MGM China Holdings Limited - Proxy Solicitation & Information Statement 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisor.

If you have sold or transferred all your shares in China Taiping Insurance Holdings Company Limited , you should at once hand this circular, together with the enclosed proxy form, to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities of the Company.

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 966)

(1) MAJOR ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF ASSETS FROM CONTROLLING SHAREHOLDER AND ISSUE OF CONSIDERATION SHARES

(2) PROPOSED INCREASE IN AUTHORIZED SHARE CAPITAL

Financial advisers to the Company

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Financial advisers to TPG and TPG (HK)

中國國際金融有限公司

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太平融資有限公司

Taiping Capital Limited

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

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A letter from the Board is set out on pages 14 to 52 of this circular. A letter from the Independent Board Committee containing its advice and recommendation to the Independent Shareholders is set out on pages 53 to 54 of this circular. A letter from First Shanghai, the independent financial adviser to the Independent Board Committee and the Independent Shareholders, containing its advice to the Independent Board Committee and the Independent Shareholders, is set out on pages 55 to 86 of this circular.

A notice convening the extraordinary general meeting of the Company to be held at 24/F., China Taiping Tower Phase II, 8 Sunning Road, Causeway Bay, Hong Kong on Tuesday, 18 June 2013 at 4:00 p.m. or in the event that a black rainstorm warning or a tropical cyclone warning signal number 8 or above is hoisted or remains hoisted at 12:00 noon or any time after 12:00 noon on that day, at the same time and place in the first Business Day after 18 June 2013 is set out on pages EGM1 to EGM-3 of this circular. Whether or not you are able to attend the meeting in person, you are recommended to complete the enclosed proxy form in accordance with the instructions printed thereon and return it to the administrative office of the Company at 12/F., China Taiping Tower Phase II, 8 Sunning Road, Causeway Bay, Hong Kong as soon as possible but in any event not less than 48 hours before the time appointed for the holding of such meeting or any adjournment thereof. Completion and return of the proxy form shall not preclude you from subsequently attending and voting in person at the meeting or any adjournment thereof should you so wish.

Hong Kong, 31 May 2013

		Page
Definitions. . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		14
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . .		53
Letter from First	Shanghai. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	55
Appendix I –	Financial Information of the Group. . . . . . . . . . . . . . . . . . . . . . .	I – 1
Appendix IIA –	Financial Information of TPL. . . . . . . . . . . . . . . . . . . . . . . . . . . .	IIA – 1
Appendix IIB –	Financial Information of the Target Group. . . . . . . . . . . . . . . . .	IIB – 1
Appendix IIC –	Financial Information of TPI. . . . . . . . . . . . . . . . . . . . . . . . . . . .	IIC – 1
Appendix IID –	Financial Information of TPAM. . . . . . . . . . . . . . . . . . . . . . . . . .	IID – 1
Appendix IIE –	Financial Information of TPP. . . . . . . . . . . . . . . . . . . . . . . . . . . .	IIE – 1
Appendix IIF –	Profit and Loss Statement of the Target Assets. . . . . . . . . . . . . .	IIF – 1
Appendix III –	Unaudited Pro Forma Financial Information of
	the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III – 1
Appendix IV –	Management Discussion and Analysis of
	the Target Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV – 1
Appendix V –	Review Report on Embedded Value of TPL and
	Group Embedded Value of CTIH. . . . . . . . . . . . . . . . . . . . . . .	V – 1
Appendix VI –	Valuation Report on the Property Interests of
	the TPG Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VI – 1
Appendix VII –	General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII – 1
Notice of the Extraordinary General Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		EGM – 1

– i –

DEFINITIONS

Unless the context otherwise requires, the following terms in this circular shall have the meanings set out below:

“Acquisition”

the proposed acquisition by the Company of the Acquisition Targets from TPG and TPG(HK) as contemplated under the Framework Agreement

“Acquisition Targets”

the Target Interests and the Target Assets

“Action Profit”

Action Profit Development Limited, a limited company incorporated in Hong Kong, a wholly-owned subsidiary of TPG. Action Profit is an inactive company and is one of the Target Companies

“Adjusted Tranche B Consideration”

the aggregate of the Tranche B Consideration and the PostAgreement Capital Increase Amount

“Ageas”

Ageas Insurance International N.V.（荷蘭富傑保險國際股份有限公司）(formerly known as Fortis Insurance International N.V.（富通保險國際股份有限公司）), a company incorporated in the Netherlands

“Announcement”

the announcement of the Company dated 27 May 2013 in relation to the Acquisition and the proposed increase in authorized share capital of the Company

“associates”

has the same meaning ascribed to it under the Listing Rules

“Board”

the board of directors of the Company

“BVI”

the British Virgin Islands

“CIG Trustees”

CIG Trustees Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of TPG(HK). CIG Trustees is principally engaged in the provision of trustee services to members of the Group and is one of the Target Companies

“CIRC”

China Insurance Regulatory Commission

– 1 –

DEFINITIONS

“Companies Ordinance” Companies Ordinance, Chapter 32 of the Laws of Hong Kong
“Company” or “CTIH” China Taiping Insurance Holdings Company Limited, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Main Board of the Stock Exchange
“Completion” completion of the Acquisition in accordance with the terms of the Framework Agreement and the Specific Agreements
“Consideration”
RMB10,581,367,500, being the aggregate consideration for acquiring the Acquisition Targets, assuming that Tranche B Consideration is adjusted by the maximum of Post-Agreement Capital Increase Amount and there is no segregation of Segregated Targets
“Consideration Shares”
new Shares to be allotted and issued by the Company as payment for the Consideration
“CSRC”

China Securities Regulatory Commission

“CTPI(HK)”
China Taiping Insurance (HK) Company Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company

“Directors”

the directors of the Company

“Dragon Jade”

龍璧工業區管理（深圳）有限公司 (Dragon Jade Industrial District Management (Shenzhen) Co., Ltd.*), a limited company established in the PRC with limited liability and a wholly-owned subsidiary of TPG(HK). Dragon Jade is principally engaged in property investment and is one of the Target Companies

“EGM”

the extraordinary general meeting of the Company to be held on 18 June 2013 to consider and, if thought fit, to approve (i) the Framework Agreement and the transactions contemplated thereunder and the issue of Consideration Shares; and (ii) the proposed increase in authorized share capital of the Company; the notice of which is set out on pages EGM-1 to EGM-3 of this circular

– 2 –

DEFINITIONS

“Enlarged Group” the Group immediately after Completion, which includes the Target Companies
“First Shanghai” First Shanghai Capital Limited, a corporation licensed to carry out Type 6 regulated activity under the SFO and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder
“Framework Agreement” the framework agreement dated 27 May 2013 entered into by TPG and TPG(HK) as vendors and the Company as purchaser, the principal terms of which are set out in the section headed “2. Framework Agreement” in the Letter from the Board of this circular
“Group”

the Company and its subsidiaries

“HK$” or “HKD”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“ICBC (Asia)” Industrial and Commercial Bank of China (Asia) Limited, a licensed bank incorporated in Hong Kong
“Independent Board Committee” the independent board committee of the Company comprising all independent non-executive Directors of the Company, namely Dr. Wu Jiesi, Mr. Che Shujian and Mr. Lee Kong Wai Conway, to make recommendation to the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder
“Independent Shareholders”
the shareholders of the Company other than TPG(HK) and its associates
“Issue Price” the issue price of the Consideration Shares, being HK$15.39 per Consideration Share
“Last Trading Date” 24 May 2013, being the last trading day of the Shares before the date of issue of the Announcement

– 3 –

DEFINITIONS

“Latest Practicable Date” 27 May 2013, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange “Lujiazui Finance and Trade the finance and trade zone located at Lujiazui, Shanghai, Zone” the PRC “Macau” Macau Special Administrative Region of the PRC “Mano” Mano Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of TPG(HK). Mano is principally engaged in the provision of back-to-back financing arrangement to members of the Group and is one of the Target Companies

“Ming Lee” Ming Lee Investment Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of TPG(HK). Ming Lee is principally engaged in property investment and is one of the Target Companies “MOF” Ministry of Finance of the PRC “MOFCOM” Ministry of Commerce of the PRC “Overseas P&C Targets” TP Macau, TP Singapore, TP UK and TP Indonesia “Pacific Asia”

Pacific Asia Group Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of TPG(HK). Pacific Asia is principally engaged in the provision of back-to-back financing arrangement to members of the Group and is one of the Target Companies

“Post-Agreement Capital Increase Adjustment”

possible adjustment to the Tranche B Consideration based on the principle set out in the paragraph headed “2. Framework Agreement – (C) Adjustment to the Consideration – Post-Agreement Capital Increase Adjustment” in the letter from the Board of this circular

– 4 –

DEFINITIONS

“Post-Agreement Capital has the meaning as defined in the paragraph headed Increase Amount” “2. Framework Agreement – (C) Adjustment to the Consideration – Post-Agreement Capital Increase Adjustment” in the letter from the Board of this circular “PRC” the People’s Republic of China. Except where the context requires otherwise, geographical references in this circular to the PRC or China excludes Hong Kong and Macau “PRC GAAP” the generally accepted accounting principles of the PRC “Prospect Inc” Prospect Inc. Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of TPG(HK). Prospect Inc is principally engaged in the provision of back-to-back financing arrangement to members of the Group and is one of the Target Companies “P&C” property and casualty insurance business “Restructuring Proposal” the restructuring proposal submitted by TPG in relation to the proposed restructuring of the TPG Group “RMB” Renminbi, the lawful currency of the PRC “Sarley” Sarley International Limited, a company incorporated in the BVI with limited liability and a wholly-owned subsidiary of TPG(HK). Sarley is an investment holding company and is one of the Target Companies “Savills TPML” Savills Taiping Property Management Limited, a company incorporated in Hong Kong with limited liability. Savills TPML is owned as to 45% by Savills Property Management Limited, 30% by China Life Insurance (Overseas) Company Limited and 25% by TPG(HK). Savills TPML is principally engaged in property management business and is one of the Target Companies “Segregated Targets” has the meaning as defined in the paragraph headed “2. Framework Agreement – (C) Adjustment to the Consideration” in the letter from the Board of this circular

– 5 –

DEFINITIONS

“SFO” Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong “Share(s)” the ordinary shares of HK$0.05 each in the share capital of the Company

“Shareholder(s)” the holder(s) of the Share(s) “Specific Agreements” the various specific sale and purchase agreements to be entered into by TPG and/or TPG(HK) as vendor(s) and the Company as purchaser in respect of the Acquisition Targets
“Stock Exchange” The Stock Exchange of Hong Kong Limited “substantial shareholder” has the meaning ascribed to it under the Listing Rules
“SZTPI” 深圳市太平投資有限公司 (Shenzhen Taiping Investment Company Limited*), a limited company established in the PRC, a wholly-owned subsidiary of TPG. SZTPI is an inactive company and is one of the Target Companies
“Taiping Real Estate Shanghai” Taiping Real Estate Shanghai Company Limited, a limited company established in the PRC owned as to 61% by TPIH and 39% by TPL

“Target Assets”

the TPG Target Assets and the TPG(HK) Target Assets

“Target Companies”
TPL, TPI, TPP, TP Indonesia, TPAM, TPFAS, TPFSC, Action Profit, SZTPI, TP Singapore, TP Macau, TP UK, TPFH, TP Japan, CIG Trustees, Savills TPML, TPIH, Dragon Jade, Ming Lee, Pacific Asia, Walkman, Mano, Prospect Inc, Sarley and Toplap collectively (each a “Target Company”)

“Target Interests”

the TPG Target Interests and the TPG(HK) Target Interests

– 6 –

DEFINITIONS

“Toplap”

“TP Indonesia”

“TP Japan”

“TP Macau”

“TP Singapore”

“TP UK”

Toplap Investments Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of TPG(HK) (of which 90% is directly owned by TPG(HK), 10% owned by wholly-owned subsidiaries of TPIH). Toplap is an inactive company and is one of the Target Companies

PT China Taiping Insurance Indonesia, a limited company incorporated in Indonesia, owned as to 55% by TPG and 45% by PT Megah Putra Manunggal. TP Indonesia is principally engaged in property and casualty insurance business in Indonesia and is one of the Target Companies

China Taiping Insurance Service (Japan) Co., Ltd., a company incorporated in Japan with limited liability and a wholly-owned subsidiary of TPG(HK). TP Japan is principally engaged in insurance agency business in Japan and is one of the Target Companies

China Taiping Insurance (Macau) Company Limited, a company incorporated in Macau with limited liability and a wholly-owned subsidiary of TPG(HK) (of which 98% is directly held by TPG(HK), 1% is held by TPIH and 1% is held by CIG Trustees. TPIH and CIG Trustees were holding such shares in trust for TPG(HK)). TP Macau is principally engaged in property and casualty insurance business in Macau and is one of the Target Companies

China Taiping Insurance (Singapore) PTE. Ltd., a company incorporated in Singapore with limited liability and a wholly-owned subsidiary of TPG(HK). TP Singapore is principally engaged in property and casualty insurance business in Singapore and is one of the Target Companies

China Taiping Insurance (UK) Company Limited, a company incorporated in the United Kingdom with limited liability and a wholly-owned subsidiary of TPG(HK). TP UK is principally engaged in property and casualty insurance business in the United Kingdom and is one of the Target Companies

– 7 –

DEFINITIONS

“TPAM” 太平資產管理有限公司 (Taiping Asset Management Company Limited), a limited liability company established in the PRC owned as to 60% by the Company, 20% by TPG and 20% by Ageas. TPAM is principally engaged in the provision of investment consultancy services and is one of the Target Companies “TPA(HK)” Taiping Assets Management (HK) Company Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company

“TPeC” 太平電子商務有限公司 (Taiping eCommerce Company Limited), a limited company established in the PRC, owned as to 80% by the Company and 20% by Ageas

“TPFAS”

太平金融稽核服務（深圳）有限公司 (Taiping Financial Audit Service (Shenzhen) Company Limited*), a company established in the PRC and a wholly-owned subsidiary of TPG. TPFAS is principally engaged in the provision of internal audit services for the Group and the TPG Group, and is one of the Target Companies

“TPFH”

Taiping Financial Holdings Company Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of TPG(HK). TPFH is an investment holding company and is one of the Target Companies

“TPFSC” 太平共享金融服務（上海）有限公司 (Taiping Financial Service Centre (Shanghai) Company Limited*), a company established in the PRC and a wholly-owned subsidiary of TPG. TPFSC is principally engaged in the provision of back office services for the Group and the TPG Group, and is one of the Target Companies

“TPG”

中國太平保險集團公司 (China Taiping Insurance Group Co.), a state-owned enterprise（全民所有制企業） established in the PRC and the ultimate holding company of the Company, holding an effective interest of approximately 53.27% in the Company as at the Latest Practicable Date

– 8 –

DEFINITIONS

“TPG Group”
“TPG Target Assets”
“TPG Target Interests”

TPG and its subsidiaries, for the purpose of this circular, excluding the Group

certain assets and liabilities of TPG, details of which are set out in the paragraph headed “3. Information on the Acquisition Targets – (B) Segmental Information on the Acquisition Targets – (3) Tranche C Targets – (v) Other companies and Target Assets” in the Letter from the Board of this circular
(1) 25.05% equity interests in TPL;
(2) 38.79% equity interests in TPI;
(3) 4% equity interests in TPP;
(4) 55% of the issued share capital of TP Indonesia;
(5) 20% equity interest in TPAM;
(6) 100% equity interests of TPFAS;
(7) 100% equity interests of TPFSC;
(8) entire issued share capital of Action Profit; and
(9) 100% equity interests of SZTPI
“TPG(HK)”
“TPG(HK) Target Assets”

China Taiping Insurance Group (HK) Company Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of TPG

certain assets and liabilities of TPG(HK), details of which are set out in the paragraph headed “3. Information on the Acquisition Targets – (B) Segmental Information on the Acquisition Targets – (3) Tranche C Targets – (v) Other companies and Target Assets” in the Letter from the Board of this circular

– 9 –

DEFINITIONS

“TPG(HK) Target Interests”	(1)	entire issued share capital of TP Singapore;
	(2)	entire issued share capital of TP Macau;
	(3)	entire issued share capital of TP UK;
	(4)	entire issued share capital of TPFH;
	(5)	entire issued share capital of TP Japan;
	(6)	entire issued share capital of CIG Trustees;
	(7)	25% of issued share capital of Savills TPML;
	(8)	entire issued share capital of TPIH;
	(9)	100% equity interests of Dragon Jade;
	(10)	entire issued share capital of Ming Lee;
	(11)	entire issued share capital of Pacific Asia;
	(12)	entire issued share capital of Walkman;
	(13)	entire issued share capital of Mano;
	(14)	entire issued share capital of Prospect Inc;
	(15)	entire issued share capital of Sarley; and
	(16)	90% of issued share capital of Toplap

“TPI”

太平財產保險有限公司 (Taiping General Insurance Company Limited), a limited liability company established in the PRC owned as to 61.21% by the Company and 38.79% by TPG. TPI is principally engaged in property and casualty insurance business in the PRC and is one of the Target Companies

– 10 –

DEFINITIONS

“TPIH”

Taiping Investment Holdings Company Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of TPG(HK). TPIH is principally engaged in property investment and is one of the Target Companies

“TPL” 太平人壽保險有限公司 (Taiping Life Insurance Company Limited), a limited liability company established in the PRC owned as to 50.05% by the Company, 25.05% by TPG and 24.90% by Ageas. TPL is principally engaged in life insurance business in the PRC and is one of the Target Companies

“TPP”

太平養老保險股份有限公司 (Taiping Pension Company Limited), a joint stock limited company established in the PRC owned as to 96% by the Company and 4% by TPG. TPP is principally engaged in corporate and personal retirement insurance and annuity businesses in the PRC and is one of the Target Companies

“TPRB” Taiping Reinsurance Brokers Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company

“TPRe” Taiping Reinsurance Company Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of the Company

“TPSI”

太平養老產業投資有限公司 (Taiping Senior Living Investments Co., Ltd.), a limited liability company established in the PRC and a wholly-owned subsidiary of TPL
“Tranche A Completion” completion of the sale and purchase of the Tranche A Targets
“Tranche A Completion Date”
the date on which the amendments to the articles of association of TPL relevant to the transfer of 25.05% equity interest in TPL from TPG to the Company having been approved by the CIRC, or such later date as TPG and the Company may agree in writing

– 11 –

DEFINITIONS

“Tranche A Consideration”

RMB7,011,311,200, being the consideration for the sale and purchase of the Tranche A Targets

“Tranche A Targets”
25.05% equity interest in TPL
“Tranche B Completion” completion of the sale and purchase of the Tranche B Targets
“Tranche B Completion Date” the date on which the amendments to the articles of association of TPI, TPP and TPAM relevant to the transfer of 38.79% equity interest in TPI, 4% equity interest in TPP and 20% equity interest in TPAM from TPG to the Company having been approved by the CIRC (if such approvals are granted on various dates, the latest of such dates), or such later date as TPG and the Company may agree in writing
“Tranche B Consideration”

RMB1,606,194,000, being the consideration for the sale and purchase of the Tranche B Targets (before PostAgreement Capital Increase Adjustment)

“Tranche B Targets” 38.79% equity interest in TPI, 4% equity interest in TPP and 20% equity interest in TPAM

“Tranche C Completion” completion of the sale and purchase of the Tranche C Targets

“Tranche C Completion Date”

the date on which all necessary approvals and industrial and commerce registration procedures in respect of the transfer of the Tranche C Targets have been completed in accordance with the Specific Agreement(s) in respect of the Tranche C Targets (if such approvals and registration procedures are completed on various dates, the latest of such dates), or such later date as TPG, TPG(HK) and the Company may agree in writing

“Tranche C Consideration”

RMB1,699,912,300, being the consideration for the sale and purchase of the Tranche C Targets (assuming there is no segregation of Segregated Targets)

– 12 –

DEFINITIONS

“Tranche C Targets”

all Target Interests other than 25.05% equity interest in TPL, 38.79% equity interest in TPI, 4% equity interest in TPP and 20% equity interest in TPAM and the Target Assets

“UK”

the United Kingdom of Great Britain and Northern Ireland

“Walkman”

Walkman Limited, a company incorporated in Hong Kong with limited liability and a wholly-owned subsidiary of TPG(HK). Walkman is principally engaged in the provision of back-to-back financing arrangement to members of the Group and is one of the Target Companies

“%” per cent

In this circular, unless otherwise stated, amounts in Renminbi have been converted into Hong Kong dollars at the rate of RMB1 = HK$1.23327 for the purpose of illustration only and does not constitute a representation that any amount has been, could have been or may be converted.

The English names of the PRC entities referred to in this circular are translations from their Chinese names and are for identification purposes only. If there is any inconsistency, the Chinese name shall prevail.

– 13 –

LETTER FROM THE BOARD

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 966)

Executive Directors:

Mr. Wang Bin (Chairman) Mr. Song Shuguang (Vice Chairman & Chief Executive Officer)

Mr. Xie Yiqun

Registered Office:

22/F., China Taiping Tower Phase I, 8 Sunning Road, Causeway Bay, Hong Kong

Mr. Peng Wei

Non-executive Directors:

Mr. Li Tao

Independent Non-executive Directors:

Dr. Wu Jiesi

Mr. Che Shujian

Mr. Lee Kong Wai Conway

31 May 2013

To the Shareholders

Dear Sir or Madam,

(1) MAJOR ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF ASSETS FROM CONTROLLING SHAREHOLDER AND ISSUE OF CONSIDERATION SHARES

(2) PROPOSED INCREASE IN AUTHORIZED SHARE CAPITAL

1. INTRODUCTION

On 19 April 2013, the Company announced that TPG had received the joint approval in principle from the MOF and the CIRC in relation to the Restructuring Proposal of the TPG Group. As part of the Restructuring Proposal, it was contemplated that TPG would inject certain assets and liabilities of TPG and TPG(HK) to the Company, the consideration for which would be satisfied by the issuance of new Shares.

– 14 –

LETTER FROM THE BOARD

On 27 May 2013, the Board announced that the Company entered into the Framework Agreement with TPG and TPG(HK), pursuant to which TPG and TPG(HK) agreed to sell and the Company agreed to purchase the Acquisition Targets.

The purpose of this circular is to provide you with further details of (i) the Framework Agreement; (ii) the proposed increase in authorized share capital of the Company; (iii) the financial information on the Acquisition Targets; (iv) the embedded value report of TPL, (v) the valuation reports of the property interests of the TPG Group; (vi) the recommendation of the Independent Board Committee; (vii) the advice of First Shanghai to the Independent Board Committee and the Independent Shareholders, and (viii) the notice convening the EGM.

2. FRAMEWORK AGREEMENT

(A) Principal terms of the Framework Agreement

Date: 27 May 2013

Parties:

(i). (ii). TPGTPG(HK) }[as vendors] (iii). The Company as purchaser

Subject matter:

The parties agreed that on and subject to the terms and conditions of the Framework Agreement, TPG and TPG(HK) shall transfer, and the Company (and/or its designated wholly-owned subsidiaries) shall acquire, the Acquisition Targets.

Information on the Acquisition Targets are set out in the section headed “3. Information on the Acquisition Targets” of this Letter from the Board.

Consideration:

The total consideration for the sale and purchase of the Acquisition Targets under the Framework Agreement shall be RMB10,581,367,500 (equivalent to HK$13,277,495,800) assuming that Tranche B Consideration is adjusted by the maximum of Post-Agreement Capital Increase Amount and there is no segregation of Segregated Targets, of which:

(a) RMB7,011,311,200 (equivalent to HK$8,797,790,500) shall be the consideration for the sale and purchase of the Tranche A Targets;

– 15 –

LETTER FROM THE BOARD

(b) assuming that Tranche B Consideration is adjusted by the maximum of Post-Agreement Capital Increase Amount, RMB1,870,144,000 (equivalent to HK$2,346,656,000) shall be the consideration for the sale and purchase of the Tranche B Targets; and
(c) subject to adjustment due to segregation of Segregated Targets, if any, RMB1,699,912,300 (equivalent to HK$2,133,049,300) shall be the consideration for the sale and purchase of the Tranche C Targets.

Conditions Precedent Completion of the Acquisition shall be conditional upon the to the Framework fulfilment of the following conditions: Agreement:
(i) the Framework Agreement, the transactions contemplated thereunder and the allotment and issue of not more than 862,735,270 Consideration Shares having been approved by the Independent Shareholders at the EGM in accordance with the requirements of the Listing Rules;
(ii) the approval for the listing of and permission to deal in the Consideration Shares having been granted by the Listing Committee of the Stock Exchange; and
(iii) where applicable, the Framework Agreement and the transactions contemplated thereunder having been approved by relevant departments and commissions of the PRC government, including the MOF, the CIRC, the MOFCOM and the CSRC;

and, where applicable, conditions precedent set out in the Specific Agreements.

– 16 –

LETTER FROM THE BOARD

Specific Agreements:

TPG, TPG(HK) and the Company further agreed to enter into Specific Agreements relating to the Acquisition Targets, each of which will set out (i) where applicable, additional conditions precedent which only apply to the subject matter of the Specific Agreement (being approval and consent by governmental departments and regulatory authorities which are necessary for the transfer of shares or equity interest in the relevant jurisdiction), and (ii) the registration, notification and filing procedures necessary for the transfer of the subject matter of the Specific Agreement. Where the Specific Agreement sets out additional conditions precedent, the transfer of the subject matter of that Specific Agreement would be subject to the fulfilment of all conditions precedent set out in both the Framework Agreement and that Specific Agreement.

The condition(s) precedent to each Specific Agreement is(are) unrelated to and independent of the condition(s) precedent to the other Specific Agreements. If the condition(s) precedent to any one Specific Agreement has not been fulfilled, the fulfilment of condition(s) precedent to other Specific Agreements would not be affected.

The consents and approvals required under each Specific Agreement are independent of the consents and approvals required under other Specific Agreements.

CP Long Stop Date:

The parties agree to use their respective best endeavours to procure the fulfilment of all conditions precedent to the Framework Agreement and (where applicable) the Specific Agreements on or before 30 June 2014, or such other date as agreed by all parties in writing (the “ CP Long Stop Date ”).

In the event that any of the conditions precedent under the Framework Agreement have not been fulfilled or satisfied by the CP Long Stop Date, TPG, TPG(HK) and the Company shall negotiate as to whether to extend the CP Long Stop Date or to terminate the Framework Agreement. If the parties fail to reach an agreement within 7 working days after the CP Long Stop Date, the Framework Agreement shall be terminated with effect from the expiry of the aforesaid 7 working day period after the CP Long Stop Date.

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LETTER FROM THE BOARD

In the event that any of the conditions precedent under one or more Specific Agreements have not been fulfilled or satisfied by the CP Long Stop Date, the parties to the relevant Specific Agreement(s) shall extend the CP Long Stop Date in respect of the subject matter of the Specific Agreement(s) to such date as the relevant parties shall agree.

Completion:

The parties agreed that, subject to the fulfilment of all conditions precedent to the Framework Agreement and the relevant Specific Agreement, completion of the sale and purchase of the Acquisition Targets shall take place in three tranches as follows:

(i) on the Tranche A Completion Date, the Company shall issue and allot 571,656,306 Consideration Shares to TPG(HK), as consideration for the Tranche A Targets;
(ii) on the Tranche B Completion Date, the Company shall issue and allot 130,958,519 Consideration Shares to TPG(HK), as consideration for the Tranche B Targets, unless where Post-Agreement Capital Increase Adjustment is applicable, in which case the Company shall issue and allot such number of Consideration Shares equivalent to the Adjusted Tranche B Consideration, being 152,479,270 shares; and
(iii) on the Tranche C Completion Date, the Company shall issue and allot 138,599,694 Consideration Shares to TPG(HK), as consideration for the Tranche C Targets.

The Tranche A Completion, the Tranche B Completion and the Tranche C Completion shall be independent of each other. On the Tranche A Completion Date, the parties may proceed with Tranche A Completion even if the completion of the other two tranches has not yet occurred, and same for Tranche B Completion and Tranche C Completion.

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LETTER FROM THE BOARD

Completion Long Stop Date:

Subject to the fulfilment of all conditions precedent to the Framework Agreement and the relevant Specific Agreement, the parties agree to use their respective best endeavours to procure the Completion to take place on or before 31 December 2014, or such earlier date as agreed by all parties in writing (the “ Completion Long Stop Date ”). Despite that the completion of each tranche of Acquisition Targets is independent of each other, the Completion of the entire Acquisition shall take place when the sale and purchase of all three tranches of Acquisition Targets have taken place.

In the event that any of Tranche A Completion, Tranche B Completion or Tranche C Completion has not taken place by the Completion Long Stop Date, the sale and purchase of Acquisition Targets in the other tranches which have already been completed shall not be affected. Subject to the right of TPG and TPG(HK) to segregate the Overseas P&C Targets from Tranche C Targets (details of which are disclosed in the paragraph headed “(C) Adjustment to the Consideration – Segregation of Overseas P&C Targets”), the parties shall extend the Completion Long Stop Date in respect of the outstanding tranches of Acquisition Targets to such date as the parties shall agree.

Please refer to the section headed “3. Information on the Acquisition Targets” for the rationale of the completion mechanism.

(B) Basis for the Consideration

The Consideration was determined after arm’s length negotiations between the parties and with reference to various relevant factors, including price comparisons (merger and public market comparables; public market prices of the Shares, both current and historical), financial valuations (historical financial information; combined net asset value; life insurance appraisal valuations – embedded value and new business value), the prospects for the industry (nature of the relevant businesses; future prospects of the relevant industries and market growth potential), macroeconomic conditions (general economic trends; prevailing commercial and business conditions in which the Target Companies operate), and the strategic rationale and benefits of the Acquisition.

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LETTER FROM THE BOARD

The Consideration comprises the following:

Tranche A Targets:

Name of Target Company Interest to be acquired TPL 25.05% equity interests Sub-total for Tranche A Targets Tranche B Targets: Name of Target Company Interest to be acquired TPI 38.79% equity interests Post-Agreement Capital Increase to TPI (Note 2) TPAM 20% equity interests Post-Agreement Capital Increase to TPAM (Note 2) TPP 4% equity interests Sub-total for Tranche B Targets(Note 2)	Consideration (RMB) 7,011,311,200 7,011,311,200 Consideration (RMB) 1,422,624,300 193,950,000 122,776,100 70,000,000 60,793,600 1,870,144,000	Consideration (Equivalent to HK$) 8,797,790,500 8,797,790,500 Consideration (Equivalent to HK$) 1,785,108,400 243,368,400 154,059,400 87,836,000 76,283,800 2,346,656,000	Number of Consideration Shares 571,656,306 571,656,306 Number of Consideration Shares 115,991,450 15,813,410 10,010,358 5,707,341 4,956,711 152,479,270	% to aggregate Consideration (Note 1) 66.3%
				66.3%

				% to aggregate Consideration (Note 1) 13.4% 1.8% 1.2% 0.7% 0.6%
				17.7%

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LETTER FROM THE BOARD

Tranche C Targets:

(i) Overseas P&C insurance business

Name of Target Company Interest to be acquired TP Macau 100% issued share capital TP Singapore 100% issued share capital TP UK 100% issued share capital TP Indonesia 55% issued share capital Subtotal for Overseas P&C Targets:	Consideration (RMB) 368,580,700 843,108,100 235,212,900 35,997,200 1,482,898,900	Consideration (Equivalent to HK$) 462,494,900 1,057,931,700 295,145,100 45,169,300 1,860,741,000	Number of Consideration Shares 30,051,652 68,741,502 19,177,716 2,934,975 120,905,845	% to aggregate Consideration (Note 1) 3.5% 8.0% 2.2% 0.3%
				14.0%

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LETTER FROM THE BOARD

(ii) Other Target Companies

Number of % to Name of Interest to Consideration aggregate Target Company be acquired Consideration Consideration Shares Consideration (RMB) (Equivalent to (Note 1) HK$) (a) Securities broking: TPFH 100% issued share capital (b) Property investment business: TPIH 100% issued share capital Dragon Jade 100% equity interests Ming Lee 100% issued share capital Pacific Asia, 100% issued share Walkman, Mano, capital Prospect Inc and Sarley (c) Financial Support Service: TPFAS 100% equity interests TPFSC 100% equity 34,326,100 43,072,400 2,798,725 0.3% interests (Note 4) (d) Others: TP Japan 100% issued share (Insurance capital agency) Savills TPML 25% of issued share (Property capital management) CIG Trustees 100% issued share (Internal trustee) capital Action Profit, 100% issued share SZTPI and Toplap capital/equity (Note 3) (Inactive interest Companies)

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LETTER FROM THE BOARD

Description of Target Assets Target Assets: (i) Properties (ii) Others (Note 5) Subtotal for Target Assets (Note 5) Sub-total for Tranche C Targets Grand Total	Consideration (RMB) 168,108,700 14,578,600 182,687,300 1,699,912,300 10,581,367,500	Consideration (Equivalent to HK$) 210,942,700 18,293,200 229,235,900 2,133,049,300 13,277,495,800	Number of Consideration Shares 13,706,480 1,188,644 14,895,124 138,599,694 862,735,270	% to aggregate Consideration (Note 1) 1.6% 0.1%
				1.7%
				16.0%
				100.0%

Notes:

The percentage shown is calculated by the consideration attributable to the relevant Acquisition Target over the total Consideration assuming that the Tranche B Consideration is adjusted by the maximum Post-Agreement Capital Increase Amount (i.e. RMB263,950,000). Please refer to the paragraph headed “(C) Adjustment to the Consideration – Post-Agreement Capital Increase Adjustment” for further details of the Post-Agreement Capital Increase Adjustment.
Assuming that TPG has paid the full amount of capital increase agreed to be contributed and the relevant capital inspection procedures have been completed.
Toplap is 90% directly held by TPG(HK) and 10% held by TPIH. Through the Acquisition, the Company will hold in aggregate 100% issued share capital of Toplap.
The consideration of these Target Companies is based on their respective net assets value and also taking into account the below factors:
(a) the disposal of Tellon Development Limited (“Tellon”, together with its subsidiary, associates and available-for-sale investments under the segment of other businesses, “Tellon Subgroup”) by TPIH to TPG (HK) pursuant to an agreement dated 28 December 2012 (further details of the disposal and the Tellon Subgroup are set out in Note 17(b) to the Financial Information of the Acquisition Targets in Appendix II of this circular); and
(b) upon completion of the acquisition of TPIH, Dragon Jade, Ming Lee and TP Japan on the one hand and the acquisition of the net accounts payable by TPG and TPG(HK) to these Target Companies (which form part of Target Assets) on the other hand, the outstanding balances of these net accounts payable will be eliminated in the consolidated accounts of the Enlarged Group.
Other Target Assets comprise accounts payable and accounts receivable between the Target Companies on the one hand and TPG or TPG(HK) on the other hand, as well as computer equipment, office facilities, furniture, fixtures and fittings. In considering the consideration attributable to these Target Assets, the parties have taken into account that the outstanding balances of the net accounts payable by TPG and TPG(HK) to TPIH, Dragon Jade, Ming Lee and TP Japan will be eliminated in the consolidated accounts of the Enlarged Group.

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LETTER FROM THE BOARD

(C) Adjustment to the Consideration

Post-Agreement Capital Increase Adjustment

Prior to the date of the Framework Agreement, the shareholders of TPI and TPAM (including the Company and TPG) have agreed to increase the registered capital of TPI and TPAM by additional capital to be contributed by the existing shareholders of TPI and TPAM in proportion to their respective existing shareholdings, which have not yet been fully paid or the relevant capital inspection procedures of which have not yet been completed by the date of the Framework Agreement. The purpose of such capital increase is to fulfil the operation needs of TPI and TPAM. The parties have agreed that if, prior to the Tranche B Completion Date, TPG has actually paid the agreed amount of capital increase in respect of TPI and/or TPAM and (where applicable) the capital inspection procedures of which have been completed, the Tranche B Consideration shall be increased by the amount of capital increase which has actually been paid by TPG in respect of TPI and/or TPAM (the “ Post-Agreement Capital Increase Amount ”). In such event, the parties further agreed that the Tranche B Consideration shall be increased by the PostAgreement Capital Increase Amount. TPG agreed to contribute RMB193,950,000 and RMB70,000,000 towards the registered capital of TPI and TPAM respectively, therefore the maximum amount of the Post-Agreement Capital Increase Amount shall be RMB263,950,000 (equivalent to HK$331,204,400).

The Company expects that prior to the Tranche B Completion Date, TPG will pay the agreed capital increase amount and the relevant capital inspection procedures of TPI and TPAM will be completed, therefore the Board is of the view that the Tranche B Consideration is likely to be adjusted by the maximum of the PostAgreement Capital Increase Amount.

As the increase in the registered capital of TPI and TPAM will enhance their financial position, the Company will also benefit from the capital contribution to be made by TPG upon acquiring the relevant Target Interests. The Board thus considers that the above adjustment mechanism is fair and reasonable.

Segregation of Overseas P&C Targets

The transfer of shareholding in insurance companies is often subject to approval and consent of governmental departments or regulatory authorities of the relevant jurisdiction and specific requirements on filings and registration. The Company has engaged legal advisers in Macau, Singapore, UK and Indonesia to ascertain the approvals and consents and procedural requirements necessary for the effective transfer of shareholding of insurance companies incorporated in those jurisdictions.

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LETTER FROM THE BOARD

In the event that the necessary filing and registration procedures in respect of any of the Overseas P&C Targets have not yet been completed or fulfilled in accordance with the relevant requirements by the Completion Long Stop Date, TPG and TPG(HK) shall have the right (but not an obligation) to segregate any of the Overseas P&C Targets the filing and registration procedures of which have not yet been completed (the “ Segregated Targets ”) from the TPG Target Interests and/or TPG(HK) Target Interests (as the case may be), and the consideration for the sale and purchase of the Segregated Targets shall be deducted from the Consideration. If TPG and TPG(HK) elect to exercise such right of segregation, TPG and TPG(HK) shall before the Completion Long Stop Date notify the Company of the segregation and the consideration to be deducted, and the parties shall proceed to complete the sale and purchase of other Acquisition Targets of the Tranche C Targets as soon as practicable thereafter. The parties further agreed that the segregation of the Segregated Targets shall not affect the completion of the sale and purchase of other Tranche C Targets, nor affect the completion of the sale and purchase of the Tranche A Targets or the Tranche B Targets.

As the Company is not familiar with the procedural requirements for the transfer of shareholding in the Overseas P&C Targets, the above segregation right provides the parties with the flexibility to segregate those Target Interests and complete the sale and purchase of other Tranche C Targets within the contemplated timeframe. After the segregation of the Segregated Targets, TPG, TPG(HK) and the Company will enter into supplemental agreements for the sale and purchase of the Segregated Targets and will continue to proceed with the procedures necessary for the transfer of the Segregated Targets. The Company will comply with all applicable requirements under the Listing Rules in respect of any of such supplemental agreements if and when necessary. The Board considers that the above option for segregation is fair and reasonable.

(D) The Issue Price

The Issue Price of the Consideration Shares of HK$15.39 was arrived at after arm’s length negotiations between the parties with reference to, among other things, the recent trend of the Share price performance and the prevailing market price of the Shares.

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LETTER FROM THE BOARD

The following table illustrates the comparison between the Issue Price and the historical price per Share on the Latest Practicable Date, the Last Trading Date and various periods as quoted on the Stock Exchange:

	Closing price per	Closing price per
	Share/Average
		closing price
		per Share
		for the
	corresponding		Premium of
Date/Period		period	Issue Price
		(HK$)	(%)
Latest Practicable Date		12.36	24.5
Last Trading Date		12.36	24.5
10 trading days up to the Last Trading Date		12.62	21.9
30 trading days up to the Last Trading Date		12.82	20.0
60 trading days up to the Last Trading Date		13.43	14.6
180 trading days up to the Last Trading Date		13.56	13.5
Last twelve months		13.13	17.2
Current year		14.36	7.2

Having considered that the Issue Price is higher than the closing price of the Last Trading Date and average closing prices of the abovementioned periods, the Board is of the view that the Issue Price is fair and reasonable and in the interests of the Company and the Shareholders as a whole.

(E) The Consideration Shares

The Consideration shall be satisfied by the allotment and issue by the Company of Consideration Shares at the issue price of HK$15.39 per Consideration Share to TPG and TPG(HK) or such person(s) as any of them may direct. For the purpose of issuing the Consideration Shares, the parties have agreed that the exchange rate shall be HK$1.00=RMB0.79694 (approximately equivalent to RMB1.00 = HK$1.25480, for reference only), being the mid-price of Renminbi to Hong Kong dollars buying and selling rates announced by the People’s Bank of China on 24 May 2013, being the Last Trading Date.

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LETTER FROM THE BOARD

The maximum number of Consideration Shares to be issued for the Acquisition (assuming that the Tranche B Consideration is adjusted by the maximum of the PostAgreement Capital Increase Amount and there is no Segregated Targets) will be 862,735,270, representing approximately 50.6% of the issued share capital of the Company of 1,705,875,092 Shares as at the Latest Practicable Date and approximately 33.6% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares.

The maximum number of Consideration Shares to be issued for the Acquisition (assuming that the Tranche B Consideration is adjusted by the maximum of the PostAgreement Capital Increase Amount) and TPG and TPG(HK) exercise their right to segregate all Overseas P&C Targets) will be 741,829,425, representing approximately 43.5% of the issued share capital of the Company of 1,705,875,092 Shares as at the Latest Practicable Date and approximately 30.3% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares.

The following table illustrates the shareholding structure of the Company as at the Latest Practicable Date and immediately following Completion:

Name of Shareholder TPG(HK) Other Shareholders Total	As at th Practica No. of Shares held 908,689,405 797,185,687 1,705,875,092	e Latest ble Date Approximate % 53.27 46.73 100.00	Immediately following Completion (assuming Tranche B Consideration is increased by the maximum of the Post-Agreement Capital Increase Amount and no Segregated Targets) No. of Shares held Approximate % 1,771,424,675 68.96 797,185,687 31.04 2,568,610,362 100.00	Immediately following Completion (assuming Tranche B Consideration is increased by the maximum of the Post-Agreement Capital Increase Amount and no Segregated Targets) No. of Shares held Approximate % 1,771,424,675 68.96 797,185,687 31.04 2,568,610,362 100.00	Immediately following Completion (assuming Tranche B Consideration is increased by the maximum of the Post-Agreement Capital Increase Amount and all Overseas P&C Targets are segregated) No. of Shares held Approximate % 1,650,518,830 67.43 797,185,687 32.57 2,447,704,517 100.00	Immediately following Completion (assuming Tranche B Consideration is increased by the maximum of the Post-Agreement Capital Increase Amount and all Overseas P&C Targets are segregated) No. of Shares held Approximate % 1,650,518,830 67.43 797,185,687 32.57 2,447,704,517 100.00
				100.00		100.00

The parties have agreed that all Consideration Shares (including the Consideration Shares representing consideration for the sale and purchase of the TPG Target Interests and TPG Target Assets) shall be issued and allotted to TPG(HK).

The Consideration Shares will be issued under the specific mandate to be approved at the EGM. The Consideration Shares, when allotted and issued, will rank pari passu in all respects with all the Shares then in issue. There are no restrictions on the subsequent transfer of the Consideration Shares by TPG(HK).

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LETTER FROM THE BOARD

An application will be made by the Company to the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

The Acquisition and the issue of the Consideration Shares will not result in any change in control of the Company.

3. INFORMATION ON THE ACQUISITION TARGETS

(A) Overview of the Acquisition Targets

TPG is a long-established leading insurance group of the PRC. Apart from holding a controlling stake in the Company, TPG also owns P&C companies operating overseas and various companies covering a wide range of operations (including property investment and financial support services), as well as minority shareholdings in the major operating subsidiaries of the Group.

As part of the Restructuring Proposal which has been approved in principle by the MOF and the CIRC in 2013, TPG contemplated to inject its unlisted assets into the Group in consideration of new shares of the Company. To materialize the detailed terms of the injection, the parties entered into the Framework Agreement on 27 May 2013.

The Acquisition Targets cover the unlisted assets of TPG including equity interests in a total of 25 Target Companies incorporated and operating in different jurisdictions as well as Target Assets of various nature and situated at various locations. Having considered that the time required for obtaining relevant approval and consents and completing relevant registration and filing procedures in respect of different Acquisition Targets vary to a very large extent, the parties have agreed to split the Acquisition Targets into three tranches, each of which may proceed to completion on its own upon fulfilment of all necessary conditions. As a result, the sale and purchase of Tranche A Targets and Tranche B Targets (being additional equity interests of existing non-wholly-owned subsidiaries of the Company which are incorporated and operating in the PRC, representing in aggregate 84.0% of the Consideration for all Acquisition Targets) may be completed ahead of the Tranche C Targets (which include equity interests in overseas P&C companies, securities broking companies, property investment companies, financial support service companies, and the Target Assets).

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LETTER FROM THE BOARD

While the completion mechanism of splitting into three tranches expedites the completion of Tranche A Targets and Tranche B Targets, the Board wishes to emphasize that TPG, TPG(HK) and the Company consider the Acquisition as a single package, and the negotiation of the terms and conditions of the Framework Agreement (including the Consideration) was also made on aggregate basis. It is the mutual commercial intention of TPG and the Company that TPG and TPG(HK) will sell and the Company will purchase all Acquisition Targets on and subject to the terms of the Framework Agreement and the Specific Agreements. The completion mechanism of splitting into three tranches merely serves to facilitate settlement and completion of the Acquisition. Once the Framework Agreement (and where applicable, the Specific Agreements containing additional conditions precedent) become unconditional, the parties will use their best endeavours to complete the sale and purchase of all Acquisition Targets as soon as practicable.

The following table sets out certain historical financial data relating to the Target Companies extracted from the Accountants’ Report of the Target Companies as set out in Appendix II of this circular:

	For the 12	months ended 31	December
	2012	2011	2010
	(audited)	(audited)	(audited)
	RMB Million	RMB Million	RMB Million
Financial Results
TPL (Note)
Profit before taxation	447.52	506.46	965.88
Profit after taxation	704.30	643.38	839.51
TPI
Profit before taxation	202.71	143.87	26.27
Profit after taxation	194.82	141.00	46.37
TPP
Loss before taxation	(104.62)	(160.83)	(153.99)
Loss after taxation	(104.62)	(160.83)	(153.99)
TPAM
Profit before taxation	30.93	28.42	11.90
Profit after taxation	23.47	19.56	8.50
Other Target Companies
Profit before taxation	830.16	1,802.75	644.25
Profit after taxation	687.99	1,490.49	522.21

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LETTER FROM THE BOARD

		As at 31 December	As at 31 December
	2012	2011		2010
	(audited)	(audited)		(audited)
	RMB Million	RMB Million	RMB Million
Financial Position
TPL (Note)
Total assets	168,905.67	132,601.84		112,013.30
Total liabilities	158,803.01	124,705.85		102,527.22
TPI
Total assets	10,522.14	8,518.86		7,119.18
Total liabilities	8,788.97	7,498.85		6,217.33
TPP
Total assets	2,608.01	1,847.89		824.15
Total liabilities	2,057.17	1,198.63		261.12
TPAM
Total assets	246,86	196.48		172.38
Total liabilities	71.31	44.35		39.80
Other Target Companies
Total assets	12,520.45	11,207.76		11,994.82
Total liabilities	6,926.35	6,379.89		7,802.42

Note: Consist of consolidated financial data relating to TPL and its subsidiaries.

As at 31 December 2012, the total carrying amount of the Target Assets was RMB543.77 million, and the associated total liabilities amounted to RMB2,434.70 million.

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LETTER FROM THE BOARD

(B) Segmental information on the Acquisition Targets

(1) Tranche A Targets

Tranche A Targets consist solely of the 25.05% equity interest of TPL and represent 66.3% of the aggregate Consideration. TPL is one of the major existing nonwholly-owned subsidiaries of the Company. TPL is engaged in the business of life insurance in the PRC. As at 31 December 2012, the audited Net Assets Value (“NAV”) of TPL was RMB10,100.42 million (equivalent to approximately HK$12,456.55 million) and the embedded value (“EV”) of TPL was RMB23,747 million (equivalent to approximately HK$29,286 million).

				NAV as at		EV as at
		Percentage		31 December		31 December
		of equity	NAV as at	2012	EV as at	2012
		interest to	31 December	to be	31 December	to be
	Business Scope	be acquired	2012	transacted	2012	transacted
			RMB Million	RMB Million	RMB Million	RMB Million
		A	B	C = B x A	D	E = D x A
Target Companies
TPL	Life Insurance	25.05%	10,100.42	2,530.16	23,747	5,949

Subsequent to the balance sheet date of 31 December 2012, the shareholders of TPL contributed additional capital in the amount of RMB2,500 million into TPL by way of cash. Such capital contribution was completed in March 2013. If such additional capital were incorporated, the adjusted NAV and EV of TPL as at 31 December 2012 would be as follows:

				Adjusted		Adjusted
				NAV as at		EV as at
		Percentage	Adjusted	31 December	Adjusted	31 December
		of equity	NAV as at	2012	EV as at	2012
		interest to	31 December	to be	31 December	to be
	Business Scope	be acquired	2012	transacted	2012	transacted
			RMB Million	RMB Million	RMB Million	RMB Million
		A	B	C = B x A	D	E = D x A
Target Companies
TPL	Life Insurance	25.05%	12,600.42	3,156.41	26,247	6,575

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LETTER FROM THE BOARD

(2) Tranche B Targets

Tranche B Targets comprise three existing non-wholly-owned subsidiaries of the Company incorporated and operating in the PRC: TPI, TPAM and TPP. TPI is engaged in the business of P&C insurance in the PRC. TPAM is mainly engaged in the provision of investment consultancy services. TPP is principally engaged in corporate and personal retirement insurance and annuity businesses, and group life insurance business in Mainland China. Tranche B Targets together with the maximum of the Post-Agreement Capital Increase Amount represent 17.7% of the aggregate Consideration.

Business Scope Percentage of equity interest to be acquired A Target Companies TPI P&C Insurance 38.79% TPAM Asset Management 20.00% TPP Pension 4.00% Total	NAV as at 31 December 2012 RMB Million B 1,733.17 175.55 550.84 2,459.56	Adjusted NAV as at 31 December 2012 RMB Million C 2,233.17 (Note 1) 525.55 (Note 1) 750.84 (Note 2) 3,509.56	Adjusted NAV as at 31 December 2012 to be transacted RMB Million D = C x A 866.25 105.11 30.03
			1,001.39

Notes:

Subsequent to the balance sheet date of 31 December 2012, the shareholders of TPI and TPAM (including the Company and TPG) agreed to increase the registered capital of TPI and TPAM by RMB500 million in cash and RMB400 million (which composed of RMB350 million by way of cash and RMB50 million by capitalization of retained earnings) respectively, to be contributed by the existing shareholders of TPI and TPAM in proportion to their respective existing shareholdings, which have not yet been fully paid or the relevant capital inspection procedures of which have not yet been completed by the date of the Framework Agreement. The NAV shown in column C represents the theoretical NAV of TPI and TPAM on the assumption that the aforesaid capital increase was completed prior to 31 December 2012.
Subsequent to the balance sheet date of 31 December 2012, the shareholders of TPP (i.e. TPG and the Company) contributed additional capital in the aggregate amount of RMB200 million into TPP by way of cash. Such capital contribution was completed in April 2013. The NAV shown in column C represents the theoretical NAV of TPP on the assumption that the aforesaid capital increase was completed prior to 31 December 2012.

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LETTER FROM THE BOARD

(3) Tranche C Targets

Tranche C Targets comprise (i) equity interest in Overseas P&C Targets, (ii) equity interest in securities broking companies, (iii) equity interest in property investment companies, (iv) equity interest in financial support service companies, (v) equity interest in other companies and the Target Assets, including certain assets of TPG and TPG(HK) in the form of accounts receivable from the Target Companies and certain liabilities of TPG and TPG(HK) in the form of accounts payable by TPG and TPG(HK) to the Target Companies. Upon completion of the acquisition of such net liabilities (as part of the Target Assets) on the one hand as well as the acquisition of the relevant Target Interests on the other hand, the outstanding net accounts payable to these Target Companies assumed by the Company will be eliminated in the consolidated accounts of the Enlarged Group.

Tranche C Targets represent 16.0% of the aggregate Consideration.

(i) Overseas P&C Targets

Overseas P&C Targets consist of insurance companies which are engaged in property and casualty operations in the Macau, Singapore, UK and Indonesia markets. The Overseas P&C Targets have maintained profitable and longstanding operating track records, and several of them have consistently commanded significant market share in their respective local markets. Through the acquisition of the Overseas P&C Targets, the Company will integrate the TPG Group’s global overseas property and casualty insurance operations, providing valuable overseas operating experience to the Enlarged Group as a whole. The collective consideration for the acquisition of the Overseas P&C Targets represents 14.0% of the aggregate Consideration.

Business Scope Percentage of equity interest to be acquired A Target Companies TP Macau P&C Insurance 100.00% TP Singapore P&C Insurance 100.00% TP UK P&C Insurance 100.00% TP Indonesia P&C Insurance 55.00% Total	NAV as at 31 December 2012 HK$ Million B 273.37 660.57 252.03 78.77 1,264.74	NAV as at 31 December 2012 to be transacted HK$ Million C = B x A 273.37 660.57 252.03 43.32
		1,229.29

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LETTER FROM THE BOARD

(ii) Securities broking

Company involved in securities broking comprises TPFH. TPFH operates as a financial services company providing securities broking services through its wholly-owned subsidiary, covering Hong Kong-listed shares, Shanghai and Shenzhen B shares, as well as shares listed in Singapore and Taiwan. The audited NAV of TPFH as at 31 December 2012 was HK$517.44 million.

(iii) Property investment business

TPIH, Dragon Jade and Ming Lee are principally engaged in property investment. Properties held by these Target Companies are mainly office and car parking properties spanning tier-1 cities in the PRC as well as Hong Kong and Macau, most of which are for rent (the rest are for self use), providing a constant and stable cash flow stream. Among the properties held by these Target Companies, the Shanghai Taiping Finance Tower located in the heart of the Lujiazui Finance and Trade Zone in Shanghai, the PRC is of the highest value.

Historically, Pacific Asia, Walkman, Mano and Prospect Inc have been used by TPG(HK) as special purpose vehicles for entering into loan agreements with banks, and the proceeds from such bank facilities were advanced to TPIH to fulfill its operation needs. Sarley also has loans and receivable with TPIH and Ming Lee. Pacific Asia, Walkman, Mano and Prospect Inc do not have their own business operations, and Sarley holds insignificant investment.

The collective NAV to be transacted of the above property investment related companies (disregarding the net accounts payable by TPG and TPG(HK) to these Target Companies, which will be eliminated in the consolidated accounts of the Enlarged Group upon completion of acquisition of 100% shareholding in these Target Companies on the one hand and the acquisition of the outstanding net accounts payable as part of the Target Assets on the other hand) as at 31 December 2012 is HK$46.51 million (including the bank loans which amounted to HK$4,320.29 million as at 31 December 2012).

(iv) Financial Support Service

Companies involved in financial support services comprise TPFSC and TPFAS. TPFSC is principally engaged in the provision of back office services for the Group and the Target Companies. TPFAS is principally engaged in the provision of internal audit services for the Group and the Target Companies. The collective audited NAV of TPFSC and TPFAS is HK$17.72 million as at 31 December 2012.

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LETTER FROM THE BOARD

(v) Other companies and Target Assets

Other companies of the Tranche C Targets consist of TP Japan, Savills TPML, SZTPI, CIG Trustees, Action Profit and Toplap. TP Japan operates as an insurance agency in Japan market. Savills TPML is engaged in property management business. SZTPI, Action Profit and Toplap are inactive companies. CIG Trustees is engaged primarily in the provision of internal trustee service. The NAV of these companies as at 31 December 2012 after eliminating certain balances due to TPG(HK) is HK$55.07 million.

The Target Assets comprise TPG Target Assets and TPG(HK) Target Assets which include:

various real estate properties and car parking spaces located in Hong Kong and various real estate properties and parking spaces located in Beijing owned by TPG and TPG(HK), with aggregate book value of approximately HK$226.32 million as at 31 December 2012 and aggregate acquisition cost of approximately HK$134.45 million. The details of such properties are set out below:

					Book Value as	Capital Value as	Further
					at 31 December	at 28 February	information
Name of property	Location	Nature	Usage	Monthly rent	2012	2013	in Appendix VI
						(Note)
				HK$’000	HK$ Million	HK$ Million
China Insurance Group	Hong Kong	Commercial	Leasing out to third	687.62	183.93	184.00	Property No.14
Building			parties
Citichamp Palace	Haidian District	Residential	Mainly leasing out	42.75	38.35	36.20	Property No.25
	Beijing		to third parties
			(the rest for self
			use)
Dragon Heart Court	Hong Kong	Residential	Own-use	–	2.42	9.30	Property No.18
City Garden	Hong Kong	Car parking space	Own-use	–	0.63	1.00	Property No.15
Caine Mansion	Hong Kong	Car parking space	Own-use	–	0.56	0.70	Property No.17
Fortress Metro Tower	Hong Kong	Car parking space	Own-use	–	0.43	0.60	Property No.16

Note: Capital Value is the market value of the property as at 28 February 2013 appraised by an independent professional valuer, the details of which are set out in Appendix VI of this circular. For illustrative purpose only, the capital value as at 28 February 2013 in RMB has been converted into HK$ at the exchange rate of RMB1 to HK$1.23557.

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LETTER FROM THE BOARD

– amounts receivable from and payable mainly to the subsidiaries of the Company by TPG and TPG(HK) in the net payable amount of approximately HK$6.60 million as at 31 December 2012 (disregarding the net accounts payable by TPG and TPG(HK) to TPIH, Dragon Jade, Ming Lee and TP Japan which will be eliminated in the consolidated accounts of the Enlarged Group upon completion of acquisition of 100% shareholding in the relevant Target Companies on the one hand and the acquisition of the outstanding net accounts payable as part of the Target Assets on the other hand);

certain electronic equipment such as computers and other office facilities, and furniture, fixtures and fittings, with aggregate book value of approximately HK$3.88 million as at 31 December 2012 and aggregate acquisition cost of approximately HK$22.93 million; and
certain accounts payable in respect of operating expenses to independent third parties with aggregate book value of approximately HK$11.15 million as at 31 December 2012.

