offering Circular or any Pricing Supplement shall be taken to have made its own investigation

and appraisal of the condition (financial or otherwise) of the Issuer, the Guarantor and the Group.

This Offering Circular is highly confidential and has been prepared by the Issuer solely for use in

connection with the Programme and the proposed offering of the Instruments under the Programme

as described herein. Neither the Issuer nor the Guarantor has authorised its use for any other purpose.

This Offering Circular may not be copied or reproduced in whole or in part. It may be distributed only

to and its contents may be disclosed only to the prospective investors to whom it is provided. By

accepting delivery of this Offering Circular each investor agrees to these restrictions.

– iii –

No representation or warranty, express or implied, is made or given by the Arrangers, the Dealers,

the Trustee or the Agents or any of their respective affiliates, directors, officers, employees,

representatives, advisers or agents or any person who controls any of them as to the accuracy,

completeness or sufficiency of the information contained or incorporated in this Offering Circular or

any other information provided by the Issuer and the Guarantor in connection with the Programme,

and nothing contained or incorporated in this Offering Circular is, or shall be relied upon as, a

promise, representation or warranty by the Arrangers, the Dealers, the Trustee or the Agents or any

of their respective affiliates, directors, officers, employees, representatives, advisers or agents or any

person who controls any of them. None of the Arrangers, the Dealers, the Trustee or the Agents or

any of their respective affiliates, directors, officers, employees, representatives, advisers or agents or

any person who controls any of them has independently verified any of the information contained in

this Offering Circular and can give assurance that such information is accurate, truthful or complete.

To the fullest extent permitted by law, the Arrangers, the Dealers, the Trustee and the Agents and each

of their respective affiliates, directors, officers, employees, representatives, advisers and agents and

each person who controls any of them do not accept any responsibility for the contents of this

Offering Circular or for any other statement, made or purported to be made by the Arrangers, the

Dealers, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees,

representatives, advisers or agents or any person who controls any of them or on its behalf in

connection with the Issuer, the Guarantor or the Group or the issue and offering of the Instruments.

Each of the Arrangers, the Dealers, the Trustee and the Agents and each of their respective affiliates,

directors, officers, employees, representatives, advisers and agents and each person who controls any

of them accordingly disclaims all and any liability whether arising in tort or contract or otherwise

which it might otherwise have in respect of this Offering Circular or any such statement. None of the

Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors,

officers, employees, representatives, advisers or agents or any person who controls any of them

accepts any liability in relation to the information contained or incorporated by reference in this

Offering Circular or any other information provided by the Issuer in connection with the Programme.

This Offering Circular, each Pricing Supplement and any other information supplied in connection

with the Programme or any Instruments (i) are not intended to provide the basis of any credit or other

evaluation and (ii) should not be considered as a recommendation by any of the Issuer, the Guarantor,

the Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors,

officers, employees, representatives, advisers or agents or any person who controls any of them that

any recipient of this Offering Circular should purchase any Instruments. Each potential purchaser of

the Instruments should determine for itself the relevance of the information contained in this Offering

Circular and its purchase of the Instruments should be based upon such investigations with its own

tax, legal and business advisers as it deems necessary.

None of the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the Agents or any of their

respective affiliates, directors, officers, employees, representatives, advisers or agents or any person

who controls any of them makes any representation to any investor in the Instruments regarding the

legality of its investment under any applicable laws. Any investor in the Instruments should be able

to bear the economic risk of an investment in the Instruments for an indefinite period of time.

– iv –

THE INSTRUMENTS AND THE GUARANTEE HAVE NOT BEEN AND WILL NOT BE

REGISTERED UNDER SECURITIES ACT OR WITH ANY SECURITIES REGULATORY

AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND

THE INSTRUMENTS MAY INCLUDE BEARER INSTRUMENTS THAT ARE SUBJECT TO

U.S. TAX LAW REQUIREMENTS. SUBJECT TO CERTAIN EXCEPTIONS, THE

INSTRUMENTS MAY NOT BE OFFERED, SOLD, OR, IN CASE OF BEARER

INSTRUMENTS, DELIVERED, WITHIN THE UNITED STATES OR TO, OR FOR THE

ACCOUNT OR BENEFIT OF, U.S. PERSONS. REGISTERED INSTRUMENTS ARE

SUBJECT TO CERTAIN RESTRICTIONS, SEE “SUBSCRIPTION AND SALE”.

IN CONNECTION WITH THE ISSUE OF ANY TRANCHE OF INSTRUMENTS, THE

DEALER OR DEALERS (IF ANY) NAMED AS THE STABILISATION MANAGER(S) (THE

“STABILISATION MANAGER(S)”) (OR PERSON(S) ACTING ON BEHALF OF ANY

STABILISATION MANAGER(S)) IN THE RELEVANT PRICING SUPPLEMENT MAY

OVER-ALLOT INSTRUMENTS OR EFFECT TRANSACTIONS WITH A VIEW TO

SUPPORTING THE MARKET PRICE OF THE INSTRUMENTS AT A LEVEL HIGHER

THAN THAT WHICH MIGHT OTHERWISE PREVAIL FOR A LIMITED PERIOD OF TIME

AFTER THE CLOSING DATE OF THE RELEVANT TRANCHE OF INSTRUMENTS.

HOWEVER, THERE IS NO OBLIGATION ON THE STABILISATION MANAGER(S) (OR

PERSON(S) ACTING ON BEHALF OF THE STABILISATION MANAGER(S)), TO DO THIS.

ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH

ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE RELEVANT

TRANCHE OF INSTRUMENTS IS MADE AND, IF BEGUN, MAY CEASE AT ANY TIME,

BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE

DATE OF THE RELEVANT TRANCHE OF INSTRUMENTS AND 60 DAYS AFTER THE

DATE OF THE ALLOTMENT OF THE RELEVANT TRANCHE OF INSTRUMENTS. ANY

STABILISATION ACTION OR OVERALLOTMENT MUST BE CONDUCTED BY THE

RELEVANT STABILISATION MANAGER(S) (OR PERSONS ACTING ON BEHALF OF ANY

STABILISATION MANAGER(S)) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND

RULES.

This Offering Circular does not describe all of the risks and investment considerations (including

those relating to each investor’s particular circumstances) of an investment in Instruments of a

particular issue. Each potential purchaser of Instruments should refer to and consider carefully the

relevant Pricing Supplement for each particular issue of Instruments, which may describe additional

risks and investment considerations associated with such Instruments. The risks and investment

considerations identified in this Offering Circular and the relevant Pricing Supplement are provided

as general information only. Investors should consult their own financial and legal advisers as to the

risks and investment considerations arising from an investment in an issue of Instruments and should

possess the appropriate resources to analyse such investment and the suitability of such investment

in their particular circumstances. Each person receiving this Offering Circular acknowledges that

such person has not relied on the Arrangers, the Dealers, the Trustee or the Agents or any of their

respective affiliates, directors, officers, employees, representatives, advisers or agents or any person

who controls any of them in connection with its investigation of the accuracy of such information or

its investment decision.

– v –

WARNING

The contents of this Offering Circular have not been reviewed by any regulatory authority of any

jurisdiction. You are advised to exercise caution in relation to the offering of the Instruments. If you

are in any doubt about any of the contents of this Offering Circular, you should obtain independent

professional advice.

INDUSTRY AND MARKET DATA

Market data and certain industry forecasts and statistics in this Offering Circular have been obtained

from both public and private sources, including market research, publicly available information and

industry publications. Although this information is believed to be reliable, it has not been

independently verified by the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the

Agents or any of their respective affiliates, directors, officers, employees, representatives, advisers

or agents or any person who controls any of them and none of the Issuer, the Guarantor, the

Arrangers, the Dealers, the Trustee or the Agents or any of their respective affiliates, directors,

officers, employees, representatives, advisers or agents or any person who controls any of them

makes any representation as to the accuracy or completeness of that information. Such information

may not be consistent with other information compiled within or outside the PRC. In addition, third

party information providers may have obtained information from market participants and such

information may not have been independently verified.

PRESENTATION OF FINANCIAL INFORMATION

The audited consolidated financial statements of the Guarantor as at and for the year ended 31

December 2020, which are included elsewhere in this Offering Circular, have been audited by

Zhongshenzhonghuan Certified Public Accountants (SGP) (“ZSZH”) (formerly known as Mazars

Certified Public Accountants (SGP)), and the audited consolidated financial statements of the

Guarantor as at and for the year ended 2021, which are included elsewhere in this Offering Circular,

have been audited by Dahua Certified Public Accountants (Special General Partnership) (“Dahua”)

(together the “Audited Consolidated Financial Statements”). The Audited Consolidated Financial

Statements were prepared and presented in accordance with the Accounting Standards for Business

Enterprises in China (“PRC GAAP”).

PRC GAAP is substantially in line with the International Financial Reporting Standards (“IFRS”),

except for certain modifications which reflect the PRC’s unique circumstances and environment.

Please see “Description of Certain Differences between PRC GAAP and IFRS” for details.

The scope of consolidation of the Audited Consolidated Financial Statements changes from time to

time. See “Notes to the Financial Statements – VII. Business Combination and Financial Statement

Consolidation” of the Guarantor’s audited consolidated financial statements as at and for the year

ended 31 December 2020 and “Notes to the Financial Statements – VII. Business Combination and

Financial Statement Consolidation” of the Guarantor’s audited consolidated financial statements as

at and for the year ended 31 December 2021. In addition, in 2017 and 2018, the Ministry of Finance

of the PRC promulgated certain new accounting standards and new requirements in relation to the

format of financial statements as well as classification and measurement of certain accounting items

(the “New Accounting Standards and Requirements”). The Audited Consolidated Financial

Statements were prepared and presented in accordance with the relevant applicable New Accounting

– vi –

Standards and Requirements. As a result, the presentation of certain accounting items in the Audited

Consolidated Financial Statements may not be comparable to the financial figures in the Guarantor’s

financial statements for the previous periods. For details of the New Accounting Standards and

Requirements and its impact on the Audited Consolidated Financial Statements, please see “Notes to

the Financial Statements – V Significant changes in accounting policies, accounting estimates and

correction of errors in prior periods – 1. Changes in accounting policies” of the Guarantor’s audited

consolidated financial statements as at and for the year ended 31 December 2020 and “Notes to the

Financial Statements – V Significant changes in accounting policies, accounting estimates and

correction of errors in prior periods” of the Guarantor’s audited consolidated financial statements as

at and for the year ended 31 December 2021.

Please also see “Risk Factors – Risks Relating to Financial and Other Information – Certain

accounting items in the Audited Consolidated Financial Statements may not be comparable to the

financial information in the Guarantor’s consolidated financial statements for the previous periods.”

for further information.

– vii –

EXCHANGE RATE INFORMATION

The consolidated financial statements of the Guarantor are presented in Renminbi. For convenience

only and unless otherwise noted, all translations from Renminbi into U.S. dollars in this Offering

Circular were made at the rate of RMB6.3726 to U.S.$1.00 (as the case may be), based on the noon

buying rate as set forth in the H.10 statistical release of the Federal Reserve Bank of New York on

30 December 2021. No representation is made that the Renminbi amounts referred to in this Offering

Circular could have been or could be converted into U.S. dollars at any particular rate or at all, and

vice versa.

ROUNDING

In this Offering Circular, where information has been presented in thousands or millions of units,

amounts may have been rounded up or down. Accordingly, totals of columns or rows of numbers in

tables or totals of numbers in charts or diagrams may not be equal to the apparent total of the

individual items and actual numbers may differ from those contained herein due to rounding.

References to information in billions of units are to the equivalent of a thousand million units.

Certain Definitions and Conventions

In this Offering Circular, unless otherwise specified or the context otherwise requires, references to

China” or the “PRC” or the “Mainland” are to the People’s Republic of China and, for the purpose

of this Offering Circular only, excluding Hong Kong, the Macau Special Administrative Region of the

People’s Republic of China and Taiwan; references to “Hong Kong” are to the Hong Kong Special

Administrative Region of the People’s Republic of China; and references to the “United States” or

U.S.” are to the United States of America.

In this Offering Circular, unless otherwise specified or the context otherwise requires, references to

Renminbi”, “RMB” or “CNY” are to the lawful currency of the PRC; references to “Hong Kong

dollar” or “HK$” are to the lawful currency of Hong Kong; references to “EUR”, “euro” or “C” are

to the lawful currency of member states of the European Union that adopt the single currency

introduced in accordance with the Treaty on the Functioning of the European Community, as amended

from time to time; and references to “U.S. dollars” or “U.S.$” are to the lawful currency of the

United States of America.

The English names of the PRC nationals, entities, departments, facilities, laws, regulations,

certificates, titles and the like are translations of their Chinese names and are included for

identification purposes only.

In this Offering Circular, unless otherwise indicated or the context otherwise requires, references to:

? “CBIRC” refers to the China Banking and Insurance Regulatory Commission;

? “Leased asset scale” includes long-term receivables, long-term receivables due within one year,

book value of fixed assets and pre-payments for purchase of financial lease assets;

? “MOFCOM” refers to the Ministry of Commerce of the People’s Republic of China;

? “NDRC” refers to the National Development and Reform Commission of the PRC or its local

counterparts;

? “PBOC” refers to the People’s Bank of China, the central bank of the People’s Republic of

China;

? the “PRC government” refers to the central government of the People’s Republic of China and

its political subdivisions, including provincial, municipal and other regional or local

government entities, and instrumentalities thereof, or where the context requires, any of them;

– viii –

? “SAFE” refers to the State Administration of Foreign Exchange of the PRC or its local

branches;

? “SASAC” refers to the State-owned Assets Supervision and Administration Commission of the

State Council of the PRC or its successor; and

? “State Council” refers to the State Council of the People’s Republic of China.

– ix –

INFORMATION INCORPORATED BY REFERENCE AND

FINANCIAL INFORMATION

This Offering Circular should be read and construed in conjunction with:

(i) each relevant Pricing Supplement;

(ii) all amendments and supplements from time to time to this Offering Circular; and

(iii) any annual or interim financial statements (whether audited or unaudited) of the Guarantor that

are circulated with this Offering Circular and are dated as at a date, or for a period ending,

subsequent to those financial statements appearing elsewhere in this Offering Circular,

which shall be deemed to be incorporated in, and to form part of, this Offering Circular and which

shall be deemed to modify or supersede the contents of this Offering Circular.

Any statement contained in this Offering Circular or in a document incorporated by reference into

this Offering Circular will be deemed to be modified or superseded for purposes of this Offering

Circular to the extent that a statement contained in any such subsequent document modifies or

supersedes that statement. Any statement that is modified or superseded in this manner will no longer

be a part of this Offering Circular, except as modified or superseded.

Copies of all such documents which are so deemed to be incorporated in, and to form part of, this

Offering Circular will be available (upon written request) free of charge, during usual business hours

on any weekday (Saturdays, Sundays and public holidays excepted), for inspection at the specified

office of the Trustee set out at the end of this Offering Circular.

SUPPLEMENTAL OFFERING CIRCULAR

Each of the Issuer and the Guarantor has given an undertaking to the Dealers that the Issuer and the

Guarantor shall prepare and publish an amendment or supplement to this Offering Circular if at any

time during the duration of the Programme a significant new factor, material mistake or material

inaccuracy arises or is noted relating to the information included in this Offering Circular which is

capable of affecting an assessment by investors of the assets and liabilities, financial position, profits

and losses, and prospects of the Issuer and/or the Guarantor and/or of the rights attaching to the

Instruments and/or the Guarantee.

– x –

FORWARD-LOOKING STATEMENTS

Certain statements under “Risk Factors”, “Description of the Group” and elsewhere in this Offering

Circular constitute “forward-looking statements”. The words including “believe”, “expect”, “plan”,

“anticipate”, “intend”, “schedule”, “estimate”, “could”, “may”, “going forward” and similar words or

expressions identify forward-looking statements. In addition, all statements other than statements of

historical facts included in this Offering Circular, including, but without limitation, those regarding

the financial position, business strategy, prospects, capital expenditure and investment plans of the

Group and the plans and objectives of the Group’s respective management for their respective future

operations (including development plans and objectives relating to the Group’s respective

operations), are forward-looking statements. Such forward-looking statements involve known and

unknown risks, uncertainties and other factors which may cause actual results or performance of the

Group to differ materially from those expressed or implied by such forward-looking statements. Such

forward-looking statements are based on numerous assumption regarding the Group’s respective

present and future business strategies and the environment in which the Group will operate in the

future. These forward-looking statements reflect the views of the Issuer and the Guarantor with

respect to future events and are not a guarantee of future performance or developments. The Issuer

expressly disclaims any obligation or undertaking to release any updates or revisions to any

forward-looking statements contained herein to reflect any change in the Issuer’s, the Guarantor’s or

the Group’s expectations with regard thereto or any change of events, conditions or circumstances,

on which any such statements were based. This Offering Circular discloses, under “Risk Factors” and

elsewhere, important factors that could cause actual results to differ materially from the Issuer’s

expectations. All subsequent written and forward-looking statements attributable to the Issuer, the

Guarantor or persons acting on behalf of the Issuer and the Guarantor are expressly qualified in their

entirety by such cautionary statements.

– xi –

TABLE OF CONTENTS

SUMMARY OF THE PROGRAMME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

SUMMARY CONSOLIDATED FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . 22

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

CAPITALISATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

DESCRIPTION OF THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

DESCRIPTION OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

DIRECTORS OF THE GUARANTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

FORM OF PRICING SUPPLEMENT OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . 126

FORM OF PRICING SUPPLEMENT OF THE PERPETUAL CAPITAL

SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

TERMS AND CONDITIONS OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

TERMS AND CONDITIONS OF THE PERPETUAL CAPITAL SECURITIES . . . . . . . 201

SUMMARY OF PROVISIONS RELATING TO THE INSTRUMENTS WHILE IN

GLOBAL FORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253

TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260

PRC REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274

PRC CURRENCY CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276

SUBSCRIPTION AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279

DESCRIPTION OF CERTAIN DIFFERENCES BETWEEN

PRC GAAP AND IFRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288

GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289

INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

– xii –

SUMMARY OF THE PROGRAMME

The following summary is qualified in its entirety by the remainder of this Offering Circular. This

summary must be read as an introduction to this Offering Circular and any decision to invest in the

Instruments should be based on a consideration of this Offering Circular as a whole, including any

information incorporated by reference. Phrases used in this summary and not otherwise defined shall

have the meanings given to them in the section entitled “Terms and Conditions of the Notes” and

“Terms and Conditions of the Perpetual Capital Securities”.

Issuer . . . . . . . . . . . . . . . . . . . . . Soar Wise Limited.

Guarantor. . . . . . . . . . . . . . . . . . AVIC International Leasing Co., Ltd.

Description . . . . . . . . . . . . . . . . . Guaranteed Medium Term Note and Perpetual Capital

Securities Programme.

Size . . . . . . . . . . . . . . . . . . . . . . . Up to U.S.$3,500,000,000 (or the equivalent in other currencies

at the date of issue) aggregate nominal amount of Instruments

outstanding at any one time. The Issuer and the Guarantor may

increase the aggregate nominal amount of the Programme in

accordance with the terms of the Dealer Agreement (as defined

in “Subscription and Sale”).

Risk Factors . . . . . . . . . . . . . . . . Investing in Instruments issued under the Programme involves

certain risks. The principal risk factors that may affect the

abilities of the Issuer and the Guarantor to fulfil their respective

obligations in respect of the Instruments are discussed under

Risk Factors”.

Arrangers . . . . . . . . . . . . . . . . . . Agricultural Bank of China Limited Hong Kong Branch, Bank

of China Limited, BNP Paribas, BOCI Asia Limited, DBS Bank

Ltd., Haitong International Securities Company Limited, ICBC

International Securities Limited, Industrial and Commercial

Bank of China (Asia) Limited and Shanghai Pudong

Development Bank Co., Ltd., Hong Kong Branch.

Dealers . . . . . . . . . . . . . . . . . . . . Agricultural Bank of China Limited Hong Kong Branch, Bank

of China Limited, BNP Paribas, BOCI Asia Limited, DBS Bank

Ltd., Haitong International Securities Company Limited, ICBC

International Securities Limited, Industrial and Commercial

Bank of China (Asia) Limited and Shanghai Pudong

Development Bank Co., Ltd., Hong Kong Branch.

The Issuer and the Guarantor may from time to time terminate

the appointment of any Dealer under the Programme or appoint

Dealer(s) either in respect of one or more Tranches or in respect

of the whole Programme. References in this Offering Circular

to “Dealers” are to all persons appointed as a dealer in respect

of one or more Tranches or the Programme.

– 1 –

Certain Restrictions . . . . . . . . . . Each issue of Instruments denominated in a currency in respect

of which particular laws, guidelines, regulations, restrictions

or reporting requirements apply will only be issued in

circumstances which comply with such laws, guidelines,

regulations, restrictions or reporting requirements from time to

time (see “Subscription and Sale”) including the following

restriction applicable at the date of this Offering Circular.

Instruments having a maturity of less than one year

Instruments having a maturity of less than one year will, if the

proceeds of the issue are accepted in the United Kingdom,

constitute deposits for the purposes of the prohibition on

accepting deposits contained in Section 19 of the Financial

Services and Markets Act 2000 unless they are issued to a

limited class of professional investors and have a denomination

of at least £100,000 or its equivalent (see “Subscription and

Sale”).

Trustee . . . . . . . . . . . . . . . . . . . . DB Trustees (Hong Kong) Limited.

Principal Paying Agent,

Registrar and Transfer

Agent. . . . . . . . . . . . . . . . . . . .

Deutsche Bank AG, Hong Kong Branch.

CMU Lodging and Paying

Agent. . . . . . . . . . . . . . . . . . . .

Deutsche Bank AG, Hong Kong Branch.

Method of Issue . . . . . . . . . . . . . The Instruments will be issued on a syndicated or nonsyndicated basis. The Instruments will be issued in Series

having one or more issue dates and on terms otherwise identical

(or identical other than in respect of the first payment of interest

(in respect of the Notes) or the first payment of Distribution (as

defined in “Terms and Conditions of the Perpetual Capital

Securities”) (in respect of the Perpetual Capital Securities), as

applicable), the Instruments of each Series being intended to be

interchangeable with all other Instruments of that Series. Each

Series may be issued in Tranches on the same or different issue

dates. The specific terms of each Tranche (which will be

completed, where necessary, with the relevant terms and

conditions and, save in respect of the issue date, issue price,

first payment of interest (in respect of the Notes) or the first

payment of Distribution (in respect of the Perpetual Capital

Securities), as applicable, and nominal amount of the Tranche,

will be identical to the terms of other Tranches of the same

Series) will be set out in the relevant Pricing Supplement.

Issue Price . . . . . . . . . . . . . . . . . Instruments may be issued at their nominal amount or at a

discount or premium to their nominal amount. Partly Paid

Instruments may be issued, the issue price of which will be

payable in two or more instalments.

– 2 –

Form of Instruments . . . . . . . . . Instruments may be issued in bearer form or in registered form

as described in “Terms and Conditions of the Notes” and “Terms

and Conditions of the Perpetual Capital Securities”. Registered

Instruments will not be exchangeable for Bearer Instruments

and vice versa.

Each Tranche of Bearer Instruments will initially be in the form

of either a Temporary Bearer Global Instrument or a Permanent

Bearer Global Instrument, in each case as specified in the

relevant Pricing Supplement.

Each Global Instrument will be deposited on or around the

relevant issue date with a common depositary or sub-custodian

for Clearstream, Euroclear and/or, as the case may be, the CMU

and/or any other relevant clearing system. Each Temporary

Bearer Global Instrument will be exchangeable for a Permanent

Bearer Global Instrument or, if so specified in the relevant

Pricing Supplement, for Definitive Instruments. If the TEFRA

D rules are specified in the relevant Pricing Supplement as

applicable, certification as to non-U.S. beneficial ownership

will be a condition precedent to any exchange of an interest in

a Temporary Bearer Global Instrument or receipt of any

payment of interest (in respect of the Notes) or receipt of any

payment of Distribution (in respect of the Perpetual Capital

Securities) in respect of a Temporary Bearer Global Instrument.

Each Permanent Bearer Global Instrument will be exchangeable

for Definitive Instruments in accordance with its terms.

Definitive Instruments will, if interest-bearing (in respect of the

Notes), have Coupons (as defined in the Trust Deed) attached

and, if appropriate, a Talon (as defined in the Trust Deed) for

further Coupons.

Registered Instruments will initially be represented by Global

Certificates. Global Certificates representing Registered

Instruments will be registered in the name of a common

depositary or nominee for one or more of Euroclear,

Clearstream and the CMU.

Clearing Systems . . . . . . . . . . . . Clearstream, Euroclear, the CMU and, in relation to any

Tranche, such other clearing system as may be agreed between

the Issuer, the Guarantor, the Principal Paying Agent, the

Trustee, the Registrar and the relevant Dealer(s).

– 3 –

Initial Delivery of Instruments . On or before the issue date for each Series, the Global

Instrument representing the Bearer Instruments or the Global

Certificate representing Registered Instruments may be

deposited with a common depositary for Euroclear and

Clearstream or deposited with a sub-custodian for the Hong

Kong Monetary Authority as operator of the CMU. Global

Instruments or Global Certificates may also be deposited with

any other clearing system or may be delivered outside any

clearing system provided that the method of such delivery has

been agreed in advance by the Issuer, the Guarantor, the

Trustee, the Principal Paying Agent, if relevant, the Registrar

and the relevant Dealer(s). Registered Instruments that are to be

credited to one or more clearing systems on issue will be

registered in the name of, or in the name of a nominee or a

common nominee for, such clearing systems.

Currencies . . . . . . . . . . . . . . . . . Subject to compliance with all relevant laws, regulations and

directives, Instruments may be issued in any currency agreed

between the Issuer, the Guarantor, the Agents and the relevant

Dealer(s).

Maturities . . . . . . . . . . . . . . . . . . Subject to compliance with all relevant laws, regulations and

directives, any maturity as may be agreed between the Issuer,

the Guarantor and the relevant Dealer(s).

Specified Denomination . . . . . . . Definitive Instruments will be issued in such denominations as

may be agreed between the Issuer, the Guarantor and the

relevant Dealer(s) save that the minimum denomination of each

Instrument will be such as may be allowed or required from

time to time by the central banks (or equivalent body) or any

laws or regulations applicable to the relevant currency

(see “– Certain Restrictions” above).

Notes

Fixed Rate Notes . . . . . . . . . . . . Fixed interest will be payable in arrear on such date or dates as

may be agreed between the Issuer, the Guarantor and the

relevant Dealer(s) and on redemption and will be calculated on

the basis of such Day Count Fraction as may be agreed between

the Issuer and the relevant Dealer(s).

– 4 –

Floating Rate Notes . . . . . . . . . . Floating Rate Notes will bear interest determined separately for

each Series as follows:

(i) on the same basis as the floating rate under a notional

interest rate swap transaction in the relevant Specified

Currency governed by an agreement incorporating the

2006 ISDA Definitions (as published by the International

Swaps and Derivatives Association, Inc. and as amended

and updated as at the Issue Date of the first Tranche of the

Notes of the relevant Series); or

(ii) by reference to EURIBOR, HIBOR or CNH HIBOR (or

such other benchmark as may be specified in the relevant

Pricing Supplement) as adjusted for any applicable

margin; or

(iii) on such other basis as may be agreed between the Issuer,

the Guarantor and the relevant Dealer(s).

Interest periods will be specified in the relevant Pricing

Supplement.

Zero Coupon Notes . . . . . . . . . . Zero Coupon Notes may be issued at their nominal amount or at

a discount to it and will not bear interest.

Dual Currency Notes . . . . . . . . . Payments (whether in respect of principal or interest and

whether at maturity or otherwise) in respect of Dual Currency

Notes will be made in such currencies, and based on such rates

of exchange, as the Issuer, the Guarantor and the relevant

Dealer(s) may agree and as may be specified in the relevant

Pricing Supplement.

Index Linked Notes . . . . . . . . . . Payments of principal in respect of Index Linked Redemption

Notes or of interest in respect of Index Linked Interest Notes

will be calculated by reference to such index and/or formula or

to changes in prices of securities or commodities or to such

other factors as the Issuer, the Guarantor and the relevant

Dealer(s) may agree and as may be specified in the relevant

Pricing Supplement.

Interest Periods and Interest

Rates . . . . . . . . . . . . . . . . . . . .

The length of the interest periods for the Notes and the

applicable interest rate or its method of calculation may differ

from time to time or be constant for any Series. Floating Rate

Notes and Index Linked Interest Notes may also have a

maximum interest rate, a minimum interest rate, or both. The

use of interest accrual periods permits the Notes to bear interest

at different rates in the same interest period. All such

information will be set out in the relevant Pricing Supplement.

– 5 –

Redemption . . . . . . . . . . . . . . . . The relevant Pricing Supplement will indicate either that the

relevant Notes cannot be redeemed prior to their stated maturity

(other than in specified instalments, if applicable, or for

taxation reasons or following an Event of Default (as defined in

Terms and Conditions of the Notes”)) or that such Notes will

be redeemable at the option of the Issuer and/or the Noteholders

upon giving notice to the Noteholders or the Issuer, as the case

may be, on a date or dates specified prior to such stated maturity

and at a price or prices and on such other terms as may be

agreed between the Issuer, the Guarantor and the relevant

Dealer(s). The relevant Pricing Supplement may provide that

Notes may be redeemable in two or more instalments of such

amounts and on such dates as are indicated in the relevant

Pricing Supplement.

Notes having a maturity of less than one year are subject to

restrictions on their denomination and distribution, see

– Certain Restrictions – Instruments having a maturity of less

than one year” above.

Optional Redemption . . . . . . . . . Notes may be redeemed before their stated maturity at the

option of the Issuer (either in whole or in part) and/or the

Noteholders to the extent (if at all) specified in the relevant

Pricing Supplement.

Redemption for Change of

Control . . . . . . . . . . . . . . . . . .

The terms of the Notes may allow for the election in the Pricing

Supplement for the early redemption of the Notes at the option

of the holders thereof upon the occurrence of a Change of

Control as further described in Condition 6(d) of the Terms and

Conditions of the Notes.

Redemption for No Registration

Event . . . . . . . . . . . . . . . . . . . .

The terms of the Notes may allow for the election in the Pricing

Supplement for the early redemption of the Notes at the option

of the holders thereof upon the occurrence of a No Registration

Event as further described in Condition 6(e) of the Terms and

Conditions of the Notes.

Redemption for Taxation

Reasons . . . . . . . . . . . . . . . . . .

Notes may be redeemed at the Issuer’s option in whole, but not

in part, prior to maturity for taxation reasons as further

described in Condition 6(c) of the Terms and Conditions of the

Notes.

– 6 –

Status of Notes . . . . . . . . . . . . . . The Notes and the Receipts (as defined in the Trust Deed) and

the Coupons relating to them will constitute direct,

unsubordinated, unconditional and (subject to Condition 4(a) of

the Terms and Conditions of the Notes) unsecured obligations

of the Issuer and shall at all times rank pari passu and without

any preference among themselves. The payment obligations of

the Issuer under the Notes and the Receipts and the Coupons

relating to them shall, save for such exceptions as may be

provided by applicable legislation and subject to Condition 4(a)

of the Terms and Conditions of the Notes, at all times rank at

least equally with all other present and future unsecured and

unsubordinated indebtedness and monetary obligations of the

Issuer.

Status of the Guarantee . . . . . . . The payment obligations of the Guarantor under the Guarantee

shall, save for such exceptions as may be provided by

applicable legislation and subject to Condition 4(a) of the

Terms and Conditions of the Notes, at all times rank at least

equally with all other present and future unsecured and

unsubordinated indebtedness and monetary obligations of the

Guarantor.

Negative Pledge and other

Covenants . . . . . . . . . . . . . . . .

The Terms and Conditions of the Notes will contain a negative

pledge provision as further described in Condition 4(a) of the

Terms and Conditions of the Notes.

Covenant to Notify NDRC . . . . . The Terms and Conditions of the Notes will contain a provision

in relation to the notification to NDRC as described in

Condition 4(d) of the Terms and Conditions of the Notes.

Undertaking relating to the

Guarantee . . . . . . . . . . . . . . . .

The Terms and Conditions of the Notes will contain a provision

relating to the Guarantee as described in Condition 4(e) of the

Terms and Conditions of the Notes.

Events of Default . . . . . . . . . . . . The Terms and Conditions of the Notes will contain certain

events of defaults as described in Condition 10 of the Terms and

Conditions of the Notes.

Cross Default . . . . . . . . . . . . . . . The Terms and Conditions of the Notes will contain a cross

default provision as described in Condition 10(c) of the Terms

and Conditions of the Notes.

– 7 –

Withholding Tax. . . . . . . . . . . . . All payments of principal and interest by or on behalf of the

Issuer or the Guarantor in respect of the Notes, the Receipts and

the Coupons or under the Guarantee (as the case may be) will

be made free and clear of, and without set-off or counterclaim

and without withholding or deduction for, or on account of, any

taxes, duties, assessments or governmental charges of whatever

nature imposed, levied, collected, withheld or assessed by or

within the Cayman Islands or the PRC or, in each case, any

political subdivision or authority therein or thereof having

power to tax, unless such withholding or deduction is required

by law. In that event, the Issuer or, as the case may be, the

Guarantor will, subject to certain customary exceptions, pay

such additional amounts as will result in the receipt by the

Noteholders or Couponholders (as defined in “Terms and

Conditions of the Notes”) of such amounts as would have been

received by them had no such withholding or deduction been

required. See Condition 8 of the Terms and Conditions of the

Notes.

Perpetual Capital Securities

Maturities. . . . . . . . . . . . . . . . . . The Perpetual Capital Securities are perpetual securities in

respect of which there is no fixed redemption date and the

Issuer shall only have the right (but not the obligation) to

redeem or purchase them in accordance with the provisions of

the Terms and Conditions of the Perpetual Capital Securities.

Distribution Basis. . . . . . . . . . . . Perpetual Capital Securities may confer a right to receive

Distribution at fixed or floating rates.

Fixed Rate Perpetual Capital

Securities. . . . . . . . . . . . . . . . .

Fixed Rate Perpetual Capital Securities will confer a right to

receive Distribution at a fixed rate which will be payable in

arrear on specified dates. If so provided in the relevant Pricing

Supplement for the Fixed Rate Perpetual Capital Securities, the

Distribution Rate (as defined in “Terms and Conditions of the

Perpetual Capital Securities”) may be reset on such dates and

bases as may be set out in the relevant Pricing Supplement.

Floating Rate Perpetual Capital

Securities. . . . . . . . . . . . . . . . .

Floating Rate Perpetual Capital Securities will bear

Distribution determined separately for each Series as follows:

(i) on the same basis as the floating rate under a notional

interest rate swap transaction in the relevant Specified

Currency governed by an agreement incorporating the

2006 ISDA Definitions (as published by the International

Swaps and Derivatives Association, Inc. and as amended

and updated as at the Issue Date of the first Tranche of the

Perpetual Capital Securities of the relevant Series); or

– 8 –

(ii) by reference to EURIBOR, HIBOR or CNH HIBOR, (or

such other benchmark as may be specified in the relevant

Pricing Supplement) as adjusted for any applicable

margin; or

(iii) on such other basis as may be agreed between the Issuer,

the Guarantor and the relevant Dealer(s).

Distribution Periods and

Distribution Rates. . . . . . . . . .

Distribution Periods (as defined in “Terms and Conditions of

the Perpetual Capital Securities”) will be specified in the

relevant Pricing Supplement.

The length of the Distribution Periods for the Perpetual Capital

Securities and the applicable Distribution Rate or its method of

calculation may differ from time to time or be constant for any

Series. Perpetual Capital Securities may have a maximum

Distribution Rate, a minimum Distribution Rate, or both. The

use of Distribution Accrual Periods (as defined in “Terms and

Conditions of the Perpetual Capital Securities”) permits the

Perpetual Capital Securities to allow Distribution at different

rates in the same Distribution Period. All such information will

be set out in the relevant Pricing Supplement.

Distribution Discretion. . . . . . . . If Distribution Deferral is specified in the relevant Pricing

Supplement, the Issuer may, at its sole discretion, elect to defer

(in whole or in part) any Distribution which is otherwise

scheduled to be paid on a Distribution Payment Date to the next

Distribution Payment Date by giving notice to the Perpetual

Capital Securityholders (in accordance with Condition 15 of the

Terms and Conditions of the Perpetual Capital Securities) and

to the Trustee and the Principal Paying Agent in writing

(substantially in the form scheduled to the Trust Deed) not more

than ten Payment Business Days (as defined in “Terms and

Conditions of the Perpetual Capital Securities”) nor less than

five Payment Business Days prior to a scheduled Distribution

Payment Date. Any partial payment of any Distribution by the

Issuer shall be shared by the Perpetual Capital Securityholders

of all outstanding Perpetual Capital Securities on a pro-rata

basis.

– 9 –

Cumulative Deferral . . . . . . . . . If Cumulative Deferral is specified in the relevant Pricing

Supplement, any Distribution deferred pursuant to Condition

5(k) of the Terms and Conditions of the Perpetual Capital

Securities shall constitute “Arrears of Distribution”. The

Issuer may, at its sole discretion, elect (in the circumstances set

out in Condition 5(k)(i) of the Terms and Conditions of the

Perpetual Capital Securities) to further defer (in whole or in

part) any Arrears of Distribution by complying with the

foregoing notice requirement applicable to any deferral of an

accrued Distribution. The Issuer is not subject to any limit as to

the number of times Distributions and Arrears of Distribution

can or shall be deferred pursuant to Condition 5(k) of the Terms

and Conditions of the Perpetual Capital Securities except that

Condition 5(k)(v) of the Terms and Conditions of the Perpetual

Capital Securities shall be complied with until all outstanding

Arrears of Distribution and Additional Distribution Amount

have been paid in full.

Additional Distribution . . . . . . . If Additional Distribution is specified in the relevant Pricing

Supplement, each amount of Arrears of Distribution shall

accrue Distributions as if it constituted the principal of the

Perpetual Capital Securities at the prevailing Distribution Rate

and the amount of such Distribution (the “Additional

Distribution Amount”) with respect to Arrears of Distribution

shall be due and payable pursuant to Condition 5 of the Terms

and Conditions of the Perpetual Capital Securities and shall be

calculated by applying the applicable Distribution Rate to the

amount of the Arrears of Distribution and otherwise

mutatis mutandis as provided in Condition 5 of the Terms and

Conditions of the Perpetual Capital Securities. The Additional

Distribution Amount accrued up to any Distribution Payment

Date shall be added (for the purpose of calculating the

Additional Distribution Amount accruing thereafter) to the

amount of Arrears of Distribution remaining unpaid on such

Distribution Payment Date so that it will itself become Arrears

of Distribution.

Restrictions in the case of

Deferral. . . . . . . . . . . . . . . . . .

If Dividend Stopper is specified in the relevant Pricing

Supplement and on any Distribution Payment Date, payment of

all Distribution payments scheduled to be made on such date

(including any Distribution accrued but unpaid on the Perpetual

Capital Securities (including any Arrears of Distribution and

any Additional Distribution Amount)) is not made in full, each

of the Issuer and the Guarantor shall not:

– 10 –

(i) declare or pay any discretionary dividends or distributions

or make any other discretionary payment, and will procure

that no discretionary dividend, distribution or other

discretionary payment is made, in each case, on any Parity

Securities (as defined in “Terms and Conditions of the

Perpetual Capital Securities”) or Junior Securities

(as defined in “Terms and Conditions of the Perpetual

Capital Securities”) of the Issuer or the Guarantor (except

(1) in relation to the Parity Securities of the Issuer or the

Guarantor, as the case may be, on a pro-rata basis, or

(2) in connection with any employee benefit plan or

similar arrangements with or for the benefit of employees,

officers, directors or consultants of the Issuer or the

Guarantor, as the case may be); or

(ii) at its discretion redeem, reduce, cancel, buy-back or

otherwise acquire for any consideration any Parity

Securities or Junior Securities of the Issuer or the

Guarantor prior to its stated maturity (except (1) in

relation to the Parity Securities of the Issuer or the

Guarantor, as the case may be, on a pro-rata basis, or

(2) in connection with any employee benefit plan or

similar arrangements with or for the benefit of employees,

officers, directors or consultants of the Issuer or the

Guarantor, as the case may be, or (3) as a result of the

exchange or conversion of its Parity Securities for its

Junior Securities),

in each case, unless and until (x) the Issuer has satisfied in full

all outstanding Arrears of Distribution and the Additional

Distribution Amount; or (y) the Issuer is permitted to do so by

an Extraordinary Resolution (as defined in the Trust Deed

referred to in the Terms and Conditions of the Perpetual Capital

Securities) of the Perpetual Capital Securityholders.

For the avoidance of doubt, the Issuer’s right of optional

deferral pursuant to Condition 5(k)(i) of the Terms and

Conditions of the Perpetual Capital Securities will not be

affected solely as a result of the incurrence of any Parity

Securities or Junior Securities.

– 11 –

In addition, the incurrence of any senior indebtedness, Parity

Securities or Junior Securities itself will not constitute a

Compulsory Distribution Payment Event. A non-discretionary

payment on, or redemption of, Parity Securities or Junior

Securities (such as a scheduled payment of principal and

interest on such Parity or Junior Securities, which the Issuer

thereof has no right to defer) does not constitute a Compulsory

Distribution Payment Event.

Status of the Perpetual Capital

Securities. . . . . . . . . . . . . . . . .

All Perpetual Capital Securities and the Coupons relating to

them will constitute direct, unsubordinated, unconditional and

(subject to Condition 4(a) of the Terms and Conditions of the

Perpetual Capital Securities) unsecured obligations of the

Issuer and shall at all times rank pari passu and without any

preference among themselves as described in “Terms and

Conditions of the Perpetual Capital Securities – Guarantee and

Status – Status of Perpetual Capital Securities”.

Status of the Guarantee . . . . . . . The Guarantor has unconditionally and irrevocably guaranteed

the due payment of all sums expressed to be payable by the

Issuer under the Trust Deed, the Perpetual Capital Securities

and the Coupons. The payment obligations of the Guarantor

under the Guarantee shall, save for such exceptions as may be

provided by applicable legislation and subject to Condition 4(a)

of the Terms and Conditions of the Perpetual Capital Securities,

at all times rank at least equally with all other present and future

unsecured and unsubordinated indebtedness and monetary

obligations of the Guarantor as described in “Terms and

Conditions of the Perpetual Capital Securities – Guarantee and

Status – Guarantee”.

Negative Pledge . . . . . . . . . . . . . The Terms and Conditions of the Perpetual Capital Securities

will contain a negative pledge provision as further described in

Condition 4(a) of the Terms and Conditions of the Perpetual

Capital Securities.

Covenant to Notify NDRC . . . . . The Terms and Conditions of the Perpetual Capital Securities

will contain a provision in relation to the notification to NDRC

as described in Condition 4(d) of the Terms and Conditions of

the Perpetual Capital Securities.

Undertaking relating to the

Guarantee . . . . . . . . . . . . . . . .

The Terms and Conditions of the Perpetual Capital Securities

will contain a provision relating to the Guarantee as described

in Condition 4(e) of the Terms and Conditions of the Perpetual

Capital Securities.

– 12 –

Optional Redemption . . . . . . . . . The Pricing Supplement issued in respect of each issue of

Perpetual Capital Securities will state whether such Perpetual

Capital Securities may be redeemed or purchased prior to their

stated maturity at the option of the Issuer (either in whole or in

part) and if so the terms applicable to such redemption.

Redemption for Taxation

Reasons . . . . . . . . . . . . . . . . . .

The Perpetual Capital Securities may be redeemed at the option

of the Issuer in whole, but not in part, on any Distribution

Payment Date (if the relevant Pricing Supplement provides that

the Perpetual Capital Securities are either Floating Rate

Perpetual Capital Securities or an Index Linked Distribution

Perpetual Capital Securities) or, at any time (if the relevant

Pricing Supplement provides that the Perpetual Capital

Securities are neither Floating Rate Perpetual Capital Securities

nor an Index Linked Distribution Perpetual Capital Securities)

for taxation reasons as further described in Condition 6(b) of

the Terms and Conditions of the Perpetual Capital Securities.

Redemption for Change of

Control . . . . . . . . . . . . . . . . . .

The Perpetual Capital Securities may be redeemed at the option

of the Issuer in whole, but not in part, at any time on giving not

more than 60 nor less than 30 days’ notice to the Perpetual

Capital Securityholders (or such other notice period as may be

specified in the relevant Pricing Supplement) in accordance

with Condition 15 of the Terms and Conditions of the Perpetual

Capital Securities (which notice shall be irrevocable) and in

writing to the Trustee and the Principal Paying Agent, if a

Change of Control Event (as defined in “Terms and Conditions

of the Perpetual Capital Securities”) occurs as further described

in Condition 6(c) of the Terms and Conditions of the Perpetual

Capital Securities.

– 13 –

Redemption for Accounting

Reasons . . . . . . . . . . . . . . . . . .

The Perpetual Capital Securities may be redeemed at the option

of the Issuer in whole, but not in part, at any time on the Issuer

giving not more than 60 nor less than 30 days’ notice to the

Perpetual Capital Securityholders in accordance with Condition

15 of the Terms and Conditions of the Perpetual Capital

Securities (which notice shall be irrevocable) and in writing to

the Trustee and the Principal Paying Agent, at their principal

amount, together with Distribution accrued to but excluding the

date fixed for redemption (including any Arrears of Distribution

and any Additional Distribution Amount), if the Issuer satisfies

the Trustee immediately before giving such notice that as a

result of any changes or amendments to PRC GAAP or the

Relevant Accounting Standards (as defined in “Terms and

Conditions of the Perpetual Capital Securities”), or any change

or amendment to the application or interpretation of the

Relevant Accounting Standards, the Perpetual Capital

Securities must not or must no longer be recorded as “equity”

in the consolidated financial statements of the Guarantor

pursuant to the Relevant Accounting Standards.

