Bank of China completes H share rights issue

The bank’s total valid acceptances and applications representing 397.4% of the total number of H rights shares available.

Bank of China Limited (“BOC”) announced the results of its H Share Rights Issue on the Hong Kong Stock Exchange (the “HKSE”) website in the evening of Friday, 10 December 2010. As at 4 p.m. on Friday, 3 December 2010, the latest time for acceptance of and payment for the H Rights Shares and the application and payment for the excess H Rights Shares, a total of 165,006 valid acceptances in respect of 7,533,641,293 H Rights Shares provisionally allotted under the H Share Rights Issue have been received, representing approximately 99.1% of the total number of the H Rights Shares available under the H Share Rights Issue, and a total of 114,197 valid applications for 22,677,052,005 excess H Rights Shares have been received for the unsubscribed H Rights Shares under the H Share Rights Issue. In aggregate, a total of 279,203 valid acceptances and applications in respect of 30,210,693,298 H Rights Shares have been received, representing approximately 397.4% of the total number of H Rights Shares available under the H Share Rights Issue, and over HK$80 billion application monies have been frozen, reflecting the overwhelming success of the H Share Rights Issue, according to a Bank of China report.

Successful Rights Issue Pioneers New Financing Mode
Based on the number of valid acceptances, a total of 68,383,833 H Rights Shares are available for excess H Rights Shares application by shareholders through submitting the Excess Application Forms. Preference was given to those applications that would top up odd lots into whole board lots by the Bank. The remaining excess H Rights Shares were allocated to qualifying H shareholders who have applied for excess H Rights Shares on a pro rata basis with reference to the number of excess H Rights Shares they have applied for.

It is expected that the fully-paid share certificates for the H Rights Shares and the refund cheques for the excess H Rights Shares with wholly or partially unsuccessful applications will be despatched by ordinary post by the H Share Registrar of BOC on Monday, 13 December. Trading of the fully-paid H Rights Shares is expected to commence on the HKSE at 9:30 a.m. on Tuesday, 14 December.

The number of BOC’s H Rights Shares to be issued is 7,602,025,126. The total gross proceeds raised from the H Share Rights Issue were approximately HK$20.83 billion. After deducting all the costs and expenses related to the H Share Rights Issue, all the net proceeds will be used to strengthen the capital base of the Bank, and subsequently improve the Bank’s capital adequacy ratio.

To support business development, the Bank has been designing its capital replenishment plan since the end of last year. After a thorough evaluation, the Bank decided to adopt a new and comprehensive financing plan that comprised of the RMB40 billion A Share convertible bond and RMB60 billion A+H Rights Issue. The issuance of A Share convertible bonds was completed in June 2010, the A Share Rights Issue was completed in November 2010 and the H Share Rights Issue is to be completed in December 2010. BOC is the first Chinese bank to adopt and execute this type of refinancing plan successfully.

The entire plan was executed in an efficient manner, from conception and evaluation, to implementation and capital-raising. The capital replenishment plan consisting of A share convertible bond and A+H Rights Issue helped BOC raise approximately RMB100 billion of gross proceeds, which is the highest from refinancing activities among Chinese banks year to date. In addition, the H Share Rights Issue attracted the highest number of applicants in a single rights issue ever in Hong Kong with approximately 170,000 shareholders participating in it. As there were many elderly retail shareholders participating, BOC made appropriate arrangements to provide additional guidance to them and explain the details of the H Share Rights Issue.

The coverage, difficulty and complexity of the Rights Issue presented challenges which were overcome through proactive vigilance by BOC and all working parties in the entire exercise. Through accurate prediction of market response, formulation of comprehensive strategies and plans, and strict adherence to the implementation plan by the related working parties, the H Share Rights Issue proceeded smoothly, and all designated branches were in order. Procedures were simple, and the application forms were processed in a timely manner.

Innovative Rights Issue Execution Arrangementsr
The Bank’s innovative H Share Rights Issue execution arrangements have set a precedent in the industry. First of all, the arrangements emphasized proactive communications with its shareholders. The Bank provided detailed information about the H Share Rights Issue to its shareholders at an early stage through advertisements on newspapers and the internet for the first time. There were also reminders in the advertisements at different stages, which include the despatch of the prospectus, the trading days of the Nil Paid H Rights and the subscription deadline. Apart from despatching the prospectus to Physical Share Certificate Holders by Computershare Hong Kong Investor Services Limited (“Computershare”), the Bank also sent the H Share Rights Issue announcement to securities firms so that these securities firms can make appropriate arrangements for their customers in advance.
Moreover, the Bank held three media briefings during the period for the Rights Issue, in addition to providing the market with updates on the progress of application form collection and process. These unprecedented arrangements have effectively enhanced the transparency of information disclosure, and thus were well received by the market.

To ensure the most efficient and convenient services to the large number of shareholders, BOC designated 20 Bank of China (Hong Kong) Limited (“BOCHK”) branches to collect the applications and reserved 15 additional designated branches as back-ups. During the period for the Rights Issue, all parties closely monitored the people flow of every designated branch, and adjusted manpower and receiving arrangement according to situation of different branches. To cope with an anticipated surge in application submissions during the last week of the subscription period, 7 out of the 15 reserved branches were opened for the convenience of shareholders as well as diverting the people flow in other branches. The total number of collection points is a record high for a rights issue exercise.

Moreover, Computershare set up 50 enquiry hotlines and assigned at least two trained staff at each designated branch to handle shareholder enquiries. Branches with high traffic, such as the Wing On House Branch in Central, were assigned with four Computershare staff to handle the enquiries related to applications and other matters. As a result, the waiting time was kept within 10-15 minutes and no shareholder complaints were logged regarding the designated branch arrangements.

For the processing centre, through the optimisation of internal workflow and specific system enhancement, the efficiency of processing improved significantly compared with other companies. A maximum of 200 staff were engaged in processing all application forms, to fulfill the pledge of completing the form processing within one day. Despite of a less than desirable market environment generally, the share price of the Bank remained stable. The actual subscription level of the A Share Rights Issue was 99.57% and that of the H Share Rights Issue was 99.1%, both of which reflected shareholders’ strong confidence in the Bank’s prospects.

Upon completion of the capital replenishment plan, the capital base of BOC will be strengthened, which lays a solid foundation for the Bank to implement its growth strategies and facilitate its business development. In the future, BOC will push forward its strategies in accordance with the macro-economic policies, enhance its core competencies and pursue further structural adjustment and business transformation. The Bank will continue its ongoing efforts to enhance its asset liability management, improve its risk management capability, and boost its competitiveness in order to achieve sustainable, steady growth and generate fruitful returns to its large number of shareholders.