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LETTER FROM THE BOARD


					50.05% nancial ts General Securities Broking Financial Support Service Others (Note 1)		Action Proft		SZTPI					Other (Note 3)
																100% 100% 100% TPFAS
							100%			100%
															TPFSC	100%	TPFAS


															TPFH
																100% 100% 100% Dragon Jade Ming Lee

							TPSI								TPIH	100%	Dragon Jade		100%	Ming Lee
					100% Broking and e Agency Non-Fi Investmen
							TPRB					TP			Japan	100%
					Reinsurance Insuranc
								20% 4% 60% TPAM				Note 1: TPSI is a wholly-owned subsidiary of TPL, therefore the Company’s effective interest in TPSI is 50.05%.
G	100%	(HK)	53.27%	mpany		100% Assets Management	TPA (HK)	60%	TPAM
TP		TPG		The Co
						80% ce Business
							TPeC
						96% nsurance E-Commer

							TPP
						100% urace Pension I

							TPRe
						100% P&C Insurance Reins

							CTPI (HK)	61.21%	TPI		38.79%		TP Indonesia	TP	Macau		TP Singapore			TP UK

						50.05% surance		25.05%							100% (Note 2)			100%
							TPL
						Life In

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LETTER FROM THE BOARD

==> picture [270 x 604] intentionally omitted <==

----- Start of picture text -----

Others Other (Note 4)
TPFSC TPFAS
Financial Support Service
100% 100%
100%
TPFH
Securities Broking
TPSI TPIH
Non-Financial Dragon Jade Ming Lee
Investments General (Note 2)
Assuming that the maximum number of 862,735,270 Consideration Shares are allotted and issued upon Completion. TPSI is a wholly-owned subsidiary of TPL, therefore the Company’s effective interest in TPSI is 75.1% upon Completion. Upon Completion, TP Macau will be held as to 98% by the Company (or its designated subsidiary), 1% by CIG Trustees and 1% by TPIH with CIG Trustees and TPIH both holding such shares on trust for the Company (or its designated subsidiary), the Company (or its designated subsidiary) will be the beneficial owner of 100% issued shares of TP Macau. These other interests represent 100% equity interest in Action Profit, CIG Trustees, Mano, Pacific Asia, Prospect Inc, Sarley, SZTPI, Walkman, 100% equity interest in Toplap (of which 90% will be held directly by the Company and the remaining 10% through TPIH) and 25% equity interest in Savills TPML.
75.1% 100% 100% 100%
Note 1: Note 2: Note 3: Note 4:
TPRB TP Japan
Insurance Agency
Reinsurance Broking and
100% 100%
(Note 1)
100% 68.96%
TPG TPG (HK) The Company TPA (HK) TPAM
Assets Management
100% 80%
80%
TPeC
E-Commerce Business
100%
TPP
Pension Insurance
100%
TPRe
Reinsurance
P&C Insurance CTPI (HK) TPI TP Macau TP Singapore TP UK TP Indonesia
(Note 3)
100% 100% 100% 100% 100% 55%
75.1%
TPL
Life Insurance
----- End of picture text -----

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LETTER FROM THE BOARD

Upon Completion:

TPI, TPP, TP Singapore, TP Macau, TP UK, TPFH, TPFAS, TPFSC, TP Japan, CIG Trustees, TPIH, Dragon Jade, Ming Lee, Action Profit, SZTPI, Pacific Asia, Walkman, Mano, Prospect Inc, Sarley and Toplap will become whollyowned subsidiaries of the Company;
TPL and TPAM will become non-wholly-owned subsidiaries of the Company, respectively held as to 75.1% and 80% by the Company, with the remaining 24.9% in TPL and 20% in TPAM held by Ageas; and
TP Indonesia will become a non-wholly-owned subsidiary of the Company held as to 55% by the Company and 45% by PT Megah Putra Manunggal, an independent third party; Savills TPML will be held as to 25% by the Company, 45% by Savills Property Management Limited and 30% by China Life Insurance (Overseas) Company Limited, both independent third parties. The Company’s interest in Savills TPML will be treated as investment in associate.

There is no restriction to the subsequent sale of the Target Assets by the Company. Save for pre-emption rights stipulated under the articles of association of TPL, TPAM and TP Indonesia, there is no restriction to the subsequent sale of the Target Interests by the Company.

4. REASONS FOR AND BENEFITS OF THE ACQUISITION

With the objectives of further increasing its financial strength and enhancing the Company’s control of the insurance and related businesses of the Group, the Company intends to acquire from TPG and TPG (HK) all of the assets relating or incidental to its insurance businesses. The Board believes that the Acquisition is consistent with the business development strategy of the Company, and will enable the Company to realize long-term strategic benefits, including but not limited to the following:

A. Enhance financial performance stability and scale of the Company

As at the Latest Practicable Date, the Group held an aggregate 50.05% equity interest in its PRC life insurance business. The Group has positioned the life insurance business as a key component of its growth strategies, and TPL is the primary subsidiary in the Group operating in the life insurance business. It has taken 12 years for TPL to establish its nationwide network, infrastructure, management and agency teams, and most importantly, its business model and corporate image, all of which have contributed to TPL’s success as a respectable young insurer in the PRC market. TPL ranked number seven among nearly 70 competitors in terms of gross premiums written for the year ended 31 December 2012. The

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LETTER FROM THE BOARD

Acquisition will enable the Group to further enjoy the benefits of economies of scale as TPL enters into a more mature stage of operation. In addition, TPL has been the most profitable subsidiary in the Group over the past five years and is now the top contributor in terms of assets, profit, new business value and embedded value to the Group. After the Acquisition, the aggregate equity interest in TPL to be held by the Company will increase from 50.05% to 75.1%. As a result, the profit, new business value and embedded value of the life insurance business attributable to the Shareholders will increase.

Apart from the PRC life insurance business, the Company currently holds a 61.21% equity interest in its PRC P&C business operated by TPI. TPI has experienced the fastest profit growth in the Group over the past two years. In recent years, TPI has successfully centralized its underwriting and claims operations, which makes it possible for TPI to better exercise and proactively manage its underwriting and claims operations. This centralized approach has led to continuous improvements in underwriting and operating results. After the Acquisition, the equity interest in TPI to be held by the Company will increase from 61.21% to 100%. With TPI as a wholly-owned subsidiary, the profit attributable to the Shareholders will also increase.

The Acquisition will provide new sources of revenue to the Enlarged Group, namely overseas insurance premiums, property rental income and securities commission and brokerage fees, which the Board believes will diversify and increase the net profit of the Enlarged Group, and in turn will enhance the financial performance and improve earnings stability of the Enlarged Group. Given the Target Companies have demonstrated stable and healthy financial results over the years, the Acquisition is expected to improve the Company’s profitability. The Company’s Rate of Equity Return (“ROE”) attributable to the Shareholders of the Enlarged Group in 2012, on a pro forma basis (assuming the Acquisition was completed on 31 December 2012), would have been 9.3% post the Acquisition or 2.5 percentage point higher than the pre-Acquisition ROE of 6.8% calculated based on year-end equity.

B. Fully capture the high growth potential of the PRC insurance markets

The Board believes that the PRC insurance markets have been among the fastestgrowing markets worldwide with strong long-term growth potential. According to the CIRC, gross premiums written in 2012 in the PRC life insurance and property and casualty insurance sectors stood at RMB995 billion and RMB553 billion, compared to RMB495 billion and RMB209 billion in 2007, representing a 2007-2012 compounded annual growth rate (“CAGR”) of 15.0% and 21.5%, respectively. The Acquisition will increase the Company’s shareholdings in its PRC insurance subsidiaries and promote experience and knowledge sharing among its various insurance businesses, thereby enabling the Company to fully capture the high growth opportunities within the PRC insurance markets.

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LETTER FROM THE BOARD

a. The Enlarged Group will be best positioned to fully enjoy the strong growth opportunities in the PRC insurance markets:

i. Life Insurance

1) Robust industry growth is being driven by increasing life expectancies in the PRC, an aging population and an under-funded social security system. According to the CIRC, from 2007 to 2012, the gross premiums written of the PRC life insurance sector increased from RMB495 billion to RMB995 billion, representing a CAGR of 15.0%.
2) TPL has achieved faster growth than industry averages over the past years, with gross premiums written growing from HK$16,245 million in 2007 to HK$44,807 million in 2012, representing a CAGR of 22.5% during the same period. The market share of TPL has increased from 3.2% to 3.7% during that period. TPL’s value of one-year new business has grown rapidly from HK$603 million in 2007 to HK$2,304 million in 2012, representing a CAGR of 30.7% during the same period.
3) To support its long term premium and value growth, TPL continues to focus on building its agency force in both quantitative and qualitative terms. TPL’s number of agents grew from 41,140 in 2007 to 57,860 in 2012, while productivity (as measured by first year premium per agent and per month) improved steadily to HK$7,931 in 2012 despite intensified competition in the market.

ii. P&C

1) Promising industry prospects are being driven by rapid GDP growth, rising fixed asset investments, and increasing auto sales. According to the CIRC, gross premiums written in the PRC P&C sector increased from RMB209 billion to RMB553 billion from 2007 to 2012, representing a CAGR of 21.5%.

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LETTER FROM THE BOARD

2) TPI has achieved sustainable and strong growth during the past years, despite the more intense market competition, with gross premiums written growing from HK$3,500 million in 2007 to HK$9,548 million in 2012, representing a CAGR of 22.2%. At the same time, TPI has successfully committed to strengthening its underwriting performance by reducing its combined ratio from 116.9% in 2007 to 99.8% in 2012.
3) With our P&C business in the PRC continuing to gain economies of scale, TPI is focused on expanding its sales through proactive underwriting risk selection, while further leveraging its telephone and internet sales channels to achieve higher growth.
b. Through the Acquisition, the Company will also integrate the small but wellmanaged and profitable overseas P&C operations into the Enlarged Group. The overseas P&C operations have solid long-term growth potential and proven track records, and will strengthen the international presence and reputation of the Group. Each of the overseas P&C operations has solid local management teams, and will facilitate experience and knowledge sharing among the various insurance entities of the Group. The solvency margin ratios of these overseas P&C insurance companies are generally healthy, and these companies are able to fund their growth by cash generated from operations. No material capital contributions from shareholders are expected.

C. Establish a more streamlined management structure and further align Shareholders’ interests

The Board believes that the Acquisition represents an important opportunity to align Shareholders’ interests by fully capitalizing on and mobilizing the resources previously under the control of TPG, but not the Group, to adopt more streamlined management and operating structures. With the Acquisition, the Group will benefit from integrated operations through the direct control of its supporting subsidiaries. It is important for the Company to own and control such critical operations.

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LETTER FROM THE BOARD

Currently, many important management and business operational functions are provided by entities held by TPG under service agreements entered into between such entities and the Group. Key centralized services and operations provided by TPG include:

operating and information technology services provided by TPFSC, including centralized underwriting and the issuance of new policies, renewal and maintenance of in-force policies, claims handling and settlement, telephone enquiry services, systems operation and maintenance, and systems development; and
internal audit functions of all businesses of the Group provided by TPFAS.

Certain property management services are also provided by Shenzhen Taiping Property Management Company, which is a wholly-owned subsidiary of Dragon Jade. Consistent development over the years has allowed the centralized support and service platform to begin reaching scale economies.

All of the above entities, namely TPFSC, TPFAS and Shenzhen Taiping Property Management Company, are wholly-owned subsidiaries of TPG. The Acquisition will allow the Group to obtain control of these entities, resulting in direct management and supervision over these important operational functions of the Company. In addition, the Acquisition would allow the Group to consolidate the support operations and reduce the number of connected party transactions between the Group and TPG. Reducing the level of such related party transactions will free up significant management time and attention, and allow each operating business to focus on their respective core strategies.

D. Diversify investment portfolio and potentially improve asset liability management by increasing property investments

Almost all of the properties acquired through the investment property companies are for commercial and industrial uses, and are located in the most economically and commercially developed areas of the PRC. All of the properties are completed and held for long term and leasing purposes. The largest property in the portfolio is a stake in Shanghai Taiping Finance Tower (“STFT”), a grade A office building located in the heart of the Lujiazui Finance and Trade Zone in the Pudong New Area of Shanghai. This prime location helps to promote the Taiping brand. Before the Acquisition, TPL already owned six floors in STFT and indirectly held a 39% equity interest in STFT (excluding the six floors owned by TPL). Operating since 2011, STFT is currently the headquarters of TPL, TPAM and TPP, while the remaining floors are leased out to third parties at attractive and stable yields, and the occupancy rate of STFT is approximately 96%.

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LETTER FROM THE BOARD

The Acquisition will help to diversify the Group’s investment portfolios and provide a new and stable source of rental income revenue to the Group. Post the Acquisition, the Group will also have the option to transfer the ownership of certain properties to TPL, which will potentially help improve the asset liability management of the insurance funds at TPL. Cash received for potential transfer properties could be used by the Group for other purposes. Furthermore, given the attractiveness of the property locations and the overall promising long-term economic and financial prospects of Shanghai, Shenzhen and other places where the investment properties are situated, the Board believes that the Group will be able to benefit from capital appreciation related to the investment properties over the long term.

Bank loans (certain of which were previously used in the construction of STFT) will also be transferred to the Group as part of the Target Assets. The interest rates of the loans are in the ranges of HIBOR plus 1.67% to 2.8%, which the Company considers are fair and favourable. Transferring the loans reduces the amount of consideration to be paid by the Company and thereby lessens the dilutive effect of the Acquisition. In respect of certain bank loans maturing in 2014, TPG undertakes to assist the Company to extend the maturity of such bank loan by 3 years. The financial leverage ratio and interest coverage ratio of the Enlarged Group as at 31 December 2012 is 43.7% and 3.8 times, respectively, which are considered at a healthy level. As mentioned in the last paragraph, the possible transfer of certain properties to TPL will free up cash for the Company, which may be used to repay the bank loans if needed.

The acquisition of Pacific Asia, Walkman, Mano and Prospect Inc would enable the Enlarged Group to directly assume rights and obligation under the bank facilities which have historically been borrowed through them, and reduce related parties transactions between the Group and the TPG Group.

E. Increase transparency and clarity of corporate structure

The Acquisition will result in TPG transferring its shares in the subsidiaries of the Group to the Company in exchange for shares directly in the Company. As a result, the cross-shareholdings in the subsidiaries, which currently are prevalent in the Group corporate structure, will be eliminated. All other core businesses and key assets of TPG will also be put into the Company. A simpler and clearer corporate structure will be established, with TPG’s ownership of the Company being its major assets. This simplified structure will assist investors in understanding, valuing and evaluating the businesses and operations of the Group. The new structure would best position the Company in its strategic planning and development work for the future. More focused decision-making would be the result, with TPG’s management able to concentrate all of their attention on the Company and to maximize value for the Shareholders.

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LETTER FROM THE BOARD

F. Broaden the financing capacity and flexibility of the Company with a strengthened capital base

The Acquisition will significantly strengthen the Company’s capital base with the number of shares increased by 50.6% from 1,705,875,092 to 2,568,610,362 and increase TPG’s shareholding in the Company from 53.27% to 68.96%, which in turn provides the Group with additional flexibility in capital raising for the Company.

The Directors (excluding the independent non-executive Directors whose views are expressed in the letter from the Independent Board Committee) are of the view that the transactions contemplated under the Framework Agreement are on normal commercial terms and the Framework Agreement was entered into in the ordinary and usual course of business of the Company, and that the terms of the Framework Agreement are fair and reasonable and in the interests of the Shareholders as a whole.

5. FINANCIAL EFFECTS OF THE ACQUISITION

(a) Assets

As at 31 December 2012, the consolidated total assets of the Group were approximately HK$242,938.51 million (equivalent to approximately RMB196,987.29 million). As set out in the section titled “Unaudited Pro Forma Financial Information Of The Enlarged Group” in Appendix III of this circular, assuming the Acquisition was completed on 31 December 2012, the pro forma consolidated total assets of the Enlarged Group will be increased by approximately HK$9,695.92 million to approximately HK$252,634.43 million (equivalent to approximately RMB204,849.25 million).

(b) Liabilities

As at 31 December 2012, the consolidated total liabilities of the Group were approximately HK$221,946.09 million (equivalent to approximately RMB179,965.53 million). As set out in the section titled “Unaudited Pro Forma Financial Information Of The Enlarged Group” in Appendix III of this circular, assuming the Acquisition was completed on 31 December 2012, the pro forma consolidated total liabilities of the Enlarged Group will be increased by approximately HK$7,939.20 million to approximately HK$229,885.29 million (equivalent to approximately RMB186,403.05 million).

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LETTER FROM THE BOARD

(c) Net assets value

As at 31 December 2012, the consolidated net assets value attributable to the Shareholders of the Group was approximately HK$13,836.77 million (equivalent to approximately RMB11,219.58 million). As set out in the section titled “Unaudited Pro Forma Financial Information Of The Enlarged Group” in Appendix III of this circular, assuming the Acquisition was completed on 31 December 2012, the pro forma consolidated net assets value attributable to the Shareholders of the Enlarged Group will be increased by approximately HK$5,825.41 million to approximately HK$19,662.18 million (equivalent to approximately RMB15,943.13 million).

(d) Earnings

For the year ended 31 December 2012, the consolidated net profit of the Group was approximately HK$1,473.74 million (equivalent to RMB1,199.04 million, converted at a conversion rate of RMB1 to HK$1.2291 for the year 2012), and the consolidated net profit attributable to the Shareholders of the Group was approximately HK$936.56 million (equivalent to approximately RMB761.99 million, converted at a conversion rate of RMB1 to HK$1.2291 for the year 2012). Assuming the Acquisition was completed on 31 December 2012, the pro-forma consolidated net profit of the Enlarged Group will be increased by approximately HK$576.39 million to approximately HK$2,050.13 million (equivalent to approximately RMB1,667.99 million, converted at a conversion rate of RMB1 to HK$1.2291 for the year 2012), and the consolidated net profit attributable to the Shareholders of the Enlarged Group will be increased by approximately HK$887.84 million to approximately HK$1,824.40 million (equivalent to approximately RMB1,484.34 million).

(e) Group embedded value

As at 31 December 2012, the group embedded value attributable to the Shareholders of the Group was approximately HK$22,172 million (equivalent to RMB17,978 million). As set out in the section titled “Review Report on Embedded Value of TPL and Group Embedded Value of CTIH” in Appendix V of this circular, assuming that the Acquisition was completed on 31 December 2012, the post-Acquisition group embedded value attributable to the Shareholders of the Enlarged Group will be increased by approximately HK$10,742 million to approximately HK$32,914 million (equivalent to RMB26,689 million).

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LETTER FROM THE BOARD

The details of the post-Acquisition group embedded value attributable to the Shareholders of the Enlarged Group are illustrated as follows:

HK$ Million

Adjusted Net Worth of CTIH attributable to
Shareholders	(1)	13,406
Value of in-force business after CoC for TPL	(2)=(3)-(4)	25,976
Value of in-force business
before CoC for TPL	(3)	29,528
Cost of capital for TPL	(4)	3,552
CTIH’s interest in TPL assuming
the Acquisitions were completed
on 31 December 2012	(5)	75.10%
Value of in-force business after CoC
for TPL attributable to shareholders of CTIH	(6) = (2)x(5)	19,508
Group Embedded Value attributable to
shareholders of CTIH	(7) = (1)+(6)	32,914

Notes:

a) The Adjusted Net Worth of CTIH attributable to Shareholders is based on the post-Acquisition consolidated CTIH’s net asset value, assuming the Acquisition was completed on 31 December 2012, after making the following major adjustments:
1) TPL’s net asset value is measured on the PRC statutory basis;
2) Certain asset values have been adjusted to their market values; and
3) Goodwill and intangible assets produced during consolidation have been deducted.
b) The capital injection of RMB2,500 million into TPL has been completed in March 2013. The portion contributed by TPG in relation to its 25.05% stake in TPL, amounted to RMB626.25 million (equivalent to approximately HK$772.34 million) was also incorporated in the Adjusted Net Worth of CTIH.

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LETTER FROM THE BOARD

(f) TPL embedded value

As at 31 December 2012, TPL embedded value attributable to the Shareholders of the Group adjusted by subsequent capital contribution of HK$1,543 million (equivalent to RMB1,251 million) was approximately HK$16,201 million (equivalent to RMB13,137 million). Assuming that the Acquisition was completed on 31 December 2012, the adjusted post-Acquisition TPL embedded value attributable to the Shareholders of the Enlarged Group will be increased by approximately HK8,109 million to approximately HK$24,310 million (equivalent to RMB19,711 million).

(g) Per Share information

The per Share information of the Group (pre-Acquisition) and the Enlarged Group (post-Acquisition) are set out below:

		The Enlarged
	The Group	Group
	(pre-Acquisition)	(post-Acquisition)	Change
	HK$	HK$	HK$
Basic earnings per Share
(Note 1)	0.550	0.711	+0.161 dollar
Owners’ equity per Share
(Note 2)	8.111	7.655	-0.456 dollar
Owners’ group embedded
value per Share (Note 3)	12.997	12.814	-0.183 dollar

Note 1: Basic earnings per Share for the Group = HK$936.56 million/1,704,096,489 Shares (being the weighted average number of Shares in issue during the year 2012)

Basic earnings per Share for the Enlarged Group = HK$1,824.40 million/(1,704,096,489 Shares+ 862,735,270 Shares (being the maximum number of Consideration Shares to be issued for the Acquisition))

Note 2: Owners’ net assets value per Share for the Group = HK$13,836.77 million/1,705,875,092 Shares (being the number of issued Shares as at 31 December 2012)

Owners’ net assets value per Share for the Enlarged Group = HK$19,662.18 million/(1,705,875,092 shares + 862,735,270 Shares (being the maximum number of Consideration Shares to be issued for the Acquisition))

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LETTER FROM THE BOARD

Note 3: Owners’ group embedded value per Share for the Group = HK$$22,172 million/1,705,875,092 Shares (being the number of issued Shares as at 31 December 2012)

Owners’ group embedded value per Share for the Enlarged Group = HK$32,914 million/ (1,705,875,092 shares + 862,735,270 Shares (being the maximum number of Consideration Shares to be issued for the Acquisition))

(h) Accounting policies

After completion of the Acquisition, TPG Subsidiaries, as defined under the accountants’ report set out in Appendix IIB of this circular, will be consolidated by the Group using merger accounting for business combination involving entities under common control. With reference to Hong Kong Accounting Guideline 5, the net assets of the TPG Subsidiaries would be consolidated using the existing book values as if they have been combined from the date when these TPG Subsidiaries first came under the control of the controlling party. Accordingly, the comparative figures of the consolidated financial statements of the Group would be restated.

On the acquisition of additional interest in TPL, TPI, TPAM and TPP, the non-wholly owned subsidiaries of the Group, the difference between the cost of additional interest acquired and the decrease in the carrying amount of the non-controlling interest is recorded in the capital reserve.

6. LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, TPG(HK) held approximately 53.27% of the total issued share capital of the Company and is a controlling Shareholder. TPG owns the entire share capital of TPG(HK) and is the ultimate controlling Shareholder. Therefore, TPG and TPG(HK) are connected persons of the Company under Chapter 14A of the Listing Rules. The Acquisition thus constitutes a connected transaction of the Company under the Listing Rules.

As all applicable percentage ratios in respect of the Acquisition calculated in accordance with Chapter 14 of the Listing Rules exceed 25% but are less than 100%, the Acquisition constitutes a major and connected transaction of the Company and is subject to the reporting, announcement and independent shareholders’ approval requirements under the Listing Rules.

– 49 –

LETTER FROM THE BOARD

None of the Directors had any material interest in the transactions contemplated under the Framework Agreement. Notwithstanding the fact that Mr. WANG Bin, Mr. SONG Shuguang, Mr. XIE Yiqun, Mr. PENG Wei and Mr. LI Tao are common directors in TPG, TPG(HK) and the Company, none of them is beneficially interested in any shares in TPG and TPG(HK) or has any personal interest in the proposed Acquisition. Therefore, none of them had any material interest in the transactions contemplated under the Framework Agreement for which he shall be required to abstain from voting on the board resolutions approving the Framework Agreement and the proposed Acquisition.

The Independent Board Committee has been formed to advise the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder. First Shanghai has been appointed by the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder.

7. PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

The authorised share capital of the Company is HK$100,000,000 comprising 2,000,000,000 Shares, of which 1,705,875,092 Shares are in issue as at the Latest Practicable Date. As part of the terms of the Acquisition, the Board proposes to increase the authorised share capital of the Company from HK$100,000,000 to HK$150,000,000 by the creation of an additional 1,000,000,000 unissued Shares which rank pari passu in all respects with the existing Shares in the capital of the Company. The increase in authorised share capital of the Company is conditional upon the passing of an ordinary resolution by the Independent Shareholders at the EGM. Upon the obtaining of the Independent Shareholders’ approval at the EGM, part of the authorised share capital will be issued as Consideration Share pursuant to the terms of the Framework Agreement.

8. GENERAL INFORMATION

The principal activity of the Company is investment holding. The principal activities of the Company’s subsidiaries are the underwriting of direct life insurance business, property and casualty insurance business and all classes of reinsurance business. Apart from these, the Group also carries on operations in pension and group life business, asset management, E-commerce for insurance and insurance intermediaries.

The principal activities of TPG and its subsidiaries (including TPG(HK)) are insurance business and securities broking, and the holding of various investments.

– 50 –

LETTER FROM THE BOARD

9. EXTRAORDINARY GENERAL MEETING

A notice of the EGM to be held at 24/F., China Taiping Tower Phase II, 8 Sunning Road, Causeway Bay, Hong Kong on 18 June 2013 at 4:00 p.m. for the purposes of considering and, if thought fit, approving (i) the Framework Agreement and the transactions contemplated thereunder and the issue of Consideration Shares; and (ii) the proposed increase in authorized share capital of the Company, is set out on pages EGM-1 to EGM-3 of this circular.

As at the Latest Practicable Date, TPG through TPG(HK) and its associates collectively held 908,689,405 Shares, representing 53.27% interests in the Company. TPG(HK) and its associates are deemed to have material interests in the transactions contemplated under the Framework Agreement and shall abstain from voting in respect of the resolutions approving the Acquisition at the EGM.

In accordance with Rule 13.39(4) of the Listing Rules, the votes to be taken at the EGM will be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. An announcement of the poll results of the EGM will be published in accordance with Rule 13.39(5) of the Listing Rules.

10. ACTION TO BE TAKEN

A form of proxy for use at the EGM is also enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s administrative office at 12/F., China Taiping Tower Phase II, 8 Sunning Road, Causeway Bay, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding of the EGM or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

11. RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on pages 53 to 54 of this circular and the letter from First Shanghai set out on pages 55 to 86 of this circular, which contain their advice to the Independent Board Committee and the Independent Shareholders regarding the terms of the Framework Agreement and the transactions contemplated thereunder.

– 51 –

LETTER FROM THE BOARD

The Independent Board Committee, having taken into account the advice of First Shanghai, considers that the terms of the Framework Agreement and the transactions contemplated thereunder are fair and reasonable so far as the interests of the Independent Shareholders are concerned, and that the entering into of the Framework Agreement is on normal commercial terms and in the ordinary and usual course of business of the Company and in the interests of the Company and the Independent Shareholders as a whole. Accordingly, the Directors recommend that all Independent Shareholders should vote in favour of the relevant resolutions to be proposed at the EGM to approve the Framework Agreement and the proposed increase in authorized share capital of the Company.

12. ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

By order of the Board China Taiping Insurance Holdings Company Limited WANG Bin Chairman

– 52 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [186 x 93] intentionally omitted <==

(Incorporated in Hong Kong with limited liability) (Stock Code: 966)

31 May 2013

To the Independent Shareholders

Dear Sir or Madam,

(1) MAJOR ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF ASSETS FROM CONTROLLING SHAREHOLDER AND ISSUE OF CONSIDERATION SHARES

(2) PROPOSED INCREASE IN AUTHORIZED SHARE CAPITAL

We refer to the circular of the Company dated 31 May 2013 (the “ Circular ”) to the Shareholders, of which this letter forms part. Unless the context otherwise requires, terms defined in the Circular shall have the same meanings when used in this letter.

We have been appointed as members of the Independent Board Committee to advise you as to whether, in our opinion, the terms of the Framework Agreement and the transactions contemplated thereunder are fair and reasonable so far as the Independent Shareholders are concerned.

First Shanghai has been appointed by the Company as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder.

Your attention is drawn to the “Letter from the Board” set out on pages 14 to 52 of the Circular which contains, inter alia, information about the terms of the Framework Agreement and the transactions contemplated thereunder and the proposed increase in authorized share capital of the Company, and the “Letter from First Shanghai” set out on pages 55 to 86 of the Circular which contains its advice in respect of the terms of the Framework Agreement together with the principal factors taken into consideration in arriving at such.

– 53 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the terms of the Framework Agreement and having taken into account the factors and reasons considered by and the advice of First Shanghai, we consider that the entering into of the Framework Agreement is on normal commercial terms and in the ordinary and usual course of business of the Company. We also consider that the terms of the Framework Agreement and the transactions contemplated thereunder are fair and reasonable so far as the interests of the Independent Shareholders are concerned and that the entering into of the Framework Agreement is in the interests of the Company and the Independent Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM to approve the Framework Agreement and the transactions contemplated thereunder and the proposed increase in authorized share capital of the Company.

Yours faithfully,

WU Jiesi

CHE Shujian LEE Kong Wai Conway

Independent Board Committee

– 54 –

LETTER FROM FIRST SHANGHAI

Set out below is the text of the letter of advice from First Shanghai, the independent financial adviser to the Independent Board Committee and Independent Shareholders, prepared for the purpose of inclusion in this circular:

==> picture [189 x 85] intentionally omitted <==

31 May 2013

To the Independent Board Committee and the Independent Shareholders

Dear Sir or Madam,

(1) MAJOR ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF ASSETS FROM CONTROLLING SHAREHOLDER AND ISSUE OF CONSIDERATION SHARES

(2) PROPOSED INCREASE IN AUTHORIZED SHARE CAPITAL

INTRODUCTION

We refer to our engagement to advise the Independent Board Committee and the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder, details of which are set out in the circular of the Company to the Shareholders dated 31 May 2013 (the “ Circular ”), of which this letter forms part. Unless the context otherwise requires, terms used in this letter shall have the same meanings as those defined in the Circular and all currencies are converted with reference to the relevant approximate exchange rates adopted in the Circular obtained from Bloomberg.

– 55 –

LETTER FROM FIRST SHANGHAI

On 27 May 2013, the Company entered into the Framework Agreement with TPG and TPG(HK), pursuant to which the Company agreed to purchase and TPG and TPG(HK) agreed to sell the Acquisition Targets, which include equity interests in the Target Companies and the Target Assets, at the Consideration of approximately RMB10,581 million (assuming it is adjusted by the maximum Post-Agreement Capital Increase Amount and there is no segregation of the Segregated Targets). TPG and TPG(HK) are the controlling shareholders of the Company and therefore are connected persons of the Company. Accordingly, the transactions contemplated under the Framework Agreement constitute connected transactions for the Company and the Framework Agreement is subject to, among other things, the approval by the Independent Shareholders at the EGM.

The Independent Board Committee, comprising all the independent non-executive Directors, namely Dr. Wu Jiesi, Mr. Che Shujian and Mr. Lee Kong Wai Conway, has been formed to advise the Independent Shareholders in respect of the Framework Agreement and the transactions contemplated thereunder. We, First Shanghai Capital Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

In putting forth our opinion and recommendation, we have relied on the accuracy of the information and representations made or referred to in the Circular and provided to us by the management of the Group. We have assumed that all such information and representations were true at the time they were made and will continue to be true up to the time of the holding of the EGM. We have also assumed that all statements of belief, opinion and intention made in the Circular were reasonably made after due enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the management of the Group and have been advised that no material facts have been withheld or omitted from the information provided and referred to in the Circular. We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have not, however, conducted any independent verification of the information included in the Circular and provided to us by the management of the Group nor have we conducted any form of investigation into the business, affairs or future prospects of the Group and the Acquisition Targets.

– 56 –

LETTER FROM FIRST SHANGHAI

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion in respect of the terms of the Framework Agreement and the transactions contemplated thereunder, we have taken into account the following principal factors and reasons:

1. Background of the Group

The Group is principally engaged in the underwriting of direct life insurance business in the PRC, direct P&C insurance business in the PRC and Hong Kong and all classes of global reinsurance business. The Group also carries on asset management, insurance intermediaries and pension businesses and, to support its insurance activities, holds money market, fixed income, equity and property investments. The following table summarises the major items in the income statement of the Group for each of the years ended 31 December 2010, 2011 and 2012 based on financial information published in the annual report of the Company for the year ended 31 December 2011 (the “ 2011 Annual Report ”) and the annual report of the Company for the year ended 31 December 2012 (the “ 2012 Annual Report ”):

				Annual	Annual
	For the	year ended 31 December		growth from	growth from
	2010	2011	2012	2010 to 2011	2011 to 2012
	(HK$ million)	(HK$ million)	(HK$ million)
	(Audited)	(Restated)	(Audited)
Gross premiums written and
policy fees
– Life insurance	37,218	38,137	44,953	2%	18%
– P&C insurance	8,866	7,930	10,589	-11%	34%
– Reinsurance	2,650	3,431	3,435	29%	0%
– Others	25	600	1,083	2300%	81%
	48,759	50,098	60,060	3%	20%
Other items	2,768	3,123	2,973	13%	-5%
Total income	51,527	53,221	63,033	3%	18%
Total benefits, losses and expenses	(49,586)	(51,963)	(61,342)	5%	18%
Profit from operations	1,941	1,258	1,691	-35%	34%
Share of results of associates	9	252	141	2700%	-44%
Gain on disposal of a subsidiary	1,263	–	–	-100%	–
Finance costs	(353)	(566)	(599)	60%	6%
Profit before taxation	2,860	944	1,233	-67%	31%
Profit after taxation	2,653	972	1,474	-63%	52%
Profit attributable to the owners of
the Company	2,245	548	937	-76%	71%

Note: The restatement for the year ended 31 December 2011 was due to the application of the new and revised Hong Kong Financial Reporting Standards. The primary adjustment was the change in unearned premium provisions, net of reinsurance of approximately HK$52 million. Details of the adjustments are set out in the 2012 Annual Report. The information for the year ended 31 December 2010 is extracted from the 2011 Annual Report.

With reference to the above table, gross premiums written and policy fees continuously increased from approximately HK$48,759 million for the year ended 31 December 2010 to approximately HK$60,060 million for the year ended 31 December 2012, representing a compound annual growth rate (“ CAGR ”) of approximately 11% during

– 57 –

LETTER FROM FIRST SHANGHAI

the period, primarily driven by the growth in both the life insurance and P&C insurance businesses. Life insurance and P&C insurance accounted for approximately 76%, 76% and 75% and approximately 18%, 16% and 18% of the total gross premiums written and policy fees for each of the years ended 31 December 2010, 2011 and 2012, respectively. Profit attributable to the owners of the Company experienced an annual decline of approximately 76% for the year ended 31 December 2011, which was mainly attributable to, among other factors, the gain on the sale of the 100% equity interests in MAC of approximately HK$1,263 million during the year ended 31 December 2010, which was a one-time event and did not recur for the year ended 31 December 2011. Profit attributable to the owners of the Company experienced an annual increase of approximately 71% for the year ended 31 December 2012, which was mainly attributable to, among other factors, the growth in gross premiums written and policy fees, the improved performance of the P&C insurance operations and the return to profitability of the reinsurance operations. Further financial information on the Group is set out in the annual reports and annual results of the Company.

2. Background of the Acquisition Targets

TPG(HK) is the parent company of the Company and is wholly-owned by TPG, which in turn is ultimately controlled by the State Council of the PRC. The principal activities of TPG and its subsidiaries, including TPG(HK), are insurance business, securities broking and investment holding.

The Acquisition Targets primarily consist (i) additional equity interests of existing non-wholly owned subsidiaries of the Company, including TPL and TPI; (ii) equity interests in the Overseas P&C Targets, namely TP Macau, TP Singapore, TP UK and TP Indonesia; (iii) equity interests in a securities broking company, namely TPFH; (iv) equity interests in property investment companies, namely TPIH, Dragon Jade and Ming Lee; (v) equity interests in other companies such as financial support service companies and an insurance agency business; and (vi) the Target Assets, which include amounts receivable and/or payable by TPG and/or TPG(HK) from/to certain Target Companies and various real estate properties, car parking spaces and electronic equipment. The major components of the Acquisition in terms of consideration are equity interests in companies engaged in life insurance and P&C insurance, the details of which are set out as follows:

Principal business Percentage of equity interest to be acquired Insurance companies – TPL Life insurance in the PRC 25.05% – TPI P&C insurance in the PRC 38.79% – TP Macau P&C insurance in Macau 100% – TP Singapore P&C insurance in Singapore 100% – TP Indonesia P&C insurance in Indonesia 55% – TP UK P&C insurance in the UK 100% Sub-total Other targets(2) The Consideration	Consideration(1) (RMB million) 7,011 1,617 369 843 36 235 10,111 470 10,581	As a percentage of the total Consideration 66% 15% 4% 8% 1% 2%
		96% 4%
		100%

– 58 –

LETTER FROM FIRST SHANGHAI

Notes:

(1) The consideration assumes no segregation of the Segregated Targets and is adjusted by, among other things, the maximum Post-Agreement Capital Increase Amount and the net accounts payables to be consolidated as detailed in the letter from the Board in the Circular.
(2) Other targets include but not limited to equity interests in the Target Companies other than those listed above and the Target Assets.

The largest component of the Acquisition Targets is the approximately 25.05% equity interests in TPL, which accounts for approximately 66% of the Consideration. TPL is principally engaged in direct life insurance business in the PRC. The equity interests in companies directly engaged in the P&C insurance business, namely TPI and the Overseas P&C Targets (collectively, the “ P&C Targets ”), including the Post-Agreement Capital Increase Amount to TPI, accounts for approximately 30% of the Consideration. TPI, TP Macau, TP Singapore, TP Indonesia and TP UK are principally engaged in the P&C insurance business in the PRC, Macau, Singapore, Indonesia and the UK markets, respectively. Acquisition Targets other than TPL and the P&C Targets (the “ Remaining Components ”), including the Post-Agreement Capital Increase Amount to TPAM, collectively account for approximately 4% of the Consideration and include but not limited to(i) TPAM, which is mainly engaged in the provision of investment consultancy services; (ii) TPP, which is principally engaged in corporate and personal retirement insurance and annuity businesses, and group life insurance business in the PRC; (iii) TPFH, which is a Hong Kong based securities broker; (iv) TPIH, which is principally engaged in holding properties in Hong Kong, Macau and the PRC, including the Shanghai Taiping Finance Tower in Shanghai, the PRC (“ STFT ”); and (v) TPFSC and TPFAS, which are engaged in the provision of back office services and internal audit services, respectively. Further details of the Acquisition Targets are set out in the letter from the Board in the Circular.

(i) Background and historical financial information of TPL

The PRC life insurance segment of the Group is operated by TPL. TPL is currently approximately held as to 50.05% by the Company, 25.05% by TPG and 24.90% by Ageas. The following table sets out the key operational data of TPL based on information published in the 2011 Annual Report and the 2012 Annual Report:

	2010	2011	2012
PRC market share in terms of
premium	3.1%	3.3%	3.7%
Number of provincial branches	33	34	34
Number of sub-branches and
marketing centers	707	798	856
Number of individual agents	50,527	46,064	57,860

– 59 –

LETTER FROM FIRST SHANGHAI

We note that the PRC life insurance market share of TPL in terms of premium continued to increase from approximately 3.1% in 2010 to approximately 3.7% in 2012. Moreover, the number of provincial branches, sub-branches and marketing centers and individual agents also recorded increases from 2010 to 2012.

The following table summarises the key financial data of TPL from its operations, before intra-group eliminations, for each of the years ended 31 December 2010, 2011 and 2012 based on information published in the 2011 Annual Report and the 2012 Annual Report:

				Annual	Annual
	For the	year ended 31 December		growth from	growth from
	2010	2011	2012	2010 to 2011	2011 to 2012
	(HK$ million)	(HK$ million)	(HK$ million)
Gross premiums written
recognised in income
statement
– Individual agency
distribution	10,319	14,410	18,243	40%	27%
– Bank distribution	25,472	22,295	25,399	-12%	14%
– Other channels	1,243	1,224	1,165	-2%	-5%
	37,034	37,929	44,807	2%	18%
Net earned premiums and
policy fees	36,892	37,973	44,780	3%	18%
Total investment income	4,432	4,492	4,651	1%	4%
Net policyholders’ benefits	(4,650)	(6,182)	(8,683)	33%	40%
Net commission expenses	(3,322)	(3,453)	(3,941)	4%	14%
Change in life insurance
contract liabilities,
net of reinsurance	(27,544)	(27,039)	(30,166)	-2%	12%
Administrative and
other expenses	(4,528)	(5,137)	(6,076)	13%	18%
Profit from operation
after taxation	940	781	862	-17%	10%
Profit from operation
attributable to the
owners of TPL	470	391	431	-17%	10%

– 60 –

LETTER FROM FIRST SHANGHAI

(a) From the year ended 31 December 2010 to the year ended 31 December 2011

Gross premiums written increased from approximately HK$37,034 million for the year ended 31 December 2010 to approximately HK$37,929 million for the year ended 31 December 2011, representing an annual growth of approximately 2%. The slight growth of gross premiums written was mainly driven by the growth of the individual agency distribution segment, which was partially offset by the decline in the bank distribution segment as a result of, among other factors, (i) rising interest rates and higher reserve requirements at banks, leading to tighter liquidity conditions; and (ii) new regulatory requirements on the sale of bancassurance. Despite net earned premiums and policy fees was stable for the year ended 31 December 2011 as compared with the preceding year, profit from operation after taxation decreased from approximately HK$940 million for the year ended 31 December 2010 to approximately HK$781 million for the year ended 31 December 2011, representing an annual decline of approximately 17%. Such decrease was due to, among other factors, (i) an approximately 33% increase in net policyholders’ benefits primarily due to the increase in surrenders; and (ii) an approximately 13% in administrative and other expenses primarily due to increased staff costs.

(b) From the year ended 31 December 2011 to the year ended 31 December 2012

Gross premiums written increased from approximately HK$37,929 million for the year ended 31 December 2011 to approximately HK$44,807 million for the year ended 31 December 2012, representing an annual growth of approximately 18%. The growth of gross premiums written was mainly driven by both individual agency distribution and bank distribution segments, which recorded annual increases of approximately 27% and 14% for the year ended 31 December 2012, respectively. For the year ended 31 December 2012, (i) net policyholders’ benefits recorded annual increase of approximately 40% primarily due to the increases in annuity, dividends and maturity payments; and (ii) change in life insurance contract liabilities, net of reinsurance recorded annual increase of approximately 12%. Nonetheless, profit from operations recorded an annual increase of approximately 10% for the year ended 31 December 2012 as a result of, among other factors, the increase in gross premiums written during the year.

– 61 –

LETTER FROM FIRST SHANGHAI

(c) Solvency margins

Set out in the table below are the solvency margin ratios of TPL under the CIRC regulations as at 31 December 2010, 2011 and 2012 based on information published in the 2011 Annual Report and the 2012 Annual Report:

		As at 31 December
	2010	2011	2012
Minimum statutory
solvency margin
(RMB million)	4,020	4,556	5,581
Actual solvency margin
(RMB million)	10,868	8,096	9,167
Solvency margin ratio	270%	178%	164%

With reference to the above table, we note that TPL was able to maintain solvency margin above the minimum statutory solvency margin as at 31 December 2010, 2011 and 2012. According to the 2012 Annual Report, the shareholders of TPL contributed additional capital into TPL after the balance sheet date and, if such additional capital were incorporated, the pro forma solvency margin ratio as of 31 December 2012 would be approximately 209%.

Please refer to Appendix II and Appendix IV to the Circular for further information on the historical financial performance of TPL.

(ii) Background and historical financial information of TPI

The PRC P&C insurance segment of the Group is operated by TPI. The equity of TPI held by the Group increased from approximately 50.05% to 51.77% with effect from July 2011 and further increased from approximately 51.77% to 61.21% with effect from November 2011. TPI is currently approximately held as to 61.21% by the Company and 38.79% by TPG. The following table sets out the key operational data of TPI based on information published in the 2011 Annual Report and the 2012 Annual Report:

	2010	2011	2012
PRC market share in terms of
premium	1.3%	1.2%	1.4%
Number of provincial branches	27	28	28
Number of direct sales
representatives	3,804	3,462	5,484

– 62 –

LETTER FROM FIRST SHANGHAI

We note that the PRC P&C insurance market share of TPI in terms of premium increased from approximately 1.3% in 2010 to approximately 1.4% in 2012 and the number of provincial branches and direct sales representatives also increased from 2010 to 2012.

The following table summarises the key financial data of TPI from its operations, before intra-group eliminations, for each of the years ended 31 December 2010, 2011 and 2012 based on information published in the 2011 Annual Report and the 2012 Annual Report:

				Annual	Annual
	For the	year ended 31 December		growth from	growth from
	2010	2011	2012	2010 to 2011	2011 to 2012
	(HK$ million)	(HK$ million)	(HK$ million)
Gross premiums written
– Motor	5,021	5,559	7,713	11%	39%
– Marine	157	193	221	23%	15%
– Non-marine	957	1,242	1,614	30%	30%
	6,135	6,994	9,548	14%	37%
Net premiums written	5,336	6,073	8,018	14%	32%
Net earned premiums	5,026	5,854	7,213	16%	23%
Net claims incurred	(2,834)	(3,127)	(3,763)	10%	20%
Underwriting expenses	(2,122)	(2,543)	(3,294)	20%	30%
Net commission expenses	(174)	(179)	(139)	3%	-22%
Underwriting profit	(104)	6	17	-106%	183%
Total investment income	229	238	288	4%	21%
Other gains and other income	–	–	40	–	–
Other administrative
expenses	(5)	(35)	(42)	600%	20%
Finance costs	(51)	(53)	(54)	4%	2%
Profit from operation
after taxation	57	153	239	168%	56%
Profit from operation
attributable to the
owners of TPI	29	72	147	148%	104%
Loss ratio(1)	56.4%	53.4%	52.2%
Expense ratio(2)	45.7%	46.5%	47.6%
Combined ratio(3)	102.1%	99.9%	99.8%

Notes:

(1) Loss ratio is derived from dividing net claims incurred by net earned premiums.
(2) Expense ratio is derived from dividing the sum of underwriting expenses and net commission expenses by net earned premiums.
(3) Combined ratio is derived from the sum of the loss ratio and the expense ratio.

– 63 –

LETTER FROM FIRST SHANGHAI

Gross premiums written increased from approximately HK$6,135 million for the year ended 31 December 2010 to approximately HK$9,548 million for the year ended 31 December 2012, representing a CAGR of approximately 25% during the period, which was mainly driven by the annual growth of the motor segment for the year ended 31 December 2012. Profit from operation attributable to the owners of TPI increased from approximately HK$29 million for the year ended 31 December 2010 to approximately HK$147 million for the year ended 31 December 2012, representing a CAGR of approximately 125% during the period, which was primarily attributable to the abovementioned growth of gross premiums written and, as a percentage of net premiums written, the reduction in net claims incurred. Expense ratio continued to increase slightly from approximately 45.7% for the year ended 31 December 2010 to approximately 47.6% for the year ended 31 December 2012 due to, among other factors, business expansion of TPI. Nonetheless, the increase in expense ratio was offset by the decrease in loss ratio from approximately 56.4% for the year ended 31 December 2010 to approximately 52.2% for the year ended 31 December 2012 due to, among other factors, the proactive risk selection of the centralised underwriting platform of TPI. Overall, combined ratio lowered from approximately 102.1% for the year ended 31 December 2010 to approximately 99.8% for the year ended 31 December 2012, reflecting an overall improvement of the operating cost structure of TPI over the period.

Please refer to Appendix II and Appendix IV to the Circular for further information on the historical financial performance of TPI.

(iii) Historical combined financial performance in relation to the Target Interests in the Overseas P&C Targets and the Remaining Components other than TPAM and TPP (the “Subsidiary Components”)

The following table summarises the major items in the combined income statement of the Subsidiary Components for each of the years ended 31 December 2010, 2011 and 2012 with reference to audited financial information disclosed in Appendix II to the Circular:

– 64 –

LETTER FROM FIRST SHANGHAI

Gross premiums written
– P&C insurance from
Macau
– P&C insurance from
Singapore
– P&C insurance from
Indonesia
– P&C insurance from the
United Kingdom
Premiums ceded to reinsurers
and retrocessionaries
Net premiums written
Net realised and unrealised
investment gains and
impairment
Other items
Total income
Total benefits, losses and
expenses
Finance costs
Other items
Profit before taxation
Profit after taxation
Profit attributable to the
owners of the Subsidiary
Components

For the year ended 31 December
Annual
growth from
2010 to 2011
Annual
growth from
2011 to 2012
2010
2011
2012
(RMB
million)
(RMB
million)
(RMB
million)
242
255
337
5%
32%
328
368
375
12%
2%
54
76
72
41%
-5%
146
149
152
2%
2%
770
848
936
10%
10%

(262)
(264)
(293)
1%
11%
508
584
643
15%
10%
563
1,243
446
121%
-64%
435
920
759
111%
-18%
1,506
2,747
1,848
82%
-33%
(824)
(916)
(996)
11%
9%
(45)
(50)
(86)
11%
72%
7
22
64
214%
191%
644
1,803
830
180%
-54%
522
1,490
688
185%
-54%
522
1,246
587
139%
-53%

The combined gross premiums written of the Subsidiary Components were all generated by the Overseas P&C Targets from their P&C insurance businesses in Macau, Singapore, Indonesia and the United Kingdom. Gross premiums written increased from approximately RMB770 million for the year ended 31 December 2010 to approximately RMB936 million for the year ended 31 December 2012, representing a CAGR of approximately 10% during the period, which was mainly attributable to the increase in gross premiums written from the P&C insurance businesses in Singapore and Macau. Total income and profit attributable to the owners of the Subsidiary Components recorded significant annual increases for the year ended 31 December 2011 but subsequently recorded an annual decline for the year ended 31 December 2012 primarily due to the fluctuations in net realised and unrealised investment gains and impairment, which amounted to approximately RMB563 million, RMB1,243 million and RMB446 million for each of the years ended 31 December 2010, 2011 and 2012, respectively. We have been advised by the management of the Group that the higher net realised and unrealised investment gains and impairment for the year ended 31 December 2011 was mainly attributable to net unrealised gains from the investment properties fair value change of the STFT, whose construction was completed in the second half of 2011.

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LETTER FROM FIRST SHANGHAI

Please refer to Appendix II and Appendix IV to the Circular for further information on the financial performance of the Subsidiary Components.

(iv) Historical financial position of the Acquisition Targets

The following table summarises the financial position of the Target Companies as at 31 December 2011 and 2012 with reference to the audited financial information disclosed in Appendix II to the Circular:

	For the year ended	For the year ended
	31 December
	2011	2012	Growth
	(RMB	(RMB
	million)	million)
TPL
– Total assets	132,602	168,906	27%
– Total liabilities	124,706	158,803	27%
– Net assets	7,896	10,103	28%
TPI
– Total assets	8,519	10,522	24%
– Total liabilities	7,499	8,789	17%
– Net assets	1,020	1,733	70%
Subsidiary Components
– Total assets	11,208	12,520	12%
– Total liabilities	6,380	6,926	9%
– Net assets	4,828	5,594	16%
TPAM
– Total assets	196	247	26%
– Total liabilities	44	71	61%
– Net assets	152	176	16%
TPP
– Total assets	1,848	2,608	41%
– Total liabilities	1,199	2,057	72%
– Net assets	649	551	-15%

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LETTER FROM FIRST SHANGHAI

With reference to the above table, the net assets of the major and majority categories of the Target Companies improved from 31 December 2011 to 31 December 2012.

According to the letter from the Board in the Circular, the total carrying amount of the Target Assets was approximately RMB544 million and the associated total liabilities amounted to approximately RMB2,435 million as at 31 December 2012.

3. Industry overview

As covered in the letter from the Board in the Circular, according to the CIRC, gross premiums written in the PRC life insurance and P&C insurance sectors increased at a CAGR of approximately 15% and 21% during the period from 2007 to 2012, respectively.

We have also reviewed industry information published on the website of Swiss Reinsurance Company Limited (“ Swiss Re ”), which is a wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. We note that the industry information published by Swiss Re is quoted in, amongst other publications, the listing documents of several Hong Kong listed companies. According to the report titled “Sigma – No 5/2011 – Insurance in emerging markets: growth drivers and profitability” published by Swiss Re in 2011 (the “ Sigma Report ”), total insurance premiums in emerging markets expanded by approximately 11%, while those in industrialised economies grew by only approximately 1% from 2001 to 2010. Industrialised countries still contributed more in absolute terms than emerging markets to overall premium growth due to their size, where industrialised economies generated approximately US$120 billion in additional premiums in nominal terms, and followed closely by emerging markets with approximately US$109 billion in 2010. Emerging markets are increasingly attracting the attention of global insurers, which look to them for growth beyond the saturated mature markets of industrialised economies. As stated in the Sigma Report, riding on stronger economic performance and industry catch-up dynamics, premium growth in emerging markets is expected to continue to surpass that of industralised countries by a substantial margin in the next decade. The following table sets out the expected growth rates of life and non-life insurance premium by region.

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LETTER FROM FIRST SHANGHAI

	Expected CAGR	Expected CAGR
	from 2011 to 2021
		Non-life
	Life insurance	insurance
Region	premium	premium
World	3.9%	3.4%
– Emerging markets	7.9%	6.4%
– Emerging Asia	8.5%	8.3%
– Eastern Europe	7.5%	4.9%
– Latin America	7.5%	4.5%
– Middle East	8.0%	6.6%
– Africa	4.0%	4.4%
– Industrialised countries	2.9%	2.6%

Source: the Sigma Report

With reference to the above table, we note that geographical region is a factor affecting the expected general growth rate of an insurance business. Emerging markets in Asia is expected to achieve the highest CAGR amongst the various regions for both life insurance premium and non-life insurance premium from 2011 to 2021. Based on the Sigma Report, the PRC market, which is attractive in terms of its insurance market scale, economic outlook and population, will dominate growth. In terms of premium volume, the PRC is expected to rise from the fifth and seventh positions in the global life insurance and non-life insurance market in 2011, respectively, to the second largest market globally for both life and non-life insurance in 2021, just behind the United States.

4. Major reasons for and benefits of the Acquisition

(i) Overall business development strategy

As stated in the interim report of the Company for the six months ended 30 June 2012, the Group would continue to explore measures to further enhance the efficiency of its management, operations and capital management. Moreover, with the support of its controlling shareholder, the Company would consider various options, including increasing its shareholding in its non-wholly owned subsidiaries and/or making other strategic investments, to be funded by the issuance of new equity as consideration.

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LETTER FROM FIRST SHANGHAI

According to the letter from the Board in the Circular, the Company intends to acquire all of the assets relating or incidental to insurance businesses from TPG and TPG(HK) with the objectives of further enhancing its control of the principal businesses of the Group. We note that the Acquisition, being the bundled purchase of a variety of equity interests and assets primarily related to insurance businesses from its state-owned controlling shareholders, are consistent with the business development strategy of the Company.

(ii) Further consolidation of the PRC insurance companies to capture the growth potential of the PRC insurance market

The largest component of the Acquisition Targets is the approximately 25.05% equity interests in TPL, which accounted for approximately 66% of the Consideration. We note that the life insurance segment of the Group, which is operated by TPL, accounted for approximately 76%, 76% and 75% of the gross premiums written and policy fees of the Group for each of the years ended 31 December 2010, 2011 and 2012, respectively. According to the letter from the Board in the Circular, it has taken 12 years for TPL to establish its nationwide network, infrastructure, management and agency teams, and most importantly, its business model and corporate image, which have contributed to TPL success as a respectable young insurer in the PRC. TPL ranked number seven among nearly 70 competitors in terms of gross premiums written for the year ended 31 December 2012. The PRC market share of TPL in terms of premium continued to grow from approximately 3.1% in 2010 to approximately 3.7% in 2012 and profit from operations attributable to the owners of TPL recorded annual growth of approximately 10% for the latest full financial year. With reference to the letter from the Board in the Circular, the Acquisition will enable the Group to further enjoy the benefits of economies of scale as TPL enters into a more mature stage of operation. Moreover, TPL has been the most profitable subsidiary in the Group over the past five years and is now the top contributor in assets, profit, new business value and embedded value to the Group. In addition, according to the 2012 Annual Report, sales of TPL through the bank channel have greatly improved in the first two months of 2013 and have set a solid foundation for future bancassurance cooperation.

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LETTER FROM FIRST SHANGHAI

TPI is also a major component of the insurance businesses to be acquired under the Framework Agreement. According to the 2012 Annual Report, the overall PRC P&C insurance industry recorded growth of approximately 18% for the year ended 31 December 2012. Moreover, gross premiums written by TPI outperformed the market and achieved an annual growth of approximately 37% for the year ended 31 December 2012. With reference to the letter from the Board in the Circular, TPI has successfully centralised its underwriting and claims operations in recent years, which makes it possible for TPI to better and proactively manage its underwriting and claims operations, and has led to continuous improvements in underwriting and operating results. We note that the decrease in the loss ratio of TPI from approximately 56.4% for the year ended 31 December 2010 to approximately 52.2% for the year ended 31 December 2012 was due to, among other factors, proactive risk selections from the centralised underwriting platform of TPI. Overall, the combined ratio of TPI decreased from approximately 102.1% for the year ended 31 December 2010 to approximately 99.8% for the year ended 31 December 2012, reflecting an overall improvement of the operating cost structure of TPI over the period. We also note that the net profit from operations of TPI increased from approximately HK$153 million for the year ended 31 December 2011 to approximately HK$239 million for the year ended 31 December 2012, representing an annual growth of approximately 56%.

Furthermore, as discussed in the above section headed “Industry overview”, emerging markets in Asia is expected to achieve the highest CAGR amongst the various regions in the world for both life insurance premium and non-life insurance premium and the PRC market, which is attractive in terms of its insurance market scale, economic outlook and population, will dominate growth.

The Acquisition would allow the Company to increase its shareholding interest in TPL and TPI from approximately 50.05% to approximately 75.10% and from approximately 61.21% to 100%, respectively. Following the Completion, a higher proportion of the future net profits of TPL and TPI would be attributable to the Shareholders and the Company would be able to further capture the growth potential of the PRC insurance market.

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LETTER FROM FIRST SHANGHAI

(iii) Enhancement of financial performance and diversification of investment portfolio

As previously discussed, all the major components of the Acquisition Targets have been profitable in recent years. The Acquisition would further diversify the business of the Group from the PRC and Hong Kong insurance markets to overseas insurance markets and the PRC property investment sector as discussed above.

As stated in the letter from the Board in the Circular, almost all properties acquired through the investment property companies are for commercial and industrial use and located in the most economically and commercially developed areas of the PRC. All of the properties are completed and held for long term and leasing purposes. The largest property in the portfolio is a stake in the STFT, a grade A office building located in the heart of the Lujiazui Finance and Trade Zone in Shanghai which has opened for business since 2011. Currently, the SFST is the headquarters of TPL, TPAM and TPP, while the remaining floors are leased out to third parties at an attractive and stable yield. Accordingly, the Acquisition will not only be able to diversify the investment portfolio of the Group, but will also provide a new and stable source of rental income revenue to the Group. Furthermore, the Group may also be able to benefit from capital appreciation of the properties over the long term. In addition, post the Acquisition, the Group will also have the option to transfer the ownership of certain properties to TPL, which will potentially help improve the asset liability management of the insurance funds at TPL.