Redemption on the Occurrence

of a Breach of Covenants

Event . . . . . . . . . . . . . . . . . . . .

The Perpetual Capital Securities may be redeemed at the option

of the Issuer in whole, but not in part, at any time, on giving not

more than 60 nor less than 30 days’ notice to the Perpetual

Capital Securityholders in accordance with Condition 15 of the

Terms and Conditions of the Perpetual Capital Securities

(which notice shall be irrevocable) and in writing to the Trustee

and the Principal Paying Agent at their principal amount

(together with any Distribution accrued to but excluding the

date fixed for redemption (including any Arrears of Distribution

and any Additional Distribution Amount)) upon the occurrence

of a Breach of Covenants Event (as defined in “Terms and

Conditions of the Perpetual Capital Securities”).

Redemption on the Occurrence

of a Relevant Indebtedness

Default Event . . . . . . . . . . . . .

The Perpetual Capital Securities may be redeemed at the option

of the Issuer in whole, but not in part, at any time, on giving not

more than 60 nor less than 30 days’ notice to the Perpetual

Capital Securityholders in accordance with Condition 15 of the

Terms and Conditions of the Perpetual Capital Securities

(which notice shall be irrevocable) and in writing to the Trustee

and the Principal Paying Agent at their principal amount

(together with any Distribution accrued to but excluding the

date fixed for redemption (including any Arrears of Distribution

and any Additional Distribution Amount)) upon the occurrence

of a Relevant Indebtedness Default Event (as defined in “Terms

and Conditions of the Perpetual Capital Securities”).

– 14 –

Redemption at the Option of

the Issuer . . . . . . . . . . . . . . . .

The Issuer may, on giving not less than 15 nor more than 30

days’ irrevocable notice to the Perpetual Capital

Securityholders (or such other notice period as may be specified

in the relevant Pricing Supplement) and in writing to the

Trustee and the Principal Paying Agent, elect to redeem all, but

not some only, of the Perpetual Capital Securities on any

Optional Redemption Date specified in the relevant Pricing

Supplement, as further described in Condition 6(g) of the Terms

and Conditions of the Perpetual Capital Securities.

Redemption for Minimum

Outstanding Amount . . . . . . .

The Perpetual Capital Securities may be redeemed at the option

of the Issuer in whole, but not in part, at any time, on giving not

more than 60 nor less than 30 days’ notice to the Perpetual

Capital Securityholders (or such other notice period as may be

specified in the relevant Pricing Supplement) in accordance

with Condition 15 of the Terms and Conditions of the Perpetual

Capital Securities (which notice shall be irrevocable) and in

writing to the Trustee and the Principal Paying Agent, at their

principal amount (together with any Distribution accrued to but

excluding the date fixed for redemption (including any Arrears

of Distribution and any Additional Distribution Amount)) if

prior to the date fixed for redemption at least 90 per cent. in

principal amount of the Perpetual Capital Securities originally

issued has already been redeemed or purchased and cancelled.

Redemption on the Occurrence

of a Dividend Stopper

Breach Event . . . . . . . . . . . . .

If Dividend Stopper is specified in the relevant Pricing

Supplement, the Perpetual Capital Securities may be redeemed

at the option of the Issuer in whole, but not in part, at any time

on giving not more than 60 nor less than 30 days’ notice to the

Perpetual Capital Securityholders in accordance with Condition

15 of the Terms and Conditions of the Perpetual Capital

Securities (which notice shall be irrevocable) and in writing to

the Trustee and the Principal Paying Agent, at their principal

amount (together with any Distribution accrued to but

excluding the date fixed for redemption (including any Arrears

of Distribution and any Additional Distribution Amount)) upon

the occurrence of a Dividend Stopper Breach Event (as defined

in “Terms and Conditions of the Perpetual Capital Securities”).

– 15 –

Limited right to institute

proceedings in relation to

Perpetual Capital Securities. .

Notwithstanding any of the provisions in Condition 10 of the

Terms and Conditions of the Perpetual Capital Securities, the

right to institute proceedings for Winding-Up (as defined in

Terms and Conditions of the Perpetual Capital Securities”) of

the Issuer or the Guarantor is limited to circumstances where

payment in respect of the Perpetual Capital Securities has

become due. In the case of any Distribution, such Distribution

will not be due if the Issuer has elected to defer that

Distribution in accordance with Condition 5(k) of the Terms and

Conditions of the Perpetual Capital Securities. See “Terms and

Conditions of the Perpetual Capital Securities – Non-Payment

for further details.

Proceedings for Winding-Up . . . (i) If there is a Winding-Up of the Issuer, or the Issuer shall

not make payment in respect of the Perpetual Capital

Securities or under the Trust Deed for a period of 14 days

or more after the date on which such payment is due, the

Issuer shall be deemed to be in default under the Trust

Deed and the Perpetual Capital Securities and the Trustee

may, subject to the provisions of Condition 10(d) of the

Terms and Conditions of the Perpetual Capital Securities,

institute proceedings for the Winding-Up of the Issuer

and/or prove in the Winding-Up of the Issuer and/or claim

in the liquidation of the Issuer for such payment.

(ii) If there is a Winding-Up of the Guarantor, or the

Guarantor shall not make payment in respect of the

Guarantee or under the Trust Deed for a period of 14 days

or more after the date on which such payment is due, the

Guarantor shall be deemed to be in default under the Trust

Deed and the Guarantee and the Trustee may, subject to

the provisions of Condition 10(d) of the Terms and

Conditions of the Perpetual Capital Securities, institute

proceedings for the Winding-Up of the Guarantor and/or

prove in the Winding-Up of the Guarantor and/or claim in

the liquidation of the Guarantor for such payment.

– 16 –

Withholding Tax. . . . . . . . . . . . . All payments of principal and Distribution by or on behalf of

the Issuer or the Guarantor in respect of the Perpetual Capital

Securities and the Coupons or under the Guarantee (as the case

may be) shall be made free and clear of, and without set-off or

counterclaim and without withholding or deduction for or on

account of, any taxes, duties, assessments or governmental

charges of whatever nature imposed, levied, collected, withheld

or assessed by or within the Cayman Islands or the PRC or, in

each case, any political subdivision or authority therein or

thereof having power to tax, unless such withholding or

deduction is required by law. In that event, the Issuer or, as the

case may be, the Guarantor will, subject to certain customary

exceptions, pay such additional amounts as will result in the

receipt by the Perpetual Capital Securityholders or

Couponholders (as defined in “Terms and Conditions of the

Perpetual Capital Securities”) of such amounts as would have

been received by them had no such withholding or deduction

been required. See Condition 8 of the Terms and Conditions of

the Perpetual Capital Securities for further details.

For both Notes and Perpetual Capital Securities

Governing Law and

Jurisdiction . . . . . . . . . . . . . . .

English law with the submission to the exclusive jurisdiction of

Hong Kong courts.

Listing and Admission to

Trading . . . . . . . . . . . . . . . . . .

Application has been made to the Hong Kong Stock Exchange

for the listing of the Programme under which Instruments may

be issued during the 12-month period after the date of this

Offering Circular on the Hong Kong Stock Exchange by way of

debt issues to Professional Investors only.

Instruments listed on the Hong Kong Stock Exchange will be

traded on the Hong Kong Stock Exchange in a board lot size of

at least HK$500,000 (or its equivalent in other currencies).

Separate application may be made for the listing of the

Instruments on the Hong Kong Stock Exchange. However,

unlisted Instruments and Instruments to be listed, traded or

quoted on or by any other competent authority, stock exchange

or quotation system may be issued pursuant to the Programme.

The relevant Pricing Supplement in respect of the issue of any

Instruments will specify whether or not such Instruments will

be listed on the Hong Kong Stock Exchange or listed, traded or

quoted on or by any other competent authority, exchange or

quotation system.

– 17 –

Selling Restrictions . . . . . . . . . . There are restrictions on the offer, sale and transfer of the

Instruments in the United States, the EEA, the United Kingdom,

Japan, Taiwan, Hong Kong, the PRC and Singapore and such

other restrictions as may be required in connection with the

offering and sale of a particular Tranche of Instruments. See

Subscription and Sale”.

United States Selling

Restrictions . . . . . . . . . . . . . . .

Regulation S, Category 2.

Restriction . . . . . . . . . . . . . . . . . Pricing Supplement. TEFRA C, TEFRA D or TEFRA not

applicable, as specified in the relevant Pricing Supplement

“TEFRA not applicable” is only available for (i) Registered

Instruments or (ii) Bearer Instruments with a term of 365 days

or less (taking into account any unilateral rights to extend or

rollover the term).

Legal Entity Identifier . . . . . . . . The legal entity identifier of the Issuer is

2138001423MK8G3BNM68.

– 18 –

SUMMARY

The summary below is only intended to provide a limited overview of information described in more

detail elsewhere in this Offering Circular. As it is a summary, it does not contain all of the

information that may be important to investors and terms defined elsewhere in this Offering Circular

shall have the same meanings when used in this summary. Prospective investors should therefore read

this Offering Circular in its entirety.

DESCRIPTION OF THE ISSUER

The Issuer was incorporated as an exempted company with limited liability under the Companies

Law, as amended of the Cayman Islands on 9 August 2018 with company number 340929.

The share capital of the Issuer is U.S.$50,000, divided into 50,000 shares of par value U.S.$1.00

each. One share has been issued and paid up, which is owned by CAVIC Aviation Leasing (Ireland)

Co., Designated Activity Company. CAVIC Aviation Leasing (Ireland) Co., Designated Activity

Company is in turn wholly-owned by the Guarantor.

The Issuer was established for the purpose of issuing the Instruments and on-lending the proceeds to

the Guarantor or its subsidiaries. Since its incorporation, the Issuer has not engaged in any business

activity or any other activity whatsoever other than activities in connection with the establishment

and maintenance of the Programme, the offering, sale or issuance of the Instruments.

DESCRIPTION OF THE GROUP

The Group is principally engaged in the leasing business in the PRC and provides a diverse array of

financial leasing and operating leasing services, focusing on the aircraft, shipping, urban

infrastructure and equipment sectors. The Guarantor was one of the first PRC leasing companies

approved by MOFCOM and the State Administration of Taxation. As at 31 December 2021, the

Guarantor was one of the leading leasing companies in the PRC. In addition, the Guarantor believes

that the Group had one of the largest networks of airline customers in the PRC as at 31 December

2021.

As at 31 December 2021, AVIC indirectly held approximately 43.78 per cent. of the issued share

capital of the Guarantor. AVIC is one of the central state-owned enterprises directly supervised by

central SASAC, focusing on aerospace and defence. Through its subsidiaries and affiliates in the PRC

and overseas, AVIC’s businesses principally cover defence, transport aircraft, engines, helicopters,

avionics and systems, general aviation, aviation research, flight test, trade and logistics, asset

management, finance services, engineering planning and construction and automobile. As at 31

December 2021, AVIC’s group consisted of a number of listed companies. AVIC had been named in

the “Global 500” published by Fortune magazine for 13 consecutive years and ranked 140th on the

list in 2021. As at the date of this Offering Circular, AVIC ranks the fourth among the industrial

manufacturing enterprises owned by SASAC in the PRC. With its extensive customer base and

supplier network, established relationship with local governments and other state-owned enterprises,

in-depth industry knowledge, strong brand recognition and experienced management, AVIC provides

the Group with valuable support for the development of its business. As at 31 December 2021, the

Guarantor was the only leasing platform operating under the financial services business segment of

AVIC.

– 19 –

In December 2021, the Group’s leased asset scale exceeded RMB158 billion. As at 31 December

2021, the leased asset scale of the Group’s operating leasing business and the Group’s financial

leasing business amounted to approximately RMB19.69 billion and RMB138.56 billion, respectively.

In terms of leased asset scale, the Guarantor ranked first and eighth among the domestic leasing

companies (excluding Bohai Leasing Co., Ltd.) and all domestic and foreign leasing companies

(excluding Bohai Leasing Co., Ltd.), respectively, in the PRC as at 31 December 2021.

For the years ended 31 December 2019, 2020 and 2021, the Group reported total consolidated

revenue from operations of approximately RMB10,076.85 million, RMB10,125.86 million and

RMB10,303.45 million, respectively, and consolidated net profit of approximately RMB1,711.21

million, RMB1,974.09 million and RMB1,990.59 million, respectively. As at 1 January 2020,

1 January 2021 and 31 December 2021, the total consolidated assets of the Group amounted to

approximately RMB148,755.70 million, RMB158,759.96 million and RMB167,583.66 million,

respectively.

The Guarantor believes that the Group has the following competitive strengths:

? significant growth potential in the PRC financial leasing industry;

? strong shareholder support from AVIC and AVIC Industry-Finance Holdings Co., Ltd.;

? leading position in the PRC financial leasing industry with an extensive and diverse customer

base;

? diversified business portfolio;

? diverse aircraft leasing services;

? able to provide customised and integrated financial services to its customers;

? access to multiple financing channels, strong balance sheet and prudent financial management;

? comprehensive and robust risk management systems; and

? experienced management team.

The Guarantor intends to implement the following principal strategies to support the further

development of the Group’s business:

? to further strengthen the Group’s leading market position in the aircraft leasing industry by

acquiring aircraft in strong demand at competitive prices and by expanding its client base;

? to strive to be cost competitive and prudently promote its business in the ship leasing sub-sector;

? to continue to strengthen the Group’s market position in the equipment leasing sub-sector;

? to explore business opportunities in other industries in the PRC;

– 20 –

? to continue to diversify financing channels and optimise capital structure;

? to further leverage the Group’s relationship with AVIC and the Guarantor’s subsidiaries and

affiliates and the strong support from AVIC; and

? to continue to strengthen risk management and corporate governance capabilities.

RECENT DEVELOPMENTS

The outbreak of COVID-19.

The ongoing COVID-19 pandemic has caused substantial disruptions in the PRC and international

economies and markets which has resulted in additional uncertainties in the Group’s operating

environment, particularly with the emergence of new variants such as the Delta variant and the

Omicron variant. The Group has been closely monitoring the impact of the ongoing COVID-19

pandemic on the Group’s businesses and will keep its contingency measures and risk management

under review as the situation evolves. Please see “Risk Factors – Risks Relating to the Group – The

extent to which the COVID-19 pandemic will impact the Group’s business, financial condition, results

of operations and prospects is uncertain and cannot be predicted.” and “Risk Factors – Risks

Relating to the Group – The Group’s operations are subject to force majeure events, political unrest

or civil disobedience movements, natural disasters and outbreaks or pandemic of contagious diseases

and other disasters.” for further information.

Issue of debt instruments since 31 December 2021.

Since 31 December 2021, the Guarantor has issued onshore debt securities (excluding

perpetual securities) in an aggregate principal amount of approximately RMB7.9 billion, and the

Guarantor has issued perpetual securities in an aggregate principal amount of approximately RMB1.6

billion.

– 21 –

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The summary audited consolidated financial information of the Guarantor as at 1 January 2020,

1 January 2021 and 31 December 2021 and for the years ended 31 December 2019, 2020 and 2021

set forth below is derived from and should be read in conjunction with the Audited Consolidated

Financial Statements, including the notes thereto and the auditor’s reports in respect of the years

ended 31 December 2020 and 2021 included elsewhere in this Offering Circular.

The Audited Consolidated Financial Statements were prepared and presented in accordance with

PRC GAAP and have been audited by ZSZH and Dahua, respectively.

PRC GAAP is substantially in line with IFRS, except for certain modifications which reflect the PRC’s

unique circumstances and environment. Please see “Description of Certain Differences between PRC

GAAP and IFRS” for details.

The scope of consolidation of the Audited Consolidated Financial Statements changes from time to

time. See “Notes to the Financial Statements – VII. Business Combination and Financial Statement

Consolidation” of the Guarantor’s audited consolidated financial statements as at and for the year

ended 31 December 2020 and “Notes to the Financial Statements – VII. Business Combination and

Financial Statement Consolidation” of the Guarantor’s audited consolidated financial statements as

at and for the year ended 31 December 2021. In addition, in 2017 and 2018, the Ministry of Finance

of the PRC promulgated the New Accounting Standards and Requirements. The Audited Consolidated

Financial Statements were prepared and presented in accordance with the relevant applicable New

Accounting Standards and Requirements. As a result, the presentation of certain accounting items in

the Audited Consolidated Financial Statements may not be comparable to the financial figures in the

Guarantor’s financial statements for the previous periods. For details of the New Accounting

Standards and Requirements and its impact on the Audited Consolidated Financial Statements, please

see “Notes to the Financial Statements – V Significant changes in accounting policies, accounting

estimates and correction of errors in prior periods – 1. Changes in accounting policies” of the

Guarantor’s audited consolidated financial statements as at and for the year ended 31 December

2020 and “Notes to the Financial Statements – V Significant changes in accounting policies,

accounting estimates and correction of errors in prior periods” of the Guarantor’s audited

consolidated financial statements as at and for the year ended 31 December 2021.

Please also see “Risk Factors – Risks Relating to Financial and Other Information – Certain

accounting items in the Audited Consolidated Financial Statements may not be comparable to the

financial information in the Guarantor’s consolidated financial statements for the previous periods.”

for further information.

– 22 –

SUMMARY CONSOLIDATED INCOME STATEMENT

For the year ended 31 December

2019 2020 2021

(RMB)

(audited)

(RMB)

(audited)

(RMB)

(audited)

1. Operating revenue ....................................................... 10,076,845,248.60 10,125,856,176.27 10,303,447,857.18

Inc: Operating revenue.................................................... 10,076,845,248.60 10,125,856,176.27 10,303,447,857.18

Interest revenue ....................................................... – – –

Earned Premium ...................................................... – – –

Fee and commission revenue........................................ – – –

2. Operating costs ........................................................... 7,016,546,547.65 6,772,685,794.02 6,874,503,191.67

Inc: Operating costs ....................................................... 5,703,618,487.96 5,386,090,034.00 6,522,046,981.12

Interest expense....................................................... – – –

Fee and commission expense ....................................... – – –

Surrender money ..................................................... – – –

Net compensation expenditure ...................................... – – –

Net amount of insurance liability reserve withdrawn ............ – – –

Expenditures dividend policy ....................................... – – –

Reinsurance expenses ................................................ – – –

Taxes and surcharges................................................. 157,159,301.81 81,242,652.75 69,694,524.82

Selling expenses ...................................................... 76,862,884.99 83,943,563.33 91,051,866.34

Administrative expenses ............................................. 1,167,804,183.60 1,276,577,245.87 284,263,826.08

Research and development expenses ............................... – – –

Finance expenses ..................................................... -88,898,310.71 -55,167,701.93 -92,554,006.69

Others .................................................................. – – –

Add: Other income ......................................................... 132,231,630.13 415,299,209.47 249,512,655.65

Income from investments (loss is listed as “-”)................... 136,169,694.19 25,571,108.89 50,015,840.48

Exchange gains (loss is listed as “-”) .............................. – – –

Gains or losses from net exposure hedging

(loss is listed as “-”) .............................................. – – –

Gains or losses from changes in fair values

(loss is listed as “-”) .............................................. 1,098,532.23 -37,898,604.42 -30,408,298.81

Credit impairment losses (loss is listed as “-”) ................... -1,403,871,392.61 -1,418,348,120.09 -1,225,550,235.51

Asset impairment losses (loss is listed as “-”) .................... 194,491.68 -912,160.06 -2,683,195.74

Gains or losses from asset disposals (loss is listed as “-”) ...... 214,627,218.25 176,653,362.48 12,818,688.61

3. Operating profit (loss is listed as “-”) ................................ 2,140,748,874.82 2,513,535,178.52 2,482,650,120.19

Add: Non-operating income ............................................... 77,894,964.37 23,619,037.90 72,281,674.73

Less: Non-operating expenses ............................................. 330,000.00 298,150.38 149,668.30

4. Profit before tax (loss is listed as “-”)................................ 2,218,313,839.19 2,536,856,066.04 2,554,782,126.62

Less: Income tax ............................................................ 507,106,554.62 562,770,616.77 564,196,018.20

5. Net profit (loss is listed as “-”) ........................................ 1,711,207,284.57 1,974,085,449.27 1,990,586,108.42

I. Net profit classified by ownership

Net profit attributable to parent company............................... 1,711,207,284.57 1,974,085,449.27 1,990,586,108.42

Net profit attributable to non-controlling interests..................... – – –

II. Net profit classified by going concern

Net profit from continuing operations .................................. 1,711,207,284.57 1,974,085,449.27 1,990,586,108.42

Net profit from discontinuing operations ............................... – – –

6. Other comprehensive income after tax ............................... -326,499.68 -221,249,974.38 -95,508,653.53

Other comprehensive income after tax attributable to

parent company ........................................................... -326,499.68 -221,249,974.38 -95,508,653.53

– 23 –

For the year ended 31 December

2019 2020 2021

(RMB) (RMB) (RMB)

(audited) (audited) (audited)

I. Items of other comprehensive income that will not be

reclassified to profit or loss .............................................. – – -2,610,234.28

i. Changes in remeasurement of defined benefit plans ................ – – –

ii. Other comprehensive income that cannot be transferred to

profit or loss under the equity method .............................. – – –

iii. Changes in fair value of investments in other equity

instruments............................................................... – – -2,610,234.28

iv. Changes in fair value of the Company’s own credit risk ......... – – –

v. Others .................................................................... – – –

II. Items of other comprehensive income that will be reclassified to

profit or loss................................................................ -326,499.68 -221,249,974.38 -92,898,419.25

i. Other comprehensive income that can be transferred to profit or

loss under the equity method .......................................... – – –

ii. Changes in fair value of other debt investments ................... – – –

iii. Changes in fair value of available-for-sale financial assets ...... – – –

iv. Amount of financial assets reclassified into other

comprehensive income.................................................. – – –

v. Gain or loss from held to maturity investment reclassified as

available for sale financial assets ..................................... – – –

vi. Provisions for credit impairment of other debt investments ..... – – –

vii. Cash flow hedging reserve (The effective portion of gains or

losses arising from cash flow hedging) .............................. – – –

viii. Translation differences arising from financial statements in

foreign currencies .......................................................

-326,499.68

-221,249,974.38

-92,898,419.25

ix. Others ?Other comprehensive income attributable to non-controlling

interests after tax........................................................ – – –

7. Total comprehensive income ........................................... 1,710,880,784.89 1,752,835,474.89 1,895,077,454.89

Total comprehensive income attributable to parent company ........... 1,710,880,784.89 1,752,835,474.89 1,895,077,454.89

Total comprehensive income attributable to

non-controlling interests .................................................. – – –

8. Earnings per share....................................................... – – –

Basic earnings per share..................................................... – – –

Diluted earnings per share................................................... – – –

– 24 –

SUMMARY CONSOLIDATED BALANCE SHEET

As at

1 January 2020

As at

1 January 2021

As at

31 December 2021

(RMB) (RMB) (RMB)

(audited) (audited) (audited)

Current assets

Cash at bank and on hand ....................................... 5,182,579,787.85 5,894,354,119.70 5,900,643,933.96

Financial assets held for trading ................................ 328,295,226.85 1,374,754,554.90 1,984,831,586.71

Financial assets classified as measured at fair value and

the change of which shall be included in current

profit or loss .................................................... – – –

Derivative financial assets ....................................... – – –

Notes receivable .................................................. 19,763,620.92 33,111,076.66 38,609,013.37

Accounts receivable .............................................. 111,562,039.23 110,603,832.37 129,341,138.28

Accounts receivable financing................................... – – –

Prepayments ....................................................... 12,754,123.27 15,902,445.64 28,617,202.22

Other receivables ................................................. 721,241,687.60 421,929,445.07 20,035,154.00

Inc: Dividends receivable ........................................ – – –

Inventories ......................................................... 9,396,091.87 7,078,415.45 3,113,331.31

Contract assets .................................................... – – –

Held-for-sale assets ............................................... – – –

Current portion of non-current assets .......................... 32,621,434,004.98 36,659,172,956.46 39,013,333,443.91

Other current assets .............................................. 1,858,382,471.26 3,022,590,986.26 3,821,493,607.17

Total current assets ................................................ 40,865,409,053.83 47,539,497,832.51 50,940,018,410.93

Non-current assets

Debt investments.................................................. – – –

Available-for-sale financial assets .............................. – – –

Other debt investments........................................... – – –

Held to maturity investment ..................................... – – –

Long-term receivables............................................ 90,227,869,868.77 88,581,640,827.20 91,158,799,371.11

Long-term equity investments ................................... 123,833,400.00 20,000.00 744,163.34

Investment in other equity instruments......................... 5,000,000.00 444,302,351.49 21,419,846.54

Other non-current financial assets .............................. – 1,015,738,955.75 1,079,063,077.14

Investment properties............................................. 56,703,544.77 54,764,710.77 52,825,876.77

Fixed assets........................................................ 12,973,276,763.28 13,733,431,632.14 16,239,837,313.48

Construction in progress ......................................... 1,889,723,899.67 1,736,607,077.74 1,478,927,965.96

Productive biological assets ..................................... – – –

Oil and gas assets................................................. – – –

Right-of-use assets................................................ – 3,394,728,791.38 3,185,230,353.11

Intangible assets .................................................. 2,379,208.38 6,321,658.21 10,598,507.73

Development expenditure ........................................ – – –

Goodwill ........................................................... – – –

Long-term deferred expenses .................................... – – –

Deferred tax assets ............................................... 849,103,084.69 1,155,917,454.04 1,496,823,999.14

Other non-current assets ......................................... 1,762,405,519.34 1,096,983,971.50 1,919,371,664.24

Inc: Special reserve materials ................................... – – –

Total non-current assets........................................... 107,890,295,288.90 111,220,457,430.22 116,643,642,138.56

TOTAL ASSETS.................................................... 148,755,704,342.73 158,759,955,262.73 167,583,660,549.49

Current liabilities

Short-term borrowings ........................................... 10,528,365,458.29 9,983,188,635.53 6,671,444,259.15

Financial liabilities held for trading ............................ – – –

Financial liabilities classified as measured at fair value and

the change of which shall be included in current

profit or loss .................................................... – – –

– 25 –

As at

1 January 2020

As at

1 January 2021

As at

31 December 2021

(RMB) (RMB) (RMB)

(audited) (audited) (audited)

Derivative financial liabilities ................................... – – –

Notes payable ..................................................... – 151,500,000.00 508,750,000.00

Accounts payable ................................................. 110,478,461.06 109,521,633.55 237,483,220.78

Payments received in advance................................... 771,315,019.23 664,893,148.13 966,918,710.52

Contract liabilities ................................................ 2,202,184.92 2,370,064.73 4,487,154.00

Employee benefits payable ...................................... 8,309,274.80 16,613,582.01 25,848,524.60

Tax payables....................................................... 1,465,138,827.64 934,800,560.01 1,009,252,212.93

Other payables .................................................... 6,154,838,911.22 7,618,201,585.36 24,061,178,175.25

Held-for-sale liabilities........................................... – – –

Current portion of non-current liabilities ...................... 27,247,801,989.41 23,565,088,858.97 25,243,456,920.79

Other current liabilities .......................................... 4,255,488,505.73 12,798,259,452.04 5,697,259,945.21

Total current liabilities ............................................ 50,543,938,632.30 55,844,437,520.33 64,426,079,123.23

Non-current liabilities

Long-term borrowings............................................ 37,569,296,866.38 44,321,274,015.31 39,490,031,118.70

Bonds payable..................................................... 16,356,343,708.19 11,667,396,968.12 26,032,975,179.16

Lease liabilities ................................................... – 3,677,769,895.12 3,099,570,687.80

Long-term payables............................................... 11,813,465,130.07 7,295,979,813.75 5,573,418,077.04

Long-term employee benefits payable.......................... – – –

Provisions.......................................................... – – –

Deferred income .................................................. – – –

Deferred tax liabilities ........................................... 95,424,022.57 171,792,452.71 277,998,729.26

Other non-current liabilities ..................................... 11,240,954,394.31 10,769,602,686.68 2,413,234,176.60

Total non-current liabilities ...................................... 77,075,484,121.52 77,903,815,831.69 76,887,227,968.56

Total liabilities ...................................................... 127,619,422,753.82 133,748,253,352.02 141,313,307,091.79

Equity

Paid-in capital..................................................... 9,978,467,899.00 9,978,467,899.00 9,978,467,899.00

National Capital ............................................. – – –

National Legal Person Capital ............................. 9,978,467,899.00 9,978,467,899.00 9,978,467,899.00

Collective Capital ........................................... – – –

Private Capital ............................................... – – –

Foreign Capital .............................................. – – –

Less: capital returned............................................. – – –

Net Paid-in capital (or share capital) ........................... 9,978,467,899.00 9,978,467,899.00 9,978,467,899.00

Other equity instruments ......................................... 3,000,000,000.00 4,500,000,000.00 4,400,000,000.00

Capital reserves ................................................... 3,342,130,738.76 3,342,130,738.76 3,342,130,738.76

Less: Treasury stock.............................................. – – –

Other comprehensive income.................................... 15,968,007.73 -205,281,966.65 -300,790,620.18

Special reserves ................................................... – – –

Surplus reserve.................................................... 507,045,820.92 607,859,791.20 749,135,118.35

Retained earnings ................................................. 2,884,890,789.40 3,850,006,502.41 5,162,891,375.78

Equity attributable to parent company ......................... 19,728,503,255.81 22,073,182,964.72 23,331,834,511.71

Non-controlling interests......................................... 1,407,778,333.10 2,938,518,945.99 2,938,518,945.99

Total owners’ equity ............................................... 21,136,281,588.91 25,011,701,910.71 26,270,353,457.70

TOTAL LIABILITIES AND OWNERS’ EQUITY ............ 148,755,704,342.73 158,759,955,262.73 167,583,660,549.49

– 26 –

OTHER FINANCIAL DATA

As at 1 January 2020

or for the year ended

31 December 2019

As at 1 January 2021

or for the year ended

31 December 2020

As at or for

the year ended

31 December 2021

EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RMB8,959,977,663.67 RMB8,849,643,450.82 RMB9,198,446,381.23

EBITDA MARGIN(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.89 0.87 0.89

GROSS DEBT(3)(5)/EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.30 13.80 13.77

NET DEBT(4)(5)/EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.70 13.13 13.13

EBITDA Interest Coverage Ratio(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.50 1.67 1.70

GROSS DEBT(3)/CAPITALISATION(7) . . . . . . . . . . . . . . . . . . . . . . . . . 1.18 1.18 1.08

Notes:

(1) The Guarantor calculates EBITDA for any period as profit before tax for the period plus interest expenses,

amortisation and depreciation. EBITDA is not a standard measure under PRC GAAP or IFRS. EBITDA is a widely

used financial indicator of a company’s ability to service and incur debt. EBITDA should not be considered in isolation

or construed as an alternative to cash flows, net income or any other measure of performance or as an indicator of the

Group’s operating performance, liquidity, profitability or cash flows generated by operating, investing or financing

activities. In evaluating EBITDA, the Guarantor believes that investors should consider, among other things, the

components of EBITDA and the amount by which EBITDA exceeds capital expenditure and other charges. The

Guarantor has included EBITDA because it believes that it is a useful supplement to the cash flow data as a measure

of the Group’s performance and its ability to generate cash flow from operations to cover debt service and taxes.

EBITDA presented herein may not be comparable to similarly titled measures presented by other companies. Investors

should not compare the Group’s EBITDA to EBITDA presented by other companies because not all companies use the

same definitions.

(2) EBITDA Margin means EBITDA divided by total revenue from operations for the period.

(3) Gross Debt means the sum of long-term borrowings and short-term borrowings.

(4) Net Debt means Gross Debt less cash at bank and on hand.

(5) Gross Debt and Net Debt as calculated above, may not be comparable to similarly titled measures reported by other

companies.

(6) EBITDA Interest Coverage Ratio means EBITDA divided by gross interest expense for the period. Gross interest

expense includes the interest expenses capitalised in property, plant and equipment.

(7) Capitalisation means the sum of long-term borrowings and total owners’ equity.

– 27 –

RISK FACTORS

An investment in the Instruments is subject to a number of risks. Investors should carefully consider

all of the information in this Offering Circular and, in particular, the risks described below, before

deciding to invest in the Instruments. The following describes some of the significant risks that could

affect the Issuer, the Guarantor, the Group and the value of the Instruments. Some risks may be

unknown to the Issuer, the Guarantor and the Group and other risks, currently believed to be

immaterial, could in fact be material. Any of these could materially and adversely affect the business,

financial condition, results of operations and prospects of the Issuer, the Guarantor and the Group.

The market price of the Instruments could decline due to any of these risks, and investors may lose

part or all of their investment. This Offering Circular also contains forward-looking statements that

involve risks and uncertainties. The actual results of the Issuer, the Guarantor or the Group could

differ materially from those anticipated in these forward-looking statements as a result of certain

factors, including the risks described below and elsewhere in this Offering Circular. The Issuer, the

Guarantor and the Group may be affected materially by requirements and restrictions that arise

under PRC laws, regulations and government policies in nearly all aspects of its business in the PRC.

RISKS RELATING TO THE GROUP

Disruptions or volatility in global and domestic financial markets could adversely impact the

industries and markets in which the Group serves and operates.

The Group is a leasing company specialising in providing customised leasing services, including

aircraft leasing, ship leasing, urban infrastructure leasing and equipment leasing, and is largely

dependent on the growth of the Group’s target industries, including the aircraft, shipping, urban

infrastructure and equipment industries. The demand for the Group’s services is substantially

influenced by general global and domestic economic conditions. Global and domestic economic

conditions may cause volatility and disruptions in the capital and credit markets.

In Asia and other emerging markets, some countries are expecting increasing inflationary pressure as

a result of liberal monetary policy or excessive foreign fund inflow, or both. The United Kingdom’s

exit from the European Union (the “EU”) has resulted in volatility in global financial markets, and

it is expected to create mid-to long-term economic uncertainty to not only the economies of the

United Kingdom and the EU, but also globally. In addition, the U.S. government’s policies may create

uncertainty for the global economy and financial markets. The United States and the PRC have been

involved in controversy over trade barriers that have triggered the implementation or proposed

implementation of tariffs on certain imported products into the two countries. Geopolitical events

such as recent military conflicts in Ukraine, continued tensions in the Middle East and the Korean

peninsula, as well as the escalation of tensions between the United States and the PRC over trade

policies, political and other issues could significantly undermine the stability of the global economy

and financial markets.

The ongoing COVID-19 pandemic has adversely affected the global economy and financial markets.

The COVID-19 pandemic and policies implemented by governments to deter the spread of the disease

have had and may continue to have an adverse effect on consumer confidence and the general

economic conditions to which the Group’s business is subject. Despite the roll-out of mass

vaccination programmes, significant COVID-19 related restrictions, including those in response to

the relatively recent outbreaks of the Delta variant and subsequently the Omicron variant, have

– 28 –

continued and in some instances, have been significantly tightened, in a number of countries. The

COVID-19 pandemic continues to affect many countries globally and there remains significant

uncertainty as to when the pandemic will end and whether governments will implement further travel

restrictions or other restrictive measures to contain the COVID-19 pandemic. The resultant

disruptions to the supply chain and reduced levels of consumption, commercial activities and

industrial production in the affected countries may result in an economic slowdown in such

economies which, if prolonged, could cause a global recession. There have been resurgences of

COVID-19 outbreak in multiple cities in the PRC, and the local governments re-imposed certain

quarantine and other restrictive measures. There can be no assurance that the COVID-19 pandemic

will not further escalate in the PRC or elsewhere. As the situation of the COVID-19 pandemic is still

evolving, the heightened uncertainties surrounding the pandemic may pose a material adverse impact

on the Group’s business, financial condition, results of operations and prospects.

While central banks of various countries have implemented stimulus packages and national

governments have proposed or adopted various forms of economic relief to contain the economic

impacts of the COVID-19 pandemic and stabilise the markets, there can be no assurance that such

monetary and fiscal policy measures will have the intended effects or that a global economic

downturn will not occur or market volatilities will not persist. There can be no assurance that changes

in the economic, social and political conditions in the PRC or the global economy would not have

a material adverse effect on the Group’s business, financial condition, results of operations and

prospects. Please see “– The extent to which the COVID-19 pandemic will impact the Group’s

business, financial condition, results of operations and prospects is uncertain and cannot be

predicted.” and “– The Group’s operations are subject to force majeure events, political unrest or

civil disobedience movements, natural disasters and outbreaks or pandemic of contagious diseases

and other disasters.” below for further information.

The outlook for the global economy and financial markets remain uncertain. The PRC economy is

sensitive to global economic conditions, and it is impossible to predict how the PRC economy will

develop in the future and whether it may slow down due to a global crisis or experience a financial

crisis. In addition, instability in the global economy may materially and adversely affect the markets

in which the Group operates, which may lead to a decline in the general demand for the Group’s

services and products. If economic conditions were to worsen or if the economic recovery fails to

continue or if an economic slowdown were to return, the Group may have difficulty accessing the

financial markets, which could make it more difficult or expensive to obtain funding and, in addition,

there can be no assurance that the Group will be able to raise finance at a reasonable cost, or at all.

The Group may also be subject to solvency risks of banks and of its counterparties in its financial

arrangements and contracts. Therefore, changes in the economic, social and political conditions in the

PRC or the global economy could have a material adverse effect on the Group’s business, financial

condition, results of operations and prospects.

– 29 –

In addition, the extent of any impact on the Group’s ability to meet funding or liquidity needs would

depend on several factors, including its operating cash flows, the duration of any market disruptions,

changes in counterparty credit risk, the impact of government intervention in financial markets

including the effects of any programmes or legislation designed to increase or restrict liquidity in

certain areas of the market, general credit conditions, the volatility of equity and debt markets, any

credit ratings and the credit capacity of the Group and the costs of financing and other general

economic and business conditions. Market disruption and volatility may also lead to a number of

other risks, including but not limited to:

? market developments that may affect customer confidence, reduce the demand for financing

services or cause increases in delinquencies and default rates, which could increase the Group’s

write-offs and provisions for credit losses;

? the process the Group uses to estimate losses from its credit exposure requires a high degree of

management’s judgment regarding numerous subjective and qualitative factors, including

forecasts of economic conditions and how economic predictors might impair the ability of its

customers to perform their contractual obligations under the leases. Financial market disruption

and volatility may reduce the accuracy of the Group’s judgments;

? the Group’s ability to engage in routine funding transactions or borrow from other financial

institutions on acceptable terms, or at all, could be adversely affected by disruptions in the

capital markets or other events, including a deterioration in investor expectations; and

? the ability of the Group’ funding counterparties to provide funding could be adversely affected

by market volatility or disruptions in the equity and credit markets.

Therefore, any market disruption or volatility may materially and adversely affect the Group’s

business, financial condition and results of operations.

The Group’s substantial indebtedness and net current liabilities position expose the Group to

liquidity risk.

The Group currently has incurred a substantial amount of indebtedness. As at 31 December 2021, the

Group’s total interest-bearing indebtedness was approximately RMB126,690.48 million, representing

approximately 75.60 per cent. of the Group’s total assets.

Due to the capital-intensive nature of the Group’s business, the need to refinance maturing debt and

the Group’s strategy of expanding its aircraft portfolios, the Guarantor expects that the Group will

incur significant additional indebtedness in the future and continue to maintain high levels of

indebtedness. The Group’s high level of indebtedness:

? may cause a substantial portion of the Group’s cash flows from operations to be dedicated to

interest and principal payments and therefore is not available to fund the Group’s operations,

working capital, capital expenditure, expansion, acquisitions or general corporate or other

purposes;

– 30 –

? may impair the Group’s ability to obtain additional financing in the future;

? may limit the Group’s flexibility in planning for, or reacting to, changes in its business and

industry;

? may make the Group more vulnerable to downturns in its business, its industry or the economy

in general;

? may restrict the Group from pursuing strategic business opportunities; and

? may increase the Group’s exposure to interest rate fluctuations.

Furthermore, the Group’s current liabilities exceeded its current assets by approximately

RMB9,678.53 million, RMB8,304.94 million and RMB13,486.06 million as at 1 January 2020, 1

January 2021 and 31 December 2021, respectively. The net current liabilities position may expose the

Group to liquidity risk which could restrict the Group’s ability to make necessary capital expenditure

or develop business opportunities, and the Group’s business, operating results and financial condition

could be materially and adversely affected.

There can be no assurance that the Group will always be able to continue to obtain the required

financing in the future or that the Group would be able to arrange for re-financing its indebtedness

when they become due, repay its indebtedness or raise the necessary funding to finance its business

growth and its capital commitments.

Furthermore, there can be no assurance that the Group will be able to comply with all the

requirements or covenants under its financing agreements or other material contracts entered into

as part of its ordinary course of business or that the Group will be able to obtain any waiver if it fails

to comply with them. The Group has not received, during the three years ended 31 December 2021,

any notice of breach of any covenant or undertaking resulting in early termination or modification of

any contracts or agreements which are material to the Group’s business.

If the Group violates any of the undertakings or covenants, it could result in increase in the interest

rates, accelerated repayment of loans and interest, termination or delay in the relevant arrangements

or legal proceedings against the Group. Any of these incidents could have a material adverse effect

on the Group’s business, operating results, and financial condition. Furthermore, the Group’s

liquidity depends on the amount of cash generated from its operations and its access to further

financial resources, which could also be in turn affected by the Group’s future operating performance,

prevailing economic conditions, and other factors outside the Group’s control.

The extent to which the COVID-19 pandemic will impact the Group’s business, financial

condition, results of operations and prospects is uncertain and cannot be predicted.

The ongoing COVID-19 pandemic in the PRC and other parts of the world since late 2019 could

materially and adversely affect the overall business sentiment and environment in the PRC and in the

markets in which the Group operates, particularly with the emergence of new variants of COVID-19

such as Delta and Omicron. Since December 2019, the outbreak of COVID-19 has caused substantial

disruption in the PRC economies and markets. In particular, the administrative actions taken by local

governmental authorities to control the spread of the COVID-19 pandemic may have an adverse

impact on the Group’s businesses. For example, the ongoing COVID-19 pandemic may cause

disruptions to the Group’s leasing business. The Group’s businesses may also be adversely affected

– 31 –

by certain relief measures implemented by the PRC government. Although the Group has adopted

various measures to minimise the adverse impact of the ongoing COVID-19 pandemic on its

businesses and operations, there can be no assurance that remedial measures adopted by the Group

will have the intended effects or that the adverse impact of the ongoing COVID-19 pandemic on the

Group will not persist.

Substantially all of the Group’s operating revenue is derived from its operations in the PRC and any

labour shortages, material contraction in air travel within the PRC, Asia and globally or contraction

or slowdown in the growth of domestic consumption in the PRC as a result of the adverse impact of

the COVID-19 pandemic could materially and adversely affect the Group’s business, financial

condition, results of operations and prospects. In addition, if any of the Group’s management or

employees are affected by the COVID-19 pandemic, the Group may be required to close down its

offices, warehouses and facilities to prevent the spread of the pandemic. The ongoing COVID-19

pandemic in the PRC may also affect the operations and financial condition of the Group’s customers

and suppliers, which in turn could materially and adversely affect the Group’s business, financial

condition, results of operations and prospects. The ongoing COVID-19 pandemic in the PRC,

especially in the cities or provinces where the Group has operations, may also delay completion of

the Group’s projects as scheduled, causing substantial increase in development costs and/or late

delivery of projects, which may adversely affect the Group’s business, financial condition, results of

operations and prospects.

The ongoing COVID-19 pandemic is expected to have an adverse impact on the Group’s businesses

and it is impossible to predict the magnitude of such impact, which could vary based on the duration

of the outbreak and the ability of the global community to contain the disease and implement

economic stimulus measures. There are uncertainties as to how the COVID-19 pandemic will evolve

and there can be no assurance that the ongoing COVID-19 pandemic in the PRC and other parts of

the world would not have a material adverse effect on the Group’s business, financial condition,

results of operations, profitability and prospects.

The PRC government (including the central SASAC) has no obligation to repay any amount

under the Instruments or the Guarantee.

The PRC government (including the central SASAC) is not an obligor and shall under no

circumstances have any obligation arising out of or in connection with the Instruments or the

Guarantee. This position has been reinforced by the Circular of the Ministry of Finance on Issues

relevant to the Regulation on the Financing Activities Conducted by Financial Enterprises for Local

Governments and State-owned Enterprises (財政部關於規範金融企業對地方政府和國有企業投融資

行為有關問題的通知) (財金 [2018] 23 ) (the “MOF Circular”) promulgated on 28 March 2018 and

which took effect on the same day, and the Circular of the National Development and Reform

Commission and the Ministry of Finance on Improvement of Market Regulatory Regime and Strict

Prevention of Foreign Debt Risks and Local Government Indebtedness Risks (Fa Gai Wai Zi [2018]

No. 706) (國家發展改革委財政部關於完善市場約束機制嚴格防範外債風險和地方債務風險的通知)

(發改外資 [2018] 706 ) (the “Joint Circular”) promulgated on 11 May 2018 and which took effect

on the same day.

