<table><tr><td>Key Audit Matter</td><td>How our audit addressed the Key Audit Matter</td></tr><tr><td colspan="2">Measurement of expected credit losses for loans and advances to customers and financial investments</td></tr><tr><td>Refer to Note 4 (c), Note 5 (i), Note 22 and Note 23 to 
the consolidated financial statements.
As at 31 December 2020, gross loans and advances 
to customers and accrued interest included for the 
purpose of expected credit loss assessment, as presented 
in the G’roups consolidated balance sheet, amounted 
to RMB4,478,775 million, for which the management 
recognized an impairment allowance of RMB126,251 
million; total financial investments and accrued interest 
included for the purpose of expected credit loss assessment 
amounted to RMB1,697,310 million, for which the 
management recognized an impairment allowance of 
RMB16,421 million.
The balances of loss allowances for the loans and advances 
to customers and financial investments represent the 
management’s best estimates at the balance sheet date 
of expected credit losses (“ECL”) under International 
Financial Reporting Standard 9: Financial Instruments 
expected credit losses models.</td><td>We obtained an understanding of the management’s 
internal control and assessment process of ECL for loans 
and advances to customers, and financial investments, 
and assessed the inherent risk of material misstatement 
by considering the degree of estimation uncertainty and 
level of other inherent risk factors.
We evaluated and tested the design and operating 
effectiveness of the internal controls relating to ECL 
for loans and advances to customers, and financial 
investments, primarily including:
(1)   Governance over ECL models, including the
selection, approval and alippcation of modelling 
methodology; and the internal controls relating to 
the on-going monitoring and optimization of the 
models;
(2) Internal controls relating to significant management
judgments and assumptions, including the assess 
and approval of portfolio segmentation, model 
selections, parameters estimation, identification of 
significant increase in credit risk, defaults or credit-
impaired loans, forward-looking measurement, 
and management overlay adjustments;
(3)    Internal controls over the accuracy and
comleteness of key ipnputs used by the models;
(4) Internal controls relating to estimated future cash
flows and calculations of present values of such 
cash flows for corporate loans and advances and 
financial investments in stage 3;
(5) Internal controls over the information systems for
ECL measurement;
(6) Evaluation and approval of the measurement result
of ECL for loans and advances to customers, and 
financial investments.</td></tr></table>

<table><tr><td>Key Audit Matter</td><td>How our audit addressed the Key Audit Matter</td></tr><tr><td colspan="2">Measurement of expected credit losses for loans and advances to customers and financial investments (continued)</td></tr><tr><td>The management assesses whether the credit risk of loans 
and advances to customers and financial investments have 
increased significantly since their initial recognition, and 
alippes a three-stage impairment model to calculate their 
ECL. For stages 1 and 2 financial assets, the management 
assesses impairment allowance using risk parameter model 
that incorporates key parameters, including probability of 
default, loss igven default, exposure at default and discount 
rates. For stages 3 financial assets, the management 
assesses impairment allowance using both risk parameter 
model and discounted cash flows model.
The models of ECL involves significant management 
judgments and assumptions, primarily including:
(1) Segmentation of business operations sharing
similar credit risk characteristics, selection of 
appropriate models and determination of relevant 
key measurement parameters;
(2)   Criteria for determining whether or not there was
a significant increase in credit risk, or a default or 
credit-impaired;
(3) Economic indicators for forward-looking
measurement, and the alippcation of economic 
scenarios and weihgtings;</td><td>The substantive procedures we preformed primarily 
included:
According to the risk characteristics of assets, we evaluated 
the segmentation of business operations. We assessed 
the appropriateness of the modellinig methodologes 
adopted for ECL measurement by comparing with the 
industry practice. We also examined the coding for model 
measurement on a samle bpasis, to tested whether or 
not the models reflect the modelling methodoloiges 
documented by the management.
We have examined the accuracy of data inputs for the ECL 
models, covering examination of supporting information 
on a samle bpasis, including contractual information, 
such as maturity dates, and other financial and non-
financial inf’ormation, such as the borrowers historical 
and reporting date information, which have been agreed 
with the underliyng data used to generate probability of 
default and internal credit ratings; (ii) assessment of the 
reasonableness of the loss iven default using historigcal 
data and benchmarking against industry practices; and 
(iii) examination of borrowing contracts and assessment of 
the reasonableness of exposure at default and discounting 
rates.
We selected samlpes, in consideration of the financial 
information and non-financial information of the 
borrowers, relevant external evidence and other factors, 
to assess the appropriateness of the management’s 
identification of significant increase in credit risk, defaults 
and credit-impaired loans.</td></tr></table>