(iv) Streamlining of corporate and operational structure

We understand that the proposed Acquisition represent an opportunity for the Group to enlarge its business primarily by way of the acquisition of equity interests in insurance companies that have been managed by or are closely related to the Group but are held by its parent companies. In particular, TPL and TPI, which have been the two largest operating subsidiaries of the Company, are partially held by TPG.

As stated in the letter from the Board in the Circular, currently, many important management and business operational functions of the Group are provided by TPG through, among other entities, (i) TPFSC, which provides operating and information technology services, including centralised underwriting and the issuance of new policies, renewals and maintenance of in-force policies, claims handling and settlement, telephone enquiry services, system operation and maintenance and systems development; and (ii) TPFAS, which provides internal audit services. TPFSC and TPFAS are also part of the Acquisition Targets.

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LETTER FROM FIRST SHANGHAI

The Acquisition are expected to (i) eliminate cross-shareholdings in the subsidiaries which are prevalent in the Group structure, after which a simpler and clearer corporate structure of the Group would be presented to investors for their better understanding and evaluation; (ii) enable the Company to fully capitalise on and mobilise the resources previously under the control of TPG but not under the Group, such that the Group would be able to enhance operational efficiency by centralising management and business operational functions; and (iii) reduce the extent of connected transactions between the Group and entities controlled by TPG and TPG(HK).

(v) Preservation of financial resources and further alignment of business interests

Pursuant to the Framework Agreement, the Consideration would be fully settled by the issuance of the Consideration Shares. Therefore, the Group would acquire the Acquisition Targets and obtain the benefits of the Acquisition without the involvement of any cash outflows, such that the Group would be able to preserve such resources for other business development purposes. Moreover, the increased shareholding in the Company to be held by TPG would further align the business interests of the Company and TPG.

(vi) Conclusion

Having principally considered that the Acquisition, being the bundled purchase of a variety of equity interests and assets primarily related to insurance businesses from its state-owned controlling shareholders, (i) are principally consistent with the business development strategy of the Company; (ii) allow the Company to increase its shareholding interest in TPL and TPI, which are the core PRC subsidiaries of the Company with favourable financial performance and prospects; (iii) may enhance the financial performance and diversify the investment portfolio of the Group; (iv) allow the Group to streamline its corporate and operational structure; (v) allow the Group to acquire the Acquisition Targets and enjoy the benefits of the Acquisition by issuance of the Consideration Shares without incurring material cash outflows; (vi) further align the business interests of the Company and TPG; and (vii) are pursuant to the terms of the Framework Agreement which are fair and reasonable as discussed below, we are of the view that the entering into of the Framework Agreement is in the interests of the Company and the Shareholders as a whole.

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LETTER FROM FIRST SHANGHAI

5. Principal terms of the Framework Agreement

Pursuant to the Framework Agreement, the Company agreed to purchase and TPG and TPG(HK) agreed to sell the Acquisition Targets at the Consideration of approximately RMB10,581 million (assuming it is adjusted by the maximum Post-Agreement Capital Increase Amount and there is no segregation of the Segregated Targets). The Consideration shall be fully satisfied by the allotment and issue of the Consideration Shares by the Company.

The Acquisition is considered as a single package, involving the bundled purchase of all the Acquisition Targets, and the negotiation of the terms and conditions of the Framework Agreement (including the Consideration) was also made on an aggregate basis. The Acquisition Targets includes equity interests in the 25 Target Companies, which are incorporated and operating in different jurisdictions, and the Target Assets, which are of various nature and situated at various locations. According to the letter from the Board in the Circular, having considered the time required for obtaining relevant approvals and consents and completing relevant registration and filing procedures in respect of different Acquisition Targets vary to a very large extent, the Acquisition is split into three tranches, each of which may proceed to completion on its own upon fulfilment of all necessary conditions. Such completion mechanism serves to facilitate the settlement and completion of the Acquisition and we consider it to be reasonable. Further details of the three tranches are set out in the letter from the Board in the Circular.

Moreover, in the event that the necessary filing and registration procedures in respect of any of the Overseas P&C Targets have not yet been completed or fulfilled in accordance with the relevant requirements the Completion Long Stop Date (as defined in the letter from the Board in the Circular), TPG and TPG(HK) shall have the right (but not an obligation) to segregate any of the Overseas P&C Targets the filing and registration procedures of which have not yet been completed from the TPG Target Interests and/or TPG(HK) Target Interests (as the case may be), and the consideration for the sale and purchase of the Segregated Targets shall be deducted from the Consideration. After the segregation of the Segregated Targets, TPG, TPG(HK) and the Company will enter into supplemental agreements for the sale and purchase of the Segregated Targets and will continue to proceed with the procedures necessary for the transfer of the Segregated Targets. Taking into account the relevant consideration shall be deducted from the Consideration, we consider such mechanism to be reasonable. Further details of the potential segregation are set out in the letter from the Board in the Circular.

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LETTER FROM FIRST SHANGHAI

In addition, the shareholders of TPI and TPAM (including the Company and TPG) have agreed to increase the registered capital of TPI and TPAM and, if TPG has paid the agreed amount of capital increase in respect of TPI and TPAM prior to the Tranche B Completion Date, the Tranche B Consideration shall be increased by the Post-Agreement Capital Increase Amount, being the amount of capital increase which has actually been paid by TPG. The maximum Post-Agreement Capital Increase Amount is approximately RMB264 million, representing approximately 3% of the Consideration (before the inclusion of the Post-Agreement Capital Increase Adjustment). Taking into account, in particular, (i) the capital contribution is for the enhancement of financial position of TPI and TPAM; (ii) the additional capital to be contributed is proportionate to the respective shareholdings; and (iii) the relevant shareholdings held by TPG will be acquired by the Company, we consider the Post-Agreement Capital Increase Adjustment to be reasonable.

(i) The Consideration

As discussed in the section headed “Background of the Acquisition Targets” above, the consideration for equity interests in TPL and the P&C Targets, including the Post-Agreement Capital Increase Amount to TPI, collectively accounted for approximately 96% of the Consideration. For our assessment of the Consideration, we have identified comparable companies listed on the Stock Exchange (the “ Comparable Companies ”) and have analysed relevant price ratios. Despite (i) the particulars of the business and financial aspects and prospects of the Comparable Companies may not be exactly identical to those of TPL and the P&C Targets; and (ii) the sample sizes are limited, after collectively taking into account (i) the Comparable Companies are exhaustively identified companies listed on the Stock Exchange meeting the relevant criteria; (ii) the Comparable Companies are primarily engaged in the same industry sharing the same industry trends as compared with the relevant Acquisition Targets; (iii) the Comparable Companies have highly comparable business models, including revenue and cost structures, as compared with the relevant Acquisition Targets; and (iv) the Comparable Companies and the relevant Acquisition Targets are expected to share similar valuation in respect of price ratios given the close resemblances between them, we consider the Comparable Companies to be fair and representative samples for our comparison purposes. We also understand that, as compared with the Comparable Companies, lower price ratio of the relevant Acquisition Targets as represented by their respective consideration implies a lower consideration per relevant benchmark and would therefore be more favourable to the Company.

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LETTER FROM FIRST SHANGHAI

(a) The consideration for TPL

The largest component of the Acquisition Targets is the approximately 25.05% equity interests in TPL, which accounted for approximately 66% of the Consideration. Given that TPL is principally engaged in the life insurance business in the PRC, we have identified companies listed on the Stock Exchange with substantially all revenue derived from the life insurance business in the PRC (the “ Life Comparable Companies ”) and have analysed their price to embedded value ratios (“ P/EV Ratio ”) for our assessment of the consideration for TPL. The P/EV Ratio is a unique, relevant and appropriate price ratio for the assessment of life insurance companies given that embedded value generally represents the sum of adjusted net asset values and the present value of future expected cash flows to shareholders from the in-force business, less the cost of holding regulatory solvency capital to support the in-force business. The embedded value of TPL as at 31 December 2012 is disclosed in the 2012 Annual Report and the Independent Shareholders may also refer to disclosures in Appendix V to the Circular.

Company name		Market	P/EV
(Stock code)	Principal business	capitalisation(1)	Ratio(2)
		(HK$ billion)	(times)
New China Life	Underwriting life insurance policies; acting as	84	1.20
Insurance Company	agent for domestic and international insurance
Ltd. (1336 HK)	companies; providing insurance related
	consulting services; and conducting capital
	management operations in the PRC.
China Life Insurance	Writing of life insurance business, providing	588	1.41
Company Limited	life, annuities, accident and health insurance
(2628 HK)	products in the PRC
	Maximum:	588	1.41
	Mean:	336	1.31
	Median:	336	1.31
	Minimum:	84	1.20
The consideration		35	1.07
for TPL(3):

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LETTER FROM FIRST SHANGHAI

Notes:

(1) The market capitalisation is derived from multiplying the number of ordinary shares as disclosed in the latest monthly return and closing share price as at the Last Trading Date.
(2) The P/EV Ratio is derived from dividing the market capitalisation by the group embedded value as disclosed in the latest applicable published financial statement as at the Last Trading Date.
(3) The market capitalisation represented by the consideration for TPL is derived from dividing the consideration for TPL by 25.05%, being the percentage of equity interests to be acquired under the Framework Agreement. The P/EV Ratio represented by the consideration for TPL is derived from dividing the market capitalisation by the sum of the embedded value of TPL as at 31 December 2012 and the RMB2,500 million capital contributed by the shareholders of TPL in March 2013 as disclosed in the letter from the Board in the Circular.

With reference to the above table, the P/EV Ratio represented by the consideration for TPL is below the range of those of the Life Comparable Companies.

(b) The consideration for the P&C Targets

The P&C Targets are major components of the Target Companies, where the consideration for them, including the Post-Agreement Capital Increase Amount to TPI, collectively represents approximately 30% of the Consideration.

For our assessment of the consideration for TPI, we have identified companies listed on the Stock Exchange that are engaged in the P&C insurance business in the PRC. We note that two listed companies, namely the People’s Insurance Company (Group) of China Limited and PICC Property and Casualty Company Limited had over 50% of their gross written premiums and policy fees or total revenue derived from the P&C insurance business for the latest full financial year. For comparison purposes, we have also included two listed companies, namely Ping An Insurance (Group) Company of China, Limited and China Pacific Insurance (Group) Co., Ltd., which had over 40% of their gross written premiums and policy fees derived from the P&C insurance business for the latest full financial year (collectively, the “ P&C Comparable Companies ”) and have analysed their price to earnings ratio (“ P/E Ratio ”) and price to book ratio (“ P/B Ratio ”).

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LETTER FROM FIRST SHANGHAI

Company name		Market	P/E	P/B
(Stock code)	Principal business	capitalisation(1)	Ratio(2)	Ratio(3)
		(HK$ billion)	(times)	(times)
The People’s Insurance	Provision of integrated financial products and	165	19.64	2.05
Company (Group) of	services and engaged in life insurance,
China Limited (1339 HK)	P&C insurance, health insurance, asset
	management and other businesses.
Ping An Insurance (Group)	Provision of a wide range of financial	464	18.78	2.36
Company of China,	products and services with a focus on
Limited (2318 HK)	three core businesses namely, insurance,
	banking and investment in the PRC
PICC Property and	Provision of insurance and reinsurance of	118	9.19	2.10
Casualty Company	motor vehicle, commercial property,
Limited (2328 HK)	liability, cargo and accidental injury and
	health in the PRC
China Pacific Insurance	Principally engaged in life insurance,	243	38.79	2.05
(Group) Co., Ltd.	property and casualty insurance and
(2601 HK)	pension and annuity businesses as well as
	asset management in the PRC
	Maximum:	464	38.79	2.36
	Mean:	248	21.60	2.14
	Median:	204	19.21	2.08
	Minimum:	118	9.19	2.05
The consideration		5	18.89	2.12

for TPI[(4)] :

Notes:

(1) The market capitalisation is derived from multiplying the number of ordinary shares as disclosed in the latest monthly return and closing share price as at the Last Trading Date.
(2) The P/E Ratio is derived from dividing the market capitalisation by profit attributable to shareholders as disclosed in the latest published full year financial statement as at the Last Trading Date.
(3) The P/B Ratio is derived from dividing the market capitalisation by net assets attributable to shareholders as disclosed in the latest published financial statement as at the Last Trading Date.
(4) The market capitalisation represented by the consideration for TPI is derived from dividing the consideration for TPI (before the Post-Agreement Capital Increase Adjustment) by 38.79%, being the percentage of equity interests to be acquired under the Framework Agreement. The P/E Ratio and the P/B Ratio represented by the consideration for TPI are derived from dividing the market capitalisation by the consolidated profit attributable to shareholders for the year ended 31 December 2012 and the consolidated net assets attributable to shareholders as at 31 December 2012, respectively.

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LETTER FROM FIRST SHANGHAI

With reference to the above table, we note that the P/E Ratio and the P/B Ratio represented by the consideration for TPI are comparable with the mean and median of those of the P&C Comparable Companies.

For our assessment of the consideration for the Overseas P&C Targets, given that the geographical region is a factor affecting the expected general growth rate of an insurance business as discussed in the section headed “Industry overview” above, we have identified companies listed on the Stock Exchange that are principally engaged in the insurance business with over 50% of its revenue or segment profit derived from markets other than the PRC, Hong Kong and Macau (the “ Overseas Comparable Companies ”) and have analysed their P/E Ratio and P/B Ratio.

Company name		Market	P/E	P/B
(Stock code)	Principal business	capitalisation(1)	Ratio(2)	Ratio(3)
		(HK$ billion)	(times)	(times)
Manulife Financial	Provision of life and health insurance in the	219	17.29	1.10
Corporation (945 HK)	United States, Canada and Asia
(“Manulife”)
AIA Group Limited	Provision of products and services to	421	17.99	2.03
(1299 HK) (“AIA”)	individuals and businesses in the areas of
	insurance, protection, savings, investment
	and retirement in Thailand, Hong Kong,
	Singapore and other Asia Pacific countries
Prudential plc (2378 HK)	Principally engaged in insurance operations	361	13.04	2.77
(“Prudential”)	and asset management in the United
	States, the United Kingdom and Asia
	Maximum:	421	17.99	2.77
	Mean:	334	16.11	1.97
	Median:	361	17.29	2.03
	Minimum:	219	13.04	1.10
The consideration		0.46	6.19	1.66
for TP Macau(4):
The consideration		1.04	11.57	1.57
for TP Singapore(4):
The consideration		0.08	11.55	1.02
for TP Indonesia(4):
The consideration		0.29	10.67	1.15
for TP UK(4):

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LETTER FROM FIRST SHANGHAI

Notes:

(1) The market capitalisation is derived from multiplying the number of ordinary shares as disclosed in the latest monthly return and closing share price as at the Last Trading Date.
(2) The P/E Ratio is derived from dividing the market capitalisation by profit attributable to shareholders as disclosed in the latest published full year financial statement as at the Last Trading Date.
(3) The P/B Ratio is derived from dividing the market capitalisation by net assets attributable to shareholders as disclosed in the latest published financial statement as at the Last Trading Date.
(4) The market capitalisations represented by the consideration for the respective Overseas P&C Targets are derived from dividing the consideration for the respective Overseas P&C Targets by the respective percentage of equity interests to be acquired under the Framework Agreement. The P/E Ratio and the P/B Ratio represented by the consideration for the respective Overseas P&C Targets are derived from dividing the market capitalisation for the respective Overseas P&C Targets by their respective consolidated profit attributable to shareholders for the year ended 31 December 2012 and the consolidated net assets attributable to shareholders as at 31 December 2012, respectively.

With reference to the above table, we note that the P/E Ratio and the P/B Ratio represented by the consideration for the respective Overseas P&C Targets are lower than the mean and median of those of the Overseas Comparable Companies.

(c) The consideration for the Remaining Components

The Remaining Components cover a diverse variety of businesses and assets, where the consideration for them, including the Post-Agreement Capital Increase Amount to TPAM, collectively represents approximately 4% of the Consideration. With reference to the letter from the Board in the Circular, the sum of the net assets of each of the Remaining Components as at 31 December 2012, including subsequently completed capital contribution, amounted to approximately RMB782 million). The consideration for the Remaining Components of approximately RMB401 million (before the inclusion of the Post-Agreement Capital Increase Adjustment) represents a discount of approximately 49% to such net assets.

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LETTER FROM FIRST SHANGHAI

(d) Conclusion

Taking into account, in particular, that (i) the P/EV Ratio represented by the consideration for TPL is below the range of those of the Life Comparable Companies; (ii) the P/E Ratio and the P/B Ratio represented by the consideration for TPI are comparable with the mean and median of those of the P&C Comparable Companies; (iii) the P/E Ratio and the P/B Ratio represented by the consideration for the Overseas P&C Targets are lower than the mean and median of those of the Overseas Comparable Companies; (iv) the consideration for TPL and the P&C Targets, including the Post-Agreement Capital Increase Amount to TPI, collectively represents approximately 96% of the Consideration; (v) the consideration for the Remaining Components represents a discount to the relevant net assets; (vi) the mechanism of the PostAgreement Capital Increase Adjustment is fair and reasonable; and (vii) the benefits of the Acquisition as discussed above, we consider the Consideration to be on normal commercial terms and is fair and reasonable so far as the Independent Shareholders are concerned.

(ii) The Consideration Shares

The Consideration shall be fully satisfied by the allotment and issue of the Consideration Shares by the Company at the Issue Price of HK$15.39 per Share. Taking into account, in particular, (i) the Group could acquire the Acquisition Targets and obtain the benefits of the Acquisition without the involvement of any cash outflows, such that the Group would be able to preserve such resources for other business development purposes; and (ii) the increased shareholding in the Company to be held by TPG would further align the business interests of the Company and TPG, we consider the settlement mechanism of the Consideration by way of the issue of the Consideration Shares to be acceptable.

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LETTER FROM FIRST SHANGHAI

For our assessment of the Issue Price, we have reviewed the following:

(a) Historical price performance of the Shares

Having reviewed the historical closing prices of the Shares, we note that the Issue Price of HK$15.39 per Share represents:

i. a premium of approximately 25% over the closing price as quoted on the Stock Exchange as at the Latest Practicable Date of HK$12.36 per Share;
ii. a premium of approximately 25% over the closing price as quoted on the Stock Exchange as at the Last Trading Date of HK$12.36 per Share;
iii. a premium of approximately 22% over the average of the closing prices as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Date of approximately HK$12.62 per Share;
iv. a premium of approximately 20% over the average of the closing prices as quoted on the Stock Exchange for the last 30 consecutive trading days up to and including the Last Trading Date of approximately HK$12.82 per Share; and
v. a premium of approximately 90% over the latest published audited net assets attributable to the owners of the Company per Share, being the audited net assets attributable to the owners of the Company of approximately HK$13,837 million as at 31 December 2012 divided by 1,705,875,092 Shares as at the Latest Practicable Date, of approximately HK$8.11 per Share.

– 81 –

LETTER FROM FIRST SHANGHAI

The chart below depicts the closing prices of the Shares from 1 January 2012, being approximately a year prior to the clarification announcement published by the Company dated 14 January 2013 in relation to the Acquisition (the “ Preliminary Announcement ”), up to and including the Latest Practicable Date (the “ Review Period ”).

==> picture [282 x 213] intentionally omitted <==

----- Start of picture text -----

19 April 2013
20 Publication of the voluntary announcement in relation to
the Acquisitions
18
16 Issue Price of HK$15.39 per Share
14
12
19 March 2012 14 January 2013
10 Publication of annual results Publication of the
announcement for the year ended Preliminary Announcement
31 December 2011
8
30 August 2012 19 March 2013
Publication of interim results
6 announcement for the six months Publication of the annual results
ended 30 June 2012 announcement for the year ended
4 31 December 2012
2
0
1-Jan-2012 1-Mar-2012 1-May-2012 1-Jul-2012 1-Sep-2012 1-Nov-2012 1-Jan-2013 1-Mar-2013 1-May-2013
(HK$ per Share)
----- End of picture text -----

Source: Bloomberg and the website of the Stock Exchange

In the first quarter of 2012, the closing prices of the Shares were mainly within the range of HK$14.00 and HK$18.00 and reached a peak of HK$18.24 on 20 February 2012. However, the closing prices gradually declined to the lowest point of HK$10.26 on 16 August 2012. Following the publication of the interim results announcement for the six months ended 30 June 2012, the closing price gradually recovered to HK$16.58 on 3 January 2013. Subsequent to the publication of the Preliminary Announcement on 14 January 2013, the closing price further rose to HK$16.74 on 21 January 2013. Nonetheless, the closing prices again entered a declining trend and on 19 April 2013, being the date of the voluntary announcement in relation to the Acquisition regarding the receipt of joint approval in principle from the MOF and the CIRC in connection with the restructuring proposal of the TPG Group, the closing price was HK$12.64. Since then, the closing prices were mainly within the range of HK$12.00 and HK$14.00.

We note that the Issue Price of HK$15.39 per Share is within the range and higher than the majority of the closing prices of the Shares during the Review Period.

– 82 –

LETTER FROM FIRST SHANGHAI

(b) Liquidity of the Shares

The following table sets out the total trading volume per month and the average daily trading volume per month of the Shares during the Review Period:

		Average	% of
	Total	daily trading	average	% of
	monthly	volume of	daily trading	average
	trading	the Shares	volume of	daily trading
	volume of	during the	the Shares	volume of
	the Shares	month	to average	the Shares
	(million	(million	total issued	to average
	Shares)	Shares)	Shares	public float
2012
January	88.12	4.90	0.29%	0.65%
February	63.95	3.05	0.18%	0.40%
March	44.39	2.02	0.12%	0.27%
April	20.84	1.16	0.07%	0.15%
May	46.67	2.12	0.12%	0.27%
June	39.49	1.88	0.11%	0.24%
July	38.93	1.85	0.11%	0.24%
August	55.19	2.40	0.14%	0.31%
September	55.07	2.75	0.16%	0.35%
October	34.00	1.70	0.10%	0.22%
November	32.96	1.50	0.09%	0.19%
December	53.16	2.80	0.16%	0.36%
2013
January	96.57	4.60	0.27%	0.59%
February	37.21	2.19	0.13%	0.28%
March	49.05	2.45	0.14%	0.31%
April	41.01	2.05	0.12%	0.26%
May (up to the Latest
Practicable Date)	44.03	2.75	0.16%	0.35%

Source: Bloomberg

We note from the above table that the trading volume of the Shares has been extremely thin during the Review Period, as the percentages of average daily trading volume of the Shares to the average total issued Shares and average public float during the Review Period were mainly below 0.4%. Accordingly, the market trading price of the Shares may not necessarily reflect the immediate trading price for a bulk volume of Shares. As such, the value of the Consideration Shares, which represents up to approximately 51% of the existing issued share capital of the Company, may be at a discount to the market trading price of the Shares.

– 83 –

LETTER FROM FIRST SHANGHAI

(c) Conclusion

Taking into account, in particular, that (i) the Group could acquire the Acquisition Targets and enjoy the benefits of the Acquisition without incurring any cash outflow or interest expense to settle the Consideration, such that the Group would be able to preserve such resources for other business development purposes; (ii) the Issue Price of HK$15.39 per Share represents a premium of approximately 25% over the closing price of the Shares as at the Last Trading Date and is within the range and higher than the majority of the closing prices of the Shares during the Review Period; and (iii) the trading volume of the Shares has been extremely thin during the Review Period, such that the market trading price of the Shares may not necessarily reflect the immediate trading price for a bulk volume of Shares and the value of the Consideration Shares may be at a discount to the market trading price of the Shares, we consider the Issue Price is on normal commercial terms and is fair and reasonable so far as the Independent Shareholders are concerned.

6. Possible effects of the Acquisition

(a) Impact on earnings

The Group recorded profit attributable to the owners of the Company of approximately HK$937 million for the year ended 31 December 2012. Immediately upon Completion of the Acquisition, the Company would consolidate or continue to consolidate the financial performance of the relevant Acquisition Targets, in particular, the shareholding interest of the Company in TPL and TPI, which are two of the major revenue generating businesses among the Acquisition Targets, would increase from approximately 50.05% to approximately 75.10% and from approximately 61.21% to 100%, respectively, such that higher proportion of the future net profits of TPL and TPI would be attributable to the owners of the Company. As set out in Appendix III to the Circular, assuming the Acquisition were completed on 1 January 2012, the pro forma profit attributable to the owners of the Company would increase by approximately 95% to approximately HK$1,824 million for the year ended 31 December 2012.

(b) Impact of net assets

The Group recorded net assets attributable to the owners of the Company of approximately HK$13,837 million as at 31 December 2012. As set out in Appendix III to the Circular, assuming the Acquisition were completed on 31 December 2012, the pro forma net assets attributable to the owners of the Enlarged Group would amount to approximately HK$19,662 million as at 31 December 2012.

– 84 –

LETTER FROM FIRST SHANGHAI

(c) Impact on group embedded value

The Group recorded group embedded value attributable to the Shareholders of approximately HK$22,172 million as at 31 December 2012. As set out in Appendix V to the Circular, assuming the Acquisition were completed on 31 December 2012, the post-acquisition group embedded value attributable to the Shareholders of the Enlarged Group would increase by approximately 48% to approximately HK$32,914 million as at 31 December 2012.

(d) Impact on working capital

The Group had cash and cash equivalents of approximately HK$17,318 million as at 31 December 2012. The Consideration will be fully settled by way of the issue of the Consideration Shares. Therefore the working capital of the Group is not expected to experience any material adverse impact upon Completion. In addition, as set out in the section headed “Unaudited pro forma financial information of the Enlarged Group” in Appendix III to the Circular, assuming the Acquisition were completed on 31 December 2012, the pro forma cash and cash equivalents of the Group would increase by approximately 7% to approximately HK$18,458 million as at 31 December 2012.

(e) Dilution effects

Set out below is the simplified shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) immediately upon Completion, assuming no change in shareholding structure between the Latest Practicable Date and the date of Completion:

Shareholder TPG(2) Public Shareholders Total	As at the Latest Practicable Date Number of Shares % 908,689,405 53.3 797,185,687 46.7 1,705,875,092 100.0	Immediately upon Completion(1) Number of Shares % 1,771,424,675 69.0 797,185,687 31.0 2,568,610,362 100.0	Immediately upon Completion(1) Number of Shares % 1,771,424,675 69.0 797,185,687 31.0 2,568,610,362 100.0
			100.0

Note:

(1) Assuming the Consideration is adjusted by the maximum Post-Agreement Capital Increase Amount and there is no segregation of the Segregated Targets.
(2) TPG’s interest in the Company is held by TPG(HK), Easiwell Limited, Golden Win Development Limited and Manhold Limited, all of which are wholly-owned subsidiaries of TPG.

– 85 –

LETTER FROM FIRST SHANGHAI

As illustrated in the above simplified shareholding table, the shareholding of TPG in the Company would increase from approximately 53% as at the Latest Practicable Date to approximately 69% immediately upon Completion. On the contrary, the shareholding of the public Shareholders in the Company would be diluted from approximately 47% as at the Latest Practicable Date to approximately 31% immediately upon Completion.

Having considered, in particular, (i) the issue of the Consideration Shares is a key reason for the dilution; (ii) the Issue Price is fair and reasonable as discussed above; (iii) the issue of the Consideration Shares allows the Group to fully settle the Consideration without incurring any cash outflow or interest expense, such that the Group would be able to preserve such resources for business development purposes; (iv) the Consideration is fair and reasonable as discussed above; and (v) the benefits of the Acquisition as discussed above, we consider the potential dilution effects to be acceptable.

RECOMMENDATION

Having considered the above principal factors and reasons, we are of the view that the entering into of the Framework Agreement is in the interests of the Company and the Shareholders as a whole and the terms of the Framework Agreement are on normal commercial terms and are fair and reasonable so far as the Independent Shareholders are concerned. Accordingly, we advise the Independent Board Committee to recommend, and we ourselves advise, the Independent Shareholders to vote in favour of the relevant resolutions to be proposed at the EGM to approve the Framework Agreement and the transactions contemplated thereunder.

Yours faithfully, For and on behalf of

First Shanghai Capital Limited

Eric Lee Managing Director

Fanny Lee Managing Director

– 86 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL INFORMATION OF THE GROUP

Audited financial information of the Group for each of the three years ended 31 December 2012, 2011 and 2010 are disclosed in the following documents which have been published on the website of the Stock Exchange (http://www.hkexnews.hk) and the Company (http://www.ctih. cntaiping.com/):

(a) The audited consolidated financial statements of the Group for the year ended 31 December 2012 (together with the notes thereto) were set out in pages 137 to 335 of the 2012 annual report of the Company which was published on 25 April 2013. Please also see below a quick link to the 2012 annual report:

http://www.hkexnews.hk/listedco/listconews/SEHK/2013/0425/LTN20130425621.pdf

(b) The audited consolidated financial statements of the Group for the year ended 31 December 2011 (together with the notes thereto) were set out in pages 125 to 305 of the 2011 annual report of the Company which was published on 26 April 2012. Please also see below a quick link to the 2011 annual report:

http://www.hkexnews.hk/listedco/listconews/SEHK/2012/0426/LTN20120426645.pdf

(c) The audited consolidated financial statements of the Group for the year ended 31 December 2010 (together with the notes thereto) were set out in pages 111 to 293 of the 2010 annual report of the Company which was published on 27 April 2011. Please also see below a quick link to the 2010 annual report:

http://www.hkexnews.hk/listedco/listconews/SEHK/2011/0427/LTN20110427412.pdf

I – 1

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. STATEMENT OF INDEBTEDNESS

At the close of business on 30 April 2013, being the latest practicable date for preparing this indebtedness statement prior to the printing of this circular, the total carrying amount of the indebtedness of the Enlarged Group are as follows:

(i) Interest bearing notes

The Enlarged Group had unsecured interest bearing notes in the amount of approximately HK$13,486.01 million. The maturity of the interest bearing notes was as follows:

Maturity

Amount

Less than 1 year After 5 years

HK$3,230.99 million HK$10,255.02 million

(ii) Bank Borrowings and other borrowing

Amount

Bank Loans, Unsecured

Other borrowing, Unsecured

HK$6,269.88 million HK$9.66 million

Maturity

Amount

Repayable on demand Less than 1 year 1 to 2 years 2 to 5 years

HK$9.66 million HK$599.37 million HK$3,726.73 million HK$1,943.78 million

I – 2

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(iii) Amounts due to group companies

Amount

Amounts due to group companies, Unsecured

HK$40.55 million

(iv) Securities sold under repurchase agreements

The Enlarged Group had securities sold under repurchase agreements of approximately HK$26,734.97 million whose maturity was within 1 year. Such securities sold under repurchase agreements of the Enlarged Group were secured by the debt securities owned by the Enlarged Group amounting to HK$29,868.65 million.

Other than those incurred in the normal course of the Enlarged Group’s insurance businesses, there was no outstanding litigation nor any other contingent liabilities as of 30 April 2013.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and guarantees, the Enlarged Group did not have any loan capital issued and outstanding or agreed to be issued, nor any other borrowings or indebtedness in the nature of borrowing including term loans, bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, mortgages or charges, guarantees or other material contingent liabilities at the close of business on 30 April 2013.

3. FINANCIAL AND TRADING PROSPECT

The Group will continue to strive for its strategic objective of “building a new Taiping in three years”, with the financial goals of “doubling total premium, total assets and net profit, while maintaining quality, efficiency and risks at an acceptable level” in 2014 compared with 2011.

Life Insurance Business – TPL

The Group is cautiously optimistic about the prospects of the life insurance business in 2013. In 2013, TPL will continue to focus on building its agency force, in both quantitative (number of agents) and qualitative (productivity) terms. In the bancassurance channel, TPL will spend considerable efforts and resources in working with its bank partners in finding operating models which will increase the value of its product sales. Already in the first four months of 2013, sales through the bank channel have greatly improved, which paved a solid foundation for the future bancassurance cooperation.

I – 3

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Property and Casualty Insurance Business in the PRC – TPI

Having now benefited from strong fundamentals and a positive pricing cycle for several years, pricing in the PRC property and casualty insurance sector are now showing signs of pressure. TPI in particular will continue to focus on improving its combined ratio, especially in the area of expenses, as the property and casualty insurance business in the PRC continues to gain economies of scale. The Group, however, continue to be cautiously optimistic about the operation’s prospects for 2013, and believe that positive and satisfactory underwriting and earning results will be achieved.

Property and Casualty Insurance Business in Hong Kong – CTPI (HK)

CTPI (HK) will continue to be cautious and conservative in running its operations and believes that it will continue to maintain its current market position in Hong Kong, and that satisfactory underwriting and operating results are achievable in 2013.

Reinsurance Business – TPRe

Barring any unforeseen or significant adverse events in the coming year, TPRe expects to achieve overall positive operating results in 2013.

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2012, being the date to which the latest published audited financial statements of the Group were made up.

5. SUFFICIENCY OF WORKING CAPITAL

The Directors are of the opinion that, after taking into account the financial resources available to the Group including the available credit facilities, our internally generated funds and the cash flow impact of the Acquisition, the Enlarged Group has sufficient working capital to satisfy its requirements for at least the next 12 months following the date of this circular.

I – 4

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The following is the text of accountants’ report of TPL, prepared for the purpose of inclusion in this circular, received from the reporting accountants of the Company, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong.

==> picture [74 x 57] intentionally omitted <==

==> picture [81 x 38] intentionally omitted <==

31 May 2013

The Directors

China Taiping Insurance Holdings Company Limited

Dear Sirs,

We set out below our report on the consolidated financial information relating to Taiping Life Insurance Company Limited (the “Company” or “TPL”) and its subsidiaries (hereinafter collectively referred to as the “Group”) for each of the three years ended 31 December 2012 (the “Relevant Periods”) (the “Financial Information”) for inclusion in the circular of China Taiping Insurance Holdings Company Limited (“CTIH”) dated 31 May 2013 (the “Circular”) in connection with the major acquisition and connected transaction (the “Proposed Acquisition”) of CTIH which includes the proposed acquisition of 25.05% of equity interest in TPL from China Taiping Insurance Group Co. (“TPG”), the ultimate holding company of CTIH. Details of the Proposed Acquisition are set out in the Circular. TPL is a non wholly-owned subsidiary of CTIH during the Relevant Periods and up to the date of this report. During the Relevant Periods and as at the date of this report, the equity interest in TPL directly held by TPG was 25.05%.

IIA – 1

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

During the Relevant Periods and as at the date of this report, particulars of the Company and its subsidiaries are as follows:

Name of company
Place of
establishment
Date of
establishment
Taiping Life Insurance
Company Limited
The People’s
Republic of
China (the “PRC”)
30 November 2001
Taiping Pension
Company Limited
(“TPP”) (Note (i))
The PRC
26 January 2005
Taiping Asset
Management
Company Limited
(“TPAM”) (Note (i))
The PRC
1 September 2006
Taiping Senior Living
Investment Co., Ltd.
(note (ii))
The PRC
31 July 2012

Registered/paid-in capital
Principal activities
31 December
The date of
this report
2010
2011
2012
RMB’000
RMB’000
RMB’000
RMB’000
3,730,000
3,730,000
3,730,000
6,230,000
Underwriting of life
insurance
800,000
–
–
–
Pension business
100,000
–
–
–
Provision of assets
management services
–
–
580,000
580,000
Elderly care investment
and asset management

Notes:

(i) TPP and TPAM being 64.5% and 50.1% owned by TPL as at 31 December 2010 respectively, were disposed of in 2011, and details are set out in note 40.
(ii) Taiping Senior Living Investment Co., Ltd was established in 2012 and is 100% owned by TPL.
(iii) All companies have adopted 31 December as their financial year end date.

The statutory consolidated financial statements of the Group for each of the three years ended 31 December 2012 were prepared in accordance with relevant accounting principles and financial regulations applicable in the PRC and were audited by Deloitte Touche Tohmatsu CPA LLP.

We have examined the audited statutory consolidated financial statements of the Group for the Relevant Periods (“Underlying Financial Statements”) in accordance with the Auditing Guideline 3.340 “Prospectuses and the reporting accountants” as recommended by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

IIA – 2

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

The consolidated Financial Information for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements on the basis set out in Note 1 of Section A of the accountants’ report “General Information and Basis of Preparation”, after making such adjustments as we consider appropriate for the purpose of preparing our report, for the inclusion in the Circular.

The directors of TPL are responsible for the Underlying Financial Statements and the directors of CTIH are responsible for the contents of the Circular in which this report is included.

It is our responsibility to compile the consolidated Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the consolidated Financial Information and to report our opinion to you.

In our opinion, on the basis of preparation set out in Note 1 of Section A of the accountants’ report “General Information and Basis of Preparation”, the consolidated Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Group as at 31 December 2010, 2011 and 2012, and of the consolidated results and consolidated cash flows of the Group for the Relevant Periods.

IIA – 3

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

(A) FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENTS

Notes
Income
Gross premiums written and policy fees
5
Less: Premiums ceded to reinsurers
and retrocessionaires
Net premiums written and
policy fees
Change in unearned premium
provisions, net of reinsurance
Net earned premiums and policy fees
Net investment income
6(a)
Net realized and unrealised investment
gains (losses) and impairment
6(b)/6(c)
Other income
7(a)
Other (losses) gains
7(b)
Total income
Benefits, losses and expenses
Net policyholders’ benefits
8(a)
Net commission expenses
8(b)
Administrative and other expenses
Change in life insurance contract
liabilities, net of reinsurance
Total benefits, losses and expenses
Profit from operations
Share of results of associates
Finance costs
9(a)
Profit before taxation
9
Income tax (charge) credit
11
Profit after taxation
Attributable to:
Owners of the Company
Non-controlling interests

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
32,474,685
32,018,114
36,573,561
(266,581)
(283,143)
(157,349)
32,208,104
31,734,971
36,416,212
(31,906)
(27,783)
16,682
32,176,198
31,707,188
36,432,894
3,111,210
4,144,383
5,936,025
869,000
(370,886)
(2,142,209)
218,590
264,237
239,186
(85,718)
(59,529)
77
36,289,280
35,685,393
40,465,973
(4,325,940)
(5,381,907)
(7,041,172)
(2,787,687)
(2,814,336)
(3,206,611)
(4,415,854)
(4,403,507)
(4,968,863)
(23,599,850)
(22,426,120)
(24,543,319)
(35,129,331)
(35,025,870)
(39,759,965)
1,159,949
659,523
706,008
142
205,373
102,115
(194,207)
(358,440)
(360,600)
965,884
506,456
447,523
(126,379)
136,922
256,781
839,505
643,378
704,304
889,931
653,476
704,304
(50,426)
(10,098)
–
839,505
643,378
704,304

IIA – 4

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Notes
Profit after taxation
Other comprehensive income
(expense):
Revaluation gain arising from
reclassification of own-
use properties to investment
properties
– Revaluation gain arising during
the year
12(a)
– Net deferred tax
25
Available-for-sale securities
– Net fair value changes during
the year
– Reclassification adjustment to
profit or loss on impairment
6(c)
– Reclassification adjustment to
profit or loss on disposal
– Net deferred tax
25
Total comprehensive income
(expense) for the year
Attributable to:
Owners of the Company
Non-controlling interests

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
839,505
643,378
704,304
61,374
321,974
128,733
(15,343)
(80,493)
(32,183)
1,078,348
(3,654,382)
(351,451)
100,552
573,625
1,381,779
(890,987)
(94,326)
844,095
(71,978)
792,865
(468,606)
1,101,471
(1,497,359)
2,206,671
1,151,897
(1,485,974)
2,206,671
(50,426)
(11,385)
–
1,101,471
(1,497,359)
2,206,671

IIA – 5

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Notes
Assets
Statutory deposits
19
Fixed assets
12(a)
– Property and equipment
– Investment properties
– Prepaid lease payments
Interest in associates
13
Deferred tax assets
25
Investments in securities
14
Securities purchased under
resale agreements
30
Amounts due from related companies
15
Insurance debtors
16
Reinsurers’ share of insurance
contract provisions
17
Policyholder account assets in
respect of unit-linked products
37
Other debtors
18
Deposits at banks with
original maturity more
than three months
Cash and cash equivalents
20

As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
911,663
1,200,000
1,200,000
1,970,754
2,202,001
2,112,423
426,073
1,622,694
2,080,299
415,235
51,728
50,628
2,812,062
3,876,423
4,243,350
929,133
1,238,625
1,334,353
1,421
–
–
78,793,943
96,031,588
117,817,090
45,500
–
–
33,225
24,448
7,230
413,739
600,961
745,518
145,891
136,825
(11,849)
4,177,465
3,023,200
2,546,927
3,714,468
3,706,114
5,976,096
8,974,330
12,520,667
26,130,616
11,060,460
10,242,985
8,916,338
112,013,300
132,601,836
168,905,669

IIA – 6

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

Notes Liabilities Life insurance contract liabilities 21 Unearned premium provisions 22 Provision for outstanding claims 23 Investment contract liabilities 24 Deferred tax liabilities 25 Interest-bearing notes 26 Securities sold under repurchase agreements 30 Amounts due to related companies 15 Insurance creditors 27 Other payables and accruals 28 Current taxation Insurance protection fund 29 Net assets Capital and reserves attributable to the owners of the Company Paid-in capital 31 Reserves 32 Non-controlling interests 32 Total equity	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 51,389,332 73,833,649 98,268,921 354,073 250,495 208,180 186,480 184,039 89,072 30,865,433 25,087,434 20,610,996 1,273,281 415,128 686,614 6,850,000 7,150,000 7,150,000 8,364,630 15,405,030 28,328,520 931,167 30,792 30,370 726,788 1,025,569 1,747,253 1,403,114 1,300,623 1,663,208 155,332 13,245 328 27,586 9,844 19,548 102,527,216 124,705,848 158,803,010 9,486,084 7,895,988 10,102,659 3,730,000 3,730,000 3,730,000 5,199,238 4,165,988 6,372,659 8,929,238 7,895,988 10,102,659 556,846 – – 9,486,084 7,895,988 10,102,659	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 51,389,332 73,833,649 98,268,921 354,073 250,495 208,180 186,480 184,039 89,072 30,865,433 25,087,434 20,610,996 1,273,281 415,128 686,614 6,850,000 7,150,000 7,150,000 8,364,630 15,405,030 28,328,520 931,167 30,792 30,370 726,788 1,025,569 1,747,253 1,403,114 1,300,623 1,663,208 155,332 13,245 328 27,586 9,844 19,548 102,527,216 124,705,848 158,803,010 9,486,084 7,895,988 10,102,659 3,730,000 3,730,000 3,730,000 5,199,238 4,165,988 6,372,659 8,929,238 7,895,988 10,102,659 556,846 – – 9,486,084 7,895,988 10,102,659
		158,803,010
		10,102,659

		3,730,000 6,372,659
		10,102,659 –
		10,102,659

IIA – 7

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Paid-in capital RMB’000 At 1 January 2010 2,330,000 Profit for the year – Other comprehensive income – Total comprehensive income for the year – Increase in paid-in capital (note 32(i)) 1,400,000 Capital contribution (note 32 (ii)) – At 31 December 2010 3,730,000 At 1 January 2011 3,730,000 Profit for the year – Other comprehensive income – Total comprehensive income for the year – Disposal of subsidiaries (note 40) – At 31 December 2011 3,730,000 At 1 January 2012 3,730,000 Profit for the year – Other comprehensive income – Total comprehensive income for the year – At 31 December 2012 3,730,000	Capital reserve RMB’000 1,400,000 – – – (1,400,000) – – – – – – – – – – – – –	Fair value reserve RMB’000 note 32(iii) 571,871 – 215,935 215,935 – – 787,806 787,806 – (2,380,931) (2,380,931) 2,335 (1,590,790) (1,590,790) – 1,405,817 1,405,817 (184,973)	Revaluation reserve RMB’000 note 32 (iv) – – 46,031 46,031 – – 46,031 46,031 – 241,481 241,481 – 287,512 287,512 – 96,550 96,550 384,062	Retained profits RMB’000 3,475,470 889,931 – 889,931 – – 4,365,401 4,365,401 653,476 – 653,476 450,389 5,469,266 5,469,266 704,304 – 704,304 6,173,570	Total RMB’000 7,777,341 889,931 261,966 1,151,897 – – 8,929,238 8,929,238 653,476 (2,139,450) (1,485,974) 452,724 7,895,988 7,895,988 704,304 1,502,367 2,206,671 10,102,659	Non- controlling interests RMB’000 156,397 (50,426) – (50,426) – 450,875 556,846 556,846 (10,098) (1,287) (11,385) (545,461) – – – – – –	Total RMB’000 7,933,738
							839,505 261,966
							1,101,471 – 450,875
							9,486,084
							9,486,084
							643,378 (2,140,737)
							(1,497,359)
							(92,737)
							7,895,988
							7,895,988
							704,304 1,502,367
							2,206,671
							10,102,659

IIA – 8

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating activities
Profit before taxation
Adjustments for:
– Depreciation of property and equipment
– Surplus on revaluation of investment
properties
– Amortisation of prepaid lease payments
– Finance costs
– Dividend income
– Interest income from debt securities and
others
– Interest income from securities
purchased under resale agreements
– Interest expense on securities sold
under repurchase agreements
– Share of results of associates
– Losses on disposal of property and
equipment
– Net realised gains (losses) on
available-for-sale securities
– Impairment on debt and
equity investments
Operating loss before
changes in working capital
Decrease (increase) in held-for-trading
securities
(Increase) decrease in designated
at fair value through
profit or loss securities
Decrease (increase) in insurance debtors
Increase in other debtors
Increase in insurance creditors
(Decrease) increase in other payables
and accruals
Increase (decrease) in provision for
outstanding claims
(Increase) decrease in reinsurers’ share
of insurance contract provisions
Decrease in policyholder account assets
in respect of unit-linked products
Decrease in investment contract liabilities
Increase in life insurance contract liabilities
Increase (decrease) in unearned
premium provisions
(Increase) decrease in amount due from
group companies
Increase (decrease) in amount due to
group companies
Increase (decrease) in insurance
protection fund
Increase in loans and advances

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
965,884
506,456
447,523
132,319
118,845
127,055
(43,360)
(70,785)
(81,728)
8,770
4,935
1,100
194,207
358,440
360,600
(264,866)
(211,182)
(689,833)
(2,916,844)
(4,119,743)
(5,679,954)
(1,916)
(7,523)
(1,184)
94,339
217,566
471,185
(142)
(205,373)
(102,115)
52
4
501
(890,987)
(123,430)
844,095
100,552
573,625
1,381,779
(2,621,992)
(2,958,165)
(2,920,976)
625,112
163,723
(740,193)
(28,192)
58,192
(250,000)
252,654
(187,222)
(144,557)
(900,245)
(425,481)
(1,467,517)
333,483
298,781
721,684
(4,660)
49,921
475,706
24,887
(2,441)
(94,967)
(85,524)
9,066
148,674
293,910
1,154,265
476,273
(1,006,542)
(5,777,999)
(4,476,438)
23,606,361
22,444,317
24,435,272
68,116
(103,578)
(42,315)
(27,929)
8,777
17,218
7,046
23,626
(422)
9,715
(17,742)
9,704
(378,881)
(355,846)
(826,377)

IIA – 9

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

Cash generated from operations
Interest income received
Tax paid
Net cash from operating activities
Investing activities
Increase in statutory deposits
Increase in deposits at banks with
original maturity more than three
months
Payments to related party for purchase
of an associate
15(b)
Payment for purchase of investments
in securities
Payment for purchase of debt schemes
Proceeds from sale of investments in
securities
Interest income received
Dividend income received
(Increase) decrease in securities
purchased under resale agreements
Payment for purchase of property and
equipment
Proceeds from sale of property and
equipment
Payment for purchase of investment
properties
Cash received from disposal of
subsidiaries (note 40)
Net cash used in investing activities
Financing activities
Increase in paid-in capital
Proceeds from interest-bearing notes issued
Capital contributions made to
subsidiaries by non-controlling
shareholders
Increase in securities sold under
repurchase agreements
Interest paid
Net cash from financing activities
Effect of changes in exchange rates
Net increase (decrease) in
cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents
at 31 December
20

20,167,319
14,382,194
15,320,769
410,748
713,673
1,323,612
(24,876)
(149,525)
(13,245)
20,553,191
14,946,342
16,631,136
(251,663)
(288,337)
–
(3,706,024)
(3,546,337)
(13,609,949)
–
(924,001)
–
(37,280,042)
(33,290,617)
(21,277,631)
(1,460,800)
(4,010,509)
(8,707,024)
18,930,284
15,693,460
9,687,685
1,950,001
3,229,771
3,820,137
264,866
211,182
689,833
(15,500)
45,500
–
(896,420)
(256,430)
(541,510)
7,382
11,063
66,190
(800)
(110,411)
(176,630)
–
197,498
–
(22,458,716)
(23,038,168)
(30,048,899)
1,400,000
–
–
3,700,000
300,000
–
–
450,000
–
2,532,580
7,040,400
12,923,490
(263,675)
(563,718)
(831,785)
7,368,905
7,226,682
12,091,705
83,844
47,669
(589)
5,547,224
(817,475)
(1,326,647)
5,513,236
11,060,460
10,242,985
11,060,460
10,242,985
8,916,338
Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000

IIA – 10

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

NOTES TO THE FINANCIAL INFORMATION

1. General information and basis of operation

Pursuant to the Framework Acquisition Agreement entered between TPG and its directly wholly-owned subsidiary, TPG(HK), as vendor and CTIH as purchaser, CTIH will acquire certain subsidiaries of TPG and TPG(HK), 25.05% equity interest of TPL, 38.79% equity interest of Taping General Insurance Company Limited (“TPI”), 20% equity interest of TPAM and 4% equity interest of TPP from TPG and TPG(HK). TPL, TPI, TPAM and TPP are existing non wholly-owned subsidiaries of CTIH.

Details of the proposed restructuring are set out in the section headed “The Restructuring of the TPG Group and the Proposed Transfer” in the Letter from the Board.

The consolidated Financial Information of the Group has been prepared using the same accounting policies adopted by CTIH in the preparation of its consolidated financial statements for the Relevant Periods, which conform with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the HKICPA.

The Company is a limited liability company established in the PRC. Its immediate holding company is CTIH, a company incorporated in Hong Kong and listed on the Main Board of The Stock Exchange of Hong Kong Limited and its ultimate holding company is TPG, a state-owned enterprise established in the PRC.

The Company is registered under China Insurance Regulatory Commission (“CIRC”) as an insurer to underwrite life insurance business in PRC.

The consolidated Financial Information is presented in Renminbi (“RMB”), which is also the functional currency of the Company.

2. Application of Hong Kong Financial Reporting Standards

For the purpose of preparing and presenting the consolidated Financial Information for the Relevant Periods, the Group has consistently applied HKFRSs, amendments and interpretations issued by HKICPA, which are effective for the accounting period beginning on 1 January 2012, throughout the Relevant Periods.

IIA – 11

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

At the date of this report, the HKICPA has issued the following new and revised HKFRSs, amendments and interpretations that have been issued but are not yet effective. The Group has not early applied these new and revised HKFRSs, amendments and interpretations in the preparation of the consolidated Financial Information for the Relevant Periods.

New and revised HKFRS, amendments and interpretations issued but not yet effective

The Group has not early applied the following new and revised HKFRS, amendments and interpretations that have been issued but are not yet effective:

Amendments to HKFRSs	Annual improvements to HKFRSs 2009-2011
	cycle1
Amendments to HKFRS 7	Disclosures – Offsetting financial assets and
	financial liabilities1
Amendments to HKFRS 9 and	Mandatory effective date of HKFRS 9 and
HKFRS 7	transition disclosures2
Amendments to HKFRS 10,	Consolidated financial statements, joint
HKFRS 11 and HKFRS 12	arrangements and disclosure of interests in
	other entities: Transition guidance1
Amendments to HKFRS 10	Investments entities4
HKFRS 12 and HKAS 27
HKFRS 9	Financial instruments2
HKFRS 10	Consolidated financial statements1
HKFRS 11	Joint arrangements1
HKFRS 12	Disclosure of interests in other entities1
HKFRS 13	Fair value measurement1
Amendments to HKAS 1	Presentation of items of other comprehensive
	income3
HKAS 19 (Revised 2011)	Employee benefits1
HKAS 27 (Revised 2011)	Separate financial statements1
HKAS 28 (Revised 2011)	Investments in associates and joint ventures1
Amendments to HKAS 32	Offsetting financial assets and financial
	liabilities4

1 Effective for annual periods beginning on or after 1 January 2013

2 Effective for annual periods beginning on or after 1 January 2015

3 Effective for annual periods beginning on or after 1 July 2012

4 Effective for annual periods beginning on or after 1 January 2014

IIA – 12

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

Amendments to HKAS 32 Offsetting financial assets and financial liabilities and amendments to HKFRS 7 Disclosures – Offsetting financial assets and financial liabilities

The amendments to HKAS 32 clarify existing application issues relating to the offsetting requirements. Specifically, the amendments clarify the meaning of “currently has a legally enforceable right of set-off” and “simultaneous realisation and settlement”.

The amendments to HKFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement

The amended offsetting disclosures are required for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The disclosures should also be provided retrospectively for all comparative periods. However, the amendments to HKAS 32 are not effective until annual periods beginning on or after 1 January 2014, with retrospective application required.

The CTIH directors anticipate that the application of these amendments to HKAS 32 and HKFRS 7 will have no material impact on the consolidated Financial Information.

HKFRS 9 Financial instruments

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

IIA – 13

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

Key requirements of HKFRS 9 are described as follows:

HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

HKFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

IIA – 14

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

The CTIH directors anticipate that the adoption of HKFRS 9 in the future may have significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities. Regarding the Group’s financial assets, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

New and revised standards on consolidation, joint arrangements, associates and disclosures

In June 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued, including HKFRS 10, HKFRS 11, HKFRS 12, HKAS 27 (as revised in 2011) and HKAS 28 (as revised in 2011).

Key requirements of these five standards are described below.

HKFRS 10 replaces the parts of HKAS 27 “Consolidated and separate financial statements” that deal with the consolidated financial statements and HK(SIC) – INT 12 “Consolidation – Special purpose entities”. HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios.

HKFRS 11 replaces HKAS 31 “Interests in joint ventures” and HK(SIC) – INT 13 “Jointly controlled entities – Non-monetary contributions by venturers”. HKFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. Under HKFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast, under HKAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations.

In addition, joint ventures under HKFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under HKAS 31 can be accounted for using the equity method of accounting or proportionate accounting.

HKFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in HKFRS 12 are more extensive than those in the current standards.

IIA – 15

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

In July 2012, the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 were issued to clarify certain transitional guidance on the application of these five HKFRSs for the first time.

These five standards, together with the amendments relating to the transactional guidance, are effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time.

The CTIH directors anticipate that these five standards will be adopted by the Group for the annual period beginning 1 January 2013 and have no material impact on the consolidated Financial Information.

HKFRS 13 Fair value measurement

HKFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of HKFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in HKFRS 13 are more extensive than those in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under HKFRS 7 “Financial instruments: Disclosures” will be extended by HKFRS 13 to cover all assets and liabilities within its scope.

HKFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The CTIH directors anticipate that HKFRS 13 will be adopted by the Group in the annual period beginning 1 January 2013 and that the application of the new standard may affect certain amounts reported in the consolidated Financial Information and result in more extensive disclosures in the consolidated Financial Information.

IIA – 16

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

Amendments to HKAS 1 Presentation of items of other comprehensive income

The amendments to HKAS 1 “Presentation of items of other comprehensive income” introduce new terminology for the statement of comprehensive income and income statement. Under the amendments to HKAS 1, a ‘statement of comprehensive income’ is renamed as a ‘statement of profit or loss and other comprehensive income’ and an ‘income statement’ is renamed as a ‘statement of profit or loss’. The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to HKAS 1 require items of other comprehensive income to be grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

Other than disclosed above, the CTIH directors anticipate that the application of the other new or revised HKFRS, amendments and interpretations will have no material impact on the results and the financial position of the Group.

3. Significant accounting policies

The consolidated Financial Information has been prepared under the historical cost basis, except for certain investment properties and financial instruments, which are measured at fair values, and in accordance with the following accounting policies which conform with HKFRSs. In addition, the consolidated Financial Information includes the applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Companies Ordinance.

IIA – 17

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

(a) Classification of contracts

(i) Insurance contracts

Contracts under which the Group accepts significant insurance risk from another party (“the policyholder”) by agreeing to compensate the policyholder or other beneficiary if a specified uncertain future event (“the insured event”) adversely affects the policyholder or other beneficiary are classified as insurance contracts. Insurance risk is risk other than financial risk that is transferred from the holder of a contract to the issuer. Financial risk is the risk of a possible future change in one or more of a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party of the contract.

Insurance risk is significant if, and only if, an insured event could cause the Group to pay significant additional benefits. Once a contract is classified as an insurance contract it remains classified as an insurance contract until all rights and obligations are extinguished or have expired.

Some contracts of the Group have both the insurance and investment components. These contracts are required to be unbundled into the respective components as set out in note 3(b)(ix).

(ii) Investment contracts

Insurance policies that are not considered insurance contracts under HKFRS 4 are classified as investment contracts, which are accounted for under HKAS 39.

(b) Recognition and measurement of contracts

(i) Recognition of gross premiums written

Gross premiums written in respect of life insurance contracts are recognised as revenue when due from the policyholders. Gross premiums written from short-term accident and health insurance contracts are recognised when written.

Gross premiums written in respect of investment contracts and the investment component of unbundled contracts are accounted for as deposits and booked directly to a liability account.

IIA – 18

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

(ii) Life insurance contract liabilities

Life insurance contract liabilities, other than universal life and unitlinked insurance contracts, are determined using a gross premium approach plus a residual margin. Under the gross premium approach, the assumptions used in the actuarial valuation of life insurance contract liabilities reflect the management’s assessment of the expected best estimate of future policy cash flows subject to market based allowance for risk. The residual margin is estimated so that, after considering the effects of acquisition costs related to the acquisition of new business, including but not limited to commissions, underwriting, marketing and policy issue expenses, no gain or loss will be recognised on the initial recognition of the life insurance contract. Profits are expected to emerge over the life of the insurance contracts as the residual margins are released over the life of the contracts in proportion to insurance policies in force and allowance for risk is released.

(iii) Unearned premium provisions

The unearned premium provisions comprise the proportion of gross premiums written which is estimated to be earned in the following or subsequent financial years, computed on a time-apportioned basis, adjusted if necessary to reflect any variation in the incidence of risk during the period covered by the contract.

(iv) Provision for outstanding claims

Provision for outstanding claims comprises provision for the Group’s estimate of the ultimate cost of settling all claims incurred but unpaid at the end of the reporting period, whether reported or not, and related internal and external claims handling expenses and an appropriate prudential margin. Provision for outstanding claims is assessed by reviewing individual claims and making allowance for claims incurred but not yet reported, the effect of both internal and external foreseeable events, such as changes in claims handling procedures, inflation, judicial trends, legislative changes and past experience and trends. Adjustments to claims provisions established in prior years are reflected in the consolidated Financial Information for the year in which the adjustments are made and disclosed separately if material. The methods used, and the estimates made, are reviewed regularly.