The repayment obligations under the Instruments and the Guarantee remain the sole obligation of the

Issuer or the Guarantor (as the case may be) and all obligations under the Instruments and the

Guarantee shall solely be fulfilled by the Issuer or the Guarantor (as the case may be) as an

independent legal person. The PRC government as the ultimate shareholder of the Guarantor only has

– 32 –

limited liability in the form of its equity contribution in the Guarantor. Each of the PRC government

(including the central SASAC) and Aviation Industry Corporation of China (“AVIC”) has no

obligation to repay any amount under the Instruments or the Guarantee. Investments in the

Instruments are relying solely on the credit risk of the Issuer and the guarantee to be provided by the

Guarantor. In the event the Issuer and the Guarantor do not fulfil their respective obligations under

the Instruments and the Guarantee (as the case may be), investors will only be able to claim as an

unsecured creditor against the Issuer, the Guarantor and their respective assets, and not any other

person including the PRC government, the central SASAC or any other local or municipal

government entities. As the MOF Circular and the Joint Circular are relatively new and given the

limited volume of published decisions related to these circulars, the interpretation and enforcement

of these laws and regulations involve uncertainties.

In addition, any ownership or control of the Group by the PRC government (including the central

SASAC) does not necessarily correlate to, or provide any assurance as to, the Issuer or the

Guarantor’s financial condition. If the Issuer and the Guarantor do not fulfil their respective

obligations under the Instruments and the Guarantee (as the case may be), investors will only have

recourse against the Issuer or the Guarantor (as the case may be), and not any other person including

the PRC government, the central SASAC or any other local or municipal government entities.

Therefore, in making an investment decision, investors must rely upon their own examination of the

financial condition of the Issuer, the Guarantor and the Group, the terms of the offering (including

the merits and risks involved) and the financial information of the Guarantor included in this Offering

Circular.

The Group’s operations are subject to force majeure events, political unrest or civil

disobedience movements, natural disasters and outbreaks or pandemic of contagious diseases

and other disasters.

Force majeure events, natural disasters, catastrophe or other events could result in severe personal

injury to the Group’s staff, property damage and environmental and other damage, which may curtail

the Group’s operations, cause delays in estimated completion dates for the Group’s projects and could

in turn materially and adversely affect the Group’s cash flows and accordingly, adversely affect its

ability to repay any debt.

A substantial part of the Group’s operations are based in the PRC, which is exposed to potential

natural disasters including, but not limited to, earthquakes, flooding, landslides, mudslides and

drought. If any of the Group’s developments are damaged by severe weather or any other disasters,

accidents, catastrophes or other events, the Group’s operations may be significantly interrupted. The

occurrence or continuance of any of such unforeseen events or similar events could increase the costs

associated with the Group’s operations and reduce its ability to operate its businesses effectively,

thereby reducing its operating income and profits.

In addition, the Group’s contracts with its suppliers and other counterparties may have force majeure

provisions that permit such parties to suspend, terminate or otherwise not perform their obligations

under the relevant contracts upon the occurrence of certain events such as strikes and other industrial

or labour disturbances, terrorism, restraints of government, civil protests, disobedience movements

or disturbances, or any natural disasters; all of which are beyond the control of the party asserting

such force majeure event. If one or more of the Group’s suppliers or other counterparties do not fulfil

their contractual obligations for any extended period of time due to a force majeure event or

otherwise, the Group’s results of operations and financial condition could be materially and adversely

affected.

– 33 –

Risks of substantial costs and liabilities are inherent in the Group’s principal operations and there can

be no assurance that significant costs and liabilities will not be incurred, including those relating to

claims for damages to property or persons. Insurance policies for civil liability and damages taken

out by the Group could prove to be significantly inadequate, and there can be no assurance that the

Group will always be able to maintain a level of cover at least equal to current cover levels and at

the same cost. The frequency and magnitude of natural disasters seen over the past few years could

have a significant impact on the capacities of the insurance and reinsurance market and on the costs

of civil liability and damages insurance cover for the Group. Please see “– The Group’s operations

may be adversely affected by operational risks, which may cause the Group to incur uninsured

losses.” for further information.

The Group’s operations and financial condition could also be materially and adversely affected by

any outbreak, epidemic and/or pandemic of (or the escalation and/or intensification of any outbreak,

epidemic and/or pandemic of) infectious or contagious diseases and/or other adverse public health

developments in the PRC or elsewhere. In particular, the ongoing COVID-19 pandemic in the PRC,

Hong Kong and other countries has led to business suspension, travel and other restrictions, labour

shortages and supply or delivery chain constraints in the PRC, Hong Kong and globally. It is difficult

to predict the level of impact of the ongoing COVID-19 pandemic on the PRC and global economies

and there can be no assurance that it would not have a material adverse effect on the Group’s

business, results of operations, financial condition and prospects.

The outbreak of severe acute respiratory syndrome (“SARS”) that began in the PRC and Hong Kong

in early 2003 had an adverse effect on all levels of business in Hong Kong and the PRC. There have

also been sporadic outbreaks of the H5N1 virus or “Avian Influenza A” among birds, in particular

poultry, as well as some isolated cases of transmission of the virus to humans. In 2009 and 2010, there

have also been global outbreaks among humans of the influenza A/H1N1 virus. Other recent

epidemics include the Middle East Respiratory Syndrome (MERS), the H5N1 avian flu, the H7N9

avian flu, the Ebola virus disease and the Zika virus disease. The ongoing COVID-19 pandemic and

outbreak of SARS and the influenza A/H1N1 virus led to a significant decline in travel volumes and

business activities throughout most of the Asian region as well as globally. The occurrence of another

outbreak of highly contagious disease or epidemic disease (whether known or unknown to the world)

(or the escalation and/or intensification of any outbreak, epidemic and/or pandemic of infectious

disease) in the PRC or elsewhere may result in another economic downturn and could adversely affect

the overall level of business and travel in the affected areas. There may also be significant disruption

to the Group’s business operations and consequently have an adverse effect on its financial condition

and results of operations. Please see “– The extent to which the COVID-19 pandemic will impact the

Group’s business, financial condition, results of operations and prospects is uncertain and cannot be

predicted.” for further information.

Certain affiliates of the Group have business activities in certain countries that are the subject

of economic sanctions.

Certain affiliates of the Group (the “Affiliates”) have business presence in a number of foreign

countries including certain countries that are the subject of economic sanctions regimes administered

or enforced by the United States, the United Nations, the EU and/or Her Majesty’s Treasury. The

Affiliates also have a large number of clients located worldwide, and engage in limited business

activities relating to countries that are the subject of various United States economic sanctions

regimes, and there can be no assurance that the Affiliates will cease to engage in business activities

relating to those countries in the foreseeable future. The interpretation or implementation of

government policy at the U.S. federal, state or local levels with respect to any current or future

– 34 –

activities by the Affiliates in countries that are the subject of U.S. sanctions or with sanctioned

individuals or entities is difficult to predict. As at the date of this Offering Circular, the Group has

not engaged in any business activities in any sanctioned countries. However, if the U.S. government

determines that the Affiliates engage in any sanctionable activity or activity that is contrary to U.S.

policy, the Affiliates may be subject to various sanctions, and the Group, as a result of the affiliate

relationship, may also be subject to various sanctions ranging from restrictions on U.S. exports or

bank financing to outright blocking of the sanctioned entities’ property within U.S. jurisdiction. If the

most extreme sanction, blocking, were applied to the Group’s property, including property of their

respective controlled subsidiaries, the Group could be prohibited from engaging in business activities

in the United States or with U.S. individuals or entities. If the Group is sanctioned, the Group could

also be prohibited from engaging in U.S. transactions in the Instruments and distributions to U.S.

individuals and entities with respect to the Instruments could also be prohibited. As a result, the

market price of the Instruments may be adversely affected, and the Instrumentholders might be unable

to sell, or receive distributions with respect to, the Instruments. In addition, the Group may also be

subject to negative media or investor attention, which may distract management, consume internal

resources and affect investors’ perception of the Group. There can be no assurance that the Group will

not be the subject of sanctions in the future due to the Affiliates’ activities.

The Guarantor’s controlling shareholder, AVIC, is subject to certain Executive Orders issued by

the United States.

Since 2018, the U.S.-China trade war has brought uncertainty to global markets and to a certain

extent, impacted businesses and financial market sentiment, influenced financial market volatility,

and slowed investment and trade. The continued intensification of tensions between the United States

and China has caused the U.S. government to focus on national security concerns and increase

scrutiny of foreign businesses such as AVIC, which indirectly held approximately 43.78 per cent. of

the issued share capital of the Guarantor as at 31 December 2021.

On 12 November 2020 and 3 June 2021, the U.S. President issued Executive Order 13959,

“Addressing the Threat From Securities Investments That Finance Communist Chinese Military

Companies”, and Executive Order 14032, “Addressing the Threat From Securities Investments That

Finance Certain Companies of the People’s Republic of China” (“E.O. 14032”) (together, the

Orders”), respectively. The present effect of the Orders is that U.S. Persons (as defined in the

Orders) are prohibited, as of 2 August 2021, from buying and selling (subject to a divestment period)

any publicly traded securities, or any publicly traded securities that are derivative of such securities

or are designed to provide investment exposure to such securities, of any company listed in the Annex

to E.O. 14032 (the “Annex”) or of any person determined by the U.S. Secretary of the Treasury, in

consultation with the U.S. Secretary of State, to operate or have operated in the “defense and related

materiel sector or the surveillance technology sector of the economy of the PRC” or to own or control

or be owned or controlled by a person who operates or has operated in that sector. The definition of

U.S. Persons in the Orders (including any United States citizen, permanent resident alien, entity

organised under the laws of the United States or any jurisdiction within the United States (including

foreign branches), or any person in the United States) is different from the definition of a U.S. person

under Regulation S of the Securities Act. E.O. 14032 includes a 10-month wind down period where

purchases for value or sales made within the prescribed period by U.S. persons solely to divest, in

whole or in part, from such restricted securities are permitted. The Orders are a form of U.S.

sanctions. Investors are responsible for ensuring that they comply with applicable provisions of

Executive Order 14032. Investors who are considered U.S. persons for purposes of the Orders should

consider whether this is an appropriate investment.

– 35 –

As at the date of this Offering Circular, to the knowledge of the Issuer and the Guarantor, AVIC is

one of the companies listed on the Annex. The Guarantor and other members of the Group have

engaged in, and will continue to engage in, various dealings and transactions with AVIC and other

companies that are listed on the Annex and/or subject to the prohibitions stipulated by the Orders

from time to time. As at the date of this Offering Circular, the prohibitions stipulated by the Orders

do not extend to the publicly traded securities of the Issuer and the Guarantor, as neither the Issuer

nor the Guarantor are named on the U.S. Department of the Treasury’s Office of Foreign Assets

Control’s Non-SDN Chinese Military Companies List (“NS-CMIC List”). Although as at the date of

this Offering Circular, the Issuer and the Guarantor are not named on the NS-CMIC List, the U.S.

Secretary of the Treasury is authorised under the Orders to include additional entities that are owned

or controlled by an entity subject to the Orders to the NS-CMIC List. Therefore, there can be no

assurance that the Issuer and/or the Guarantor will not be subject to the Orders in the future.

The inclusion of AVIC in the Annex and the fact that AVIC is subject to the prohibitions stipulated

by the Orders may result in negative media and investor attention targeted at AVIC and/or the Group,

which may cause their business partners to re-evaluate the risk of transacting with AVIC and/or the

Group, in particular in light of ongoing U.S.-China tensions. In addition, if the U.S. Secretary of the

Treasury ultimately determines that any of the Issuer, the Guarantor or other member of the Group

is named as an entity subject to the Orders, investors who are U.S. Persons will be prohibited (subject

to divestment periods) from entering into certain transactions in the relevant entity’s publicly traded

securities (which may include the Instruments and/or the Guarantee). In such case, the market

liquidity of the Instruments may be materially and adversely affected. Instrumentholders who are

U.S. Persons may also be required to divest their holdings in the Instruments and may have to do so

at a loss. The inclusion of AVIC in the Annex and the fact that AVIC is subject to the prohibitions

stipulated by the Orders may also affect AVIC and/or the Group’s businesses in the overseas markets

(including the United States). Although the Group’s overall operations and activities in the United

States and the Group’s business with individuals or entities in the United States represent only a small

percentage of the Group’s consolidated total revenue, such operations and activities of the Group may

be materially and adversely affected as tensions between the United States and China intensify.

In the future, any further escalation of the U.S.-China tensions may cause the U.S. government to

impose further sanctions and/or restrictions on AVIC and/or the Group, which could include measures

with a range of severity, including possible prohibition of transactions by the sanctioned entity

through the U.S. financial system and blocking sanctions. The Group has been closely monitoring the

development of the Orders and actively implementing corresponding mitigation measures in response

to the latest development of such situations. However, there can be no assurance that any potential

restrictions or sanctions on AVIC, the Group and/or any affiliates of the Guarantor will not materially

and adversely affect the business, prospects, financial condition and results of operations of AVIC,

the Group or the relevant affiliates and their future business expansion in the overseas markets

(including the United States).

The Group operates in an increasingly competitive market.

The PRC financial leasing industry is becoming increasingly competitive, and there can be no

assurance that the Group will be able to sustain its competitive advantage or maintain its market

position or effectively implement its business strategies. The Group faces competition from both

international and domestic players (including the financing divisions of vendors, manufacturers of

aircraft, vessels, urban infrastructure equipment and other equipment, financial institutions including

– 36 –

banks and other leasing companies) in its business, and competes with them in capturing new

business opportunities. Some of the Group’s competitors may have significant financial resources,

marketing and other capabilities, more extensive know-how and business relationships and longer

operating track records. Leveraging AVIC’s aircraft manufacturing business and industry expertise

within the aviation industry, the Group competes with its competitors on the basis of availability of

the aircraft types or product types that meet customers’ needs and the ability to provide customised

and integrated services to its customers. The Group’s revenue is affected by these competitive factors

and its success depends on its ability to compete effectively. Competition from such entities may

result in, among others, downward competitive pressure on interest rates charged to customers,

adoption by the Group’s competitors of innovative financial services or comparatively effective

branding efforts, any of which may have a material adverse effect on the Group’s business, financial

condition and results of operations.

Upon the PRC’s accession to the World Trade Organisation in 2001, the PRC financial leasing

industry entered a phase of rapid development and the number of both foreign and domestic investors

participating in the industry has increased. In order to fulfil its commitment to liberalise the PRC

financial leasing market, MOFCOM implemented several policies to develop further the financial

leasing industry and encourage additional investment. For instance, the Measures on the

Administration of Foreign Investment in the Leasing Industry was promulgated in 2005 and permitted

the incorporation of foreign investment leasing companies either through the establishment of

wholly-owned or joint venture financial leasing companies. In order to encourage participation by

domestic investors, the “Circular on Issues in Connection with the Engagement in Financial Leasing

Business” was jointly promulgated by MOFCOM and the State Administration of Taxation. This

notice permitted the establishment of domestic pilot financial leasing companies. Pursuant to the

Decision of the State Council of PRC on the Fifth Batch of Administrative Examination and Approval

Matters to be Cancelled or Delegated to Subordinate Authorities (國務院關於第五批取消和下放管理

層級行政審批專案的決定) promulgated and effected on 4 July 2010, approval for the establishment

or modification of foreign invested enterprises engaged in financial leasing with a total investment

amount of U.S.$300 million or less can be approved by provincial-level governmental authorities

instead of those at the national level. The Guarantor believes that these measures are likely to further

increase competition in the PRC financial leasing industry. If the Group is unable to compete

successfully against current and future participants in the industry and maintain its competitive

advantage and market share, its business, results of operations and financial condition may be

materially and adversely affected.

The industries in which the Group is engaged are cyclical.

The aviation industry is cyclical. Demand for passenger and cargo air transportation services and, in

turn, demand for passenger and cargo aircraft has a strong positive correlation with economic growth.

Decline in economic activity adversely affects demand for business travel and air cargo services. In

addition, economic contraction may also impact leisure travel as discretionary income is reduced. The

ongoing COVID-19 pandemic, as well as the financial crisis in Europe and the United States and,

together with slowing or contracting economies worldwide, may develop into a severe or prolonged

global recession that could result in lower demand for passenger and air cargo services, lower lease

rates for the Group’s aircraft, higher default rates among its customers and a decline in the value of

its portfolio of aircraft. Such developments would materially and adversely affect the Group’s

business, financial condition and results of operations, including its ability to meet its financial

obligations.

– 37 –

In addition, a proportion of the Group’s net lease receivables relates to the shipping industry. The

shipping industry is highly cyclical and is affected by factors such as global and regional economic

and political conditions, changes in regulatory regimes, strikes or armed conflicts, extreme weather

conditions and piracy. Likewise, in relation to the Group’s equipment leasing business, the industries

in which the Group’s customers are engaged can be very cyclical and are dependent on factors

including global and regional economic and political conditions and changes in regulatory regimes.

These factors are beyond the Group’s control and the nature, timing and degree of changes in industry

conditions are largely unpredictable. Any downturn in the shipping industry could result in extensive

customer defaults, decreased revenue, which in turn could materially and adversely affect the Group’s

business, financial condition and results of operations.

The Group is exposed to risks associated with entering into contracts with public organisations,

and its performance may be significantly affected by changes in government policies.

The Group’s customers, in particular in its urban infrastructure leasing business, include agencies and

entities owned, controlled by or otherwise associated with local governments. The revenue

contributed by these customers accounts for a substantial part of the Group’s total revenue. Any

changes in the government’s budget or other policy considerations may result in reduced demand for

the Group’s urban infrastructure leasing business, and to the extent that the Group’s customers are

funded or supported by the government, may lead to customer defaults or contract termination, which

would adversely affect the Group’s business, financial position and results of operations, which in

turn may potentially affect the Group’s ability to meet its financial obligations.

The Group is subject to various PRC and overseas regulatory requirements and the Group’s

failure to comply with such requirements, could materially and adversely affect its business,

financial condition, results of operations and reputation.

Certain members of the Group are the pilot domestic financial leasing enterprises approved by

MOFCOM and are subject to regulation by various PRC authorities including MOFCOM and the

State Administration of Taxation. On 8 May 2018, the General Office of MOFCOM issued the Notice

on Matters about the Rearrangement of Supervisory Responsibilities over Finance Leasing

Companies, Factoring Companies and Pawnshops (商務部辦公廳關於融資租賃公司、商業保理公司

和典當行管理職責調整有關事宜的通知) (the “2018 Notice”), according to which the authority of

rule-making on operation and regulation of finance leasing companies, factoring companies and

pawnshops shall be transferred to CBIRC. From time to time, weaknesses in certain areas of the

Group’s operations, such as risk management and internal controls may be identified, which may

result in sanctions, fines or penalties being imposed on the Group. There can be no assurance that the

Group will be able to comply with all such requirements and guidelines at all time or that the Group

will not be subject to sanctions, fines or other penalties in the future as a result of non-compliance.

If sanctions, fines and other penalties are imposed on the Group for its non-compliance, the Group’s

business, financial condition, results of operations and reputation may be materially and adversely

affected.

Also, there can be no assurance that existing policies, laws and regulations governing the financial

leasing industry will not change in the future or that any such changes will not materially and

adversely affect the Group’s business, financial condition and results of operations nor can there be

any assurance that the Group will be able to adapt to all such changes on a timely basis.

– 38 –

In addition, the aviation industry, in which many of the Group’s customers operate, and the operation

of aircraft are subject to domestic and international regulatory controls as well as additional controls

that various national or federal civil aviation authorities may impose, including the airworthiness

directives for aircraft operated by airlines within the jurisdiction of such authorities. The regulatory

authorities can suspend or revoke the licence granted to the Group’s airline customers to operate an

aircraft for failure to comply with these regulations, resulting in the grounding of aircraft. If the

business activities of any of the Group’s lessees are disrupted due to failure to meet regulatory

requirements, the ability of such lessees to meet their lease obligations towards the Group may be

adversely affected.

Regulatory approvals are required for the import, re-export, deregistration or registration of the

aircraft in various jurisdictions. Certain jurisdictions set maximum age limits for aircraft being

imported or registered. Subsequent changes in applicable laws may modify such requirements, or

approvals previously granted may be withdrawn. These changes may adversely affect the ability of

the Group to sell these aircraft and may impair the values of these aircraft and thus have an adverse

effect on the Group’s financial performance and its ability to meet its financial obligations.

The Group is subject to risks related to default payments and breaches by its lessees or other

contractual counterparties.

The Group’s business, financial condition and results of operations are to a certain extent dependent

upon the ability of its lessees to perform their contractual obligations under the leases. The ability

of each lessee to perform its contractual obligations is, in turn, dependent on its financial condition

and cash flow. If a lessee defaults, there can be no assurance that any security deposits paid under

the lease will be adequate to cover the lessee’s unpaid lease obligations, or that the maintenance

reserves collected during the lease term will be sufficient to cover the Group’s maintenance expenses

or the costs of re-leasing the aircraft.

Any deficiencies in the Group’s risk management and internal control systems may materially

and adversely affect the Group’s financial condition and results of operations.

The Group has implemented an integrated and prudent risk management system to protect the

long-term interests of its shareholders, customers and employees. However, the Group’s risk

management systems and internal control policies may not be effective in mitigating its exposure to

all types of risk, including unidentified or unanticipated risks. Some risk management and control

methods are based upon historical market behaviour and past events. As such, the Group may not be

able to adequately identify or estimate future risk exposures, which could be significantly greater

than the levels indicated by measures based on historical data. Other risk management methods

depend on evaluation of information regarding markets, customers or other relevant matters, which

may be inaccurate, incomplete, obsolete or improperly evaluated. For instance, the information

infrastructure in the PRC is still under development and there is no extensive and unified nationwide

credit information system. As such, risk assessment may not be based on complete, accurate,

up-to-date or reliable information. Furthermore, as the Group enters into new industry sectors,

expands into new customer segments or develops additional product and service offerings, it may not

be in a position to adequately identify, predict and manage future risk exposures.

In addition, management of operational, legal or regulatory risks requires various sets of policies and

procedures in order to accurately record and verify a large number of transactions and events. Such

policies and procedures may not be fully effective. Any failure of the Group’s risk management

procedures or any failure to identify applicable risks may have a material adverse effect on its results

of operations and financial condition.

– 39 –

The Group’s financial leasing businesses are capital intensive with long payback periods and the

Group may not be able to maintain sufficient liquidity to meet its business needs.

The Group is primarily engaged in aircraft leasing, ship leasing, urban infrastructure leasing and

large-scale equipment leasing, which typically require significant initial cash outlays and have long

payback periods. For example, the Group is typically required to deposit a portion of the purchase

price of the aircraft or vessel (as the case may be) to the vendor as pre-delivery payment and pay the

remaining balance of the purchase price at the time of delivery. As at 31 December 2021, the lease

term for the Group’s leasing businesses ranged from three to 12 years depending on the type of

leasing, during which the Group typically receives monthly, quarterly or semi-annual rental payments

from its lessees.

Although the Group generally generates significant funds from its operations, its ability to continue

to meet its cash requirements over the long-term requires substantial liquidity and access to sources

of funds. The Group has financed its businesses through a combination of borrowings from financial

institutions, such as commercial banks, and the issuance of onshore asset back securities as well as

onshore and offshore debt securities, but there can be no assurance that the Group is able to secure

adequate financing for its business operations.

In addition, the Group may require additional financing to fund working capital requirements, grow

its business and refinance existing debt obligations. There can be no assurance that additional

financing, either on a short-term or a long-term basis, will be made available or, if available, such

financing will be obtained on favourable terms.

Any decrease in the residual value of the aircraft, vessels, urban infrastructure equipment or

other equipment that the Group finances could adversely affect its business, financial condition

and results of operations.

Any decline in the residual value of the aircraft, vessels, urban infrastructure equipment or other

equipment financed by the Group may reduce the Group’s earnings. The Group recognises the

residual value of leased aircraft and vessel (as the case may be) based on the estimated future market

value of the leased asset at the maturity of the lease. The Group estimates the residual value of leased

asset at the inception of a lease based on a number of factors, including historical sale prices,

management’s experience and any known significant market and product trends. If the estimated

market value of the Group’s leased assets declines significantly due to economic factors,

obsolescence or other adverse circumstances, the Group may not realise the expected residual value

of the leased asset, which could adversely affect the Group’s business, financial condition and results

of operations.

The Group has pledged certain lease receivables to secure its borrowings.

The Group has pledged certain of its lease receivables to secure some of its bank loans. If the Group

defaults on such bank loans, the lenders may foreclose such leased receivables which the Group has

pledged, which may disrupt and adversely affect the Group’s business. Although the terms of the

Group’s indebtedness may limit the Group’s ability to create certain security over its assets, there can

be no assurance that the Group will not pledge its leased receivables to secure its borrowings in the

future. There can also be no assurance that the Group will not default on any of its borrowings in the

future. As at 31 December 2021, a substantial portion of the Group’s lease receivables with total

carrying values of approximately RMB60.73 billion were pledged to secure its bank loans amounting

to approximately RMB42.91 billion.

– 40 –

The value of collateral or guarantees securing the Group’s leases and the assets underlying its

leases which are disposed of upon repossession may be inadequate to cover related lease

receivables.

As at 31 December 2021, a considerable part of the Group’s leases was secured by collaterals or

provided with guarantees. To mitigate credit risks of its leases, the Group may request the lessees to

provide guarantees and/or collaterals for the leases. Such guarantees and/or collaterals are typically

negotiated on a case-by-case basis, depending on the nature of the business of the relevant lessee. In

the event of any material default on the lease payment terms, the Group is contractually entitled to

enforce its security rights over any guarantee or collateral, and/or repossess and dispose of the assets

underlying its leases to realise their value. However, the value of such collateral and/or assets

underlying such leases to be disposed of may decline and may be materially and adversely affected

by a number of factors, such as any damage, loss, oversupply, devaluation or reduced market demand.

Similarly, any significant deterioration in the financial condition or creditworthiness of guarantors

under the Group’s guaranteed leases could significantly decrease any amounts which the Group may

be able to recover under such guarantees.

The Group’s policies require periodic internal re-evaluation of collaterals, guarantees and assets

underlying its leases for impairment testing purposes. If the value of such collaterals, guarantees or

assets underlying the Group’s leases proves to be inadequate to cover the related lease receivables,

the Group may need to obtain additional security from its customers or other sources, but there can

be no assurance that it will be able to do so. Any decline in the value of such collaterals, guarantees

or assets underlying the Group’s leases or the Group’s inability to obtain additional security may

result in impairment losses and require the Group to make additional impairment provisions against

its lease receivables, which may in turn materially and adversely affect its business, financial

condition and results of operations.

The Group may not be able to successfully enforce its rights to the underlying collateral or

guarantees to its leases, or enforce its rights to repossess leased assets.

In the PRC, the procedures for liquidating or otherwise realising the collateral value of tangible assets

and the procedures for enforcing the Group’s rights to a guarantee or to repossess and dispose of the

asset underlying its leases could be time-consuming and in practice it may be difficult to realise such

collateral value, enforce the guarantee or repossess and dispose of assets underlying the Group’s

leases. Although the Group could apply to a PRC court in accordance with the PRC Civil Procedure

Law (中華人民共和國民事訴訟法) for the attachment or disposal of any underlying collateral, the

enforcement of a guarantee or the repossession of the assets underlying the Group’s leases upon

default, it is uncertain whether any judgment made by local courts would be enforceable due to

uncertainties of the PRC legal system governing such enforcement. In addition, under PRC law, the

Group’s rights to any collateral securing its leases may be subordinated to other claims. For example,

according to the PRC Enterprise Bankruptcy Law (中華人民共和國企業破產法), claims for the

amount that a company in bankruptcy owed its employees prior to 27 August 2006 (being the date

of publication of the PRC Enterprise Bankruptcy Law), including but not limited to salaries, medical

insurance and pension benefits, will have priority over the rights of such company’s creditors to

collateral, if not adequately provided for in liquidation proceedings. Therefore, upon any default of

any lessee or any guarantor under the Group’s lease, if the Group is unable to successfully enforce

its right in respect of any collateral or any guarantee related to any assets underlying its leases to be

repossessed and disposed of on a timely basis, the Group’s asset quality, business, financial condition

or results of operations may be materially and adversely affected.

– 41 –

The Group’s provisions for impairment losses on lease receivables may not be adequate to cover

future credit losses, and may have a material adverse impact on the Group’s business, financial

condition and results of operations.

The Group makes provisions for impairment losses on lease receivables in accordance with PRC

GAAP. As at 1 January 2020, 1 January 2021 and 31 December 2021, the Group’s consolidated

impairment provision on lease receivables were approximately RMB2.50 billion, RMB3.24 billion

and RMB4.11 billion, respectively, and the accumulated impairment provision represented

approximately 2.00 per cent., 2.52 per cent. and 3.06 per cent. of the Group’s net lease receivables,

respectively. This reflected both the growth of the Group’s business operations and its approach to

provisions in view of the macroeconomic environment. The amount of provisions for impairment

losses on the Group’s lease receivables is determined on the basis of its internal provisioning

procedures and guidelines taking into account a number of factors, such as the nature and

industry-specific characteristics of the Group’s customers and their creditworthiness, economic

conditions and trends, write-off experience, delinquencies and the value of underlying collateral and

guarantees. As the Group’s provisions require significant judgment and estimation, its allowance for

impairment losses may not always be adequate to cover actual credit losses in its business operations.

The Group’s allowance may prove to be inadequate if unforeseen or adverse changes occur in the

PRC economy or other economies in which the Group operates or if other events adversely affect

specific customers, industries or markets. As at 1 January 2020, 1 January 2021 and 31 December

2021, the Group’s non-performing lease receivable was approximately RMB1.60 billion, RMB1.66

billion and RMB1.68 billion, respectively, the Group’s non-performing lease receivable rates were

approximately 1.27 per cent., 1.29 per cent. and 1.25 per cent., respectively, and the Group’s

allowance coverage ratios for non-performing lease receivable were approximately 156.66 per cent.,

195.62 per cent. and 244.32 per cent., respectively. The Group may need to make additional

provisions for its lease receivables, which could significantly reduce its profit and may materially and

adversely affect its business, financial condition, results of operations and prospects.

The Group may not be able to sell the aircraft, vessel, urban infrastructure equipment or other

equipment upon termination or expiry of an existing lease.

Upon termination or expiry of an existing lease, the Group needs to sell the aircraft, vessel, urban

infrastructure equipment or other equipment (as the case may be). There can be no assurance that the

Group can sell the aircraft, vessel, urban infrastructure equipment or other equipment (as the case

may be) at a price favourable to the Group or at all.

Factors that could affect the Group’s ability to sell the aircraft, vessel, urban infrastructure equipment

or other equipment include business cycles in the relevant industry, global and domestic financial

market conditions and market disruption risks which could adversely affect the liquidity, interest

rates, the availability of funding sources and natural or man-made calamities. Failure by the Group

to sell the relevant asset at a favourable price may result in losses incurred by the Group which may

have a material adverse effect on the Group’s financial condition and profitability.

– 42 –

The Group may not be able to successfully identify, acquire, invest in or operate suitable

investment projects, acquisition targets or businesses.

There can be no assurance that the Group will be able to identify suitable investments and acquisition

targets, complete the investments and acquisitions on satisfactory terms or, if at all, if any such

investments and acquisitions are consummated, satisfactorily integrate the acquired businesses and

investments. Any failure of the Group to implement its expansion plans through investments and

acquisitions could have a material adverse effect on the Group’s business, financial position and

results of operations, as well as its future prospects.

In addition, the Group’s subsidiaries operating in different business segments may determine that it

is in their shareholders’ interests to pursue new business ventures. There can be no assurance that

such business ventures will be successful or generate the synergies expected, if any. The successful

completion of this type of transaction will depend on several factors, including satisfactory due

diligence findings and the receipt of necessary regulatory approval, among others. If the Group fails

to complete such business ventures or such ventures prove to be unsuccessful, the Group’s operating

segments involved may be adversely affected.

There are risks associated with any material acquisitions by the Group in the future.

The Group may consider expanding its business by acquiring certain interests in other companies.

During the course of these transactions, the Group will conduct due diligence investigations with

respect to the target companies, but such due diligence conducted with respect to any acquisition

opportunity may not reveal all relevant facts that are necessary or useful in evaluating such

opportunity, which could subject the Group to unknown financial, legal and other risks and liabilities.

When determining the consideration for any acquisition, the Group will consider various factors,

including but not limited to the quality of the target business, estimated costs associated with the

acquisition and the management of the target business, prevailing market conditions and intensity of

competition. The Group will also face various issues arising from the acquisition after the relevant

transaction is completed, such as integration of the business into its operations and allocation of

internal resources. There can be no assurance that the Group will be able to address these issues

effectively.

In addition, any major acquisition or transaction of similar nature may consume substantial

management attention and financial resources of the Group or even cause the Group to incur

significant indebtedness. Any material decrease in its financial resources may limit the Group’s

ordinary operating activities and increase pressure on its liquidity, and in turn could adversely affect

its business, financial condition and results of operations.

The Group is unable to predict whether there will be any target suitable for acquisition or when any

suitable acquisition opportunities could arise. In the event that the Group enters into any letter of

intent or agreement for any material acquisition after the issue of the Instruments, the market price

and the trading volume of the Instruments may be adversely affected.

– 43 –

The Group may not be able to execute successfully or fully its business strategy with respect to

assets, projects or subsidiaries in which the Guarantor has minority interests (if any).

The Group may not be able to execute successfully or fully its business strategy with respect to assets,

projects or subsidiaries in which the Guarantor has minority interests (if any). The Group may also

fail to manage such assets, projects or subsidiaries successfully. The Group’s involvement with such

assets, projects and subsidiaries is generally subject to the terms of applicable agreements and

arrangements. The Guarantor may not have any board representation, veto power or power to exercise

control over the management, policies, business and affairs of certain of its subsidiaries in which the

Guarantor does not have majority interests.

The Group may encounter difficulties in executing its growth strategy and integrating its

expansion plans which may have a material adverse impact on its growth prospects, business

and results of operations.

As part of the Group’s business strategy, it plans to continue to explore growth opportunities within

other target industries in the PRC, Asia and overseas with high growth potential to complement its

existing businesses. The Group may achieve this through acquisitions, expansion, alliances, joint

ventures or partnerships, where suitable opportunities arise and under appropriate market conditions.

While the Group did not have any existing timetable to expand into these new industries as at the date

of this Offering Circular and it has not engaged in any related negotiations or entered into any

agreements with any acquisitions, alliances, joint ventures or partnerships, the Group may engage in

such transactions in the near future. However, there can be no assurance that the Group will be able

to identify any suitable target industries, investment projects or business partners in the near future.

In addition, any failure to effectively manage the Group’s expansion plans may lead to increased

costs, impaired growth and reduced profitability for the Group. Even upon completion of investments

or partnerships, the Group may experience difficulties in integrating such businesses into its existing

business model, and may incur higher costs than initially anticipated. All of the above factors may

materially and adversely affect the Group’s business, financial position and results of operations. The

shares of the Issuer, the Guarantor or one or more of its subsidiaries may become listed on one or

more stock exchanges. As a result of this, the entering into of certain transactions by the Issuer, the

Guarantor or any such subsidiary may be subject to various regulatory restrictions. Intra-group

transactions may also be subject to applicable listing requirements, such as the issuance of press

notices, the obtaining of independent shareholders’ approval at general meetings and disclosure in

annual reports and accounts. As a result, subsidiaries with funding needs may not be able to obtain

financial support from the Group in a timely manner, or at all.

– 44 –

The Group may engage in related party transactions with its affiliates and joint ventures from

time to time which may create potential conflicts of interest.

The Group may engage in a variety of transactions with its affiliates and joint ventures, which may

include providing guarantees. There can be no assurance that those transactions would be deemed as

arm’s length or the Group’s related parties will not take actions that favour their interests over the

Group’s. There can be no assurance that conflicts of interests will not arise between the Group and

its affiliates and joint ventures pursuant to such related party transactions. If a borrower defaults on

any borrowings guaranteed by the relevant Group’s member, the relevant lender may exercise its right

under the guarantee to demand repayment from the Group, which may result in a funding shortage

at the Group level. The internal control regarding the management of various related party

transactions can also be challenging and demanding for the Group. Failure to adequately control and

manage its related party transaction could have an adverse effect on the Group’s business, financial

condition or results of operations.

The Group may be exposed to credit risk relating to guarantees.

The Group may from time to time provide guarantees in respect of indebtedness of entities which

were not members of the Group. If there is a downturn in the general economic conditions in the PRC

and globally or other adverse factors causing a deterioration of the financial condition of the

guaranteed entities and the guaranteed entities are unable to fulfil their obligations under their

respective indebtedness as a result of which the Group is required to pay the outstanding debt

obligations on behalf of the guaranteed entities, the Group’s financial condition, results of operations

and prospects could be materially and adversely affected.

The Group’s ability to generate cash to service its indebtedness depends on many factors

beyond its control.

The Group’s ability to make payments on and to refinance its indebtedness, including the

Instruments, and to fund planned capital expenditures will depend on the Group’s ability to generate

cash. This, to a certain extent, is subject to general economic or financial conditions, competitive,

legislative, regulatory environment and other factors that are beyond the Group’s control. There can

be no assurance that the Group may generate sufficient cash flow from its operations to enable it to

pay its indebtedness, including the Instruments, or to fund the Group’s other liquidity needs. The

Group may need to refinance all or a portion of its indebtedness, including the Instruments, on or

before maturity. However, the Group might not be able to refinance any of its indebtedness, including

the Instruments, on commercially reasonable terms or at all. If the Group is unable to service its

indebtedness or obtain refinancing on terms acceptable to the Group, it may be forced to adopt an

alternative strategy that may include reducing or delaying capital expenditures, selling assets or

seeking equity capital. These strategies may not be instituted on satisfactory terms, if at all.

– 45 –

Changes in interest rates and currency exchange rates could have an adverse effect on the

Group’s business, financial condition and results of operations.

The Group’s business is affected by interest rates, including both the interest rates charged to its

financial leasing customers and the interest rates it pays under its loans and other financing

obligations. In order to remain responsive to changing interest rates and to manage the Group’s

interest rate exposure, the Group has implemented measures to adjust the structure of its assets and

liabilities based on an assessment of the sensitivity of projected net interest income under various

interest rate scenarios. However, an increase in interest rates, or the perception that such an increase

may occur, could adversely affect the Group’s ability to obtain bank loans at favourable interest rates,

its ability to maximise its interest income, its ability to originate new leases and its ability to grow.

In addition, changes in interest rates or in the relationships between short-term and long-term interest

rates or between different interest rate indices (i.e., basis risk) could affect the interest rates received

on interest-earning assets differently from the interest rates paid on interest-bearing liabilities, which

could, in turn, result in an increase in interest expense or a decrease in net interest income (which

is the Group’s interest income minus the Group’s interest expense). In addition, the Group’s net

interest income is also impacted by whether it can adjust the interest rates it charges its customers

in response to fluctuations in interest rates for the Group’s interest-bearing bank borrowings to

maintain its net interest spread and its net interest margin. If the Group fails to appropriately adjust

the interest rates of its lease contracts in a timely manner, its net interest spread and its net interest

margins may decrease, and as a result, its profitability and results of operations would be adversely

impacted. Any increase in the Group’s interest expense or decrease in its net interest income could

have a material adverse effect on its business, results of operations and financial condition.

In addition, fluctuations in exchange rates may also reduce the Group’s earnings and cash flow or

adversely affect the Group’s financial condition. Although the Group manages interest rate and

exchange rate risks with a variety of techniques, including the selective use of interest swaps and

cross-currency swaps, there can be no assurance that fluctuations in interest rates and currency

exchange rates will not have an adverse effect on the Group’s earnings and cash flows. If any of the

variety of instruments and strategies the Group uses to hedge its exposure to these various types of

risk are ineffective, the Group may incur losses.

The Group depends on its key senior management members and key senior officers and may

have difficulty attracting and retaining skilled employees.

The Group’s financial leasing business is a highly specialised area which requires professional

knowledge and know-how in business areas including, but not limited to, finance, accounting,

international trade, insurance, the aviation, shipping and other related industries and various areas of

law. The Group’s success depends, to a significant extent, upon the abilities, expertise and dedication

of its key senior management members, senior officers and skilled employees. There is significant

competition in the PRC for such talent. If such key personnel leaves the Group to join other

employers, including the Group’s competitors, the Group may face difficulties employing and

assimilating suitable replacement personnel in the short term. Failure to recruit, train, develop and

retain personnel with the necessary qualifications may have a material adverse effect on the Group’s

business, financial condition, results of operations and prospects.

– 46 –

The Group’s business is dependent on the proper functioning of its information technology

systems.

The success of the Group’s operations is highly dependent on the ability of its information technology

systems to accurately process a large number of transactions and information in a timely manner. The

proper functioning of the Group’s financial control, risk management, accounting, customer service

and other data processing systems is critical to its business and its ability to compete effectively. If

the Group’s systems cannot cope with increased demand or otherwise fail to perform, the Group could

experience unanticipated business disruptions, slower response times and limitation on its ability to

monitor and manage data and risk exposure, control financial and operation conditions, and keep

accurate records. These consequences could result in operating outages, poor operating performance,

financial losses and potential intervention by regulatory authorities.

Although the Group has established its own internal back-up systems to carry on principal functions

in the event of system failures, there can be no assurance that its operations will not be materially

disrupted if any of the Group’s systems fail due to, among other things, fire, natural disasters, power

loss, software faults, computer virus attacks, conversion errors due to system upgrades, or security

breaches. The internal safety measures may not be effective in preventing any harm or damage

resulting from risks threatening the Group’s information technology systems. Any disruption to any

of the Group’s information technology systems could have a material adverse effect on its operations,

business and financial condition.

Although the Group’s systems had not experienced major system failures and delays in the past, there

can be no assurance that the Group’s systems would not experience future system failures and delays,

or the measures taken by the Group to reduce the risk of system disruptions are effective or adequate.

If internet traffic and communication volume increase unexpectedly or other unanticipated events

occur, the Group may need to expand and upgrade the Group’s technology, systems and network

infrastructure. There can be no assurance that the Group will be able to accurately project the rate,

timing or cost of any increases, or expand and upgrade the Group’s systems and infrastructure to

accommodate any increases in a timely manner.

The Group may not be able to detect and prevent fraud or other misconducts committed by its

officers, employees representatives, agents, customers or other third parties.

Following the 18th Chinese Communist Party Congress in 2012 and the wide-reaching anticorruption campaign in the PRC, the Central Leading Group for Inspection Work (the “Inspection

Leading Group”), a coordination body set up under the Central Committee of the Chinese

Communist Party for the purpose of managing party disciplinary inspections nationwide, has

dispatched inspection teams to provinces and central government organs such as ministries and

state-owned enterprises in the PRC to conduct inspection work on party disciplinary enforcement.

While the Guarantor is not aware of any inspections or actions against the Group or its officers or

employees by the Inspection Leading Group as at the date of this Offering Circular, there can be no

assurance that there will not be any such inspections or actions by the Inspection Leading Group or

other governmental authorities or that any such inspections or actions would not affect the Group as

a result.

– 47 –

In addition, the Group may be exposed to fraud or other misconducts committed by its former or

current officers, employees, representatives, agents, customers or other third parties that could

subject the Group to financial losses and sanctions imposed by governmental authorities, which in

turn affects its reputation. In particular, the Group’s operations are large in scale, which may render

fraudulent or accidental transactions difficult to detect.

These misconducts could include:

? hiding unauthorised or unsuccessful activities, resulting in unknown and unmanaged risks or

losses;

? intentionally concealing material facts, or failing to perform necessary due diligence procedures

designed to identify potential risks, which are material to the Group in deciding whether to make

investments or dispose of assets;

? improperly using or disclosing confidential information;

? recommending products, services or transactions that are not suitable for the Group’s customers;

? misappropriation of funds;

? conducting transactions that exceed authorised limits;

? engaging in misrepresentation or fraudulent, deceptive or otherwise improper activities when

marketing or selling products;

? engaging in unauthorised or excessive transactions to the detriment of the Group’s customers;

? making or accepting the bribery activities;

? conducting any inside dealing; or

? otherwise not complying with applicable laws or the Group’s internal policies and procedures.

In particular, the Group is required to comply with applicable anti-money laundering, anti-terrorism

laws and other regulations in the PRC and other relevant jurisdictions. The Group seeks to comply

fully with all applicable legislations in the PRC and other relevant jurisdictions such as the U.S.

Foreign Corrupt Practices Act, the UK Bribery Act and any applicable sanctions.

The Group’s internal control procedures are designed to monitor its operations and ensure overall

compliance. In particular, the Group has adopted policies and procedures aimed at detecting and

preventing the use of its business platforms to facilitate money laundering activities and terrorist acts.

However, such internal control procedures may be unable to identify all incidents of non-compliance

or suspicious transactions in a timely manner if at all.

– 48 –

In addition, fraud or other misconducts by employees (such as unauthorised business transactions and

breaches of its internal policies and procedures) or third parties (such as breach of law) may be

difficult to detect and prevent and could subject the Group to financial loss, sanctions imposed by

governmental authorities and seriously harm its reputation. The Group’s risk management systems,

information technology systems and internal control procedures are designed to monitor its

operations and overall compliance. However, there can be no assurance that it will be able to identify

all non-compliance or suspicious transactions in a timely manner or at all. Furthermore, it is not

always possible to detect and prevent fraud or other misconducts and the precautions undertaken by

the Group to prevent and detect such activities may not be effective. Hence, it is possible that fraud

or other misconducts may have previously occurred but was undetected, or that fraud or other

misconducts may occur in the future. If such fraud or any other misconduct does occur, it may cause

negative publicity as a result and the relevant government agencies may freeze its assets or impose

fines or other penalties on the Group. Any of these may materially and adversely affect the Group’s

reputation, business, financial condition and results of operations.

The Group is subject to additional operating costs.

