Statement from PwC China and PricewaterhouseCoopers Zhong Tian LLP

Statement of PwC China and PricewaterhouseCoopers Zhong Tian LLP Regarding the Administrative Penalties Announced by the Ministry of Finance of the People's Republic of China and the China Securities Regulatory Commission over the Audits of Hengda Real Estate Group Company Limited

13 September 2024 - The Ministry of Finance of the People's Republic of China and the China Securities Regulatory Commission (collectively referred to as "regulators") have today published the administrative penalties related to the audits by PricewaterhouseCoopers Zhong Tian LLP ("we" or "PwC Zhong Tian") of our former client Hengda Real Estate Group Company Limited ("Hengda"). PwC Zhong Tian LLP is a member firm of the PwC network representing PwC China's audit business in the Chinese mainland.

PwC Zhong Tian cooperated fully with the regulators, respects their decisions, and will fully comply with the administrative penalties.

PwC Zhong Tian accepts that the audit work on Hengda fell below our own high standards and the standards our stakeholders rightly expect of us. We are determined to address the shortcomings and strengthen how we operate going forward.

We deeply regret and apologise for the impact this has had on our clients and people. We will work tirelessly to regain their trust.

After a thorough investigation, we have taken a number of accountability and remedial actions across the firm to address this matter. The individuals in China who worked on this audit, and who have been strongly reprimanded by the regulators, are no longer with PwC. PwC China has also held former and current individuals with leadership responsibility for the business to account, and is appointing new leaders, including individuals with experience delivering quality elsewhere in our network. These new leaders will implement enhancements in quality management and have as their highest priority demonstrating PwC's commitment to trust and integrity in the capital markets.

PwC China has a long history of high quality audits and we do not believe that the behaviour of a very small number of engagement team members is representative of the work of the vast majority of PwC China's 18,000 professionals. In addition, PwC Zhong Tian is implementing a remediation plan that will enhance and further improve its quality management system. This will involve additional investment in people, training and technology, and a reinforced focus on culture and governance to ensure our commitment to quality is reflected in everything we do.

PwC Zhong Tian is fully committed to complying with the highest auditing standards. We support our regulators' actions in their supervision of both markets and industries, and we will continue to make our professional contributions to support the advancement of Chinese capital markets and strengthen the overall national financial system.
    

Note:

• Hengda is the principal subsidiary of China Evergrande Group, a listed company in Hong Kong.
• PwC China is a construct referring to the collaboration of PwC network entities in the Chinese mainland, Hong Kong SAR and Macau SAR.
• PwC Zhong Tian is an audit partnership in the Chinese mainland and was the auditor of Hengda. The sanctions imposed by the regulators apply to PwC Zhong Tian but not to other separate PwC legal entities that provide non-audit services in the Chinese mainland, or any PwC legal entities in Hong Kong SAR.