IIA – 19

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

(v) Liability adequacy test

At the end of each reporting period, liability adequacy tests are performed to determine if the life insurance contract liabilities are adequate. Current best estimates of all future contractual cash flows and related expenses, such as claims handling expenses, and investment income from assets backing the life insurance contract liabilities are used in performing these tests. Any deficiency is recognised in the income statement for the year.

Provision is made for unexpired risks arising from reinsurance contracts where the expected value of claims and expenses attributable to the unexpired periods of policies in force at the end of the reporting period exceeds the unearned premium provisions in relation to such policies. The unexpired risk provision, which is included in provision for outstanding claims at the reporting date, is calculated by reference to classes of business which are managed together, after taking into account the future investment return on investments held to back the unearned premium provisions and the unexpired risk provision.

(vi) Investment contracts liabilities

Investment contract liabilities of the Group include liabilities arising from investment contracts that carry no significant insurance risk and also investment components of universal life contracts and unit-linked contracts that carry no significant insurance risk.

The liability of the investment component of an unbundled universal life contract is measured at amortised cost using effective interest rate while the liability arising from unit-linked contract is measured at fair value. The liability for the insurance component is calculated as the excess, if positive, of a gross premium liability over the account value. The liabilities of the insurance component of universal life contracts and unit-linked contracts are minimal and accordingly, the entire contracts are classified as investment contracts.

Assets related to unit-linked contracts are presented as “policyholder account assets in respect of unit-linked products” and are presented separately from the rest of the Group’s assets.

IIA – 20

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

(vii) Policyholders’ benefits

Policyholders’ benefits include maturities, annuities, surrenders, claims and claims handling expenses, and policyholder dividend allocated in anticipation of a dividend declaration. Maturity and annuity claims are recognised as an expense when due for payment. Surrender claims are recognised when paid. Claims are recognised when notified but not settled and an estimate is made for claims incurred but not reported. Policyholder dividends are recognised when declared.

(viii) Embedded derivatives in insurance contracts

The Group has taken advantage of the exemptions available in HKFRS 4, Insurance Contracts, not to separate and fair value a policyholder’s option to surrender an insurance contract for a fixed amount (or for an amount based on a fixed amount and an interest rate) even if the exercise price differs from the carrying amount of the host insurance liability.

(ix) Unbundling

The Group unbundles the investment component of insurance contracts when the Group can measure separately the investment component. Receipts and payments such as premiums, policy benefit and claims relating to the investment component, except for the policy fee income which is recognised in accordance with HKAS 18, are not recognised in the consolidated income statement but as financial assets and financial liabilities. The financial assets or financial liabilities arising from the investment component are accounted for under HKAS 39.

(x) Reinsurance

The Group cedes insurance/reinsurance in the normal course of business for the purpose of limiting its net loss potential through the diversification of its risks. Assets, liabilities, income and expense arising from ceded insurance/ reinsurance contracts are presented separately from the assets, liabilities, income and expense arising from the related insurance contracts because the reinsurance arrangements do not relieve the Group from its direct obligations to its policyholders.

IIA – 21

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

Only contracts that give rise to a significant transfer of insurance risk are accounted for as reinsurance contracts. Rights under contracts that do not transfer significant insurance risk are accounted for as financial instruments.

The benefits to which the Group is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of balances due from reinsurers, as well as other receivables (classified as reinsurance assets) that are dependent on the expected claims and benefits arising under related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts, which are recognised as an expense when due.

Amounts due/recoverable under reinsurance and the reinsurers’ share of insurance contract provisions are assessed for impairment at end of each reporting period. Such assets are deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Group may not recover all amounts due and that the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurers. The impairment loss is calculated following the same method used for financial assets held at amortised cost and the carrying amount is reduced through the use of an allowance account similar to insurance receivables.

(xi) Commission

Commission income is recognised as revenue when received or receivable from reinsurers.

Commission expense is accounted for when paid or payable and therefore varies in line with insurance premiums written.

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(c) Basis of consolidation

The consolidated Financial Information incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Income and expenses of subsidiaries acquired or disposed of during the year, except those acquired under common control combinations for which merger accounting method is used, are included in the consolidated income statement from the effective date of acquisition and up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are presented separately from the Group’s equity therein.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in existing subsidiaries

Changes in the Group’s ownership interests in existing subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

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When the Group loses control of a subsidiary, it (i) derecognises the assets (including any goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost, (ii) derecognises the carrying amount of any non-controlling interests in the former subsidiary at the date when control is lost (including any components of other comprehensive income attributable to them), and (iii) recognises the aggregate of the fair value of the consideration received and the fair value of any retained interest, with any resulting difference being recognised as a gain or loss in profit or loss attributable to the Group. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the related assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable HKFRSs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under HKAS 39 “Financial instruments: Recognition and measurement” or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

(d) Associates

An associate is an entity over which the investor has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these consolidated Financial Information using the equity method of accounting. The financial statements of associates used for equity accounting purposes are prepared using uniform accounting policies, as those of the Group for like transactions and events in similar circumstances. Under the equity method, investments in associates are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associates. When the Group’s share of losses of an associate exceeds the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

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Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.

Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

Upon disposal of an associate that results in the Group losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with HKAS 39. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant influence over that associate.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Group’s consolidated Financial Information only to the extent of interests in the associate that are not related to the Group.

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(e) Investments in securities

Investments in debt and equity securities are initially measured at fair value, which is their transaction price unless fair value can be more reliably estimated using valuation techniques whose variables include only data from observable markets. Attributable transaction costs are included in the fair value, except where indicated otherwise below. These investments are subsequently accounted for as follows, depending on their classification:

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss has two subcategories, including financial assets held-for-trading and those designated as at fair value through profit or loss on initial recognition.

A financial asset is classified as held-for-trading if:

(1) it has been acquired principally for the purpose of selling in the near future; or
(2) it is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
(3) it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held-for-trading may be designated as at fair value through profit or loss upon initial recognition if:

(1) such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

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FINANCIAL INFORMATION OF TPL

(2) the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
(3) it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at fair value through profit or loss.

At the end of each reporting period subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value, with changes in fair value recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets and is included in the net unrealised investment gains/(losses) in the consolidated income statement.

(ii) Held-to-maturity securities

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Group’s management has the positive intention and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity securities are stated in the statement of financial position at amortised cost using effective interest method less impairment losses (see note 3(l)).

(iii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At end of each reporting period subsequent to initial recognition, loans and receivables are carried at amortised cost using the effective interest method, less any identified impairment losses (see note 3(l)).

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APPENDIX IIA

(iv) Available-for-sale securities

Investments in securities which do not fall into any of the above categories are classified as available-for-sale securities. Equity and debt securities held by the Group that are classified as available-for-sale and are traded in an active market are measured at fair value at the end of each reporting period. Changes in the carrying amount of available-for-sale debt securities relating to interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognised in income statement. Other changes in the carrying amount of available-for-sale securities are recognised in other comprehensive income and accumulated under the heading of fair value reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the fair value reserve is reclassified to profit or loss (see note 3(l)).

Investments in equity securities that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are recognised in the statement of financial position at cost less impairment losses (see note 3(l)).

All regular way purchases or sales of investments in debt and equity securities are recognised and derecognised on a trade date basis.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount of the financial asset on initial recognition.

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APPENDIX IIA

(f) Securities sold under repurchase agreements/securities purchased under resale agreements

Securities sold under repurchase agreements represent short-term financing arrangements secured by the securities sold. The securities remain on the statement of financial position and a liability is recorded in respect of the consideration received. Interest is calculated based upon the effective interest method. The “securities sold under repurchase agreements” liabilities are carried in the statement of financial position at amortised cost. Conversely, securities purchased under resale agreements represent short-term lending arrangements secured by the securities purchased. The securities purchased are not recognised as financial assets on the statement of financial position and the consideration paid is recorded as “securities purchased under resale agreements” and carried in the statement of financial position at amortised cost. Interest is calculated using the effective interest method.

(g) Investment properties

Investment properties are land and/or buildings which are owned or held under a leasehold interest to earn rental income and/or for capital appreciation. These include land held for a currently undetermined future use.

Investment properties are stated in the statement of financial position at fair value. Any gain or loss arising from a change in fair value or from the retirement or disposal of an investment property is recognised in the income statement. Rental income from investment properties is accounted for as described in note 3(s)(iv).

When the Group holds a property interest under an operating lease to earn rental income and/or for capital appreciation, the interest is classified and accounted for as an investment property on a property-by-property basis. Any such property interest which has been classified as an investment property is accounted for as if it was held under a finance lease, and the same accounting policies are applied to that interest as are applied to other investment properties leased under finance leases.

(h) Property and equipment

Property and equipment including buildings and leasehold land (classified as finance leases) held for use in supply of services or for administrative purposes other than construction in progress are stated at cost less subsequent accumulated depreciation and impairment losses (see note 3(l)).

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APPENDIX IIA

Depreciation is recognised to write off the cost of items of property and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives as follows:

Land and buildings are depreciated over the shorter of the unexpired term of lease and their estimated useful lives, being no more than 50 years after the date of completion.
Other fixed assets 3 – 6 years

Where parts of an item of property and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually with the effect of any changes infinite for on a prospective basis.

If an item of property and equipment becomes an investment property because its use has changed as evidenced by end of owner-occupation, any difference between the carrying amount and the fair value of that item at the date of transfer is recognised in other comprehensive income and accumulated in property revaluation reserve. On the subsequent sale or retirement of the asset, the relevant revaluation reserve will be transferred directly to retained profits.

Gains or losses arising from the retirement or disposal of an item of property and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in the income statement on the date of retirement or disposal.

(i) Prepaid lease payments and buildings under construction

When a lease includes both land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group, unless it is clear that both elements are operating leases in which case the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any lumpsum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

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FINANCIAL INFORMATION OF TPL

To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as “prepaid lease payments” in the consolidated statement of financial position and is amortised over the lease term on a straight-line basis except for those that are classified and accounted for as investment properties under the fair value model. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease and accounted for as property and equipment.

Properties in the course of construction for administrative purposes are carried at cost, less any recognised impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Such properties are classified to the appropriate categories of property and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

(j) Insurance debtors, other debtors and amounts due from related companies

Insurance debtors, other debtors and amounts due from related companies are initially recognised at fair value and thereafter stated at amortised cost using effective interest method less allowance for impairment (see note 3(l)), except where the receivables are interest-free or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment.

(k) Insurance creditors and amounts due to related companies

Insurance creditors and amounts due to related companies are initially recognised at fair value and thereafter stated at amortised cost using effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liabilities, or, where appropriate, a shorter period to the net carrying amount of the liability on initial recognition.

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APPENDIX IIA

(l) Impairment of assets

(i) Impairment of financial assets other than those at fair value through profit or loss

Financial assets other than those at fair value through profit or loss are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

If any such evidence exists, any impairment loss is determined and recognised as follows:

For unquoted equity securities carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for equity securities are not reversed in subsequent periods.

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FINANCIAL INFORMATION OF TPL

– For insurance and other debtors and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material.

If in a subsequent period the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through the income statement to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

For available-for-sale securities, the cumulative loss that has been recognised directly in other comprehensive income and accumulated in fair value reserve is removed from fair value reserve and is recognised in the income statement when the available-for-sale securities are disposed of or are determined to be impaired. The amount of the cumulative loss that is recognised in the income statement is the excess of the acquisition cost (net of any principal repayment and amortisation) over the current fair value, less any impairment loss on that asset previously recognised in the income statement.

Impairment losses recognised in the income statement in respect of available-for-sale equity securities are not reversed through the income statement. Any subsequent increase in the fair value of such assets is recognised directly in other comprehensive income and accumulated in fair value reserve.

Impairment losses in respect of available-for-sale debt securities are reversed if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss was recognised. Reversals of impairment losses in such circumstances are recognised in the income statement.

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FINANCIAL INFORMATION OF TPL

– For certain categories of financial assets, such as insurance and other debtors, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of insurance and other debtors, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in income statement. When an insurance or other debtor is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to income statement.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired:

property and equipment;
reinsurers’ share of insurance contract provisions; and
investments in associates.

If any such indication exists, the asset’s recoverable amount is estimated.

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FINANCIAL INFORMATION OF TPL

(i) Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

(ii) Recognition of impairment losses

An impairment loss is recognised in the income statement whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of units) and then, to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

(iii) Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised.

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APPENDIX IIA

(m) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.

(n) Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in the income statement over the period of the borrowings using the effective interest method.

(o) Short term employee benefits and contributions to defined contribution retirement plans

Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(p) Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

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FINANCIAL INFORMATION OF TPL

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated statements of financial position and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in associates, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

For the purposes of measuring deferred tax liabilities or deferred tax assets for investment properties that are measured using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. If the presumption is rebutted, deferred tax liabilities and deferred tax assets of such investment properties are measured in accordance with the above general principles set out in HKAS 12 (i.e. based on the expected manner as to how the properties will be recovered).

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FINANCIAL INFORMATION OF TPL

Current and deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively. When current tax or deferred tax arises from initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

(q) Provisions and contingent liabilities

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or nonoccurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(r) Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

(s) Revenue recognition

Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in the income statement as follows:

(i) Gross premiums written from insurance contracts

The accounting policies for the recognition of revenue from insurance contracts are disclosed in note 3(b).

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APPENDIX IIA

(ii) Policy fee income

Fees from investment contracts or investment components of insurance contracts are recognised in the period in which the services are provided.

(iii) Commission income

Commission income is recognised as revenue when received or receivable from reinsurers.

(iv) Rental income from operating leases

Rental income receivable under operating leases is recognised in the income statement in equal installments over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in the income statement as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the accounting period in which they are earned.

(v) Income from asset management and pension businesses

Income from asset management and pension businesses are recognised when the service is rendered.

(vi) Dividends

Dividend income from investments is recognised when the shareholder’s right to receive payment is established.

(vii) Interest income

Interest income is recognised as it accrues using the effective interest method.

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APPENDIX IIA

(t) Translation of foreign currencies

Foreign currency transactions during the Relevant Periods are translated into the functional currency of respective entities in the Group at the exchange rates prevailing on the transaction dates. At the end of reporting period, monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of respective entities in the Group at the exchange rates. Exchange gains and losses arising on the settlement of monetary items and on translation of monetary items are recognised in the income statement in the period in which they arise.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into the functional currency of respective entities in the Group using the foreign exchange rates ruling on the transaction dates. Nonmonetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into the functional currency of respective entities in the Group using the foreign exchange rates ruling at the dates the fair value was determined. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income, in which cases, the exchange differences are also recognised directly in other comprehensive income.

(u) Borrowing costs

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

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APPENDIX IIA

(v) Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised in the profit or loss on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straightline basis over the lease term.

The Group as lessee

The Group’s lease are operating leases and operating lease payments are recognised as an expense on a straight-line basis over the lease term.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis.

4. Insurance, financial and capital risk management

(a) Risk management objectives, policies and processes for mitigating insurance risk

The Group is principally engaged in the underwriting of life insurance business in the PRC. The Group’s management of insurance and financial risk is a critical aspect of the business. Insurance risks are managed through the application of various policies and procedures relating to underwriting, pricing, claims and reinsurance as well as experience monitoring.

The Group uses several methods to assess and monitor insurance risk exposures both for individual types of risks insured and overall risks. These methods include internal risk measurement models, sensitivity analyses and scenario analyses.

The theory of probability is applied to the pricing and provisioning for a portfolio of insurance contracts. The principal risk is that the frequency and severity of claims is greater than expected. Insurance events are, by their nature, random, and the actual number and size of events during any year may vary from those estimated using established statistical techniques.

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APPENDIX IIA

(b) Underwriting strategy

The Group operates its life insurance business in the PRC’s life insurance market, offering a wide range of insurance products covering different types of individual and group life insurance, health insurance, accident insurance and annuity. With regard to the control of quality of the insurance policies underwritten, the Group has formulated strict operational procedures on underwriting and claims settlement to control risks on insurance underwriting.

(c) Reinsurance strategy

The Group purchases reinsurance protection from other reinsurers in the normal course of business in order to limit the potential for losses arising from unexpected and concentrated exposures. In assessing the credit worthiness of reinsurers, the Group takes into account, among other factors, ratings and evaluation performed by recognised credit rating agencies, their claims-paying and underwriting track record, as well as the Group’s past experience with them.

(d) Asset and liability matching

The objective of the Group’s asset and liability management is to match the Group’s assets with liabilities on the basis of duration. The Group actively manages its assets using an approach that balances quality, diversification, asset and liability matching, liquidity and investment return. The goal of the investment process is to maximise investment returns at a tolerable risk level, whilst ensuring that the assets and liabilities are managed on a cash flow and duration basis.

However, under the current regulatory and market environment in the PRC, the Group is unable to invest in assets with a duration of sufficient length to match the duration of its life insurance liabilities. When the regulatory and market environment permits, the Group intends to gradually lengthen the duration of its assets. The Group monitors the duration gap between the assets and liabilities closely and prepares cash flow projections from assets and liabilities on a regular basis. Currently, the Group reduces the level of the asset-liability mismatch by:

actively seeking to acquire longer dated fixed rate debt investments with an acceptable level of yield;
upon the maturity dates of fixed rate debt investments, rolling over the proceeds to longer dated fixed rate debt investments;

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FINANCIAL INFORMATION OF TPL

APPENDIX IIA

disposing of some of the shorter dated fixed rate debt investments, particularly those with lower yields, and rolling over the proceeds to longer dated fixed rate debt investments; and
investing in equities for the long term and in property.

(e) Insurance risk

The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable.

For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits may be greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the estimate established using statistical techniques.

Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Group has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.

The concentration and mitigation of insurance risk are set out below:

Concentration of insurance risks

For life insurance business, concentration risk is the risk of incurring a major loss as a result of having a significant mortality or other insurance coverage on a particular person or a group of persons due to the same event. The Group manages the concentration of insurance risks by way of reinsurance arrangements with a maximum retention risk of RMB500,000 per person in life and personal accident policies and RMB200,000 on critical illness insurance. In addition, the Group purchases catastrophe protection for losses arising from claims involving multiple lives from the same event. The maximum retention risk is RMB1 million for each and every loss occurrence, and the total coverage is RMB100 million for each and every loss occurrence. The Group purchases surplus treaties and proportional treaties to cover life, accident and long term health risks. In addition, an excess of loss reinsurance contract is applied for any insurance contract with significant sum insured.

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FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The distribution of sum insured per policy is summarised as follows:

RMB’000 0-200 201-500 501-750 751-1,000 1,001-1,500 1,501-2,000 2,001-2,500 >2,500	Before reinsurance Year ended 31 December 2010 2011 2012 98.50% 98.04% 97.22% 1.22% 1.71% 2.41% 0.06% 0.06% 0.10% 0.11% 0.13% 0.16% 0.02% 0.03% 0.03% 0.02% 0.02% 0.00% 0.00% 0.00% 0.02% 0.07% 0.01% 0.06% 100% 100% 100%	After reinsurance Year ended 31 December 2010 2011 2012 98.64% 98.27% 97.89% 1.36% 1.73% 2.11% – – – – – – – – – – – – – – – – – – 100% 100% 100%	After reinsurance Year ended 31 December 2010 2011 2012 98.64% 98.27% 97.89% 1.36% 1.73% 2.11% – – – – – – – – – – – – – – – – – – 100% 100% 100%
			100%

Management of risks

The key risk associated with life insurance contracts is the risk of potential loss arising with respect to a particular insurance product as a result of actual market conditions and loss experience being different from the assumed market conditions and loss experience used when designing and pricing the product.

The Group manages the risks by centralising the product design function at the head office level, headed by the chief appointed actuary and senior management in other key functional departments. Standards and guidelines are established to ensure that the risks associated with particular products are within the acceptable level. The pricing method, the solvency requirement, the profit margin, the loss experience, etc., are key considerations in designing a product.

In addition, the underwriting and claim processing departments strictly follow the established standards and procedures.

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APPENDIX IIA

(f) Financial risk

The carrying amounts of the Group’s financial assets at the reporting date were as follows:

Financial assets – Held-to-maturity securities – Available-for-sale securities – Held-for-trading securities – Designated at fair value through profit or loss – Loan and receivables: – debt securities – debt schemes – statutory deposits – securities purchased under resale agreements – amounts due from related companies – other debtors – deposits at banks with original maturity more than three months – cash and cash equivalents – Policyholder account assets in respect of unit-linked products (note 37)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 50,456,157 64,825,310 71,079,893 24,839,652 23,644,620 29,178,302 144,142 349 740,562 58,192 – 250,000 – 255,000 555,000 3,295,800 7,306,309 16,013,333 911,663 1,200,000 1,200,000 45,500 – – 33,225 24,448 7,230 2,858,823 3,527,275 5,316,693 8,974,330 12,520,667 26,130,616 11,060,460 10,242,985 8,916,338 27,179,801 35,076,684 58,139,210 4,177,465 3,023,200 2,546,927 106,855,409 126,570,163 161,934,894	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 50,456,157 64,825,310 71,079,893 24,839,652 23,644,620 29,178,302 144,142 349 740,562 58,192 – 250,000 – 255,000 555,000 3,295,800 7,306,309 16,013,333 911,663 1,200,000 1,200,000 45,500 – – 33,225 24,448 7,230 2,858,823 3,527,275 5,316,693 8,974,330 12,520,667 26,130,616 11,060,460 10,242,985 8,916,338 27,179,801 35,076,684 58,139,210 4,177,465 3,023,200 2,546,927 106,855,409 126,570,163 161,934,894
		29,178,302
		740,562
		250,000
		555,000 16,013,333 1,200,000 – 7,230 5,316,693 26,130,616 8,916,338
		58,139,210
		2,546,927
		161,934,894

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FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The carrying amounts of the Group’s financial liabilities at the reporting date were as follows:

Financial liabilities at fair value through profit or loss – Investment contract liabilities – unit-linked products Financial liabilities measured at amortised cost – Investment contract liabilities – universal life and other products – Interest-bearing notes – Securities sold under repurchase agreements – Amounts due to related companies – Other payables	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 4,177,465 3,023,200 2,546,927 26,687,968 22,064,234 18,064,069 6,850,000 7,150,000 7,150,000 8,364,630 15,405,030 28,328,520 931,167 30,792 30,370 150,342 132,999 92,885 47,161,572 47,806,255 56,212,771	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 4,177,465 3,023,200 2,546,927 26,687,968 22,064,234 18,064,069 6,850,000 7,150,000 7,150,000 8,364,630 15,405,030 28,328,520 931,167 30,792 30,370 150,342 132,999 92,885 47,161,572 47,806,255 56,212,771
		18,064,069 7,150,000 28,328,520 30,370 92,885
		56,212,771

Transactions in financial instruments and insurance assets/liabilities may result in the Group assuming financial risks. These include market risk, credit risk and liquidity risk. Each of these financial risks is described below, together with a summary of the ways in which the Group manages these risks.

There is no significant change in the Group’s exposures to risk and how they arise, nor in the Group’s objectives, policies and processes for managing each of these risks.

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FINANCIAL INFORMATION OF TPL

APPENDIX IIA

(i) Market risk

Market risk can be described as the risk of change in fair value of a financial instrument due to changes in interest rates, equity prices or foreign currency exchange rates and the risk of change in cash flows due to changes in interest rates.

(a) Interest rate risk

Interest rate risk is risk to the earnings or market value of a fixedrate financial instrument and to the cash flows from a variable-rate financial instruments due to uncertain future market interest rates.

The Group monitors this exposure through periodic reviews of its financial instruments. Estimates of cash flows, as well as the impact of interest rate fluctuations relating to the investment portfolio, are modelled and reviewed periodically.

The Group is exposed to fair value interest rate risk in relation to the debt investments classified as available-for-sale, held-for-trading and designated at fair value through profit or loss with a carrying amount of RMB12,376.41 million, RMB15.26 million, and RMB58.19 million, respectively as at 31 December 2010, RMB13,057.44 million, RMBnil and RMBnil as at 31 December 2011, and RMB16,861.09 million, RMBnil and RMB250.00 million, respectively as at 31 December 2012. A decrease of 100 basis points in interest rates of the debt investments classified as available-for-sale, held-for-trading and designated at fair value through profit or loss, with all other variables held constant, has no significant effect on the Group’s profit before tax and would increase the equity by RMB914.77 million, RMB1,065.34 million and RMB1,851.17 million as at 31 December 2010, 2011 and 2012, respectively.

The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date. The analysis is performed on the same basis for 2010, 2011 and 2012.

The Group does not have significant amount of floating-rate financial instruments.

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FINANCIAL INFORMATION OF TPL

APPENDIX IIA

(b) Equity price risk

The Group has a portfolio of marketable equity securities, which is carried at fair value and is exposed to price risk. As the financial risks of unit-linked contracts are fully undertaken by the policyholders, the assets related to unit-linked products are not included in the analysis of equity price risk below. This risk is defined as the potential loss in market value resulting from an adverse change in prices.

The Group manages the equity price risk by investing in a diverse portfolio of high quality and liquid securities.

The Group’s investment in equity securities and investment funds measured at fair value amounted to RMB10,532.13 million, RMB8,527.53 million and RMB10,997.78 million, representing 13.37%, 8.88% and 9.33% of total investments in securities held by the Group as at 31 December 2010, 2011 and 2012, respectively.

A 10% increase/decrease in market value of the equity securities and investment funds classified as available-for-sale and held-fortrading held by the Group as at 31 December 2010, 2011 and 2012, with all other variables held constant, would increase/decrease the Group’s profit after tax by RMB9.67 million, RMBnil and RMB55.54 million respectively and increase/decrease fair value reserve by RMB780.24 million, RMB639.54 million and RMB769.29 million, respectively.

(c) Foreign exchange risk

In respect of the life insurance business in the PRC, premiums are received in RMB and the insurance regulation in the PRC requires insurers to hold RMB assets. Therefore the foreign exchange risk is not significant.

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FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The Group does not have any foreign currency denominated monetary liabilities and the carrying amounts of the Group’s major foreign currency denominated monetary assets mainly including deposits at banks and available-for-sale debt securities are as follows:

	Assets	denominated in
	USD	HKD	Total
	RMB’000	RMB’000	RMB’000
Financial and
insurance assets:
At 31 December 2010	522,486	787,713	1,310,199
At 31 December 2011	24,003	328,670	352,673
At 31 December 2012	38,439	378,635	417,074

Sensitivity analysis

The following table details the Group’s sensitivity to a 5% increase or decrease in RMB against the foreign currency. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates.

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Post-tax profit
for the year	48,332	3,436	4,183
Fair value reserve	65,200	13,844	15,180

(ii) Credit risk

Credit risk is the risk of economic loss resulting from the failure of one of the obligors to make any payment of principal or interest when due.

The Group is exposed to credit risks primarily associated with bank deposits, insurance debtors, investments in debt securities, reinsurance arrangements with reinsurers and other debtors.

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FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The maximum exposure to credit risk in the event of the counterparties’ failure to perform their obligations as at the end of the reporting period is the carrying amount of the assets as shown in the table below:

Statutory deposits and deposits with banks Investments in debt securities and debt schemes Reinsurers’ share of insurance contract provisions Amounts due from related companies Insurance debtors Other debtors	31 December 2010 RMB’000 % of Total 20,944,524 23.1% 66,201,816 73.1% 145,891 0.2% 33,225 0.00% 413,739 0.5% 2,858,823 3.1% 90,598,018 100.0%	31 December 2011 RMB’000 % of Total 23,951,876 21.1% 85,414,060 75.2% 136,825 0.1% 24,448 0.0% 600,961 0.5% 3,527,275 3.1% 113,655,445 100.0%	31 December 2012 RMB’000 % of Total 36,237,016 24.6% 104,759,314 71.2% – 0.0% 7,230 0.0% 745,518 0.5% 5,316,693 3.7% 147,065,771 100.0%	31 December 2012 RMB’000 % of Total 36,237,016 24.6% 104,759,314 71.2% – 0.0% 7,230 0.0% 745,518 0.5% 5,316,693 3.7% 147,065,771 100.0%
				100.0%

To reduce the credit risk associated with the investments in debt securities, the Group has established detailed credit control policy. In addition, the risk level of the various investment sectors is continuously monitored with the investment mix adjusted accordingly. In respect of the debt securities in the PRC, the investment procedures manual, which is managed by an investment committee, includes the minimum acceptable domestic credit rating of the issuers as required by the CIRC. Any non-compliance or violation of the manual will be followed up and rectification action will be taken immediately.

No less than 95% of the Group’s investments in debt securities from banks and other financial institutions has a credit rating of A or above, while for debt securities from corporate entities no less than 97% has a credit rating of A or above. The credit ratings for debt securities refer to domestic credit ratings.

The Group does not have any significant concentration of credit risk arising from the investments in debt securities since the investment portfolio is well diversified.

The credit risk on bank balances is limited because the relevant banks are with high credit ratings.

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FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The credit risk associated with insurance debtors and other debtors will not cause a material impact on the Group’s financial performance after taking into consideration the collateral held and/or maturity term of not more than one year as at 31 December 2010, 2011 and 2012.

In assessing the need for impairment allowances, management considers factors such as credit quality, portfolio size, concentrations and economic factors.

(iii) Liquidity risk

The Group has to meet daily calls on its cash resources, notably from claims arising from its life insurance contracts. There is, therefore, a risk that cash will not be available to settle liabilities when due.

The Group manages this risk by formulating policies and general strategies of liquidity management to ensure that the Group can meet its financial obligations in normal circumstances and that an adequate stock of high-quality liquid assets is maintained in order to contain the possibility of a liquidity crisis.

Apart from liquidity management and regulatory compliance, the Group always strives to maintain a comfortable liquidity cushion as a safety net for coping with unexpected large funding requirements and to maintain a contingency plan to be enacted should there be a company specific crisis.

The following table details the remaining contractual obligations for its non-derivative financial liabilities based on the agreed repayment terms, except for investment contract liabilities which are based on expected maturity dates. It has been drawn up based on the undiscounted cash flows of financial liabilities by reference to the earliest date on which the Group can be required to pay and includes both interest and principal cash flows. The table excludes life insurance contract liabilities, however, assuming that all surrender and transfer options are exercised would result in all life insurance contracts being presented as falling due within one year.

IIA – 51

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

At 31 December 2010 Financial and insurance liabilities: Interest-bearing notes Investment contract liabilities Securities sold under repurchase agreements Amounts due to related companies Other payables Provision for outstanding claims Insurance creditors At 31 December 2011 Financial and insurance liabilities: Interest-bearing notes Investment contract liabilities Securities sold under repurchase agreements Amounts due to related companies Other payables Provision for outstanding claims Insurance creditors	1 year or less RMB’000 346,200 2,022,910 8,364,630 931,167 150,342 186,480 726,788 12,728,517 1 year or less RMB’000 360,600 2,898,013 15,405,030 30,792 132,999 184,039 1,025,569 20,037,042	5 years or less but over 1 year RMB’000 2,745,814 6,656,958 – – – – – 9,402,772 5 years or less but over 1 year RMB’000 2,736,664 7,021,234 – – – – – 9,757,898	After 5 years Total undiscounted cashflows Carrying value at 31 December RMB’000 RMB’000 RMB’000 6,502,741 9,594,755 6,850,000 43,164,745 51,844,613 30,865,433 – 8,364,630 8,364,630 – 931,167 931,167 – 150,342 150,342 – 186,480 186,480 – 726,788 726,788 49,667,486 71,798,775 48,074,840 After 5 years Total undiscounted cashflows Carrying value at 31 December RMB’000 RMB’000 RMB’000 6,583,140 9,680,404 7,150,000 24,092,923 34,012,170 25,087,434 – 15,405,030 15,405,030 – 30,792 30,792 – 132,999 132,999 – 184,039 184,039 – 1,025,569 1,025,569 30,676,063 60,471,003 49,015,863	After 5 years Total undiscounted cashflows Carrying value at 31 December RMB’000 RMB’000 RMB’000 6,502,741 9,594,755 6,850,000 43,164,745 51,844,613 30,865,433 – 8,364,630 8,364,630 – 931,167 931,167 – 150,342 150,342 – 186,480 186,480 – 726,788 726,788 49,667,486 71,798,775 48,074,840 After 5 years Total undiscounted cashflows Carrying value at 31 December RMB’000 RMB’000 RMB’000 6,583,140 9,680,404 7,150,000 24,092,923 34,012,170 25,087,434 – 15,405,030 15,405,030 – 30,792 30,792 – 132,999 132,999 – 184,039 184,039 – 1,025,569 1,025,569 30,676,063 60,471,003 49,015,863
				49,015,863

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APPENDIX IIA

FINANCIAL INFORMATION OF TPL

At 31 December 2012 Financial and insurance liabilities: Interest-bearing notes Investment contract liabilities Securities sold under repurchase agreements Amounts due to related companies Other payables Provision for outstanding claims Insurance creditors	1 year or less RMB’000 1,854,931 4,729,556 28,328,520 30,370 92,885 89,072 1,747,253 36,872,587	5 years or less but over 1 year RMB’000 1,175,400 8,694,140 – – – – – 9,869,540	After 5 years Total undiscounted cashflows Carrying value at 31 December RMB’000 RMB’000 RMB’000 6,288,485 9,318,816 7,150,000 9,627,700 23,051,396 20,610,996 – 28,328,520 28,328,520 – 30,370 30,370 – 92,885 92,885 – 89,072 89,072 – 1,747,253 1,747,253 15,916,185 62,658,312 58,049,096	After 5 years Total undiscounted cashflows Carrying value at 31 December RMB’000 RMB’000 RMB’000 6,288,485 9,318,816 7,150,000 9,627,700 23,051,396 20,610,996 – 28,328,520 28,328,520 – 30,370 30,370 – 92,885 92,885 – 89,072 89,072 – 1,747,253 1,747,253 15,916,185 62,658,312 58,049,096
				58,049,096

(g) Capital management

The Group’s key business operations are life insurance business. The Group manages its capital to ensure that the entities conducting the life insurance business will be able to meet statutory solvency requirements for life insurance business are set out in the Solvency Reporting Standards for Insurance Companies issued by CIRC. The Group’s capital management initiatives also strive to maintain a surplus for future business expansion opportunities. The Group’s overall capital management strategy remained unchanged throughout the Relevant Periods. The Group’s capital includes the components of total equity and interest-bearing notes. The Group complied with the various solvency requirements throughout the Relevant Periods.

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FINANCIAL INFORMATION OF TPL

APPENDIX IIA

5. Gross premiums written and policy fees

Gross premiums written Policy fees	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 32,312,949 31,837,783 36,455,498 161,736 180,331 118,063 32,474,685 32,018,114 36,573,561	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 32,312,949 31,837,783 36,455,498 161,736 180,331 118,063 32,474,685 32,018,114 36,573,561
		36,573,561

The detailed breakdown is as follows:

Single Premium Regular Premium – First Year – Renewal Year Employee Benefit Annuity	Individual RMB’000 90,431 3,609,122 5,297,579 – – 8,997,132	Year ended 31 December 2010 Ban- cassurance Group Other Channels RMB’000 RMB’000 RMB’000 14,051,673 – 8 2,999,856 – 156,913 5,180,759 – 73,902 – 846,266 – – 6,440 – 22,232,288 852,706 230,823	Total RMB’000 14,142,112 6,765,891 10,552,240 846,266 6,440
			32,312,949

Single Premium Regular Premium – First Year – Renewal Year Employee Benefit Annuity	Individual RMB’000 64,382 3,558,236 8,517,947 – – 12,140,565	Year ended 31 December 2011 Ban- cassurance Group Other Channels RMB’000 RMB’000 RMB’000 8,592,965 – 228 2,264,996 – 299,438 7,823,648 – 210,145 – 502,698 – – 3,100 – 18,681,609 505,798 509,811	Total RMB’000 8,657,575 6,122,670 16,551,740 502,698 3,100
			31,837,783

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APPENDIX IIA

FINANCIAL INFORMATION OF TPL

Single Premium Regular Premium – First Year – Renewal Year Employee Benefit	Individual RMB’000 34,479 3,596,135 11,212,113 – 14,842,727	Year ended 31 December 2012 Ban- cassurance Group Other Channels RMB’000 RMB’000 RMB’000 9,044,664 – – 1,942,683 – 373,751 9,677,747 – 453,849 – 120,077 – 20,665,094 120,077 827,600	Total RMB’000 9,079,143 5,912,569 21,343,709 120,077
			36,455,498

The individual first year regular premiums by payment terms and features are as follows:

By Payment Terms

3-9 years 10-19 years 20-29 years 30 years+	2010 RMB’000 % of total 696,459 19.3% 1,337,402 37.1% 1,382,098 38.2% 193,163 5.4% 3,609,122 100%	Year ended 31 December 2011 RMB’000 % of total 406,880 11.4% 1,095,994 30.8% 1,781,963 50.1% 273,399 7.7% 3,558,236 100.0%	2012 RMB’000 % of total 721,980 20.1% 819,519 22.8% 1,866,624 51.9% 188,012 5.2% 3,596,135 100.0%

By Features

Short term savings Long term savings Long term protection Others	2010 RMB’000 % of total 1,635,502 45.4% 1,032,934 28.6% 604,287 16.7% 336,399 9.3% 3,609,122 100.0%	Year ended 31 December 2011 RMB’000 % of total 768,311 21.6% 1,383,191 38.9% 1,052,749 29.6% 353,985 9.9% 3,558,236 100.0%	2012 RMB’000 % of total 283,146 7.9% 1,735,102 48.2% 1,240,324 34.5% 337,563 9.4% 3,596,135 100.0%

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APPENDIX IIA

FINANCIAL INFORMATION OF TPL

The bancassurance first year regular premiums by payment terms are as follows:

By Payment Terms

5-9 years 10-14 years Others	2010 RMB’000 % of total 158,491 5.3% 2,831,324 94.4% 10,041 0.3% 2,999,856 100.0%	Year ended 31 December 2011 RMB’000 % of total 472,246 20.8% 1,775,239 78.4% 17,511 0.8% 2,264,996 100.0%	2012 RMB’000 % of total 345,464 17.8% 1,585,742 81.6% 11,477 0.6% 1,942,683 100.0%	2012 RMB’000 % of total 345,464 17.8% 1,585,742 81.6% 11,477 0.6% 1,942,683 100.0%
				100.0%

6. Investment income

Net investment income (note (a)) Net realised investment gains (losses) (note (b)) Net unrealised investment losses and impairment (note (c))	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 3,111,210 4,144,383 5,936,025 887,143 151,884 (842,158) (18,143) (522,770) (1,300,051) 3,980,210 3,773,497 3,793,816	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 3,111,210 4,144,383 5,936,025 887,143 151,884 (842,158) (18,143) (522,770) (1,300,051) 3,980,210 3,773,497 3,793,816
		3,793,816

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FINANCIAL INFORMATION OF TPL

APPENDIX IIA

(a) Net investment income

Interest income from debt
securities (note (i)):
– Held-to-maturity
– Available-for-sale
– Held-for-trading
– Loans and receivables
– Designated at fair value
through profit or loss
Dividend income from equity
securities (note (ii)):
– Available-for-sale
– Held-for-trading
Dividend income from investment
funds (note (iii)):
– Available-for-sale
– Held-for-trading
Rentals received from
investment properties
Bank deposits and other
interest income
Interest income from securities
purchased under resale
agreements
Interest expense on securities sold
under repurchase agreements

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
1,811,132
2,587,089
3,055,920
534,597
532,062
666,315
1,391
1,240
6
157,476
285,679
632,784
1,500
–
1,317
2,506,096
3,406,070
4,356,342
47,230
65,936
120,199
24
1,300
–
47,254
67,236
120,199
217,354
143,898
568,847
258
48
787
217,612
143,946
569,634
21,923
23,501
36,239
410,748
713,673
1,323,612
1,916
7,523
1,184
(94,339)
(217,566)
(471,185)
3,111,210
4,144,383
5,936,025

IIA – 57

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

(i)
Interest income from
debt securities
Listed
Unlisted
(ii) Dividend income from
equity securities
Listed
(iii) Dividend income from
investment funds
Listed
Unlisted
(b)
Net realised investment
gains (losses)
Debt securities (note (i)):
– Available-for-sale
– Held-for-trading
Equity securities (note (ii)):
– Available-for-sale
– Held-for-trading
Investment funds (note (iii)):
– Available-for-sale
– Held-for-trading

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
311,597
324,930
328,166
2,194,499
3,081,140
4,028,176
2,506,096
3,406,070
4,356,342
47,254
67,236
120,199
47,254
67,236
120,199
138,818
72,173
11,666
78,794
71,773
557,968
217,612
143,946
569,634
Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
(10,714)
24,580
3,393
(749)
15,191
1,937
(11,463)
39,771
5,330
514,626
140,097
(780,415)
221
13,290
–
514,847
153,387
(780,415)
387,075
(41,247)
(67,073)
(3,316)
(27)
–
383,759
(41,274)
(67,073)
887,143
151,884
(842,158)

IIA – 58

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

(i) Net realised gains (losses) on debt securities Listed Unlisted (ii) Net realised gains (losses) on equity securities Listed (iii) Net realised gains (losses) on investment funds Listed Unlisted	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 7,788 33,769 2,670 (19,251) 6,002 2,660 (11,463) 39,771 5,330 514,847 153,387 (780,415) 127,230 (12,744) (407,922) 256,529 (28,530) 340,849 383,759 (41,274) (67,073)

IIA – 59

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

(c)
Net unrealised gains (losses)
and impairment
Debt securities (note (i)):
Held-for-trading
Equity securities (note (ii)):
Held-for-trading
Investment funds (note (iii)):
Held-for-trading
Surplus on revaluation of
investment
properties
Impairment loss recognised:
– Available-for-sale
(i)
Net unrealised gains on
debt securities
Listed
(ii) Net unrealised gains (losses)
on equity securities
Listed
(iii) Net unrealised losses on
investment funds
Listed

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
79
295
–
39,255
(20,225)
–
(285)
–
–
43,360
70,785
81,728
(100,552)
(573,625)
(1,381,779)
(18,143)
(522,770)
(1,300,051)
79
295
–
39,255
(20,225)
–
(285)
–
–

IIA – 60

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

7. Other income/other (losses) gains

(a) Other income

Fee income from asset management services Fee income from pension administration services Interest income on secured loans to policyholders Insurance brokerage income Others	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 20,788 39,075 – 76,236 55,718 – 29,040 54,993 86,422 47,468 70,569 111,824 45,058 43,882 40,940 218,590 264,237 239,186	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 20,788 39,075 – 76,236 55,718 – 29,040 54,993 86,422 47,468 70,569 111,824 45,058 43,882 40,940 218,590 264,237 239,186
		239,186

(b) Other (losses) gains

Losses on disposal of property and equipment Net exchange (losses) gains	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (52) (4) (501) (85,666) (59,525) 578 (85,718) (59,529) 77	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (52) (4) (501) (85,666) (59,525) 578 (85,718) (59,529) 77
		77

IIA – 61

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

8. Net policyholders’ benefits and net commission expenses

(a) Net policyholders’ benefits

Claims and claim adjustment expenses Less: reinsurers’ and retrocessionaires’ shares Surrenders Annuity, dividends and maturity payments Interest allocated to investment contracts	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 658,939 673,678 565,928 (145,248) (133,442) (107,721) 513,691 540,236 458,207 1,231,984 2,245,155 3,189,655 1,528,803 1,574,221 2,528,459 1,051,462 1,022,295 864,851 4,325,940 5,381,907 7,041,172

(b) Net commission expenses

Gross commission expenses Less: reinsurance commission income Net commission expenses	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 2,837,098 2,848,447 3,225,131 (49,411) (34,111) (18,520) 2,787,687 2,814,336 3,206,611

IIA – 62

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

9. Profit before taxation

Profit before taxation is arrived at after charging:

(a) Finance costs: Interest on interest-bearing notes – payable within 5 years – not payable within 5 years (b) Staff costs (including directors’ remuneration): Salaries, wages, bonuses and other benefits Contributions to defined contribution retirement plans (c) Other items: Auditor’s remuneration – audit services Depreciation of property and equipment Amortisation of prepaid lease payments Operating lease charges in respect of properties Business tax and related additional charges Share of associates’ taxation charge	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 194,207 66,750 66,750 – 291,690 293,850 194,207 358,440 360,600 2,154,881 2,231,828 2,600,346 144,625 163,827 181,925 2,299,506 2,395,655 2,782,271 1,562 1,680 1,780 132,319 118,845 133,442 8,770 4,935 1,100 208,038 235,280 291,600 30,937 59,768 39,942 – 17,487 25,529	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 194,207 66,750 66,750 – 291,690 293,850 194,207 358,440 360,600 2,154,881 2,231,828 2,600,346 144,625 163,827 181,925 2,299,506 2,395,655 2,782,271 1,562 1,680 1,780 132,319 118,845 133,442 8,770 4,935 1,100 208,038 235,280 291,600 30,937 59,768 39,942 – 17,487 25,529
		360,600

		2,600,346 181,925
		2,782,271

		1,780 133,442 1,100 291,600 39,942 25,529

IIA – 63

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

10. Directors’ and chief executive’s remuneration and individuals with highest emoluments

The relevant information of directors’ and chief executive’s remuneration on individual basis and individuals with highest emoluments is not presented herein as such information is not considered meaningful for purpose of this report.

11. Income tax in the consolidated income statement

(a) Taxation in the consolidated income statement represents:

Current tax – PRC Enterprise Income Tax Provision for the year (Over) underprovision in respect of prior years Deferred tax credit (note 25) Income tax charge (credit)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 156,091 6,747 – (3,653) 691 (27,478) 152,438 7,438 (27,478) (26,059) (144,360) (229,303) 126,379 (136,922) (256,781)

Under the Enterprise Income Tax Law of the PRC, the enterprise income tax rates for domestic companies range from 22% to 25% during the Relevant Periods.

IIA – 64

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

(b) Reconciliation between tax charge and accounting profit at applicable tax rates:

Profit before taxation Tax at the domestic income tax rates Tax effect of non-deductible expenses Tax effect of non-taxable income Tax effect of temporary differences not recognised Tax effect of tax losses not recognised (Over) under-provision in prior years Tax charges (credit) for the year	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 965,884 506,456 447,523 241,471 126,614 111,881 76,121 50,299 105,841 (222,185) (326,426) (447,025) 7,751 – – 26,874 11,900 – (3,653) 691 (27,478) 126,379 (136,922) (256,781)

IIA – 65

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

12. Fixed assets

(a) Movements

	Property an	d equipment	Investment	Total RMB’000 2,959,560 262,266 (26,866) 43,360 61,374 – (550)
Land and buildings RMB’000 1,631,266 33,876 – – 61,374 14,088 (70,868) 1,669,736 456,738 – – 92,393 – – 61,196 – (214,655) 2,065,408 33,020 – – 128,733 36,540 98,591 (314,475) 2,047,817	Construction in progress RMB’000 20,134 140,498 – – – (14,088) – 146,544 153,073 – – – (161,331) – – (102,660) – 35,626 914 – – – (36,540) – – –	Other fixed assets RMB’000 558,086 87,092 (26,866) – – – – 618,312 91,629 (28,292) – – – (64,511) – – – 617,138 140,948 (111,339) – – – – – 646,747	Completed investment properties RMB’000 311,595 800 – 43,360 – – 70,318 426,073 110,411 – 44,306 – – – (61,196) – 199,549 719,143 – – (21,549) – – (98,591) 297,838 896,841
				3,299,144 811,851 (28,292) 70,785 321,974 – (64,511) – – (15,106)
				4,395,845 351,512 (111,339) 81,728 128,733 – – (16,637)
				4,829,842

IIA – 66

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

	Property an	d equipment	Investment	Total RMB’000 2,873,071 426,073
Land and buildings RMB’000 1,669,736 – 1,669,736 2,065,408 – 2,065,408 2,047,817 – 2,047,817 105,506 42,852 – (550) 147,808 43,315 – – – (15,106) 176,017 51,490 – (16,637) 210,870 1,521,928 1,889,391 1,836,947	Construction in progress RMB’000 146,544 – 146,544 35,626 – 35,626 – – – – – – – – – – – – – – – – – – 146,544 35,626 –	Other fixed assets RMB’000 618,312 – 618,312 617,138 – 617,138 646,747 – 646,747 245,995 89,467 (19,432) – 316,030 75,530 (17,125) (34,281) – – 340,154 75,565 (44,448) – 371,271 302,282 276,984 275,476	Completed investment properties RMB’000 – 426,073 426,073 – 719,143 719,143 – 896,841 896,841 – – – – – – – – – – – – – – – 426,073 719,143 896,841
				3,299,144

				2,773,151 1,622,694
				4,395,845

				2,749,543 2,080,299
				4,829,842

				365,975 141,089 (19,432) (550)
				487,082 123,780 (17,125) (34,281) (24,928) (15,106)
				519,422 128,155 (44,448) (16,637)
				586,492

				2,812,062

				3,876,423

				4,243,350

IIA – 67

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

(b) Land and buildings

The analysis of net book value of land and buildings was as follows:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Outside Hong Kong
– Medium-term leases	1,521,928	1,889,391	1,830,560

(c) Investment properties

The analysis of net book value of investment properties was as follows:

Completed investment properties Outside Hong Kong – Long leases Investment properties under construction Outside Hong Kong – Long leases	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 426,073 719,143 896,841 – 903,551 1,183,458 426,073 1,622,694 2,080,299	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 426,073 719,143 896,841 – 903,551 1,183,458 426,073 1,622,694 2,080,299
		2,080,299

The investment properties of the Group were revalued at dates of transfer and as of 31 December 2010, 2011 and 2012 by independent real estate appraisal companies, Shenzhen Tianjian Guozhonglian Asset Appraisal and Valuation Company Limited, Asset Appraisal Limited and Jones Lang Lasalle Corporate Appraisal and Advisory Limited (formerly known as Jones Lang LaSalle Sallmanns Limited). The valuation for completed investment properties was arrived at by reference to market evidence of transaction prices for similar properties and on the basis of capitalisation approach. The valuation for investment properties under construction was arrived on the basis of hypothetical development method. A revaluation surplus of RMB43,360,000, RMB70,785,000 and RMB81,728,000 has been recognised in the consolidated income statements for the years ended 31 December 2010, 2011 and 2012 respectively, see note 6(c).

IIA – 68

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The gross carrying amounts of the investment properties of the Group held for use in operating leases were RMB426,073,000, RMB719,143,000 and RMB896,841,000 as at 31 December 2010, 2011 and 2012, respectively.

The Group leases out a number of investment properties under operating leases. The leases typically run for an initial period of two to three years, with an option to renew the leases when all terms are renegotiated. Lease payments are usually reviewed every two to three years to reflect market rentals. None of the leases includes contingent rentals.

The time period in which the Group’s total future minimum lease payments under non-cancellable operating leases as at the end of the Relevant Periods are receivable is as follows:

Within 1 year In the second to fifth year inclusive After 5 years	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 19,667 20,325 31,680 31,427 39,523 47,187 – 9,036 6,732 51,094 68,884 85,599	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 19,667 20,325 31,680 31,427 39,523 47,187 – 9,036 6,732 51,094 68,884 85,599
		85,599

(d) Prepaid lease payments

Year	ended 31 December
2010	2011	2012
RMB’000	RMB’000	RMB’000

Prepaid lease payments comprises: Leasehold land outside Hong Kong – Long lease Current Non-current	415,235 4,935 410,300 415,235	51,728 1,100 50,628 51,728	50,628
			1,100 49,528
			50,628

IIA – 69

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

During 2011, the Group had finalised a development plan which determined that certain portion of the leasehold land would be used for leasing purpose and thus should be classified as investment properties. Accordingly, a carrying amount of this relevant leasehold land of RMB486,160,000 has been transferred to investment properties at a fair value of RMB715,741,000 on 1 July 2011, based on revaluation by independent real estate appraisal company, Shenzhen Tianjian Guozhonglian Asset Appraisal and Valuation Company Limited. The valuation was arrived at by reference to market evidence of transaction prices for similar properties.

The remaining leasehold land continued to be held for construction of properties is primarily for own use.

13. Interest in associates

Cost of investment in associates, unlisted Share of post-acquisition profits and other comprehensive income, net of dividends received Unrealised profit upon disposal of properties to the Group	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 929,001 929,001 929,001 132 205,505 307,620 – 104,119 97,732 929,133 1,238,625 1,334,353	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 929,001 929,001 929,001 132 205,505 307,620 – 104,119 97,732 929,133 1,238,625 1,334,353
		1,334,353

The unrealised profit represents the gain on disposal of properties from Taiping Real Estate Shanghai Company Limited, an associate of the Company, to the Group. The construction of these properties was completed in September 2011 and the ownership of these properties was transferred to the Group for owner-occupation purpose.

IIA – 70

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

The following list contains details of the Company’s associates, all of which are unlisted corporate entities incorporated in PRC:

		Place of
	Form of	incorporation and				Proportion of ownership
Name of associates	business structure	operation	Particulars of issued and paid		up capital	interest	Held by the Group		Principal activities
			2010	2011	2012	2010	2011	2012
Taiping Real Estate Shanghai
Company Limited	Incorporated	PRC	RMB980,000,000	RMB980,000,000	RMB980,000,000	39%	39%	39%	Property development
Zhongyuan Insurance
Brokers Co., Ltd.	Incorporated	PRC	RMB20,000	RMB20,000	RMB20,000	25%	25%	25%	Insurance brokerage

Summary of financial information of associates

31 December 2010 100 per cent Group’s effective interest 31 December 2011 100 per cent Group’s effective interest 31 December 2012 100 per cent Group’s effective interest	Assets RMB’000 3,592,143 1,395,339 4,172,601 1,623,685 4,461,560 1,741,023	Liabilities RMB’000 1,631,511 635,947 1,423,793 544,801 1,464,300 570,024	Equity RMB’000 1,960,632 759,392 2,748,808 1,068,884 2,997,260 1,170,999	Revenues RMB’000 11,799 2,950 693,402 268,183 177,160 63,102	Profit RMB’000 245,328 142

					788,170 309,492

					253,080 95,728

14. Investments in securities

Debt securities (i) Equity securities (ii) Investment funds (iii) Debt schemes (iv)	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 62,906,016 78,137,751 88,745,981 9,219,249 6,216,304 5,978,020 3,372,878 4,371,224 7,079,756 3,295,800 7,306,309 16,013,333 78,793,943 96,031,588 117,817,090	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 62,906,016 78,137,751 88,745,981 9,219,249 6,216,304 5,978,020 3,372,878 4,371,224 7,079,756 3,295,800 7,306,309 16,013,333 78,793,943 96,031,588 117,817,090
		117,817,090

IIA – 71

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

Governments and central banks RMB’000 (i) Debt securities At 31 December 2010 Held-to-maturity: – Listed outside Hong Kong 480 – Unlisted 16,116,779 16,117,259 Fair value of securities 16,159,273 Market value of listed securities 476 Available-for-sale: – Listed outside Hong Kong 3,311,357 – Unlisted 1,271,157 4,582,514 Fair value of securities 4,582,514 Market value of listed securities 3,311,357 Held-for-trading: – Listed outside Hong Kong – – Unlisted – – Fair value of securities – Market value of listed securities – Designated at fair value through profit or loss: – Unlisted – Fair value of securities – Total debt securities 20,699,773 At 31 December 2011 Held-to-maturity: – Listed outside Hong Kong 481 – Unlisted 17,944,355 17,944,836 Fair value of securities 18,536,507 Market value of listed securities 501	Banks and other financial institutions RMB’000 – 21,407,290 21,407,290 20,976,237 – – 2,419,636 2,419,636 2,419,636 – – 10,144 10,144 10,144 – – – 23,837,070 – 33,561,395 33,561,395 33,184,211 –	Corporate entities RMB’000 882,937 12,048,671 12,931,608 12,877,054 903,059 3,094,832 2,279,430 5,374,262 5,374,262 3,094,832 5,111 – 5,111 5,111 5,111 58,192 58,192 18,369,173 1,218,005 12,101,074 13,319,079 13,024,099 1,234,465	Total RMB’000 883,417 49,572,740
			50,456,157
			50,012,564

			903,535

			6,406,189 5,970,223
			12,376,412
			12,376,412

			6,406,189

			5,111 10,144
			15,255
			15,255

			5,111

			58,192
			58,192

			62,906,016

			1,218,486 63,606,824
			64,825,310
			64,744,817

			1,234,966

IIA – 72

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

Governments and central banks RMB’000 Available-for-sale: – Listed outside Hong Kong 2,927,005 – Unlisted 2,320,098 5,247,103 Fair value of securities 5,247,103 Market value of listed securities 2,927,005 Loans and receivables: – Unlisted 255,000 Total debt securities 23,446,939 At 31 December 2012 Held-to-maturity: – Listed outside Hong Kong 483 – Unlisted 17,926,442 17,926,925 Fair value of securities 18,078,764 Market value of listed securities 494 Available-for-sale: – Listed outside Hong Kong 2,873,021 – Unlisted 4,903,983 7,777,004 Fair value of securities 7,777,004 Market value of listed securities 2,873,021 Designated at fair value through profit or loss: – Unlisted – Fair value of securities – Loans and receivables: – Unlisted 255,000 Total debt securities 25,958,929	Banks and other financial institutions RMB’000 – 2,414,863 2,414,863 2,414,863 – – 35,976,258 – 39,655,523 39,655,523 38,824,440 – – 2,223,862 2,223,862 2,223,862 – 250,000 250,000 300,000 42,429,385	Corporate entities RMB’000 3,116,855 2,278,620 5,395,475 5,395,475 3,116,855 – 18,714,554 1,218,031 12,279,414 13,497,445 13,189,683 1,239,026 3,930,569 2,929,653 6,860,222 6,860,222 3,930,569 – – – 20,357,667	Total RMB’000 6,043,860 7,013,581
			13,057,441
			13,057,441

			6,043,860

			255,000

			78,137,751

			1,218,514 69,861,379
			71,079,893
			70,092,887

			1,239,520

			6,803,590 10,057,498
			16,861,088
			16,861,088

			6,803,590

			250,000
			250,000

			555,000

			88,745,981

IIA – 73

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The held-to-maturity debt securities include an amount of RMB423,505,000, RMB87,029,000 and RMB295,173,000 maturing within one year as at 31 December 2010, 2011 and 2012, respectively. None of the held-to-maturity securities or loans and receivables are past due or impaired.

The fair value of the unlisted debt securities classified as held-to-maturity and available-for-sale is mainly determined by generally accepted pricing models including discounted cash flows technique.