The Group may incur other operational costs upon a lessee’s default or where the terms of the lease

require the Group to pay a portion of additional operating costs. Such costs, which can be substantial,

include:

(a) the costs of casualty, liability or war risk insurance and the liability costs or losses when

insurance coverage has not been or cannot be obtained as required or is insufficient in amount

or scope;

(b) the costs of licensing, exporting or importing an aircraft, costs of storing and operating an

aircraft, airport taxes, custom duties, air navigation charges, landing fees and similar

governmental or quasi-governmental impositions; and

(c) penalties and costs associated with the failure of lessees to keep the aircraft registered under all

appropriate local requirements or obtain required governmental licences, consents and

approvals.

The failure to pay some of these costs can result in liens on the aircraft or a loss of insurance. Any

of these events could result in the grounding of the aircraft and prevent the sale or other use of the

aircraft until the problem is resolved. This could adversely affect the Group’s business, financial

condition and results of operations.

The Group is exposed to interest rate risk.

Interest rate fluctuations may influence the Group’s financial performance. Any changes in the

prevailing interest rates may impact the Group’s borrowing costs as a portion of the Group’s

borrowings bear floating interest rates. The Group may be susceptible to interest rate volatility if it

is unable to match its floating rate liabilities with floating rate payments or secure appropriate hedges

for the same.

While the Group’s exposure to interest rate volatility may be hedged through the use of interest rate

swaps and interest caps, the magnitude of the final exposure depends on the effectiveness of the

hedge. There can be no assurance that fluctuations in interest rates will not have an adverse effect on

the Group’s earnings or cash flows. If any of the various instruments and strategies which the Group

uses to hedge its exposure to interest rate risk are or become ineffective, the Group may incur

significant losses, which could have a material adverse effect on the Group’s financial position and

results of operations.

– 49 –

The Group may be subject to legal, litigation and regulatory proceedings.

The Group may be involved, from time to time, in legal proceedings arising in the ordinary course

of its operations. Please see “Description of the Group – Legal and Regulatory Proceedings” for

further information. Litigation arising from any failure, injury or damage from the Group’s operations

may result in the relevant member of the Group being named as defendant in lawsuits asserting large

claims against such member of the Group or subject such member of the Group to significant

regulatory penalties. These risks often may be difficult to assess or quantify and their existence and

magnitude often remain unknown for a substantial period of time. Actions brought against the Group

may result in settlements, injunctions, fines, penalties or other sanctions adverse to the Group’s

reputation, financial condition and results of operations. Even if the Group is successful in defending

against these actions, the costs associated with the Group’s defence may be significant. When the

market experiences a downturn, the number of legal claims and amount of damages sought in

litigations and regulatory proceedings may increase. A significant judgment, arbitration award or

regulatory action against the Group, or a disruption in the Group’s business arising from adverse

adjudications in proceedings against the Group’s director(s), senior management or key employees,

would materially and adversely affect the Group’s liquidity, business, financial condition, reputation,

results of operations and prospects.

The Group’s operations may be adversely affected by operational risks, which may cause the

Group to incur uninsured losses.

The Group faces various operational risks in connection with its business, including but not limited

to:

? interruptions caused by operational errors, electricity outages, raw material shortages, the

failure of equipment and other operational risks;

? operating limitations imposed by environmental or other regulatory requirements;

? work-related personal injuries;

? on-site occupational accidents;

? economic loss due to product reclaim;

? credit risks relating to the performance of customers or other contractual third parties;

? disruption in the global capital markets and the economy in general;

? loss on investments;

? environmental or industrial accidents; and

? catastrophic events such as fires, earthquakes, explosions, floods or other natural disasters.

– 50 –

These operational risks may be beyond the control of the Group and could cause significant business

interruptions, property damages, personal injuries and property or environmental damage. The

occurrence of any of these events, and the consequences resulting from them, may not be covered

adequately, or at all, by the Group’s insurance policies. In addition, certain types of risks are not

insured in the PRC because they are either uninsurable or not economically insurable, such as risks

from wars, acts of terrorism or acts of God, business interruption, property risks and third party

(public) liability. To the extent that the Group suffers loss or damage that is not covered by insurance

or that exceeds the limit of its insurance coverage, its business, financial condition, results of

operations, prospects and cash flow may be materially and adversely affected.

The Group may not be able to adequately protect its intellectual property, which could

adversely affect its business operations.

The Group relies on a combination of patents, copyrights, trademarks and contractual rights to protect

its intellectual property. There can be no assurance that any protective measures adopted by the Group

will be sufficient to prevent any misappropriation of the Group’s intellectual property. The legal

regime governing intellectual property in the PRC is still evolving and the level of protection

afforded in respect of intellectual property rights in the PRC differs from those in other jurisdictions.

In the event that the measures taken by the Group and the protection afforded by law do not

adequately safeguard the Group’s proprietary technology or property, the Group could suffer

significant losses due to the sales of competing products or services that appoints the Group’s

intellectual property which in turn could adversely affect its business, financial condition and results

of operations.

There might be claims asserted against the Group.

Although under some of its leases the Group does not control the operation of its leased assets such

as aircraft, vessels, urban infrastructure equipment and other equipment, its ownership of the assets

could give rise, in some jurisdictions, to strict liability for losses resulting from their operation.

Lessees of the Group are normally required under the leases to indemnify the Group for, and insure

against, amongst others, liabilities arising out of the use and operation of the assets, including

third-party claims for death or injury to persons and damage to property for which the Group may be

deemed liable. The lessees are also typically required to maintain public liability, property damage

and all risks and war risks insurance on the leased assets at agreed upon levels.

There can be no assurance that the lessee’s insurance, and any contingent insurance undertaken by

the Group, will be adequate or sufficient to cover all types of claims that may be asserted against the

Group. Any insurance coverage shortfall or default by lessees to fulfil their indemnification or

insurance obligations, as well as the lack of available insurance, could reduce the proceeds upon an

event of loss and could subject the Group to uninsured liabilities, any of which could have an adverse

impact on the Group’s financial performance and its ability to meet its financial obligations.

– 51 –

Failure to obtain, renew, or retain licences, permits or approvals or failure to comply with

applicable laws and regulations may affect the Group’s ability to conduct its business.

The Group is subject to rules and regulations and is required to hold various licences, permits and

approvals issued by relevant authorities for the operation of its businesses. Any infringement of legal

or regulatory requirements, or any suspension or revocation of these licences, permits and approvals

may have a material adverse impact on the Group’s business and operations. In addition, the

regulatory and licensing requirements within the PRC financial leasing industry are constantly

evolving and the Group may be subject to more stringent regulatory requirements due to changes in

the political or economic policies in the PRC. There can be no assurance that the Group will be able

to satisfy such regulatory requirements or it will be able to retain, obtain or renew relevant licences,

permits or approvals in the future. Any failure to comply with the regulatory and legal requirements

may hinder the Group’s business operations and materially and adversely affect its results of

operations and financial condition.

Uncertainties and changes in the PRC’s legal framework for finance leasing and factoring businesses

could also materially and adversely affect the Group’s business. On 8 May 2018, the General Office

of MOFCOM issued the 2018 Notice, according to which the authority of rule-making on operation

and regulation of finance leasing companies, factoring companies and pawnshops shall be transferred

to CBIRC, which is a new department organ established on 21 March 2018 to combine and replace

the functions and authorities of the previous China Banking Regulatory Commission and China

Insurance Regulatory Commission. Detailed implementing measures of the 2018 Notice have not

been promulgated. In the event that other regulatory policies changes or stricter rules are promulgated

and implemented, the Group will be required to comply with further requirements and adjust its

business accordingly, and this may have a material adverse effect on the Group’s business, financial

condition and results of operations.

Changes in the organisational structure of the Group or the Guarantor’s shareholders may

affect the Group’s financial condition and results of operations.

The Group or the Guarantor’s shareholders may undergo certain organisational restructuring from

time to time which may affect whether certain subsidiaries of the Guarantor will be consolidated in

the Guarantor’s consolidated financial statements or, as the case may be, whether the Guarantor will

be consolidated in the consolidated financial statements of the Guarantor’s shareholders. In addition,

the Guarantor may issue shares to entities other than the existing shareholders which would in turn

dilute the existing shareholders’ shareholding in the Guarantor’s registered share capital. There can

also be no assurance that any such organisational restructuring or changes in the Guarantor’s

shareholding structure will not have a material adverse effect on the Group’s business, financial

condition, results of operations and prospects.

The Group relies on government support to a certain extent and a reduction or discontinuance

of government support could materially and adversely affect the financial condition and results

of operations of the Group.

Given the Guarantor’s exclusive position as the only aviation leasing company with state-owned

background, the Group has in the past received support (but not including credit support) from the

PRC government in the form of governmental subsidies and preferential tax treatment to support its

investment and operation of its businesses. For example, for the years ended 31 December 2019, 2020

and 2021, the Group received government grants of approximately RMB70.09 million, RMB22.85

million and RMB72.28 million, respectively.

– 52 –

There can be no assurance that the PRC government or the central SASAC will continue to provide

support to the Group or that the governmental subsidies, preferential tax treatment or other types of

government support will not be reduced, adjusted or terminated due to changes in government policy

or otherwise. If the favourable governmental subsidies, preferential tax treatment or other incentives

which are currently available to the Group are reduced or eliminated in the future, the viability of the

Group’s businesses may be affected and the financial condition and results of operations of the Group

will be materially and adversely affected.

RISKS RELATING TO CONDUCTING BUSINESS IN THE PRC

The Group’s business, financial condition, results of operations and prospects could be

adversely affected by slowdown in the PRC economy.

A substantial part of the Group’s revenue is derived from the PRC. The Group relies, to a significant

degree, on its domestic operations to achieve revenue growth. Domestic demand for leasing services

is materially affected by growth of private consumption and overall economic growth in the PRC.

Therefore, the performance of the PRC economy affects, to a significant degree, the Group’s

business, prospects, financial condition and results of operations.

In recent years, as a result of recurring liquidity tightening in the banking system, alternative lending

and borrowing outside of traditional banking practices, generally known as “shadow banking”, has

grown to become an integral and significant aspect of the PRC economy. Such alternative lending is

loosely regulated and has led to an increase in the PRC’s debt levels leading to concerns over rising

bad debts and financial problems. As some of the funds obtained from shadow banking are being used

for investments in speculative and risky products, should a widespread default on such investments

occur, this could harm the growth prospects of the PRC economy. There were reports of a number of

shadow banking defaults in the PRC resulting in increased scrutiny and oversight by regulators who

have proposed draft rules to control the industry. Even if the PRC government increases regulation

over such alternative lending and borrowing, there can be no assurance that such regulations will be

successful, or that they would not have an adverse impact on the overall loan markets and liquidity

in the PRC, which will materially and adversely impact the PRC economy. Although the PRC

government has taken several measures with the intention of increasing investor confidence in the

PRC economy, there can be no assurance that such measures will be effective. There can be no

assurance that the PRC government will not implement any reforms which may conflict with such

targeted growth. The Group’s business, financial conditions and results of operations could be

adversely affected by the PRC government’s inability to effect timely economic reforms.

The future performance of the PRC economy is also exposed to material changes in global economic

and political environments as well as the performance of certain major developed economies in the

world, such as the United States, the United Kingdom and the EU. Effective on 31 January 2020, the

United Kingdom has officially exited from the EU. There remains significant uncertainty as to its

impact on the economic conditions of other parts of the world, such as the PRC, including but not

limited to further decreases in global stock exchange indices, increased foreign exchange volatility

(in particular a further weakening of the pound sterling and euro against other leading currencies) and

a possible economic recession involving more countries and areas. Concerns over possible inflation

or deflation, uncertainty relating to currency exchange rates and interest rates, the availability and

cost of credit, volatility in commodity and oil prices, geopolitical issues, and unstable financial

markets and the global housing and mortgage markets, have contributed to increased market

volatility, weakened business and consumer confidence and diminished expectations for economic

growth around the world. The outlook for the global economy and financial markets remains

– 53 –

uncertain. From time to time, the PRC and other countries may adopt, adjust or withdraw their

macroeconomic measures, monetary policies and economic stimulus packages, which further

increases the difficulty in predicting the outlook for the global economy and financial markets.

Economic conditions in the PRC are sensitive to global economic conditions and it is impossible to

predict how the PRC economy will develop in the future and whether it might slow down due to the

global crisis or experience a financial crisis in a manner and scale similar to that in the United States

and the European countries between 2008 and 2011.

In addition, the PRC government continues to play a significant role in regulating the development

of industries in the PRC by imposing top-down policies. It also exercises significant control over

PRC economic growth through the allocation of resources, controlling the payment of foreign

currency denominated obligations, setting monetary policy and providing preferential treatment to

particular industries or companies. Furthermore, many of the economic reforms carried out by the

PRC government are unprecedented or experimental and are expected to be refined and improved

over time. This refining and adjustment process may not necessarily have positive effects on the

Group’s operations and business development. Other political, economic and social factors may also

lead to further adjustments of the reform measures. Other factors or events, such as the ongoing

COVID-19 pandemic, which has occurred in the PRC and other countries since late 2019, may also

have a significant adverse impact on the PRC’s political, economic and social conditions, which in

turn may materially and adversely affect the Group’s business, financial condition, results of

operations and prospects. There can be no assurance that future changes in the PRC’s political,

economic and social conditions, laws, regulations and policies will not have a material adverse effect

on the Group’s current or future business and financial condition.

Any slowdown in the PRC economy may increase the Group’s exposure to material losses from its

investments, decrease the opportunities for developing the Group’s businesses, create a credit

tightening environment, increase the Group’s financing costs, or reduce government subsidies to the

Group, any of which may result in a material adverse effect on the Group’s business, results of

operations and financial condition.

The future performance of the PRC economy is not only affected by the economic and monetary

policies of the PRC government, but has been, and will in the future continue to be, materially

affected by global or regional geopolitical, economic and market conditions, including factors such

as the liquidity of the global financial markets, the level and volatility of debt and equity prices,

interest rates, currency and commodities prices, investor sentiment, inflation and the availability and

cost of capital and credit. Please see “– Risks Relating to the Group – Disruptions or volatility in

global and domestic financial markets could adversely impact the industries and markets in which the

Group serves and operates.” for further information.

Turmoil in the financial markets could increase the Group’s cost of borrowing and impede

access to or increase the cost of financing the Group’s operations and investments.

The availability of credit to entities operating within emerging markets, including the Guarantor, is

significantly influenced by levels of investor confidence in such markets as a whole. Any factors that

may affect market confidence could affect the costs or availability of funding for entities within

emerging markets. Historically, challenging market conditions in emerging markets have resulted in

reduced liquidity, widening of credit spreads, lack of price transparency in credit markets, a reduction

in available financing and a tightening of credit terms. Significant fluctuations in the financial

markets in the PRC and globally may cause adverse effects on the Group’s business operations and

investments as a whole.

– 54 –

The PRC’s economic, political and social conditions, as well as government policies in the PRC,

could affect the Group’s businesses.

A substantial part of the Group’s businesses, assets and operations is located in the PRC. Accordingly,

the Group’s business prospects, financial condition and results of operations are, to a significant

degree, subject to the economic, political and legal developments in the PRC. The PRC economy

differs from the economies of developed countries in many respects, including, among other things,

level of government involvement, level of economic development, growth rate, foreign exchange

controls and resources allocation.

The PRC economy is in the process of transitioning from a centrally planned economy to a more

market-oriented economy. For more than four decades, the PRC government has implemented

economic reform measures to utilise market forces in the development of the PRC economy.

Economic reform measures, however, may be adjusted, modified or applied inconsistently from

industry to industry or across different regions of the country. As a result, the Group may not continue

to benefit from all, or any, of these measures in the future. In addition, the PRC government continues

to play a significant role in regulating industries and the economy through policy measures. The

Group cannot predict whether changes in PRC economic, political or social conditions and in PRC

laws, regulations and policies will adversely affect its business, financial condition or results of

operations.

In addition, many of the economic reforms carried out by the PRC government are unprecedented or

experimental and are expected to be refined and improved over time. Other political, economic and

social factors may also lead to further adjustments of the reform measures. This refining and

adjustment process may not necessarily have a positive effect on the Group’s operations and business

development.

The Group’s business, financial condition and results of operations may be adversely affected by:

? changes in PRC political, economic and social conditions;

? changes in policies of the PRC government, including changes in policies in relation to the

Group’s business segments;

? changes in laws and regulations or the interpretation of laws and regulations;

? measures that may be introduced to control inflation or deflation;

? changes in the rate or method of taxation;

? the imposition of additional restrictions on currency conversion and remittances abroad; and

? a reduction in tariff protection and other import restrictions.

If the PRC’s economic growth slows down or if the PRC economy experiences a recession, the

Group’s business, results of operations and financial condition could be materially and adversely

affected.

– 55 –

Uncertainty with respect to the PRC legal system could affect the Group.

As a substantial part of the Group’s businesses is conducted, and a substantial part of the Group’s

assets is located, in the PRC, the Group’s operations are governed principally by, and subject to, PRC

laws and regulations. The PRC legal system is based on written statutes. Published court opinions are

limited. Prior court decisions may be cited for reference. Since 1979, PRC laws and regulations

dealing with economic matters such as the issuance and trade of securities, foreign investment,

corporate organisation and governance, commerce, taxation, foreign exchange and trade, with a view

to developing a comprehensive system of commercial law, have significantly enhanced the

protections afforded to market participants in the PRC. However, the PRC has not developed a fully

integrated legal system and recently enacted laws and regulations may not sufficiently cover all

aspects of economic activities in the PRC. In particular, because these laws and regulations (including

the MOF Circular promulgated on 28 March 2018 and which took effect on the same day and the Joint

Circular promulgated on 11 May 2018 and which took effect on the same day) are relatively new, and

because of limited volume of published decisions, the interpretation and enforcement of these laws

and regulations involve uncertainties, as compared to other more developed jurisdictions. The PRC

legal system is also based, in part, on government policies and internal rules (some of which are not

published on a timely basis or at all) that may have a retroactive effect. As a result, in certain cases,

the Group may not be aware of the Group’s violation of these policies and rules until sometime after

the violation. In addition, any litigation in the PRC may be protracted and result in substantial costs,

diversion of the Group’s resources and management’s attention and it may be difficult to obtain a

swift and equitable enforcement of laws in the PRC, or the enforcement of judgments by a court of

another jurisdiction. Such uncertainty may impede the Group’s ability to enforce contracts that the

Group has entered into with its investors, creditors, customers, suppliers and business partners. The

Group cannot predict the effect of future developments in the PRC legal system or the integration of

such developments under the legal systems of other jurisdictions, including the promulgation of new

laws, changes to existing laws or the interpretation or enforcement thereof, the pre-emption of local

regulations by national laws, or the overturn of local government’s decisions by itself, provincial or

national governments. Such uncertainty in interpretation, implementation and enforcement may limit

legal protections available to or against the Group. In addition, any bankruptcy proceeding relating

to the Group would likely involve PRC bankruptcy laws. The procedural and substantive provisions

of PRC bankruptcy laws may differ from comparable provisions of the local insolvency laws of

jurisdictions with which the Instrumentholders are familiar. All of the above could have a material

adverse effect on the Group’s business, prospects, financial condition and results of operations.

Certain PRC regulations governing PRC companies are less developed than those applicable to

companies incorporated in more developed countries.

Most of the members of the Group are established in the PRC and are subject to PRC regulations

governing PRC companies. These regulations contain certain provisions that are required to be

included in the joint venture contracts, articles of association and all other major operational

agreements of these PRC companies and are intended to regulate the internal affairs of these

companies. These regulations in general, and the provisions for protection of shareholders’ rights and

access to information in particular, are less developed than those applicable to companies

incorporated in Hong Kong, the United States, the United Kingdom and other developed countries or

regions.

– 56 –

There may be difficulties in effecting service of legal process and enforcing judgments against

the Guarantor or its directors or members of the Guarantor’s senior management who reside

in the PRC in connection with judgments obtained in non-PRC courts.

The Guarantor is a company incorporated under the laws of the PRC, and a substantial part of the

Group’s businesses, assets and operations is located in the PRC. In addition, a majority of the

Guarantor’s directors, supervisors and executive officers reside in the PRC, and substantially all of

their assets may be located in the PRC. As a result, it may not be possible for investors to effect

service of process upon the Guarantor or its directors or members of its senior management inside

the PRC. The PRC has not entered into treaties or arrangements providing for the recognition of

judgment made by courts of most other jurisdictions. On 14 July 2006, Hong Kong and the PRC

entered into the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and

Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative

Region Pursuant to Choice of Court Agreements Between Parties Concerned (關於內地與香港特別行

政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排) (the “Choice of Court

Arrangement”), pursuant to which a party with a final court judgment rendered by a Hong Kong

court requiring payment of money in a civil and commercial case according to a “choice of court”

agreement in writing may apply for recognition and enforcement of the judgment in the PRC.

Similarly, a party with a final court judgment rendered by a PRC court requiring payment of money

in a civil and commercial case pursuant to a “choice of court” agreement in writing may apply for

recognition and enforcement of such judgment in Hong Kong. A “choice of court” agreement in

writing is defined as any agreement in writing entered into between parties after the effective date

of the Choice of Court Arrangement in which a Hong Kong court or a PRC court is expressly

designated as the court having sole jurisdiction for the dispute. Therefore, it is not possible to enforce

a judgment rendered by a Hong Kong court in the PRC if the parties in dispute do not enter into a

“choice of court” agreement in writing. As a result, it may be difficult or impossible for investors to

effect service of process against the Guarantor, the Group’s assets or the Guarantor’s directors or

members of its senior management in the PRC and/or to seek recognition and enforcement for foreign

judgments in the PRC. On 18 January 2019, Hong Kong and the PRC entered into the Arrangement

on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters between

the Courts of the Mainland and of the Hong Kong Special Administrative Region (關於內地與香港

特別行政區法院相互認可和執行民商事案件判決的安排) (the “2019 Arrangement”), which seeks to

establish a bilateral legal mechanism with greater clarity and certainty for recognition and

enforcement of judgments in a wider range of civil and commercial matters between the courts of

Hong Kong and the PRC. The 2019 Arrangement will be implemented by local legislation in Hong

Kong and will take effect after both Hong Kong and the PRC have completed the necessary

procedures to enable implementation and shall apply to judgments made by the courts of Hong Kong

and the PRC on or after the date of the commencement of the 2019 Arrangement. Upon

commencement of the 2019 Arrangement, the Choice of Court Arrangement shall be terminated,

except for “choice of court” agreements in writing made between parties before the commencement

of the 2019 Arrangement, in which case the Choice of Court Arrangement shall continue to apply.

However, the recognition and enforcement of judgments rendered by a Hong Kong court in the PRC

are subject to the provisions, limits, procedures and other terms and requirements of the 2019

Arrangement. There can be no assurance that investors can successfully effect service of process

against the Guarantor or the Guarantor’s directors or members of its senior management in the PRC

and/or to seek recognition and enforcement for judgments rendered by a Hong Kong court in the PRC.

– 57 –

Furthermore, the PRC does not have treaties or agreements providing for the reciprocal recognition

and enforcement of judgments awarded by courts of the United States, the United Kingdom, or most

other European countries or Japan. Hence, the recognition and enforcement in the PRC of judgment

of a court in any of these jurisdictions in relation to any matter not subject to a binding arbitration

provision may be difficult or even impossible.

Increases in the costs of labour may have an adverse impact on the Group’s results of

operations.

The PRC Labour Contract Law (中華人民共和國勞動合同法) became effective on 1 January 2008,

and it was amended on 28 December 2012, which has taken effect on 1 July 2013. The current PRC

Labour Contract Law has imposed greater liabilities on employers and significantly increased the cost

of an employer’s decision to reduce its workforce. Further it requires certain terminations to be based

upon seniority instead of merit. In the event that the Group decides to significantly change or

decrease the Group’s workforce within the PRC, the PRC Labour Contract Law could adversely affect

the Group’s financial condition and results of operations. In addition, the PRC government has

continued to introduce various new labour-related regulations after the promulgation of the PRC

Labour Contract Law. Among other things, the Paid Annual Leave Provisions (職工帶薪年休假條例),

which became effective on 1 January 2008, stipulated that employees who have served more than one

year with an employer are entitled to a paid vacation from five to 15 days, depending on their length

of service. Subject to certain exceptions, employees who waive such vacation time at the request of

employers shall be compensated at three times their normal salaries for each waived vacation day.

Under the National Tourism and Leisure Outline 2013-2020 (國民旅遊休閒綱要2013-2020), which

became effective on 2 February 2013, regulations on paid annual leave of employees shall have been

implemented on a general basis by 2020.

On 28 October 2010, the Standing Committee of the National People’s Congress promulgated the

PRC Social Insurance Law (中華人民共和國社會保險法) which has taken effect on 1 July 2011, and

it was amended on 29 December 2018, which has taken effect on the same day. According to the PRC

Social Insurance Law, employees will participate in pension insurance, work-related injury insurance,

medical insurance, unemployment insurance and maternity insurance and the employers must,

together with their employees or separately, pay for the social insurance premiums for such

employees.

To further strengthen the protection on labour remuneration, rest and vacations, social insurance and

other basic rights and interests of labourers, the Opinion of the Central Committee of the Communist

Party of China and the State Council on Building Harmonious Labour Relationships (中共中央、國

務院關於構建和諧勞動關係的意見) was issued on 21 March 2015, which acts as a guideline on PRC

labour legislation.

As a result of the implementation of these and any future rules and regulations designed to enhance

the standard for labour protection, the Group’s labour costs may continue to increase. If the costs of

labour increase significantly, and the Group cannot offset such increase by reducing other costs or

cannot pass on such increase to for example, the buyers or tenants of its commercial properties in the

PRC, its business, the Group’s results of operations and financial position may be materially and

adversely affected.

– 58 –

In addition, a labour shortage or increase in costs of raw materials and other components required for

the Group’s business operation may cause similar adverse effects, particularly if the Group is unable

to identify and employ other appropriate means to reduce the costs. In such circumstances, the profit

margin may decrease and the financial results may be adversely affected. Inflation in the PRC has

also increased in recent years. Inflation in the PRC increases the costs of labour and the costs of raw

materials the Group must purchase for production. Rising labour costs may increase the Group’s

operating costs and partially erode the cost advantage of the Group’s PRC-based operations and

therefore materially and adversely impact the Group’s profitability.

The payment of dividends by the Guarantor’s operating subsidiaries in the PRC is subject to

restrictions under PRC law.

Part of the Group’s businesses are operated by the Guarantor’s operating subsidiaries in the PRC.

PRC laws require that dividends be paid only out of net profit, calculated according to the PRC

accounting principles, which differ from generally accepted accounting principles in other

jurisdictions. In addition, PRC law requires enterprises set aside part of their net profit as statutory

reserves before distributing the net profit for the current financial year. These statutory reserves are

not available for distribution as cash dividends. Since the availability of funds to fund the Guarantor’s

operations and to service its indebtedness depends upon dividends received from these subsidiaries

to a certain extent, any legal restrictions on the availability and usage of dividend payments from the

Guarantor’s subsidiaries may impact the Guarantor’s ability to fund its operations and to service its

indebtedness.

The Group is subject to restrictions on the remittance of Renminbi into and out of the PRC and

governmental controls on currency conversion, and may be affected by the risks relating to

fluctuations in exchange rates in the future.

The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and

the remittance of currency out of PRC. A portion of the Group’s operating revenue is denominated

in Renminbi, which may need to be converted into other currencies in order to meet the Group’s

foreign currency obligations, such as payments of principal and interests or Distribution under the

Instruments or other foreign currency denominated debt, if any.

Under the existing PRC laws and regulations on foreign exchange, payments of current account

items, including profit distributions, interest payments and trade and service related foreign exchange

transactions, can be made in foreign currencies without prior approval from SAFE provided that

certain procedural requirements are complied with. Approval from or registration with competent

government authorities is required where Renminbi is to be converted into foreign currency and

remitted out of the PRC to pay capital expenses such as the repayment of loans denominated in

foreign currencies. The PRC government may, at its discretion, take measures to restrict access to

foreign currencies for current account and capital account transactions under certain circumstances.

If the foreign exchange control system prevents the Group from obtaining sufficient foreign

currencies to satisfy the Group’s foreign currency demands, the Group may not be able to pay

interests and/or principal to holders of the Instruments or other foreign currency denominated debt,

if any. In addition, there can be no assurance that new laws or regulations will not be promulgated

in the future that would have the effect of further restricting the remittance of Renminbi into or out

of the PRC.

– 59 –

The value of Renminbi against U.S. dollar and other foreign currencies is subject to changes in the

PRC’s policies, as well as international economic and political developments. On 21 July 2005, the

PRC government adopted a more flexible managed floating exchange rate system to allow the value

of Renminbi to fluctuate within a regulated band that is based on market supply and demand with

reference to a basket of currencies. From 21 July 2005 to 17 March 2014, the floating band of

interbank spot foreign exchange market trading price of Renminbi against U.S. dollar was gradually

widened from 0.3 per cent. to 2 per cent. On 11 August 2015, PBOC adjusted the mechanism for

market makers to form the central parity rate by requiring them to consider the closing exchange rate

of the last trading date, the supply and demand of foreign exchange and the rate change at primary

international currencies. On 11 December 2015, the China Foreign Exchange Trade System, a

sub-institutional organisation of PBOC, published the China Foreign Exchange Trade System

(CFETS) Renminbi exchange rate index for the first time which weighs Renminbi based on 13

currencies, to guide the market in order to measure the Renminbi exchange rate from a new

perspective. Starting from 1 October 2016, Renminbi has been added to the Special Drawing Rights

basket created by the International Monetary Fund. There can be no assurance that the PRC

government will continue to gradually liberalise the control over cross-border Renminbi remittances

in the future, that any pilot schemes for Renminbi cross-border utilisation will not be discontinued

or that new PRC regulations will not be promulgated in the future which have the effect of restricting

the remittance of Renminbi into or outside the PRC.

In addition, the value of Renminbi has depreciated significantly against U.S. dollar since the end of

2015 and there can be no assurance that Renminbi will not experience significant depreciation or

appreciation against U.S. dollar or against any other currency in the future. The exchange rate

between Renminbi and U.S. dollar experienced further fluctuation between 1 January 2016 and the

date of this Offering Circular. On 5 August 2019, PBOC set the Renminbi’s daily reference rate above

7 per U.S. dollar for the first time in over a decade amidst an uncertain trade and global economic

climate. There remains significant international pressure on the PRC government to adopt an even

more flexible currency policy, which could result in further and more significant appreciation of

Renminbi against U.S. dollar. If further reforms are implemented and result in devaluation of

Renminbi against U.S. dollar, the Group’s business, financial condition, results of operations and

prospects could be adversely affected because of the Group’s U.S. dollar denominated indebtedness

and other obligations. Such devaluation could also adversely affect the value, translated or converted

into U.S. dollars or otherwise, of the Group’s earnings and ability to satisfy its obligations under the

Instruments.

Furthermore, members of the Group may be required to obtain SAFE’s approval before converting

significant amounts of Renminbi into or out of foreign currencies. In the future, it is possible that the

PRC government could adopt a more flexible currency policy, which could result in further and more

significant revaluations of Renminbi against any foreign currency. Any future exchange rate volatility

relating to Renminbi or any significant revaluation of Renminbi may materially and adversely affect

earnings and financial position of the Group.

– 60 –

There is foreign exchange control in the PRC.

The Group’s PRC subsidiaries are subject to PRC laws and regulations on currency conversion. In the

PRC, SAFE regulates the conversion of Renminbi into foreign currencies. Currently, foreign-invested

enterprises (“FIEs”) are required to apply to local banks designated by SAFE for foreign exchange

registration after receiving their business licences. With such registration certifications, FIEs are

allowed to open foreign currency accounts including the “basic account” and “capital account”.

Currently, conversion within the scope of the “basic account” for current account type purposes such

as the remittance of foreign currencies for payment of dividends, can be effected without the approval

of SAFE. However, the conversion of currency in the “capital account,” for capital items such as

direct investments, loans and securities, still requires the approval of SAFE.

The Group has PRC subsidiaries that are FIEs and the ability of these subsidiaries to pay dividends

or make other distributions to the Group may be restricted by, among other things, the availability

of funds, and statutory and other legal restrictions including PRC foreign exchange control

restrictions. To the extent that the ability of the Group’s subsidiaries to distribute to the Group is

restricted, it may have an adverse effect on the Group’s cash flows.

The operations of the Group may be affected by inflation and deflation within the PRC.

Economic growth in the PRC had historically been accompanied by periods of high inflation.

Increasing inflation rates were due to many factors beyond the Group’s control, such as rising food

prices, rising production and labour costs, high lending levels, PRC and foreign government policies

and regulations as well as movements in exchange rates and interest rates. It is impossible to

accurately predict future inflationary trends. If inflation rates rise beyond the Group’s expectations,

the Group may be unable to increase the prices of its services and products in amounts that are

sufficient to cover its increasing operating costs. Further inflationary pressures within the PRC may

have a material adverse effect on the Group’s business, financial condition or results of operations.

Recently, concerns have arisen over deflationary pressures in the PRC as a result of weak domestic

demand and slow economy. A prolonged period of deflation may result in falling profits, closure of

plants and shrinking employment and incomes by companies and individuals, any of which could

adversely affect the Group’s business, financial condition or results of operations.

RISKS RELATING TO FINANCIAL AND OTHER INFORMATION

The Guarantor’s independent auditors, ZSZH, may be involved in investigations initiated by

relevant PRC authorities from time to time.

ZSZH, the Guarantor’s independent auditors, is a registered accounting firm in the PRC supervised

by the PRC courts and other relevant PRC regulatory agencies, including China Securities Regulatory

Commission (“CSRC”).

In recent years, ZSZH was involved in investigations initiated by relevant PRC authorities and

received administrative and rectification orders and warnings from CSRC or its local branches. In

particular, ZSZH was issued warning letters and administrative and rectification orders by CSRC in

recent years for, among other things, its defects in audit and verification procedures and failure to

identify internal control defects relating to the preparation of the audit reports of a number of

companies listed on the stock exchanges in the PRC.

– 61 –

As confirmed by ZSZH, the companies involved in the administrative and regulatory actions

mentioned above are unrelated to the Group and the audit work performed by ZSZH for the Group

is not affected by the above incidents. ZSZH also confirmed that the auditor’s reports for the Audited

Consolidated Financial Statements included elsewhere in this Offering Circular remain valid and

effective. ZSZH also confirmed that its ability to provide comfort letters in respect of the offering of

the Instruments and the qualification of the auditors and independent accountants involved in the

offering of the Instruments are not affected by such administrative and regulatory actions. However,

there can be no assurance that the relevant PRC regulatory agencies would not carry out any review

of ZSZH’s audit and/or other assurance work conducted in relation to other companies. There can also

be no assurance that ZSZH’s involvement in such administrative and regulatory actions or any

negative publicities about ZSZH would not affect investors’ confidence in companies and financial

statements audited or reviewed by it or have a material adverse effect on the Group. Prospective

investors should consider these factors prior to making any investment decision.

The Audited Consolidated Financial Statements have been prepared and presented in

accordance with PRC GAAP, which is different from IFRS.

The Audited Consolidated Financial Statements included elsewhere in this Offering Circular have

been prepared and presented in accordance with PRC GAAP. PRC GAAP is substantially in line with

IFRS, except for certain modifications which reflect the PRC’s unique circumstances and

environment. Please see “Description of Certain Differences between PRC GAAP and IFRS” for

details. Each investor should consult its own professional advisers for an understanding of the

differences between PRC GAAP and IFRS and/or between PRC GAAP and other generally accepted

accounting principles, and how those differences might affect the financial information contained

herein.

Historical consolidated financial information of the Group may not be indicative of its current

or future results of operations.

The historical financial information of the Group included in this Offering Circular is not indicative

of its future financial results. Such financial information is not intended to represent or predict the

Group’s results of operations of any future periods. The Group’s future results of operations may

change materially if its future growth deviates from the historical trends for various reasons,

including factors beyond its control, such as changes in economic environment, PRC environmental

rules and regulations and the competitive landscape of the industries in which the Group operates its

businesses. The Group may also acquire businesses or companies or dispose of its subsidiaries or

assets from time to time in accordance with the Group’s business objectives. Period-to-period

comparisons of the Group’s historical operating results must be evaluated in light of the impact of

any such transactions.

Certain accounting items in the Audited Consolidated Financial Statements may not be

comparable to the financial information in the Guarantor’s consolidated financial statements

for the previous periods.

The scope of consolidation of the Audited Consolidated Financial Statements changes from time to

time. See “Notes to the Financial Statements – VII. Business Combination and Financial Statement

Consolidation” of the Guarantor’s audited consolidated financial statements as at and for the year

ended 31 December 2020 and “Notes to the Financial Statements – VII. Business Combination and

Financial Statement Consolidation” of the Guarantor’s audited consolidated financial statements as

at and for the year ended 31 December 2021. In addition, in 2017 and 2018, the Ministry of Finance

of the PRC promulgated the New Accounting Standards and Requirements. The Audited Consolidated

Financial Statements were prepared and presented in accordance with the relevant applicable New

– 62 –

Accounting Standards and Requirements. As a result, the presentation of certain accounting items in

the Audited Consolidated Financial Statements may not be comparable to the financial figures in the

Guarantor’s financial statements for the previous periods. For details of the New Accounting

Standards and Requirements and its impact on the Audited Consolidated Financial Statements, please

see “Notes to the Financial Statements – V Significant changes in accounting policies, accounting

estimates and correction of errors in prior periods – 1. Changes in accounting policies” of the

Guarantor’s audited consolidated financial statements as at and for the year ended 31 December 2020

and “Notes to the Financial Statements – V Significant changes in accounting policies, accounting

estimates and correction of errors in prior periods” of the Guarantor’s audited consolidated financial

statements as at and for the year ended 31 December 2021.

There can be no assurance that the Ministry of Finance of the PRC will not promulgate other new

accounting standards or requirements in relation to financial statements which may affect the

Guarantor’s accounting policies or the presentation of the Guarantor’s financial statements.

Accordingly, potential investors must exercise caution and consult its financial advisors if necessary

when using the consolidated financial information of the Group to evaluate its financial performance.

The Guarantor published and may continue to publish periodical financial information in the

PRC pursuant to applicable PRC regulatory rules. Investors should be cautious and not place

any reliance on the financial information other than that disclosed in this Offering Circular.

The Guarantor from time to time issues mid-term or short-term bonds and commercial papers in the

domestic capital markets in the PRC. For so long as any Instruments remains outstanding, the

Guarantor is obligated by the terms of the Instruments, among others, to provide holders of the

Instruments with its audited financial statements and certain unaudited periodical financial

statements. The periodical financial information published by the Group in the PRC may not be

audited or reviewed by independent auditors. As such, such financial information published in the

PRC does not form part of this Offering Circular and should not be referred to or relied upon by

potential investors to provide the same quality of information associated with any audited or reviewed

financial information. The published financial information in the PRC may be adjusted or restated to

address subsequent changes in accordance with the accounting standards, the Guarantor’s accounting

policies and/or applicable laws and regulations affecting the Guarantor’s financial reporting or to

reflect the subsequent comments given by the independent auditors during the course of such

auditors’ audit or review. Such adjustment or restatement may cause discrepancies between the

financial information with respect to a particular period or date contained in the Guarantor’s

management accounts published in the PRC and the Audited Consolidated Financial Statements. The

Guarantor is not responsible to holders of the Instruments for the unaudited and unreviewed financial

information from time to time published in the PRC and therefore investors should not place any

reliance on any such financial information.

Certain facts and statistics in this Offering Circular are derived from publications not

independently verified by the Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee, the

Agents or their respective advisers.

This Offering Circular contains facts and statistics relating to the economy of the PRC and the

industries in which the Group operates. While each of the Issuer and the Guarantor has taken

reasonable care to select reliable information sources and ensure that the facts and statistics relating

to the PRC’s economy and the industries in which the Group operates presented are accurately

extracted from such sources, such facts and statistics have not been independently verified by the

Issuer, the Guarantor, the Arrangers, the Dealers, the Trustee or the Agents or any of their respective

affiliates, directors, officers, employees, representatives, advisers or agents or any person who

controls any of them and, therefore, none of them makes any representation as to the accuracy of such

– 63 –

facts and statistics, which may not be consistent with other information compiled within or outside

the PRC. Due to ineffective calculation and collection methods and other problems, the facts and

statistics herein may be inaccurate or may not be comparable to facts and statistics produced for other

economies and should not be unduly relied upon.

The Issuer has little or no business activities of its own and will be dependent on funds from its

affiliates to make payments under the Instruments.

The Issuer has little or no business activities of its own and its ability to make payments under the

Instruments depends on funds from its affiliates. In the event that the Issuer does not obtain sufficient

funds from the Guarantor and/or other members of the Group, its ability to make payments under the

Instruments could be adversely affected.

RISKS RELATING TO THE INSTRUMENTS UNDER THE PROGRAMME AND THE

GUARANTEE

There is uncertainty relating to the enforceability of the Guarantee. If the Guarantor fails to

complete the SAFE registration in connection with the Guarantee within the time period

prescribed by SAFE, there may be logistical hurdles for cross-border payment under the

Guarantee.

On 12 May 2014, SAFE promulgated the Notice concerning the Foreign Exchange Administration

Rules on Cross-border Security and the relating implementation guidelines (collectively the “SAFE

Regulations”) which stipulate that any guarantee provided by PRC-incorporated entities in favour of

offshore creditors in connection with debt financing granted to offshore debtors is required to be

registered with SAFE. Under the SAFE Regulations, the Guarantor is required to register the

Guarantee with SAFE as a procedural matter within 15 business days after the date of execution of

the Deed(s) of Guarantee. In the event that the Guarantor is required to perform its payment

obligations under the Guarantee, the Guarantor must submit the registration documents issued by

SAFE to its local SAFE branch within the prescribed timeframe.

Pursuant to the SAFE Regulations, the registration or record-filing of a cross-border guarantee

contract by SAFE, and other administrative matters and requirements specified therein, will not

constitute prerequisites for the cross-border guarantee contract to come into effect. However, failure

to complete the registration as required may result in a fine up to RMB300,000 under the Notice of

the State Administration of Foreign Exchange on Issuing the Measures on the Foreign Exchange

Administration of Cross-border Guarantees. In addition, where the Guarantor fails to complete the

registration with SAFE, the Guarantor must, before performing the obligations under the Guarantee,

complete a remedial registration. Only by submitting the registration documents or remedial

registration documents will the Guarantor be able to remit funds outside PRC in order to perform its

payment obligations under the Guarantee. In addition, if the guarantee liability is a repayment

obligation for an issuer under the offshore bond issuance, the equity interests of such issuer must be

directly or indirectly held by an onshore entity and the proceeds of the bond issuance must be used

for an offshore project in which the onshore entity has an equity interest and the issuer and such

offshore project must have been duly approved by, registered and filed with the relevant authorities

in charge of outbound investment.

– 64 –

There can be no assurance that the Guarantor will be able to complete the registration of the

Guarantee with SAFE within the prescribed timeframe or at all. Under the Terms and Conditions of

the Notes and the Terms and Conditions of the Perpetual Capital Securities, Instrumentholders may

require the Issuer to redeem their Instruments in the event that the Guarantee is not registered within

a specified timeframe. Instrumentholders who do not exercise such redemption option should note

that before requisite registrations and/or approvals of the Guarantee given by the Guarantor are

completed, it is uncertain whether the Guarantee given by the Guarantor can be enforced in practice.

There may be hurdles at the time of remittance of funds (if any cross-border payment is to be made

by the Guarantor under the Guarantee) as domestic banks may require evidence of SAFE registration

in connection with the Guarantee in order to effect such remittance.

The SAFE Regulations are recent regulations and may be subject to a degree of executive and policy

discretion and interpretation by SAFE.

The Instruments and the Guarantee are unsecured obligations.

The Instruments are unsecured obligations of the Issuer and the Guarantor, respectively. The

repayment of the Instruments and payment under the Guarantee may be adversely affected if:

? the Issuer or the Guarantor enters into bankruptcy, liquidation, reorganisation or other

winding-up proceedings;

? there is a default in payment under the Issuer’s or the Guarantor’s future secured indebtedness

or other unsecured indebtedness; or

? there is an acceleration of any of the Issuer’s or the Guarantor’s indebtedness.

If any of these events were to occur, the Issuer’s or the Guarantor’s assets may not be sufficient to

pay amounts due on the Instruments.

The ratings of the Instruments may be downgraded or withdrawn.

Each Tranche of Instruments may be rated or unrated, as specified in the relevant Pricing Supplement.

The rating represents the opinion of the relevant rating agency and its assessment of the ability of the

Issuer and the Guarantor to perform its obligations under the Instruments, and credit risks in

determining the likelihood that payments will be made when due under the Instruments and/or the

Guarantee. A rating is not a recommendation to buy, sell or hold securities. The rating can be lowered

or withdrawn at any time. None of the Issuer, the Guarantor, the Trustee or the Agents is obliged to

inform holders of the Instruments if a rating is lowered or withdrawn. A reduction or withdrawal of

a rating may adversely affect the market price of the Instruments.

Any downgrading of the Guarantor’s corporate ratings, or those of its subsidiaries, by any rating

agencies could adversely affect the Group’s business and the Group’s liquidity.

Any adverse revision to the Guarantor’s corporate ratings, or those of its subsidiaries, for domestic

and international debt by rating agencies such as Fitch, Moody’s Investors Service, Inc. (“Moody’s”)

and S&P Global Ratings (“S&P”) may adversely affect the Group’s business, its financial

performance and the trading price of the Instruments. Further, the Group’s ability to obtain financing

or to access to capital markets may also be limited, thereby lowering its liquidity.

– 65 –

The credit ratings assigned to the Instruments may not reflect all risks.