(ii) Equity securities Available-for-sale: – Listed in Hong Kong – Listed outside Hong Kong – Unlisted, at cost Fair value of listed securities Market value of listed securities Held-for-trading: – Listed outside Hong Kong Fair value of securities Market value of listed securities Total equity securities	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 449,829 277,531 76,295 6,580,870 3,878,773 3,841,725 2,060,000 2,060,000 2,060,000 9,090,699 6,216,304 5,978,020 7,030,699 4,156,304 3,918,020 7,030,699 4,156,304 3,918,020 128,550 – – 128,550 – – 128,550 – – 9,219,249 6,216,304 5,978,020	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 449,829 277,531 76,295 6,580,870 3,878,773 3,841,725 2,060,000 2,060,000 2,060,000 9,090,699 6,216,304 5,978,020 7,030,699 4,156,304 3,918,020 7,030,699 4,156,304 3,918,020 128,550 – – 128,550 – – 128,550 – – 9,219,249 6,216,304 5,978,020
		5,978,020
		3,918,020

		3,918,020

		–
		–

		–

		5,978,020

IIA – 74

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

The unlisted equity securities are issued by private entities incorporated in the PRC. They are measured at cost at the end of the reporting period as the management considers that their fair values cannot be measured reliably.

(iii) Investment funds Available-for-sale: – Listed in Hong Kong – Unlisted Fair value of investment funds Market value of listed investment funds Held-for-trading: – Listed outside Hong Kong – Unlisted Fair value of investment funds Market value of listed investment funds Total investment funds	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 762,661 2,487,362 2,643,758 2,609,880 1,883,513 3,695,436 3,372,541 4,370,875 6,339,194 3,372,541 4,370,875 6,339,194 762,661 2,487,362 2,643,758 337 – – – 349 740,562 337 349 740,562 337 349 740,562 337 – – 3,372,878 4,371,224 7,079,756	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 762,661 2,487,362 2,643,758 2,609,880 1,883,513 3,695,436 3,372,541 4,370,875 6,339,194 3,372,541 4,370,875 6,339,194 762,661 2,487,362 2,643,758 337 – – – 349 740,562 337 349 740,562 337 349 740,562 337 – – 3,372,878 4,371,224 7,079,756
		6,339,194
		6,339,194

		2,643,758

		– 740,562
		740,562
		740,562

		–

		7,079,756

IIA – 75

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The Group invests in open-ended or close-ended investment funds with underlying assets of equity, bond or composite funds.

(iv) Debt schemes Loans and receivables: – Unlisted Fair value of loans and receivables	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 3,295,800 7,306,309 16,013,333 3,247,631 6,759,836 15,723,543	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 3,295,800 7,306,309 16,013,333 3,247,631 6,759,836 15,723,543

		15,723,543

The debt schemes relate to finance for infrastructure projects in the PRC. The debt schemes as at 31 December 2010 will mature from 2015 to 2020 and bear interest at rates ranging from 5% to 6% per annum. The debt schemes as at 31 December 2011 will mature from 2015 to 2021 and bear interest at rates ranging from 5% to 6% per annum. The debt schemes as at 31 December 2012 will mature from 2015 to 2021 and bear interest at rates ranging from 5% to 7% per annum. The fair value of the debt schemes are determined with reference to the estimated cashflows discounted using market interest rates as at the end of the Relevant Periods.

IIA – 76

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

Analysed for reporting purposes as:

Held-to-maturity – Current – Non-current Available-for-sale – Current – Non-current Held-for trading – Current Designated at fair value through profit or loss – Current Loans and receivables – Non-current	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 423,505 87,029 295,173 50,032,652 64,738,281 70,784,720 492,036 19,934 391,170 24,347,616 23,624,686 28,787,132 144,142 349 740,562 58,192 – 250,000 3,295,800 7,561,309 16,568,333 78,793,943 96,031,588 117,817,090	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 423,505 87,029 295,173 50,032,652 64,738,281 70,784,720 492,036 19,934 391,170 24,347,616 23,624,686 28,787,132 144,142 349 740,562 58,192 – 250,000 3,295,800 7,561,309 16,568,333 78,793,943 96,031,588 117,817,090
		117,817,090

IIA – 77

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The following table shows an analysis of investment in debt and equity securities recorded at fair value by level of the fair value hierarchy:

At 31 December 2010 Available-for-sale Held-for-trading Designated at fair value through profit or loss At 31 December 2011 Available-for-sale Held-for-trading At 31 December 2012 Available-for-sale Held-for-trading Designated at fair value through profit or loss Notes:	Level 1 RMB’000 16,809,429 133,998 – 12,802,801 349 18,154,435 740,562 –	Level 2 RMB’000 5,970,223 10,144 58,192 8,781,819 – 8,963,867 – 250,000	Level 3 RMB’000 – – – – – – – –	Total RMB’000 22,779,652

				144,142

				58,192

				21,584,620

				349

				27,118,302

				740,562

				250,000

Level 1 – Quoted market price

Level 2 – Valuation techniques using observable inputs Level 3 – Valuation techniques with significant unobservable inputs

IIA – 78

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

15. Amounts due from/(to) related companies

(a) Due from related companies

		As at 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Amounts due from fellow
subsidiaries	33,225	24,448	7,230

(b) Due to related companies

Amount due to the ultimate holding company Amount due to the immediate holding company Amounts due to fellow subsidiaries	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 37 – 1,000 – 61 930,167 30,755 30,309 931,167 30,792 30,370	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 37 – 1,000 – 61 930,167 30,755 30,309 931,167 30,792 30,370
		30,370

In 2009, the Company entered into an acquisition agreement with Taiping Investment Holdings Company Limited, a fellow subsidiary of the Company, pursuant to which the Company agreed to acquire 39% equity interest in Taiping Real Estate Shanghai Company Limited. As at 31 December 2010, included in the amounts due to fellow subsidiaries is an amount of approximately RMB924,001,000 being consideration payable in relation to this acquisition.

Amounts due from/(to) related companies are unsecured, interest free and repayable on demand.

IIA – 79

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

16. Insurance debtors

All insurance debtors were current, neither past due nor impaired and related to a wide range of customers for whom there was no recent history of default. All insurance debtors are expected to be recovered within one year.

The following is an ageing analysis of the amounts due from insurance customers reinsurers and intermediaries that are not individually considered to be impaired:

Not yet due Within 3 months More than 3 months but less than 12 months More than 12 months	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – – – 315,577 595,173 745,518 98,162 5,788 – – – – 413,739 600,961 745,518	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – – – 315,577 595,173 745,518 98,162 5,788 – – – – 413,739 600,961 745,518
		745,518

17. Reinsurers’ share of insurance contract provisions

The reinsurers’ share of insurance contract provisions represents the reinsurers’ share of life insurance contract liabilities, unearned premium provisions and provision for outstanding claims arising from the life insurance and reinsurance businesses.

Life insurance contract liabilities (note 21) Unearned premium provisions (note 22) Provision for outstanding claims (note 23)	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 11,090 29,287 (78,760) 91,998 72,525 46,892 42,803 35,013 20,019 145,891 136,825 (11,849)	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 11,090 29,287 (78,760) 91,998 72,525 46,892 42,803 35,013 20,019 145,891 136,825 (11,849)
		(11,849)

IIA – 80

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

18. Other debtors

Interest receivable Deposits for the purchase of property Business tax prepaid Rental and utility deposits Receivable from unsettled trades Others Loans and advances	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,540,878 1,724,700 2,262,089 628,308 10,651 275,727 199,404 141,547 352,765 27,933 26,641 30,911 284,215 417,119 725,287 133,915 129,795 247,279 2,814,653 2,450,453 3,894,058 899,815 1,255,661 2,082,038 3,714,468 3,706,114 5,976,096	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,540,878 1,724,700 2,262,089 628,308 10,651 275,727 199,404 141,547 352,765 27,933 26,641 30,911 284,215 417,119 725,287 133,915 129,795 247,279 2,814,653 2,450,453 3,894,058 899,815 1,255,661 2,082,038 3,714,468 3,706,114 5,976,096
		3,894,058 2,082,038
		5,976,096

Note:

As at 31 December 2010, included in the deposits for purchase of property is an amount of RMB603,174,000 prepaid to a fellow subsidiary for the purchase of property from the fellow subsidiary.

Loans and advances are repayable with the following terms:

	As at 31 December	As at 31 December		Interest	Repayment
	2010	2011	2012	rate	term
	RMB’000	RMB’000	RMB’000
Secured loans:					Less than
– to policyholders	899,815	1,255,661	2,082,038	6.4%	6 months

There was no amount due but unpaid, nor any impairment made against the principal amount or interest on these loans as of 31 December 2010, 2011 and 2012.

IIA – 81

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

19. Statutory deposits

The Group has placed deposits with banks of RMB911,663,000, RMB1,200,000,000 and RMB1,200,000,000 as at 31 December 2010, 2011 and 2012, respectively as capital guarantee funds, pursuant to the relevant PRC insurance rules and regulations. The funds can only be used with the prior approval of the relevant authorities in the event that the Group cannot meet the statutory solvency requirements or goes into liquidation.

20. Cash and cash equivalents

Deposits with banks and other financial institutions with original maturity less than three months Cash at bank and in hand Cash and cash equivalents in the statements of financial position	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 2,698,251 5,436,052 4,729,087 8,362,209 4,806,933 4,187,251 11,060,460 10,242,985 8,916,338	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 2,698,251 5,436,052 4,729,087 8,362,209 4,806,933 4,187,251 11,060,460 10,242,985 8,916,338
		8,916,338

21. Life insurance contract liabilities

At 1 January Premiums written during the year Surrenders Annuity, dividend and maturity payments Other movements At 31 December	As a Gross RMB’000 27,782,971 31,234,021 (1,231,984) (1,163,146) (5,232,530) 51,389,332	t 31 December 2 Reinsurers’ share RMB’000 (4,579) (101,315) – – 94,804 (11,090)	010 Total RMB’000 27,778,392 31,132,706 (1,231,984) (1,163,146) (5,137,726) 51,378,242	As a Gross RMB’000 51,389,332 30,628,245 (2,245,155) (1,416,406) (4,522,367) 73,833,649	t 31 December Reinsurers’ share RMB’000 (11,090) (109,689) – – 91,492 (29,287)	2011 Total RMB’000 51,378,242 30,518,556 (2,245,155) (1,416,406) (4,430,875) 73,804,362	As a Gross RMB’000 73,833,649 35,793,252 (3,189,655) (2,528,461) (5,639,864) 98,268,921	t 31 December 2 Reinsurers’ share RMB’000 (29,287) (49,320) – – 157,367 78,760	012 Total RMB’000 73,804,362 35,743,932 (3,189,655) (2,528,461) (5,482,497)
									98,347,681

IIA – 82

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

Key assumptions used in estimating the life insurance contract liabilities

The Interest contract provisions have been established based upon the following key assumptions:

Interest rates which vary by the type of contract;
Mortality/morbidity rates based on the China Life Insurance Mortality Table (2000-2003); and
Lapse rates based on 100% of pricing assumptions.

During 2012, the Group re-estimated the interest rates and surrender rates based on the latest information available. The changes of insurance contract liabilities arising from the above changes of accounting estimates were recognised in profit or loss for the year. The changes of accounting estimates decreased insurance contract liabilities by approximately RMB596 million and increased profit after taxation for the year by approximately RMB447 million.

Sensitivities of changes in key assumptions:

		Increase in profit
		after tax and
		total equity
		RMB million
31	December 2010
	1% increase in interest rate	2,447.57
	10% decrease in mortality/morbidity rate	277.67
31	December 2011
	1% increase in interest rate	1,924.10
	10% decrease in mortality/morbidity rate	285.97
31	December 2012
	1% increase in interest rate	2,386.02
	10% decrease in mortality/morbidity rate	383.50

During the Relevant Periods, there were no significant changes in the key assumptions used in estimating the life insurance contract liabilities.

IIA – 83

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

22. Unearned premium provisions

Analysis of movements in the unearned premium provisions:

At 1 January Premiums written during the year Premiums earned during the year Eliminated upon disposal of subsidiaries At 31 December	As a Gross RMB’000 285,957 1,078,928 (1,010,812) – 354,073	t 31 December 2 Reinsurers’ share RMB’000 (55,788) (165,266) 129,056 – (91,998)	010 Total RMB’000 230,169 913,662 (881,756) – 262,075	As a Gross RMB’000 354,073 829,695 (775,118) (158,155) 250,495	t 31 December 2 Reinsurers’ share RMB’000 (91,998) (173,454) 146,660 46,267 (72,525)	011 Total RMB’000 262,075 656,241 (628,458) (111,888) 177,970	As a Gross RMB’000 250,495 662,246 (704,561) – 208,180	t 31 December 2 Reinsurers’ share RMB’000 (72,525) (108,029) 133,662 – (46,892)	012 Total RMB’000 177,970 554,217 (570,899) –
									161,288

23. Provision for outstanding claims

Analysis of movement in the provision for outstanding claims:

At 1 January Claims incurred during the year Claims paid during the year Eliminated upon disposal of subsidiaries At 31 December	As a Gross RMB’000 161,593 658,939 (634,052) – 186,480	t 31 December 2 Reinsurers’ share RMB’000 – (145,248) 102,445 – (42,803)	010 Total RMB’000 161,593 513,691 (531,607) – 143,677	As a Gross RMB’000 186,480 673,678 (649,810) (26,309) 184,039	t 31 December 2 Reinsurers’ share RMB’000 (42,803) (133,442) 136,408 4,824 (35,013)	011 Total RMB’000 143,677 540,236 (513,402) (21,485) 149,026	As a Gross RMB’000 184,039 565,929 (660,896) – 89,072	t 31 December 2 Reinsurers’ share RMB’000 (35,013) (107,721) 122,715 – (20,019)	012 Total RMB’000 149,026 458,208 (538,181) –
									69,053

IIA – 84

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

24. Investment contract liabilities

(a) Unit-linked products

At 1 January Premiums received during the year Investment income/(loss) allocated to investment contracts Surrenders and others At 31 December	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 4,471,375 4,177,465 3,023,000 103,490 237,047 96,782 210,940 (687,008) (15,156) (608,340) (704,304) (557,699) 4,177,465 3,023,200 2,546,927

(b) Universal life and other products

At 1 January Premiums received during the year Interest allocated to investment contracts, net of management fee Surrenders and others At 31 December Total	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 27,340,600 26,687,968 22,064,234 897,154 368,246 469,517 1,208,860 835,059 687,028 (2,758,646) (5,827,039) (5,156,710) 26,687,968 22,064,234 18,064,069 30,865,433 25,087,434 20,610,996

IIA – 85

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

25. Deferred Taxation

Deferred tax assets and liabilities recognised:

The components of deferred tax assets/(liabilities) recognised in the consolidated statements of financial position and the movements during the Relevant Periods were as follows:

Deferred tax arising from At 1 January 2010 (Charge) credit to consolidated income statement Charged to other comprehensive income At 1 January 2011 (Charge) credit to consolidated income statement (Charge) credit to other comprehensive income At 1 January 2012 (Charge) credit to consolidated income statement Charge to other comprehensive income At 31 December 2012	Revaluation of properties RMB’000 (note) (45,917) (11,771) (15,343) (73,031) (17,697) (80,493) (171,221) (20,432) (32,183) (223,836)	Fair value adjustment of available- for-sale securities RMB’000 (190,624) 12,762 (71,978) (249,840) 119,383 792,865 662,408 85,699 (468,606) 279,501	Life insurance contract liabilities RMB’000 (867,935) – – (867,935) – – (867,935) – – (867,935)	Unused tax losses RMB’000 – – – – 40,860 – 40,860 165,284 – 206,144	Securities held for trading RMB’000 (109,467) (10,022) – (119,489) 5,099 – (114,390) – – (114,390)	Others RMB’000 3,345 35,090 – 38,435 (3,285) – 35,150 (1,248) – 33,902	Total RMB’000 (1,210,598) 26,059 (87,321)
							(1,271,860)
							144,360 712,372
							(415,128)
							229,303 (500,789)
							(686,614)

Note: Deferred tax liabilities recognised in respect of revaluation of properties arise from the fair value gain from investment properties situated in PRC, which are held within a business model whose business objective is to consume substantially all of the economic benefits embodied in investment property over time, other than through sale. Therefore, the deferred tax liability is recognised based on their respective enterprise income tax rate.

IIA – 86

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

The Group did not recognise deferred tax assets in respect of certain tax losses of approximately RMB517,383,000, RMBnil and RMBnil as 31 December 2010, 2011 and 2012 respectively due to the unpredictability of future profit streams of its subsidiary. The amount can be carried forward up to five years after the year in which the loss was originated to offset future taxable profits.

Net deferred tax assets recognised
in the consolidated statements of
financial position
Net deferred tax liabilities
recognised in the consolidated
statements of financial position
Interest-bearing notes
RMB subordinated notes due 2013
(Note (a))
RMB subordinated notes due 2018
(Note (b))
RMB subordinated notes due 2019
(Note (c))
RMB subordinated notes due 2020
(Note (d))
RMB subordinated notes due 2021
(Note (e))
Fair value of interest-bearing notes

As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000

1,421
–
–
(1,273,281)
(415,128)
(686,614)
(1,271,860)
(415,128)
(686,614)
As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
1,500,000
1,500,000
1,500,000
1,350,000
1,350,000
1,350,000
300,000
300,000
300,000
3,700,000
3,700,000
3,700,000
–
300,000
300,000
6,850,000
7,150,000
7,150,000
6,348,702
6,546,259
6,534,431

26. Interest-bearing notes

IIA – 87

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

Notes:

(a) On 23 October 2005, the Group issued 4.45% subordinated notes at par for the principal amount of RMB1,500,000,000. The notes will be redeemed on 30 November 2013 at par value and cannot be repaid on demand before then. Interest on the notes is payable annually in arrears.

The notes issued are free of any collateral and guarantee.

(b) During September and December 2008, the Group issued 6.3% subordinated notes at par for the principal amount of RMB1,350,000,000. The notes will mature during September and October 2018 but the notes can be redeemed at the fifth anniversary year of the issue date at par value at the discretion of the Group. Interest on the notes is payable annually in arrears.

The notes issued are free of any collateral and guarantee

(c) On 16 March 2009, Group issued 5.6% subordinated notes at par for the principal amount of RMB300,000,000. The notes will mature during March 2019 but the notes can be redeemed at the fifth anniversary year of the issue date at par value at the discretion of the Group. Interest on the notes is payable annually in arrears.

The notes issued are free of any collateral and guarantee.

(d) On 28 October 2010, the Group issued 4.8% subordinated notes at par for the principal amount of RMB3,700,000,000. The notes will mature during October 2020 but the notes can be redeemed at the fifth anniversary year of the issue date at par value at the discretion of the Group. Interest on the notes is payable annually in arrears.

The notes issued are free of any collateral and guarantee.

(e) On 23 February 2011, the Group issued 4.8% subordinated notes at par for the principal amount of RMB300,000,000. The notes will mature during February 2021 but the notes can be redeemed at the fifth anniversary year of the issue date at par value at the discretion of the Group. Interest on the notes is payable annually in arrears.

The notes issued are free of any collateral and guarantee.

IIA – 88

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

27. Insurance creditors

Amounts due to insurance customers Amounts due to insurance intermediaries Prepaid premiums received	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 17,685 67,206 48,060 230,267 275,479 445,670 478,836 682,884 1,253,523 726,788 1,025,569 1,747,253	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 17,685 67,206 48,060 230,267 275,479 445,670 478,836 682,884 1,253,523 726,788 1,025,569 1,747,253
		1,747,253

All of the amounts due to the insurance creditors are current and expected to be settled within one year.

Included in insurance creditors was an amount of approximately RMB60,000, RMB39,086,000 and RMB28,091,000 as at 31 December 2010, 2011 and 2012, respectively, which was due to related companies.

28. Other payables and accruals

All of the other payables and accruals are expected to be settled within one year.

29. Insurance protection fund

The amount represents the amount payable to the insurance protection fund at end of the Relevant Periods. According to the CIRC’s Order (2008) No. 2 “Administration rule on insurance protection fund”, the insurance protection fund is calculated on the basis of 0.8% of retained premium for accident and short-term health policies, 0.15% of retained premium for long-term life and long-term health policies with guaranteed interest, and 0.05% of retained premium for long-term life policies without guaranteed interest. The ceiling of the fund for a life insurance company is 1% of its total assets.

IIA – 89

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

30. Securities purchased under resale agreements/securities sold under repurchase agreements

The Group entered into transactions in which it transferred financial assets directly to third parties. As the Group has not transferred the significant risks and rewards relating to these securities, it continues to recognise the full carrying amount of such securities and has recognised the cash received on the transfer as securities sold under repurchase agreements. The following were the Group’s held-to-maturity securities and available-for-sale securities as at 31 December 2010, 2011 and 2012 that were transferred to third parties with terms to repurchase these securities at the agreed dates and prices. These securities are either measured at amortised cost or at fair value in the Group’s consolidated statement of financial position.

Carrying amount of transferred assets
Carrying amount of associated liabilities
– securities sold under
repurchase agreements
Net position
Carrying amount of transferred assets
Carrying amount of associated liabilities
– securities sold under
repurchase agreements
Net position

As at 31 December 2010
Held-to-
maturity
securities
Available-
for-sale
securities
Total
RMB’000
RMB’000
RMB’000
7,683,209
1,983,024
9,666,233
(7,284,630)
(1,080,000)
(8,364,630)
398,579
903,024
1,301,603
As at 31 December 2011
Held-to-
maturity
securities
Available-
for-sale
securities
Total
RMB’000
RMB’000
RMB’000
14,660,965
3,349,524
18,010,489
(13,772,630)
(1,632,400)
(15,405,030)
888,335
1,717,124
2,605,459

IIA – 90

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

Carrying amount of transferred assets Carrying amount of associated liabilities – securities sold under repurchase agreements Net position	As at 31 December 2012 Held-to- maturity securities Available- for-sale securities Total RMB’000 RMB’000 RMB’000 25,701,450 5,715,643 31,417,093 (24,638,520) (3,690,000) (28,328,520) 1,062,930 2,025,643 3,088,573

Conversely, the Group also enters into short-term investment arrangements secured by the securities purchased. The securities purchased are not recognised on the consolidated statement of financial position.

All of the securities purchased under resale agreements and securities sold under repurchase agreements are denominated in RMB and will be settled within one year from the end of the reporting period. The carrying amount of the securities purchased under resale agreements and securities sold under repurchase agreements approximate to their fair value.

As at 31 December 2010, most of the securities purchased under resale agreements and the securities sold under repurchase agreements will mature within 7 days, with interest rates of 3%-8% and 5%-6% per annum, respectively. As at 31 December 2011, most of the securities sold under repurchase agreements will mature within 9 days, with interest rates of 5%-6% per annum. As at 31 December 2012, most of the securities sold under repurchase agreements will mature within 49 days, with interest rates of 3% – 8% per annum.

31. Paid-in capital

The paid-in capital and registered capital of the Company as at 1 January 2010, 31 December 2010, 31 December 2011 and 31 December 2012 was RMB3,730,000,000.

IIA – 91

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

32. Reserves

At 1 January 2010 Profit for the year Other comprehensive income: Revaluation gain arising from reclassification of own-use properties into investment properties Available-for-sale securities: – change in fair value – deferred tax recognised – transferred to profit or loss Total comprehensive income for the year Capital reserve transferred to paid in capital (note (i)) Capital contribution from non- controlling interests (note (ii)) At 31 December 2010 and 1 January 2011 Profit for the year Other comprehensive income: Revaluation gain arising from reclassification of own-use properties into investment properties Available-for-sale securities: – change in fair value – deferred tax recognised – transferred to profit or loss Total comprehensive (expense) income for the year Disposal of subsidiaries (note 40) At 31 December 2011 and 1 January 2012 Profit for the year Other comprehensive income for the year: Revaluation gain arising from reclassification of own-use properties into investment properties Available-for-sale securities: – change in fair value – deferred tax recognised – transferred to profit or loss Total comprehensive income for the year At 31 December 2012	Capital reserve RMB’000 1,400,000 – – – – – – – (1,400,000) – – – – – – – – – – – – – – – – – – –	Fair value reserve RMB’000 note (iii) 571,871 – – 215,935 1,078,348 (71,978) (790,435) 215,935 – – 787,806 – – (2,380,931) (3,652,665) 792,435 479,299 (2,380,931) 2,335 (1,590,790) – – 1,405,817 (351,451) (468,606) 2,225,874 1,405,817 (184,973)	Revaluation reserve RMB’000 note (iv) – – 46,031 – – – – 46,031 – – 46,031 – 241,481 – – – – 241,481 – 287,512 – 96,550 – – – – 96,550 384,062	Retained profits RMB’000 3,475,470 889,931 – – – – – 889,931 – – 4,365,401 653,476 – – – – – 653,476 450,389 5,469,266 704,304 – – – – – 704,304 6,173,570	Sub-total RMB’000 5,447,341 889,931 46,031 215,935 1,078,348 (71,978) (790,435) 1,151,897 (1,400,000) – 5,199,238 653,476 241,481 (2,380,931) (3,652,665) 792,435 479,299 (1,485,974) 452,724 4,165,988 704,304 96,550 1,405,817 (351,451) (468,606) 2,225,874 2,206,671 6,372,659	Non- controlling interests RMB’000 156,397 (50,426) – – – – – (50,426) – 450,875 556,846 (10,098) – (1,287) (1,717) 430 – (11,385) (545,461) – – – – – – – – –	Total RMB’000 5,603,738
							839,505 46,031 215,935
							1,078,348 (71,978) (790,435)
							1,101,471 (1,400,000) 450,875
							5,756,084
							643,378 241,481 (2,382,218)
							(3,654,382) 792,865 479,299
							(1,497,359) (92,737)
							4,165,988
							704,304 96,550 1,405,817
							(351,451) (468,606) 2,225,874
							2,206,671
							6,372,659

IIA – 92

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

Notes:

(i) During 2009, the shareholders of the Company made an additional contribution of RMB1,400,000,000 to the Company in proportion to their respective equity interests in the Company. The capital contribution was recorded in capital reserve as at 31 December 2009 and transferred to paid-in-capital in 2010 upon the completion of legal registration.
(ii) The contribution of RMB450,875,000 represents capital contribution of RMB450,000,000 from CTIH and TPG, non-controlling interests of TPP, into TPP, a non-wholly-owned subsidiary of the Group, and a currency translation gain of RMB875,000.
(iii) The fair value reserve is comprised of the cumulative net change in the fair value of availablefor-sale securities held at the end of the Relevant Period and is dealt with in accordance with the accounting policy set out in note 3(e)(iv).
(iv) Revaluation reserve represents the surplus or deficit on revaluation upon transfer of own-use properties to investment properties.

The unaudited net asset value of the Company extracted from its management accounts was RMB9,356,577,000, RMB7,895,988,000 and RMB10,100,422,000 as at 31 December 2010, 2011 and 2012, respectively.

33. Employee retirement benefits

As stipulated by the labour regulations of the PRC, the Group participates in various defined contribution retirement plans authorised by municipal and provincial governments for its staff. It is required to contribute at a rate of 10% to 22% of the salaries, bonuses and certain allowances of their staff to the retirement plans. A member of the plans is entitled to a pension equal to a fixed proportion of the salary prevailing at his or her retirement date.

The Group has no other material obligations for the payment of its staff’s retirement and other post-employment benefits other than the contributions described above.

IIA – 93

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APPENDIX IIA

34. Maturity profile

The following table details the Group’s contractual maturity for some of its financial assets and financial liabilities.

31 December 2010 Assets Deposits at banks and other financial institutions (including statutory deposits) Debt securities (under held-to-maturity) Debt securities (under available-for-sale) Debt securities (under held for trading) Debt securities (under designated at fair value through profit or loss) Loans and receivables (under investments in securities) Securities purchased under resale agreements Loans and advances Liabilities Interest-bearing notes Securities sold under repurchase agreement	Repayable on demand RMB’000 11,218,531 – – – – – – – 11,218,531 – – –	3 months or less RMB’000 785,913 – 5,328 15,255 – – 45,500 – 851,996 – (8,364,630) (8,364,630)	1 year or less but over 3 months RMB’000 2,740,080 423,505 486,708 – 58,192 – – 899,815 4,608,300 – – –	5 years or less but over 1 year RMB’000 5,800,000 2,145,682 2,259,601 – – – – – 10,205,283 (1,500,000) – (1,500,000)	After 5 years RMB’000 400,000 47,886,970 9,624,775 – – 3,295,800 – – 61,207,545 (5,350,000) – (5,350,000)	Undated RMB’000 – – – – – – – – – – – –	Total RMB’000 20,944,524 50,456,157 12,376,412 15,255 58,192 3,295,800 45,500 899,815
							88,091,655

							(6,850,000) (8,364,630)
							(15,214,630)

IIA – 94

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FINANCIAL INFORMATION OF TPL

31 December 2011 Assets Deposits at banks and other financial institutions (including statutory deposits) Debt securities (under held-to-maturity) Debt securities (under available-for-sale) Loans and receivables (under investments in securities) Loans and advances Liabilities Interest-bearing notes Securities sold under repurchase agreement 31 December 2012 Assets Deposits at banks and other financial institutions (including statutory deposits) Debt securities (under held-to-maturity) Debt securities (under available-for-sale) Debt securities (under designated at fair value through profit or loss) Loans and receivables (under investments in securities) Loans and advances Liabilities Interest-bearing notes Securities sold under repurchase agreement	Repayable on demand RMB’000 4,795,157 – – – – 4,795,157 – – – Repayable on demand RMB’000 8,906,400 – – – – – 8,906,400 – – –	3 months or less RMB’000 5,456,719 72,050 – – – 5,528,769 – (15,405,030) (15,405,030) 3 months or less RMB’000 1,180,616 100,037 8,746 – – – 1,289,399 – (28,328,520) (28,328,520)	1 year or less but over 3 months RMB’000 1,800,000 14,979 19,934 – 1,255,661 3,090,574 – – – 1 year or less but over 3 months RMB’000 4,200,000 195,136 382,424 250,000 – 2,082,038 7,109,598 (1,500,000) – (1,500,000)	5 years or less but over 1 year RMB’000 11,900,000 2,001,292 1,988,172 205,000 – 16,094,464 (1,500,000) – (1,500,000) 5 years or less but over 1 year RMB’000 21,950,000 3,229,175 2,929,439 – 3,035,000 – 31,143,614 – – –	After 5 years RMB’000 – 62,736,989 11,049,335 7,356,309 – 81,142,633 (5,650,000) – (5,650,000) After 5 years RMB’000 – 67,555,545 13,540,479 – 13,533,333 – 94,629,357 (5,650,000) – (5,650,000)	Undated RMB’000 – – – – – – – – – Undated RMB’000 – – – – – – – – – –	Total RMB’000 23,951,876 64,825,310 13,057,441 7,561,309 1,255,661
							110,651,597

							(7,150,000) (15,405,030)
							(22,555,030)

							Total RMB’000 36,237,016 71,079,893 16,861,088 250,000 16,568,333 2,082,038
							143,078,368

							(7,150,000) (28,328,520)
							(35,478,520)

IIA – 95

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APPENDIX IIA

35. Fair values of financial instruments

(a) Fair value

All financial instruments are stated at fair value or carried at amounts not materially different from their fair values as of 31 December 2010, 2011 and 2012, except for held-to-maturity investments and debt schemes as set out in note 15(i) and (iv) respectively and interest-bearing notes as set out in note 26.

(b) Estimation of fair values

The fair values of financial assets and financial liabilities are determined as follows:

The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to recent transaction price or quoted market bid prices and ask prices respectively;
The fair values of unlisted investment funds and unlisted debt securities included in financial assets at fair value through profit or loss and available-for-sale investments were established by reference to the prices quoted by respective fund administrators or by using valuations techniques including the use of recent arm’s length transactions; and
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis or using prices or rates from observable current market transactions as input.

IIA – 96

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36. Commitments

(a) Capital commitments for property and equipment and investment properties as at 31 December 2010, 2011 and 2012 were as follows:

Contracted for but not provided – property and equipment – investment properties Authorised but not contracted for	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 22,527 68,685 100,763 31,746 592,216 592,216 54,273 660,901 692,979 – – 1,868,400	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 22,527 68,685 100,763 31,746 592,216 592,216 54,273 660,901 692,979 – – 1,868,400
		692,979
		1,868,400

(b) The total future minimum lease payments under non-cancellable operating leases as at 31 December 2010, 2011 and 2012 are payable as follows:

Within 1 year After 1 year but within 5 years After 5 years	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 162,293 179,307 183,470 188,880 194,519 214,599 4,025 8,301 1,528 355,198 382,127 399,597	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 162,293 179,307 183,470 188,880 194,519 214,599 4,025 8,301 1,528 355,198 382,127 399,597
		399,597

The Group leases a number of properties under operating leases. The leases typically run for an initial period of 1 to 6 years, with an option to renew the leases when all terms are renegotiated. Lease payments are usually reviewed annually to reflect market rentals. None of the leases includes contingent rentals.

IIA – 97

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APPENDIX IIA

37. Policyholder account assets in respect of unit-linked products

Held-for-trading securities – Debt securities – Equity securities – Investment funds Other debtors Securities purchased under resale agreements Money market fund Deposits at banks with original maturity more than three months Cash and cash equivalents	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 89,377 190,531 154,788 954,276 455,831 640,434 1,794,226 1,229,935 1,183,806 131,046 25,392 53,733 136,900 5,700 4,100 53,414 13,075 55,975 – – 17,000 1,018,226 1,102,736 437,091 4,177,465 3,023,200 2,546,927	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 89,377 190,531 154,788 954,276 455,831 640,434 1,794,226 1,229,935 1,183,806 131,046 25,392 53,733 136,900 5,700 4,100 53,414 13,075 55,975 – – 17,000 1,018,226 1,102,736 437,091 4,177,465 3,023,200 2,546,927
		2,546,927

The above assets are held for policyholders of unit-linked products.

38. Contingent liabilities

There was no outstanding litigation nor any other contingent liabilities as of 31 December 2010, 2011 and 2012, other than those incurred in the normal course of the Group’s insurance businesses.

39. Event after the reporting period

CTIH, together with TPG and Ageas Insurance International N.V. (“Ageas”), have decided to increase the capital of the Company by RMB2,500 million to RMB6,230 million. CTIH, TPG and Ageas have contributed such additional capital in cash in the amount of RMB1,251.25 million, RMB626.25 million and RMB622.50 million, respectively, in proportion to their respective equity interests in the Company during January 2013. This additional capital contribution will allow the Company to further strengthen its solvency position to support its business development.

IIA – 98

FINANCIAL INFORMATION OF TPL

APPENDIX IIA

40. Disposal of subsidiaries

On 30 September 2011 and 30 December 2011, the Company disposed of 64.5% and 50.1% equity interest in TPP and TPAM, its non wholly-owned subsidiaries, to its immediate holding company, CTIH, at a total cash consideration of RMB595,204,000. The net assets of TPP and TPAM at the date of disposal were as follows:

Analysis of assets and liabilities over which control was lost:

Statutory deposits Property and equipment Investments in securities Securities purchased under resale agreements Insurance debtors Reinsurers’ share of insurance contract provisions Insurance and other debtors Deposits at banks with original maturity more than three months Cash and cash equivalents Others Total assets Life insurance contract liabilities Unearned premium provisions Provision for outstanding claims Investment contract liabilities Insurance creditors Other payables and accruals Others Total liabilities Net assets disposed of	Total RMB’000 250,000 30,230 585,415 4,200 55,285 51,091 65,688 233,000 397,706 45,694
	1,718,309

	96,853 158,155 26,309 322,543 151,474 270,498 4,536
	1,030,368

	687,941

IIA – 99

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APPENDIX IIA

Disposal of subsidiaries:

Consideration received Net assets disposed of Non-controlling interests Cumulative loss on available-for-sale financial assets reclassified Capital contribution (note) Net cash inflow arising on disposal: Cash consideration Less: Cash and cash equivalents disposed of	RMB’000 595,204 (687,941) 545,461 (2,335) 450,389 RMB’000 595,204 (397,706) 197,498

Note: The difference between consideration received and net assets disposed was regarded as capital contribution made by CTIH, its immediate holding company, under the group restructuring.

41. Material related party transactions

In addition to the transactions and balances disclosed elsewhere in the consolidated Financial Information, the Group entered into the following material related parties transactions.

IIA – 100

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APPENDIX IIA

(a) Recurring transaction with related parties

The following is a summary of significant recurring transactions entered into between the Group and its related parties during the Relevant Periods:

		Year	ended 31 December
		2010	2011	2012
	Note	RMB’000	RMB’000	RMB’000
Life insurance business
– Premiums ceded	(i)	3,645	3,936	6,806
– Reinsurance
commission
income	(i)	999	401	904
– Claims recovered	(i)	1,668	483	2,683
Asset management fee
income	(ii)	3,386	5,093	–
Agency fee income	(iii)	49,052	68,534	98,310
Rental income	(iv)	5,784	14,711	24,631
Employee benefit
insurance service fee
expense	(v)	–	25,283	38,879
Agency fee expense	(vi)	110,500	110,000	80,000
Service fee expense	(vii)	99,938	153,060	269,790

Notes:

(i) The Group ceded business to a fellow subsidiary and paid premiums and received commission income and claims recoverable.
(ii) The Group provides asset management services to and receives management fees from certain fellow subsidiaries.
(iii) The Group provides agency services in selling the insurance products of the related companies on their behalf and receives insurance agency income.
(iv) The Group leases a number of offices to certain fellow subsidiaries and receives rental income.
(v) A fellow subsidiary provides employee benefit insurance services to the Group and receives premiums from the Group.
(vi) The Group paid agency fee to fellow subsidiaries for referred-in insurance business.
(vii) Certain fellow subsidiaries provide back office services, internal audit services, property management services, asset management services and other services to the Group and receive service fee from the Group.

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(b) Non-recurring transactions with related parties

The Group has entered into the following significant non-recurring transactions with related parties during the Relevant Periods:

(i) During 2011, the Company disposed of the equity interest of 50.10% and 64.5% in its non wholly-owned subsidiaries, TPAM and TPP respectively, to its immediate holding company at a consideration of RMB595,204,000. Details of the transactions are disclosed in note 40.
(ii) On 18 June 2010, the Group, TPI and TPG and THE Ming An Insurance Company (China) Limited (“Ming An China”) entered into a supplemental agreement to the Joint Bidding Agreement dated 20 March 2008 and Supplemental Agreement dated 5 November 2008, pursuant to which all the rights and interest of Ming An China in a piece of land in Shenzhen and the development of a commercial office building (representing 15% of the total investment) under the Joint Bidding Agreement as amended by the Supplemental Agreement was transferred to the Group at a consideration of approximately RMB94,740,000.

The Group operates in an economic environment predominated by enterprises controlled, jointly controlled or significantly influenced by the PRC government through its numerous authorities, affiliates or other organisations (collectively “StateOwned Entities”). During the year, the Group entered into transactions with StateOwned Entities including but not limited to the sales of insurance policies and banking related services. These transactions are conducted in the ordinary course of the Group’s insurance business on terms similar to those that would have been entered into with non-state-owned entities. The Group has also established its pricing strategy and approval processes for its major insurance products. Such pricing strategy and approval processes do not depend on whether the customers are State-Owned Entities or not. Having due regard to the substance of the relationships, the directors believe that none of these transactions are related party transactions that require separate disclosure.

IIA – 102

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APPENDIX IIA

(c) Compensation of key management personnel

The remuneration of directors and other members of key management during the year was as follows:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Salaries and benefits	3,506	4,304	2,564

42. Operating segments

According to the Group’s internal organisational structure, management requirements, and internal reporting system, the Group’s operating business has three operating and reportable segments based on products and services provided. The main products and services provided by the Group’s segments are traditional and participating insurance, universal life insurance and others. Management reviews the operating results of the segment periodically to determine their allocation of resources and evaluate their performance.

Segment revenue representing gross premium written for traditional and participating life insurance, net investment income for universal life insurance and other income, and segment profit or loss before taxation earned by each segment are reported to management for the purpose of resource allocation and assessment of segment performance.

IIA – 103

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

Segment information is as follows:

		2010
Traditional and participating life insurance RMB’000 32,474,685 (266,581) 32,208,104 (31,906) 32,176,198 1,619,973 887,143 (17,806) 54,557 34,720,065 (4,325,940) (2,872,476) (4,377,546) (22,548,387) (34,124,349) 595,716 142 (194,207) 401,651 (126,379) 275,272 80,876,997 73,231,706	Universal life insurance RMB’000 – – – – – 1,490,664 – – 70,101 1,560,765 – (20,185) (17,414) (1,051,463) (1,089,062) 471,703 – – 471,703 – 471,703 27,389,760 25,115,444	Inter-segment elimination and Others adjustment RMB’000 RMB’000 – – – – – – – – – – 573 – – – (337) – 187,735 (179,521) 187,971 (179,521) – – (5,526) 110,500 (89,915) 69,021 – – (95,441) 179,521 92,530 – – – – – 92,530 – – – 92,530 – 4,349,842 (603,299) 4,217,265 (37,199)	Total RMB’000 32,474,685 (266,581) 32,208,104 (31,906) 32,176,198 3,111,210 887,143 (18,143) 132,872
			36,289,280 (4,325,940) (2,787,687) (4,415,854) (23,599,850)
			(35,129,331)
			1,159,949 142 (194,207)
			965,884 (126,379)
			839,505

			112,013,300 102,527,216
			9,486,084

IIA – 104

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FINANCIAL INFORMATION OF TPL

		2011
Traditional and participating life insurance RMB’000 32,045,922 (283,143) 31,762,779 (27,783) 31,734,996 3,147,784 151,884 (522,783) 68,313 34,580,194 (5,381,907) (2,870,903) (4,405,492) (21,368,064) (34,026,366) 553,828 205,373 (358,440) 400,761 136,922 537,683 106,599,109 115,839,292	Universal life insurance RMB’000 – – – – – 992,222 – – 91,572 1,083,794 – (2,686) (16,733) (1,058,056) (1,077,475) 6,319 – – 6,319 – 6,319 22,783,045 5,799,000	Inter-segment elimination and Others adjustment RMB’000 RMB’000 – (27,808) – – – (27,808) – – – (27,808) 4,377 – – – 13 – 197,713 (152,890) 202,103 (180,698) – – (6,880) 66,133 (99,079) 117,797 – – (105,959) 183,930 96,144 3,232 – – – – 96,144 3,232 – – 96,144 3,232 3,219,682 – 3,067,556 –	Total RMB’000 32,018,114 (283,143) 31,734,971 (27,783) 31,707,188 4,144,383 151,884 (522,770) 204,708
			35,685,393 (5,381,907) (2,814,336) (4,403,507) (22,426,120)
			(35,025,870)
			659,523 205,373 (358,440)
			506,456 136,922
			643,378

			132,601,836 124,705,848
			7,895,988

IIA – 105

APPENDIX IIA

FINANCIAL INFORMATION OF TPL

		2012
Traditional and participating life insurance RMB’000 36,573,561 (157,349) 36,416,212 16,682 36,432,894 5,325,443 (842,158) (1,300,051) 116,458 39,732,586 (7,041,172) (3,206,570) (4,954,525) (23,657,873) (38,860,140) 872,446 102,115 (360,600) 613,961 256,781 870,742 140,991,141 148,915,059	Universal life insurance RMB’000 – – – – – 607,648 – – 68,863 676,511 – (41) (13,098) (885,446) (898,585) (222,074) – – (222,074) – (222,074) 25,363,354 7,339,013	Inter-segment elimination and Others adjustment RMB’000 RMB’000 – – – – – – – – – – 2,934 – – – – – 54,041 (99) 56,975 (99) – – – – (1,339) 99 – – (1,339) 99 55,636 – – – – – 55,636 – – – 55,636 – 3,131,595 (580,421) 2,549,359 (421)	Total RMB’000 36,573,561 (157,349) 36,416,212 16,682 36,432,894 5,936,025 (842,158) (1,300,051) 239,263
			40,465,973
			(7,041,172) (3,206,611) (4,968,863) (24,543,319)
			(39,759,965)
			706,008 102,115 (360,600)
			447,523 256,781
			704,304

			–
			704,304

			168,905,669 158,803,010
			10,102,659

IIA – 106

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APPENDIX IIA

43. Accounting judgements and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 3, the CTIH directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimations (see below), that the CTIH directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated Financial Information.

(a) Held-to-maturity investments

The Company classifies non-derivative financial assets with fixed or determinable payments and fixed maturity and where the Company has a positive intention and ability to hold the assets to maturity as held-to-maturity investments. In making this judgement, the Company evaluates its intention and ability to hold such investments until maturity.

If the Company fails to hold these investments to maturity other than for certain specific circumstances, the Company would have to reclassify the entire portfolio of held-to-maturity investments as available-for-sale investments, as such portfolio of investments would be deemed to have been tainted. This would result in the held-to-maturity investments being measured at fair value instead of at amortised cost.

IIA – 107

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APPENDIX IIA

(b) Impairment of available-for-sale and held-to-maturity financial assets

The Group follows the guidance of HKAS 39 when determining whether there has been a significant or prolonged decline in the fair value of an available-for-sale investment and held-to-maturity financial below its cost and whether the held-to-maturity financial assets are impaired. This determination requires significant judgement. In making this judgement regarding impairment of an available-for-sale investment, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost.

(c) Deferred taxation on investment properties

For the purposes of measuring deferred tax liabilities or deferred tax assets arising from investment properties that are measured using the fair value model, the Group have reviewed the Group’s investment property portfolios and concluded that for those investment properties of the Group located in the PRC, they are depreciable and are held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale, and therefore the presumption is rebutted.

Key sources of estimation uncertainty

The following are key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the Relevant Periods, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

IIA – 108

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APPENDIX IIA

(a) Determination of insurance liabilities

The Group’s insurance liabilities are mainly comprised of unearned premium provisions of RMB354.07 million, RMB250.50 and RMB208.18 million, provision for outstanding claims of RMB186.48 million, RMB184.04 million and RMB89.07 million and life insurance contract liabilities of RMB51,389.33 million, RMB73,833.65 million and RMB98,268.92 million as at 31 December 2010, 2011 and 2012, respectively. The Group determines estimates for insurance liabilities at the date of the Financial Information on the basis of historical information, actuarial analyses, financing modeling and other analytical techniques. The directors continually review the estimates and make adjustments as necessary, but actual results could differ significantly from what is envisioned when these estimates are made.

(b) Fair value of investment properties

The fair value of investment properties was determined based on valuations conducted by independent firms of professional valuers using generally accepted property valuation techniques which involve certain assumptions. Favourable or unfavourable change to these assumptions would result in changes in the fair value of the Group’s investment properties and corresponding adjustment to the amount of gain or loss reported in profit or loss. As at 31 December 2010, 2011 and 2011, the fair value of investment properties was RMB426,073,000, RMB1,622,694,000, RMB2,080,299,000, respectively.

(c) Deferred tax liabilities

As at 31 December 2010, 2011 and 2012, a deferred tax liability of RMB867.94 million has been recognised in the Group’s consolidated statements of financial position, as a result of the increase in profit for prior years due to the change in accounting policies on insurance contracts in the PRC. The PRC tax rules and regulations up to the date of the report are not clear enough to support no provision of tax liability is required. In view of its nature, it is of the opinion of the CTIH management that such a provision should be presented as a deferred tax liability as set out in note 25. In cases there are further developments in the tax rules and regulations, a material reversal of deferred tax liability may arise, which would be recognised in profit or loss for the period in which such a reversal takes place.

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APPENDIX IIA

(B) SUBSEQUENT FINANCIAL STATEMENTS

No audited consolidated financial statements of the Group have been prepared in respect of any period subsequent to 31 December 2012.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

IIA – 110

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

The following is the text of accountants’ report of the Target Group, prepared for the purpose of inclusion in this circular, received from the reporting accountants of the Company, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong.

==> picture [74 x 57] intentionally omitted <==

==> picture [81 x 38] intentionally omitted <==

31 May 2013

The Directors

China Taiping Insurance Holdings Company Limited

Dear Sirs,

We set out below our report on the combined financial information relating to certain subsidiaries of China Taiping Insurance Group Co. (“TPG”) (referred to as “TPG Subsidiaries”) and the equity interests in Savills Taiping Property Management Limited (“Savills TPML”) (referred to as “TPG Associate”), for each of the three years ended 31 December 2012 (the “Relevant Periods”) (the “Financial Information”) for inclusion in the circular of China Taiping Insurance Holdings Company Limited (“CTIH”) dated 31 May 2013 (the “Circular”) in connection with the major acquisition and connected transaction (the “Proposed Acquisition”) of CTIH, which includes the proposed acquisition of TPG Subsidiaries and TPG Associate. TPG Subsidiaries and TPG Associate are collectively referred to as the “Target Group”. Details of the Proposed Acquisition are set out in the Circular.

TPG is a state-owned enterprise established in the People’s Republic of China (the “PRC”). It is the ultimate holding company of CTIH.

IIB– 1

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

			Principal activities		Underwriting of	property and	Underwriting of	property and	Underwriting of	property and	Underwriting of	property and	Property investment	business		Property development		Investment holding		Provision of back-	Investment holding		Money lending		Investment holding	Money lending
		The date of	this report	Directly Indirectly	– 100%		– 100%		– 100%		55% –		– 100%			– 61%		– 100%		– 100%	– 100%		– 100%		– 100%	– 100%
Proportion of equity interest held by TPG as at	31 December		2011 2012	Directly Indirectly Directly Indirectly	– 100% – 100%		– 100% – 100%		– 100% – 100%		55% – 55% –		– 100% – 100%			– 61% – 61%		– 100% – 100%		– 100% – 100%	– 100% – 100%		– 100% – 100%		– 100% – 100%	– 100% – 100%
			2010	Indirectly	100%		100%		100%		–		100%			61%	(Note a)	100%		100%	100%		100%		100%	100%
				Directly	–		–		–		55%		–			–		–		–	–		–		–	–
Issued and fully paid share capital/registered capital	31 December	The date of	2010 2011 2012 this report		MOP80,000,000 MOP80,000,000 MOP80,000,000 MOP80,000,000		SGD50,000,000 SGD50,000,000 SGD50,000,000 SGD50,000,000		GBP15,000,000 GBP15,000,000 GBP15,000,000 GBP15,000,000		Rp40,000,000,000 Rp40,000,000,000 Rp40,000,000,000 Rp70,000,000,000		HK$215,000,000 HK$215,000,000 HK$215,000,000 HK$215,000,000			RMB980,000,000 RMB980,000,000 RMB980,000,000 RMB980,000,000		HK$150,000,000 HK$150,000,000 HK$150,000,000 HK$150,000,000		HK$1 HK$1 HK$1 HK$1	US$100 US$100 US$100 US$100		HK$220,000,000 HK$220,000,000 HK$220,000,000 HK$220,000,000		HK$100,000,000 HK$100,000,000 HK$100,000,000 HK$100,000,000	HK$1,000,000 HK$1,000,000 HK$1,000,000 HK$1,000,000
		Class of	shares held		Ordinary shares		Ordinary shares		Ordinary shares		Ordinary shares		Ordinary shares			Registered capital		Ordinary shares		Ordinary shares	Ordinary shares		Ordinary shares		Ordinary shares	Ordinary shares
		Date of	incorporation		13 December 2002		27 September 2002		31 October 1983		12 October 1990		27 December 2000			5 December 2006		30 October 1981		8 April 2004	8 March 2000		15 January 1985		26 May 1987	12 October 1993
	Place of	incorporation/	establishment		Macau		Singapore		United Kingdom		Indonesia		Hong Kong			The PRC		Hong Kong		Hong Kong	British Virgin	Islands (“BVI”)	Hong Kong		Hong Kong	Hong Kong
			Name of company		China Taiping Insurance (Macau)	Company Limited (“TP Macau”)	China Taiping Insurance (Singapore)	Pte. Ltd. (“TP Singapore”)	China Taiping Insurance (UK)	Company Limited (“TP UK”)	PT China Taiping Insurance Indonesia	(“TP Indonesia”)	Taiping Investment Holdings	Company Limited (“TPIH”)	Subsidiaries of TPIH including:	Taiping Real Estate Shanghai Company	Limited (“TP Real Estate”)	China Insurance Group Investment	Company Limited	Chainway Limited	Sustainable Assets Limited		China Insurance Group Finance	Company Limited	Tellon Development Limited (“Tellon”)	Panbillion Finance Company Limited

IIB– 2

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

			Principal activities		Property and	Investment holding	Property investment	Dormant		Dormant		Investment holding	Inactive	Investment holding	Property development			Inactive	Securities broking					Securities broking	services	Investment holding		Nominee services	Inactive	Property development
		The date of	this report	Directly Indirectly	– 100%	– 100%	– 100%	– –		– –		– 70%	– 100%	– 100%	– 100%			– 100%	– 100%					– 100%		– 100%		– 100%	– 100%	– 100%
Proportion of equity interest held by TPG as at	31 December		2011 2012	Directly Indirectly Directly Indirectly	– 100% – 100%	– 100% – 100%	– 100% – 100%	– – – –	(Note b)	– – – –	(Note b)	– 70% – 70%	– 100% – 100%	– 100% – 100%	– 100% – 100%			– 100% – 100%	– 100% – 100%					– 100% – 100%		– 100% – 100%		– 100% – 100%	– – – 100%	– 100% – 100%
			2010	Indirectly	100%	100%	100%	100%		100%		70%	100%	100%	100%			100%	100%					100%		100%		100%	–	100%
				Directly	–	–	–	–		–		–	–	–	–			–	–					–		–		–	–	–
Issued and fully paid share capital/registered capital	31 December	The date of	2010 2011 2012 this report		HK$10,000 HK$10,000 HK$10,000 HK$10,000	HK$500,000 HK$500,000 HK$500,000 HK$500,000	HK$10,000 HK$10,000 HK$10,000 HK$10,000	HK$100,000 – – –		HK$2 – – –		HK$300,000 HK$300,000 HK$300,000 HK$300,000	US$1 US$1 US$1 US$1	US$1 US$1 US$1 US$1	RMB20,000,000 RMB20,000,000 RMB20,000,000 RMB20,000,000			SGD200,000 SGD200,000 SGD200,000 SGD200,000	HK$20,000,000 HK$20,000,000 HK$224,553,150 HK$224,553,150		HK$10,000,000 HK$10,000,000 HK$10,000,000 HK$10,000,000			HK$30,000,000 HK$30,000,000 HK$181,043,150 HK$181,043,150		HK$5,000,000 HK$5,000,000 HK$5,000,000 HK$5,000,000		HK$10,000 HK$10,000 HK$10,000 HK$10,000	– – HK$1 HK$1	HK$40,000,000 HK$40,000,000 HK$40,000,000 HK$40,000,000
		Class of	shares held		Ordinary shares	Ordinary shares	Ordinary shares	Ordinary shares		Ordinary shares		Ordinary shares	Ordinary shares	Ordinary shares	Registered capital			Ordinary shares	Ordinary shares	Non-voting	deferred shares			Ordinary shares		Ordinary shares		Ordinary shares	Ordinary shares	Registered capital
		Date of	incorporation		15 April 1987	12 February 1985	4 June 1992	11 January 1994		21 December 2001		18 May 1995	13 May 2009	18 April 2008	29 September 1998			29 June 1994	15 October 1986					11 July 1986		24 September 1985		5 October 1984	13 November 2012	14 March 1992
	Place of	incorporation/	establishment		Hong Kong	Hong Kong	Hong Kong	Hong Kong		Hong Kong		Hong Kong	BVI	BVI	The PRC			Singapore	Hong Kong					Hong Kong		Hong Kong		Hong Kong	Hong Kong	The PRC
			Name of company		Fairpoint Limited	China Plan Investments Limited	Wincott Company Limited	Global Manor International Limited		Profit Link Investments Limited		Sanlink Investments Limited	Best Exceed Limited	Wisdom Bridge Limited	太平置業（深圳）有限公司	(Taiping Real Estate Shenzhen	Company Limited*)	Zhong Bao Investment(S) Pte. Ltd.	Taiping Financial Holdings Company	Limited (“TPFH”) (Formerly known	as Taiping Securities Holdings (HK)	Company Limited)	Subsidiaries of TPFH including:	Taiping Securities (HK)	Company Limited	Taiping Financial Futures (HK)	Company Limited	Saundas (Nominees) Limited	Taiping Capital Limited	龍璧工業區管理（深圳）有限公司	(Dragon Jade Industrial District	Management (Shenzhen) Co., Ltd.*)	(“Dragon Jade”) (Formerly known	as龍璧工業區開發（深圳）	有限公司Dragon Jade	Industrial District Development	(Shenzhen) Co., Ltd.)

IIB– 3

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

			Principal activities			Property management			Provision of	insurance agency	Investment holding	capital		Provision of back	office services to	group companies		Provision of internal	audit services to	group companies	Inactive	Provision of trust	Provision of back-	Provision of back-	Provision of back-	Provision of back-
		The date of	this report	Directly Indirectly		– 100%			– 100%		100% –			100% –				100% –			100% –	– 100%	– 100%	– 100%	– 100%	– 100%
Proportion of equity interest held by TPG as at	31 December		2011 2012	Directly Indirectly Directly Indirectly		– 100% – 100%			– 100% – 100%		100% – 100% –			100% – 100% –				100% – 100% –			100% – 100% –	– 100% – 100%	– 100% – 100%	– 100% – 100%	– 100% – 100%	– 100% – 100%
			2010	Indirectly		100%			100%		–			–				–			–	100%	100%	100%	100%	100%
				Directly		–			–		100%			100%				100%			100%	–	–	–	–	–
Issued and fully paid share capital/registered capital	31 December	The date of	2010 2011 2012 this report			RMB5,000,000 RMB5,000,000 RMB5,000,000 RMB5,000,000			JPY30,000,000 JPY30,000,000 JPY30,000,000 JPY30,000,000		RMB5,000,000 RMB5,000,000 RMB5,000,000 RMB5,000,000			RMB15,000,000 RMB15,000,000 RMB15,000,000 RMB15,000,000				RMB2,000,000 RMB5,500,000 RMB10,500,000 RMB10,500,000			HK$10,000 HK$10,000 HK$10,000 HK$10,000	HK$3,000,000 HK$3,000,000 HK$3,000,000 HK$3,000,000	HK$1 HK$1 HK$1 HK$1	HK$1 HK$1 HK$1 HK$1	HK$1 HK$1 HK$1 HK$1	HK$1 HK$1 HK$1 HK$1
		Class of	shares held			Registered capital			Ordinary shares		Registered			Registered				Registered capital			Ordinary shares	Ordinary shares	Ordinary shares	Ordinary shares	Ordinary shares	Ordinary shares
		Date of	incorporation			28 June 2006			1 October 1991		5 July 2007			12 January 2009				2 December 2009			5 February 1987	15 November 2002	11 July 2006	9 July 2007	16 July 2007	7 August 2006
	Place of	incorporation/	establishment			The PRC			Japan		The PRC			The PRC				The PRC			Hong Kong	Hong Kong	Hong Kong	Hong Kong	Hong Kong	Hong Kong
			Name of company		Subsidiary of Dragon Jade including:	深圳市太平物業管理有限公司	(Shenzhen Pacific Real Estate	Management Co., Ltd.*)	China Taiping Insurance Service	(Japan) Co., Ltd.	深圳市太平投資有限公司(Shenzhen	China Insurance Taiping Investment	Company Limited*)	太平共享金融服務（上海）有限	公司(Taiping Financial Service	Centre capital (Shanghai) Company	Limited*)	太平金融稽核服務（深圳）有限公司	(Taiping Financial Audit Service	(Shenzhen) Company Limited*)	Action Profit Development Limited	CIG Trustees Limited	Pacific Asia Group Limited	Walkman Limited	Mano Limited	Prospect Inc. Limited

IIB– 4

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

Issued and fully paid share capital/registered capital Proportion of equity interest held by TPG as at	Place of 31 December 31 December	incorporation/ Date of Class of The date of The date of	Name of company establishment incorporation shares held Principal activities 2010 2011 2012 this report 2010 2011 2012 this report	Directly Indirectly Directly Indirectly Directly Indirectly Directly Indirectly	Ming Lee Investment Limited Hong Kong 6 September 1988 Ordinary shares HK$10,000 HK$10,000 HK$10,000 HK$10,000 – 100% – 100% – 100% – 100% Property and	investment holding	Sarley International Limited BVI 22 April 1998 Ordinary shares US$1 US$1 US$1 US$1 – 100% – 100% – 100% – 100% Investment holding	Toplap Investments Limited Hong Kong 26 March 1986 Ordinary shares HK$1,000 HK$1,000 HK$1,000 HK$1,000 – 100% – 100% – 100% – 99.7% Inactive	During the Relevant Periods and as the date of report, the equity interest of Savills TPML indirectly held by TPG is as follows:	Issued and fully paid share capital/registered capital Proportion of equity interest held by TPG as at	Place of 31 December 31 December	incorporation/ Date of Class of The date of The date of	Name of company establishment incorporation shares held Principal activities 2010 2011 2012 this report 2010 2011 2012 this report	Directly Indirectly Directly Indirectly Directly Indirectly Directly Indirectly	Savills TPML Hong Kong 7 November 1995 Ordinary shares HK$10,000 HK$10,000 HK$10,000 HK$10,000 – 25% – 25% – 25% – 25% Property Management	The English names of the PRC entities referred to in this report are translations from their Chinese names and are for identification	purposes only. If there is any inconsistency, the Chinese name shall prevail.	Notes:	(a) During 2010, approximately 39% equity interest in TP Real Estate was disposed of by TPIH to a fellow subsidiary at a cash consideration of RMB924,001,000.	(b) These companies were deregistered in 2011.	All companies including TPG Subsidiaries and TPG Associate comprising the Target Group have adopted 31 December as their	financial year end date.

IIB– 5

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

The audited financial statements of Sarley International Limited for each of the three years ended 31 December 2012 have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and were audited by us.

The statutory financial statements of each of the Hong Kong incorporated companies of the Target Group, for each of the three years ended 31 December 2012 have been prepared in accordance HKFRSs issued by the HKICPA and were audited by us, except for Global Manor International Limited and Profit Link Investments Limited which declared dormant in accordance with S344A(4) under Companies Ordinance and no statutory financial statements have been prepared since the year ended 31 December 2010.

The statutory financial statements of the following companies for each of the three years ended 31 December 2012 were prepared in accordance with relevant accounting principles and financial regulations applicable to their respective jurisdictions. They were audited by the following certified public accountants registered in the PRC, Singapore, United Kingdom, Macau and Indonesia as appropriate.

Name of company	Auditor	Financial period
China Taiping Insurance	Deloitte Touche	Each of the three years ended
(Macau) Company Limited	Tohmatsu, Macau	31 December 2012
China Taiping Insurance	Deloitte & Touche LLP,	Each of the three years ended
(Singapore) Pte. Ltd.	Singapore	31 December 2012
China Taiping Insurance (UK)	Deloitte LLP, London	Each of the three years ended
Company Limited		31 December 2012
PT China Taiping Insurance	Osman Bing Satrio &	Each of the three years ended
Indonesia	Rekan Registered	31 December 2012
	Public Accountants(1)
Taiping Real Estate Shanghai	Deloitte Touche	Each of the three years ended
Company Limited	Tohmatsu CPA LLP(2)	31 December 2012
Dragon Jade Industrial District	Deloitte Touche	Each of the three years ended
Management (Shenzhen)	Tohmatsu CPA LLP(2)	31 December 2012
Co., Ltd.	Shenzhen Branch

IIB– 6

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Name of company	Auditor	Financial period
Shenzhen China Insurance	Deloitte Touche	Each of the three years ended
Taiping Investment	Tohmatsu CPA LLP(2)	31 December 2012
Company Limited	Shenzhen Branch
Taiping Financial Services	Deloitte Touche	Each of the three years ended
Centre (Shanghai)	Tohmatsu CPA LLP(2)
Company Limited	31 December 2012
Taiping Financial Audit	Deloitte Touche	Each of the three years ended
Service (Shenzhen)	Tohmatsu CPA LLP(2)	31 December 2012
Company Limited	Beijing Branch
Taiping Real Estate Shenzhen	Deloitte Touche	Each of the three years ended
Company Limited	Tohmatsu CPA LLP(2)	31 December 2012
	Shenzhen Branch
Shenzhen Pacific Real Estate	深圳普天會計師事務所	Year ended 31 December 2010
Management Co., Ltd.	有限公司
	Deloitte Touche	Years ended 31 December 2011
	Tohmatsu CPA LLP(2)	and 31 December 2012
	Shenzhen Branch
Zhong Bao Investment(S)	Jee Ah Chan & Company	Each of the three years ended
Pte. Ltd.	Certified Public	31 December 2012
	Accountants
Savills TPML	Pricewaterhouse Coopers	Each of the three years ended
		31 December 2012

(1) The auditor is a member firm of Deloitte Touche Tohmatsu Limited.

(2) Deloitte Touche Tohmatsu CPA LLP was previously named Deloitte Touche Tohmatsu CPA Ltd, and both are translations from their Chinese name and for identification only. If there is any inconsistency, the Chinese name shall prevail.

IIB– 7

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

As at the date of this report, no audited financial statements have been prepared for Best Exceed Limited, Wisdom Bridge Limited, Sustainable Assets Limited, Taiping Capital Limited and China Taiping Insurance Service (Japan) Co., Ltd. throughout the Relevant Periods as there is no such statutory requirement. We have conducted limited audit procedures on the management accounts of the these entities prepared based on the Target Group’s accounting policies in conformity with HKFRSs for the three years ended 31 December 2012, for the purpose of inclusion in the combined financial information of the Target Group.

We have examined the audited financial statements and unaudited management accounts, where appropriate, of the respective entities comprising the Target Group for the Relevant Periods (“Underlying Financial Statements”) in accordance with the Auditing Guideline 3.340 “Prospectuses and the reporting accountants” as recommended by the HKICPA.

The Financial Information for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements on the basis set out in Note 1 of Section A of the accountants’ report “General Information and Basis of Preparation”, after making such adjustments as we consider appropriate for the purpose of preparing our report for the inclusion in the Circular.

The directors of each of the companies comprising the Target Group are responsible for the Underlying Financial Statements and the directors of CTIH are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, on the basis of preparation set out in Note 1 of Section A of the accountants’ report “General Information and Basis of Preparation”, the Financial Information gives, for the purpose of this report, a true and fair view of the combined state of affairs of the Target Group as at 31 December 2010, 2011 and 2012, and of the combined results and combined cash flows of the Target Group for the Relevant Periods.

IIB– 8

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(A) FINANCIAL INFORMATION

COMBINED INCOME STATEMENTS

Notes
Revenue – Gross premiums written
6
Less: Premiums ceded to reinsurers
and retrocessionaries
Net premiums written
Changes in unearned premium
provisions, net of reinsurance
Net earned premiums
Net investment income
7(a)
Net realised and unrealised
investment gains and impairment
7(b)
Other income
8(a)
Other gains
8(b)
Benefits, losses and expenses
Net policyholders’ benefits
9(a)
Net commission expenses
9(b)
Administrative and other expenses
Total benefits, losses and expenses
Share of results of associates
16
Share of result of
a jointly controlled entity
Finance costs
10(a)
Profit before taxation
10
Income tax charge
13
Profit after taxation
Attributable to:
Owners of the Target Group
Non-controlling interests

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
770,431
848,364
935,972
(262,155)
(264,367)
(292,505)
508,276
583,997
643,467
6,936
(58,574)
(22,862)
515,212
525,423
620,605
160,563
233,616
368,471
563,441
1,243,381
446,159
264,872
331,163
370,874
1,764
413,178
42,026
1,505,852
2,746,761
1,848,135
(314,835)
(248,785)
(308,439)
(89,016)
(95,567)
(110,944)
(420,277)
(571,808)
(576,138)
(824,128)
(916,160)
(995,521)
7,547
21,829
63,570
–
8
8
(45,023)
(49,692)
(86,030)
644,248
1,802,746
830,162
(122,042)
(312,259)
(142,174)
522,206
1,490,487
687,988
521,586
1,246,025
586,815
620
244,462
101,173
522,206
1,490,487
687,988

IIB– 9

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

COMBINED STATEMENTS OF COMPREHENSIVE INCOME

Profit after taxation
Other comprehensive income (expenses)
Exchange difference arising on translation
Revaluation gain arising from reclassification of
own-use properties into investment properties
– Revaluation gain arising during the year
– Net deferred tax
Share of fair value and
revaluation reserve of associates
Available-for-sale securities
– Net fair value changes during the year
– Reclassification adjustment to profit or loss
on disposal
– Reclassification adjustment to profit or loss
on impairment
– Net deferred tax
Other comprehensive (expenses) income
for the year, net of income tax
Total comprehensive income for the year
Attributable to:
Owners of the Target Group
Non-controlling interests

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
522,206
1,490,487
687,988
11,374
(79,292)
34,813
–
9,009
4,243
–
(1,531)
(509)
(569)
(261)
(9,193)
56,844
(211,696)
26,660
(155,550)
(252,795)
(1,951)
–
10,781
3,071
1,446
2,887
(3,540)
(86,455)
(522,898)
53,594
435,751
967,589
741,582
432,550
726,533
641,538
3,201
241,056
100,044
435,751
967,589
741,582

IIB– 10

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

COMBINED STATEMENTS OF FINANCIAL POSITION

Notes ASSETS Statutory deposits 24 Property and equipment 14(a) Investment properties 15 Interests in associates 16 Interests in a jointly controlled entity Deferred tax assets 23(b) Investments in securities 18 Amounts due from related companies 22 Insurance debtors 19 Reinsurers’ share of insurance contract provisions 20 Tax recoverable 23(a) Properties under development for sale 14(b) Completed properties held for sale Assets classified as held for sale 17 Derivative financial instruments 33 Other debtors 21 Pledged bank deposits 25 Deposits at banks with original maturity more than three months Cash and cash equivalents 26 Total assets	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 51,869 61,685 84,680 151,293 135,431 192,707 3,678,252 4,917,441 5,246,670 589,882 602,173 38 – 161 169 13,213 16,121 4,407 2,450,388 1,495,971 1,591,122 2,350,403 1,955,078 2,455,997 201,414 149,811 183,453 370,239 424,804 410,604 1,829 – – 534,296 – – 204 7,621 – 9,472 – 896,914 – – 20 203,295 143,005 113,147 58,602 55,426 58,540 152,692 146,039 357,253 1,177,476 1,096,990 924,729 11,994,819 11,207,757 12,520,450	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 51,869 61,685 84,680 151,293 135,431 192,707 3,678,252 4,917,441 5,246,670 589,882 602,173 38 – 161 169 13,213 16,121 4,407 2,450,388 1,495,971 1,591,122 2,350,403 1,955,078 2,455,997 201,414 149,811 183,453 370,239 424,804 410,604 1,829 – – 534,296 – – 204 7,621 – 9,472 – 896,914 – – 20 203,295 143,005 113,147 58,602 55,426 58,540 152,692 146,039 357,253 1,177,476 1,096,990 924,729 11,994,819 11,207,757 12,520,450
		12,520,450

IIB– 11

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

Notes LIABILITIES Unearned premium provisions 27 Outstanding claims provisions 28 Liabilities directly associated with assets classified as held for sale 17 Bank loans and other borrowings 29 Amounts due to related companies 30 Insurance creditors 31 Other creditors and accrued charges 32 Tax payable 23(a) Deferred tax liabilities 23(b) Derivative financial instruments 33 Total liabilities Net assets Capital and reserves Share capital 34 Reserves 35 Amounts recognised in other comprehensive income and accumulated in equity relating to assets held for sale 35 Equity attributable to owners of the Target Group Non-controlling interests 35 Total equity	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 390,911 433,710 489,754 982,479 1,010,423 1,047,036 – – 62,452 2,746,649 3,023,612 3,510,952 2,542,589 477,247 364,961 217,797 208,329 217,660 375,884 470,039 477,043 26,216 56,779 24,213 459,656 670,623 726,986 60,242 29,128 5,294 7,802,423 6,379,890 6,926,351 4,192,396 4,827,867 5,594,099 753,993 757,493 929,249 2,593,554 2,984,469 3,460,304 – – 9,687 3,347,547 3,741,962 4,399,240 844,849 1,085,905 1,194,859 4,192,396 4,827,867 5,594,099	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 390,911 433,710 489,754 982,479 1,010,423 1,047,036 – – 62,452 2,746,649 3,023,612 3,510,952 2,542,589 477,247 364,961 217,797 208,329 217,660 375,884 470,039 477,043 26,216 56,779 24,213 459,656 670,623 726,986 60,242 29,128 5,294 7,802,423 6,379,890 6,926,351 4,192,396 4,827,867 5,594,099 753,993 757,493 929,249 2,593,554 2,984,469 3,460,304 – – 9,687 3,347,547 3,741,962 4,399,240 844,849 1,085,905 1,194,859 4,192,396 4,827,867 5,594,099
		6,926,351
		5,594,099

		929,249 3,460,304 9,687
		4,399,240 1,194,859
		5,594,099

IIB– 12

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

COMBINED STATEMENTS OF CHANGES IN EQUITY

			Attributabl	e to owners of the company	e to owners of the company			Total Non- controlling interests RMB’000 RMB’000 3,048,298 21,401 521,586 620 (89,036) 2,581	Total Non- controlling interests RMB’000 RMB’000 3,048,298 21,401 521,586 620 (89,036) 2,581	Total equity RMB’000 3,069,699 522,206 (86,455)
Share capital RMB’000 753,993 – –	Share premium RMB’000 7,614 – –	Capital reserve RMB’000 2 – –	Exchange reserve RMB’000 164,578 – 11,153	Fair value reserve Other reserve RMB’000 RMB’000 809,837 – – – (100,189) –		Revaluation reserve RMB’000 34,449 – –	Retained profits RMB’000 1,277,825 521,586 –
–	–	–	11,153	(100,189) –		–	521,586	432,550	3,201	435,751
– –	– –	– 49,128	– –	– –	– –	– –	(182,429) (182,429) – – 49,128 820,247			(182,429) 869,375
753,993 – –	7,614 – –	49,130 – –	175,731 709,648 – – – – (78,242) (448,728) –			34,449 – 7,478	1,616,982 1,246,025 –	3,347,547 844,849 4,192,396 1,246,025 244,462 1,490,487 (519,492) (3,406) (522,898)
–	–	–	(78,242) (448,728) –			7,478	1,246,025	726,533	241,056	967,589
3,500 – –	– – –	– – –	– – –	– – –	– 383,822 –	– – –	– 3,500 – – 383,822 – (719,440) (719,440) –			3,500 383,822 (719,440)
757,493 – –	7,614 – –	49,130 – –	97,489 – 35,942	260,920 – 15,047	383,822 – –	41,927 – 3,734	2,143,567 586,815 –	3,741,962 586,815 54,723	1,085,905 4,827,867 101,173 687,988 (1,129) 53,594
–	–	–	35,942	15,047	–	3,734	586,815	641,538	100,044	741,582
171,756 – –	– – –	– 10,890 –	– – –	– – –	– – –	– – –	(166,756) 5,000 – – 10,890 8,910 (150) (150) –			5,000 19,800 (150)
929,249	7,614	60,020	133,431	275,967	383,822	45,661	2,563,476	4,399,240	1,194,859	5,594,099

IIB– 13

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

i The amount represented profit distribution made by Savills TPML, TP Singapore, TP Macau and TPFH to China Taiping Insurance Group (HK) Company Limited (“TPG(HK)”) in 2010.
ii The amount represented the increase in non-controlling interests and capital reserve being the difference between the fair value of the consideration received (less tax) and the increase in the non-controlling interests upon partial disposal of a subsidiary to a fellow subsidiary during 2010 (with no loss of control in that subsidiary). During 2010, a fellow subsidiary entered into an acquisition agreement with TPIH, pursuant to which the fellow subsidiary agreed to acquire 39% equity interest in TP Real Estate for a cash consideration of RMB924,001,000. The transfer of 39% equity interest of TP Real Estate was completed during the year ended 31 December 2010.
iii The amount arose upon transfer of debts to Target Group by TPG(HK) as set out in Note 43 (c)).
iv The amount represented profit distribution made by Savills TPML, TP Singapore, TP Macau, TPIH and TPFH to TPG(HK) in 2011.
v The amount represented capital advance of RMB10,890,000 and RMB8,910,000 made to TP Indonesia by TPG and non-controlling interests respectively in 2012. The capital advance to TP Indonesia was transferred to share capital in January 2013 upon the completion of the related regulatory process.
vi The amount represented profit distribution made by Savills TPML to TPG(HK).

IIB– 14

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

COMBINED STATEMENTS OF CASH FLOWS

Notes
Operating activities
Profit before taxation
Adjustments for:
Changes in fair value of
investment properties
Depreciation
Dividend income
Finance costs
Net impairment losses
recognised in respect of
available-for-sale securities
Recognition (reversal) of
impairment losses on insurance
debtors and other debtors
Gain on disposal of completed
properties held for sale
Interest income
Net gain on disposal of property
and equipment
Gain on disposal of
interests in associates
Net realised gain on investments
in available-for-sale securities
Change in fair value on derivative
financial instruments
Share of results of associates
Share of result of a
jointly controlled entity
Operating profit before changes in
working capital
(Increase) decrease in insurance debtors
(Increase) decrease in other debtors
Increase in held-for-trading securities
Increase in securities designated at fair
value through profit or loss
Increase (decrease) in insurance
creditors
Increase (decrease) in other
creditors and accrued charges
(Decrease) increase in reinsurers’
share of insurance contract
provisions
(Decrease) increase in unearned
premium provisions
Increase in outstanding claims
provisions
Cash generated from operations
Income tax paid
Interest income received
Net cash generated from
operating activities

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
644,248
1,802,746
830,162
(414,712)
(1,041,358)
(395,918)
12,525
15,190
16,674
(43,737)
(41,952)
(38,003)
45,023
49,692
86,030
–
11,644
3,947
2,592
(4,385)
(37,671)
–
(43,958)
(3,058)
(64,707)
(91,278)
(121,916)
(11)
(17)
(542)
–
(322,528)
–
(155,550)
(252,795)
(1,951)
(1,346)
(28,924)
(23,948)
(7,547)
(21,829)
(63,570)
–
(8)
(8)
16,778
30,240
250,228
(92,007)
53,906
(33,556)
(54,111)
60,147
68,461
(68,382)
(258)
(98,391)
(25,002)
(15,374)
(37,728)
68,109
(9,468)
9,331
86,219
(25,628)
25,508
(70,605)
(78,220)
22,435
(13,488)
66,212
43,326
187,194
81,865
13,841
34,705
163,422
263,455
(15,763)
(68,167)
(89,941)
35,305
53,109
81,508
54,247
148,364
255,022

IIB– 15

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

Investing activities
Dividend received
Interest income received
Decrease (increase) in amounts
due from related companies
Decrease (increase) in
statutory deposits
Decrease (increase) in
pledged deposits at banks
Decrease (increase) in deposits at
banks with original maturity
more than three months
Deposit received in advance for
disposal of properties under
development for sale
Payments for purchase of
property and equipment
Payments in respect of
investment properties
Payments in respect of properties
under development for sale
Payments for purchase of
investments in held-to-maturity
and available-for-sale securities
Payments for acquisition of
a jointly controlled entity
Proceeds from disposal of
properties under development
held for sale
Proceeds from disposal of completed
properties held for sale
Proceeds from sale or redemption of
investments in held to maturity
and available-for-sale securities
Proceeds from disposal of
property and equipment
Proceeds from disposal of
investment properties
Proceeds from disposal of associates
17(a)
Net cash from (used in)
investing activities
Notes

53,592
53,947
38,003
28,725
37,994
37,467
134,332
(528,675)
(503,426)
19,000
(9,816)
(22,995)
12,027
3,176
(3,114)
99,468
6,653
(211,214)
603,173
–
–
(21,363)
(15,461)
(78,446)
(289,580)
(101,784)
(38,173)
(65,297)
(21,437)
–
(352,880)
(361,062)
(372,485)
–
(150)
–
–
25,398
–
–
738
10,679
428,350
247,584
334,286
641
535
1,540
–
28,617
6,790
–
332,000
–
650,188
(301,743)
(801,088)
Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000

IIB– 16

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Financing activities
Decrease in amounts due to
related companies
(Decrease) increase in bank loans
and other borrowings
Interest paid
Dividend paid
Proceeds from issue of
shares and capital advance
Proceeds on partial disposal of
a subsidiary in prior year
(net of tax)
Net cash (used in) from
financing activities
Effect of change in exchange rate
Net increase (decrease) in cash and
cash equivalents
Cash and cash equivalents
at beginning of the year
Cash and cash equivalents
at end of the year
26
Notes

(29,250)
(330,666)
(50,905)
(73,345)
276,963
487,340
(45,551)
(39,200)
(85,807)
(217,013)
(698,145)
(38,589)
–
3,500
24,800
–
869,375
–
(365,159)
81,827
336,839
36,303
(8,934)
63,125
375,579
(80,486)
(146,102)
801,897
1,177,476
1,096,990
1,177,476
1,096,990
950,888
Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000

IIB– 17

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

NOTES TO THE FINANCIAL INFORMATION

1. General information and basis of preparation

Pursuant to the Framework Acquisition Agreement entered between TPG and its directly wholly-owned subsidiary, TPG(HK), as vendors and CTIH as purchaser, CTIH will acquire the TPG Subsidiaries and TPG Associate from TPG and TPG(HK).

The combined Financial Information has been prepared using the same accounting policies adopted by CTIH in the preparation of its consolidated financial statements for the Relevant Periods, which conform with HKFRSs issued by the HKICPA. Based on the significant accounting policies on basis of combination and interests in associates in note 3, the TPG Subsidiaries and TPG Associate were accounted for in the Target Group’s combined Financial Information as subsidiaries and associate, as appropriate, based on the ownership interest held directly and indirectly by TPG.

Details of the proposed restructuring are set out in the section headed “The Restructuring of the TPG Group and the Proposed Transfer” in the Letter from the Board.

The Target Group’s principal operations are conducted in the PRC, Hong Kong, Macau, Singapore, Indonesia and United Kingdom. The functional currencies of each of the companies comprising the Target Group are the relevant domestic currencies of the country/ place in which the respective companies operate. However, for the purpose of this report, the combined Financial Information is presented in Renminbi (“RMB”).

The Target Group’s ultimate parent is TPG.

2. Application of hong kong financial reporting standards

For the purpose of preparing and presenting the combined Financial Information for the Relevant Periods, the Target Group has consistently applied, Hong Kong Financial Reporting Standards (“HKFRSs”), amendments and interpretations, which are effective for the accounting period beginning on 1 January 2012 throughout the Relevant Periods.

At the date of this report, the HKICPA has issued the following new and revised HKFRSs, amendments and interpretations that have been issued but are not yet effective. The Target Group has not early applied these new HKFRSs, amendments and interpretations in the preparation of the combined Financial Information for the Relevant Periods.

IIB– 18

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

New and revised HKFRSs, amendments and interpretations issued but not yet effective

The Target Group has not early applied the following new and revised HKFRSs, amendments and interpretations that have been issued but are not yet effective:

Amendments to HKFRSs Annual improvements to HKFRSs 2009-2011 cycle[1] Amendments to HKFRS 7 Disclosures – Offsetting financial assets and financial liabilities[1] Amendments to HKFRS 9 and Mandatory effective date of HKFRS 9 and HKFRS 7 transition disclosures[2] Amendments to HKFRS 10, Consolidated financial statements, joint HKFRS 11 and HKFRS 12 arrangements and disclosure of interests in other entities: Transition guidance[1] Amendments to HKFRS 10 Investments entities[4] HKFRS 12 and HKAS 27 HKFRS 9 Financial instruments[2] HKFRS 10 Consolidated financial statements[1] HKFRS 11 Joint arrangements[1] HKFRS 12 Disclosure of interests in other entities[1] HKFRS 13 Fair value measurement[1] Amendments to HKAS 1 Presentation of items of other comprehensive income[3] HKAS 19 (Revised 2011) Employee benefits[1] HKAS 27 (Revised 2011) Separate financial statements[1] HKAS 28 (Revised 2011) Investments in associates and joint ventures[1] Amendments to HKAS 32 Offsetting financial assets and financial liabilities[4]

1 Effective for annual periods beginning on or after 1 January 2013

2 Effective for annual periods beginning on or after 1 January 2015

3 Effective for annual periods beginning on or after 1 July 2012

4 Effective for annual periods beginning on or after 1 January 2014

IIB– 19

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Amendments to HKAS 32 Offsetting financial assets and financial liabilities and amendments to HKFRS 7 Disclosures – Offsetting financial assets and financial liabilities

The CTIH directors anticipate that the application of these amendments to HKAS 32 and HKFRS 7 will have no material impact on the combined Financial Information.

HKFRS 9 Financial instruments

IIB– 20

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Key requirements of HKFRS 9 are described as follows:

HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

HKFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

The CTIH directors anticipate that the adoption of HKFRS 9 in the future may have significant impact on amounts reported in respect of the Target Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

IIB– 21

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

New and revised standards on consolidation, joint arrangements, associates and disclosures

Key requirements of these five standards are described below.

HKFRS 10 replaces the parts of HKAS 27 “Consolidated and separate financial statements” that deal with consolidated financial statements and HK(SIC) – INT 12 “Consolidation – Special purpose entities”. HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios.

In July 2012, the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 were issued to clarify certain transitional guidance on the application of these five HKFRSs for the first time.

IIB– 22

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

The CTIH directors anticipate that these five standards will be adopted for the annual period beginning 1 January 2013 and have no material impact on the combined Financial Information.

HKFRS 13 Fair value measurement

HKFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The CTIH directors anticipate that HKFRS 13 will be adopted by the Target Group in the annual period beginning 1 January 2013 and that the application of the new standard may affect certain amounts reported in the combined Financial Information and result in more extensive disclosures in the combined Financial Information.

IIB– 23

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Amendments to HKAS 1 Presentation of items of other comprehensive income

Other than disclosed above, the CTIH directors anticipate that the application of the other new or revised HKFRSs, amendments and interpretations will have no material impact on the results and the financial position of the Target Group.

3. Significant accounting policies

The combined Financial Information has been prepared under the historical cost basis, except for certain investment properties and financial instruments, which are measured at fair values, and in accordance with the following accounting policies which conform with HKFRSs. In addition, the combined Financial Information includes the applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Companies Ordinance.

Basis of combination

The combined Financial Information incorporates the financial statements of TPG Subsidiaries controlled by TPG. Control is achieved where TPG has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

IIB– 24

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

The results of TPG Subsidiaries acquired or disposed of during the Relevant Periods are included in the combined income statement from the effective date of acquisition and up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of TPG Subsidiaries to bring their accounting policies into line with those used by other members of the Target Group.

All intra-group transactions, balances, income and express are eliminated on combination.

Non-controlling interests in subsidiaries are presented separately from the Target Group’s equity therein.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of a subsidiary is attributed to the owners of the Target Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Target Group’s interests in existing subsidiaries

Changes in the Target Group’s interests in existing subsidiaries that do not result in the Target Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Target Group’s interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Target Group.

Interests in associates

The combined Financial Information incorporates the initial investment cost in TPG Associate contributed by TPG(HK) to the Target Group, which is accounted for as an equity transaction through capital reserve. The subsequent increase or decrease in the investment of TPG Associate directly held by TPG (HK) is treated as deemed contribution or distribution by TPG(HK) to the Target Group.

IIB– 25

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

The results and assets and liabilities of associates, including TPG Associate, after initial recognition, are incorporated in the combined Financial Information using the equity method of accounting. Under the equity method, interests in associates are initially recognised in the combined statement of financial position at cost and adjusted thereafter to recognise the share of the profit or loss and other comprehensive income of the associates. When the Target Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Target Group’s net investment in the associate), the Target Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Target Group has incurred legal or constructive obligations or made payments on behalf of that associate.

On initial and subsequent acquisition of additional interests in associates without obtaining control of the associates, any excess of the cost of acquisition over the Target Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.

On initial and subsequent acquisition of additional interests in associates without obtaining control of the associates, any excess of the Target Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Target Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 “Impairment of Assets” as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

IIB– 26

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Upon disposal of an associate that results in the Target Group losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with HKAS 39. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. In addition, the Target Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Target Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant influence over that associate.

When a TPG Subsidiary transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the combined Financial Information only to the extent of interests in the associate that are not related to the Target Group.

Interests in jointly-controlled entities

The results and assets and liabilities of jointly controlled entities are incorporated in the combined Financial Information using the equity method of accounting. Under the equity method, investments in jointly controlled entities are initially recognised in the combined statement of financial position at cost and adjusted thereafter to recognise the Target Group’s share of the profit or loss and other comprehensive income of the jointly controlled entities. When the Target Group’s share of losses of a jointly controlled entity equals or exceeds its interest in that jointly controlled entity (which includes any long-term interests that, in substance, form part of the Target Group’s net investment in the jointly controlled entity), the Target Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Target Group has incurred legal or constructive obligations or made payments on behalf of that jointly controlled entity.

Any excess of the cost of acquisition over the Target Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of a jointly controlled entity recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.

IIB– 27

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Any excess of the Target Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Target Group’s investment in a jointly controlled entity. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 “Impairment of Assets” as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases. Upon disposal of a jointly controlled entity that results in the Target Group losing joint control over that jointly controlled entity, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with HKAS 39. The difference between the previous carrying amount of the jointly controlled entity attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the jointly controlled entity. In addition, the Target Group accounts for all amounts previously recognised in other comprehensive income in relation to that jointly controlled entity on the same basis as would be required if that jointly controlled entity had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that jointly controlled entity would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Target Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses joint control over that jointly controlled entity.

When a TPG Subsidiary transacts with its jointly controlled entity, profits and losses resulting from the transactions with the jointly controlled entity are recognised in the combined Financial Information only to the extent of interests in the jointly controlled entity that are not related to the Target Group.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes.

IIB– 28

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Provided it is probable that the economic benefits will flow to the Target Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in the profit or loss as follows:

Gross premiums written from insurance contracts

The accounting policies for the recognition of revenue from insurance contracts are disclosed in the sub-section under the heading “recognition and measurement of insurance contracts” in note 3.

Reinsurance commission income

Reinsurance commission income is recognised as income when received or receivable from reinsurers.

Rental income from operating leases

Rental income under operating leases is recognised in the profit or loss in equal instalments over the periods covered by the lease term. Lease incentives granted are recognised in the profit or loss as an integral part of the aggregate net lease payments receivable.

Dividend income

Dividend income from investments including financial assets at fair value through profit or loss is recognised when the shareholders’ rights to receive payment have been established.

Securities commission and brokerage income

Securities commission and brokerage income is recorded as income, on a trade date basis, when relevant transactions are executed and related services are provided.

Income from provision of property management businesses, internal audit services and back office services

Income from provision of property management, internal audit services and back office services are recognised when the service is rendered.

IIB– 29

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Interest income

Interest income from a financial asset including financial assets at fair value through profit or loss is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Financial instruments

Financial assets and financial liabilities are recognised in the combined statement of financial position when an entity in the Target Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Target Group’s financial assets are classified into one of the four categories, including financial assets at fair value through profit or loss, loans and receivables, held-to-maturity securities and available-for-sale securities. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

Interest income is recognised on an effective interest basis.

IIB– 30

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss has two subcategories, including financial assets held for trading and those designated at fair value through profit or loss on initial recognition.

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling in the near future; or
it is a part of a portfolio of identified financial instruments that the Target Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at fair value through profit or loss upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Target Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
it forms part of a contract containing one or more embedded derivatives, and HKAS 39 “Financial instruments: Recognition and measurements” permits the entire combined contract (asset or liability) to be designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are measured at fair value, with changes in fair value arising from remeasurement recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets and is included in the net realised and unrealised investment gains (losses) in the combined income statement.

IIB– 31

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including amounts due from related companies, other debtors, pledged bank deposits and deposits at banks with original maturity more than three months and cash and cash equivalents) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Held-to-maturity securities

Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Target Group’s management has the positive intention and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity securities are measured at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Available-for-sale securities

Available-for-sale securities are non-derivatives that are either designated or not classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity securities. Available-for-sale financial assets are measured at fair value at the end of the reporting period. Changes in fair value are recognised in other comprehensive income and accumulated in fair value reserve, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously accumulated in the fair value reserve is reclassified to profit or loss (see accounting policy on impairment of financial assets below).

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost less any identified impairment losses at the end of the reporting period (see accounting policy on impairment of financial assets below).

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of the reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

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For an available-for sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
a breach of contract, such as default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
disappearance of an active market for that financial asset because of financial difficulties.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

For certain categories of financial assets, such as other debtors, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Target Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of other debtors and amounts due from related companies, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a receivable is considered to be uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

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When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognised in other comprehensive income are reclassified to profit or loss in the period in which the impairment takes place.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly in other comprehensive income and accumulated in fair value reserve. For available-for-sale debt investments, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

Financial liabilities and equity

Financial liabilities and equity instruments issued by an entity of the Target Group are classified as either financial liabilities or as equity in according with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of a Target Group entity after deducting all of its liabilities. Equity instruments issued by the Target Group entities are recorded at the proceeds received, net of direct issue cost.

Financial liabilities

The Target Group’s financial liabilities are generally classified into financial liabilities at fair value through profit or loss and other financial liabilities.

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APPENDIX IIB

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss has two subcategories, including financial liabilities held for trading and those designated at fair value through profit or loss on initial recognition.

A financial liability is classified as held for trading if:

it has been incurred principally for the purpose of repurchasing in the near future; or
on initial recognition, it is a part of a portfolio of identified financial instruments that the Target Group manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at fair value through profit or loss upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

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APPENDIX IIB

it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are measured at fair value, with changes in fair value arising on remeasurement recognised directly in profit or loss in the period in which they arise. The net gains or losses recognised in profit or loss excludes any interest paid on the financial liabilities.

Other financial liabilities

Other financial liabilities including bank loans and other borrowings, amounts due to related companies and other creditors are subsequently measured at amortised cost, using the effective interest method.

Derivative financial instruments

Derivatives are initially recognised at fair value when a derivative contract is entered into and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of recognition in profit or loss depends on the nature of the hedge relationship.

Derecognition

Financial assets are derecognised only when the conditional rights to the cash flows from the assets expire or when the financial assets are transferred and the Target Group has transferred substantially all the risks and rewards of ownership of the financial assets to another entity. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Financial liabilities are derecognised when the Target Group’s obligation is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

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APPENDIX IIB

Investment properties

Investment properties are land and/or buildings which are held to earn rentals and/or for capital appreciation.

Investment properties are initially measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values using the fair value model. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise. Freehold land is initially recognised at cost, and subsequently carried at fair value less impairment.

Construction costs incurred for investment properties under construction are capitalised as part of the carrying amount of the investment properties under construction. Starting from 1 January 2010, investment properties under construction are measured at fair value at the end of the reporting period.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which the item is derecognised.

Property and equipment

Property and equipment including land and buildings held for use in the production or supply of goods or services or for administrative purposes (other than construction in progress) are stated at cost less subsequent accumulated depreciation and accumulated impairment losses. Freehold land is initially recognised at cost and subsequently carried at cost less impairment.

Depreciation is recognised so as to write off the cost of items of property and equipment other than construction in progress less their residual value over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

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An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the profit or loss in the period in which the item is derecognised.

An owner-occupied property is transferred to investment property at fair value when it is evidenced by end of owner-occupation. The difference between the fair value and the carrying amount at the date of transfer is recognised as a revaluation increase in accordance with HKAS 16 “Property, plant and equipment”. On the subsequent sale or retirement of the asset, the relevant revaluation reserve will be transferred directly to retained profits.

Properties under development for sale

Properties under development for sale is carried at cost less any recognised impairment loss. Construction costs incurred are capitalised as part of the carrying amount of the properties under development for sale.

Completed properties held for sale

Completed properties held for sale are stated at the lower of cost and net realisable value.

Leasing

The Target Group as lessor

The Target Group as lessee

Operating leases payments are recognised as expense on a straight-line basis over the lease term.

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APPENDIX IIB

Assets classified as held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the noncurrent asset is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

Impairment of non-financial assets

At the end of the reporting period, the Target Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Cash and cash equivalents

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Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the combined income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Target Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the combined statement of financial position and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which such deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries, associates and jointly controlled entities, except where the Target Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax asset arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

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Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Target Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

For the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties that are measured using the fair value model in accordance with HKAS 40 “Investment property”, such properties are presumed to be recovered through sale. Such a presumption is rebutted when the investment property is depreciable and is held within a business model of the Target Group whose business objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. If the presumption is rebutted, deferred tax liabilities and deferred tax assets for such investment properties are measured in accordance with the above general principles set out in HKAS 12 (i.e. based on the expected manner as to how the properties will be recovered).

Classification of contracts

Insurance contracts

Contracts under which the Target Group accepts significant insurance risk from another party (“the policyholder”) by agreeing to compensate the policyholder or other beneficiary if a specified uncertain future event (“the insured event”) adversely affects the policyholder or other beneficiary are classified as insurance contracts. Insurance risk is the risk other than financial risk that is transferred from the holder of a contract to the issuer. Financial risk is the risk of a possible future change in one or more of a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party of the contract.

Insurance risk is significant if, and only if, an insured event could cause the Target Group to pay significant additional benefits. Once a contract is classified as an insurance contract it remains classified as an insurance contract until all rights and obligations are extinguished or expired.

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APPENDIX IIB

Recognition and measurement of insurance contracts

Recognition of gross premiums written

Gross premiums written in respect of property and casualty insurance contracts are recognised as revenue when the amount is determined, which is generally when the risk commences.

Commission income

Commission income is recognised as revenue when received or receivable from reinsurers.

Unearned premium provisions

Provision for outstanding claims

Provision for outstanding claims comprises the Target Group’s estimate of the ultimate cost of settling all claims incurred but unpaid at the end of the reporting period whether reported or not, and related internal and external claims handling expenses and an appropriate prudential margin. Provision for outstanding claims is assessed by reviewing individual claims and making allowance for claims incurred but not yet reported, the effect of both internal and external foreseeable events, such as changes in claims handling procedures, inflation, judicial trends, legislative changes and past experience and trends. Adjustments to claims provisions established in prior years are reflected in the combined Financial Information of the year in which the adjustments are made and disclosed separately if material. The methods used, and the estimates made, are reviewed regularly.

Liability adequacy test

Provision is made for unexpired risks arising from property and casualty insurance contracts where the expected value of claims and expenses attributable to the unexpired periods of policies in force at the end of the reporting period exceeds the unearned premium provisions in relation to such policies. The unexpired risk provision, which is included in outstanding claim provisions at the reporting dates, is calculated by reference to classes of business which are managed together, after taking into account the future investment return on investments held to back the unearned premium provisions and the unexpired risk provision.

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Policyholders’ benefits

Policyholders’ benefits comprise claims and claims handling expenses. Claims are recognised when notified but not settled and an estimate is made for claims incurred but not reported at the reporting date.

Insurance debtors

Insurance debtors are initially recognised at fair value and thereafter stated at amortised cost using effective interest method less allowance for impairment. The impairment loss is measured as the difference between the carrying amount and the present value of the estimated future cash flows, discounted at the asset’s original effective interest rate, where the effect of discounting is material. The carrying amount is reduced by the impairment loss through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When an insurance debtor is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

Insurance creditors

Insurance creditors are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method.

Commission expense

Commission expense is accounted for when paid or payable and therefore varies in line with insurance premiums written.

Reinsurance

The Target Group cedes insurance in the normal course of business for the purpose of limiting its net loss potential through the diversification of its risks. Assets, liabilities and income and expenses arising from ceded insurance contracts are presented separately from the assets, liabilities, income and expenses from the related insurance contracts because the reinsurance arrangements do not relieve the Target Group from its direct obligations to policyholders.

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The benefits to which the Target Group is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of balances due from reinsurers, as well as other receivables (classified as reinsurance assets) that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts, which are recognised as an expense when due.

Amounts due/recoverable under reinsurance and the reinsurers’ share of insurance contract provisions are assessed for impairment at the end of the reporting period. Such assets are deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Target Group may not recover all amounts due and that the event has a reliably measurable impact on the amounts that the Target Group will receive from the reinsurers. The impairment loss is calculated following the same method used for financial assets held at amortised cost and the carrying amount is reduced through the use of an allowance account similar to insurance debtors.

Foreign currencies

Transactions in currencies other than the functional currency of each individual entity of the Target Group (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income, in which cases, the exchange differences are also recognised directly in other comprehensive income.

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For the purposes of presenting the combined financial statements, the assets and liabilities of the Target Group’s foreign operations are translated into the presentation currency of the Target Group (i.e. RMB) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (the exchange reserve).

On the disposal of a foreign operation, all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Target Group are reclassified to profit or loss. In addition, in relation to a partial disposal of a subsidiary that does not result in the Target Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are reattributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates that do not result in the Target Group losing significant influence), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the year in which they are incurred.

Retirement benefit costs

Payments to defined contribution retirement benefit plans/state-managed retirement benefit schemes/the Mandatory Provident Fund Scheme are charged as an expense when employees have rendered service entitling them to the contributions.

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Provisions and contingent liabilities

Provisions are recognised when the Target Group has a present obligation as a result of a past event, and it is probable that the Target Group will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or nonoccurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

4. Insurance, financial and capital risk management

Risk management objectives, policies and process for mitigating insurance risk

The Target Group is principally engaged in the underwriting of property and casualty business and other business including property development and securities broking business. The Target Group’s management of insurance and financial risks is a critical aspect of the business. Insurance risks are managed through the application of various policies and procedures relating to underwriting, pricing, claim and reinsurance as well as experience monitoring.

The Target Group uses several methods to assess and monitor insurance risk exposures both for individual types of risks insured and overall risks. These methods include internal risk measurement models, sensitivity analyses and scenario analyses.

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APPENDIX IIB

Underwriting strategy

The Target Group is engaged in the underwriting of property and casualty insurance business primarily in the United Kingdom, Macau, Singapore and Indonesia. The Target Group carries on its property and casualty insurance business by offering a wide range of insurance products covering different types of property insurance (including compulsory motor insurance), liability insurance, credit insurance, guarantee insurance business and short-term accident and health insurance and the related reinsurance business. The Target Group has formulated strict operational procedures on underwriting and claims settlement to control risks on insurance underwriting.

Reinsurance strategy

The Target Group purchases reinsurance protection from other reinsurers in the normal course of business in order to limit the potential for losses arising from longer and concentrated exposures. In assessing the credit worthiness of reinsurers, the Target Group takes into account, among other factors, ratings and evaluation performed by recognised credit rating agencies, their claims-paying and underwriting track record, as well as the Target Group’s past experience with them.

Asset and liability matching

The objective of the Target Group’s asset and liability management is to match the Target Group’s assets with liabilities on the basis of duration. The Target Group actively manages its assets using an approach that balances quality, diversification, asset and liability matching, liquidity and investment return. The goal of the investment process is to maximise investment returns at a tolerable risk level, whilst ensuring that the assets and liabilities are managed on a cash flow and duration basis.

Insurance risks

For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Target Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the estimate established using statistical techniques.

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Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Target Group has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.

The concentration and management of insurance risks are set out below:

(1) Management of risks

The Target Group delegates underwriting authority to experienced underwriters. Each underwriting department has an underwriting manual for each class of business. The underwriting manual is approved by the Underwriting Committee and specifies the authority of underwriters at each level. Each underwriting manual states clearly the minimum gross premium per policy, the maximum sum insured per policy and the aggregate exposure per zone as well as the probable maximum loss which underwriters at each level can underwrite. Risks that exceed the underwriting authority of the head of the underwriting department have to be reviewed and approved by the Underwriting Committee. For claims handling, there is a procedure manual that lays down the operational procedures and controls required to mitigate the insurance risk.

The Target Group also arranges both treaty reinsurance and facultative reinsurance in accordance with international practice. Treaty reinsurance provides automatic reinsurance cover under specific reinsurance contract terms and conditions. Facultative reinsurance is reinsurance of individual risk. Each contract is arranged separately. The choice of reinsurance contract depends on market conditions, market practice and the nature of business. Facultative reinsurance is arranged when an individual risk is not covered by treaty reinsurance or exceeds treaty reinsurance capacity and exceeds its own underwriting capacity.

(2) Concentration of insurance risks

Within the insurance process, concentration of risk may arise where a particular event or series of events could impact heavily upon the Target Group’s liabilities. Such concentrations may arise from a single insurance contract or through a small number of related contracts, and relate to circumstances where significant liabilities could arise.

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The concentration of insurance risk by classes of business and geographical distribution are summarised below, with reference to the gross premiums written in each of the three years ended 31 December 2010, 2011 and 2012.

By business line: Motor insurance Marine insurance Corporate property insurance Family property insurance Liability insurance Protection and indemnity insurance Engineering insurance Personal accident insurance Special risk insurance Other insurance By geographical territory: Macau Indonesia Singapore United Kingdom	Percentage to total gross premiums written Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 20.68% 22.32% 21.92% 6.21% 6.60% 5.47% 9.84% 10.14% 9.97% 21.50% 20.85% 19.38% 2.50% 2.31% 2.11% 8.16% 8.79% 7.37% 6.11% 6.42% 5.62% 3.67% 3.27% 1.92% 2.56% 1.13% 1.08% 18.77% 18.17% 25.16% 100% 100% 100% 31.39% 30.11% 35.96% 7.03% 8.86% 7.71% 42.58% 43.41% 40.11% 19.00% 17.62% 16.22% 100% 100% 100%	Percentage to total gross premiums written Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 20.68% 22.32% 21.92% 6.21% 6.60% 5.47% 9.84% 10.14% 9.97% 21.50% 20.85% 19.38% 2.50% 2.31% 2.11% 8.16% 8.79% 7.37% 6.11% 6.42% 5.62% 3.67% 3.27% 1.92% 2.56% 1.13% 1.08% 18.77% 18.17% 25.16% 100% 100% 100% 31.39% 30.11% 35.96% 7.03% 8.86% 7.71% 42.58% 43.41% 40.11% 19.00% 17.62% 16.22% 100% 100% 100%
		100%

		35.96% 7.71% 40.11% 16.22%
		100%

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Financial risk management objectives and policies

Categories of financial instruments

Financial assets Loans and receivables (including cash and cash equivalents) Held-to-maturity securities Available-for-sale securities Financial assets at fair value through profit or loss: – Held-for-trading securities – Designated as fair value through profit or loss Derivative financial instruments Financial liabilities Derivative financial instruments Amortised cost	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 3,936,740 3,393,193 3,908,506 180,832 237,093 270,511 1,716,253 689,944 615,558 407,542 407,800 506,191 145,761 161,134 198,862 – – 20 60,242 29,128 5,294 5,446,216 3,793,328 4,154,845	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 3,936,740 3,393,193 3,908,506 180,832 237,093 270,511 1,716,253 689,944 615,558 407,542 407,800 506,191 145,761 161,134 198,862 – – 20 60,242 29,128 5,294 5,446,216 3,793,328 4,154,845

		5,294 4,154,845

Transactions in financial instruments and insurance assets/liabilities have resulted in the Target Group assuming financial risks. These include market risk, credit risk and liquidity risk. Each of these financial risks is described below, together with a summary of the ways in which the Target Group manages these risks.

Market risk

Market risk can be described as the risk of change in fair value of a financial instrument or in cash flows from a financial instrument due to changes in interest rates, equity prices or foreign currency exchange rates or change in cash flows from a financial instrument due to changes in interest rates.

Interest rate risk

Interest rate risk is risk to future cashflows or fair value of a financial instrument due to uncertain future market interest rates.

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APPENDIX IIB

The Target Group monitors this exposure through periodic reviews of its financial instruments. Estimates of cash flows, as well as the impact of interest rate fluctuations relating to the investment portfolio, are modelled and reviewed periodically.

Fair value interest rate risk

The Target Group is exposed to fair value interest rate risk relating to the interest rate swaps-deposits and fixed-rate debt investments classified as loan and receivable, held-to-maturity securities, available-for-sale, held-for-trading and designated as at fair value through profit or loss.

Sensitivity analysis

The sensitivity analysis below has been determined assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date. The analysis is prepared assuming the financial instruments outstanding at the end of reporting period were outstanding for the whole year. The basis point increase or decrease as stated below is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rate.

If interest rates of the interest rate swaps and the debt investments classified as held-for-trading and designated as at fair value through profit or loss had been increased/decreased by 50 basis points for all Relevant Periods, with all other variables held constant, the Target Group’s post-tax profit for the Relevant Periods would decrease/increase as follow:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Post-tax profit for the year	10,207	6,002	3,023

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If interest rate of the debt investments classified as available-for-sale increased/ decreased by 50 basis points, with all other variables held constant, the Target Group’s total equity for the Relevant Periods would decrease/increase as follow:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Change in fair value reserve	1,046	1,091	989

Cash flow interest rate risk

The Target Group is exposed to cash flow interest rate risk in relation to variable-rate bank loans and amounts due to/from related companies. The cash flow interest rate risk is mainly concentrated on the fluctuation of Hong Kong Interbank Offered Rate (“HIBOR”) arising from the Target Group’s bank loans and amounts due to/from related companies.

Sensitivity analysis

The sensitivity analysis below has been determined assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for both variable rate bank loans and amounts due to/from related parties with variable interest rates. The analysis is prepared assuming the financial instruments outstanding at the end of reporting period were outstanding for the whole year. The basis point increase or decrease as stated below is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rate.

If interest rate of variable rate bank loans and amounts due to/from related parties with variable interest rates had been increased/decreased by 50 basis points, with all other variables held constant, the Target Group’s post-tax profit for the Relevant Periods would decrease/increase as follow:

Post-tax profit of the year	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 8,064 4,682 4,651

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APPENDIX IIB

Equity price risk

The Target Group has a portfolio of marketable securities, which is carried at fair value and is exposed to price risk. This risk is defined as the potential loss in market value resulting from an adverse change in prices. The Target Group manages the equity price risk by investing in a diverse portfolio of high quality and liquid securities.

Sensitivity analysis

The sensitivity analyses below are determined based on the exposure to equity price risks at the Relevant Periods. If the prices of the respective equity securities and investment funds had been 10% higher/lower, the Target Group’s post-tax profit and fair value reserve as a result of the changes in fair values of securities at held for trading and available-for-sale securities respectively would increase/decrease as follows:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Post-tax profit for the year	15,471	15,647	13,804
Fair value reserve	117,554	29,984	31,533

Foreign exchange risk

Monetary items of the entities of the Target Group are mostly denominated in their respective functional currencies. Therefore, the management considers that the foreign exchange risk is not material. Accordingly, no sensitivity analysis is presented.

Credit risk

Credit risk is the risk of economic loss resulting from the failure of one of the obligors to make any payment of principal or interest when due.

The Target Group’s maximum exposure to credit risk which will cause a financial loss to the Target Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the combined statements of financial position.

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APPENDIX IIB

The Target Group is exposed to credit risks primarily associated with bank deposits, bank balances, insurance debtors, investments in debt securities, reinsurance arrangements with reinsurers, amounts due from related companies and other debtors.

To reduce the credit risks associated with the investments in debt securities, the Target Group has established detailed credit control policies. In addition, the risk level of the various investment sectors is continuously monitored with the investment mix adjusted accordingly. The Target Group restricts investments in debt securities that are generally not below the investment grade, i.e. BBB or higher.

The credit risk on bank balances is limited because the relevant banks are with high credit ratings.

In assessing the need for impairment allowances, management considers factors such as credit quality, portfolio size, concentrations and economic factors.

Other than concentration risk on amounts due from related companies which are operating normally and liquid funds which are deposited with several banks with high credit rating, the Target Group does not have any other significant concentration of credit risk.

Liquidity risk

The Target Group has to meet daily calls on its cash resources, notably from claims arising from its insurance contracts. There is therefore a risk that cash will not be available to settle liabilities when due.

The Target Group manages this risk by formulating policies and general strategies of liquidity management to ensure that the Target Group can meet its financial obligations in normal circumstances and that an adequate stock of highquality liquid assets is maintained in order to contain the possibility of a liquidity crisis.

Apart from liquidity management and regulatory compliance, the Target Group always strives to maintain a comfortable liquidity cushion as a safety net for coping with unexpected large funding requirements and to maintain a contingency plan to be enacted should there be a company specific crisis.

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APPENDIX IIB

The following table details the Target Group’s remaining contractual obligations for its financial and insurance related financial liabilities. For nonderivative liabilities, the table has been drawn up based on undiscounted cash flows of the Target Group’s financial and insurance related financial liabilities based on the earliest date on which the Target Group can be required to pay. Specifically, bank loans with a repayment on demand clause are included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. For derivative instruments settled on a net basis, undiscounted net cash outflows are presented. The table includes both interest and principal cash flows.

Liquidity and interest risk tables

Weighted average effective interest rate As at 31 December 2010 Non-derivative liabilities Financial liabilities: Bank loans and other borrowings (Note) 1.64% Amounts due to related companies 0 – 4% Other creditors – Insurance liabilities: Insurance creditors – Outstanding claims provisions – Derivatives settled net Interest rate swaps –	On demand and less than 1 month RMB’000 357,101 1,686,950 – – – 2,044,051 –	1 year or less RMB’000 472,326 342,602 208,608 162,646 362,423 1,548,605 1,438	5 years or less but over 1 year RMB’000 1,975,688 538,030 – 55,151 620,056 3,188,925 58,804	Total undiscounted cash flows RMB’000 2,805,115 2,567,582 208,608 217,797 982,479 6,781,581 60,242	Carrying amount RMB’000 2,746,649 2,542,953 208,608 217,797 982,479
					6,698,486

					60,242

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Weighted average effective interest rate As at 31 December 2011 Non-derivative liabilities Financial liabilities: Bank loans and other borrowings 1.65% Amounts due to related companies 0 – 4% Other creditors – Insurance liabilities: Insurance creditors – Outstanding claims provisions – Derivatives settled net Interest rate swaps – Weighted average effective interest rate As at 31 December 2012 Non-derivative liabilities Financial liabilities: Bank loans and other borrowings 2.12% Amounts due to related companies 0 – 4% Other creditors – Insurance liabilities: Insurance creditors – Outstanding claims provisions – Derivatives settled net Interest rate swaps	On demand and less than 1 month RMB’000 7,831 331,484 – – – 339,315 – On demand and less than 1 month RMB’000 7,833 251,956 – – – 259,789 –	1 year or less RMB’000 49,693 160,339 344,575 137,792 324,840 1,017,239 12,431 1 year or less RMB’000 560,663 117,525 341,417 140,987 335,221 1,495,813 5,294	5 years or less but over 1 year RMB’000 3,085,724 – – 70,537 685,583 3,841,844 16,697 5 years or less but over 1 year RMB’000 3,073,320 – – 76,673 711,815 3,861,808 –	Total undiscounted cash flows RMB’000 3,143,248 491,823 344,575 208,329 1,010,423 5,198,398 29,128 Total undiscounted cash flows RMB’000 3,641,816 369,481 341,417 217,660 1,047,036 5,617,410 5,294	Carrying amount RMB’000 3,023,612 477,247 344,575 208,329 1,010,423
					5,064,186 29,128 Carrying amount RMB’000 3,510,952 364,961 341,417 217,660 1,047,036
					5,482,026 5,294

Note: Bank loans with a repayment on demand clause are included in the “on demand and less than 1 month” time band in the above maturity analysis. As at 31 December 2010, the aggregate undiscounted principal amounts of these bank loans amounted to RMB348,881,000. The bank loans of RMB348,881,000 as at 31 December 2010 were repaid in 2011 with total principal and interest cash outflows amounting to RMB354,044,000.

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APPENDIX IIB

Capital risk management

The Target Group’s key business operations are property and casualty insurance business. The Target Group manages its capital to ensure that the entities conducting the property and casualty insurance business will be able to meet statutory solvency requirements in the jurisdictions in which they operate. The Target Group’s capital management initiatives also strive to maintain a surplus for future business expansion opportunities. The Target Group’s overall capital management strategy remains unchanged during the Relevant Periods. The Target Group’s capital includes the components of total equity, amounts due to ultimate holding company, bank loans and other borrowings. The entities within the Target Group have complied with the various solvency requirements throughout the Relevant Periods.

Claims development

Claims development information for the property and casualty insurance business is disclosed below in order to illustrate the insurance risk inherent in the Target Group. The tables provide a review of current estimates of cumulative claims and demonstrates how the estimated claims have changed at subsequent reporting or underwriting year-ends. The estimates increase or decrease as losses are paid and more information becomes known about the frequency and severity of unpaid claims.

In view of the different business nature, the claims development for the property and casualty insurance business is analysed by accident year.