One or more independent credit rating agencies may assign credit ratings to an issue of the

Instruments. The ratings may not reflect the potential impact of all risks related to structure, market,

additional factors discussed above and other factors that may affect the value of the Instruments. A

credit rating is not a recommendation to buy, sell or hold securities and may be revised or withdrawn

by the rating agency at any time. There can be no assurance that the ratings assigned to any

Instruments will remain in effect for any given period or that the ratings will not be revised or

withdrawn by the rating agencies in the future if, in their judgment, the circumstances so warrant.

None of the Issuer, the Guarantor, the Trustee or the Agents has any obligation to inform holders of

the Instruments of any such suspension, revision, downgrade or withdrawal. A suspension,

downgrade or withdrawal of the ratings of any Instruments at any time may adversely affect the

market price of the Instruments.

The Guarantor’s credit rating may decline.

There is a risk that the Guarantor’s credit rating may change as a result of changes in its operating

performance or capital structure, or for some other reason. No assurance can be given that a credit

rating will remain for any given period of time or that a credit rating will not be lowered or withdrawn

by the relevant rating agency if, in its judgment, circumstances in the future so warrant or if a

different methodology is applied to derive such credit ratings. Any lowering or withdrawal of the

Guarantor’s credit rating could, notwithstanding that it is not a rating of the Instruments, adversely

impact the market price and the liquidity of the Instruments.

The Instruments may not be a suitable investment for all investors.

Each potential investor in any Instruments must determine the suitability of that investment in light

of its own circumstances. In particular, each potential investor should:

? have sufficient knowledge and experience to make a meaningful evaluation of the relevant

Instruments, the merits and risks of investing in the relevant Instruments and the information

contained or incorporated by reference in this Offering Circular, any applicable supplement to

this Offering Circular or any Pricing Supplement;

? have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its

particular financial situation, an investment in the relevant Instruments and the impact such

investment will have on its overall investment portfolio;

? have sufficient financial resources and liquidity to bear all of the risks of an investment in the

relevant Instruments, including where principal or interest or Distribution is payable in one or

more currencies, or where the currency for principal or interest or Distribution payments is

different from the potential investor’s currency;

? understand thoroughly the terms of the relevant Instruments and be familiar with the behaviour

of any relevant indices and financial markets; and

? be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for

economic, interest rate and other factors that may affect its investment and its ability to bear the

applicable risks.

– 66 –

Some Instruments may be complex financial instruments and such instruments may be purchased as

a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to

the purchaser’s overall portfolios. A potential investor should not invest in Instruments which are

complex financial instruments unless it has the expertise (either alone or with the help of a financial

adviser) to evaluate how the Instruments will perform under changing conditions, the resulting effects

on the value of such Instruments and the impact this investment will have on the potential investor’s

overall investment portfolio.

Additionally, the investment activities of certain investors are subject to legal investment laws and

regulations, or review or regulation by certain authorities. Each potential investor should consult its

legal advisers to determine whether and to what extent (1) the Instruments are legal investments for

it, (2) the Instruments can be used as collateral for various types of borrowing, and (3) other

restrictions apply to its purchase of any Instrument. Financial institutions should consult their legal

advisers or the appropriate regulators to determine the appropriate treatment of the Instruments under

any applicable risk-based capital or similar rules.

The Instruments are redeemable in the event of certain withholding taxes being applicable.

There can be no assurance as to whether or not payments on the Instruments may be made without

withholding taxes or deductions applying from the date of issue of the first Tranche of Instruments

for or on account of any taxes, duties, assessments or governmental charges of whatever nature

imposed, levied, collected, withheld or assessed by or within the Cayman Islands or the PRC or, in

each case, any political subdivision or authority therein or thereof having power to tax. Although,

pursuant to the Terms and Conditions of the Notes and the Terms and Conditions of the Perpetual

Capital Securities, the Issuer is required to gross up payments on account of any such withholding

taxes or deductions, the Issuer also has the right to redeem the Instruments at any time subject to

certain specified exceptions in the event that it or the Guarantor has or will become obliged to pay

additional amounts on account of any existing or future withholding or deduction for any taxes,

duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld

or assessed by or within the Cayman Islands or the PRC or, in each case, any political subdivision

or authority therein or thereof having power to tax as a result of any change in, or amendment to, the

laws or regulations of the PRC or any political subdivision or any authority thereof or therein having

power to tax, or any change in the application or official interpretation of such laws or regulations,

which change or amendment becomes effective on or after the date on which agreement is reached

to issue the first Tranche of the Instruments.

The Instruments do not restrict the Group’s ability to incur additional debt or to take other

actions that could negatively impact holders of the Instruments.

Neither the Issuer nor the Guarantor is restricted under the Terms and Conditions of the Notes and

the Terms and Conditions of the Perpetual Capital Securities from incurring additional debt,

including secured debt, or from repurchasing the Instruments. In addition, the covenants applicable

to the Instruments do not require the Issuer or the Guarantor to achieve or maintain any minimum

financial results relating to the Issuer’s or the Guarantor’s financial position or results of operations.

The Group’s ability to recapitalise, incur additional debt and take other actions that are not limited

by the Terms and Conditions of the Notes and the Terms and Conditions of the Perpetual Capital

Securities could diminish the Group’s ability to make payments on the Instruments and amortising

bonds when due.

– 67 –

A change in English law which governs the Instruments may adversely affect

Instrumentholders.

The Terms and Conditions of the Notes and the Terms and Conditions of the Perpetual Capital

Securities are governed by English law in effect as at the date of issue of the relevant Instruments.

There can be no assurance as to the impact of any possible judicial decision or change to English law

or administrative practice after the date of issue of the relevant Instruments.

The Issuer may not be able to redeem the Instruments upon the due date for redemption thereof.

If specified in the relevant Pricing Supplement, the Issuer may, at its option or following the

occurrence of a Change of Control (as defined in “Terms and Conditions of the Notes”) or a Change

of Control Event (as defined in “Terms and Conditions of the Perpetual Capital Securities”), and at

maturity (in case of the Notes only) or at any time will, be required to redeem all of the Instruments.

If such an event were to occur, the Issuer may not have sufficient cash in hand and may not be able

to arrange financing to redeem the Instruments in time, or on acceptable terms, or at all. The ability

to redeem the Instruments in such event may also be limited by the terms of other debt instruments.

The Issuer’s failure to repay, repurchase or redeem tendered Instruments could constitute an event of

default under the Notes or a non-payment event under the Perpetual Capital Securities, which may

also constitute a default under the terms of the Issuer’s, the Guarantor’s or the Group’s other

indebtedness.

The Instruments may be represented by Global Instruments or Global Certificates and holders

of a beneficial interest in a Global Instrument or Global Certificate must rely on the procedures

of the relevant Clearing System(s).

Instruments issued under the Programme may be represented by one or more Global Instruments (in

the case of Bearer Instruments) or Global Certificates (in the case of Registered Instruments). Such

Global Instruments and Global Certificates will be deposited with a common depositary for Euroclear

and Clearstream or lodged with the CMU (each of Euroclear, Clearstream and the CMU, a “Clearing

System”). Except in the circumstances described in the relevant Global Instrument or Global

Certificate, investors will not be entitled to receive Definitive Instruments. The relevant Clearing

System(s) will maintain records of the beneficial interests in the Global Instruments or Global

Certificates. While the Instruments are represented by one or more Global Instruments or Global

Certificates, investors will be able to trade their beneficial interests only through the Clearing

Systems.

While the Instruments are represented by one or more Global Instruments or Global Certificates, the

Issuer will discharge its payment obligations under the Instruments by making payments to the

relevant Clearing System for distribution to their account holders or in the case of the CMU, to the

persons for whose account(s) interests in such Global Instruments or Global Certificate are credited

as being held in the CMU in accordance with the CMU Rules (as defined in the Trust Deed) as

notified by the CMU to the Issuer in a relevant CMU Issue Position Report (as defined by the CMU

Rules) or any other notification by the CMU.

A holder of a beneficial interest in a Global Instrument or Global Certificate must rely on the

procedures of the relevant Clearing System(s) to receive payments under the relevant Instruments.

None of the Issuer, the Trustee or the Agents has any responsibility or liability for the records relating

to, or payments made in respect of, beneficial interests in the Global Instruments or Global

Certificates.

– 68 –

Holders of beneficial interests in the Global Instruments or Global Certificates will not have a direct

right to vote in respect of the relevant Instruments. Instead, such holders will be permitted to act only

to the extent that they are enabled by the relevant Clearing System(s) to appoint appropriate proxies.

Similarly, holders of beneficial interests in the Global Instruments or Global Certificates will not

have a direct right under the respective Global Instruments or Global Certificates to take enforcement

action against the Issuer and/or the Guarantor in the event of a default or, as the case may be, a

non-payment by or a winding-up of the Issuer or the Guarantor under the relevant Instruments but

will have to rely upon their rights under the Trust Deed.

Instrumentholders should be aware that Definitive Instruments which have a denomination that

is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult

to trade.

In relation to any issue of Instruments which have a denomination consisting of a minimum Specified

Denomination (as defined in “Terms and Conditions of the Notes” and “Terms and Conditions of the

Perpetual Capital Securities”, as the case may be) plus a higher integral multiple of another smaller

amount, it is possible that the Instruments may be traded in amounts in excess of the minimum

Specified Denomination that are not integral multiples of such minimum Specified Denomination. In

such a case an Instrumentholder who, as a result of trading such amounts, holds a principal amount

of less than the minimum Specified Denomination will not receive a Definitive Instrument in respect

of such holding (should Definitive Instruments be printed) and would need to purchase a principal

amount of Instruments such that it holds an amount equal to one or more Specified Denominations.

If Definitive Instruments are issued, holders should be aware that Definitive Instruments which have

a denomination that is not an integral multiple of the minimum Specified Denomination may be

illiquid and difficult to trade.

Gains on the transfer of the Instruments and interest payable by the Issuer to overseas

Instrumentholders may be subject to income tax and value-added tax under PRC tax laws.

Under the Enterprise Income Tax Law of the PRC (the “EIT Law”) which took effect on 1 January

2008 and its implementation rules, any gains realised on the transfer of the Instruments by holders

who are deemed under the EIT Law as non-resident enterprises may be subject to PRC enterprise

income tax if such gains are regarded as income derived from sources within the PRC. Under the EIT

Law, a “non-resident enterprise” means an enterprise established under the laws of a jurisdiction

other than the PRC and whose actual administrative organisation is not in the PRC, which has

established offices or premises in the PRC, or which has not established any offices or premises in

the PRC but has obtained income derived from sources within the PRC. There remains uncertainty

as to whether the gains realised on the transfer of the Instruments by enterprise holders would be

treated as income derived from sources within the PRC and be subject to PRC enterprise income tax.

In addition, there is uncertainty as to whether gains realised on the transfer of the Instruments by

individual holders who are not PRC citizens or residents will be subject to PRC individual income

tax. If such gains are subject to PRC income tax, the 10 per cent. enterprise income tax rate and 20

per cent. individual income tax rate will apply respectively unless there is an applicable tax treaty or

arrangement that reduces or exempts such income tax. The taxable income will be the balance of the

total income obtained from the transfer of the Instruments minus all costs and expenses that are

permitted under PRC tax laws to be deducted from the income. According to the Arrangement

between the Mainland and the Hong Kong Special Administrative Region for the Avoidance of

Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the

– 69 –

Taxation Arrangement”) which was promulgated on 21 August 2006, Instrumentholders who are

Hong Kong residents, including both enterprise holders and individual holders, will be exempted

from PRC income tax on capital gains derived from a sale or exchange of the Instruments if such

capital gains are not connected with an office or establishment that the Instrumentholders have in the

PRC and all the other relevant conditions are satisfied.

Pursuant to the EIT Law, the PRC Individual Income Tax Law (the “IIT Law”) which took effect on

30 June 2011, and the implementation regulations in relation to both the EIT Law and the IIT Law,

PRC income tax at a rate of 10 per cent. or 20 per cent. is normally applicable to PRC-source income

derived by non-resident enterprises or individuals respectively, subject to adjustment by applicable

treaty. If the Issuer is deemed a PRC resident enterprise for tax purposes, interest or, as the case may

be, Distribution payments on the Instruments may be considered to be sourced within the PRC, and

therefore be subject to PRC income tax at a rate of 10 per cent. for non-resident enterprise

Instrumentholders and at a rate of 20 per cent. for non-resident individual Instrumentholders (or a

lower treaty rate, if any).

On 23 March 2016, the Ministry of Finance of the PRC and the State Administration of Taxation of

the PRC issued the Circular of Full Implementation of Replacing Business Tax with Value-Added Tax

Reform (Caishui [2016] No. 36) (“Circular 36”), which introduced a new value-added tax (“VAT”)

from 1 May 2016. VAT is applicable where entities or individuals provide services within the PRC.

If the Issuer is treated as PRC tax resident and if PRC tax authorities take the view that the

Instrumentholders are providing loans within the PRC, or if the Guarantor is treated as PRC tax

resident and in the event that the Guarantor is required to fulfil its obligations under the Guarantee

by making interest or, as the case may be, Distribution payments on behalf of the Issuer, the

Instrumentholders will be subject to VAT at the rate of six per cent. and certain surcharges when

receiving the interest or, as the case may be, Distribution payments under the Instruments. VAT is

unlikely to be applicable to any transfer of Instruments between entities or individuals located outside

of the PRC and therefore unlikely to be applicable to gains realised upon such transfers of

Instruments, but there is uncertainty as to the applicability of VAT if either the seller or buyer of

Instruments is located inside the PRC. Circular 36 together with other laws and regulations pertaining

to VAT are relatively new, the interpretation and enforcement of such laws and regulations involve

uncertainties. Pursuant to the Circular 36, the PRC Interim Regulations on Urban Maintenance and

Construction Tax (中華人民共和國城市維護建設稅暫行條例), the Interim Provisions on Imposition

of Education Surcharge (徵收教育費附加的暫行規定), the Notice on Unification of the Application

of Urban Maintenance and Construction Tax and Education Surcharge by Domestic and Foreign

Enterprises and Individuals (關於統一內外資企業和個人城市維護建設稅和教育費附加制度的通知),

the Notice on Relevant Issues of Imposition of Municipal Maintenance and Education Surcharge on

Foreign-invested Enterprises (關於對外資企業徵收城市維護建設稅和教育費附加有關問題的通知),

the municipal maintenance tax and education surcharge will be applicable when entities and

individuals are obliged to pay VAT (for an aggregate of maximum 12 per cent. on any VAT payable).

If an Instrumentholder, being a non-resident enterprise or non-resident individual, is required to pay

any PRC income tax on interest or gains on the transfer of the Instruments, the value of the relevant

Instrumentholder’s investment in the Instruments may be materially and adversely affected.

– 70 –

Foreign Account Tax Compliance withholding may apply to payments on Instruments.

Whilst the Instruments are in global form and held within Euroclear, Clearstream or the CMU, in all

but the most remote circumstances, it is not expected that Sections 1471 through 1474 of the U.S.

Internal Revenue Code (commonly referred to as “FATCA”) will affect the amount of any payment

received by Euroclear, Clearstream or the CMU. However, FATCA may affect payments made to

custodians or intermediaries in the subsequent payment chain leading to the ultimate investor if any

such custodian or intermediary generally is unable to receive payments free of FATCA withholding.

It also may affect payment to any ultimate investor that is a financial institution that is not entitled

to receive payments free of withholding under FATCA, or an ultimate investor that fails to provide

its broker (or other custodian or intermediary from which it receives payment) with any information,

forms, other documentation or consents that may be necessary for the payments to be made free of

FATCA withholding. Investors should choose the custodians or intermediaries with care (to ensure

each is compliant with FATCA or other laws or agreements related to FATCA), provide each

custodian or intermediary with any information, forms, other documentation or consents that may be

necessary for such custodian or intermediary to make a payment free of FATCA withholding.

Investors should consult their own tax adviser to obtain a more detailed explanation of FATCA and

how FATCA may affect them. The Issuer’s obligations under the Instruments are discharged once it

has made payment to, or to the order of, the common depositary for Euroclear and Clearstream or the

CMU and the Issuer has therefore no responsibility for any amount thereafter transmitted through

Euroclear, Clearstream or the CMU and custodians or intermediaries.

The insolvency laws of the Cayman Islands, the PRC and other local insolvency laws may differ

from those of another jurisdiction with which the holders of the Instruments are familiar.

As the Issuer and the Guarantor are incorporated under the laws of the Cayman Islands and the PRC,

respectively, any insolvency proceeding relating to the Issuer or the Guarantor would likely involve

insolvency laws of the Cayman Islands or, as the case may be, the PRC, the procedural and

substantive provisions of which may differ from comparable provisions of the local insolvency laws

of jurisdictions with which the holders of the Instruments are familiar.

The Trustee may request the Instrumentholders to provide an indemnity and/or security and/or

prefunding to its satisfaction.

In certain circumstances, including without limitation giving of notice to the Issuer and the Guarantor

pursuant to Condition 10 of the Terms and Conditions of the Notes or, as the case may be, Condition

10(c) of the Terms and Conditions of the Perpetual Capital Securities and taking enforcement steps

and/or actions and/or initiating proceedings pursuant to Condition 12 of the Terms and Conditions of

the Notes or, as the case may be, the Terms and Conditions of the Perpetual Capital Securities, the

Trustee may, at its sole discretion, request the Instrumentholders to provide an indemnity and/or

security and/or prefunding to its satisfaction before it takes steps and/or actions and/or initiates

proceedings on behalf of the Instrumentholders. The Trustee shall not be obliged to take any such

steps and/or actions and/or initiate such proceedings if not first indemnified and/or secured and/or

prefunded to its satisfaction. Negotiating and agreeing to an indemnity and/or security and/or

prefunding can be a lengthy process and may impact on when such steps and/or actions can be taken

and/or such proceedings can be initiated. The Trustee may not be able to take steps and/or actions

and/or to initiate proceedings, notwithstanding the provision of an indemnity or security or

prefunding to it, in breach of the terms of the Trust Deed or the Terms and Conditions of the Notes

or, as the case may be, the Terms and Conditions of the Perpetual Capital Securities and in such

circumstances, or where there is uncertainty or dispute as to the applicable laws or regulations, to the

extent permitted by the agreements and the applicable laws or regulations, it will be for the holders

of the Instruments to take such steps and/or actions and/or to initiate such proceedings directly.

– 71 –

Modifications and waivers may be made in respect of the Terms and Conditions of the Notes (in

relation to the Notes) or the Terms and Conditions of the Perpetual Capital Securities (in

relation to the Perpetual Capital Securities), the Agency Agreement, the Deed of Guarantee

and/or the Trust Deed by the Trustee or less than all of the holders of the Instruments, and

decisions may be made on behalf of all holders of the Instruments that may be adverse to the

interests of the individual holders of the Instruments.

The Terms and Conditions of the Notes and the Terms and Conditions of the Perpetual Capital

Securities contain provisions for calling meetings of the holders of the Instruments to consider

matters affecting their interests generally. These provisions permit defined majorities to bind all

Instrumentholders including those Instrumentholders who did not attend and vote at the relevant

meeting and those Instrumentholders who voted in a manner contrary to the majority. There is a risk

that the decision of the majority of holders of the Instruments may be adverse to the interests of

individual holders of the Instruments.

The Terms and Conditions of the Notes and the Terms and Conditions of the Perpetual Capital

Securities also provide that the Trustee may, without the consent of the holders of the Instruments,

agree (i) to any modification of the Deed of Guarantee, the Trust Deed, the Terms and Conditions of

the Notes, the Terms and Conditions of the Perpetual Capital Securities and/or the Agency Agreement

(as defined in “Terms and Conditions of the Notes” and “Terms and Conditions of the Perpetual

Capital Securities”, as the case may be) (other than in respect of a reserved matter) which in the

opinion of the Trustee will not be materially prejudicial to the interests of the holders of the

Instruments and (ii) to any modification of the Instruments, the Trust Deed, the Terms and Conditions

of the Notes, the Terms and Conditions of the Perpetual Capital Securities, the Deed of Guarantee or

the Agency Agreement which in the opinion of the Trustee is of a formal, minor or technical nature

or is to correct a manifest error or to comply with any mandatory provision of applicable law.

In addition, the Trustee may, without the consent of the holders of the Instruments, authorise or waive

any proposed breach or breach of the Instruments, the Deed of Guarantee, the Trust Deed or the

Agency Agreement (other than a proposed breach, or a breach relating to the subject of certain

reserved matters) if, in the opinion of the Trustee, the interests of the holders of the Instruments will

not be materially prejudiced thereby.

Substitutions may be made in respect of the Issuer and/or the Guarantor.

The Terms and Conditions of the Notes provide that the Trustee may but shall not be obliged to,

subject to such amendment of the Trust Deed, the Agency Agreement and/or the Deed of Guarantee

and such other conditions as may be set out in the Trust Deed or as the Trustee may require, but

without the consent of the Noteholders or the Couponholders, to the substitution of the Issuer’s

successor in business or any Subsidiary as defined in the Trust Deed of the Issuer or its successor in

business or of the Guarantor or its successor in business or any Subsidiary of the Guarantor or its

successor in business in place of the Issuer or the Guarantor, or of any previous substituted company,

as principal debtor or guarantor under the Trust Deed and the Notes. In the case of such a substitution

the Trustee may (but shall not be obliged to) agree, without the consent of the Noteholders or the

Couponholders, to a change of the law governing the Notes, the Receipts, the Coupons, the Talons

and/or the Trust Deed provided that such change would not in the opinion of the Trustee be materially

prejudicial to the interests of the Noteholders. Please see Condition 11(c) of the Terms and Conditions

of the Notes for further information.

– 72 –

RISKS RELATING TO THE STRUCTURE OF A PARTICULAR ISSUE OF INSTRUMENTS

UNDER THE PROGRAMME

A wide range of Instruments may be issued under the Programme. A number of these Instruments may

have features which contain particular risks for potential investors. Set out below is a description of

certain such features:

The market price of Instruments carrying optional redemption features may be more limited

than that of Instruments without these features.

Instruments issued under the Programme may sometimes have Issuer optional redemption features.

In a decreasing interest rate environment, the Issuer may exercise its right to redeem such Instruments

earlier than the final maturity date at the stated optional redemption price and an investor may face

reinvestment risk as well as see the market price of the Instruments converge to its redemption price

as it gets closer to the optional redemption date.

An optional redemption feature is likely to limit the market value of the Instruments. During any

period when the Issuer may elect to redeem the Instruments, the market value of those Instruments

generally will not rise substantially above the price at which they can be redeemed. This also may

be true prior to any redemption period.

The Issuer may be expected to redeem Instruments when its cost of borrowing is lower than the

interest rate (in relation to Notes) or Distribution Rate (in relation to Perpetual Capital Securities) on

the Instruments. At those times, an investor generally would not be able to reinvest the redemption

proceeds at an effective interest and/or distribution rate as high as the interest rate (in relation to

Notes) or Distribution Rate (in relation to Perpetual Capital Securities), respectively, on the

Instruments being redeemed and may only be able to do so at a significantly lower rate. Potential

investors should consider reinvestment risk in light of other investments available at that time.

Dual Currency Instruments have features which are different from single currency issues.

The Issuer may issue Instruments with principal or interest payable in one or more currencies which

may be different from the currency in which the Instruments are denominated. Potential investors

should be aware that:

? the market price of such Instruments may be volatile;

? they may receive no interest;

? payment of principal or interest or Distribution may occur at a different time or in a different

currency than expected; and

? the amount of principal payable at redemption may be less than the nominal amount of such

Instruments or even zero.

Failure by an investor to pay a subsequent instalment of Partly Paid Instruments may result in

an investor losing all of its investment.

The Issuer may issue Instruments where the issue price is payable in more than one instalment.

Failure to pay any subsequent instalments could result in an investor losing all of its investment.

– 73 –

The market price of variable rate Instruments with a multiplier or other leverage factor may

be volatile.

Instruments with variable interest or distribution rates can be volatile securities. If they are structured

to include multipliers or other leverage factors, or caps or floors, or any combination of those features

or other similar related features, their market values may be even more volatile than those for

securities that do not include such features.

Inverse Floating Rate Instruments are typically more volatile than conventional floating rate

debt.

Inverse Floating Rate Instruments have an interest rate equal to a fixed rate minus a rate based upon

a reference rate such as EURIBOR. The market values of such Instruments typically are more volatile

than market values of other conventional floating rate debt securities based on the same reference rate

(and with otherwise comparable terms). Inverse Floating Rate Instruments are more volatile because

an increase in the reference rate not only decreases the interest rate of the Instruments, but may also

reflect an increase in prevailing interest rates, which further adversely affects the market value of

these Instruments.

Instruments carrying an interest rate (in relation to Notes) or a Distribution Rate (in relation

to Perpetual Capital Securities) which may be converted from fixed to floating interest rates (in

relation to Notes) or fixed to floating Distributions Rates (in relation to Perpetual Capital

Securities), and vice versa, may have lower market values than other Instruments.

Fixed Rate Notes and Floating Rate Notes may bear interest at a rate that the Issuer may elect to

convert from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Fixed Rate Perpetual

Capital Securities and Floating Rate Perpetual Capital Securities may bear Distribution at a rate that

the Issuer may elect to convert from a fixed rate to a floating rate, or from a floating rate to a fixed

rate. The Issuer’s ability to convert the interest rate (in relation to Notes) or the Distribution Rate (in

relation to Perpetual Capital Securities) will affect the secondary market and the market value of such

Instruments since the Issuer may be expected to convert the rate when it is likely to produce a lower

overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate, the spread on the

Fixed Rate Instruments may be less favourable than then prevailing spreads on comparable Floating

Rate Instruments tied to the same reference rate. In addition, the new floating rate at any time may

be lower than the rates on other Instruments. If the Issuer converts from a floating rate to a fixed rate,

the fixed rate may be lower than then prevailing rates on its Instruments.

The market prices of Instruments issued at a substantial discount or premium tend to fluctuate

more in relation to general changes in interest rates than do prices for conventional

interest-bearing securities.

The market values of securities issued at a substantial discount or premium to their nominal amount

tend to fluctuate more in relation to general changes in interest rates than do prices for conventional

interest-bearing securities. Generally, the longer the remaining term of the securities, the greater the

price volatility as compared to conventional interest-bearing securities with comparable maturities.

Investors may lose part or all of their investment in any Index Linked Instruments issued.

If, in the case of a particular Tranche of Instruments, the relevant Pricing Supplement specifies that

the Instruments are Index Linked Instruments or variable redemption amount Instruments, there is a

risk that the investor may lose the value of its entire investment or part of it.

– 74 –

Risks relating to the Instruments which are linked to “benchmarks”.

The Euro Interbank Offered Rate (“EURIBOR”) and other interest rate or other types of rates and

indices which are deemed to be “benchmarks” are the subject of ongoing national and international

regulatory discussions and proposals for reform. These reforms may cause such benchmarks to

perform differently than in the past or to disappear entirely, or have other consequences which cannot

be predicted. Any such consequence could have a material adverse effect on any Instruments linked

to or referencing such a benchmark.

Some of these reforms are already effective whilst others are still to be implemented. Regulation (EU)

2016/1011 (the “EU Benchmark Regulation”) was published in the Official Journal of the European

Union on 29 June 2016 and has applied from 1 January 2018 (with the exception of provisions

specified in Article 59 (mainly on critical benchmarks) that have applied since 30 June 2016).

Regulation (EU) 2016/1011 as it forms part of domestic law by virtue of the European Union

(Withdrawal) Act 2018 (the “UK Benchmark Regulation”) among other things, applies to the

provision of benchmarks and the use of a benchmark in the UK. Similarly, it prohibits the use in the

UK by UK supervised entities of benchmarks of administrators that are not authorised by the FCA

or registered on the FCA register (or, if non-UK based, not deemed equivalent or recognised or

endorsed). The EU Benchmark Regulation and/or the UK Benchmark Regulations, as applicable,

could have a material impact on any Instruments linked to EURIBOR or another “benchmark” rate

or index, in particular, if the methodology or other terms of the “benchmark” are changed in order

to comply with the terms of the EU Benchmark Regulation and/or the UK Benchmark Regulation as

applicable, and such changes could (amongst other things) have the effect of reducing or increasing

the rate or level, or affecting the volatility of the published rate or level, of the benchmark. In

addition, each of the EU Benchmark Regulation and the UK Benchmark Regulation stipulates that

each administrator of a “benchmark” regulated thereunder must be licensed by the competent

authority of the Member State where such administrator is located. There is a risk that administrators

of certain “benchmarks” will fail to obtain a necessary licence, preventing them from continuing to

provide such “benchmarks”. Other administrators may cease to administer certain “benchmarks”

because of the additional costs of compliance with the EU Benchmark Regulation, the UK

Benchmark Regulations and other applicable regulations, and the risks associated therewith. There is

also a risk that certain benchmarks may continue to be administered but may in time become obsolete.

On 21 September 2017, the European Central Bank announced that it would be part of a new working

group tasked with the identification and adoption of a “risk free overnight rate” which can serve as

a basis for an alternative to current benchmarks used in a variety of financial instruments and

contracts in the euro area.

Following the implementation of any such potential reforms, the manner of administration of

benchmarks may change, with the result that they may perform differently than in the past, or the

benchmark could be eliminated entirely, or there could be other consequences that cannot be

predicted. Furthermore, even prior to the implementation of any changes, uncertainty as to the nature

of alternative reference rates and as to potential changes to such benchmark may adversely affect

such benchmark during the term of the relevant Instruments, the return on the relevant Instruments

and the trading market for securities based on the same benchmark.

The Terms and Conditions of the Notes and the Terms and Conditions of the Perpetual Capital

Securities provide for certain fallback arrangements in the event that a published benchmark, such as

EURIBOR and/or any page on which such benchmark may be published (or any other successor

– 75 –

service) becomes unavailable, including the possibility that the rate of interest could be set by

reference to a successor rate or an alternative reference rate and that such successor rate or alternative

rate may be adjusted (if required) in order to reduce or eliminate, to the extent reasonably practicable

in the circumstances, any economic prejudice or benefit (as applicable) to investors arising out of the

replacement of the relevant benchmark. In certain circumstances the ultimate fallback of interest for

a particular Interest Period (as defined in “Terms and Conditions of the Notes”) or Distribution for

a particular Distribution Period (as defined in “Terms and Conditions of the Perpetual Capital

Securities”) may result in the rate of interest for the last preceding Interest Period or Distribution

Period, respectively, being used.

This may result in the effective application of a fixed rate for Floating Rate Instruments based on the

rate which was last observed on the Relevant Screen Page (as defined in “Terms and Conditions of

the Notes” or “Terms and Conditions of the Perpetual Capital Securities”, as the case may be). In

addition, due to the uncertainty concerning the availability of successor rates and alternative rates and

the involvement of an Independent Adviser (as defined in “Terms and Conditions of the Notes” or

Terms and Conditions of the Perpetual Capital Securities”, as the case may be), the relevant fallback

provisions may not operate as intended at the relevant time.

Any such consequences could have a material adverse effect on the value of and return on any such

Instruments. Moreover, any of the above matters or any other significant change to the setting or

existence of any relevant reference rate could affect the ability of the Issuer to meet its obligations

under the Floating Rate Instruments or could have a material adverse effect on the value or liquidity

of, and the amount payable under, the Floating Rate Instruments. Investors should consider these

matters when making their investment decision with respect to the relevant Floating Rate

Instruments.

RISKS RELATING TO PERPETUAL CAPITAL SECURITIES

Perpetual Capital Securityholders will have no right to require redemption.

The Issuer may issue Perpetual Capital Securities under the Programme. The Perpetual Capital

Securities are perpetual and have no fixed final maturity date. Perpetual Capital Securityholders have

no right to require the Issuer to redeem Perpetual Capital Securities at any time, and an investor who

acquires Perpetual Capital Securities may only dispose of such Perpetual Capital Securities by sale.

Perpetual Capital Securityholders who wish to sell their Perpetual Capital Securities may be unable

to do so at a price at or above the amount they have paid for them, or at all. Therefore, holders of

Perpetual Capital Securities should be aware that they may be required to bear the financial risks of

an investment in Perpetual Capital Securities for an indefinite period of time.

If specified in the relevant Pricing Supplement, Perpetual Capital Securityholders may not

receive Distribution payments if the Issuer elects not to pay all or a part of a Distribution under

the Terms and Conditions of the Perpetual Capital Securities.

If Distribution Deferral is specified in the relevant Pricing Supplement, the Issuer may, at its sole

discretion, elect to defer any scheduled Distributions or Arrears of Distribution for any period of time

except that Condition 5(k)(v) of the Terms and Conditions of the Perpetual Capital Securities (see

Terms and Conditions of the Perpetual Capital Securities – Distribution Deferral – Restrictions in

the case of Deferral”) shall be complied with until all outstanding Arrears of Distribution and

– 76 –

Additional Distribution Amount have been paid in full. Save as aforesaid, the Issuer is not subject to

any limits as to the number of times Distributions or Arrears of Distribution can be deferred.

Although Arrears of Distributions following a deferral are cumulative, the Issuer may defer their

payment for an indefinite period of time by delivering the relevant deferral election notices to the

Trustee and the Principal Paying Agent.

Any deferral of Distribution will likely have an adverse effect on the market price of the Perpetual

Capital Securities. In addition, as a result of the Distribution deferral provision of any such Perpetual

Capital Securities, the market price of such Perpetual Capital Securities may be more volatile than

the market prices of debt securities on which original issue discount or distribution accrues that are

not subject to such deferrals and may be more sensitive generally to adverse changes in the Issuer’s

and the Guarantor’s financial condition.

The Perpetual Capital Securities may be redeemed at the Issuer’s option on the date(s) specified

in the relevant Pricing Supplement or on the occurrence of certain other events.

The Perpetual Capital Securities are perpetual capital securities and have no fixed final redemption

date. If specified in the relevant Pricing Supplement, the Perpetual Capital Securities may be

redeemed at the option of the Issuer on certain date(s) specified in the relevant Pricing Supplement

at their principal amount (or such other redemption amount stated in the relevant Pricing Supplement)

together with all outstanding Arrears of Distribution, Additional Distribution Amounts and

Distribution accrued to the date fixed for redemption. In addition, if specified on the relevant Pricing

Supplement, the Issuer may, at its option, redeem the Perpetual Capital Securities in whole, but not

in part, on any Distribution Payment Date, or any time after such Distribution Payment Date, for

taxation reasons or upon the occurrence of certain other events, including a Change of Control Event,

an Equity Disqualification Event (as defined in “Terms and Conditions of the Perpetual Capital

Securities”), a Breach of Covenants Event, a Relevant Indebtedness Default Event, a Dividend

Stopper Breach Event or if at least 90 per cent. in principal amount of the Perpetual Capital Securities

originally issued has already been cancelled prior to the date fixed for redemption. See “Terms and

Conditions of the Perpetual Capital Securities – Redemption, Purchase and Options” for further

details.

The date on which the Issuer elects to redeem the Perpetual Capital Securities may not accord with

the preference of individual Perpetual Capital Securityholders. This may be disadvantageous to

Perpetual Capital Securityholders in light of market conditions or the individual circumstances of the

holder of Perpetual Capital Securities. In addition, an investor may not be able to reinvest the

redemption proceeds in comparable securities at an effective distribution rate at the same level as that

of the Perpetual Capital Securities.

There are limited remedies for default under the Perpetual Capital Securities.

Any scheduled Distribution will not be due if the Issuer elects to defer that Distribution pursuant to

the Terms and Conditions of the Perpetual Capital Securities. Notwithstanding any of the provisions

relating to non-payment defaults, the right to institute Winding-Up proceedings is limited to

circumstances where payment has become due and is unpaid and the Issuer or the Guarantor fails to

make the payment when due. The only remedy against the Issuer or the Guarantor available to the

Trustee or (where the Trustee has failed to proceed against the Issuer or the Guarantor as provided

in the Terms and Conditions of the Perpetual Capital Securities) any Perpetual Capital Securityholder

– 77 –

for recovery of amounts in respect of the Perpetual Capital Securities following the occurrence of a

payment default after any sum becomes due in respect of the Perpetual Capital Securities will be

instituting Winding-Up proceedings and/or proving and/or claiming in such Winding-Up in respect

of any payment obligations of the Issuer or the Guarantor arising from the Perpetual Capital

Securities and the Trust Deed. The Trustee or (where the Trustee has failed to proceed against the

Issuer or the Guarantor as provided in the Terms and Conditions of the Perpetual Capital Securities)

any Perpetual Capital Securityholder can only institute proceedings for the Winding-Up of the Issuer

or the Guarantor and/or prove in the Winding-Up of the Issuer or the Guarantor and/or claim in the

liquidation of the Issuer and/or Guarantor for such payment, if there is a Winding-Up of the Issuer

or the Guarantor, or the Issuer or the Guarantor has not made payment in respect of the Perpetual

Capital Securities or under the Trust Deed for a period of 14 days or more after the date on which

such payment is due.

The Issuer may raise or redeem other capital which affects the price of the Perpetual Capital

Securities.

The Issuer and the Guarantor may raise additional capital through the issue of other securities or other

means. There is no restriction, contractual or otherwise, on the amount of securities or other liabilities

which the Issuer and the Guarantor may issue or incur and which rank senior to, or pari passu with,

the Perpetual Capital Securities. The issue of any such securities or the incurrence of any such other

liabilities or the redemption of any such securities may reduce the amount (if any) recoverable by

holders of Perpetual Capital Securities on a Winding-Up of the Issuer and/or the Guarantor, and may

increase the likelihood of a deferral of Distribution under the Perpetual Capital Securities. The issue

of any such securities or the incurrence of any such other liabilities or the redemption of any such

securities might also have an adverse impact on the trading price of the Perpetual Capital Securities

and/or the ability of holders of Perpetual Capital Securities to sell their Perpetual Capital Securities.

Substitutions may be made in respect of the Perpetual Capital Securities.

The Terms and Conditions of the Perpetual Capital Securities provide that if a Special Event (as

defined in “Terms and Conditions of the Perpetual Capital Securities”) has occurred and is

continuing, then the Issuer may at its option, subject to Condition 5 of the Terms and Conditions of

the Perpetual Capital Securities (without any requirement for the consent or approval of the Perpetual

Capital Securityholders) and subject to it having satisfied the Trustee immediately prior to the giving

of any notice referred to in Condition 11(c) of the Terms and Conditions of the Perpetual Capital

Securities that the provisions of Condition 11(c) of the Terms and Conditions of the Perpetual Capital

Securities have been complied with, and having given not less than 30 nor more than 60 days’

irrevocable notice to the Perpetual Capital Securityholders in accordance with Condition 15 of the

Terms and Conditions of the Perpetual Capital Securities and to the Trustee and the Principal Paying

Agent in writing, at any time either (i) substitute all, but not some only, of the Perpetual Capital

Securities for Qualifying Securities (as defined in “Terms and Conditions of the Perpetual Capital

Securities”) or (ii) vary the terms of the Perpetual Capital Securities with the effect that they remain

or become (as the case may be) Qualifying Securities, and the Trustee shall (subject to the provisions

of Condition 11(c) of the Terms and Conditions of the Perpetual Capital Securities and subject to the

receipt by it of the certificate signed by any Authorised Signatory (as defined in “Terms and

Conditions of the Perpetual Capital Securities”) of the Issuer referred to in the definition of

Qualifying Securities) agree to such substitution or variation. Please see Condition 11(c) of the Terms

and Conditions of the Perpetual Capital Securities for further information.

– 78 –

RISKS RELATING TO THE MARKET GENERALLY

Set out below is a brief description of certain market risks, including liquidity risk, exchange rate

risk, interest rate risk and credit risk:

Instruments issued under the Programme have no current active trading market and may trade

at a discount to their initial offering price and/or with limited liquidity.

Instruments issued under the Programme will be new securities which may not be widely distributed

and for which there is currently no active trading market (unless in the case of any particular Tranche,

such Tranche is to be consolidated with and form a single series with a Tranche of Instruments which

is already issued). If the Instruments are traded after their initial issuance, they may trade at a

discount to their initial offering price, depending upon prevailing interest rates, the market for similar

securities, general economic conditions and the financial condition of the Issuer, the Guarantor and

the Group. If the Instruments are trading at a discount, investors may not be able to receive a

favourable price for their Instruments, and in some circumstances investors may not be able to sell

their Instruments at all or at their fair market value. Although application has been made to the Hong

Kong Stock Exchange for the listing of the Programme by way of debt issues to Professional

Investors only during the 12-month period after the date of this Offering Circular on the Hong Kong

Stock Exchange, there can be no assurance that such application will be accepted, that any particular

Tranche of Instruments will be so admitted or that an active trading market will develop. In addition,

the market for investment grade and crossover grade debt has been subject to disruptions that have

caused volatility in prices of securities similar to the Instruments issued under the Programme.

Accordingly, there can be no assurance as to the development or liquidity of any trading market, or

that disruptions will not occur, for any particular Tranche of Instruments. In addition, one or more

initial investors in the Instruments may purchase a significant portion of the aggregate principal

amount of the Instruments pursuant to any offering under the Programme. The existence of any such

significant Instrumentholder(s) may reduce the liquidity of the Instruments in the secondary trading

market. Accordingly, there can be no assurance as to the development or liquidity of any trading

market, or that disruptions will not occur, for any particular Tranche of Instruments.

The liquidity and price of the Instruments following an offering may be volatile.

The price and trading volume of the Instruments may be highly volatile. Factors such as variations

in the revenues, earnings and cash flows of the Group and proposals of new investments, strategic

alliances and/or acquisitions, interest rates and fluctuations in prices for comparable companies and

government regulations and changes thereof applicable to the Group’s industry and general economic

conditions nationally or internationally could cause the price of the Instruments to change. Any such

developments may result in large and sudden changes in the volume and price at which the

Instruments will trade. There can be no assurance that these developments will not occur in the future.

Developments in other markets may adversely affect the market price of the Instruments.

The market price of the Instruments may be adversely affected by declines in the international

financial markets and world economic conditions. The market for the Instruments is, to varying

degrees, influenced by economic and market conditions in other markets, especially those in Asia.

Although economic conditions are different in each country, investors’ reactions to developments in

one country can affect the securities markets and the securities of issuers in other countries, including

– 79 –

China. Since the global financial crisis of 2008 and 2009, the international financial markets have

experienced significant volatility, such as that caused in recent years by the global financial and

economic crisis including the European debt crisis, the United Kingdom’s withdrawal from the EU,

the recent trade tensions between the United States and the PRC, and the ongoing COVID-19

pandemic around the world. If similar developments occur in the international financial markets in

the future, the market price of the Instruments could be adversely affected.

Exchange rate risks and exchange controls may result in an Instrumentholder receiving less

interest or Distribution or principal than expected.

The Issuer will pay principal and interest or Distribution on the Instruments in the Specified Currency

(as defined in “Terms and Conditions of the Notes” or “Terms and Conditions of the Perpetual Capital

Securities”, as the case may be). This presents certain risks relating to currency conversions if an

Instrumentholder’s financial activities are denominated principally in a currency or currency unit (the

Investor’s Currency”) other than the Specified Currency. These include the risk that exchange rates

may significantly change (including changes due to devaluation of the Specified Currency or

revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the

Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the

Investor’s Currency relative to the Specified Currency would decrease:

(i) the Investor’s Currency equivalent yield on the Instruments;

(ii) the Investor’s Currency equivalent value of the principal payable on the Instruments; and

(iii) the Investor’s Currency equivalent market value of the Instruments.

Governments and monetary authorities may impose (as some have done in the past) exchange

controls that could adversely affect an applicable exchange rate. As a result, an Instrumentholder may

receive less interest or Distribution or principal than expected, or no interest or Distribution or

principal.

Changes in market interest rates may adversely affect the value of Fixed Rate Instruments.

Investment in Fixed Rate Instruments involves the risk that subsequent changes in market interest

rates may adversely affect the value of Fixed Rate Instruments. Generally, a rise in interest rates may

cause a fall in the prices of the Fixed Rate Instruments, resulting in a capital loss for the relevant

Instrumentholders. However, the relevant Instrumentholders may reinvest the interest payments at

higher prevailing interest rates. Conversely, when interest rates fall, the prices of the Fixed Rate

Instruments may rise. The relevant Instrumentholders may enjoy a capital gain but interest payments

received may be reinvested at lower prevailing interest rates.

As the Fixed Rate Instruments will carry a fixed interest rate, the trading price of the Fixed Rate

Instruments will consequently vary with the fluctuations in interest rates. If the relevant

Instrumentholders sell the Fixed Rate Instruments they hold before the maturity of such Fixed Rate

Instruments, they may receive an offer less than the amount they have invested.

– 80 –

RISKS RELATING TO RENMINBI-DENOMINATED INSTRUMENTS

Instruments denominated in Renminbi (“Renminbi Instruments”) may be issued under the

Programme. Renminbi Instruments contain particular risks for potential investors.

Renminbi is not freely convertible and there are significant restrictions on the remittance of

Renminbi into and outside the PRC which may adversely affect the liquidity of Renminbi

Instruments.

Renminbi is not freely convertible at present. The PRC government continues to regulate conversion

between Renminbi and foreign currencies, including the Hong Kong dollar, despite significant

reduction in control by it in recent years over trade transactions involving the import and export of

goods and services as well as other frequent routine foreign exchange transactions. These transactions

are known as current account items.

However, remittance of Renminbi by foreign investors into the PRC for settlement purposes of capital

account items, such as capital contributions, is generally only permitted upon obtaining specific

approvals from, or completing specific registrations or filings with, the relevant authorities on a

case-by-case basis and is subject to a strict monitoring system. Regulations in the PRC on the

remittance of Renminbi into the PRC for settlement of capital account items are being developed.