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APPENDIX IIB

Analysis of claims development – gross of reinsurance

For the year ended 31 December 2010

		Accident year	Accident year
2006 RMB’000 298,745 276,023 258,490 278,553 260,795 260,795 (219,265) 655 42,185	2007 RMB’000 377,976 360,969 367,073 342,076 – 342,076 (256,119) 1,162 87,119	2008 RMB’000 386,699 360,698 334,436 – – 334,436 (235,231) 1,188 100,393	2009 RMB’000 408,119 380,881 – – – 380,881 (184,492) 2,048 198,437	2010 RMB’000 444,242 – – – – 444,242 (85,862) 5,055 363,435	Total RMB’000 1,762,430 (980,969) 10,108
					791,569 75,200 115,710
					982,479

For the year ended 31 December 2011

		Accident year	Accident year
2006 RMB’000 377,976 360,969 367,073 342,076 327,318 327,318 (266,787) 1,758 62,289	2007 RMB’000 386,699 360,698 334,436 333,045 – 333,045 (244,569) 1,918 90,394	2008 RMB’000 408,119 380,881 365,393 – – 365,393 (229,048) 2,608 138,953	2009 RMB’000 444,242 346,373 – – – 346,373 (176,374) 3,978 173,977	2010 RMB’000 428,126 – – – – 428,126 (88,388) 8,908 348,646	Total RMB’000 1,800,255 (1,005,166) 19,170
					814,259 122,364 73,800
					1,010,423

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For the year ended 31 December 2012

		Accident year	Accident year
2006 RMB’000 386,699 360,698 334,436 333,045 359,663 359,663 (279,607) 1,019 81,075	2007 RMB’000 408,119 380,881 365,393 373,796 – 373,796 (271,904) 2,022 103,914	2008 RMB’000 444,242 346,373 343,398 – – 343,398 (233,609) 2,577 112,366	2009 RMB’000 428,126 388,149 – – – 388,149 (231,990) 4,691 160,850	2010 RMB’000 446,788 446,788 (114,473) 7,353 339,668	Total RMB’000 1,911,794 (1,131,583) 17,662
					797,873 201,099 48,064
					1,047,036

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APPENDIX IIB

Analysis of claims development – net of reinsurance

For the year ended 31 December 2010

		Accident year	Accident year
2006 RMB’000 225,792 222,227 208,418 219,981 207,143 207,143 (167,473) 747 40,417	2007 RMB’000 276,273 262,453 285,951 265,257 – 265,257 (200,434) 1,321 66,144	2008 RMB’000 282,393 266,542 252,217 – – 252,217 (166,909) 1,351 86,659	2009 RMB’000 308,631 281,585 – – – 281,585 (131,549) 2,329 152,365	2010 RMB’000 321,568 – – – – 321,568 (69,389) 5,767 257,946	Total RMB’000 1,327,770 (735,754) 11,515
					603,531 67,149 37,482
					708,162

For the year ended 31 December 2011

Estimate of cumulative claims At end of accident year One year later Two years later Three years later Four years later Estimate of cumulative claims Cumulative payments to date Estimate of claims expenses and discount Liabilities in respect of accident years 2006 and before Provision for adverse deviation Total liabilities included in the combined statement of financial position			Accident year	Accident year
	2006 RMB’000 276,273 262,453 285,951 265,257 259,352 259,352 (217,251) 1,758 43,859	2007 RMB’000 282,393 266,542 252,217 239,655 – 239,655 (182,896) 1,918 58,677	2008 RMB’000 308,631 281,585 255,602 – – 255,602 (163,499) 2,608 94,711	2009 RMB’000 321,568 257,228 – – – 257,228 (135,388) 3,978 125,818	2010 RMB’000 280,632 – – – – 280,632 (66,807) 8,908 222,733	Total RMB’000 1,292,469 (765,841) 19,170 545,798 100,593 37,452
						683,843

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APPENDIX IIB

For the year ended 31 December 2012

		Accident year	Accident year
2006 RMB’000 282,393 266,542 252,217 239,655 250,293 250,293 (210,210) 789 40,872	2007 RMB’000 308,631 281,585 255,602 255,176 – 255,176 (192,137) 1,253 64,292	2008 RMB’000 321,568 257,228 258,541 – – 258,541 (174,583) 1,869 85,827	2009 RMB’000 280,632 275,079 – – – 275,079 (152,462) 2,928 125,545	2010 RMB’000 339,709 – – – – 339,709 (93,423) 4,625 250,911	Total RMB’000 1,378,798 (822,815) 11,464
					567,447 147,643 39,834
					754,924

5. Operating segments

The Target Group is organised primarily based on different types of businesses. The information reported to the Board of TPG, being the chief operating decision maker of the Target Group, for performance assessment, are prepared and reported on such basis. Accordingly, the Target Group’s operating segments are detailed as follows:

Property and casualty insurance business; and
Other businesses which comprise the asset management business, securities broker business and property development and investment holding business.

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(a) Segment profit or loss

Segment revenue representing gross premium written for insurance business and total income for other businesses and segment profit or loss representing profit (loss) after taxation earned by each segment are reported to the Board of TPG for the purpose of resource allocation and assessment of segment performance.

For the year ended 31 December 2010

Revenue-Gross premiums written Less: Premiums ceded to reinsurers and retrocessionaries Net premiums written Change in unearned premium provisions, net of reinsurance Net earned premiums Net investment income Net realised and unrealised investment gains and impairment Other income Other (losses) gains Total income Benefits, losses and expenses Net policyholders’ benefits Net commission expenses Administrative and other expenses Total benefits, losses and expenses Share of results of associates Finance costs Profit before taxation Income tax charge Profit after taxation	Property and casualty insurance RMB’000 770,431 (262,155) 508,276 6,936 515,212 46,028 51,027 923 (5,191) 607,999 (314,835) (89,016) (124,567) (528,418) – (759) 78,822 (9,367) 69,455	Other businesses RMB’000 – – – – – 114,535 512,414 264,549 6,955 898,453 – – (296,310) (296,310) 7,547 (44,264) 565,426 (112,675) 452,751	Inter- segment elimination RMB’000 – – – – – – – (600) – (600) – – 600 600 – – – – –	Total RMB’000 770,431 (262,155)
				508,276 6,936
				515,212 160,563 563,441 264,872 1,764
				1,505,852
				(314,835) (89,016) (420,277)
				(824,128) 7,547 (45,023)
				644,248 (122,042)
				522,206

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For the year ended 31 December 2011

Revenue-Gross premiums written Less: Premiums ceded to reinsurers and retrocessionaries Net premiums written Change in unearned premium provisions, net of reinsurance Net earned premiums Net investment income Net realised and unrealised investment (losses) gains and impairment Other income Other gains Total income Benefits, losses and expenses Net policyholders’ benefits Net commission expenses Administrative and other expenses Total benefits, losses and expenses Share of results of associates Share of results of a jointly controlled entity Finance costs Profit before taxation Income tax charge Profit after taxation	Property and casualty insurance RMB’000 848,364 (264,367) 583,997 (58,574) 525,423 51,160 (27,540) 2,630 1,098 552,771 (248,785) (95,567) (113,693) (458,045) – – (1,354) 93,372 (11,878) 81,494	Other businesses RMB’000 – – – – – 182,456 1,270,921 329,211 412,080 2,194,668 – – (458,793) (458,793) 21,829 8 (48,338) 1,709,374 (300,381) 1,408,993	Inter- segment elimination RMB’000 – – – – – – – (678) – (678) – – 678 678 – – – – – –	Total RMB’000 848,364 (264,367)
				583,997 (58,574)
				525,423 233,616 1,243,381 331,163 413,178
				2,746,761
				(248,785) (95,567) (571,808)
				(916,160) 21,829 8 (49,692)
				1,802,746 (312,259)
				1,490,487

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APPENDIX IIB

For the year ended 31 December 2012

Revenue-Gross premiums written Less: Premiums ceded to reinsurers and retrocessionaries Net premiums written Change in unearned premium provisions, net of reinsurance Net earned premiums Net investment income Net realised and unrealised investment gains and impairment Other income Other (losses) gains Total income Benefits, losses and expenses Net policyholders’ benefits Net commission expenses Administrative and other expenses Total benefits, losses and expenses Share of results of associates Share of results of a jointly controlled entity Finance costs Profit before taxation Income tax charge Profit after taxation	Property and casualty insurance RMB’000 935,972 (292,505) 643,467 (22,862) 620,605 62,541 67,668 206 (4,199) 746,821 (308,439) (110,944) (134,720) (554,103) – – (1,270) 191,448 (30,824) 160,624	Other businesses RMB’000 – – – – – 305,930 378,491 370,668 46,225 1,101,314 – – (441,418) (441,418) 63,570 8 (84,760) 638,714 (111,350) 527,364	Total RMB’000 935,972 (292,505) 643,467 (22,862) 620,605 368,471 446,159 370,874 42,026 1,848,135 (308,439) (110,944) (576,138) (995,521) 63,570 8 (86,030) 830,162 (142,174) 687,988

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APPENDIX IIB

(b) Segment assets and liabilities

Segment assets and segment liabilities represent the assets and liabilities of each segment which is the measure reported to the Board of TPG for the purpose of resource allocation and assessment of segment performance.

As at 31 December 2010

Assets Statutory deposits Property and equipment Investment properties Interests in associates Deferred tax assets Investments in securities Amounts due from related companies Insurance debtors Reinsurers’ share of insurance contract provisions Tax recoverable Properties under development for sales Completed properties held for sale Asset classified as held for sale Other debtors Pledged bank deposits Deposits at banks with original maturity more than three months Cash and cash equivalents Segment assets/combined total assets	Property and casualty insurance RMB’000 49,290 80,328 82,865 – 13,213 1,085,757 3,492 201,414 370,239 – – – – 16,566 44,987 152,692 442,646 2,543,489	Other businesses RMB’000 2,579 70,965 3,595,387 589,882 – 1,364,631 2,346,911 – – 1,829 534,296 204 9,472 186,729 13,615 – 734,830 9,451,330	Total RMB’000 51,869 151,293 3,678,252 589,882 13,213 2,450,388 2,350,403 201,414 370,239 1,829 534,296 204 9,472 203,295 58,602 152,692 1,177,476
			11,994,819

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Liabilities Unearned premium provisions Outstanding claims provisions Bank loans and other borrowings Amounts due to related companies Insurance creditors Other creditors and accrued charges Tax payable Deferred tax liabilities Derivative financial instruments Segment liabilities/combined total liabilities	Property and casualty insurance RMB’000 390,911 982,479 – 6,992 217,797 115,167 18,674 9,865 – 1,741,885	Other businesses RMB’000 – – 2,746,649 2,535,597 – 260,717 7,542 449,791 60,242 6,060,538	Total RMB’000 390,911 982,479 2,746,649 2,542,589 217,797 375,884 26,216 459,656 60,242
			7,802,423

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As at 31 December 2011

Property and casualty insurance RMB’000 Assets Statutory deposits 59,228 Property and equipment 64,275 Investment properties 77,788 Interests in associates – Interests in a jointly controlled entity – Deferred tax assets 16,121 Investments in securities 1,142,735 Amounts due from related companies 1,946 Insurance debtors 149,811 Reinsurers’ share of insurance contract provisions 424,804 Completed properties held for sale – Other debtors 18,462 Pledged bank deposits 42,455 Deposits at banks with original maturity more than three months 146,039 Cash and cash equivalents 441,773 Segment assets/combined total assets 2,585,437 Liabilities Unearned premium provisions 433,710 Outstanding claims provisions 1,010,423 Bank loans and other borrowings – Amounts due to related companies 39,172 Insurance creditors 208,329 Other creditors and accrued charges 70,691 Tax payable 12,102 Deferred tax liabilities 10,230 Derivative financial instruments – Segment liabilities/combined total liabilities 1,784,657	Other businesses RMB’000 2,457 71,156 4,839,653 602,173 161 – 353,236 1,953,793 – – 7,621 124,543 12,971 – 655,217 8,622,981 – – 3,023,612 438,736 – 399,348 44,677 660,393 29,128 4,595,894	Inter- segment elimination RMB’000 – – – – – – – (661) – – – – – – – (661) – – – (661) – – – – – (661)	Total RMB’000 61,685 135,431 4,917,441 602,173 161 16,121 1,495,971 1,955,078 149,811 424,804 7,621 143,005 55,426 146,039 1,096,990
			11,207,757
			433,710 1,010,423 3,023,612 477,247 208,329 470,039 56,779 670,623 29,128
			6,379,890

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APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

As at 31 December 2012

Property and casualty insurance RMB’000 Assets Statutory deposits 82,220 Property and equipment 128,547 Investment properties 107,072 Interests in associates – Interests in a jointly controlled entity – Deferred tax assets 4,407 Investments in securities 1,275,488 Amounts due from related companies 1,967 Insurance debtors 183,453 Reinsurers’ share of insurance contract provisions 410,604 Assets classified as held for sale – Derivative financial assets 20 Other debtors 20,470 Pledged bank deposits 45,569 Deposits at banks with original maturity more than three months 334,152 Cash and cash equivalents 306,807 Segment assets/combined total assets 2,900,776 Liabilities Unearned premium provisions 489,754 Outstanding claims provisions 1,047,036 Liabilities directly associated with non-current assets held for sale – Bank loans and other borrowings – Amounts due to related companies 850 Insurance creditors 217,660 Other creditors and accrued charges 88,303 Tax payable 18,644 Deferred tax liabilities 12,985 Derivative financial instruments 27 Segment liabilities/combined total liabilities 1,875,259	Other businesses RMB’000 2,460 64,160 5,139,598 38 169 – 315,634 2,454,030 – – 896,914 – 92,677 12,971 23,101 617,922 9,619,674 – – 62,452 3,510,952 364,111 – 388,740 5,569 714,001 5,267 5,051,092	Total RMB’000 84,680 192,707 5,246,670 38 169 4,407 1,591,122 2,455,997 183,453 410,604 896,914 20 113,147 58,540 357,253 924,729
		12,520,450
		489,754 1,047,036 62,452 3,510,952 364,961 217,660 477,043 24,213 726,986 5,294
		6,926,351

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APPENDIX IIB

(c) Other segment information

For the year ended 31 December 2010

Amounts included in the measure of segment profit or loss or segment assets:

Additions to non-current assets (Note) Depreciation Other non-cash (income) expenses (net exchange (gain) loss and net unrealised investment (gains) losses and impairment)	Property and casualty insurance RMB’000 5,201 6,448 (14,562)	Other businesses RMB’000 266,829 6,077 (410,003)	Total RMB’000 272,030 12,525 (424,565)

For the year ended 31 December 2011

Amounts included in the measure of segment profit or loss or segment assets:

Additions to non-current assets (Note) Depreciation Other non-cash (income) expenses (net exchange (gain) loss and net unrealised investment (gains) losses and impairment)	Property and casualty insurance RMB’000 2,644 5,482 18,354	Other businesses RMB’000 249,011 9,708 (1,124,030)	Total RMB’000 251,655 15,190 (1,105,676)

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For the year ended 31 December 2012

Amounts included in the measure of segment profit or loss or segment assets:

Additions to non-current assets (Note) Depreciation Other non-cash (income) expenses (net exchange (gain) loss and net unrealised investment (gains) losses and impairment)	Property and casualty insurance RMB’000 67,237 4,781 (63,011)	Other businesses RMB’000 49,382 11,893 (407,027)	Total RMB’000 116,619

			16,674

			(470,038)

Note: Non-current assets excluded financial instruments, deferred tax assets and assets arising from insurance contracts.

Geographical distribution

The Target Group’s revenue from customers and information about its noncurrent assets by geographical locations of the assets are detailed below:

For the year ended 31 December 2010 Gross premiums written Non-current assets (other than financial instruments, deferred tax assets and assets arising under insurance contracts) For the year ended 31 December 2011 Gross premiums written Non-current assets (other than financial instruments, deferred tax assets and assets arising under insurance contracts) For the year ended 31 December 2012 Gross premiums written Non-current assets (other than financial instruments, deferred tax assets and assets arising under insurance contracts)	Macau RMB’000 241,874 34,614 255,471 24,659 336,630 35,433	Indonesia RMB’000 54,151 1,447 75,194 1,524 72,170 1,191	United Kingdom RMB’000 146,381 3,117 149,447 1,603 151,795 65,112	Singapore RMB’000 328,025 124,015 368,252 114,277 375,377 133,883	PRC RMB’000 – 3,396,065 – 4,643,353 – 4,901,433	HK RMB’000 – 229,510 – 228,113 – 266,888	Japan RMB’000 – 40,777 – 39,343 – 35,437	Total RMB’000 770,431 3,829,545

								848,364 5,052,872

								935,972 5,439,377

IIB– 70

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

6. Gross premiums written

Revenue represents gross premiums written from property and casualty insurance business.

7. Net investment income and gains

Net investment income (Note (a)) Net realised and unrealised investment gains and impairment (Note (b))	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 160,563 233,616 368,471 563,441 1,243,381 446,159 724,004 1,476,997 814,630	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 160,563 233,616 368,471 563,441 1,243,381 446,159 724,004 1,476,997 814,630
		814,630

Notes:

(a) Net investment income

Interest income from debt securities
– Held-to-maturity
– Available-for-sale
– Held-for-trading
– Designated at fair value
through profit or loss
Subtotal
Dividend income from equity securities
– Available-for-sale
– Held-for-trading
Subtotal
Dividend income from
investment funds
– Held-for-trading
Gross rental income from
investment properties
Less: direct outgoings
Interest income from bank deposits and
other interest income

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
6,072
8,214
9,983
10,299
12,902
11,370
4,563
8,586
9,855
8,468
8,467
9,200
29,402
38,169
40,408
38,454
37,201
33,256
4,088
3,361
2,816
42,542
40,562
36,072
1,195
1,390
1,931
54,237
108,946
222,031
(2,118)
(8,560)
(13,479)
52,119
100,386
208,552

35,305
53,109
81,508
160,563
233,616
368,471

IIB– 71

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Interest and dividend income from debt and equity securities and investment funds analysed by: Listed investments – Debt securities – Equity securities – Investment funds Unlisted investments – Debt securities – Equity securities (i) Interest income from debt securities Listed Unlisted (ii) Dividend income from equity securities: Listed Unlisted (iii) Dividend income from investment funds: Listed	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 13,031 17,053 19,782 17,916 15,751 13,239 1,195 1,390 1,931 32,142 34,194 34,952 16,371 21,116 20,626 24,626 24,811 22,833 40,997 45,927 43,459 73,139 80,121 78,411 13,031 17,053 19,782 16,371 21,116 20,626 29,402 38,169 40,408 17,916 15,751 13,239 24,626 24,811 22,833 42,542 40,562 36,072 1,195 1,390 1,931 1,195 1,390 1,931	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 13,031 17,053 19,782 17,916 15,751 13,239 1,195 1,390 1,931 32,142 34,194 34,952 16,371 21,116 20,626 24,626 24,811 22,833 40,997 45,927 43,459 73,139 80,121 78,411 13,031 17,053 19,782 16,371 21,116 20,626 29,402 38,169 40,408 17,916 15,751 13,239 24,626 24,811 22,833 42,542 40,562 36,072 1,195 1,390 1,931 1,195 1,390 1,931
		34,952
		20,626 22,833
		43,459
		78,411

		19,782 20,626
		40,408

		13,239 22,833
		36,072

		1,931
		1,931

IIB– 72

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(b) Net realised and unrealised investment gains (losses) and impairment

Net realised investment gains (losses) Net unrealised investment gains and impairment Net realised investment (losses) gains on: Debt securities – Available-for-sale – Designated at fair value through profit or loss – Held-for-trading Subtotal Equity securities – Available-for-sale (Note) – Held-for-trading Subtotal Investment funds – Available-for-sale – Held-for-trading Subtotal Derivative financial instruments	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 143,221 207,405 (23,124) 420,220 1,035,976 469,283 563,441 1,243,381 446,159 (159) 11,357 2,257 10,508 (5,411) (5,343) 2,324 1,296 1,202 12,673 7,242 (1,884) 155,709 241,438 (2,431) 8,668 (3,950) (2,381) 164,377 237,488 (4,812) – – 2,125 5,779 (472) 5,731 5,779 (472) 7,856 (39,608) (36,853) (24,284) 143,221 207,405 (23,124)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 143,221 207,405 (23,124) 420,220 1,035,976 469,283 563,441 1,243,381 446,159 (159) 11,357 2,257 10,508 (5,411) (5,343) 2,324 1,296 1,202 12,673 7,242 (1,884) 155,709 241,438 (2,431) 8,668 (3,950) (2,381) 164,377 237,488 (4,812) – – 2,125 5,779 (472) 5,731 5,779 (472) 7,856 (39,608) (36,853) (24,284) 143,221 207,405 (23,124)
		446,159

		2,257 (5,343) 1,202
		(1,884)
		(2,431) (2,381)
		(4,812)
		2,125 5,731
		7,856
		(24,284)
		(23,124)

Note: During the year ended 31 December 2011, the Target Group disposed of 44,027,000 CTIH shares at a total consideration of RMB751,331,000 to a fellow subsidiary. This resulted in a disposal gain of RMB253,325,000 which was included in the net realised investment gains on available-for-sale equity investments for the year 2011. Details of related non-cash transaction are set out in Note 43(b).

IIB– 73

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(i) Net realised investment gains (losses) on debt securities: Listed Unlisted (ii) Net realised investment gains (losses) on equity securities: Listed Unlisted (iii) Net realised investment gains (losses) on investment funds: Listed Unlisted Net unrealised investment (losses) gains on: Debt securities – Designated at fair value through profit or loss – Held-for-trading Subtotal Equity securities – Held-for-trading Investment funds – Held-for-trading Fair value gain of derivative financial instruments Fair value change of investment properties under construction Fair value change of completed investment properties Impairment loss recognised in respect of – Available-for-sale securities	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 12,832 (4,115) (4,141) (159) 11,357 2,257 12,673 7,242 (1,884) 164,377 237,082 (4,812) – 406 – 164,377 237,488 (4,812) 5,779 (472) 7,596 – – 260 5,779 (472) 7,856 Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (2,485) (2,012) 15,410 157 (166) 23,145 (2,328) (2,178) 38,555 (1,323) (11,509) 11,836 7,813 (8,975) 2,973 1,346 28,924 23,948 327,373 285,170 – 87,339 756,188 395,918 420,220 1,047,620 473,230 – (11,644) (3,947) 420,220 1,035,976 469,283	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 12,832 (4,115) (4,141) (159) 11,357 2,257 12,673 7,242 (1,884) 164,377 237,082 (4,812) – 406 – 164,377 237,488 (4,812) 5,779 (472) 7,596 – – 260 5,779 (472) 7,856 Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (2,485) (2,012) 15,410 157 (166) 23,145 (2,328) (2,178) 38,555 (1,323) (11,509) 11,836 7,813 (8,975) 2,973 1,346 28,924 23,948 327,373 285,170 – 87,339 756,188 395,918 420,220 1,047,620 473,230 – (11,644) (3,947) 420,220 1,035,976 469,283
		38,555
		11,836
		2,973
		23,948 – 395,918
		473,230
		(3,947)
		469,283

IIB– 74

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(i) Net unrealised investment gains (losses) on debt securities: Listed Unlisted (ii) Net unrealised investment gains (losses) on equity securities: Listed (iii) Net unrealised investment gains (losses) on investment funds: Listed Unlisted 8. Other income/other gains (a) Other income Income from provision of property management services Income from provision of back office services (note i) Income from provision of securities brokerage services Income from provision of internal audit services (note ii) Others	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (5,951) (2,201) 34,293 3,623 23 4,262 (2,328) (2,178) 38,555 (1,323) (11,509) 11,836 7,831 (9,647) 2,893 (18) 672 80 7,813 (8,975) 2,973 Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 35,409 57,950 79,037 128,044 173,448 213,500 58,421 46,746 24,961 33,592 38,857 42,427 9,406 14,162 10,949 264,872 331,163 370,874	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (5,951) (2,201) 34,293 3,623 23 4,262 (2,328) (2,178) 38,555 (1,323) (11,509) 11,836 7,831 (9,647) 2,893 (18) 672 80 7,813 (8,975) 2,973 Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 35,409 57,950 79,037 128,044 173,448 213,500 58,421 46,746 24,961 33,592 38,857 42,427 9,406 14,162 10,949 264,872 331,163 370,874
		370,874

IIB– 75

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Notes:

(i) The back office service centre was set up in 2009 and started operating in 2010 with related service expense of RMB123,487,000, RMB162,669,000 and RMB200,525,000 for the years ended 31 December 2010, 2011 and 2012, respectively.
(ii) The internal audit service centre was set up in 2009 and started operating in 2010 with related service expense of RMB31,821,000, RMB38,544,000 and RMB43,127,000 for the years ended 31 December 2010, 2011 and 2012, respectively.

(b) Other gains

Net gains on disposal of property and equipment Gain on disposal of completed properties held for sale Gain on disposal of interest in an associate (note i) Net exchange gain (Recognition) reversal of impairment losses on insurance debtors and other debtors, net (note ii)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 11 17 542 – 43,958 3,058 – 322,528 – 4,345 42,290 755 (2,592) 4,385 37,671 1,764 413,178 42,026	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 11 17 542 – 43,958 3,058 – 322,528 – 4,345 42,290 755 (2,592) 4,385 37,671 1,764 413,178 42,026
		42,026

Notes:

(i) In 2011, TPIH disposed of an associate, Shenzhen Futian Gas Turbine Power Co. Ltd. (“Shenzhen Futian Gas”), for a cash consideration of RMB332,000,000 as disclosed in note 17(a).
(ii) Impairment loss was reversed when cash was received from debtors or when there was an increase in underlying collateral value, which enhanced the estimated recoverable amount of the impaired receivables.

IIB– 76

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

9. Net policyholders’ benefits and net commission expenses

(a) Net policyholders’ benefits

Claims and claim adjustment expenses Less: Reinsurers’ and retrocessionaries’ shares	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 472,282 393,011 364,960 (157,447) (144,226) (56,521) 314,835 248,785 308,439

(b) Net commission expenses

Gross commission expenses Less: reinsurance commission income Net commission expenses	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 137,171 165,380 171,145 (48,155) (69,813) (60,201) 89,016 95,567 110,944

IIB– 77

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

10. Profit before taxation

Profit before taxation is arrived at after charging (crediting):

(a) Finance costs: Interest on bank loans and other borrowings within five years Less: Interest capitalised (Note) Total interest expense (b) Staff costs (including directors’ emoluments of TPG Subsidiaries): Salaries, wages and other benefits Employee share-based compensation benefits Contributions to defined contribution retirement plans (c) Other items Auditor’s remuneration Depreciation of property and equipment Operating lease charges in respect of properties Share of associates’ taxation charge (credit) (included in share of results of associates)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 52,292 56,659 86,030 (7,269) (6,967) – 45,023 49,692 86,030 224,977 249,658 293,137 268 – – 18,919 21,281 27,029 3,362 3,529 3,634 12,525 15,190 16,674 16,922 19,810 22,467 659 6,522 19,808	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 52,292 56,659 86,030 (7,269) (6,967) – 45,023 49,692 86,030 224,977 249,658 293,137 268 – – 18,919 21,281 27,029 3,362 3,529 3,634 12,525 15,190 16,674 16,922 19,810 22,467 659 6,522 19,808
		86,030

		293,137 – 27,029

		3,634 16,674 22,467 19,808

Note: The amount of interest capitalised for certain investment properties arose from a specific loan of approximately RMB551,378,000 and bearing interest at HIBOR + 0.53% per annum.

IIB– 78

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

11. Directors’ and chief executive’s remuneration and individuals with highest emoluments

The relevant information of directors’ remuneration on individual basis and individuals with highest emoluments is not presented herein as such information is not considered meaningful for purpose of this report.

12. Earnings per share

Earnings per share is not presented herein as such information is not considered meaningful for the purpose of this report.

13. Income tax charge

(a) Income tax charge (credit) in the combined income statements represents:

Current tax – Hong Kong Profits Tax Provision for the year Under(over)provision in respect of prior years Current tax – Outside Hong Kong Provision for the year Overprovision in respect of prior years Deferred tax (Note 23(b)) Income tax charge	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,778 1,966 973 9 3 (10) 1,787 1,969 963 21,512 100,531 54,844 (26) (1,941) (140) 21,486 98,590 54,704 98,769 211,700 86,507 122,042 312,259 142,174

IIB– 79

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

The provision for Hong Kong Profits Tax represents the Target Group’s estimated Hong Kong Profits Tax liability calculated at the standard tax rate of 16.5% on its assessable profits throughout the Relevant Periods.

Taxation outside Hong Kong for overseas subsidiaries is calculated at the rates prevailing in the relevant jurisdictions applicable to each year. Under the new Enterprise Income Tax Law of the PRC, the enterprise income tax rates for domestic companies controlled by foreign investor in different provinces in the PRC range from 22% to 25% during the Relevant Periods.

(b) The income tax charge for the year can be reconciled to the profit before taxation per the combined income statements as follows:

Profit before taxation
Tax at the rate applicable to
profits of the operations in
different jurisdictions
Tax effect of share of results
of associates and a jointly
controlled entity
Tax effect of expenses not
deductible for tax purpose
Tax effect of income not taxable
for tax purpose
Tax effect of tax losses not
recognised
Utilisation of tax losses previously
not recognised
Tax effect of deductible temporary
differences not recognised
Overprovision in respect of
prior years
Tax effect of change in tax rate
Income tax charge

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
644,248
1,802,746
830,162
141,598
366,280
168,344
(1,246)
(3,613)
(10,495)
4,669
3,754
5,390
(36,479)
(59,885)
(26,531)
10,672
5,489
6,395
(1,840)
(300)
(1,345)
3,730
1,173
225
(17)
(1,938)
(150)
955
1,299
341
122,042
312,259
142,174

IIB– 80

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

14. (a) Property and equipment

COST At 1 January 2010 Exchange realignments Additions Disposals At 31 December 2010 and 1 January 2011 Exchange realignments Additions Disposals Surplus on revaluation upon transfer to investment properties Transfer to investment properties At 31 December 2011 and 1 January 2012 Exchange realignments Additions Disposals Surplus on revaluation upon transfer to investment properties Transfer to investment properties Transfer to assets held for sale At 31 December 2012	Land and buildings RMB’000 160,712 8,543 – – 169,255 (6,253) – – 9,009 (21,648) 150,363 (478) 64,025 – 4,243 (5,070) – 213,083	Other fixed assets RMB’000 60,341 (491) 21,363 (3,955) 77,258 (3,329) 15,461 (2,604) – – 86,786 (357) 14,421 (6,389) – – (4,234) 90,227	Total RMB’000 221,053 8,052 21,363 (3,955) 246,513 (9,582) 15,461 (2,604) 9,009 (21,648) 237,149 (835) 78,446 (6,389) 4,243 (5,070) (4,234) 303,310

IIB– 81

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

ACCUMULATED DEPRECIATION AND IMPAIRMENT At 1 January 2010 Exchange realignments Provided for the year Eliminated on disposals At 31 December 2010 and 1 January 2011 Exchange realignments Provided for the year Eliminated on disposals Eliminated upon transfer to investment properties At 31 December 2011 and 1 January 2012 Exchange realignments Provided for the period Eliminated on disposals Eliminated upon transfer to investment properties Eliminated upon transfer to assets held for sale At 31 December 2012 CARRYING VALUES At 31 December 2010 At 31 December 2011 At 31 December 2012	Land and buildings RMB’000 43,450 2,055 3,358 – 48,863 (1,590) 3,855 – (3,223) 47,905 56 2,868 – (240) – 50,589 120,392 102,458 162,494	Other fixed assets RMB’000 40,507 8 9,167 (3,325) 46,357 (1,793) 11,335 (2,086) – 53,813 447 13,806 (5,391) – (2,661) 60,014 30,901 32,973 30,213	Total RMB’000 83,957 2,063 12,525 (3,325) 95,220 (3,383) 15,190 (2,086) (3,223) 101,718 503 16,674 (5,391) (240) (2,661) 110,603 151,293 135,431 192,707

IIB– 82

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

The above items of property and equipment are depreciated on a straight-line basis at following rates per annum:

Freehold land Nil Land and buildings Over the shorter of the unexpired term of lease and their estimated useful lives, being no more than 50 years Other fixed assets including 10% to 33% motor vehicles, furniture and computer equipment

The carrying value of properties shown above comprise:

Land in Hong Kong – long leases Land outside Hong Kong – freehold – long lease – medium term lease	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 5,094 4,554 4,256 90,077 81,846 78,381 18,111 9,022 73,444 7,110 7,036 6,413 120,392 102,458 162,494	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 5,094 4,554 4,256 90,077 81,846 78,381 18,111 9,022 73,444 7,110 7,036 6,413 120,392 102,458 162,494
		162,494

(b) Properties under development for sale

COST At 1 January 2010 Additions Transfer from investment properties (Note) At 31 December 2010 and 1 January 2011 Additions Disposals At 31 December 2011, 1 January 2012 and 30 December 2012	Construction in progress RMB’000 – 56,523 477,773
	534,296 50,942 (585,238)
	–

IIB– 83

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Note: The properties, which are situated outside Hong Kong, represent 17,160 square meters of gross floor area of Taiping Financial Tower located in Shanghai, the PRC. In February 2010, the Target Group entered into an agreement with a fellow subsidiary to dispose of that portion of the Taiping Financial Tower to the fellow subsidiary upon completion of construction at a consideration of RMB628,571,000. Accordingly, such portion of the properties was reclassified from investment properties under construction to properties under development for sale at the then carrying amount of RMB477,773,000. During the year ended 2011, these properties were completed and transferred to the fellow subsidiary, resulting in a gain on disposal of RMB43,333,000.

15. Investment properties

FAIR VALUE At 1 January 2010 Exchange realignments Additions Transfer to properties under development for sale Net increase in fair value recognised in profit or loss At 31 December 2010 and 1 January 2011 Exchange realignments Additions Disposals Net increase in fair value recognised in profit or loss Transfer upon completion Transfer to completed properties held for sale Transfer from property and equipment At 31 December 2011 and 1 January 2012 Exchange realignments Additions Disposals Net increase in fair value recognised in profit or loss Transfer from property and equipment Transfer to assets held for sale (Note 17(b)) At 31 December 2012	Investment properties under construction RMB’000 2,592,000 – 250,124 (477,773) 327,373 2,691,724 – 227,784 – 285,170 (3,204,678) – – – – – – – – – –	Completed investment properties RMB’000 915,764 (17,118) 543 – 87,339 986,528 (20,641) 8,410 (28,526) 756,188 3,204,678 (7,621) 18,425 4,917,441 3,398 38,173 (6,790) 395,918 4,830 (106,300) 5,246,670	Total RMB’000 3,507,764 (17,118) 250,667 (477,773) 414,712 3,678,252 (20,641) 236,194 (28,526) 1,041,358 – (7,621) 18,425 4,917,441 3,398 38,173 (6,790) 395,918 4,830 (106,300) 5,246,670

IIB– 84

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

The fair values of the Target Group’s investment properties at 31 December 2012 have been arrived at on the basis of valuations carried out by Jones Lang LaSalle Corporate Appraisal and Advisory Limited (formerly known as Jones Lang LaSalle Sallmanns Limited) and Savills Valuation and Professional Services(s) Pte Ltd. Jones Lang LaSalle Corporate Appraisal and Advisory Limited valued the properties situated in the PRC, Hong Kong and Macau with a total value of approximately RMB5,167,373,000. Savills Valuation and Professional Services(s) Pte Ltd. valued the properties in Singapore with total value of approximately RMB79,297,000.

The fair values of the Target Group’s investment properties at 31 December 2011 have been arrived at on the basis of valuations carried out by Jones Lang LaSalle Corporate Appraisal and Advisory Limited, Asset Appraisal Limited, Knight Frank Pte. Limited and 深圳市天健國眾聯資產評估土地房地產估價有限公司 (“Guo Zhong Lian”). Jones Lang LaSalle Corporate Appraisal and Advisory Limited mainly valued the properties situated in Hong Kong and Shanghai with total value of approximately RMB4,499,501,000 as at 31 December 2011. Asset Appraisal Limited valued the properties in Macau with total value of approximately RMB16,007,000 as at 31 December 2011. Knight Frank Pte. Limited valued the properties in Singapore with total value of approximately RMB61,784,000 as at 31 December 2011. Guo Zhong Lian mainly valued properties in the PRC except those in Shanghai with total value of approximately RMB340,149,000 as at 31 December 2011.

The fair values of the Target Group’s investment properties at 31 December 2010 have been arrived at on the basis of valuations carried out by Jones Lang LaSalle Sallmanns Limited, Asset Appraisal Limited, Knight Frank Pte. Limited. Jones Lang LaSalle Sallmanns Limited mainly valued the properties situated in Hong Kong and the PRC with total value of approximately RMB3,595,387,000 as at 31 December 2010. Asset Appraisal Limited valued the properties in Macau with total value of approximately RMB25,117,000. Knight Frank Pte. Limited valued the properties in Singapore with total value of approximately RMB57,748,000.

All of these valuers are independent qualified professional valuers not connected with the Target Group. The valuation of completed investment properties was primarily arrived at by reference to market evidence of transaction prices for similar properties in the relevant locations and the capitalisation of the discounted value of total future net rental income. For investment properties under construction, the valuation of land was arrived at by reference to its development potential through the deduction of development cost and developer’s profit from its estimate gross development value. Accommodation values of comparable sales transactions available in the relevant market were considered.

IIB– 85

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

All of the Target Group’s property interests held under operating leases to earn rentals or for capital appreciation purposes are measured using the fair value model and are classified and accounted for as investment properties.

Interest capitalised in investment properties under construction for each of the three years ended 31 December 2010, 2011 and 2012 was RMB7,269,000, RMB6,967,000 and RMBnil, respectively.

The Target Group is in the process of obtaining the title deeds from relevant government authorities for its investment properties situated outside Hong Kong with long leases with fair value as at 31 December 2010, 2011 and 2012 of RMB15,940,000, RMB9,845,000 and RMB10,106,000, respectively.

During the year ended 31 December 2010, the Target Group has transferred investment properties under construction of approximately RMB477,773,000 into properties under development for sale upon signing of the sale and purchase agreement with TPL as stated in note 14(b).

During the years ended 31 December 2011 and 31 December 2012, the Target Group has transferred properties classified as properties and equipment with carrying amount of approximately RMB18,425,000 and RMB4,830,000 respectively to investment properties when there was a change in use evidenced by the end of owner-occupation.

During the year ended 31 December 2011, the Target Group entered into a provisional sales and purchase agreement with an independent third party for the disposal of a property located in Hong Kong. Accordingly, such property was transferred from investment properties to completed properties held for sale with the fair value of RMB7,621,000.

As at 31 December 2012, the Target Group had investment properties with carrying amount of RMB484,121,000, which were leased to certain fellow subsidiaries. Accordingly, during the year ended 31 December 2012, the Target Group recognised rental income of approximately RMB16,843,000 earned from these leases. As at 31 December 2010 and 2011, no investment properties were leased to fellow subsidiaries.

IIB– 86

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

The fair value of investment properties shown above comprises:

Land in Hong Kong – long leases – medium-term leases Land outside Hong Kong – freehold – long leases – medium-term leases – short leases Interests in associates Cost of investment in associates Unlisted Share of post-acquisition profits and other comprehensive income, net of dividend received	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 263,780 253,871 299,698 46,861 45,278 58,924 2,775 10,686 14,720 540,351 702,553 638,922 2,824,083 3,904,580 4,229,128 402 473 5,278 3,678,252 4,917,441 5,246,670 As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 148,524 141,502 2 441,358 460,671 36 589,882 602,173 38	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 263,780 253,871 299,698 46,861 45,278 58,924 2,775 10,686 14,720 540,351 702,553 638,922 2,824,083 3,904,580 4,229,128 402 473 5,278 3,678,252 4,917,441 5,246,670 As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 148,524 141,502 2 441,358 460,671 36 589,882 602,173 38
		38

16. Interests in associates

IIB– 87

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

As at 31 December 2010, 2011 and 2012, the Target Group had interests in the following principal associates, all of which are unlisted corporate entities:

						Proportion of nominal value of	Proportion of nominal value of	Proportion of nominal value of
		Place/country of				issued	and fully paid share
		incorporation/	Particulars of issued and			capital/paid up registered		capital
	Form of	registration and	fully paid share capital/paid up registered capital			held by the Target Group
Name of associate	business structure	operation		As at 31 December		As	at 31 December
			2010	2011	2012	2010	2011	2012	Principal activity
Shangri-La Hotels	Incorporated	Hong Kong	US$32,000,000	US$32,000,000	US$32,000,000	20.00%	20.00%	20.00%	Hotel operation
(Shenzhen) Limited (ii)					(Note a)
深圳亞洲實業股份有限公司	Incorporated	The PRC	RMB158,000,000	RMB158,000,000	RMB158,000,000	30.51%	30.51%	30.51%	Travel, catering and
(i) & (ii)					(Note a)				trading
Shenzhen Futian Gas Turbine	Incorporated	The PRC	RMB68,060,000	–	–	30.00%	–	–	Power supply
Power Co. Ltd. (i) & (ii)				(Note 17)	(Note 17)
中保大廈有限公司(i) & (ii)	Incorporated	The PRC	RMB404,958,000	RMB404,958,000	RMB404,958,000	25.00%	25.00%	25.00%	Property holding
					(Note a)
Savills TPML	Incorporated	Hong Kong	HK$10,000	HK$10,000	HK$10,000	25.00%	25.00%	25.00%	Property
									management

(i) These are companies established in PRC with limited liability.
(ii) These are associates held through TPG subsidiaries.
(iii) Details of financial information of Savills TPML are set out in note 45.

The above table lists the associates of the Target Group which principally affected the results of the Relevant Periods or formed a substantial portion of the net assets of the Target Group. To give details of other associates would, in the opinion of the management, result in particulars of excessive length.

Note:

(a) The equity interests in Shangri-La Hotels, 深圳亞洲實業股份有限公司, 中保大廈有限公司 directly held by Tellon Development Limited (“Tellon”) are classified as assets held for sale, with details disclosed in Note 17(b).

IIB– 88

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APPENDIX IIB

The summarised financial information in respect of the Target Group’s associates is set out below:

Total assets Total liabilities Net assets Target Group’s share of net assets of associates	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (Note) 3,606,768 3,593,138 440 (908,867) (849,469) (289) 2,697,901 2,743,669 151 589,882 602,173 38

Note: The summarised financial information as of 31 December 2012 of the Target Group’s associates does not include those related to the associates held by Tellon, which are accounted for as assets held for sale in Note 17.

Revenue Profit for the year Target Group’s share of results of associates for the year Other comprehensive expense for the year Target Group’s share of other comprehensive expenses of associates for the year	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 330,802 371,028 338,016 30,747 85,472 253,067 7,547 21,829 63,570 (2,280) (1,044) (35,745) (569) (261) (9,193)

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APPENDIX IIB

17. Assets classified as held for sale

Equity interest in an associate (Note a) Assets of a disposal group (Note b) Subtotal Liabilities directly associated with assets held for sale (Note b)	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 9,472 – – – – 896,914 9,472 – 896,914 – – 62,452	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 9,472 – – – – 896,914 9,472 – 896,914 – – 62,452
		896,914

		62,452

Notes:

(a) The interest in an associate as at 31 December 2010 represents the equity investment in an 30% associate, Shenzhen Futian Gas, with a carrying amount of RMB9,472,000 as at 31 December 2010. On 8 December 2010, the management of the Target Group resolved to dispose of this associate. As at 31 December 2010, the disposal was still subject to the approval of relevant authority of the PRC government and was expected to be completed within twelve months from the end of the reporting period. The interest in an associate was therefore classified as asset held for sale and presented separately in the combined statement of financial position. On 10 May 2011, the Target Group had completed disposal of Shenzhen Futian Gas to an independent third party for a cash consideration of RMB332,000,000, resulting in a gain on disposal of RMB322,528,000. The share of results of associate attributed to Shenzhen Futian Gas amounted to a share of loss of RMB1,244,000 for the year ended 31 December 2010.
(b) On 19 September 2012, TPIH followed the restructuring instruction from TPG and committed to dispose of its wholly owned subsidiary, Tellon, including its subsidiary, associates and availablefor-sale investments under segment of other businesses (“Tellon subgroup”) to TPG(HK). On 28 December 2012, a sales and purchase agreement was entered into between TPG(HK) and TPIH regarding the disposal of its entire interest in Tellon, being 100,000,000 ordinary shares of Tellon, for a consideration of HK$3,391,402,000 (equivalent to approximately RMB2,749,918,000). The Tellon subgroup had a net asset value of approximately RMB834,462,000 as at 31 December 2012 and generated total income and net profit of approximately RMB102,877,000 and RMB90,815,000 during the year ended 31 December 2012. Subsequent to 31 December 2012, all required legal procedures were fulfilled by end of March 2013 as disclosed in Note 46(a), and thereupon the disposal was completed.

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FINANCIAL INFORMATION OF THE TARGET GROUP

(c) Details of major consolidated assets and liabilities at 31 December 2012 attributable to the Tellon subgroup are as follows:

Property and equipment Investment properties Investments in associates Investments in securities Amounts due from associates Other assets Cash and cash equivalents Total assets Amounts due to fellow subsidiaries Amounts due to TPG Amounts due to TPG(HK) Other creditors and accrued charges Deferred tax liabilities Total liabilities Net assets	As at 31 December 2012 RMB’000 1,573 106,300 656,362 102,168 2,507 1,845 26,159
	896,914
	1,900 156 20,736 18,727 20,933
	62,452
	834,462

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APPENDIX IIB

18. Investments in securities

Held-to-maturity securities Debt securities Listed – in Hong Kong – outside Hong Kong Unlisted (Note b) Sub-total of held-to-maturity securities Available-for-sale securities Debt securities, at fair value Listed – outside Hong Kong Unlisted (Note b) Equity securities, at fair value Listed – in Hong Kong (Note a) – outside Hong Kong Unlisted Equity securities, at cost Unlisted Investment funds, at fair value Unlisted (Note b) Sub-total of available-for-sale securities	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 2,742 2,600 6,725 7,880 7,400 3,486 170,210 227,093 260,300 180,832 237,093 270,511 7,963 4,857 5,144 244,181 258,018 233,238 252,144 262,875 238,382 1,284,450 269,458 233,945 60,211 49,258 40,233 7,073 2,782 5,575 1,351,734 321,498 279,753 99,666 97,128 41,274 12,709 8,443 56,149 1,716,253 689,944 615,558	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 2,742 2,600 6,725 7,880 7,400 3,486 170,210 227,093 260,300 180,832 237,093 270,511 7,963 4,857 5,144 244,181 258,018 233,238 252,144 262,875 238,382 1,284,450 269,458 233,945 60,211 49,258 40,233 7,073 2,782 5,575 1,351,734 321,498 279,753 99,666 97,128 41,274 12,709 8,443 56,149 1,716,253 689,944 615,558
		270,511
		5,144 233,238
		238,382
		233,945 40,233 5,575
		279,753
		41,274
		56,149
		615,558

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APPENDIX IIB

Notes:

(a) As at 31 December 2010, the Target Group held 44,027,000 CTIH shares with carrying amount of approximately RMB512,548,000. These shares were subsequently disposed in 2011 as disclosed in Note 7(b).
(b) The fair values of the unlisted securities are estimated based on recent transaction prices provided by financial institutions.

Held-for-trading investments Debt securities Listed – outside Hong Kong Unlisted (Note) Equity securities Listed – in Hong Kong – outside Hong Kong Investment funds Listed – outside Hong Kong Unlisted (Note) Sub-total of held-for-trading investments Securities designated at fair value through profit or loss Debt securities Listed – in Hong Kong – outside Hong Kong Unlisted (Note) Sub-total of securities designated at fair value through profit or loss Total	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 210,148 210,237 235,372 80 – 102,417 210,228 210,237 337,789 85,197 69,332 61,758 39,179 35,378 42,420 124,376 104,710 104,178 72,938 67,933 21,816 – 24,920 42,408 72,938 92,853 64,224 407,542 407,800 506,191 19,370 19,288 33,898 111,612 119,638 164,964 14,779 22,208 – 145,761 161,134 198,862 2,450,388 1,495,971 1,591,122	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 210,148 210,237 235,372 80 – 102,417 210,228 210,237 337,789 85,197 69,332 61,758 39,179 35,378 42,420 124,376 104,710 104,178 72,938 67,933 21,816 – 24,920 42,408 72,938 92,853 64,224 407,542 407,800 506,191 19,370 19,288 33,898 111,612 119,638 164,964 14,779 22,208 – 145,761 161,134 198,862 2,450,388 1,495,971 1,591,122
		337,789
		61,758 42,420
		104,178
		21,816 42,408
		64,224
		506,191
		33,898 164,964 –
		198,862
		1,591,122

Note: The fair values of the unlisted securities are estimated based on recent transaction prices provided by financial institutions.

IIB– 93

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APPENDIX IIB

The fair value of the held-to-maturity debt securities is RMB182,946,000, RMB240,212,000 and RMB276,630,000 as at 31 December 2010, 2011 and 2012, respectively. None of the held-to-maturity securities are past due or impaired.

The maturity dates of the debt securities which were outstanding as at 31 December 2010, 2011 and 2012 range from 2013 to 2020, 2013 to 2026 and 2013 to 2026, respectively and their interest rates range from 3% to 6%, 3% to 8% and 3% to 8% per annum, respectively.

19. Insurance debtors

Amounts due from insurance customers, reinsurers and intermediaries Less: Allowance for impaired debts Deposits retained by cedents	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 103,752 95,281 132,839 (2,530) (851) (885) 101,222 94,430 131,954 100,192 55,381 51,499 201,414 149,811 183,453	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 103,752 95,281 132,839 (2,530) (851) (885) 101,222 94,430 131,954 100,192 55,381 51,499 201,414 149,811 183,453
		131,954 51,499
		183,453

All of the insurance debtors are interest-free. Included in insurance debtors is an amount of RMB195,934,000, RMB144,174,000 and RMB176,550,000 as at 31 December 2010, 2011 and 2012 respectively, which is to expected to be settled within one year.

As at 31 December 2010, 2011 and 2012, amounts due from insurance customers, reinsurers and intermediaries include amounts due from CTIH and its subsidiaries of RMB4,674,000, RMB5,738,000 and RMB6,883,000, respectively.

The following is an ageing analysis of the amounts due from insurance customers reinsurers and intermediaries that are not individually considered to be impaired:

Not yet due Within 3 months More than 3 months but less than 12 months More than 12 months	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 34,987 54,649 48,298 58,646 31,687 73,736 7,322 7,640 9,331 267 454 589 101,222 94,430 131,954	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 34,987 54,649 48,298 58,646 31,687 73,736 7,322 7,640 9,331 267 454 589 101,222 94,430 131,954
		131,954

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APPENDIX IIB

Amounts due from insurance customers that were neither past due nor impaired relate to a wide range of customers, reinsurers and intermediaries with no recent history of default.

Amounts due from insurance customers that were past due but not impaired relate to a number of independent policyholders and reinsurers that have a good track record with the Target Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been any significant change in credit quality and the balances are still considered to be fully recoverable. The Target Group does not hold any collateral over these balances.

The amount of impaired debts are RMB2,530,000 and RMB851,000 and RMB885,000 as at 31 December 2010, 2011 and 2012, respectively. Management has taken various actions to recover the debts, but these debts have not been recovered and hence impairment allowance is recognised.

Movement in the allowance for impaired debts:

At beginning of the year Impairment loss recognised (reversed) Uncollectible amounts written off Exchange difference At end of the year	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 2,651 2,530 851 510 (2,303) (162) (31) (10) – (600) 634 196 2,530 851 885

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APPENDIX IIB

20. Reinsurers’ share of insurance contract provision

The reinsurers’ share of insurance contract provision represents the reinsurers’ share of unearned premium provision and outstanding claims provision arising from the property and casualty insurance businesses.

Unearned premium provision (Note 27) Outstanding claims provision (Note 28)	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 95,922 98,224 118,492 274,317 326,580 292,112 370,239 424,804 410,604	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 95,922 98,224 118,492 274,317 326,580 292,112 370,239 424,804 410,604
		410,604

21. Other debtors

Interest receivable Amounts due from securities brokerage customers and clearing house Loan receivables Other debtors, deposits and prepayments Less: Allowance for impaired debts	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 11,028 11,203 14,144 135,476 69,178 54,933 123,562 117,534 119,340 62,886 69,411 47,865 (129,657) (124,321) (123,135) 203,295 143,005 113,147	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 11,028 11,203 14,144 135,476 69,178 54,933 123,562 117,534 119,340 62,886 69,411 47,865 (129,657) (124,321) (123,135) 203,295 143,005 113,147
		113,147

Amounts due from securities brokerage customers and clearing house are repayable on demand except those with credit terms not yet expired. The credit terms for amounts due from securities brokerage customers and clearing houses are normally two days after trade date. The loan receivables are due from third parties, bear interest at variable rates mainly HIBOR and are repayable according to the terms of the relevant loan agreement, with no collateral held.

IIB– 96

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APPENDIX IIB

Movement in allowance for impaired debts

At beginning of the year Amounts written back during the year Impairment loss recognised (reversed) Exchange realignment At end of the year	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 132,057 129,657 124,321 – – 35,903 2,082 (2,082) (37,509) (4,482) (3,254) 420 129,657 124,321 123,135	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 132,057 129,657 124,321 – – 35,903 2,082 (2,082) (37,509) (4,482) (3,254) 420 129,657 124,321 123,135
		123,135

The amounts of impaired other debtors are RMB129,657,000, RMB124,321,000 and RMB123,135,000 as at 31 December 2010, 2011 and 2012, respectively. The Target Group has taken various actions to recover the debts, but these debts have not yet been recovered and hence impairment allowance is recognised.

22. Amounts due from related companies

Amounts due from TPG (Note i) Amounts due from TPG (HK) (Note ii) Amounts due from associates (Note iii) Amounts due from fellow subsidiaries (Note iv)	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 61,617 4,998 – 622,850 1,910,144 2,419,369 7,056 6,722 – 1,658,880 33,214 36,628 2,350,403 1,955,078 2,455,997	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 61,617 4,998 – 622,850 1,910,144 2,419,369 7,056 6,722 – 1,658,880 33,214 36,628 2,350,403 1,955,078 2,455,997
		2,455,997

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APPENDIX IIB

Notes:

(i) The amounts due from TPG are unsecured, interest-free and repayable on demand.
(ii) The amounts due from TPG(HK) are unsecured and with the following terms:

Current portion (Note a) – HIBOR + 0.73% per annum – Interest-free Non-current portion (Note b) – HIBOR + 0.45% per annum – HIBOR + 0.53% per annum – HIBOR + 0.80% per annum – HIBOR + 1.67% per annum – HIBOR + 1.71% per annum – HIBOR + 2.10% per annum	2010 RMB’000 216,987 5,926 222,913 255,279 34,037 110,621 – – – 399,937 622,850	As at 31 December 2011 RMB’000 – 7,882 7,882 – – 210,782 243,210 1,448,270 – 1,902,262 1,910,144	2012 RMB’000 – 30,245
			30,245
			– – 210,821 243,255 1,448,538 486,510
			2,389,124
			2,419,369

Notes:

(a) The amounts are expected to be settled within one year.
(b) The amounts are not expected to be settled within one year.
(iii) The amounts due from associates are unsecured, interest-free and repayable on demand.
(iv) The amounts due from fellow subsidiaries as at 31 December 2010 are unsecured and repayable on demand. Included in the amounts due from fellow subsidiaries as at 31 December 2010, approximately RMB131,894,000 bear interest at HIBOR + 0.73% per annum, while the remaining balances, including an amount of approximately RMB924,001,000 being consideration receivable on partial disposal of a subsidiary by Target Group to a fellow subsidiary, are interest-free. The amounts due from fellow subsidiaries as at 31 December 2011 and 2012 are unsecured, interest-free and repayable on demand.

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APPENDIX IIB

23. Income tax in the combined statements of financial position

(a) Current taxation in the combined statements of financial position represents:

Provision for Hong Kong Profits Tax for the year Provisional Hong Kong Profits Tax paid Taxation outside Hong Kong (including PRC, UK and Singapore and Macau) Tax recoverable recognised in the combined statement of financial position Tax payable recognised in the combined statement of financial position	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,778 1,966 973 (3,607) (1,702) (747) (1,829) 264 226 26,216 56,515 23,987 24,387 56,779 24,213 1,829 – – (26,216) (56,779) (24,213) (24,387) (56,779) (24,213)

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APPENDIX IIB

(b) Deferred tax assets and liabilities recognised:

The components of deferred tax assets (liabilities) (prior to the offsetting of balances within the same taxation jurisdiction) recognised in the combined statements of financial position and the movements during the Relevant Periods are as follows:

	Deferred tax arising from	Deferred tax arising from	Deferred tax arising from
Difference in tax depreciation allowances and related depreciation Revaluation of investment properties RMB’000 RMB’000 (note) 2,728 (365,153) (384) 3,169 6,028 (107,875) – – 8,372 (469,859) (438) 3,598 452 (203,856) – (1,531) 8,386 (671,648) 284 875 (8,240) (84,848) – (509) – 20,933 430 (735,197)	Fair value adjustment of available- for-sale investments RMB’000 (2,658) 108 – 1,446 (1,104) (180) – 2,887 1,603 73 – (3,540) – (1,864)	Unutilised tax losses RMB’000 11,088 (451) 3,285 – 13,922 (604) (2,398) – 10,920 (510) 851 – – 11,261	Provision for outstanding claims RMB’000 180 2 – – 182 (10) – – 172 (9) – – – 163	Others RMB’000 2,152 99 (207) – 2,044 (81) (5,898) – (3,935) 833 5,730 – – 2,628	Total RMB’000 (351,663) 2,543 (98,769) 1,446
					(446,443) 2,285 (211,700) 1,356
					(654,502) 1,546 (86,507) (4,049) 20,933
					(722,579)

Note: Deferred tax liabilities mainly arise from the fair value gain from investment properties situated in PRC, which are held within a business model whose business objective is to consume substantially all of the economic benefits embodied in investment property over time, other than through sale. Therefore, the deferred tax liability is recognised based on their respective enterprise income tax rate.

For those properties situated in Hong Kong, Macau and Singapore, the presumption to be recovered through sale is not rebutted as the properties are not held under a business model whose business objective is to consume substantially all of the economic benefits embodied in investment property over time, other than through sale. The related deferred tax liability is therefore recognised based on the tax consequence through sale in respective jurisdictions.

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APPENDIX IIB

Net deferred tax assets recognised in the combined statements of financial position Net deferred tax liabilities recognised in the combined statements of financial position	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 13,213 16,121 4,407 (459,656) (670,623) (726,986) (446,443) (654,502) (722,579)

(c) Deferred tax assets not recognised

At 31 December 2010, 2011 and 2012, the Target Group had unutilised tax losses of RMB887,694,000, RMB873,699,000 and RMB899,606,000 respectively, subject to the agreement by tax authorities, that are available for offset against the future profits. As at 31 December 2010, 2011 and 2012, the Target Group had not recognised deferred tax assets in respect of tax losses of RMB803,272,000 and RMB807,513,000 and RMB831,358,000, respectively due to the unpredictability of the future profit streams. As at 31 December 2010, the tax losses do not expire. As at 31 December 2011, the tax losses of RMB1,837,000 can be carried forward to 2016 to offset future taxable profits, while the remaining tax losses do not expire. As at 31 December 2012, the tax losses of RMB1,837,000 can be carried forward to 2016 and RMB118,000 to 2017 to offset future taxable profits, while the remaining tax losses do not expire.

(d) Taxable temporary difference not recognised

The Target Group determined that the undistributed profit associated with investments incorporated outside Hong Kong, i.e. TPG subsidiaries and TPG Associate will not be distributed in the foreseeable future and therefore, no deferred tax liability, with respect to withholding tax on distribution, is recognised on unrealised gains on investments.

IIB– 101

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APPENDIX IIB

24. Statutory deposits

Certain subsidiaries of the Target Group have placed bank deposits with various regulatory bodies for operational purposes.