Although the Renminbi was added to the Special Drawing Rights basket created by the International

Monetary Fund in 2016 and policies further improving accessibility to Renminbi to settle

cross-border transactions in foreign currencies were implemented by PBOC in 2018, there can be no

assurance that the PRC government will continue to gradually liberalise control over cross-border

remittance of Renminbi in the future, that any pilot schemes for Renminbi cross-border utilisation

will not be discontinued or that new regulations in the PRC will not be promulgated in the future

which have the effect of restricting or eliminating the remittance of Renminbi into or outside the

PRC. In the event that funds cannot be repatriated outside the PRC in Renminbi, this may affect the

overall availability of Renminbi outside the PRC and the ability of the Issuer and the Guarantor to

source Renminbi to finance their obligations under Instruments denominated in Renminbi.

Holders of beneficial interests in Renminbi Instruments may be required to provide certifications and

other information (including Renminbi account information) in order to allow such holder to receive

payments in Renminbi in accordance with the Renminbi clearing and settlement system for

participating banks in Hong Kong.

There is only limited availability of Renminbi outside the PRC, which may affect the liquidity

of the Renminbi Instruments and the ability of the Issuer and the Guarantor to source

Renminbi outside the PRC to service Renminbi Instruments.

As a result of the restrictions by the PRC government on cross-border Renminbi fund flows, the

availability of Renminbi outside the PRC is limited. While PBOC has entered into agreements on the

clearing of Renminbi business with financial institutions in a number of financial centres and cities

(the “Renminbi Clearing Banks”), including but not limited to Hong Kong and are in the process

of establishing Renminbi clearing and settlement mechanisms in several other jurisdictions (the

Settlement Arrangements”), the current size of Renminbi denominated financial assets outside the

PRC remains limited.

– 81 –

There are restrictions imposed by PBOC on Renminbi business participating banks in respect of

cross-border Renminbi settlement, such as those relating to direct transactions with PRC enterprises.

Furthermore, Renminbi business participating banks do not have direct Renminbi liquidity support

from PBOC. The Renminbi Clearing Banks only have access to onshore liquidity support from PBOC

to square open positions of participating banks for limited types of transactions and are not obliged

to square for participating banks any open positions resulting from other foreign exchange

transactions or conversion services. In such cases, the participating banks will need to source

Renminbi from the offshore market to square such open positions.

Although it is expected that the offshore Renminbi market will continue to grow in depth and size,

its growth is subject to many constraints as a result of PRC laws and regulations on foreign exchange.

There can be no assurance that new PRC regulations will not be promulgated or the Settlement

Arrangements will not be terminated or amended in the future which will have the effect of restricting

availability of Renminbi outside the PRC. The limited availability of Renminbi outside the PRC may

affect the liquidity of the Renminbi Instruments. To the extent the Issuer or the Guarantor is required

to source Renminbi outside the PRC to service the Renminbi Instruments, there can be no assurance

that the Issuer or the Guarantor will be able to source such Renminbi on satisfactory terms, if at all.

Investment in the Renminbi Instruments is subject to exchange rate risks.

The value of Renminbi against U.S. dollar and other foreign currencies fluctuates from time to time

and is affected by changes in the PRC and international political and economic conditions and by

many other factors. All payments of interest and principal will be made with respect to the RMB

Instruments in Renminbi. As a result, the value of these Renminbi payments in U.S. dollars or other

foreign currencies may vary with the prevailing exchange rates in the marketplace. If the value of

Renminbi depreciates against U.S. dollar or other foreign currencies, the value of investment in U.S.

dollars or other applicable foreign currencies will decline. In August 2015, PBOC changed the way

it calculates the mid-point price of Renminbi against U.S. dollar, requiring the market-makers who

submit for PBOC’s reference rates to consider the previous day’s closing spot rate, foreign-exchange

demand and supply as well as changes in major currency rates. This change, and other changes such

as widening the trading band that may be implemented, may increase volatility in the value of the

Renminbi against foreign currencies. In addition, there may be tax consequences for investors as a

result of any foreign currency gains resulting from any investment in the Renminbi Instruments.

There may be PRC tax consequences with respect to investment in the Renminbi Instruments.

In considering whether to invest in the Renminbi Instruments, investors should consult their

individual tax advisers with regard to the application of PRC tax laws to their particular situation as

well as any tax consequences arising under the laws of any other tax jurisdictions. The value of the

holder’s investment in the Renminbi Instruments may be materially and adversely affected if the

holder is required to pay PRC tax with respect to acquiring, holding or disposing of and receiving

payments under those Renminbi Instruments.

Investment in Renminbi Instruments is subject to interest rate risks.

The PRC government has gradually liberalised its regulation of interest rates in recent years. Further

liberalisation may increase interest rate volatility. In addition, the interest rate for Renminbi in

markets outside the PRC may significantly deviate from the interest rate for Renminbi in the PRC as

a result of foreign exchange controls imposed by PRC laws and regulations and prevailing market

conditions.

– 82 –

As Renminbi Notes may carry a fixed interest rate, the trading price of the Renminbi Notes will

consequently vary with the fluctuations in the Renminbi interest rates. If holders of the Renminbi

Notes propose to sell their Renminbi Notes before their maturity, they may receive an offer lower

than the amount they have invested.

Payments in respect of the Renminbi Instruments will only be made to investors in the manner

specified in such Renminbi Instruments.

All payments to investors in respect of the Renminbi Instruments will be made solely by (i) when the

Renminbi Instruments are represented by Global Instruments or Global Certificates, transfer to a

Renminbi bank account maintained in Hong Kong in accordance with prevailing CMU Rules, or (ii)

when the Renminbi Instruments are in definitive form, transfer to a Renminbi bank account

maintained in Hong Kong in accordance with prevailing rules and regulations. Neither the Issuer nor

the Guarantor can be required to make payment by any other means (including in any other currency

or in bank notes, by cheque or draft or by transfer to a bank account in the PRC).

Remittance of proceeds into or outside of the PRC in Renminbi may be difficult.

In the event that the Issuer decides to remit some or all of the proceeds into the PRC in Renminbi,

its ability to do so will be subject to obtaining all necessary approvals from, and/or registration or

filing with, the relevant PRC government authorities. However, there can be no assurance that the

necessary approvals from, and/or registration or filing with, the relevant PRC government authorities

will be obtained at all or, if obtained, they will not be revoked or amended in the future.

There can be no assurance that the PRC government will continue to gradually liberalise the control

over cross-border Renminbi remittances in the future, that the pilot schemes introduced will not be

discontinued or that new PRC regulations will not be promulgated in the future which have the effect

of restricting or eliminating the remittance of Renminbi into or outside the PRC. In the event that the

Issuer does remit some or all of the proceeds into the PRC in Renminbi and the Issuer subsequently

is not able to repatriate funds outside the PRC in Renminbi, it will need to source Renminbi outside

the PRC to finance its obligations under the Renminbi Instruments, and its ability to do so will be

subject to the overall availability of Renminbi outside the PRC.

RISKS RELATING TO IRISH TAXES

A change in Irish tax laws could adversely affect the Group.

Changes in Irish tax laws may adversely impact the value of the Instrumentholders’ investment. In

particular, the Issuer intends to satisfy the conditions to be a “Qualifying Company” as defined in

Section 110 of Ireland’s Taxes Consolidation Act 1997 (“TCA”). There can be no assurance that the

tax treatment of a “Qualifying Company” for the purposes of Section 110 of TCA will not change in

the future. The tax deductibility of the Issuer’s interest costs will depend on the applicability of

Section 110 of TCA (as more properly described below) and the current practice of the Revenue

Commissioners of Ireland in relation to the same. Any change to these rules may have an impact on

the Instrumentholders.

– 83 –

The Issuer may not satisfy or continue to satisfy the requirements to be a “Qualifying

Company” under Irish law.

The Issuer intends to satisfy the conditions to be a “Qualifying Company” as defined in Section 110

of TCA and be subject to Irish corporation tax at 25 per cent. on its taxable profits. If the Issuer ceases

to satisfy the conditions to be a “Qualifying Company” as defined in Section 110 of TCA, the Issuer

will not be entitled to benefits under Section 110 of TCA.

Any change in the Issuer’s tax residency could have material adverse effects on the Issuer’s

taxes.

The Issuer intends to be a tax resident in Ireland. The net proceeds from the issue of the Instruments

may be on-lent to the Guarantor and/or other members of the Group under inter-company loan

agreements. If the Issuer ceases to be a tax resident in Ireland, withholding tax on interest payment

to the Issuer may apply.

Restrictions to deductibility of interest – Changes to Section 110 of TCA.

There may be restrictions on the deductibility of interest or funding expenses paid by a qualifying

company within the meaning of Section 110 of TCA (such as the Issuer) where that company holds

or manages certain loans, securities, or other interests which derive their value from Irish land.

Further detail on these provisions is set out in “Taxation – Ireland”. If the Issuer holds or manages

any of the relevant assets and is not able to benefit from any of the exceptions contained in the

legislation, additional Irish tax may be payable by the Issuer.

BEPS & ATAD Considerations.

On 5 October 2015, the Organisation for Economic Co-operation and Development (the “OECD”)

published final recommendations for new, or amendments to existing, tax laws arising from its Base

Erosion and Profit Shifting (“BEPS”) project. The focus of one of the recommendations (Action 6)

is the prevention of treaty abuse by developing model treaty provisions to prevent the granting of

treaty benefits in inappropriate circumstances. At a minimum, countries which participate in the

BEPS project are required to include in their tax treaties: (i) an express statement that the common

intention of each contracting state which is party to such treaties is to eliminate double taxation

without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance;

and one, or both, of (ii) a “limitation-on benefits” (“LOB”) rule; and (iii) a “principal purposes test”

(“PPT”) rule.

The PPT rule could deny a treaty benefit (such as a reduced rate of withholding tax) if it is reasonable

to conclude, having regard to all facts and circumstances, that obtaining that benefit was one of the

principal purposes of any arrangement or transaction that resulted directly or indirectly in that

benefit, unless it is established that granting that benefit in those circumstances would be in

accordance with the object and purpose of the relevant provisions of the treaty.

In order to effect changes to existing tax treaties, the OECD published the text and explanatory

statement of the “Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base

Erosion and Profit Shifting” (the “Multilateral Instrument” or “MLI”). The Multilateral Instrument

is to be applied alongside existing tax treaties (rather than amending them directly), modifying the

application of those existing treaties in order to implement BEPS measures.

– 84 –

Action 6 is implemented into the double tax treaties Ireland has entered into with jurisdictions by the

inclusion of the PPT.

The MLI entered into force for Ireland on 1 May 2019. As a general rule, it has effect for Ireland’s

tax treaties:

? with respect to taxes withheld at source, from 1 January 2020; and

? with respect to all other taxes levied by Ireland, for taxes levied with respect to taxable periods

beginning on or after 1 November 2019.

The date on which the MLI modifies each treaty depends on when Ireland’s treaty partners deposit

their own instruments of ratification.

In addition, further to the publication by the OECD of its BEPS recommendations, the EU member

states adopted Directive 2016/1164/EU – the so-called anti-tax avoidance directive (“ATAD”) on

12 July 2016 to implement in the EU member states’ domestic legal frameworks common measures

to tackle tax avoidance practices, ATAD lays down, amongst others, (i) controlled foreign corporation

rules, (ii) rules regarding anti-hybrid mismatches within the EU, (iii) general interest limitation rules,

and (iv) a general anti-abuse rule.

The interest limitation rule contained in ATAD applies in Ireland to accounting periods of “relevant

entities” commencing on or after 1 January 2022.

The interest limitation rule provides that interest costs in excess of 30 per cent. of an entity’s earnings

before interest, tax, depreciation and amortisation will not be deductible in the year in which they are

incurred but may remain available for carrying forward. The restriction on interest deductibility only

applies in respect of the amount by which the borrowing costs exceed interest revenues and other

equivalent revenues.

To the extent the Issuer funds interest payments made under the Instruments solely from interest

revenues and equivalent amounts, the Issuer should have limited, or no, exceeding borrowing costs.

In such circumstances, there should be no material impact on the Issuer’s tax position. However, there

is still uncertainty as to how gains arising with respect to loan assets, including non-performing loan

assets, will be treated for the purposes of the interest limitation rule.

The interest limitation rule also provides for a de minimis exemption such that in circumstances

where the Issuer’s exceeding borrowing costs in a financial year are less than EUR3 million, no

restriction should apply.

The legislation contains additional exceptions, including the concept of a “single company worldwide

group”, which may be relevant to the Issuer to the extent that the Issuer is not included in

consolidated financial statements by any entity and does not elect to be part of an Irish interest group.

It is expected that Irish Revenue will publish guidance during 2022 on the interest limitation rule.

– 85 –

If, as a result of the interest limitation rule, there is a restriction in the amount of interest for which

the Issuer can take a tax deduction, this may result in an increased Irish tax liability for the Issuer.

Following the adoption of ATAD, the EU member states decided to go further as regards

hybrid-mismatches with third countries and adopted the Directive 2017/952/EU (“ATAD 2”)

amending the ATAD provisions, on 29 May 2017. EU member states were required to implement

these rules by 31 December 2019 except for the provision on reverse hybrid mismatches for which

implementation was permitted to be postponed to 31 December 2021. The reverse hybrid rules, which

apply in Ireland from 1 January 2022, are primarily relevant to entities that are treated as transparent

for tax purposes. The Issuer is not treated as transparent for Irish tax purposes and, as such, no Irish

tax impact should arise for the Issuer from the implementation of the reverse hybrid rules in Ireland.

The Issuer’s tax treatment may be impacted by the implementation of ATAD II in other EU

jurisdictions. The Issuer’s Irish tax position may be impacted by Ireland’s implementation of the

anti-hybrid legislation. The final Irish implementing legislation was enacted as part of the Finance

Act 2019, which has been effective from 1 January 2020, and initial guidance from the Irish Revenue

was issued on 9 July 2020.

EU Proposal for Anti-Tax Avoidance Directive III (“ATAD III”)

On 22 December 2021, the European Commission published a proposal for a Council Directive to

prevent the misuse of shell entities for tax purposes. The new ATAD III proposals aim at legal entities

which have limited substance and economic activity in their jurisdictions of residence. Where the

rules apply, the proposal is that such entities should be denied the benefit of double taxation

agreements entered into between EU member states as well as certain EU tax directives, including

the Parent Subsidiary Directive and Interest and Royalty Directive.

As currently drafted, the proposals contain exemptions for certain entities including “securitisation

special purpose entities” and entities which have a transferable security admitted to trading or listed

on a regulated market or multilateral trading facility.

There is no certainty that the proposals will be introduced in their current form. The proposals require

the unanimous approval of the EU Council before it is adopted. Until the proposals receive approval

and a final directive is published, it is not possible to provide definitive guidance on the impact of

the proposals on the Issuer’s Irish tax position.

OECD Model GloBE Rules and the European Commission’s Proposed Directive on GloBE Rules

On 20 December 2021, the OECD published the draft Global Anti-Base Erosion Model Rules which

are aimed at ensuring that Multinational Enterprises (“MNEs”) will be subject to a global minimum

15 per cent. tax rate from 2023 (“GloBE Rules”). The GloBE Rules are part of the OECD/G20

Inclusive Framework on BEPS which currently has 141 participant countries.

On 22 December 2021, the European Commission published a proposal for a directive to implement

the GloBE Rules in the EU. This proposes to introduce minimum effective taxation for MNEs with

revenues of at least EUR750 million, operating in the EU’s internal market and beyond. It provides

a common framework for implementing the GloBE Rules into EU member states’ national laws.

– 86 –

The proposal requires the unanimous approval of the EU Council before it is adopted. If the Issuer

is regarded as part of an “MNE Group” (or large-scale domestic group) which has revenues of more

than EUR750 million a year, it may be within the scope of the GloBE Rules. However, until the

proposal receives approval and a final directive is published, it is not possible to provide definitive

guidance on the impact of the proposal on the Issuer’s Irish tax position.

Application of transfer pricing to the Issuer.

Transfer pricing legislation impacting qualifying companies (such as the Issuer) under Section 110

of the TCA was introduced in Finance Act 2019.

Under the legislation, transactions between the Issuer and an associated person may be subject to

transfer pricing from 1 January 2020. If transfer pricing were to apply to any of the transactions

entered into by the Issuer, the Issuer would be required to maintain and have available certain

documents and records for the purposes of determining its compliance with the transfer pricing rules.

The Issuer may also be required to adjust, and increase, its taxable profits and consequently have a

larger tax liability than may be expected.

The Issuer will be associated with a person who has the power to secure that the affairs of the Issuer

are conducted in accordance with their wishes. Any person controlled by the same person as the

Issuer, will also be associated with the Issuer. A person will only have control of the Issuer for these

purposes if they have shareholder or voting control of the Issuer, or if the Issuer’s constitutional

documents or other documents regulating the Issuer, or any other company provide them with control.

Instrumentholders are not currently anticipated to be persons who would be considered associated

with the Issuer, merely by reason of holding Instruments.

Transactions between the Issuer and an associated person who is chargeable to Irish corporation or

income tax (other than another qualifying person for the purposes of Section 110 TCA) will not

generally give rise to a transfer pricing adjustment for the Issuer. The transfer pricing legislation will

not apply with respect to securities issued by a qualifying company for the purposes of Section 110

TCA under which the return is to any extent dependent on the results of the company’s business or

represents more than a reasonable commercial return.

– 87 –

CAPITALISATION AND INDEBTEDNESS

The following table sets forth the audited consolidated total borrowings (both current and non-current

portions), total equity and total capitalisation of the Guarantor as at 31 December 2021. This table

should be read in conjunction with the Guarantor’s audited consolidated financial statements as at and

for the year ended 31 December 2021 and related notes thereto included elsewhere in this Offering

Circular.

As at 31 December 2021

(RMB) (U.S.$)(1)

(audited) (unaudited)

Total borrowings – current portion

Short-term borrowings ........................................... 6,671,444,259.15 1,046,895,185.51

Notes payable.......................................................... 508,750,000.00 79,833,976.71

Current portion of non-current liabilities ................. 25,243,456,920.79 3,961,249,242.19

Other current liabilities .......................................... 5,697,259,945.21 894,024,408.44

38,120,911,125.15 5,982,002,812.85

Total borrowings – non-current portion

Long-term borrowings ............................................ 39,490,031,118.70 6,196,847,616.15

Other non-current liabilities ................................... 2,413,234,176.60 378,689,102.82

Bonds payable......................................................... 26,032,975,179.16 4,085,141,885.44

67,936,240,474.46 10,660,678,604.41

Equity

Paid-in capital ........................................................ 9,978,467,899.00 1,565,839,358.97

Capital reserves....................................................... 3,342,130,738.76 524,453,243.38

Surplus reserve ...................................................... 749,135,118.35 117,555,647.36

Retained earnings .................................................... 5,162,891,375.78 810,170,319.14

Other equity instruments ......................................... 4,400,000,000.00 690,456,014.81

Other comprehensive income................................... -300,790,620.18 -47,200,612.02

23,331,834,511.71 3,661,273,971.64

Total capitalisation(2) ............................................. 91,268,074,986.17 14,321,952,576.05

Current portion of total borrowings and total

capitalisation ...................................................... 129,388,986,111.32 20,303,955,388.90

Notes:

(1) For convenience only, all translations from Renminbi into U.S. dollars are made at the rate of RMB6.3726 to

U.S.$1.00, based on the noon buying rate as set forth in the H.10 statistical release of the Federal Reserve Bank of

New York on 30 December 2021.

(2) Total capitalisation represents the sum of equity and total borrowings – non current portion.

Since 31 December 2021, the Guarantor has issued onshore debt securities (excluding

perpetual securities) in an aggregate principal amount of approximately RMB7.9 billion, and the

Guarantor has issued perpetual securities in an aggregate principal amount of approximately RMB1.6

billion. Except as otherwise disclosed above, there has been no material change in the consolidated

capitalisation and indebtedness of the Group since 31 December 2021.

– 88 –

USE OF PROCEEDS

The net proceeds from the issue of each Tranche of Instruments will be used for debt replacement and

providing financing for leasing projects. If, in respect of any particular issue, there is a particular

identified use of proceeds, this will be stated in the relevant Pricing Supplement.

– 89 –

DESCRIPTION OF THE ISSUER

OVERVIEW

The Issuer was incorporated as an exempted company with limited liability under the Companies

Law, as amended of the Cayman Islands on 9 August 2018 with company number 340929. The

registered office of the Issuer is at the offices of Conyers Trust Company (Cayman) Limited, Cricket

Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

SHARE CAPITAL

The share capital of the Issuer is U.S.$50,000, divided into 50,000 shares of par value U.S.$1.00

each. One share has been issued and paid up, which is owned by CAVIC Aviation Leasing (Ireland)

Co., Designated Activity Company. CAVIC Aviation Leasing (Ireland) Co., Designated Activity

Company is in turn wholly-owned by the Guarantor.

BUSINESS ACTIVITIES

The Issuer was established for the purpose of issuing the Instruments and on-lending the proceeds to

the Guarantor or its subsidiaries. Since its incorporation, the Issuer has not engaged in any business

activity or any other activity whatsoever other than activities in connection with the establishment

and maintenance of the Programme, the offering, sale or issuance of the Instruments. The Issuer will

be managed in accordance with its memorandum and articles of association and the laws of the

Cayman Islands. The Issuer has no employees.

DIRECTORS

The directors of the Issuer as at the date of this Offering Circular are Zhou Yong, Tom Geary and

Laura Morgan.

FINANCIAL INFORMATION

Under Cayman Islands law, the Issuer is not required to carry out annual audits, appoint auditors or

publish interim or annual financial statements. The Issuer has not published, and does not propose to

publish, any financial statements. The Issuer is, however, required to keep proper books of account

as it is necessary to give a true and fair view of the state of the Issuer’s affairs and to explain its

transactions.

– 90 –

DESCRIPTION OF THE GROUP

OVERVIEW

The Group is principally engaged in the leasing business in the PRC and provides a diverse array of

financial leasing and operating leasing services, focusing on the aircraft, shipping, urban

infrastructure and equipment sectors. The Guarantor was one of the first PRC leasing companies

approved by MOFCOM and the State Administration of Taxation. As at 31 December 2021, the

Guarantor was one of the leading leasing companies in the PRC. In addition, the Guarantor believes

that the Group had one of the largest networks of airline customers in the PRC as at 31 December

2021.

As at 31 December 2021, AVIC indirectly held approximately 43.78 per cent. of the issued share

capital of the Guarantor. AVIC is one of the central state-owned enterprises directly supervised by

central SASAC, focusing on aerospace and defence. Through its subsidiaries and affiliates in the PRC

and overseas, AVIC’s businesses principally cover defence, transport aircraft, engines, helicopters,

avionics and systems, general aviation, aviation research, flight test, trade and logistics, asset

management, finance services, engineering planning and construction and automobile. As at 31

December 2021, AVIC’s group consisted of a number of listed companies. AVIC had been named in

the “Global 500” published by Fortune magazine for 13 consecutive years and ranked 140th on the

list in 2021. As at the date of this Offering Circular, AVIC ranks the fourth among the industrial

manufacturing enterprises owned by SASAC in the PRC. With its extensive customer base and

supplier network, established relationship with local governments and other state-owned enterprises,

in-depth industry knowledge, strong brand recognition and experienced management, AVIC provides

the Group with valuable support for the development of its business. As at 31 December 2021, the

Guarantor was the only leasing platform operating under the financial services business segment of

AVIC.

In December 2021, the Group’s leased asset scale exceeded RMB158 billion. As at 31 December

2021, the leased asset scale of the Group’s operating leasing business and the Group’s financial

leasing business amounted to approximately RMB19.69 billion and RMB138.56 billion, respectively.

In terms of leased asset scale, the Guarantor ranked first and eighth among the domestic leasing

companies (excluding Bohai Leasing Co., Ltd.) and all domestic and foreign leasing companies

(excluding Bohai Leasing Co., Ltd.), respectively, in the PRC as at 31 December 2021.

For the years ended 31 December 2019, 2020 and 2021, the Group reported total consolidated

revenue from operations of approximately RMB10,076.85 million, RMB10,125.86 million and

RMB10,303.45 million, respectively, and consolidated net profit of approximately RMB1,711.21

million, RMB1,974.09 million and RMB1,990.59 million, respectively. As at 1 January 2020,

1 January 2021 and 31 December 2021, the total consolidated assets of the Group amounted to

approximately RMB148,755.70 million, RMB158,759.96 million and RMB167,583.66 million,

respectively.

– 91 –

Awards and Recognitions

In recognition of its achievements, the Guarantor has received numerous awards which include the

following:

? The Guarantor was ranked 13th in terms of fleet value in the “Global Aircraft Leasing

Companies Ranking” published by FlightGlobal in 2021.

? The Guarantor was ranked 16th in the list of global top 50 lessors of 2021 published by Cirium

in 2021.

? The Guarantor was ranked 20th in the list of global top 50 lessors of 2020 published by Cirium

in 2020.

? The Guarantor was ranked 31st in terms of fleet value in the “Global Aircraft Leasing

Companies Ranking” published by FlightGlobal in 2019.

? The Guarantor was awarded the “Best Transaction Award” and “Ten Years Industry Promotion

Award” in the seventh China Air Finance “Wan Hoo” Awards Presentation Ceremony in 2019.

? The Guarantor was recognised as one of the first “five-star enterprises” in Dongjiang by the

Dongjiang Free Trade Port Zone of Tianjin in 2018.

? The Guarantor was awarded the “China Maritime Financing Star Award” at the fourth China

Maritime Finance (Dongjiang) International Forum in 2018.

? The Guarantor was awarded the “Industry Promotion Award” in the sixth China Air Finance

“Wan Hoo” Awards Presentation Ceremony in 2018.

? The Guarantor was awarded the “Financial Outstanding Contribution Award” by the People’s

Government of Shanghai Pudong Xinqu in 2016, 2017 and 2018.

? The Guarantor was awarded the “One Belt One Road and International Projects Development

Award” in the fifth China Air Finance “Wan Hoo” Awards Presentation Ceremony in 2017.

? The Guarantor was recognised as a “Shanghai City Five Star Integrity Enhancement Enterprise”

by the Shanghai Financial Leasing Industry Association of the Organising Committee of the

Shanghai Corporate Integrity Enhancement Campaign in 2015, 2016 and 2017.

? The Guarantor was recognised as an “Outstanding Enterprise” by the Shanghai Leasing Trade

Association in 2017.

? The Guarantor was recognised as the “Pudong Xinqu Modern Service Industry Outstanding

Contribution Award” by the People’s Government of Shanghai Pudong Xinqu in 2017.

? The Guarantor was recognised as reaching the “Pudong Corporate Social Responsibility

Standards” by the Office of Shanghai Pudong Corporate Social Responsibility in 2017.

? The Guarantor was recognised as the “Best Risk Management Enterprise for Customer

Experience in 2017” at the Financial Risk Management Leadership Forum 2018 and 2017

Financial Risk Management Awards Presentation Ceremony.

? The Guarantor was recognised as the “Advanced Unit of Planned Financial Management” by

AVIC in 2017.

? The Guarantor was recognised as the “PRC Financial Leasing Enterprise of the Year” at the

China Financial Leasing Annual Conference in 2012 and 2016.

? The Guarantor’s direct financing arrangement with Export Development Canada was awarded

the “Innovation Award” in the third China Air Finance “Wan Hoo” Awards Presentation

Ceremony in 2015.

– 92 –

? The Guarantor was recognised as the “Most Influential Enterprise” by the Shanghai Financial

Leasing Industry Association in 2014.

? The Guarantor was awarded the “PRC Best Financial Innovation Award” by the Organising

Committee of the sixth Beijing International Finance Expo in 2010.

COMPETITIVE STRENGTHS

The Guarantor believes that the Group has the following competitive strengths:

Significant growth potential in the PRC financial leasing industry.

Supported by the favourable government policies, financial reforms, development of industry laws

and regulations, industry collaborations and lowered cost of funding resulting from interest rate

liberalisation, the PRC financial leasing industry has grown significantly in recent years.

The following chart sets forth the number of financial leasing companies in the PRC from 2008 to

2021:

142 170 233 369 643 1,106

2,202

4,508

7,136

9,676

11,777

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Unit: #

12,130

12,156

11,917

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2020 2021 2019

Source: China Leasing Alliance (中國租賃聯盟)

The following chart sets forth the registered capital of financial leasing enterprises in the PRC from

2006 to 2021:

0

5000

10000

15000

20000

25000

30000

35000

571 1,003 1,187 1,308 1,617 1,955 2,576 3,060

6,611

15,165

25,569

32,031

32,331

Unit: RMB100 million

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2018 2017 2019 2020 2021

32,763

33,154

32,689

Source: China Leasing Alliance (中國租賃聯盟)

– 93 –

The following chart sets forth the outstanding financial leasing contracts balance in the PRC from

2008 to 2021:

2008

1,550 3,700

7,000 9,300

15,500

21,000

32,000

44,400

53,300

60,600

66,500

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Unit: RMB100 million

2019 2020 2021

66,540

65,040

62,100

Source: China Leasing Alliance (中國租賃聯盟)

The following chart sets forth the penetration of financial leasing in the PRC from 2007 to 2022:

2007

0.2%

0.9%

1.6%

2.5% 3.0%

4.1% 4.7%

6.2%

8.0%

10.8%

11.9%

13.2%

14.6%

16.1%

9.8%

8.9%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

18.0%

Unit: %

Source: Qianzhan Industry Institute

As at the date of this Offering Circular, the PRC is the second largest financial leasing market in the

world. However, the Guarantor believes that the penetration of financial leasing in the PRC is still

low as compared to other developed countries, resulting in significant growth potential in the PRC

financial leasing market.

In December 2021, the Group’s leased asset scale exceeded RMB158 billion. In terms of leased asset

scale, the Guarantor ranked first and eighth among the domestic leasing companies (excluding Bohai

Leasing Co., Ltd.) and all domestic and foreign leasing companies (excluding Bohai Leasing Co.,

Ltd.), respectively, in the PRC as at 31 December 2021. The Guarantor believes that the Group’s

business has benefited, and will continue to benefit, from the development and growth of the PRC

financial leasing industry.

– 94 –

Strong shareholder support from AVIC and AVIC Industry-Finance Holdings Co., Ltd.

The Guarantor’s controlling shareholder, AVIC, is a central state-owned enterprise directly

supervised by central SASAC, focusing on aerospace and defence. AVIC had been named in the

“Global 500” published by Fortune magazine for 13 consecutive years and ranked 140th on the list

in 2021. As at the date of this Offering Circular, AVIC ranks the fourth among the industrial

manufacturing enterprises owned by SASAC in the PRC. As a leading manufacturer of aircraft,

aviation engines and helicopters in the PRC, AVIC has established and maintained strong long-term

relationships with local governments and large corporations across the PRC, which has enabled the

Group to benefit from numerous business opportunities and enhance its market share and reputation

in the financial leasing industry. Leveraging AVIC’s leading position and track record in the aircraft

manufacturing business, the Guarantor believes that the Group has a competitive advantage over its

competitors in the provision of financial leasing services for domestically manufactured civil aircraft.

The Guarantor believes that the Group can continue to leverage support from, and its relationship

with, AVIC and its subsidiaries and affiliates to further enhance its competitiveness and market share

in the financial leasing industry by acquiring and sourcing suitable aircraft and other assets to meet

its customers’ needs, improving management capabilities and corporate governance and further

strengthening its brand equity and credibility.

The Guarantor also believes that the Group has a competitive advantage derived from the continued

strong support from AVIC in terms of its brand name and expertise in the aviation industry, its

network and resources as well as its supply of domestically manufactured civil aircraft which has also

been paramount to the Group’s businesses and development. AVIC has provided strong financial

support to the Group in the form of loan, capital injection and guarantee. For example, as at 31

December 2021, AVIC has provided various loans to the Group in the amount of approximately

RMB25.4 billion. AVIC has also made several capital injections to the Group since 2006. The

Guarantor’s registered capital was increased from RMB430 million in 2006 to RMB9.98 billion as

at 31 December 2021. Please see “– Corporate History” for further information.

In light of AVIC’s state-owned background, the Group has also received government support in the

form of governmental subsidies to support the Group’s overall business operations. For the years

ended 31 December 2019, 2020 and 2021, the Group received government grants of approximately

RMB70.09 million, RMB22.85 million and RMB72.28 million, respectively.

In addition to strong financial support, AVIC has also continued to provide talent support to the

Group. As at 31 December 2021, AVIC has appointed all of the Guarantor’s directors, recommended

all of the Group’s senior management and supervisors.

To promote the continual development of the PRC aviation industry, Chinese policy banks have also

been supportive of AVIC and the Group on promoting the usage of domestically manufactured civil

aircraft in the PRC. In November 2014, Okay Airways, the Guarantor, AVIC Xi’an Aircraft Industry

(Group) Co., Ltd. and China Development Bank entered into a strategic co-operation agreement

under which China Development Bank would provide financing of approximately RMB10 billion to

support the usage of A-series aircraft in the PRC. In addition, the Group has entered into strategic cooperation agreements with China Development Bank, China Construction Bank, Postal Savings Bank

of China, Ping An Bank and China Minsheng Bank, respectively. Also, in 2017, 14 banks have

granted a U.S.$200 million syndicated loan to the Group. In addition, in 2016, AVIC IndustryFinance Holdings Co., Ltd. has provided credit support to the Group by giving a guarantee to a credit

– 95 –

facility granted by The Export-Import Bank of China to the Guarantor. In 2018, AVIC IndustryFinance Holdings Co., Ltd. has provided additional credit support to the Group by giving a guarantee

to a U.S.$1 billion credit facility granted by the Export-Import Bank of China to the Guarantor. As

at 31 December 2021, the total credit line granted by AVIC Industry-Finance Holdings Co., Ltd. to

the Guarantor amounted to approximately RMB22.2 billion. AVIC Industry-Finance Holdings Co.,

Ltd. was the first financial holding company in the PRC listed on the Shanghai Stock Exchange and

was assigned a corporate rating of A3 and A- by Moody’s and Fitch, respectively, as at the date of

this Offering Circular.

In addition, the Guarantor believes that the Group will continue to receive business resources and

professional and technical support from AVIC and AVIC Industry-Finance Holdings Co., Ltd., and

benefit from the “single line of production, financing and marketing” (產、融、銷一條線) business

structure of the AVIC’s group as well as the crossover sales and referral of customers between the

Group and other business units of the AVIC’s group.

Leading position in the PRC financial leasing industry with an extensive and diverse customer

base.

The Group is recognised as one of the market leaders among the PRC financial leasing companies,

in particular in relation to the aircraft sector. The Guarantor was one of the first PRC leasing

companies approved by MOFCOM and the State Administration of Taxation. As at 31 December

2021, the Guarantor was one of the leading leasing companies in the PRC. As at 31 December 2021,

the Guarantor had 821 domestic customers and 60 overseas customers. In addition, the Guarantor

believes that the Group had one of the largest networks of airline customers in the PRC as at 31

December 2021. In 2019, the Guarantor was awarded the “Best Transaction Award” and “Ten Years

Industry Promotion Award” in the seventh China Air Finance “Wan Hoo” Awards Presentation

Ceremony. In 2021, the Guarantor was ranked 16th in the list of global top 50 lessors of 2021

published by Cirium and was ranked 13th in terms of fleet value in the “Global Aircraft Leasing

Companies Ranking” published by FlightGlobal in 2021.

Throughout its approximately 19 years of operation, the Group has established and maintained a

well-structured financial and operating leasing platform for both overseas and domestically

manufactured civil aircraft, as well as for shipping, urban infrastructure and large-scale equipment.

The Group operates one of the youngest fleets among major top-tier aircraft leasing companies in the

PRC, comprising internationally renowned aircraft (including new generation Airbus, Boeing,

Embraer and Bombardier aircraft) as well as domestically manufactured civil aircraft (including the

ARJ21, Modern Ark MA60 and Y-12).

– 96 –

The Group’s leading market position in the PRC financial leasing industry for aircraft is supported

by both a well-established and an expanding customer base across the PRC with whom it has

maintained strong long-term relationships. The Group’s customer base for its aircraft leasing business

comprises a number of domestic airline companies in the PRC and multinational airline companies

in various countries in Asia and Europe, primarily including China Eastern Airlines, Air China, China

Southern Airlines, Xiamen Airlines, Shenzhen Airlines, Hebei Airlines, Hainan Airlines, Tianjin

Airlines, Juneyao Airlines, Okay Airways, China Express, Donghai Airlines, Qingdao Airlines,

Vietnam Airlines, Turkish Airlines, Wizz Air, Indigo Airline, Spring Airways, Lion Air, Chengdu

Airlines, Scandinavian Airlines, Myway Airlines, Loong Air, Kunming Airlines and Etihad Airways.

As at 31 December 2021, the Guarantor had approximately 59 domestic customers and 14 overseas

customers in respect of its aircraft leasing business. Leveraging AVIC’s brand name and close

relationships with local governments and large corporations across the PRC, the Group is able to

develop business relationships with long-term customers of strong credit profile. Its customers have

been selected under stringent risk management procedures based on factors such as the stability of

their cash flows and/or asset values, industry reputation and track record performance. As testimony

to its customers’ satisfaction and reliance on its services, the Group also has a large number of repeat

customers. The Group has also successfully tapped into its financial leasing customer base to provide

extended value-added services in addition to providing its integrated financial services to new

customers.

Diversified business portfolio.

The Group’s business portfolio includes aircraft leasing, ship leasing, urban infrastructure leasing and

equipment leasing. As at 31 December 2021, aircraft leasing, ship leasing, urban infrastructure

leasing and equipment leasing business accounted for approximately 33.76 per cent., 11.38 per cent.,

24.88 per cent. and 29.97 per cent. of the Group’s total leased asset scale, respectively.

The Group’s diversified business portfolio enables the Group to reduce the risks associated with

reliance on limited portfolios of business and also mitigate any adverse impact resulting from price,

supply and demand volatilities as well as geographical concentration risk relating to any single

business portfolio. In particular, as at 31 December 2021, the Guarantor was one of the leading

leasing companies in the PRC. As at 31 December 2021, the Group provided leasing for more than

30 different types of aircraft across the passenger, commercial and general aircraft spectrum. The

Group also has an extensive vessel fleet including high-end vessels and operates a diverse portfolio

of large-sized commercial vessels such as bulk carriers, container ships, liquid cargo ships and other

vessels. In addition, the Guarantor entered into a project co-operation agreement with SDTR Marine

Pte. Ltd. and Dalian Shipbuilding Industry Co., Ltd. in January 2019 pursuant to which the Group

would lease ten 85,000 DWT Super-Kamsarmax bulk carriers to SDTR Marine Pte. Ltd. As at 31

December 2021, the Group’s number of vessels on lease reached 194. The Group’s urban

infrastructure leasing and equipment leasing businesses are also the Group’s main sources of revenue.

The Guarantor believes that the Group’s diversified business portfolio will continue to enable the

Group to equip itself for future growth and capture potential opportunities.

– 97 –

Diverse aircraft leasing services.

The Group provides diverse aircraft leasing services to its customers. It has a diversified and rapidly

growing aircraft fleet comprising both overseas and domestically manufactured civil aircraft. As at

31 December 2019, 2020 and 2021, the total number of aircraft on lease were 300, 313 and 329,

respectively. In addition, the Group has developed strategic relationships with Boeing and COMAC.

The Group ordered 30 ARJ21 aircraft in 2016 and 30 C919 in 2017 from COMAC. As at 31 December

2021, the Group’s aircraft on lease comprised 62 domestically manufactured aircraft, 171 mainstream

passenger aircraft, 26 business jets and 70 general aircraft. The Group’s fleet of domestically

manufactured aircraft includes the ARJ21, Modern Ark MA60, Y-12, AC313 and LE-500; its fleet of

mainstream passenger aircraft includes A350, B787, B777, A320, B737 and CRJ900; its fleet of

business jets includes BBJ, Gulfstream GV, Challenger 850, Global Express 6000 and Falcon; and its

fleet of general aircraft includes Cessna, King Air and Cirrus aircraft.

Able to provide customised and integrated financial services to its customers.

The Group has developed strong industry experience and expertise in the financial leasing business

for the aircraft, shipping, urban infrastructure and equipment sectors. In particular, it is able to

provide professional, customised and integrated financial services to meet the ever-changing business

requirements of its clients. It is also able to enhance its sales and marketing capabilities primarily

through the following:

? the establishment of a dedicated sales team comprising former industry professionals with

substantial industry knowledge and experience, as well as sales and marketing skills;

? the maintenance of close and regular contact with its customers by organising industry

exhibitions and forums to create platforms for market information exchange among industry

players and participating in industry specific associations to gain first-hand market information

on the latest market trends within the target industries;

? the leveraging of its knowledge and experience in the relevant industry sectors and its

established relationships with manufacturers and sales agents in order to source suitable aircraft,

vessels, urban infrastructure equipment and other equipment at competitive prices to

accommodate the business needs of its customers and enhance its competitiveness;

? the establishment and maintenance of the “single line of production, financing and marketing”

business structure of the AVIC’s Group as well as the crossover sales and share of customers

between the Group’s financial leasing business sector and other business units of the Group;

? the maintenance of an advanced information technology system to improve the efficiency and

quality of its services; and

? the provision of management training and on-going support services for its customers.

– 98 –

Access to multiple financing channels, strong balance sheet and prudent financial management.

The Group’s business growth and working capital requirements are primarily supported by internal

funding sources, bank loans, debt issuances and equity. With the strong shareholder support from

AVIC, the Guarantor has a registered capital of RMB9.98 billion as at 31 December 2021, being one

of the highest in the financial leasing industry.

Leveraging the support from, credibility of and relationship with AVIC, the Group maintains close

relationships with a large number of systematically important banks, policy banks and domestic and

international commercial banks. As at 31 December 2021, approximately 61 banks provided banking

facilities to the Group to support its various funding needs, including The Export-Import Bank of

China, China Development Bank, Agricultural Development Bank of China, Bank of China,

Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China,

Bank of Communications, DBS Bank, EDC, Deutsche Bank, Natixis, Commonwealth Bank of

Australia and BNP Paribas with a total approved credit line of approximately RMB127.19 billion and

unused credit line of approximately RMB73.42 billion. These relationships have allowed the Group

to secure sustainable sources of financing to support its business growth and working capital

requirements. In addition, the Group has been able to obtain long-term financing with favourable

interest rates from national policy banks for the Group’s acquisition of domestically manufactured

civil aircraft. Utilising its close relationships with the banks, the Group is able to secure bank

financing at a cost efficient level.

The unique corporate structure of the Group also enables it to explore funding solutions in both

domestic and international debt capital markets, such as issuing asset-backed securities or financial

bonds, or issuing bonds in offshore markets via its offshore subsidiaries. As at 31 December 2021,

approximately 77.57 per cent. and 22.43 per cent. of the Group’s debt securities were issued in the

domestic and international markets, respectively. For example, backed by an AAA corporate rating

issued by China Chengxin International Credit Rating Company Limited, the Guarantor issued bonds

in the PRC in an aggregate principal amount of approximately RMB41.97 billion as at 31 December

2021, comprising medium term notes of approximately RMB9.8 billion, super and short-term

commercial paper of approximately RMB3.0 billion, privately placed notes of approximately

RMB7.4 billion and corporate bonds of approximately RMB12.38 billion. As at 31 December 2021,

the Guarantor obtained a quota to issue bonds in the aggregate amount of up to approximately

RMB52.0 billion in the PRC, of which approximately RMB33.5 billion was unused. In addition, on

13 June 2014, Soar Rise Limited, an indirect wholly-owned subsidiary of the Guarantor, issued

RMB500,000,000 4.375 per cent. credit enhanced bonds due 2017 (the “2017 Bonds”) which are

unconditionally and irrevocably guaranteed by the China Aviation International Holding Co., Ltd. (a

direct wholly-owned subsidiary of the Guarantor) and have the benefit of a keepwell and liquidity

support deed provided by the Guarantor. Payments of principal and interest in respect of the 2017

Bonds also have the benefit of an irrevocable standby letter of credit issued by Agricultural Bank of

China Limited, Singapore Branch. Also, the Guarantor issued U.S.$300,000,000 3.00 per cent. notes

due 2020 under its U.S.$500,000,000 medium term note programme in November 2017. In November

2018, May 2019, October 2019, November 2020, March 2021, August 2021 and September 2021, the

Issuer issued U.S.$350,000,000 4.625 per cent. guaranteed notes due 2021, U.S.$450,000,000 3.50

per cent. guaranteed notes due 2022, U.S.$200,000,000 3.45 per cent. guaranteed perpetual capital

notes, U.S.$200,000,000 3.425 per cent. guaranteed perpetual capital notes, U.S.$500,000,000 1.75

per cent. guaranteed notes due 2024, EUR200,000,000 0.95 per cent. guaranteed notes due 2022 and

U.S.$300,000,000 1.65 per cent. guaranteed notes due 2024 under the Programme which are

unconditionally and irrevocably guaranteed by the Guarantor, respectively.

The Guarantor believes the Group’s access to diversified funding sources enables the Group to secure

adequate and cost efficient funds to support the growth and expansion of its overall business

operations and working capital requirements.

– 99 –

In addition, the Group has implemented prudent financial policies to ensure a strong balance sheet

and a healthy financial position by maintaining gearing ratios at a level that the Group considers

reasonable. The Group aims to closely manage the levels of gearing ratio to avoid any potential

liquidity risk. By reference to the gearing ratios of main competitors in the PRC, the Guarantor

believes that the Group’s gearing ratio has been maintained at reasonable levels. The Group has been

able to secure sufficient equity and debt financing to match the expansion of its business operations

and working capital requirements.

The Guarantor believes that the Group’s diversified access to financing channels, strong balance

sheet and liquidity position and prudent financial policies enables the Group to undertake large-scale

projects and further increase the size of its operating assets in accordance with the regulatory

restrictions.

Comprehensive and robust risk management systems.

The Group has adopted a prudent risk management strategy and established a comprehensive internal

control and risk management system to enhance its overall internal control and risk management

capabilities, covering various areas such as financial management, financial planning, connected

transactions, subsidiary management and investment management.

The internal control and risk management system was developed from, and is fully integrated with,

the Group’s overall internal control and risk management system. The Group’s risk management is

fully integrated into its approval process for each key business decision and project. At each stage

of the approval process, all elements of risk, including credit risk, market risk, liquidity risk, asset

risk, tax and accounting risk and legal and compliance risk, are carefully and independently assessed

by the risk management team of the Group. The Group also has a dedicated risk management team

to continuously monitor the risk level during the life cycle of each project and the creditworthiness

of its lessee portfolio using its internal risk management system. Policies and procedures for

managing risks across the Group are overseen by the Group’s risk control committee. As at 1 January

2020, 1 January 2021 and 31 December 2021, the Group’s consolidated impairment provision on

lease receivables were approximately RMB2.50 billion, RMB3.24 billion and RMB4.11 billion,

respectively, and the accumulated impairment provision represented approximately 2.00 per cent,

2.52 per cent. and 3.06 per cent. of the Group’s net lease receivables, respectively.

In addition, the Group targets to maintain a reasonable level of customer concentration. For the years

ended 31 December 2019, 2020 and 2021, the top five customers for the Group accounted for

approximately 13.27 per cent., 11.61 per cent. and 16.00 per cent. of the Group’s lease receivables,

respectively.

Experienced management team.

Most members of the Group’s management team have been with the Group since the Group’s

inception. As at 31 December 2021, approximately 20.24 per cent. of the Group’s employees had been

with the Group for over ten years, approximately 33.33 per cent. of the Group’s employees had been

with the Group for five to ten years, approximately 37.70 per cent. of the Group’s employees had

been with the Group for one to five years and approximately 8.73 per cent. of the Group’s employees

had been with the Group for less than one year. In addition, the Group’s experienced management

team has extensive knowledge in the leasing industry, strong asset management and disposition

– 100 –

capability, and strong working relationships with the PRC government authorities and leading

industry players. The Guarantor believes that the Group’s management team’s strong industry

knowledge and in-depth understanding of the relevant regulatory, legal and tax considerations and the

needs and interests of the parties involved, enable the Group to successfully structure and execute the

large-scale and sophisticated transactions that the Group enters into with clients and financing

partners.

In addition, the Group is committed to motivating and developing its employees and creating a

meritocratic system under which compensation is dependent on the satisfaction of attainable

performance targets. It has fostered a distinct culture and set of core values which it seeks to reinforce

with the Guarantor’s directors, senior management and employees. These core values embrace the

spirit of continuous learning and innovation, integrity, discipline, a competitive spirit, harmony and

co-operation. The Group is also committed to provide training and seminars for its employees to

further develop their knowledge and expertise in the relevant industry.

BUSINESS STRATEGIES

The Guarantor intends to implement the following principal strategies to support the further

development of the Group’s business:

To further strengthen the Group’s leading market position in the aircraft leasing industry by

acquiring aircraft in strong demand at competitive prices and by expanding its client base.

The Group intends to regularly review opportunities to acquire suitable aircraft, focusing on assets

that are not only in strong demand but that also meet the Group’s disciplined fleet portfolio mix

criteria and leasing strategies. For example, the Group has introduced a variety of trunk and regional

aircraft and high-end mainstream passenger aircraft. The core fleet comprises models that the

Guarantor believes will have operational longevity and that are capable of being easily transitioned

between airlines to avoid potentially costly ground time between leases. The Group will only

purchase aircraft models that the Guarantor believes will remain in strong demand in the industry in

the long run. As at 31 December 2021, the B737, A320, CRJ900, MA60 and ARJ21 were the Group’s

choice of narrowbody aircraft given their wide operator base, thus ensuring their marketability to

airlines. The Group also leases wide body aircraft, such as the B787 and A350, to some of its key

clients. In addition, the Group has developed strategic relationships with Boeing and COMAC. The

Group ordered 30 ARJ21 aircraft in 2016 and 30 C919 in 2017 from COMAC. The Group will also

continue to offer innovative and comprehensive financing solutions to meet the ever-changing needs

of its customers to enhance its market share in the aircraft leasing industry, in particular, in relation

to domestically manufactured civil aircraft.

Leveraging AVIC’s in-depth knowledge of the aviation industry, the Group plans to further strengthen

its supplier negotiation capabilities and targets to place aircraft order at competitive prices in order

to maintain pricing advantages over its competitors.

In addition, the Group plans to further expand its customer base in both the PRC and overseas

markets. Through its offshore entities, the Group plans to maintain its relationships and co-operation

with internationally renowned airlines, aircraft manufacturers and aircraft leasing companies to

explore business opportunities in overseas markets. The Group targets to achieve a diversified

customer base to avoid over-exposure to any given geographical area and customer group.

– 101 –

To strive to be cost competitive and prudently promote its business in the ship leasing

sub-sector.

The Group will continue to actively manage its capital structure and operating cost base to eliminate

inefficiencies and minimise the costs of its service offering. In particular, the Group intends to lower

its funding costs by exploring funding solutions in both domestic and international capital markets

and lower its operating costs by further improving its centralised back office systems.

The Group will continue to focus on the quality of its leased assets and prudently promote its ship

leasing business. Also, the Group will gradually focus on providing operating leasing services for

shipping which generate stable and recurring income to improve its cash flows. In addition, the

Guarantor intends to further expand its client base in the United States and Europe.

To continue to strengthen the Group’s market position in the equipment leasing sub-sector.

The Group will continue to seize the opportunities provided by the on-going urbanisation and

industrialisation in the PRC including: (i) the growing demand for alternative financing by large

corporations and local governments, and (ii) substantial opportunities to help clients finance largescale projects. The Group aims to expand its business in sectors that will have significant fixed asset

investment growth with preferential national policy support under the PRC’s “Fourteenth Five-Year

Plan”, such as transportation, logistics, energy, chemical, utilities and others. The Group will further

strengthen its research on the leasing industry and select its major business areas by focusing on

regions supported by favourable policies, fast-growing economy, and industry cluster effects. For

example, Zhejiang, Jiangsu and Jiangxi provinces may be the key regions where the Group will

further develop its business. The Group will continue to focus on local state-owned companies and

listed corporations, and expand its level of co-operation with clients by providing diverse and

customised services leveraging its full financial leasing licences and comprehensive business

platforms. The Guarantor believes the Group’s advantage of multiple business platforms will provide

clients with more comprehensive and higher quality leasing services.

To explore business opportunities in other industries in the PRC.

The Guarantor intends to continue exploring growth opportunities within other target industries in the

PRC with growth potential and in industries which it believes the Group’s services can be

competitive, so as to complement its existing businesses. For example, the Group has expanded into

the railway and renewable energy industries in the PRC.

The Group is also exploring business opportunities in other industries in the PRC, such as high-end

manufacturing industry, and may penetrate into these new industries only when suitable opportunities

arise. While the Group does not have any existing timetable to expand into these new industries, the

Guarantor believes that the Group’s track record and extensive experience in the PRC financial

leasing industry will provide the Group with sufficient insights into industry trends, customer needs

and market potential, which will equip the Group with the required capabilities to pursue suitable

expansion and penetration into these new industries.

To continue to diversify financing channels and optimise capital structure.

The Group will continue to broaden its access to multiple financing channels to support its business

development with adequate and cost-efficient funding:

? bank borrowings will remain the main financing source to the Group. The Group intends to

further enhance co-operation with existing and new banking partners;

– 102 –

? bond issuance will be the supplemental financing sources to the Group. The Group may issue

onshore corporate bonds or financial bonds, or issue bonds in offshore capital markets; and

? asset-backed security will be a new financing source to the Group.

The Guarantor believes that the Group’s ability to access extensive and diversified sources of funding

and to explore the option of funding the transactions with onshore or offshore debt may enable the

Group to optimise its costs of funding. Utilising its adequate and cost-efficient funding, the Group

will also continue to improve and maintain its financial performance.

To further leverage the Group’s relationship with AVIC and the Guarantor’s subsidiaries and

affiliates and the strong support from AVIC.

The Guarantor plans to further leverage AVIC’s brand name and the Group’s close relationships with

various provincial and local governments and large corporations to further expand the Group’s

aircraft leasing business in the PRC. In particular, by leveraging AVIC’s aircraft manufacturing

business and its experience in the aviation industry, the Group seeks to further enhance its market

share in the aviation leasing business for domestically manufactured civil aircraft and promote the

usage of domestically manufactured civil aircraft in the PRC. The Group will further leverage AVIC’s

network to enhance its negotiation capabilities and relationship with leasing assets suppliers. The

Group will further seek technical support from AVIC when expanding its aircraft leasing business

offshore. The Guarantor also believes that AVIC will continue to provide strong financial talent, and

other support to the Group in the form of loan, capital injection and guarantee, which will enable the

Group to support its overall business growth and working capital requirements.

To continue to strengthen risk management and corporate governance capabilities.

The Guarantor intends to further enhance the Group’s risk management and corporate governance

capabilities by continuing to focus on implementing an integrated and dynamic risk management

system and optimising prudent risk management systems to protect the long-term interests of its

shareholders, customers and employees. The Guarantor has upgraded the Group’s information

technology system to more closely monitor and control the status of assets, financing project

management and overall asset monitoring of the Group. In addition, the Guarantor intends to

proactively streamline the procedures to enhance stringent selection process of suitable fundamental

and sustainable industries, the segmentation of suitable target customers, customer credit assessment

and approval procedures, as well as portfolio monitoring and management. Utilising more

comprehensive and upgraded risk management systems, the Group is able to improve its selection

process and valuation of its leasing assets, and hence to minimise downside risks such as credit

default of its clients and asset price deflation. The Group will also maintain prudent investment

policies that aim to achieve a balance between assets and liabilities, between investment returns and

risk taking, and among its business segments.

– 103 –

CORPORATE HISTORY

The Guarantor was incorporated in 1993 with a registered capital of U.S.$5 million. Since the

incorporation of the Guarantor in 1993, the Group has successfully grown to become one of the

leading leasing companies in the PRC. The following table sets forth the key corporate milestones of

the Group:

Year Event

2004................................................ The Guarantor was approved by MOFCOM to conduct

financial leasing business.

2006................................................ Following restructuring, the Guarantor’s registered capital

was increased to RMB430 million.

2009................................................ The Guarantor’s registered capital was increased to RMB850

million.

2010................................................ The Guarantor was honoured as a “Top 10 Financial Leasing

Enterprise” at the China Financial Leasing Annual

Conference.

The Guarantor was awarded the “PRC Best Financial

Innovation Award” by the Organising Committee of the Sixth

Beijing International Finance Expo.

The Guarantor was awarded the “World Expo Honour Award”

by the Organising Committee of the Shanghai World Expo.

2011 ................................................ The Guarantor’s registered capital was increased to RMB1.5

billion and the Group’s leased asset scale reached RMB14

billion.

The Guarantor was recognised as reaching the “Pudong

Corporate Social Responsibility Standards” by the Office of

Shanghai Pudong Corporate Social Responsibility.

2012................................................ The Guarantor was recognised as a “Integrity Enhancement

Enterprise” by the Shanghai Financial Leasing Industry

Association of the Organising Committee of the Shanghai

Corporate Integrity Enhancement Campaign.

The Guarantor was honoured as the “PRC Financial Leasing

Enterprise of the Year” at the 2012 China Financial Leasing

Annual Conference.

The Guarantor’s registered capital was increased to RMB2.00

billion.

– 104 –

Year Event

2013................................................ The shares of AVIC Industry-Finance Holdings Co., Ltd.

were listed on the Shanghai Stock Exchange.

The Guarantor’s registered capital was increased to RMB2.73

billion.

The Guarantor was recognised as a “Shanghai Three Star

Integrity Enhancement Enterprise” by the Shanghai Financial

Leasing Industry Association of the Organising Committee of

the Shanghai Corporate Integrity Enhancement Campaign.

The Guarantor was awarded the “Innovation and Pioneering

Award” at the 2013 China Financial Leasing Annual

Conference.

The Guarantor was awarded the “Innovation Award” jointly

by the Dongjiang Free Trade Port Zone of Tianjin and the

General Aviation Committee of China Air Transportation

Association for the first leasing transaction for CRJ900

aircraft in the PRC.

2014................................................ The Guarantor’s registered capital was increased to RMB3.79

billion.

The Guarantor was recognised as the “Most Influential

Enterprise” by the Shanghai Financial Leasing Industry

Association.

The Guarantor was recognised as a “Shanghai Four Star

Integrity Enhancement Enterprise” by the Shanghai Financial

Leasing Industry Association of the Organising Committee of

the Shanghai Corporate Integrity Enhancement Campaign.

The Guarantor was awarded the “Innovation Award” jointly

by the Dongjiang Free Trade Port Zone of Tianjin and the

General Aviation Committee of China Air Transportation

Association for the leasing transactions for B737-800 and

B737-900ER aircraft.

The Guarantor was recognised as reaching the “Pudong

Corporate Social Responsibility Standards” by the Office of

Shanghai Pudong Corporate Social Responsibility.

– 105 –

Year Event

2015................................................ The Group was the first leasing company in the PRC to enter

into direct financing arrangement with Export Development

Canada for its leasing transaction with China Express in

respect of two CRJ900 aircraft.

The Guarantor was recognised as a “Shanghai Five Star

Integrity Enhancement Enterprise” by the Shanghai Financial

Leasing Industry Association of the Organising Committee of

the Shanghai Corporate Integrity Enhancement Campaign.

The Guarantor’s direct financing arrangement with Export

Development Canada was awarded the “Innovation Award” in

the third China Air Finance “Wan Hoo” Awards Presentation

Ceremony.

The Group’s leased asset scale exceeded RMB50 billion.

2016................................................ The Guarantor’s registered capital was increased to RMB4.94

billion.

The Guarantor was recognised as a “Shanghai City Five Star

Integrity Enhancement Enterprise” by the Shanghai Financial

Leasing Industry Association of the Organising Committee of

the Shanghai Corporate Integrity Enhancement Campaign.

The Guarantor was awarded the “Financial Outstanding

Contribution Award” by the People’s Government of

Shanghai Pudong Xinqu.

The Guarantor was recognised as the “PRC Financial Leasing

Enterprise of the Year” at the 2016 China Financial Leasing

Annual Conference.

The Group’s leased asset scale exceeded RMB60 billion.

– 106 –

Year Event

2017................................................ The Guarantor’s registered capital was increased to RMB7.47

billion.

The Guarantor was awarded the “Financial Outstanding

Contribution Award” by the People’s Government of

Shanghai Pudong Xinqu.

The Guarantor was recognised as a “Shanghai City Five Star

Integrity Enhancement Enterprise” by the Shanghai Financial

Leasing Industry Association of the Organising Committee of

the Shanghai Corporate Integrity Enhancement Campaign.

The Guarantor was recognised as an “Outstanding

Enterprise” by the Shanghai Leasing Trade Association.

The Guarantor was awarded the “One Belt One Road and

International Projects Development Award” in the fifth China

Air Finance “Wan Hoo” Awards Presentation Ceremony.

The Guarantor was recognised as the “Pudong Xinqu Modern

Service Industry Outstanding Contribution Award” by the

People’s Government of Shanghai Pudong Xinqu.

The Guarantor was recognised as reaching the “Pudong

Corporate Social Responsibility Standards” by the Office of

Shanghai Pudong Corporate Social Responsibility.

The Guarantor was recognised as the “Best Risk Management

Enterprise for Customer Experience in 2017” at the Financial

Risk Management Leadership Forum 2018 and 2017

Financial Risk Management Awards Presentation Ceremony.

The Guarantor was recognised as the “Advanced Unit of

Planned Financial Management” by AVIC in 2017.

The Group’s leased asset scale exceeded RMB80 billion.

– 107 –

Year Event

2018................................................ The Group’s leased asset scale exceeded RMB100 billion.

The Guarantor’s registered capital was increased to RMB9.98

billion.

The Guarantor was recognised as one of the first “five-star

enterprises” in Dongjiang by the Dongjiang Free Trade Port

Zone of Tianjin.

The Guarantor was awarded the “Industry Promotion Award”

in the sixth China Air Finance “Wan Hoo” Awards

Presentation Ceremony.

The Guarantor was awarded the “China Maritime Financing

Star Award” at the fourth China Maritime Finance

(Dongjiang) International Forum.

The Guarantor was awarded the “Financial Outstanding

Contribution Award” by the People’s Government of

Shanghai Pudong Xinqu.

2019................................................ China Aviation Investment Co., Ltd. increased its capital and

issued new shares to five strategic investors including but not

limited to China Life Insurance Company Limited (中國人壽

保險股份有限公司). Following such capital increase, AVIC

Industry-Finance Holdings Co., Ltd.’s shareholding in China

Aviation Investment Co., Ltd. decreased from 100 per cent. to

approximately 73.56 per cent..

The Guarantor was ranked 31st in terms of fleet value in the

“Global Aircraft Leasing Companies Ranking” published by

FlightGlobal.

The Guarantor was awarded the “Best Transaction Award”

and “Ten Years Industry Promotion Award” in the seventh

China Air Finance “Wan Hoo” Awards Presentation

Ceremony.

The Group’s leased asset scale exceeded RMB140 billion.

2020................................................ The Guarantor was ranked 20th in the list of global top 50

lessors of 2020 published by Cirium.

The Group’s leased asset scale exceeded RMB150 billion in

June 2020.

2021................................................ The Guarantor was ranked 16th in the list of global top 50

lessors of 2021 published by Cirium.

The Guarantor was ranked 13th in terms of fleet value in the

“Global Aircraft Leasing Companies Ranking” published by

FlightGlobal.

The Group’s leased asset scale exceeded RMB158 billion.

– 108 –

RECENT DEVELOPMENTS

The outbreak of COVID-19.

The ongoing COVID-19 pandemic has caused substantial disruptions in the PRC and international

economies and markets which has resulted in additional uncertainties in the Group’s operating

environment, particularly with the emergence of new variants such as the Delta variant and the

Omicron variant. The Group has been closely monitoring the impact of the ongoing COVID-19

pandemic on the Group’s businesses and will keep its contingency measures and risk management

under review as the situation evolves. Please see “Risk Factors – Risks Relating to the Group – The

extent to which the COVID-19 pandemic will impact the Group’s business, financial condition, results

of operations and prospects is uncertain and cannot be predicted.” and “Risk Factors – Risks

Relating to the Group – The Group’s operations are subject to force majeure events, political unrest

or civil disobedience movements, natural disasters and outbreaks or pandemic of contagious diseases

and other disasters.” for further information.

Issue of debt instruments since 31 December 2021.

Since 31 December 2021, the Guarantor has issued onshore debt securities (excluding

perpetual securities) in an aggregate principal amount of approximately RMB7.9 billion, and the

Guarantor has issued perpetual securities in an aggregate principal amount of approximately RMB1.6

billion.

– 109 –

ORGANISATIONAL STRUCTURE

The following chart sets forth a simplified corporate structure of the Group, which shows the Issuer,

the Guarantor and the Guarantor’s shareholders as at 31 December 2021:

State-owned Assets Supervision

and Administration Commission

of the State Council of the PRC



Aviation Industry

Corporation of China(1)



AVIC Industry-Finance Holdings Co., Ltd.

AVIC Xi’an

Aircraft Industry

(Group) Co., Ltd.

(“AVIC Xian”)

COMAC

Capital Co., Ltd.

(“COMAC Capital”)

China Aviation

Investment

Co., Ltd.

AVIC International Leasing Co., Ltd.

(The Guarantor)



CAVIC Aviation

Leasing (Ireland)

Co., Designated

Activity Company



100%

100% 49.79%
9.97% 73.56%49.07%
100%

Soar Wise Limited

(The Issuer)



100%

1.37% 0.49% 49.07%

Note:

(1) As at 31 December 2021, AVIC directly owned approximately 39.45 per cent. of the issued share capital of AVIC

Industry-Finance Holdings Co., Ltd. and indirectly through its subsidiaries (other than AVIC Xi’an and COMAC

Capital) owned approximately 10.34 per cent. of the issued share capital of AVIC Industry-Finance Holdings Co., Ltd.

– 110 –

BUSINESS DESCRIPTION

The Group is principally engaged in the leasing business in the PRC and provides a diverse array of

financial leasing and operating leasing services, primarily focusing on the aircraft, shipping, urban

infrastructure and equipment sectors. The Group primarily focuses on large-scale projects and

long-term customers with strong credit profile, which allow the Group to dedicate its resources to

customised leasing products and value-added services to key clients in target industries, as well as

to anticipate and adapt to shifting market conditions and changing customer needs. By concentrating

on large-scale leasing businesses, the Group is able to achieve economies of scale and a market

leading position in the leasing industry. Throughout its approximately 17 years of operation, the

Group has established and maintained a well-structured financial and operating leasing platform for

both overseas and domestically manufactured civil aircraft, as well as for large-scale equipment,

urban infrastructure equipment and vessels.

The Guarantor was one of the first PRC leasing companies approved by MOFCOM and the State

Administration of Taxation. As at 31 December 2021, the Guarantor was one of the leading leasing

companies in the PRC. In addition, the Guarantor believes that the Group had one of the largest

networks of airline customers in the PRC as at 31 December 2021.

As at 31 December 2021, AVIC indirectly held approximately 43.78 per cent. of the issued share

capital of the Guarantor. AVIC is one of the central state-owned enterprises directly supervised by

central SASAC, focusing on aerospace and defence. Through its subsidiaries and affiliates in the PRC

and overseas, AVIC’s businesses principally cover defence, transport aircraft, engines, helicopters,

avionics and systems, general aviation, aviation research, flight test, trade and logistics, asset

management, finance services, engineering planning and construction and automobile. As at

31 December 2021, AVIC’s group consisted of a number of listed companies. AVIC had been named

in the “Global 500” published by Fortune magazine for 13 consecutive years and ranked 140th on the

list in 2021. As at the date of this Offering Circular, AVIC ranks the fourth among the industrial

manufacturing enterprises owned by SASAC in the PRC. With its extensive customer base and

supplier network, established relationship with local governments and other state-owned enterprises,

in-depth industry knowledge, strong brand recognition and experienced management, AVIC provides

the Group with valuable support for the development of its business. As at 31 December 2021, the

Guarantor was the only leasing platform operating under the financial services business segment of

AVIC.

In December 2021, the Group’s leased asset scale exceeded RMB158 billion. As at 31 December

2021, the leased asset scale of the Group’s operating leasing business and the Group’s financial

leasing business amounted to approximately RMB19.69 billion and RMB138.56 billion, respectively.

In terms of leased asset scale, the Guarantor ranked first and eighth among the domestic leasing

companies (excluding Bohai Leasing Co., Ltd.) and all domestic and foreign leasing companies

(excluding Bohai Leasing Co., Ltd.), respectively, in the PRC as at 31 December 2021.

For the years ended 31 December 2019, 2020 and 2021, the Group reported total consolidated

revenue from operations of approximately RMB10,076.85 million, RMB10,125.86 million and

RMB10,303.45 million, respectively, and consolidated net profit of approximately RMB1,711.21

million, RMB1,974.09 million and RMB1,990.59 million, respectively. As at 1 January 2020,

1 January 2021 and 31 December 2021, the total consolidated assets of the Group amounted to

approximately RMB148,755.70 million, RMB158,759.96 million and RMB167,583.66 million,

respectively.

– 111 –

The following table sets forth the breakdown by product of the Group’s consolidated revenue from

operations for the periods indicated:

Consolidated revenue

from operations by

products

(RMB million, except

percentages)

For the year ended 31 December2019 Percentage
Percentage 2020 Percentage 2021

Financial Leasing and

Operating Leasing .... 9,934.78 98.59% 9,795.37 96.74% 9,860.91 95.70%

Others.......................... 142.07 1.41% 330.49 3.26% 442.54 4.30%

Total ........................... 10,076.85 100% 10,125.86 100% 10,303.45 100%

The following table sets forth the Group’s income from financial leasing and operating leasing,

expenses relating to financial leasing and operating leasing and net income from financial leasing and

operating leasing for the periods indicated:

For the year ended 31 December

2019 2020 2021

(RMB million)

Income from financial leasing and

operating leasing.................................................. 9,934.78 9,795.37 9,860.91

Expenses relating to financial leasing and

operating leasing ................................................ 5,579.39 5,074.40 6,142.35

Net income from financial leasing and

operating leasing ................................................ 4,335.38 4,720.97 3,718.56

The following table sets forth the breakdown of the Group’s leased asset scale by the operating

leasing and financial leasing businesses of each target industry as at the dates indicated:

Leased asset scale

by industries

(RMB billion, except

percentages)

As at 31 December2019 Percentage 2021 Percentage
2020 Percentage



Aircraft........................ 42.31 29.90% 45.86 30.74% 53.43 33.76%

Shipping ..................... 15.44 10.91% 19.45 13.04% 18.01 11.38%

Urban Infrastructure...... 40.50 28.62% 44.48 29.81% 39.38 24.88%

Equipment.................... 43.27 30.57% 39.41 26.42% 47.43 29.97%

Total ........................... 141.52 100% 149.20 100% 158.25 100%

– 112 –

The following table sets forth the number of new lease agreements entered into by the Group and the

total contracted amount of the relevant new lease agreements for the periods indicated:

For the year ended 31 December

2019 2020 2021

Number of new lease agreements ............................ 403 343 431

Total contracted amount of new lease agreements

(RMB billion) ...................................................... 73.64 60.28 75.93

The following table sets forth the breakdown of the Group’s leased asset scale by business model as

at the dates indicated:

As at 31 December

Business model (percentage) 2019 2020 2021

Sale and lease-back ................................................. 65.97% 64.13% 60.65%

Direct financial leasing ........................................... 24.41% 24.16% 26.91%

Operating leasing .................................................... 9.62% 11.71% 12.44%

Total ....................................................................... 100% 100% 100%

The following table sets forth the Group’s rental recovery rate as at the dates indicated:

As at 31 December

2019 2020 2021

Rental recovery rate(1) (percentage)......................... 99.27% 98.90% 99.31%

Note:

(1) The rental recovery rate means, for a relevant period, lease payments received divided by lease receivables multiplied

by 100 per cent..

Aircraft Leasing

Overview

The Group is principally involved in the provision of financial leases and operating leases of

domestic aircraft, mainstream passenger aircraft, business jets and general aircraft to airlines in the

PRC and other Asia regions. Leveraging its track record, it has established long-term business

relationships and co- operation arrangements with domestic and international aircraft manufacturers

as well as suppliers, airlines and general aviation companies.

– 113 –

Business Model

The Group’s aircraft leases primarily comprise financial leases and operating leases.

Under direct financial leases, the Group typically enters into a commercial arrangement with its

clients pursuant to which: (i) the client, as the lessee, will select the required asset; (ii) the Group,

as the lessor, will then purchase that asset; (iii) the lessee will be entitled to use that asset for the

duration of the lease; (iv) the lessee will make a series of rental payments to the Group for the use

of that asset during the lease term; (v) the Group will recover a majority or the entire costs of the asset

and earn interest from the rental payments made by the lessee; and (vi) the lessee has the option to

acquire ownership of the asset from the Group upon expiry of the lease term. Under direct financial

leasing arrangements, substantially all of the risks and reward of ownership of the assets are

transferred to the lessees.

Under operating leases, the client, as the lessee, bears all of the risks and reward of the operation of

the asset, while the Group, as a lessor, retains ownership and risks related to the ownership of the

asset. The lessee generally makes rental payments to the lessor in advance, and the lessor may require

the lessee to pay a security deposit equivalent to an amount ranging from one to six months’ rent. The

lessee will be required to return the asset to the lessor at the end of the lease term in a pre-agreed

acceptable condition that will allow the lessor to lease out the asset to another client rapidly upon

expiry of the lease term, with compensation mechanics in place as an alternative.

Lease rentals are contracted on either a fixed rate or floating rate basis. For fixed rate leases, the

rental is typically fixed in advance at the time of execution of lease contract or just prior to the

delivery date by reference to a swap rate in line with the term of the lease. For floating rate leases,

rental payments are typically re-set periodically by reference to applicable benchmark interest rates.

During the full lease term, the Group, as the lessor, will require the airline lessees to undertake the

required maintenance procedures and maintain full value insurance extending to the aircraft and its

installed parts.

Since 2010, the Group has commenced using its project companies established in Ireland, the

Dongjiang Free Trade Port Zone of Tianjin, the China (Shanghai) Pilot Free Trade Zone and the

Hainan Free Trade Zone to act as lessors to enter into aircraft leasing transactions with airline

operators in the PRC. As at 31 December 2021, the Group had approximately 182 aircraft leasing

special-purpose vehicle companies.

– 114 –

The Group’s project companies source their fleet primarily from three channels, namely, (i) direct

purchases from aircraft manufacturers; (ii) sale and lease-back transactions with airline operators;

and (iii) purchases from other aircraft leasing companies or other owners, with or without leases in

place. The following diagram illustrates a simplified structure of an aircraft leasing transaction

engaged by the Group’s project companies:

Aircraft manufacturers

The Group’s

project

companies

3. Payment of the purchase price

1. The Group’s project companies source

their fleet primarily from three channels,

namely, direct purchases from aircraft

manufacturers, sale and lease-back

transactions with airline operators and

purchases from other aircraft leasing

companies or other owners, with or

without leases in place.

4. The Group’s project companies lease

the aircraft to airline operators in

long-term

5. The Group’s project companies receive

lease payments from airline operators


Airline

operators

2. The Group’s project companies

obtained long-term bank borrowings

6. The Group’s project companies pay

principal and interest to banks/financial

institutions


Banks/

Financial

institutions

The following table sets forth the breakdown of leased asset scale of the Group’s aircraft leasing

business by business model as at the dates indicated:

Aircraft leasing – Business model (percentage)

As at 31 December

2019 2020 2021

Sale and lease-back ................................................ 6.80% 5.65% 3.87%

Direct financial leasing .......................................... 66.06% 65.56% 68.47%

Operating leasing .................................................... 27.14% 28.79% 27.66%

Total ....................................................................... 100% 100% 100%

Fleet of Aircraft

The Group has a diversified and rapidly growing aircraft fleet comprising both overseas and

domestically manufactured civil aircraft. The Group operates one of the youngest fleets among major

top-tier aircraft leasing companies in the PRC, comprising internationally renowned aircraft

(including new generation Airbus, Boeing, Embraer and Bombardier aircraft) as well as domestically

manufactured civil aircraft (including the ARJ21, Modern Ark MA60 and Y-12). The Group’s fleet

comprises mainly modern, in- production fuel efficient aircraft types based around the B737, A320,

CRJ900 and MA60 families of aircraft, with an emphasis on narrowbody aircraft. As at 31 December

2021, the average age of the Group’s fleet of aircraft was approximately four years.

Leveraging the support from, and its relationships with, AVIC and the Guarantor’s subsidiaries and

affiliates, the Group also maintains strong business relationships with both domestic and international

– 115 –

aircraft manufacturers and sales agents. The Group focuses on acquiring aircraft at attractive prices,

sourcing suitable aircraft from AVIC and its subsidiaries and affiliates, sourcing external funding at

competitive rates, maintaining an efficient operational structure with low overhead and minimizing

aircraft transition costs. In addition, the Group has developed strategic relationships with Boeing and

COMAC. The Group ordered 30 ARJ21 aircraft in 2016 and 30 C919 in 2017 from COMAC.

The following table sets forth certain data about the Group’s aircraft fleet as at or for the periods

indicated:

As at or for the year ended

31 December

2019 2020 2021

Total number of aircraft contracted for delivery

(for the periods indicated) .................................. 44 57 54

Total contracted amount of aircraft contracted for

delivery (for the periods indicated) .....................

RMB18.54

billion

RMB6.98

billion

RMB14.29

billion

Total number of aircraft delivered (for the periods

indicated)............................................................. 33 50 52

Total contracted amount in respect of aircraft

delivered (for the periods indicated) ...................

RMB15.24

billion

RMB10.18

billion

RMB14.38

billion

Total number of aircraft on lease (as at the dates

indicated) ........................................................... 300 313 329

Aircraft type:

– Domestic aircraft ................................................ 53 52 62

– Mainstream passenger aircraft ............................. 130 150 171

– Business jets ....................................................... 22 24 26

– General aircraft ................................................... 95 87 70

Customers

As at 31 December 2021, the Group’s aircraft were primarily leased and delivered to aircraft

operators in Asia and Europe with a lease term typically ranging from eight to 12 years. The

Guarantor believes that the contracted revenue generated from long-term leases combined with a

high-quality lessee base provide the Group with a stable source of earnings and cash flow from year

to year.

The Guarantor believes that the Group had one of the largest networks of airline customers in the

PRC as at 31 December 2021. In March 2015, the Group was the first leasing company in the PRC

to enter into direct financing arrangement with Export Development Canada for its leasing

transaction with China Express in respect of two CRJ900 aircraft. The Group enjoys both a

well-established and an expanding customer base across the PRC with whom it has maintained strong

long-term relationships. The Group’s customer base for its aircraft leasing business comprises a

number of domestic airline companies in the PRC and multinational airline companies in various

countries in Asia and Europe, primarily including China Eastern Airlines, Air China, China Southern

Airlines, Xiamen Airlines, Shenzhen Airlines, Hebei Airlines, Hainan Airlines, Tianjin Airlines,

Juneyao Airlines, Okay Airways, China Express, Donghai Airlines, Qingdao Airlines, Vietnam

Airlines, Turkish Airlines, Wizz Air, Indigo Airline, Spring Airways, Lion Air, Chengdu Airlines,

Scandinavian Airlines, Myway Airlines, Loong Air, Kunming Airlines and Etihad Airways. For the

years ended 31 December 2019, 2020 and 2021, the top five customers for the Group’s aircraft

leasing business accounted for approximately 11.29 per cent., 11.61 per cent. and 16.00 per cent. of

the Group’s aircraft leasing assets, respectively.

As at 31 December 2021, the Group’s non-performing aircraft lease receivable was approximately

RMB6.99 million.

– 116 –

Ship Leasing

Overview

The Group primarily provides ship leasing services to shipping companies established in the PRC or

ultimately owned by PRC entities.

Business Model

The Group leases its vessels primarily via direct financial leasing, sale and lease-back arrangements

and operating leasing. The business model for direct financial leasing is similar to that described

under “– Business Description – Aircraft Leasing” above. Under sale and lease-back transactions, the

lessee purchases the asset first and then sells it to the Group. The asset is leased back by the Group

to the lessee, who will subsequently make a series of rental payments for the use of the asset. Such

an arrangement allows the lessee to make full use of the asset while not having capital tied up in the

asset and, in some situations, to enjoy a tax benefit.

During the full lease term, the Group, as the lessor, will require the shipping lessees to undertake the

required maintenance procedures and maintain full value insurance extending to the vessel and its

installed parts.

The following table sets forth the breakdown of leased asset scale of the Group’s ship leasing

business by business model as at the dates indicated:

Ship leasing – Business model (percentage)

As at 31 December

2019 2020 2021

Sale and lease-back ................................................ 61.55% 58.00% 53.29%

Direct financial leasing ........................................... 28.12% 23.15% 23.58%

Operating leasing .................................................... 10.33% 18.85% 23.14%

Total ....................................................................... 100% 100% 100%

The Group leverages its industry expertise within the shipping industry and provides customised ship

financing services to provide effective and reliable funding support for its shipping customers. The

Group’s specialised sales team is capable of providing comprehensive financing solutions and

professional advisory services for its customers who request industry-specific financing advice for

the purchase of their vessels. The Guarantor believes that the Group’s provision of an integrated and

customised range of financial services to its shipping customers has enhanced its customers’ trust and

reliance on its services and enabled it to establish its market presence within the ship financing

market.

In addition, the Group’s operations in the ship leasing market are categorised as the U.S. dollar

financing business and the Renminbi financing business. Its U.S. dollar financing services are

provided primarily to shipping companies operating on international shipping lines, and its Renminbi

financing services are provided principally to shipping companies operating on domestic shipping

lines. The Group also provides various advisory services to its shipping industry customers which

include (i) vessel operation advisory services such as ship selection and purchasing timing analysis;

(ii) industry competition analysis based on its cumulative industry expertise and market information;

and (iii) finance consulting services such as working capital and cash flow management consulting

based on an analysis of the customer’s financial statements and operational status, profit projection

and vessel value assessment.

– 117 –

Fleet of Vessel

The Group has an extensive vessel fleet including high-end vessels and operates a diverse portfolio

of large-sized commercial vessels, primarily including bulk carriers, container ships, liquid cargo

ships (such as liquefied petroleum gas carriers, chemical tankers, asphalt carriers and heavy-lift

ships) and other vessels (such as gas carriers, car carriers, passenger ships and cattle carriers). As at

31 December 2021, the Group’s number of vessels on lease reached 194 and the average age of the

Group’s vessel fleet was approximately four years.

The following table sets forth certain data about the Group’s vessel fleet as at or for the periods

indicated:

As at or for the year ended

31 December

2019 2020 2021

Total number of vessel contracted for delivery (for

the periods indicated) .......................................... 62 26 48

Total contracted amount of vessels contracted for

delivery (for the periods indicated) .....................

RMB9.15

billion

RMB4.78

billion

RMB8.02

billion

Total number of vessel delivered (for the periods

indicated)............................................................. 53 42 52

Total contracted amount in respect of vessels

delivered (for the periods indicated) ...................

RMB7.59

billion

RMB7.23

billion

RMB14.38

billion

Total number of vessel on lease (as at the dates

indicated) ........................................................... 216 248 194

Vessel type:

– Bulk carriers ....................................................... 102 112 89

– Container ships ................................................... 34 38 15

– Liquid cargo ships .............................................. 42 50 42

– Other vessels ...................................................... 38 48 48

Customers

As at 31 December 2021, part of the Group’s vessels were leased and delivered to shipping companies

established in the PRC or ultimately owned by PRC entities, including other members of AVIC’s

group, with a lease term ranging from five to ten years. The Group has also developed business

relationships with customers in the United States, Greece, Switzerland and the United Kingdom. As

at 31 December 2021, the Group’s key customers included China COSCO Shipping Corporation

Limited, China Merchants Group, China State Shipbuilding Corporation, SUMEC Group

Corporation, China Shipbuilding Industry Corporation, Jianlong Group, Trawind Shipping Logistics,

Taizhou Maple Leaf Shipbuilding Co., Ltd., Wide Shine Development Limited, Mediterranean

Shipping Company, Golden Union Shipping Co. S.A., Navig8 Limited, Seanergy Maritime Holdings

Corp., Scorpio Tankers Inc. and Interlink Maritime Corp. In addition, pursuant to the project

co-operation agreement between the Guarantor, SDTR Marine Pte. Ltd. and Dalian Shipbuilding

Industry Co., Ltd. entered into in January 2019, the Group would lease ten 85,000 DWT

Super-Kamsarmax bulk carriers to SDTR Marine Pte. Ltd. The Group intends to further expand its

overseas customer base. For the years ended 31 December 2019, 2020 and 2021, the top five

customers for the Group’s ship leasing business accounted for approximately 4.80 per cent., 5.10 per

cent. and 3.23 per cent. of the Group’s ship leasing assets, respectively.

As at 31 December 2021, none of the Group’s shipping customers was in material default or breach

of their leasing contracts with the Group.

– 118 –

Urban Infrastructure Leasing

The Group operates a diverse portfolio of, and provides financial leasing services for, urban

infrastructure equipment, covering primarily public transport related equipment, water supply,

sewage disposal and water-environmental protection machinery, construction machinery, gas and heat

supply equipment and agricultural machinery. As at 31 December 2021, the lease term of the Group’s

urban infrastructure leasing typically ranges from three to five years.

The Group promotes urban infrastructure construction in the key cities in the PRC by providing urban

infrastructure leasing services primarily to infrastructure construction and operation management

companies in the PRC, including Zhenjiang Transportation Industry Group. The Group also provides

financial leasing services to tourism companies in the PRC, such as Dengfeng Songshan Shaolin

Cultural Tourism Co. Ltd and Wuzhen International Tourism Group. Leveraging on its established

relationship with local governments and other state-owned enterprises, the Group has close

relationships with agencies or entities owned, controlled by or otherwise associated with local

governments, including local government financing vehicles, in the PRC and has assisted these

organisations in a variety of urban infrastructure or public utilities construction projects. For the

years ended 31 December 2019, 2020 and 2021, the top five customers for the Group’s urban

infrastructure leasing business accounted for approximately 3.16 per cent., 2.98 per cent. and 2.44 per

cent. of the Group’s urban infrastructure leasing assets, respectively.

The urban infrastructure financial leasing business primarily involves sale and lease-back services.

The business model for sale and lease-back is similar to those described under “– Business

Description – Ship Leasing” above.

Equipment Leasing

The Group provides financial leasing services for large-scale equipment to various manufacturers in

a wide range of industries, including the machinery, iron and steel, chemical and transportation and

logistics industries. The Group’s equipment leasing business also focuses on the technological

transformation of equipment used in the aviation industry. In addition, the Group has established a

presence in the environmental protection industry by providing equipment leasing services to the

renewable energy, energy saving and environmentally-friendly machinery and modern agricultural

sectors. The Group provides financial leasing services for large scale equipment to its clients with the

aim to satisfy their financing and investment needs, optimise its clients’ financial structures and

promote technological advancement and upgrade of industrial equipment. As at 31 December 2021,

the lease term of the Group’s equipment leases typically ranges from three to five years.

– 119 –

The following table sets forth the breakdown of leased asset scale of the Group’s equipment leasing

business by industry as at the dates indicated:

Leased asset scale

Industry (percentage)

As at 31 December

2019 2020 2021

Papermaking............................................................ 3.79% 3.45% 1.51%

Iron and Steel ......................................................... 12.72% 16.47% 13.83%

Machinery ............................................................... 25.52% 26.77% 33.22%

Chemical................................................................. 17.96% 15.58% 10.24%

Renewable Energy................................................... 3.99% 6.16% 13.21%

Transportation and Logistics.................................... 11.87% 5.59% 6.23%

Other Equipment(1).................................................. 24.14% 25.98% 21.76%

Total ....................................................................... 100% 100% 100%

Note:

(1) Other equipment includes aviation equipment, energy saving and environmentally-friendly machinery and modern

agricultural equipment.

The Group serves these sectors by providing equipment leasing services to various manufacturers,

satisfying the financing and investment needs of clients, optimising clients’ financial structures, and

promoting technological advancement and replacement of industrial equipment. The Group has close

relationships with state-owned companies, listed companies and large-scale privately-owned

enterprises across the PRC, including Chengdu Chengfa Science & Energy Power Engineering Co.,

Ltd., AVIC SAC Commercial Aircraft Company Limited, Shanghai Aviation Aero – Engine

Manufacturing Co., Ltd., Beijing Enterprises Clean Energy Electric Power Limited, China Sinogy

Electric Engineering Company Limited and Wuhan Metro Group Company Limited and has assisted

these organisations in a variety of equipment leasing projects. For the years ended 31 December 2019,

2020 and 2021, the top five customers for the Group’s equipment leasing business accounted for

approximately 2.06 per cent., 2.34 per cent. and 1.94 per cent. of the Group’s equipment leasing

assets, respectively.

The large-scale equipment financial leasing business involves a variety of services including sale and

lease-back, direct financial leasing and financial advisory services. The business models for direct

financial leasing and sale and lease-back are similar to those described under “– Business Description

– Aircraft Leasing” and “– Business Description – Ship Leasing” above, respectively.

– 120 –

The following table sets forth the breakdown of leased asset scale of the Group’s equipment leasing

business by business model as at the dates indicated:

Equipment leasing – Business model

(percentage)

As at 31 December

2019 2020 2021

Sale and lease-back ................................................. 93.69% 94.74% 94.72%

Direct financial leasing ........................................... 5.20% 3.74% 3.71%

Operating leasing .................................................... 1.11% 1.52% 1.57%

Total ....................................................................... 100% 100% 100%

The Group also provides financial advisory service in equipment leasing according to the clients’

need for sale or purchase of equipment, financial statement optimisation and business restructuring.

COMPREHENSIVE AND ROBUST RISK MANAGEMENT

The Group’s risk management principle is to implement an integrated and dynamic risk management

system and continue to optimise its risk management system to protect the long-term interests of

shareholders, customers and employees.

The Group has implemented its prudent risk management system across three dimensions:

Business model dimension. The Group’s business is organised and operated with an industryfocused approach. Such a business model helps manage systematic risk through established

procedures, primarily comprising (i) a stringent selection process of suitable, fundamental and

sustainable industries; (ii) segmentation of suitable targeted customers; (iii) customer credit

assessment and approval procedures; and (iv) portfolio monitoring and management. The Guarantor

believes these established procedures enable it to maintain relatively low overall risk.

Strategic dimension. The Group’s risk management initiatives at the strategic level are led by its

board of directors and senior management under the supervision of its risk management committee,

with a focus on risks arising from strategic planning, business operations, corporate credit

environment, finance and accounting, and the financial markets. The Group has established a vertical

reporting procedure involving relevant functional departments in its strategic risk management

system, and a risk reporting framework has been established to monitor the overall risk balance at the

corporate level and to regularly oversee the Group’s risk management system at a strategic level.

Operational dimension. The Group’s risk management initiatives at the operational level primarily

focus on the management of its credit risk (which includes risks arising from new industry selection,

new customer selection, customer credit assessment and approval, as well as portfolio monitoring and

management), operational risk, liquidity risk and interest rate risk. The Group has established “three

lines of defence” at the operational level:

(i) in terms of credit risk and operational risk management, the Group has been (a) complying

strictly with rules and regulations imposed on financial leasing companies by CBIRC and other

statutory and regulatory bodies, (b) controlling project risks by ensuring strict adherence to

internal credit facility standards and preliminary screening guidelines, (c) assessing credit risks

of new customers and projects through standardised credit evaluation procedures before

– 121 –

entering into any business contract, (d) strengthening its internal authorisation and approval

policies and procedures, and (e) establishing effective supervision and monitoring measures

during post-transaction portfolio management;

(ii) in terms of liquidity risk management, the Group has been managing its balance sheet to match

the durations of its assets and liabilities; and

(iii) in terms of interest rate risk management, the Group has been hedging its interest rate risk by

matching its lease pricing mechanisms with interest on its borrowings.

Through its comprehensive in-house risk management system, the Group carries out reviews of all

existing lessees to monitor lessees’ compliance with obligations under leases and to detect warning

signs of potential delinquencies so that corrective measures can be taken in a timely manner.

CUSTOMERS

As at 31 December 2021, the Group had 881 customers.

The following table sets forth the breakdown by industry of the Group’s customers as at 31 December

2021:

As at 31 December 2021

Customers by industries Number Percentage

Aircraft ................................................................................... 73 8.29%

Shipping.................................................................................. 63 7.15%

Urban Infrastructure ................................................................ 331 37.57%

Equipment ............................................................................... 414 46.99%

Total ....................................................................................... 881 100%

The Group’s main customer base consists of local state-owned companies and listed corporations.

The Group has established comprehensive systems adopting certain criteria for its customer selection

process, including their track record and business scale, with the aim of selecting long-term

customers with strong profitability potential, long-term financing demands, stable cash flows and a

sound financial base. The Guarantor believes that the Group’s customers’ satisfaction and reliance on

its services is demonstrated by a large number of repeat customers.

INSURANCE

As at 31 December 2021, the Group maintained a range of insurance cover on its fixed assets

underlying its leases. The Group maintains asset insurance for the assets underlying its leases to cover

significant loss or damage to such assets during the leasing period. The insurance payments are

generally paid by its customers in line with leasing industry practice and the Group is usually the

beneficiary of such insurance. As at 31 December 2021, the Group did not maintain credit insurance

for its lease receivables.

The Group provides social security insurance for its employees as required by PRC social security

regulations, such as pension insurance, unemployment insurance, work injury insurance, maternity

insurance and medical insurance.

– 122 –

Please see “Risk Factors – Risks relating to the Group – The Group’s operations may be adversely

affected by operational risks, which may cause the Group to incur uninsured losses.” in this Offering

Circular for a discussion of the risks associated with the Group’s insurance coverage.

LEGAL AND REGULATORY PROCEEDINGS

The Group is involved, from time to time, in legal proceedings arising in the ordinary course of its

operations. See “Risk Factors – Risks Relating to the Group – The Group may be subject to legal,

litigation and regulatory proceedings.”. A majority of these legal proceedings involve claims initiated

by it to recover payment of leasing receivables from its customers.

Except as otherwise disclosed in this Offering Circular, as at 31 December 2021, none of the

Guarantor or its subsidiaries was involved in any litigation or arbitration proceedings which could

have a material adverse effect on its business, financial condition and results of operations nor is the

Guarantor aware of any such litigation or proceedings pending or threatened against it or any of their

respective subsidiaries which is material in the context of the offering of the Instruments.

EMPLOYEES

As at 31 December 2021, the Group had approximately 252 employees. The Guarantor believes that

the Group has a high-quality workforce possessing specialised industry expertise, with approximately

36.90 per cent. of its employees having attained bachelor’s degrees and approximately 58.73 per cent.

having attained master’s degrees or above as at 31 December 2021.

The Group’s ability to attract, retain and motivate qualified personnel is critical to its success. The

Guarantor believes that the Group offers employees competitive compensation, that the Group is able

to attract and retain qualified personnel and that the Group has maintained a stable core management

team. The Group’s remuneration packages are generally structured by reference to market rates and

individual merit. Salaries are normally reviewed annually, based on performance appraisals and other

relevant criteria.

In accordance with PRC regulations, the Group has established an employee labour union, in which

all of its employees are eligible for participation. The labour union organises various activities for its

employees, such as charity fund raising activities to help employees in poor economic condition due

to serious illnesses. The labour union has established a labour dispute committee to assist its

employees in dealing with their potential labour disputes with the Group.

As at the date of this Offering Circular, the Group has not experienced any major disputes with, nor

has there been any major labour action taken by, the labour union which has had a material effect on

its business.

– 123 –

DIRECTORS OF THE GUARANTOR

The directors of the Guarantor as at 31 December 2021 were as follows:

Name Position

Zhou Yong......................................................... Chairman

Zhou Qinye ....................................................... Director

Cai Mingsheng .................................................. Director

Li Jun................................................................ Director

Li Tianshu ......................................................... Director

Wu Liang .......................................................... Director

Liu Xinfeng....................................................... Director

The biographies of the Guarantor’s directors as at 31 December 2021 were as follows:

Zhou Yong

Mr. Zhou, born in 1963, serves as the chairman of the board of directors, the secretary of the party

committee and the general manager of the Guarantor. He previously served various positions in

Shanghai Xinsheng Aviation Industry Investment and Development Co., Ltd. (上海欣盛航空工業投

資發展有限公司), including but not limited to, deputy general manager, general manager, vice

chairman and chairman of the board of directors. He also worked as the general manager, the

chairman of the board of directors and the secretary of the party committee of China Aviation

Industry Shanghai Asset Operations and Management Co., Ltd. (中航工業上海資產經營管理有限公

). Mr. Zhou also worked for Aviation Industry Pudong Development Centre (航空工業浦東開發中

) and was an executive director, deputy general manager and manager of the finance department

of Shanghai Guoyi Aviation Industry Company (上海國翼航空工業公司). Mr. Zhou also worked at

Shanghai Aviation Electric Co., Ltd (上海航空電器有限公司), AVIC and China Aviation Medical

Industry Management Co., Ltd. (中航醫療產業管理有限公司). Mr. Zhou holds a postgraduate degree.

Zhou Qinye

Mr. Zhou, born in 1952, serves as a director of the Guarantor. Mr. Zhou previously worked as a

consultant of the research and development centre of and the chief accountant and a deputy general

manager in the Shanghai Stock Exchange. He also served as a member of the issuance audit

committee and the major reorganisation audit committee of China Securities Regulatory Commission

and a deputy director in the Shanghai University of Finance and Economics. Mr. Zhou holds a

postgraduate degree.

Cai Mingsheng

Mr. Cai, born in 1968, serves as a director of the Guarantor. He also serves as a supervisor of the

board of supervisors of the Guarantor. He previously served various positions in the Beijing

University of Aeronautics and Astronautics. Mr. Cai holds a doctoral degree.

– 124 –

Li Jun

Mr. Li, born in 1977, serves as a director and the deputy general manager of the Guarantor. He

previously served various positions in Yangtze River International Leasing Co., Ltd. (揚子江國際租

賃有限公司) (formerly known as Chongqing Changjiang International Leasing Co., Ltd. (重慶長江國

際租賃有限公司)) and Sanya Phoenix International Airport Co., Ltd. (三亞鳳凰國際機場有限責任公

). Mr. Li holds a master’s degree.

Li Tianshu

Mr. Li, born in 1978, serves as a director of the Guarantor. He also serves as the head of the planning

and finance department of AVIC Industry-Finance Holdings Co., Ltd. He previously served various

positions in Beijing Shougang High-Tech Co., Ltd. (北京首鋼高新技術公司), Ping An Insurance

(Group) Company of China, Ltd. (中國平安保險公司), China Aviation Industry Corporation II (中國

航空工業第二集團), AVIC and AVIC Electromechanical Systems Co., Ltd. (中航工業機電系統股份有

限公司). Mr. Li holds a master’s degree and is a senior accountant and certified public accountant.

Wu Liang

Mr. Wu, born in 1979, serves as a director of the Guarantor. He also serves as the deputy head of the

securities department of AVIC Industry-Finance Holdings Co., Ltd. He previously served various

positions in Airbus Beijing Engineering Centre Co., Ltd. (空客北京工程技術中心有限公司), Kaibo

Engineering Group Corporation (中??﹪H工程諮詢有限公司) and AVIC Industry-Finance

Holdings Co., Ltd. Mr. Wu holds a master’s degree.

Liu Xinfeng

Mr. Liu, born in 1975, serves as a director of the Guarantor. He previously worked as the head of the

European project team of the International Cooperation Project Office under the International

Cooperation Department of Xi’an Aircraft International Corporation (西安飛機國際航空製造股份有

限公司). He also served various positions in Xi’an Aircraft International (Tianjin) Corporation (西飛

國際航空製造(天津)有限公司). Mr. Liu holds a bachelor’s degree.

– 125 –

FORM OF PRICING SUPPLEMENT OF THE NOTES

The Pricing Supplement that will be issued in respect of each Tranche will be substantially in the

following form, duly supplemented (if necessary), amended (if necessary) and completed to reflect the

particular terms of the relevant Notes and their issue:

[EU MiFID II product governance/Professional investors and ECPs only target market – Solely

for the purposes of [the/each] manufacturer’s product approval process, the target market assessment

in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is eligible

counterparties and professional clients only, each as defined in [Directive 2014/65/EU (as amended,

MiFID II”)] [MiFID II]; and (ii) all channels for distribution of the Notes to eligible counterparties

and professional clients are appropriate. [Consider any negative target market] Any person

subsequently offering, selling or recommending the Notes (a “distributor”) should take into

consideration the manufacturer[’s/s’] target market assessment; however, a distributor subject to

MiFID II is responsible for undertaking its own target market assessment in respect of the Notes (by

either adopting or refining the manufacturer[’s/s’] target market assessment) and determining

appropriate distribution channels.]

[UK MiFIR product governance/Professional investors and ECPs only target market – Solely

for the purposes of [the/each] manufacturer’s product approval process, the target market assessment

in respect of the Notes has led to the conclusion that: (i) the target market for the Notes is only

eligible counterparties, as defined in the FCA Handbook Conduct of Business Sourcebook (“COBS”),

and professional clients, as defined in Regulation (EU) No 600/2014 as it forms part of domestic law

by virtue of the European Union (Withdrawal) Act 2018; and (ii) all channels for distribution of the

Notes to eligible counterparties and professional clients are appropriate. [Consider any negative

target market] Any [person subsequently offering, selling or recommending the Perpetual Capital

Securities (a “distributor”)]/[distributor] should take into consideration the manufacturer[’s/s’]

target market assessment; however, a distributor subject to the FCA Handbook Product Intervention

and Product Governance Sourcebook (the “UK MiFIR Product Governance Rules”) is responsible

for undertaking its own target market assessment in respect of the Notes (by either adopting or

refining the manufacturer[’s/s’] target market assessment) and determining appropriate distribution

channels.]

[PRIIPs REGULATION – PROHIBITION OF SALES TO EEA RETAIL INVESTORS – The

Notes are not intended to be offered, sold or otherwise made available to and should not be offered,

sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For

these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined

in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); (ii) a customer

within the meaning of Directive (EU) 2016/97 (the “Insurance Distribution Directive”), where that

customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID

II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129 (the “Prospectus

Regulation”). Consequently no key information document required by Regulation (EU) No

1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the Notes or otherwise

making them available to retail investors in the EEA has been prepared and therefore offering or

selling the Notes or otherwise making them available to any retail investor in the EEA may be

unlawful under the PRIIPs Regulation.]

– 126 –

[UK PRIIPs REGULATION – PROHIBITION OF SALES TO UK RETAIL INVESTORS – The

Notes are not intended to be offered, sold or otherwise made available to and should not be offered,

sold or otherwise made available to any retail investor in the United Kingdom (the “UK”). For these

purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in

point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of

the European Union (Withdrawal) Act 2018 (the “EUWA”); (ii) a customer within the meaning of the

provisions of the Financial Services and Markets Act 2000 (the “FSMA”) and any rules or regulations

made under the FSMA to implement the Insurance Distribution Directive, where that customer would

not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No

600/2014 as it forms part of domestic law by virtue of the EUWA; or (iii) not a qualified investor as

defined in Article 2 of the Prospectus Regulation as it forms part of domestic law by virtue of the

EUWA (the “UK Prospectus Regulation”). Consequently no key information document required by

the PRIIPs Regulation as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs

Regulation”) for offering or selling the Notes or otherwise making them available to retail investors

in the UK has been prepared and therefore offering or selling the Notes or otherwise making them

available to any retail investor in the UK may be unlawful under the UK PRIIPs Regulation.]

[Singapore SFA Product Classification: In connection with Section 309B of the Securities and Futures

Act 2001 of Singapore (the “SFA”) and the Securities and Futures (Capital Markets Products)

Regulations 2018 of Singapore (the “CMP Regulations 2018”), the Issuer has determined, and

hereby notifies all relevant persons (as defined in Section 309A(1) of the SFA), that the Notes [are

prescribed capital markets products]/[capital markets products other than prescribed capital markets

products] (as defined in the CMP Regulations 2018) and [are] [Excluded]/[Specified] Investment

Products (as defined in the MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and

MAS Notice FAA-N16: Notice on Recommendations on Investment Products).]1

[This document is for distribution to professional investors (as defined in Chapter 37 of the Rules

Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong Kong

Stock Exchange”) (“Professional Investors”) only.

Notice to Hong Kong investors: The Issuer and the Guarantor confirm that the Notes are intended

for purchase by Professional Investors only and will be listed on the Hong Kong Stock Exchange on

that basis. Accordingly, the Issuer and the Guarantor confirm that the Notes are not appropriate as an

investment for retail investors in Hong Kong. Investors should carefully consider the risks involved.

The Hong Kong Stock Exchange has not reviewed the contents of this document, other than to

ensure that the prescribed form disclaimer and responsibility statements, and a statement

limiting distribution of this document to Professional Investors only have been reproduced in

this document. Listing of the Programme and the Notes on the Hong Kong Stock Exchange is

not to be taken as an indication of the commercial merits or credit quality of the Programme,

the Notes or the Issuer or the Guarantor or the Group or quality of disclosure in this document.

Hong Kong Exchanges and Clearing Limited and the Hong Kong Stock Exchange take no

responsibility for the contents of this document, make no representation as to its accuracy or

completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or

in reliance upon the whole or any part of the contents of this document.

1 For any Notes to be offered to Singapore investors, the Issuer to consider whether it needs to re-classify the Notes

pursuant to Section 309B of the SFA prior to the launch of the offer.

– 127 –

This document, together with the Offering Circular (as defined below), includes particulars given in

compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong

Limited for the purpose of giving information with regard to the Issuer, the Guarantor and the Group.

The Issuer and the Guarantor accept full responsibility for the accuracy of the information contained

in this document and each confirms, having made all reasonable enquiries, that to the best of its

knowledge and belief there are no other facts the omission of which would make any statement herein

misleading.]

WARNING: The contents of this Pricing Supplement have not been reviewed by any regulatory

authority of any jurisdiction. You are advised to exercise caution in relation to the offering of the

Notes. If you are in any doubt about any of the contents of this Pricing Supplement, you should obtain

independent professional advice.

[Date]

SOAR WISE LIMITED

Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] due []

Guaranteed by AVIC International Leasing Co., Ltd.

under its U.S.$3,500,000,000

Guaranteed Medium Term Note and Perpetual Capital Securities Programme

This document constitutes the Pricing Supplement relating to the issue of Notes described herein.

Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions

of the Notes (the “Conditions”) set forth in the Offering Circular dated 16 May 2022 (the “Offering

Circular”) [and the Supplemental Offering Circular dated []]. This Pricing Supplement contains the

final terms of the Notes and must be read in conjunction with such Offering Circular [as so

supplemented]. Full information on the Issuer, the Guarantor and the offer of the Notes is only

available on the basis of the combination of this Pricing Supplement, the Offering Circular [and the

Supplemental Offering Circular dated []].

[N.B. If [the Issuer or] the Guarantor has prepared any unaudited, but reviewed, condensed

consolidated financial statements dated as at a date, or for a period ending, subsequent to the

financial statements appearing in the latest Offering Circular, ensure that such financial

statements are provided to potential investors of the relevant series of Notes as soon as practicable

upon announcement of the deal.]

[The following alternative language applies if the first tranche of an issue which is being increased

was issued under an Offering Circular with an earlier date.

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth

in the Offering Circular dated 16 May 2022. This Pricing Supplement contains the final terms of the

Notes and must be read in conjunction with the Offering Circular dated 16 May 2022 [and the

Supplemental Offering Circular dated []], save in respect of the Conditions which are extracted from

the Offering Circular dated [original date] and are attached hereto.] Full information on the Issuer,

the Guarantor and the offer of the Notes is only available on the basis of the combination of this

Pricing Supplement, the Offering Circular [and the Supplemental Offering Circular dated []].

– 128 –

[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the

numbering should remain as set out below, even if “Not Applicable” is indicated for individual

paragraphs or sub-paragraphs. Italics denote directions for completing the Pricing Supplement.]

[If the Notes have a maturity of less than one year from the date of their issue, the minimum

denomination may need to be £100,000 or its equivalent in any other currency.]

1 (i) Issuer: Soar Wise Limited

(ii) Guarantor: AVIC International Leasing Co., Ltd.

2 (i) Series Number: []

(ii) Tranche Number: []

(iii) Date on which the Notes become

fungible:

[The Notes will be consolidated and form a single

Series with [identify earlier Tranches] on [the Issue

Date/the date that is 40 days after the Issue

Date/exchange of the Temporary Global Instrument

for interests in the Permanent Global Instrument, as

referred to in paragraph [] below, which is expected

to occur on or about [date]] [Not Applicable] (if

fungible with an existing Series, details of that

Series, including the date on which the Notes become

fungible)

3 Specified Currency or Currencies: []

4 Aggregate Nominal Amount:

(i) Series: []

(ii) Tranche: []

5 (i) Issue Price: [] per cent. of the Aggregate Nominal Amount [plus

accrued interest from [insert date] (in the case of

fungible issues only, if applicable)]

[(ii) Net proceeds: [[] (required only for listed issues)]]

6 (i) Specified Denominations:2,3 []

(ii) Calculation Amount: []

2 Notes (including Notes denominated in sterling) in respect of which the issue proceeds are to be accepted by the Issuer

in the United Kingdom or whose issue otherwise constitutes a contravention of section 19 of the FSMA and which have

a maturity of less than one year and must have a minimum redemption value of £100,000 (or its equivalent in other

currencies).

3 If the specified denomination is expressed to be C100,000 or its equivalent and multiples of a lower principal amount

(for example C1,000), insert the additional wording as follows: C100,000 and integral multiples of C1,000 in excess

thereof up to and including C199,000. No notes in definitive form will be issued with a denomination above C199,000.

In relation to any issue of Notes which are a “Global Instrument exchangeable to Definitive Notes” in circumstances

other than in the limited circumstances specified in the Global Instrument, such Instruments may only be issued in

denominations equal to, or greater than, C100,000 (or equivalent) and multiples thereof.

– 129 –

7 (i) Issue Date: []

(ii) Interest Commencement Date: [specify/Issue Date/Not Applicable]

8 Maturity Date: [Fixed rate – specify date/Floating rate – Interest

Payment Date falling in or nearest to [specify

month]]4

9 Interest Basis: [[] per cent. Fixed Rate]

[[EURIBOR/HIBOR/CNH HIBOR] +/- [] per cent.

Floating Rate]

[Zero Coupon]

[Index Linked Interest]

[Dual Currency Interest]

[specify other]

(further particulars specified below)

10 Redemption/Payment Basis: [Redemption at par]

[Index Linked Redemption]

[Dual Currency Redemption]

[Partly Paid]

[Instalment]

[specify other]

11 Change of Interest Basis or

Redemption/Payment Basis:

[Specify details of any provision for change of Notes

into another Interest Basis or Redemption/Payment

Basis] [Not Applicable]

12 Put/Call Options: [Investor Put]5

[Issuer Call]

[Change of Control Put Option]

[No Registration Put Option]

[(further particulars specified below)]

4 Note that for Renminbi and Hong Kong dollar denominated Fixed Rate Notes where the Interest Payment Dates are

subject to modification it will be necessary to use the second option here.

5 For as long as Bearer Notes issued in accordance with TEFRA D are represented by a Temporary Global Instrument,

an Investor Put shall not be available unless the certification required under TEFRA D with respect to non-U.S.

beneficial ownership has been received by the Issuer or the Agent.

– 130 –

13 Date of [Board] approval for issuance

of Notes and Guarantee obtained:

[] [and [], respectively]

(N.B. Only relevant where Board (or similar)

authorisation is required for the particular tranche

of Notes or related Guarantee)

14 Listing: [The Stock Exchange of Hong Kong Limited/specify

other/None] (For Notes to be listed on the Hong

Kong Stock Exchange, insert the expected effective

listing date of the Notes)

15 Method of distribution: [Syndicated/Non-syndicated]

Provisions Relating to Interest (if any) Payable

16 Fixed Rate Note Provisions [Applicable/Not Applicable]

(If not applicable, delete the remaining

subparagraphs of this paragraph)

(i) Rate[(s)] of Interest: [] per cent. per annum [payable [annually/semi

annually/quarterly/other (specify)] in arrear]

(If payable other than annually, consider amending

Condition 5)

(ii) Interest Payment Date(s): [[] in each year [adjusted in accordance with

[specify Business Day Convention and any

applicable Business Centre(s) for the definition of

“Business Day”]/not adjusted]

(N.B.: This will need to be amended in the case of

long or short coupons)

(iii) Fixed Coupon Amount(s): [] per Calculation Amount6

(Applicable to Notes in definitive form)

(iv) Broken Amount(s): [] per Calculation Amount, payable on the Interest

Payment Date falling [in/on] []

6 For Renminbi or Hong Kong dollar denominated Fixed Rate Notes where the Interest Payment Dates are subject to

modification the following alternative wording is appropriate: “Each Fixed Coupon Amount shall be calculated by

multiplying the product of the Rate of Interest and the Calculation Amount by the Day Count Fraction and rounding

the resultant figure to the nearest CNY0.01, CNY0.005 being rounded upwards in the case of Renminbi denominated

Fixed Rate Notes and to the nearest HK$0.01, HK$0.005 for the case of Hong Kong dollar denominated Fixed Rate

Notes, being rounded upwards.”

– 131 –

(Applicable to Notes in definitive form)

(v) Day Count Fraction: [30/360 or Actual/Actual (ICMA/ISDA) or

Actual/365 (Fixed)7 or [specify other]]

(vi) Determination Date(s): [] in each year

[Insert regular interest payment dates, ignoring issue

date or maturity date in the case of a long or short

first or last coupon]

(N.B.: This will need to be amended in the case of

regular interest payment dates which are not of equal

duration)

(N.B.: Only relevant where Day Count Fraction is

Actual/Actual (ICMA))

(vii) Other terms relating to the

method of calculating interest for

Fixed Rate Notes:

[None/Give details]

17 Floating Rate Note Provisions [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this paragraph)

(i) Interest Period(s): [][[, subject to adjustment in accordance with the

Business Day Convention set out in (v) below/, not

subject to any adjustment[, as the Business Day

Convention in (v) below is specified to be Not

Applicable]

(ii) Specified Period(s)/Specified

Interest Payment Dates:

[[] in each year[, subject to adjustment in

accordance with the Business Day Convention set

out in (v) below/, not subject to any adjustment[, as

the Business Day Convention in (v) below is

specified to be Not Applicable]]]

(iii) Interest Period Date: [Not Applicable]/[] [in each year[, subject to

adjustment in accordance with the Business Day

Convention set out in (v) below/, not subject to any

adjustment[, as the Business Day Convention in (v)

below is specified to be Not Applicable]]

(iv) First Interest Payment Date: []

7 Applicable to Hong Kong dollar denominated Fixed Rate Notes and Renminbi denominated Fixed Rate Notes.

– 132 –

(v) Business Day Convention [Floating Rate Convention/Following Business

Day Convention/Modified Following Business

Day Convention/Preceding Business Day

Convention/other (give details)] [Not Applicable]

(vi) Additional Business Centre(s): []

(vii) Manner in which the Rate of

Interest and Interest Amount is to

be determined:

[Screen Rate

Determination/ISDA

Determination/other (give details)]

(viii) Party responsible for calculating

the Rate of Interest and Interest

Amount (if not the Principal

Paying Agent):

[]

(ix) Screen Rate Determination:

(a) Reference Bank: []

(b) Reference Rate: []

(Either EURIBOR, HIBOR or other, although

additional information is required if other –

including fallback provisions in the Agency

Agreement)

(c) Interest Determination

Date(s):

[]

(first day of each Interest Period if Hong Kong dollar

HIBOR and the second day on which the TARGET2

System is open prior to the start of each Interest

Period if EURIBOR)

(d) Relevant Screen Page: []

(In the case of EURIBOR, if not Reuters EURIBOR01

ensure it is a page which shows a composite rate or

amend the fallback provisions appropriately)

(x) ISDA Determination:

(a) Floating Rate Option: []

(b) Designated Maturity: []

(c) Reset Date: []

(xi) Margin(s) [+/-][] per cent. per annum

– 133 –

(xii) Minimum Rate of Interest: [] per cent. per annum

(xiii) Maximum Rate of Interest: [] per cent. per annum

(xiv) Day Count Fraction: [Actual/Actual or Actual/Actual (ISDA)

Actual/365 (Fixed)

Actual/365 (Sterling)

Actual/360

30/360, 360/360 or Bond Basis

30E/360 or Eurobond Basis

30E/360 (ISDA)

Other]

(See Condition 5 for alternatives)

(xv) Benchmark discontinuation and

fallback provisions

(a) Benchmark Discontinuation

(Condition 5(j)):

[Applicable/Not Applicable]

(b) Fallback provisions,

rounding provisions,

denominator and any other

terms relating to the method

of calculating interest on

Floating Rate Notes, if

different from those set out

in the Conditions:

[]

18 Zero Coupon Note Provisions: [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this paragraph)

(i) Amortisation Yield: [] per cent. per annum

(ii) Reference Price: []

(iii) Any other formula/basis of

determining amount payable:

[]

– 134 –

(iv) Day Count Fraction in relation to

Early Redemption Amounts and

late payment:

[Condition 7.6(c) and Condition 7.11 apply/specify

other]

(Consider applicable day count fraction if not U.S.

dollar denominated)

19 Index Linked Interest Note Provisions [Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this paragraph)

(i) Index/Formula: [give or annex details]

(ii) Calculation Agent: []

(iii) Party responsible for calculating

the Rate of Interest (if not the

Calculation Agent) and Interest

Amount (if not the Principal

Paying Agent):

[]

(iv) Provisions for determining

Coupon where calculation by

reference to Index and/or

Formula is impossible or

impracticable:

[need to include a description of market disruption

or settlement disruption events and adjustment

provisions]

(v) Specified Period(s)/Specified

Interest Payment Dates:

[]

(vi) Business Day Convention: [Floating Rate Convention/Following Business Day

Convention/Modified Following Business Day

Convention/Preceding Business Day

Convention/specify other]

(vii) Additional Business Centre(s): []

(viii)Minimum Rate of Interest: [] per cent. per annum

(ix) Maximum Rate of Interest: [] per cent. per annum

(x) Day Count Fraction: []

– 135 –

20 Dual Currency Interest Note

Provisions

[Applicable/Not Applicable]

(If not applicable, delete the remaining subparagraphs of this paragraph)

(i) Rate of Exchange/method of

calculating Rate of Exchange:

[give or annex details]

(ii) Party, if any, responsible for

calculating the principal and/or

interest due (if not the Principal

Paying Agent):

[]

(iii) Provisions applicable where

calculation by reference to Rate

of Exchange impossible or

impracticable:

[need to include a description of market disruption

or settlement disruption events and adjustment

provisions]

(iv) Person at whose option Specified

Currency(ies) is/are payable:

[]

Provisions Relating to Redemption

21 Issuer Call: [Applicable/Not Applicable]

(If applicable, specify/include details. If not

applicable, delete the remaining sub-paragraphs of

this paragraph)

(i) Optional Redemption Date(s): []

(ii) Optional Redemption Amount

and method, if any, of calculation

of such amount(s):

[[] per Calculation Amount/specify other/see

Appendix]

(iii) If redeemable in part: []

(a) Minimum Redemption

Amount:

[]

(b) Maximum Redemption

Amount:

[]

(iv) Notice period (if other than as

set out in the Conditions):

(N.B. If setting notice periods which are different to

those provided in the Conditions, the Issuer is

advised to consider the practicalities of distribution

of information through intermediaries, for example,

clearing systems and custodians, as well as any other

notice requirements which may apply, for example,

as between the Issuer and the Principal Paying Agent

or the Trustee)

– 136 –

22 Investor Put: [Applicable/Not Applicable]

(If applicable, specify/include details. If not

applicable, delete the remaining sub-paragraphs of

this paragraph)

(i) Optional Redemption Date(s): []

(ii) Optional Redemption Amount

and method, if any, of calculation

of such amount(s):

[[] per Calculation Amount/specify other/see

Appendix]

(iii) Notice period (if other than as

set out in the Conditions):

[]

(N.B. If setting notice periods which are different to

those provided in the Conditions, the Issuer is

advised to consider the practicalities of distribution

of information through intermediaries, for example,

clearing systems and custodians, as well as any other

notice requirements which may apply, for example,

as between the Issuer and the Principal Paying Agent

or the Trustee)

23 Change of Control Put: [Applicable/Not Applicable]

24 No Registration Put [Applicable/Not Applicable]

(If applicable, specify/include details. If not

applicable, delete the remaining sub-paragraphs of

this paragraph)

(i) Registration Deadline []

(ii) Registration Document []

(Please see Condition 6(e) for further details)

25 Final Redemption Amount: [[] per Calculation Amount/specify other/see

Appendix]]

26 Early Redemption Amount payable on

redemption for taxation reasons or on

event of default and/or the method of

calculating the same:

[[] per Calculation Amount/specify other/see

Appendix]]

– 137 –

General Provisions Applicable to the Notes

27 Form of Notes: [Bearer Notes:

[Temporary Global Instrument exchangeable for a

Permanent Global Instrument which is exchangeable

for Definitive Notes in the limited circumstances

specified in the Permanent Global Instrument]

[Temporary Global Instrument exchangeable for

Definitive Notes on [] days’ notice8]

[Permanent Global Instrument exchangeable for

Definitive Notes in the limited circumstances

specified in the Permanent Global Instrument]

[Registered Notes:

Global Certificate exchangeable for Individual Note

Certificates in the limited circumstances described in

the Global Certificate]

28 Additional Financial Centre(s) or other

special provisions relating to Payment

Dates:

[Not Applicable/give details]

(Note that this paragraph relates to the place of

payment and not Interest Period end dates to which

sub-paragraphs 17(iii) and 19(vii) relate)

29 Talons for future Coupons or Receipts

to be attached to Definitive Bearer

Notes (and dates on which such

Talons mature):

[Yes/No/If yes, give details]

30 Details relating to Partly Paid Notes:

amount of each payment comprising

the Issue Price and date on which

each payment is to be made and

consequences of failure to pay,

including any right of the Issuer to

forfeit the Notes and interest due on

late payment:

[Not Applicable/give details. N.B.: a new form of

Temporary Global Instrument and/or Permanent

Global Instrument may be required for Partly Paid

issues]

8 If the Specified Denominations of the Notes in paragraph 6 includes language substantially to the following effect:

“C100,000 and integral multiples of C1,000 in excess thereof up to and including C199,000”, the Temporary Global

Instrument shall not be exchangeable on [] days’ notice.

– 138 –

31 Details relating to Instalment Notes:

(i) Instalment Amount(s): [Not Applicable/give details]

(ii) Instalment Date(s): [Not Applicable/give details]

32 Redenomination applicable: Redenomination [not] applicable

[(If Redenomination is applicable, specify the

applicable Day Count Fraction and any provisions

necessary to deal with floating rate interest

calculation (including alternative reference rates)]

33 Consolidation provisions: [Not Applicable/The provisions] [annexed to this

Pricing Supplement] apply]

34 Notification to PRC Authorities [specify the NDRC Circular/the Cross-border

Security Registration requirements]

(Please see Condition 4(d) and Condition 4(e) for

further details)

35 Other terms or special conditions: [Not Applicable/give details]

Distribution

36 (i) If syndicated, names and

addresses of Managers/relevant

Dealer and commitments:

[Not Applicable/give names and addresses and

commitments]

(ii) Date of Subscription Agreement: []

(iii) Stabilisation Manager(s) (if any): [Not Applicable/give name]

37 If non-syndicated, name of relevant

Dealer:

[Not Applicable/give name and address]

38 Total commission and concession: [] per cent. of the Aggregate Nominal Amount

39 U.S. Selling Restrictions: [Reg. S Category 2; TEFRA D/TEFRA C/TEFRA not

applicable9]

40 Additional selling restrictions: [Not Applicable/give details]

41 Prohibition of Sales to EEA Retail

Investors:

[Applicable/Not Applicable]10

9 “TEFRA not applicable” is only available for Bearer Notes with a term of 365 days or less (taking into account any

unilateral extensions and rollovers) or Registered Notes.

10 If the Notes clearly do not constitute “packaged” products, “Not Applicable” should be specified. If the Notes may

constitute “packaged” products and no key information document will be prepared, “Applicable” should be specified.

– 139 –

42 Prohibition of Sales to UK Retail

Investors:

[Applicable/Not Applicable]11

Operational Information

43 ISIN: []

44 Common Code: []

45 CMU Instrument Number: []

46 Legal Entity Identifier (LEI): 2138001423MK8G3BNM68

47 Any clearing system(s) other than

Euroclear or Clearstream and the

relevant identification number(s):

[CMU/Not Applicable/give name(s) and number(s)]

48 Delivery: Delivery [against/free of] payment

(insert here any other relevant codes)

General

49 Rating[s]: The Notes to be issued have [not] been rated:

[S&P: []];

[Moody’s: []];

[Fitch: []];

[[Other: []]

(the above disclosure should reflect the rating

allocated to Notes of the type being issued under the

Programme generally or, where the issue has been

specifically rated, that rating)

50 Governing Law: English Law

[USE OF PROCEEDS

Give details if different from the “Use of Proceeds” section in the Offering Circular.]

11 If the Notes clearly do not constitute “packaged” products, “Not Applicable” should be specified. If the Notes may

constitute “packaged” products and no key information document will be prepared, “Applicable” should be specified.

– 140 –

[STABILISATION

In connection with this issue, [insert name of Stabilisation Manager] (the “Stabilisation Manager”)

(or persons acting on behalf of any Stabilisation Manager) may over-allot Notes or effect transactions

with a view to supporting the market price of the Notes at a level higher than that which might

otherwise prevail for a limited period after the closing date of the relevant Tranche of Notes.

However, there is no obligation on such Stabilisation Manager (or persons acting on behalf of any

Stabilisation Manager) to do this. Any stabilisation action may begin on or after the date on which

adequate public disclosure of the terms of the offer of the relevant Tranche of Notes is made and, if

begun, may cease at any time, but must end no later than the earlier of 30 days after the issue date

of the relevant Tranche of Notes and 60 days after the date of the allotment of the relevant Tranche

of Notes. Any stabilisation action or over-allotment must be conducted by the relevant Stabilisation

Manager (or persons acting on behalf of any Stabilisation Manager) in accordance with all applicable

laws and rules.]

[LISTING APPLICATION

This Pricing Supplement comprises the final terms required for the issue of Notes described herein

pursuant to the U.S.$3,500,000,000 Guaranteed Medium Term Note and Perpetual Capital Securities

Programme of Soar Wise Limited.]

[MATERIAL ADVERSE CHANGE STATEMENT

[Except as disclosed in this document, there/There]12 has been no significant change in the financial

or trading position of the Issuer, the Guarantor or the Group since [insert date of last audited full year

or interim financial statements] and no material adverse change in the financial position or prospects

of the Issuer, the Guarantor or the Group since [insert date of last published audited annual financial

statements].]

RESPONSIBILITY

The Issuer and the Guarantor accept responsibility for the information contained in this Pricing

Supplement.

Signed on behalf of Soar Wise Limited as

the Issuer:

Signed on behalf of AVIC International

Leasing Co., Ltd. as the Guarantor:

By: By:

Duly authorised Duly authorised

12 If any change is disclosed in the Pricing Supplement, it will require approval by the Stock Exchange(s). Consideration

should be given as to whether or not such disclosure should be made by means of a supplemental Offering Circular

rather than in a Pricing Supplement.

– 141 –

FORM OF PRICING SUPPLEMENT OF

THE PERPETUAL CAPITAL SECURITIES

The Pricing Supplement that will be issued in respect of each Tranche will be substantially in the

following form, duly supplemented (if necessary), amended (if necessary) and completed to reflect the

particular terms of the relevant Perpetual Capital Securities and their issue:

[EU MiFID II product governance/Professional investors and ECPs only target market – Solely

for the purposes of [the/each] manufacturer’s product approval process, the target market assessment

in respect of the Perpetual Capital Securities has led to the conclusion that: (i) the target market for

the Perpetual Capital Securities is eligible counterparties and professional clients only, each as

defined in [Directive 2014/65/EU (as amended, “MiFID II”)] [MiFID II]; and (ii) all channels for

distribution of the Perpetual Capital Securities to eligible counterparties and professional clients are

appropriate. [Consider any negative target market] Any person subsequently offering, selling or

recommending the Perpetual Capital Securities (a “distributor”) should take into consideration the

manufacturer[’s/s’] target market assessment; however, a distributor subject to MiFID II is

responsible for undertaking its own target market assessment in respect of the Perpetual Capital

Securities (by either adopting or refining the manufacturer[’s/s’] target market assessment) and

determining appropriate distribution channels.]

[UK MiFIR product governance/Professional investors and ECPs only target market – Solely

for the purposes of [the/each] manufacturer’s product approval process, the target market assessment

in respect of the Perpetual Capital Securities has led to the conclusion that: (i) the target market for

the Perpetual Capital Securities is only eligible counterparties, as defined in the FCA Handbook

Conduct of Business Sourcebook (“COBS”), and professional clients, as defined in Regulation (EU)

No 600/2014 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act

2018; and (ii) all channels for distribution of the Perpetual Capital Securities to eligible

counterparties and professional clients are appropriate. [Consider any negative target market] Any

[person subsequently offering, selling or recommending the Perpetual Capital Securities (a

distributor”)]/[distributor] should take into consideration the manufacturer[’s/s’] target market

assessment; however, a distributor subject to the FCA Handbook Product Intervention and Product

Governance Sourcebook (the “UK MiFIR Product Governance Rules”) is responsible for

undertaking its own target market assessment in respect of the Perpetual Capital Securities (by either

adopting or refining the manufacturer[’s/s’] target market assessment) and determining appropriate

distribution channels.]

[PRIIPs REGULATION – PROHIBITION OF SALES TO EEA RETAIL INVESTORS – The

Perpetual Capital Securities are not intended to be offered, sold or otherwise made available to and

should not be offered, sold or otherwise made available to any retail investor in the European

Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more)

of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended,

MiFID II”); (ii) a customer within the meaning of Directive (EU) 2016/97 (the “Insurance

Distribution Directive”), where that customer would not qualify as a professional client as defined

in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU)

2017/1129 (the “Prospectus Regulation”). Consequently no key information document required by

Regulation (EU) No 1286/2014 (as amended, the “PRIIPs Regulation”) for offering or selling the

Perpetual Capital Securities or otherwise making them available to retail investors in the EEA has

been prepared and therefore offering or selling the Perpetual Capital Securities or otherwise making

them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.]

– 142 –

[UK PRIIPs REGULATION – PROHIBITION OF SALES TO UK RETAIL INVESTORS – The

Perpetual Capital Securities are not intended to be offered, sold or otherwise made available to and

should not be offered, sold or otherwise made available to any retail investor in the United Kingdom

(the “UK”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail

client as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic

law by virtue of the European Union (Withdrawal) Act 2018 (the “EUWA”); (ii) a customer within

the meaning of the provisions of Financial Services and Markets Act 2000 (“the FSMA”) and any

rules or regulations made under the FSMA to implement the Insurance Distribution Directive, where

that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of

Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA; or (iii) not

a qualified investor as defined in Article 2 of the Prospectus Regulation as it forms part of domestic

law by virtue of the EUWA (the “UK Prospectus Regulation”). Consequently no key information

document required by the PRIIPs Regulation as it forms part of domestic law by virtue of the EUWA

(the “UK PRIIPs Regulation”) for offering or selling the Perpetual Capital Securities or otherwise

making them available to retail investors in the UK has been prepared and therefore offering or

selling the Perpetual Capital Securities or otherwise making them available to any retail investor in

the UK may be unlawful under the UK PRIIPs Regulation.]

[Singapore SFA Product Classification: In connection with Section 309B of the Securities and Futures

Act 2001 of Singapore (the “SFA”) and the Securities and Futures (Capital Markets Products)

Regulations 2018 of Singapore (the “CMP Regulations 2018”), the Issuer has determined, and

hereby notifies all relevant persons (as defined in Section 309A(1) of the SFA), that the Perpetual

Capital Securities [are prescribed capital markets products]/[capital markets products other than

prescribed capital markets products] (as defined in the CMP Regulations 2018) and [are]

[Excluded]/[Specified] Investment Products (as defined in the MAS Notice SFA 04-N12: Notice on the

Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment

Products).]1

[This document is for distribution to professional investors (as defined in Chapter 37 of the Rules

Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong Kong

Stock Exchange”) (“Professional Investors”) only.

Notice to Hong Kong investors: The Issuer and the Guarantor confirm that the Perpetual Capital

Securities are intended for purchase by Professional Investors only and will be listed on the Hong

Kong Stock Exchange on that basis. Accordingly, the Issuer and the Guarantor confirm that the

Perpetual Capital Securities are not appropriate as an investment for retail investors in Hong Kong.

Investors should carefully consider the risks involved.

The Hong Kong Stock Exchange has not reviewed the contents of this document, other than to

ensure that the prescribed form disclaimer and responsibility statements, and a statement

limiting distribution of this document to Professional Investors only have been reproduced in

this document. Listing of the Programme and the Perpetual Capital Securities on the Hong

Kong Stock Exchange is not to be taken as an indication of the commercial merits or credit

quality of the Programme, the Perpetual Capital Securities or the Issuer or the Guarantor or

the Group or quality of disclosure in this document. Hong Kong Exchanges and Clearing Limited

and the Hong Kong Stock Exchange take no responsibility for the contents of this document, make

no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever

for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this

document.

1 For any Perpetual Capital Securities to be offered to Singapore investors, the Issuer to consider whether it needs to

re-classify the Perpetual Capital Securities pursuant to Section 309B of the SFA prior to the launch of the offer.

– 143 –

This document, together with the Offering Circular (as defined below), includes particulars given in

compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong

Limited for the purpose of giving information with regard to the Issuer, the Guarantor and the Group.

The Issuer and the Guarantor accept full responsibility for the accuracy of the information contained

in this document and each confirms, having made all reasonable enquiries, that to the best of its

knowledge and belief there are no other facts the omission of which would make any statement herein

misleading.]

WARNING: The contents of this Pricing Supplement have not been reviewed by any regulatory

authority of any jurisdiction. You are advised to exercise caution in relation to the offering of the

Perpetual Capital Securities. If you are in any doubt about any of the contents of this Pricing

Supplement, you should obtain independent professional advice.

[Date]

SOAR WISE LIMITED

Issue of [Aggregate Nominal Amount of Tranche] [Title of Perpetual Capital Securities]

Guaranteed by AVIC International Leasing Co., Ltd.

under its U.S.$3,500,000,000

Guaranteed Medium Term Note and Perpetual Capital Securities Programme

This document constitutes the Pricing Supplement relating to the issue of Perpetual Capital Securities

described herein.

Terms used herein shall be deemed to be defined as such for the purposes of the Terms and Conditions

of the Perpetual Capital Securities (the “Conditions”) set forth in the Offering Circular dated 16 May

2022 (the “Offering Circular”) [and the Supplemental Offering Circular dated []]. This Pricing

Supplement contains the final terms of the Perpetual Capital Securities and must be read in

conjunction with such Offering Circular [as so supplemented]. Full information on the Issuer, the

Guarantor and the offer of the Perpetual Capital Securities is only available on the basis of the

combination of this Pricing Supplement, the Offering Circular [and the Supplemental Offering

Circular dated []].

[N.B. If [the Issuer or] the Guarantor has prepared any unaudited, but reviewed, condensed

consolidated financial statements dated as at a date, or for a period ending, subsequent to the

financial statements appearing in the latest Offering Circular, ensure that such financial

statements are provided to potential investors of the relevant series of Perpetual Capital Securities

as soon as practicable upon announcement of the deal.]

[The following alternative language applies if the first tranche of an issue which is being increased

was issued under an Offering Circular with an earlier date.

– 144 –

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth

in the Offering Circular dated 16 May 2022. This Pricing Supplement contains the final terms of the

Perpetual Capital Securities and must be read in conjunction with the Offering Circular dated 16 May

2022 [and the Supplemental Offering Circular dated []], save in respect of the Conditions which are

extracted from the Offering Circular dated [original date] and are attached hereto.] Full information

on the Issuer, the Guarantor and the offer of the Perpetual Capital Securities is only available on the

basis of the combination of this Pricing Supplement, the Offering Circular [and the Supplemental

Offering Circular dated []].

[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that the

numbering should remain as set out below, even if “Not Applicable” is indicated for individual

paragraphs or sub-paragraphs. Italics denote directions for completing the Pricing Supplement.]

1 (i) Issuer: Soar Wise Limited

(ii) Guarantor: AVIC International Leasing Co., Ltd.

2 (i) Seri