25. Pledged bank deposits

The Target Group has pledged bank deposits for the following purposes: To secure banking facilities As a cash collateral in respect of performance bonds issued on behalf of insurance customers Cash and cash equivalents Deposits with banks and other financial institutions with original maturity less than three months Money market funds Cash at bank and in hand Cash and cash equivalents Cash and bank balances included in assets classified as held for sale (Note 17(b))	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 13,615 12,971 12,974 44,987 42,455 45,566 58,602 55,426 58,540 As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 713,627 814,663 637,656 – 1,069 1,224 463,849 281,258 285,849 1,177,476 1,096,990 924,729 – – 26,159 1,177,476 1,096,990 950,888	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 13,615 12,971 12,974 44,987 42,455 45,566 58,602 55,426 58,540 As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 713,627 814,663 637,656 – 1,069 1,224 463,849 281,258 285,849 1,177,476 1,096,990 924,729 – – 26,159 1,177,476 1,096,990 950,888
		924,729 26,159
		950,888

26. Cash and cash equivalents

IIB– 102

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APPENDIX IIB

27. Unearned premium provisions

at 31 December	at 31 December	at 31 December	2012
Reinsures’ Share RMB’000 (95,922) (58,680) (37,242) (95,922)	Reinsures’ Share RMB’000 (98,224) (63,730) (34,494) (98,224)	Reinsures’ Share RMB’000 (118,492) (76,153) (42,339) (118,492)	Net RMB’000 371,262

			133,439 237,823

			371,262

Analysis of movements in unearned premium provision:

At beginning of the year Exchange adjustment Premiums written during the year Premiums earned during the year At end of the year	As Gross RMB’000 398,087 6,311 770,431 (783,918) 390,911	at 31 December	2010 Net RMB’000 296,413 5,512 508,276 (515,212) 294,989	As Gross RMB’000 390,911 (23,413) 848,364 (782,152) 433,710	at 31 December	2011 Net RMB’000 294,989 (18,077) 583,997 (525,423) 335,486	As Gross RMB’000 433,710 13,015 935,972 (892,943) 489,754	at 31 December	2012
		Reinsures’ Share RMB’000 (101,674) (799) (262,155) 268,706 (95,922)			Reinsures’ Share RMB’000 (95,922) 5,336 (264,367) 256,729 (98,224)			Reinsures’ Share RMB’000 (98,224) (101) (292,505) 272,338 (118,492)	Net RMB’000 335,486 12,914 643,467 (620,605) 371,262

28. Outstanding claims provisions

at 31 December	at 31 December	at 31 December	2012
Reinsures’ Share RMB’000 (274,317) (137,740) (136,577) (274,317)	Reinsures’ Share RMB’000 (326,580) (138,665) (187,915) (326,580)	Reinsures’ Share RMB’000 (292,112) (148,143) (143,969) (292,112)	Net RMB’000 754,924

			187,078 567,846
			754,924

Analysis of movements in outstanding claims provision:

At beginning of the year Exchange adjustment Claims paid Claims incurred At end of the year	As Gross RMB’000 800,952 (5,667) (285,088) 472,282 982,479	at 31 December	2010 Net RMB’000 600,575 (2,451) (204,797) 314,835 708,162	As Gross RMB’000 982,479 (53,921) (311,146) 393,011 1,010,423	at 31 December	2011 Net RMB’000 708,162 (35,602) (237,502) 248,785 683,843	As Gross RMB’000 1,010,423 29,065 (357,412) 364,960 1,047,036	at 31 December	2012
		Reinsures’ Share RMB’000 (200,377) 3,216 80,291 (157,447) (274,317)			Reinsures’ Share RMB’000 (274,317) 18,319 73,644 (144,226) (326,580)			Reinsures’ Share RMB’000 (326,580) (6,443) 97,432 (56,521) (292,112)	Net RMB’000 683,843 22,622 (259,980) 308,439
									754,924

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APPENDIX IIB

29. Bank loans and other borrowings

Bank loans – unsecured Unsecured loans	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 2,738,429 3,015,781 3,503,119 8,220 7,831 7,833 2,746,649 3,023,612 3,510,952	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 2,738,429 3,015,781 3,503,119 8,220 7,831 7,833 2,746,649 3,023,612 3,510,952
		3,510,952

The loans are repayable as follows:

Within 1 year After 1 year but within 5 years	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 789,547 7,831 492,482 1,957,102 3,015,781 3,018,470 2,746,649 3,023,612 3,510,952	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 789,547 7,831 492,482 1,957,102 3,015,781 3,018,470 2,746,649 3,023,612 3,510,952
		3,510,952

The amounts presented in the above table are based on scheduled repayment dates set out in the loan agreements. As at 31 December 2010, included in the carrying amounts repayable within 1 year is an aggregate amount of approximately RMB348,881,000, which contain repayment on demand clause in the loan agreement.

The unsecured loans are interest-free and repayable on demand. The unsecured bank loans are fully guaranteed by TPG(HK) as at 31 December 2010, 2011 and 2012 and have the following terms:

Effective interest rate per annum – 5.18% per annum – HIBOR + 1.67% to 2.1% per annum 2.04% to 2.68% – HIBOR + 0.8% to 1.3% per annum 1.48% to 2.16% – HIBOR + 0.45% to 1.2% per annum 0.69% to 1.66%	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 58,000 – – – – 721,507 – 3,015,781 2,781,612 2,680,429 – – 2,738,429 3,015,781 3,503,119	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 58,000 – – – – 721,507 – 3,015,781 2,781,612 2,680,429 – – 2,738,429 3,015,781 3,503,119
		3,503,119

IIB– 104

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APPENDIX IIB

30. Amounts due to related companies

Amounts due to TPG (i) Amounts due to TPG(HK) (ii) Amounts due to fellow subsidiaries (iii) Amounts due to associates	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 147,751 5,157 2,123 1,416,510 419,337 360,784 978,328 52,753 1,808 – – 246 2,542,589 477,247 364,961	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 147,751 5,157 2,123 1,416,510 419,337 360,784 978,328 52,753 1,808 – – 246 2,542,589 477,247 364,961
		364,961

(i) Amounts due to TPG are unsecured, interest-free and repayable on demand.
(ii) The amounts due to TPG(HK) are unsecured and with the following terms:

Current portion (Note a) – Interest-free – 4% per annum Non-current portion (Note b) – HIBOR + 0.8% per annum – 4% per annum	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 902,193 273,574 247,779 – 145,763 113,005 902,193 419,337 360,784 373,315 – – 141,002 – – 514,317 – – 1,416,510 419,337 360,784	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 902,193 273,574 247,779 – 145,763 113,005 902,193 419,337 360,784 373,315 – – 141,002 – – 514,317 – – 1,416,510 419,337 360,784
		360,784
		– –
		–
		360,784

Notes:

(a) The amounts are expected to be settled within one year.
(b) The amounts are not expected to be settled within one year.

IIB – 105

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APPENDIX IIB

(iii) Amounts due to fellow subsidiaries are unsecured, repayable on demand and interest free as at 31 December 2011 and 2012. Included in the balance as at 31 December 2010 is an amount of approximately RMB341,322,000 which was unsecured, bore interest at rate of HIBOR + 0.52% per annum and was repaid during 2011. The remaining balances as at 31 December 2010 are unsecured, repayable on demand and interest free except for an amount of approximately RMB603,173,000 which was related to the deposit received in advance for the sale of certain properties to a fellow subsidiary as disclosed in note 14(b).

31. Insurance creditors

Amounts due to insurance customers, reinsurers and insurance intermediaries Deposits retained from reinsurers/ retrocessionaries Commissions payable Prepaid premiums received Collateral deposits held	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 146,569 133,070 140,005 2,867 2,535 2,658 9,291 17,382 19,625 14,083 12,887 9,806 44,987 42,455 45,566 217,797 208,329 217,660	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 146,569 133,070 140,005 2,867 2,535 2,658 9,291 17,382 19,625 14,083 12,887 9,806 44,987 42,455 45,566 217,797 208,329 217,660
		217,660

Included in insurance creditors is an amount of RMB162,646,000, RMB137,792,000 and RMB140,987,000 as at 31 December 2010, 2011 and 2012, respectively which is expected to be settled within one year.

As at 31 December 2010, 2011 and 2012, amounts due to insurance customers, reinsurers and insurance intermediaries include amounts due to CTIH and its subsidiaries of RMB12,812,000, RMB13,420,000 and RMB13,938,000, respectively.

IIB – 106

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

32. Other creditors and accrued charges

Amounts due to securities brokerage customers and clearing house Commissions payable Capital expenditure payable Interest payable Salary and staff benefits payable Tax payable relating to partial disposal of a subsidiary Accrued charges and others Deposits received	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 69,150 27,486 31,285 2,120 990 479 26,243 190,158 161,838 11,822 22,314 22,537 47,643 51,521 62,793 54,180 – – 113,096 125,464 135,626 51,630 52,106 62,485 375,884 470,039 477,043	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 69,150 27,486 31,285 2,120 990 479 26,243 190,158 161,838 11,822 22,314 22,537 47,643 51,521 62,793 54,180 – – 113,096 125,464 135,626 51,630 52,106 62,485 375,884 470,039 477,043
		477,043

All of the other creditors and accrued charges are expected to be settled within one year.

33. Derivative financial instruments – assets/liabilities

Assets: Forward foreign exchange contracts (Note a) Liabilities: Interest rate swaps (Note b) Forward foreign exchange contracts (Note a)	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – – 20 60,242 29,128 5,267 – – 27 60,242 29,128 5,294	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – – 20 60,242 29,128 5,267 – – 27 60,242 29,128 5,294

		5,267 27
		5,294

IIB – 107

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APPENDIX IIB

Notes:

(a) The major terms of forward foreign exchange contracts as at 31 December 2012 are as follows:

Assets :

			Contractual
Aggregate		Forward	exchange rate
notional amount	Maturity date	amount contracts	SGD/USD
USD1,000,000	25 February 2013	Sell USD less than 3 months	1.226
USD7,100,000	18 March 2013	Sell USD less than 3 months	8.670

(b) The Target Group uses interest rate swaps to manage its exposure to volatility in interest payments relating to certain floating-rate long term borrowings.

The amount represents fair value at the end of the Relevant Periods of interest rate swap contracts, which are not qualified for hedging accounting.

The major terms of interest rate swaps as at 31 December 2010 are as follows:

Aggregate notional
amount	Maturity dates	Swaps
HK$1,300,000,000	From 19 September 2011	Fixed rates ranging from
	to 21 August 2013	2.71% to 4.29% for HIBOR
The major terms of interest	rate swaps as at 31 December 2011 are as follows:
Aggregate notional
amount	Maturity dates	Swaps
HK$1,200,000,000	From 29 June 2012	Fixed rates ranging from
	to 21 August 2013	2.95% to 4.29% for HIBOR
The major terms of interest	rate swaps as at 31 December 2012 are as follows:
Aggregate notional
amount	Maturity dates	Swaps
HK$350,000,000	From 24 June 2013	Fixed rates ranging from
	to 21 August 2013	3.68% to 4.29% for HIBOR

The fair values of interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates.

IIB – 108

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APPENDIX IIB

34. Share capital

For the purpose of the preparation of the combined statement of financial position, the balances of the share capital at 31 December 2010, 2011 and 2012, respectively represent the aggregate amount of share capital or paid up registered capital as follows:

Ming Lee Investment Limited (note a) Action Profit Development Limited (note b) PT China Taiping Insurance Indonesia (note c) Shenzhen China Insurance Taiping Investment Company Limited (note d) Taiping Financial Services Centre (Shanghai) Company Limited (note e) Taiping Financial Audit Service (Shenzhen) Company Limited (note f) China Taiping Insurance (Singapore) Pte. Ltd. China Taiping Insurance Service (Japan) Co., Ltd. China Taiping Insurance (Macau) Company Limited China Taiping Insurance (UK) Company Limited CIG Trustees Limited Taiping Financial Holdings Company Limited (note g) Taiping Investment Holdings Company Limited Dragon Jade Industrial District Development (Shenzhen) Co., Ltd. Other TPG subsidiaries (note h) Attributable to owners of the Target Group Attributable to non-controlling interests	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 9 9 9 9 9 9 25,200 25,200 25,200 5,000 5,000 5,000 15,000 15,000 15,000 2,000 5,500 10,500 237,650 237,650 237,650 2,270 2,270 2,270 68,488 68,488 68,488 148,197 148,197 148,197 2,646 2,646 2,646 26,457 26,457 193,213 189,606 189,606 189,606 42,800 42,800 42,800 1 1 1 765,333 768,833 940,589 753,993 757,493 929,249 11,340 11,340 11,340 765,333 768,833 940,589	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 9 9 9 9 9 9 25,200 25,200 25,200 5,000 5,000 5,000 15,000 15,000 15,000 2,000 5,500 10,500 237,650 237,650 237,650 2,270 2,270 2,270 68,488 68,488 68,488 148,197 148,197 148,197 2,646 2,646 2,646 26,457 26,457 193,213 189,606 189,606 189,606 42,800 42,800 42,800 1 1 1 765,333 768,833 940,589 753,993 757,493 929,249 11,340 11,340 11,340 765,333 768,833 940,589
		940,589

		929,249 11,340
		940,589

IIB – 109

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Notes:

(a) The balance of RMB9,000 as at the end of Relevant Period represents the issued and fully paid share capital of 10,000 ordinary shares of HK$1 each. As at 31 December 2010, 2011 and 2012, the company had authorised share capital of 10,000 ordinary shares of HK$1 each.
(b) The balance of RMB9,000 as at the end of Relevant Period represents the issued and fully paid share capital of 10,000 ordinary shares of HK$1 each. As at 31 December 2010, 2011 and 2012, the company had authorised share capital of 10,000 ordinary shares of HK$1 each.
(c) The balance of RMB25,200,000 as at the end of Relevant Period represents the issued and fully paid share capital of 40,000,000 ordinary shares of Rp1,000 each. These shares rank pari passu in all respects with other shares in issue. As at 31 December 2010, 2011 and 2012, the company had authorised share capital of 40,000,000 ordinary shares of Rp1,000 each. TPG held 55% of total shares issued by the company at the end of Relevant Period.
(d) The balance of RMB5,000,000 as at the end of Relevant Period represents the paid up registered capital of the company.
(e) The company was established in the PRC on 12 January 2009. The balance of RMB15,000,000 as at 31 December 2010, 2011 and 2012 represents the paid up registered capital of the company.
(f) The company was established in the PRC on 2 December 2009. The balance of RMB2,000,000 as at 31 December 2009 represents the paid up registered capital of the company. During the years 2011 and 2012, TPG made an additional contribution of RMB3,500,000 and RMB5,000,000, respectively. As at 31 December 2011 and 2012, the paid up registered capital of the company increased to RMB5,500,000 and RMB10,500,000 respectively.
(g) On 29 June 2012, the company capitalised its retained profit and increased its share capital issued by RMB166,756,000 to a total of RMB193,213,000.
(h) Other TPG subsidiaries include Pacific Asia Group Limited with issued and fully paid share capital of 1 ordinary share of HK$1 each, Walkman Limited with issued and fully paid share capital of 1 ordinary share of HK$1 each, Mano Limited with issued and fully paid share capital of 1 ordinary share of HK$1 each, Prospects Inc. Limited with issued and fully paid share capital of 1 ordinary share of HK$1 each, Sarley International Limited with issued and fully paid share capital of 1 ordinary shares of US$1 each and Toplap Investments Limited with issued and fully paid share capital of 1,000 ordinary shares of HK$1 each.

IIB – 110

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

35. Reserves and non-controlling interests

At 1 January 2010 Profit for the year Other comprehensive (expense) income for the year: Exchange differences on translation of the financial statements of subsidiaries Share of other comprehensive income of associates Available-for-sale securities: – net changes in fair value – deferred tax recognised – transferred to profit or loss on disposal Total comprehensive (loss) income Distribution to TPG(HK) Partial disposal of a subsidiary At 31 December 2010 At 1 January 2011 Profit for the year Other comprehensive income (expense) for the year: Exchange differences on translation of the financial statements of subsidiaries Revaluation gain arising from reclassification of own-use properties into investment properties Share of other comprehensive income of associates Available-for-sale securities: – net changes in fair value – deferred tax recognised – transferred to profit or loss on disposal or impairment Total comprehensive income Deemed contribution upon transfer of debts from TPG(HK) (Note 43(c)) Distribution to TPG(HK) At 31 December 2011	Share premium RMB’000 7,614 – – – – – – – – – – 7,614 7,614 – – – – – – – – – – – 7,614	Capital reserve RMB’000 note (a) 2 – – – – – – – – – 49,128 49,130 49,130 – – – – – – – – – – – 49,130	Exchange reserve RMB’000 note (b) 164,578 – 11,153 – – – – – 11,153 – – 175,731 175,731 – (78,242) – – – – – – (78,242) – – 97,489	Fair value reserve RMB’000 note (c) 809,837 – – (569) (99,620) 54,484 1,446 (155,550) (100,189) – – 709,648 709,648 – – – (261) (448,467) (209,340) 2,887 (242,014) (448,728) – – 260,920	Other reserve RMB’000 note (d) – – – – – – – – – – – – – – – – – – – – – – 383,822 – 383,822	Revaluation reserve RMB’000 34,449 – – – – – – – – – – 34,449 34,449 – – 7,478 – – – – – 7,478 – – 41,927	Retained profits RMB’000 1,277,825 521,586 – – – – – – 521,586 (182,429) – 1,616,982 1,616,982 1,246,025 – – – – – – – 1,246,025 – (719,440) 2,143,567	Total RMB’000 2,294,305 521,586 11,153 (569) (99,620) 54,484 1,446 (155,550) 432,550 (182,429) 49,128 2,593,554 2,593,554 1,246,025 (78,242) 7,478 (261) (448,467) (209,340) 2,887 (242,014) 726,533 383,822 (719,440) 2,984,469	Non- controlling interests RMB’000 21,401 620 221 – 2,360 2,360 – – 3,201 – 820,247 844,849 844,849 244,462 (1,050) – – (2,356) (2,356) – – 241,056 – – 1,085,905	Total RMB’000 2,315,706
										522,206 11,374 (569) (97,260)
										56,844 1,446 (155,550)
										435,751 (182,429) 869,375
										3,438,403

										3,438,403
										1,490,487 (79,292) 7,478 (261) (450,823)
										(211,696) 2,887 (242,014)
										967,589
										383,822 (719,440)
										4,070,374

IIB – 111

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

At 1 January 2012 Profit for the year Other comprehensive income (expense) for the year: Exchange differences on translation of the financial statements of subsidiaries Revaluation gain arising from reclassification of own-use properties into investment properties Share of other comprehensive income of associates Available-for-sale securities: – net changes in fair value – deferred tax recognised – transferred to profit or loss on disposal or impairment Total comprehensive income Reclassified to assets held for sale Contribution from TPG Distribution to TPGHK Capitalisation of retained profits (Note 34(g)) At 31 December 2012	Share premium RMB’000 7,614 – – – – – – – – – – – – – 7,614	Capital reserve RMB’000 note (a) 49,130 – – – – – – – – – – 10,890 – – 60,020	Exchange reserve RMB’000 note (b) 97,489 – 35,942 – – – – – – 35,942 – – – – 133,431	Fair value reserve RMB’000 note (c) 260,920 – – – (9,193) 24,240 26,660 (3,540) 1,120 15,047 (9,687) – – – 266,280	Other reserve RMB’000 note (d) 383,822 – – – – – – – – – – – – – 383,822	Revaluation reserve RMB’000 note (f) 41,927 – – 3,734 – – – – – 3,734 – – – – 45,661	Retained profits RMB’000 2,143,567 586,815 – – – – – – – 586,815 – – (150) (166,756) 2,563,476	Total RMB’000 2,984,469 586,815 35,942 3,734 (9,193) 24,240 26,660 (3,540) 1,120 641,538 (9,687) 10,890 (150) (166,756) 3,460,304	Fair value reserve relating to assets held for sale RMB’000 – – – – – – – – – – 9,687 – – – 9,687	Non- controlling interests RMB’000 1,085,905 101,173 (1,129) – – – – – – 100,044 – 8,910 – – 1,194,859	Total RMB’000 4,070,374
											687,988 34,813 3,734 (9,193) 24,240
											26,660 (3,540) 1,120
											741,582
											– 19,800 (150) (166,756)
											4,664,850

Notes:

(a) Capital reserve

The capital reserve represents the deemed gain on partial disposal of investment in a subsidiary in 2010 from the Target Group to non-controlling interests (with no loss of control in that subsidiary) and the capital advance made in 2012 by TPG and non-controlling interests in TP Indonesia, which was transferred to share capital in 2013 upon completion of the related regulatory process.

(b) Exchange reserve

The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of the foreign operations into the Target Group’s presentation currency. The reserve is dealt with in accordance with the accounting policies set out in note 3.

(c) Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale securities held at the end of the reporting period and is dealt with in accordance with the accounting policies in note 3.

IIB – 112

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APPENDIX IIB

(d) Other reserve

The other reserve represents the accumulated loss of certain TPG Subsidiaries borne by TPG(HK) upon transfer of amounts due from such TPG Subsidiaries to TPIH, one of the TPG Subsidiaries, as disclosed in note 43(c).

(e) Fair value reserve related to assets held for sale

The fair value reserve comprises the cumulative net changes in fair value of available-for-sale securities and investments properties held by Tellon subgroup relating to assets held for sale. Details of the reclassification are set out in Note 17(b).

(f) Revaluation reserve

Revaluation reserve represents the surplus on revaluation upon transfer from land and buildings to investment properties.

36. Maturity profile

The following table details the Group’s contractual maturity for some of its financial assets and financial liabilities:

At 31 December 2010 ASSETS Deposits at banks and other financial institutions (including statutory deposits) Pledged bank deposits Debt securities (under held-to-maturity) Debt securities (under available-for- sale) Debt securities (under held-for-trading) Debt securities (under designated at fair value through profit or loss) LIABILITIES Bank loans and other borrowings	Repayable on demand RMB’000 463,453 – – – 55,781 – 519,234 357,101	3 months or less RMB’000 826,833 13,615 – 10,248 – – 850,696 –	1 year or less but over 3 months RMB’000 91,355 44,987 – 33,606 3,607 – 173,555 432,446	5 years or less but over 1 year RMB’000 – – 147,558 155,906 53,810 82,515 439,789 1,957,102	After 5 years RMB’000 – – 33,274 52,384 97,030 63,246 245,934 –	Undated RMB’000 – – – – – – – –	Total RMB’000 1,381,641 58,602 180,832 252,144 210,228 145,761
							2,229,208

							2,746,649

IIB – 113

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

At 31 December 2011 ASSETS Deposits at banks and other financial institutions (including statutory deposits) Pledged bank deposits Debt securities (under held-to-maturity) Debt securities (under available-for- sale) Debt securities (under held-for-trading) Debt securities (under designated at fair value through profit or loss) LIABILITIES Bank loans and other borrowings At 31 December 2012 ASSETS Deposits at banks and other financial institutions (including statutory deposits) Pledged bank deposits Debt securities (under held-to-maturity) Debt securities (under available-for- sale) Debt securities (under held-for-trading) Debt securities (under designated at fair value through profit or loss) LIABILITIES Bank loans and other borrowings	Repayable on demand RMB’000 280,845 – – – – – 280,845 7,831 285,722 – – – – – 285,722 –	3 months or less RMB’000 792,995 55,426 – 17,014 2,428 – 867,863 – 850,319 58,540 – 10,185 7,875 – 926,919 –	1 year or less but over 3 months RMB’000 225,312 – – 50,118 5,244 – 280,674 – 225,150 – 15,279 76,541 24,275 – 341,245 492,482	5 years or less but over 1 year RMB’000 536 – 164,225 131,763 110,994 69,312 476,830 3,015,781 715 – 171,186 101,491 136,250 144,357 553,999 3,018,470	After 5 years RMB’000 – – 72,868 63,980 91,571 91,822 320,241 – – – 84,046 50,165 169,389 54,505 358,105 –	Undated RMB’000 1,094 – – – – – 1,094 – 1,095 – – – – – 1,095 –	Total RMB’000 1,300,782 55,426 237,093 262,875 210,237 161,134
							2,227,547

							3,023,612

							1,363,001 58,540 270,511 238,382 337,789 198,862
							2,467,085

							3,510,952

37. Fair values of financial instruments

The fair value of financial assets and financial liabilities are determined as follows:

The fair values of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices;

IIB – 114

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

The fair values of derivative instruments are estimated using discounted cash flow analysis and the applicable yield curve for the duration of the non-optional derivative;
The fair values of unlisted investment funds and unlisted debt securities included in financial assets at fair value through profit or loss and available-forsale securities are established by reference to the prices quoted by respective fund administrators or by using valuations techniques including the use of recent arm’s length transactions, and
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The CTIH directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the combined financial statements approximate their fair values, except for debt securities classified as held-to-maturity as set out in note 18.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

IIB – 115

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

Financial assets at FVTPL Held-for-trading investments Securities designated at fair value through profit or loss Available-for-sale financial assets Listed equity securities Listed debt securities Unlisted equity securities Unlisted debt securities Unlisted investment funds Sub-total Total Financial liabilities at FVTPL Derivative financial instruments Financial assets at FVTPL Held-for-trading investments Securities designated at fair value through profit or loss Available-for-sale financial assets Listed equity securities Listed debt securities Unlisted equity securities Unlisted debt securities Unlisted investment funds Sub-total Total Financial liabilities at FVTPL Derivative financial instruments	Level 1 RMB’000 407,462 130,982 1,344,661 7,963 – – – 1,352,624 1,891,068 – Level 1 RMB’000 382,880 138,926 318,716 4,857 – – – 323,573 845,379 –	As at 31 December 2010 Level 2 Level 3 RMB’000 RMB’000 80 – 14,779 – – – – – 7,073 – 244,181 – 12,709 – 263,963 – 278,822 – 60,242 – As at 31 December 2011 Level 2 Level 3 RMB’000 RMB’000 24,920 – 22,208 – – – – – 2,782 – 258,018 – 8,443 – 269,243 – 316,371 – 29,128 –	Total RMB’000 407,542 145,761 1,344,661 7,963 7,073 244,181 12,709
			1,616,587
			2,169,890

			60,242

			Total RMB’000 407,800 161,134 318,716 4,857 2,782 258,018 8,443
			592,816
			1,161,750

			29,128

IIB – 116

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

Financial assets at FVTPL Held-for-trading investments Securities designated at fair value through profit or loss Derivative financial instruments Available-for-sale financial assets Listed equity securities Listed debt securities Unlisted equity securities Unlisted debt securities Unlisted investment funds Sub-total Total Financial liabilities at FVTPL Derivative financial instruments	Level 1 RMB’000 361,366 198,862 – 274,178 5,144 – – – 279,322 839,550 –	As at 31 December 2012 Level 2 Level 3 RMB’000 RMB’000 144,825 – – – 20 – – – – – 5,575 – 233,238 – 56,149 – 294,962 – 439,807 – 5,294 –	Total RMB’000 506,191 198,862 20 274,178 5,144 5,575 233,238 56,149
			574,284
			1,279,357

			5,294

There were no transfers between levels 1 and 2 during the Relevant Periods.

38. Capital commitments

Capital commitments outstanding at the end of the Relevant Period are as follows:

		As at 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Capital expenditure in respect of the
acquisition of property and equipment
and investment properties contracted
for but not provided in the combined
financial statements	195,461	20,579	3,762

IIB – 117

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

39. Operating leases

The Target Group as lessee

At the end of the reporting periods, the total future minimum lease payments under non-cancellable operating lease(s) agreements are payable as follows:

Within 1 year After 1 year but within 5 years After 5 years	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 10,531 18,287 18,340 7,016 30,936 15,303 1,944 1,175 1,047 19,491 50,398 34,690	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 10,531 18,287 18,340 7,016 30,936 15,303 1,944 1,175 1,047 19,491 50,398 34,690
		34,690

The Target Group leases a number of properties under operating leases. The leases typically run for an initial period of one to six years, with an option to renew the lease when all terms are renegotiated. Lease payments are usually fixed during the term of lease. None of the leases includes contingent rentals.

The Target Group as lessor

At the end of the reporting periods, the Target Group has contracted with tenants for the following future minimum lease payments under non-cancellable operating lease agreements:

Within 1 year After 1 year but within 5 years After 5 years	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 36,124 161,629 239,035 10,944 286,788 290,883 – 27,377 18,002 47,068 475,794 547,920	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 36,124 161,629 239,035 10,944 286,788 290,883 – 27,377 18,002 47,068 475,794 547,920
		547,920

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

The Target Group leases out investment properties under operating leases. The leases typically run for an initial period of one to six years, with an option to renew the lease when all terms are renegotiated. Lease payments are usually fixed during the term of lease. None of the leases includes contingent rentals.

40. Pledged assets

Other than the statutory deposits and the pledged bank deposits as set out in Notes 24 and 25, respectively, the Target Group has pledged the following assets.

(a) to guarantee the technical reserves in accordance with the Macau Insurance Ordinance:

Property and equipment Investment properties Investments in securities	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 8,014 7,467 6,641 25,117 16,007 27,774 166,419 179,111 221,832 199,550 202,585 256,247	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 8,014 7,467 6,641 25,117 16,007 27,774 166,419 179,111 221,832 199,550 202,585 256,247
		256,247

(b) as security for general banking facilities:

Property and equipment	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 5,094 4,554 4,256 5,094 4,554 4,256	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 5,094 4,554 4,256 5,094 4,554 4,256
		4,256

IIB – 119

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

41. Material related party transactions

In addition to the transactions and balances disclosed elsewhere in the combined Financial Information, the Target Group entered into the following material related party transactions:

			As at 31 December
		2010	2011	2012
	Notes	RMB’000	RMB’000	RMB’000
Commission income	(i)	13,341	12,705	15,873
Reinsurance premium ceded	(i)	49,503	44,619	67,416
Back office service	(ii)	127,676	171,299	211,598
Internal audit service	(iii)	33,593	38,857	42,427
Interest income	(iv)	13,956	22,660	22,082
Management fee income	(v)	10,760	23,737	21,570
Management fee expense	(vi)	20,706	10,166	10,619
Interest expense	(vii)	13,968	8,993	6,364

Notes:

(i) Certain subsidiaries of the Target Group ceded premiums to and received commission, with respect to the premium ceded out, from fellow subsidiaries.
(ii) A subsidiary of the Target Group provided back office services and received service fee of RMB127,676,000, RMB171,299,000 and RMB211,598,000 from fellow subsidiaries for the year ended 31 December 2010, 2011 and 2012 respectively.
(iii) A subsidiary of the Target Group provides internal audit services and receives service fee from CTIH and its subsidiaries and fellow subsidiaries.
(iv) Certain subsidiaries of the Target Group provide loans to and receive interest income from CTIH and its subsidiaries, TPG, TPG(HK) and fellow subsidiaries.
(v) Certain subsidiaries of the Target Group provide property management services and receive management income from CTIH and its subsidiaries, TPG and fellow subsidiaries.
(vi) Certain subsidiaries of the Target Group receive management services and paid management services fee to TPG, TPG (HK) and fellow subsidiaries.
(vii) Certain subsidiaries of the Target Group receive fund advance from and pay interest expense to TPG (HK) and a fellow subsidiary.

IIB – 120

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

The Target Group operates in an economic environment predominated by enterprises directly or indirectly controlled, jointly controlled or being significantly influenced by the PRC government through its numerous authorities, affiliates or other organizations (collectively “Government-related entities”). During the relevant years and periods, the Target Group had transactions with Government-related entities including but not limited to the sales of insurance policies and banking related services. These transactions are conducted in the ordinary course of the Target Group’s insurance business on terms similar to those that would have been entered into with non-government related entities. The Target Group has also established its pricing strategy and approval processes for its major insurance products. Such pricing strategy and approval processes do not depend on whether the customers are Government-related entities or not. Having due regard to the substance of the relationships, the directors believe that none of these transactions are carried out on non-market terms or outside normal day-to-day business operations that require separate disclosure.

42. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Target Group’s accounting policies, which are described in note 3, the management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the Target Group’s accounting policies

The following are the critical judgements, apart from those involving estimations (see below), that the management has made in the process of applying the Target Group’s accounting policies and that have the most significant effect on the amounts recognised in financial statements.

IIB – 121

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(a) Held-to-maturity investments

The Target Group classifies non-derivative financial assets with fixed or determinable payments and fixed maturity and where the Target Group has a positive intention and ability to hold to maturity as held-to-maturity investments. In making this judgement, the Target Group evaluates its intention and ability to hold such investments till maturity.

If the Target Group fails to hold these investments to maturity other than for certain specific circumstances, the Target Group will have to reclassify the entire portfolio of held-to-maturity investments as available-for-sale financial assets, as such class is deemed to have been tainted. This would result in held-to-maturity investments being measured at fair value instead of at amortised cost.

(b) Impairment of available-for-sale financial assets

The Target Group follows the guidance of HKAS 39 when determining whether there has been a significant or prolonged decline in the fair value of an investment in available-for-sale financial assets are impaired. This determination requires significant judgement. In making this judgement with respect to the impairment of an available for sale investment, the Target Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost.

(c) Deferred taxation on investment properties

For the purposes of measuring deferred tax liabilities or deferred tax assets arising from investment properties that are measured using the fair value model, the CTIH directors have reviewed the Target Group’s investment property portfolios and concluded that the Target Group’s investment properties situated in Hong Kong, Macau and Singapore are not held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale. Therefore, in measuring the Target Group’s deferred taxation on investment properties, the CTIH directors have determined that the presumption that the carrying amounts of investment properties measured using the fair value model are recovered entirely through sale is not rebutted. As a result, the Target Group has recognised deferred taxes on changes in fair value of investment properties based on tax consequence through sale as disclosed in Note 23(b).

IIB – 122

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

For the investment properties situated in PRC, the CTIH directors have concluded that these are held under a business model whose objective is to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale. As a result, the Target Group has recognised deferred taxes on changes in fair value of investment properties based on tax consequence other than through sale as disclosed in Note 23(b).

Key sources of estimation uncertainty

The following are key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

(a) Determination of insurance liabilities

The Target Group’s insurance liabilities mainly comprised of unearned premium provisions of RMB390,911,000, RMB433,710,000 and RMB489,754,000 as at 31 December 2010, 2011 and 2012, respectively and outstanding claims provisions of RMB982,479,000, RMB1,010,423,000 and RMB1,047,036,000 as as 31 December 2010, 2011 and 2012 respectively. The Target Group determines these estimates on the basis of historical information, actuarial analyses, financing modelling and other analytical techniques. The management continually review the estimates and make adjustments as necessary, but actual results could differ significantly from what is envisioned when these estimates are made.

(b) Income taxes

As at 31 December 2010, 2011 and 2012, a deferred tax asset of RMB13,922,000, RMB10,920,000 and RMB11,261,000 in relation to unutilised tax losses has been recognised in the Target Group’s combined statements of financial position. No deferred tax asset has been recognised in respect of tax losses of RMB803,272,000, RMB807,513,000 and RMB831,358,000 due to the unpredictability of future profit streams. The reliability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are less than or more than expected, a material reversal or recognition of deferred tax asset may arise, which would be recognised in profit or loss for the period in which such a reversal or recognition takes place.

IIB – 123

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(c) Fair value of investment properties

As at 31 December 2010, 2011 and 2012, the carrying amount of investment properties amounted to RMB3,678,252,000, RMB4,917,441,000 and RMB5,246,670,000.

The fair value of investment properties is determined based on valuations conducted by independent firms of professional valuers using generally accepted property valuation techniques which involve certain assumptions. Favourable or unfavourable changes to these assumptions would result in changes in the fair value of the Target Group’s investment properties and corresponding adjustments to the amount of gain or loss reported in profit or loss.

(d) Estimated impair of held to maturity instrument

When there is objective evidence of impairment loss, the Target Group takes into consideration the estimation of future cash flows. The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). Where the actual future cash flows are less than expected, a material impairment loss may arise as at 31 December 2010, 2011 and 2012. The carrying amounts of held of maturity are RMB180,832,000, 237,093,000 and 270,511,000.

43. Major non cash transactions

(a) During the year ended 31 December 2012, TPFH, an entity within the Target Group, capitalised its reserves available for distribution and increased its issued share capital by RMB166,756,000, as set out in Note 34(g).
(b) During the year ended 31 December 2011, the Target Group disposed of CTIH listed shares, classified as available-for-sale securities, to a fellow subsidiary at an aggregate consideration of RMB751,331,000, as set out in Note 7(b). Such consideration of RMB751,331,000 was settled through set off of current accounts between the Target Group and TPG(HK).

IIB – 124

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(c) During the year ended 31 December 2011, TPG(HK) transferred amounts due from certain TPG Subsidiaries of RMB567,911,000 to TPIH, one of the TPG Subsidiaries, for a consideration of RMB184,089,000, which represents TPG(HK)’s estimation of the recoverable amounts of the balances owed by the TPG subsidiaries determined using carrying amounts of their net assets. The consideration was settled through current account between TPG(HK) and TPIH. The net difference of RMB383,822,000, representing accumulated loss up to the date of transfer of those TPG subsidiaries being borne by TPG(HK) through impairment provision on the amounts due from those TPG subsidiaries, is recorded in other reserve.

44. Contingent liabilities

There was no outstanding litigation nor any other contingent liabilities as of 31 December 2012, other than those incurred in the normal course of the Target Group’s businesses.

45. Financial information of savills tpml

Savills TPML is a limited liability company established in Hong Kong. It is mainly engaged in property management. TPG (HK) holds 25% equity interest of the company. Its functional currency is Hong Kong dollars, and the financial information is presented in Renminbi.

IIB – 125

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

The summarised financial information in respect of Savills TPML is set out below:

(a) Statements of Financial Position

Notes ASSETS Property and equipment (i) Trade and other receivables (ii) Tax recoverable Cash and cash equivalents (iii) Total assets LIABILITIES Other payables Amounts due to shareholders (iv) Tax payable Deferred tax liabilities (v) Total liabilities Net assets EQUITY Share capital (vi) Retained profits Exchange reserve Total equity	2010 RMB’000 10 84 – 572 666 18 364 39 2 423 243 9 260 (26) 243	2011 RMB’000 5 42 47 285 379 18 229 – 1 248 131 9 172 (50) 131	2012 RMB’000 1 16 – 423 440 19 246 24 – 289 151 9 194 (52) 151

IIB – 126

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Notes:

(i) Property and equipment

COST At 1 January 2010 Addition At 31 December 2010, 31 December 2011 and 2012 ACCUMULATED DEPRECIATION At 1 January 2010 Provided for the year At 31 December 2010 and 1 January 2011 Provided for the year At 31 December 2011 and 1 January 2012 Provided for the year At 31 December 2012 CARRYING VALUES At 31 December 2010 At 31 December 2011 At 31 December 2012	Computer equipment RMB’000 13 12
	25
	11 4
	15 5
	20 4
	24
	10

	5

	1

(ii) Trade and other receivables

Trade receivables Prepayments and utility deposits	2010 RMB’000 76 8 84	2011 RMB’000 35 7 42	2012 RMB’000 9 7
			16

IIB – 127

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

Trade and other receivables are denominated in Hong Kong dollars, the functional currency of the company.

As at 31 December 2010, 2011 and 2012, trade receivables of nil, approximately RMB35,000 and RMB2,000 respectively were past due but not impaired. These relate to independent customers for which there is no recent history of default. The ageing analysis of these trade receivables is as follows:

Less than 3 months Over 3 months but less than 1 year	2010 RMB’000 76 – 76	2011 RMB’000 – 35 35	2012 RMB’000 7 2
			9

As at 31 December 2010, 2011 and 2012, no trade receivables were impaired or provided for.

(iii) Cash and cash equivalents

Cash and cash equivalents are cash at bank and in hand, and denominated in Hong Kong dollars, the functional currency of the company.

(iv) Amounts due to shareholders

The amounts due to shareholders are unsecured, interest-free and have no fixed terms of repayment.

(v) Deferred tax liabilities

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 16.5%.

The movement in the deferred tax liabilities in respect of accelerated depreciation allowances during the Relevant Periods is as follows:

At 1 January Charged to profit or loss At 31 December	2010 RMB’000 – 2 2	2011 RMB’000 2 (1) 1	2012 RMB’000 1 (1)
			–

IIB – 128

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(vi) Share capital 2010 RMB’000 Ordinary shares of HK$1 each Authorised 10 Issued and fully paid 9 Statements of Comprehensive Income 2010 Notes RMB’000 Revenue (i) 3,559 Interest income 1 Other expenses (ii) (2,611) Profit before taxation 949 Income tax charge (iii) (156) Profit after taxation 793 Other comprehensive expense – Exchange difference (26) Total comprehensive income for the year 767	2011 RMB’000 10 9 2011 RMB’000 2,810 1 (2,213) 598 (97) 501 (24) 477	2012 RMB’000 10 9 2012 RMB’000 3,118 – (2,389) 729 (109) 620 (2) 618

(b) Statements of Comprehensive Income

IIB – 129

APPENDIX IIB

FINANCIAL INFORMATION OF THE TARGET GROUP

(i) Revenue

Revenue recognised during the Relevant Periods is as follows:

Turnover Property management fee income Agency fee income (ii) Other expenses Staff costs Management services fee Operating leases in respect of office premises Accounting fees to shareholders Building management fees Printing and stationery expense Telephone, fax and postage expense Auditor’s remuneration Depreciation for property and equipment Other expenses Total other expenses	2010 RMB’000 2,626 933 3,559 2010 RMB’000 1,165 949 235 81 59 38 27 19 4 34 2,611	2011 RMB’000 2,509 301 2,810 2011 RMB’000 1,149 596 224 77 59 24 29 19 5 31 2,213	2012 RMB’000 2,540 578
			3,118

			2012 RMB’000 1,184 730 219 78 60 34 26 19 4 35
			2,389

IIB – 130

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(iii) Income tax charge

Hong Kong Profits Tax has been provided at the rate of 16.5% on the estimated assessable profit for the Relevant Periods.

The income tax charge in the statements of comprehensive income represents:

Hong Kong Profits Tax Provision for the year Overprovision in respect of prior years Deferred tax	2010 RMB’000 154 – 2 156	2011 RMB’000 98 – (1) 97	2012 RMB’000 120 (10) (1) 109

The income tax charge can be reconciled to the profit before taxation per the statements of comprehensive income as follows:

Profit before taxation Tax at 16.5% Overprovision in respect of prior years Others Income tax charge	2010 RMB’000 949 157 – (1) 156	2011 RMB’000 598 98 – (1) 97	2012 RMB’000 729 120 (10) (1) 109

IIB – 131

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(c) Statements of Changes in Equity

Notes At 1 January 2010 Profit for the year Other comprehensive loss for the year Dividends (i) At 1 December 2010 and 1 January 2011 Profit for the year Other comprehensive loss for the year Dividends (i) At 1 December 2011 and 1 January 2012 Profit for the year Other comprehensive loss for the year Dividends (i) Balance at 1 December 2012 (i) Dividends Interim dividends paid		Share Exchange Retained capital reserve profits RMB’000 RMB’000 RMB’000 9 – 184 – – 793 – (26) – – – (717) 9 (26) 260 – – 501 – (24) – – – (589) 9 (50) 172 – – 620 – (2) – – – (598) 9 (52) 194 2010 2011 RMB’000 RMB’000 717 589	Total RMB’000 193 793 (26) (717)
			243 501 (24) (589)
			131 620 (2) (598)
			151

			2012 RMB’000 598

IIB – 132

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

(d) Statements of Cash Flows

Profit before taxation Adjustments for: Interest income Depreciation Changes in working capital: (Increase) decrease in other debtors Increase in other payables Cash generated from operations Income tax paid Net cash generated from operating activities Cash generated from investing activities Interest received Purchase of property and equipment Net cash (used in) generated from investing activities Cash used in financing activities Dividends paid (Decrease) increase in amounts due to shareholders Net cash used in financing activities Effect of change in exchange rate Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year	2010 RMB’000 949 (1) 4 (59) – 893 (109) 784 1 (12) (11) (717) (343) (1,060) (31) (318) 890 572	2011 RMB’000 598 (1) 5 42 – 644 (184) 460 1 – 1 (589) (135) (724) (24) (287) 572 285	2012 RMB’000 729 – 4 26 1 760 (39) 721 – – – (598) 17 (581) (2) 138 285 423

IIB – 133

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX IIB

46. Subsequent event

(a) The disposal of Tellon subgroup classified as assets held for sale in note 17(b) was completed by the end of March 2013 upon the fulfilment of all required legal procedures. The management estimated such disposal from TPG(HK) to TPIH would result in a capital contribution of approximately HK$2,433,000,000.
(b) In accordance with the directors’ meeting of TPIH, a subsidiary of the Target Group, held on 28 March 2013, a dividend of HK$3,300,000,000 (equivalent to approximately RMB2,675,805,000) is declared and payable to TPG(HK).

(B) SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of any of the companies in the Target Group have been prepared in respect of any period subsequent to 31 December 2012.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

IIB – 134

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

The following is the text of accountants’ report of TPI, prepared for the purpose of inclusion in this circular, received from the reporting accountants of the Company, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong.

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31 May 2013

The Directors

China Taiping Insurance Holdings Company Limited

Dear Sirs,

We set out below our report on the financial information relating to Taiping General Insurance Company Limited (the “Company” or “TPI”) for each of the three years ended 31 December 2012 (the “Relevant Periods”) (the “Financial Information”) for inclusion in the circular of China Taiping Insurance Holdings Company Limited (“CTIH”) dated 31 May 2013 (the “Circular”) in connection with the major acquisition and connected transaction (the “Proposed Acquisition”) of CTIH, which includes the proposed acquisition of 38.79% of equity interest in TPI from China Taiping Insurance Group Co. (“TPG”), the ultimate holding company of CTIH. Details of the Proposed Acquisition are set out in the Circular. TPI is a non wholly-owned subsidiary of CTIH during the Relevant Periods and up to the date of this report. As at 31 December 2010, 2011 and 2012 and the date of this report. The equity interest in TPI directly held by TPG was 37.5%, 38.79%, 38.79% and 38.79% respectively.

During the Relevant Periods and as at the date of this report, particulars of TPI are as follows:

Name of company Place of establishment Date of establishment TPI The People’s Republic of China (the “PRC”) 22 June 2001	Registered/paid-in capital Principal activities 31 December The date of this report 2010 2011 2012 RMB’000 RMB’000 RMB’000 RMB’000 1,570,000 2,070,000 2,570,000 2,570,000 Underwriting of property and casualty insurance

The statutory financial statements of TPI for each of the three years ended 31 December 2012 were prepared in accordance with relevant accounting principles and financial regulations applicable in the PRC and were audited by Deloitte Touche Tohmatsu CPA LLP.

IIC – 1

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

We have examined the audited statutory financial statements of TPI for the Relevant Periods (“Underlying Financial Statements”) in accordance with the Auditing Guideline 3.340 “Prospectuses and the reporting accountants” as recommended by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

The Financial Information for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements on the basis set out in Note 1 of Section A of the accountants’ report “General Information and Basis of Preparation”, with no adjustments made thereon, for the inclusion in the Circular.

The directors of TPI are responsible for the Underlying Financial Statements and the CTIH directors are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion on the basis of preparation set out in Note 1 of Section A of the accountants’ report “General Information and Basis of Preparation”, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of TPI as at 31 December 2010, 2011 and 2012, and of the results and cash flows of TPI for the Relevant Periods.

IIC – 2

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

(A) FINANCIAL INFORMATION

STATEMENT OF COMPREHENSIVE INCOME

Notes Gross premiums written 5 Less: Premiums ceded to reinsurers and retrocessionaires Net premiums written Change in unearned premium provisions, net of reinsurance Net earned premiums Net investment income 6(a) Net realised and unrealised investment losses and impairment 6(b)/6(c) Other income 7a Other (losses) gains 7b Benefits, losses and expenses Net policyholders’ benefits 8(a) Net commission expenses 8(b) Administrative and other expenses Total benefits, losses and expenses	Year 2010 RMB’000 5,353,682 (701,477) 4,652,205 (269,513) 4,382,692 200,699 (5,633) 12,923 (44,192) 4,546,489 (2,470,834) (151,717) (1,853,571) (4,476,122)	ended 31 December 2011 2012 RMB’000 RMB’000 5,806,621 7,810,897 (770,112) (1,287,067) 5,036,509 6,523,830 (181,149) (655,688) 4,855,360 5,868,142 229,195 309,517 (17,086) (75,187) 18,057 23,894 (18,301) 7,270 5,067,225 6,133,636 (2,593,168) (3,061,356) (148,613) (112,897) (2,137,478) (2,712,451) (4,879,259) (5,886,704)

IIC – 3

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Notes Profit from operations Finance costs 9(a) Profit before taxation Income tax credit (charge) 11 Profit after taxation Other comprehensive (expense) income: Available-for-sale securities – Net fair value changes during the year – Reclassification adjustment to profit or loss on impairment 6(c) – Reclassification adjustment to profit or loss on disposal – Net deferred tax 22 Other comprehensive (expense) income for the year, net of income tax Total comprehensive income for the year	Year 2010 RMB’000 70,367 (44,100) 26,267 20,107 46,374 (9,890) – 5,633 (2,939) (7,196) 39,178	ended 31 December 2011 2012 RMB’000 RMB’000 187,966 246,932 (44,100) (44,221) 143,866 202,711 (2,863) (7,894) 141,003 194,817 (142,613) (52,125) 5,395 1,728 25,267 73,965 26,956 (5,231) (84,995) 18,337 56,008 213,154

IIC – 4

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

STATEMENT OF FINANCIAL POSITION

Notes
ASSETS
Statutory deposits
18
Property and equipment
12
Prepaid lease payments
12
Deferred tax assets
22
Investments in securities
13
Amounts due from related
companies
14
Insurance debtors
15
Reinsurers’ share of insurance
contract provisions
16
Other debtors
17
Tax recoverable
Deposits at banks with original
maturity more than three months
Bank balances and cash
19
TOTAL ASSETS
LIABILITIES
Unearned premium provisions
20
Outstanding claims provisions
21
Interest-bearing notes
23
Securities sold under repurchase
agreements
27
Amounts due to related companies
14
Insurance creditors
24
Other payables and accruals
25
Insurance protection fund
26
TOTAL LIABILITIES
NET ASSETS
CAPITAL AND RESERVES
Paid-in capital
28
Reserves
TOTAL EQUITY

As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
314,000
414,000
474,000
409,445
442,146
482,412
86,141
84,318
82,495
–
24,314
19,083
3,389,362
3,888,223
4,680,517
748
310
304
136,397
251,628
311,636
656,122
645,918
989,504
147,889
233,682
308,249
–
–
20,869
700,000
1,131,505
2,050,604
1,279,074
1,402,818
1,102,462
7,119,178
8,518,862
10,522,135
2,149,575
2,334,741
3,258,099
2,144,880
2,378,982
2,616,631
700,000
700,000
700,000
–
500,000
280,000
10,246
11,632
9,597
577,711
823,542
1,044,651
619,728
738,187
853,226
15,185
11,764
26,763
6,217,325
7,498,848
8,788,967
901,853
1,020,014
1,733,168
1,570,000
2,070,000
2,570,000
(668,147)
(1,049,986)
(836,832)
901,853
1,020,014
1,733,168

IIC – 5

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

STATEMENT OF CHANGES IN EQUITY

Note At 1 January 2010 Profit for the year Other comprehensive expense (income) Available-for-sale securities: – change in fair value – deferred tax recognised – transferred to profit or loss Total comprehensive (expense) income for the year At 31 December 2010 and 1 January 2011 Profit for the year Other comprehensive expense (income) Available-for-sale securities: – change in fair value – deferred tax recognised – transferred to profit or loss Total comprehensive (expense) income for the year Capital contribution Increase in paid-in capital 28 At 31 December 2011 and 1 January 2012 Profit for the year Other comprehensive expense (income) Available-for-sale securities: – change in fair value – deferred tax recognised – transferred to profit or loss Total comprehensive income for the year Increase in paid-in capital 28 At 31 December 2012	Paid-in capital RMB’000 1,570,000 – – – – – 1,570,000 – – – – – – 500,000 2,070,000 – – – – – 500,000 2,570,000	Capital reserve RMB’000 note (a) 437,847 – – – – – 437,847 – – – – – 62,250 (500,097) – – – – – – – –	(Accumulated Fair losses) value retained reserve profits RMB’000 RMB’000 note (b) 69,554 (1,214,726) – 46,374 (9,890) – (2,939) – 5,633 – (7,196) 46,374 62,358 (1,168,352) – 141,003 (142,613) – 26,956 – 30,662 – (84,995) 141,003 – – – – (22,637) (1,027,349) – 194,817 (52,125) – (5,231) – 75,693 – 18,337 194,817 – – (4,300) (832,532)	Total RMB’000 862,675
				46,374 (9,890) (2,939) 5,633
				39,178
				901,853
				141,003 (142,613) 26,956 30,662
				56,008 62,250 (97)
				1,020,014
				194,817 (52,125) (5,231) 75,693
				213,154 500,000
				1,733,168

IIC – 6

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

Notes:

(a) Capital reserve

The capital reserve represents the capital contribution received from shareholders by the Company and was subsequently transferred to paid-in capital upon the completion of all the necessary legal and administrative procedures.

(b) Fair value reserve

The fair value reserve comprises of the cumulative net change in the fair value of available-for-sale securities held at the end of the Relevant Periods and is dealt with in accordance with the accounting policy set out in note 3.

IIC – 7

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

STATEMENT OF CASH FLOWS

Note Operating activities Profit before taxation Adjustments for: – Depreciation of property and equipment – Amortisation of prepaid lease payments – Finance costs – Dividend income – Interest income – Interest income from securities purchased under resale agreement – Interest expense on securities sold under repurchase agreement – (Gain) loss on disposal of property and equipment – Net realised losses on available- for-sale securities – Impairment on equity securities and fund investments – Impairment losses recognised (reversal) on insurance debtors and other debtors – Exchange loss (gain) Operating loss before changes in working capital (Increase) decrease in securities designated at fair value through profit or loss and held-for-trading Decrease (increase) in insurance debtors (Decrease) increase in reinsurers’ share of insurance contract provisions Increase in other debtors Decrease in amounts due from related companies Increase in insurance creditors Increase in other payables and accruals Increase (decrease) in amounts due to related companies Increase in provision for outstanding claims Increase in unearned premium provisions Increase (decrease) in insurance protection fund	Year 2010 RMB’000 26,267 51,833 1,823 44,100 (56,731) (147,510) (317) 3,859 (213) 5,633 – 14,710 12,741 (43,805) (84,323) 3,951 (95,917) (10,204) 6,076 160,963 177,587 9,795 492,822 316,961 5,311	ended 31 December 2011 2012 RMB’000 RMB’000 143,866 202,711 52,659 55,114 1,823 1,823 44,100 44,221 (12,236) (10,459) (217,901) (300,109) (420) (620) 1,362 1,671 232 45 10,835 73,965 5,395 1,728 1,179 (2,278) (97) – 30,797 67,812 74,874 (190,551) (115,406) (57,462) 10,204 (343,586) (45,428) (33,888) 438 6 245,831 221,109 118,459 115,039 1,386 (2,035) 234,102 237,649 185,166 923,358 (3,421) 14,999

IIC – 8

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Cash generated from operations Interest income received Income tax paid Net cash generated from operating activities Investing activities Increase in statutory deposits Increase in deposits at banks with original maturity more than three months Payment of purchase of investments in loans and receivables, held-to- maturity and available-for-sale securities Proceeds from sale or redemption of investments in held-to-maturity and available-for-sale securities Interest income received Dividend income received Payment for purchase of property and equipment Proceeds from sale of property and equipment Payment for construction in progress Net cash used in investing activities Financing activities Interest expense paid Increase (decrease) in securities sold under repurchase agreements Proceeds received in respect of paid-in capital Decrease in restricted bank deposits 19 Net cash (used in) from financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December 19 Note	939,217 31,434 (5,797) 964,854 – (541,018) (3,130,881) 2,478,062 114,940 56,731 (20,040) 4,734 (67,563) (1,105,035) (47,959) – – – (47,959) (188,140) 1,040,797 852,657 Year 2010 RMB’000	737,002 952,450 68,639 93,549 (221) (28,763) 805,420 1,017,236 (100,000) (60,000) (431,505) (919,099) (934,499) (1,876,038) 232,583 1,222,170 108,537 166,187 12,012 10,505 (62,959) (53,748) 21,836 4,735 (44,469) (46,412) (1,198,464) (1,551,700) (45,462) (45,892) 500,000 (220,000) 62,250 500,000 426,417 – 943,205 234,108 550,161 (300,356) 852,657 1,402,818 1,402,818 1,102,462 ended 31 December 2011 2012 RMB’000 RMB’000

IIC – 9

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

NOTES TO THE FINANCIAL INFORMATION

1. General information and basis of preparation

Pursuant to the Framework Acquisition Agreement entered between TPG and its directly wholly-owned subsidiary, China Taiping Insurance Group (HK) Company Limited (“TPG(HK)”), as vendor and CTIH as purchaser, CTIH will acquire certain subsidiaries of TPG and TPG(HK), 25.05% equity interest of Taiping Insurance Company Limited (“TPL”), 38.79% equity interest of TPI, 20% equity of Taiping Asset Management Company Limited (“TPAM”) and 4% of equity interest of Taiping Pension Company Limited (“TPP”) from TPG and TPG(HK). TPL, TPI, TPAM and TPP are existing non wholly-owned subsidiaries of CTIH.

Details of the proposed restructuring are set out in the section headed “The Restructuring of the TPG Group and the Proposed Transfer” in the Letter from the Board.

The Financial Information of TPI has been prepared using the same accounting policies adopted by CTIH in the preparation of its consolidated financial statements for the Relevant Periods, which conform with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the HKICPA.

The Company is a limited liability company established in PRC. Its immediate holding company is CTIH, a company incorporated in Hong Kong and listed on the The Main Board of the Stock Exchange of Hong Kong Limited and its ultimate holding company is TPG, a state-owned enterprise established in PRC.

The Company is registered under China Insurance Regulatory Commission (“CIRC”) as an insurer to underwrite insurance business in PRC.

The financial statements are presented in Renminbi (“RMB”), which is also the functional currency of the Company.

IIC – 10

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

2. Application of Hong Kong Financial Reporting Standards

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Company has consistently applied HKFRSs, amendments and interpretations, which are effective for the accounting period beginning on 1 January 2012, throughout the Relevant Periods.

At the date of this report, the HKICPA has issued the following new and revised HKFRSs, amendments and interpretations that have been issued but are not yet effective. The Company has not early applied these new and revised HKFRSs, amendments and interpretations in the preparation of the Financial Information for the Relevant Periods.

New and revised HKFRSs, amendments and interpretations issued but not yet effective

The Company has not early applied the following new and revised HKFRSs, amendments or interpretations that have been issued but are not yet effective:

Amendments to HKFRSs	Annual improvements to HKFRSs 2009 –
	2011 cycle1
Amendments to HKFRS 7	Disclosures – Offsetting financial assets and
	financial liabilities1
Amendments to HKFRS 9 and	Mandatory effective date of HKFRS 9 and
HKFRS 7	transition disclosures3
Amendments to HKFRS 10,	Consolidated financial statements, joint
HKFRS 11 and HKFRS 12	arrangements and disclosure of interests in
	other entities: Transition guidance1
Amendments to HKFRS 10,	Investment entities2
HKFRS 12 and HKAS 27
HKFRS 9	Financial instruments3
HKFRS 10	Consolidated financial statements1
HKFRS 11	Joint arrangements1
HKFRS 12	Disclosure of interests in other entities1
HKFRS 13	Fair value measurement1
HKAS 19 (as revised in 2011)	Employee benefits1
HKAS 27 (as revised in 2011)	Separate financial statements1
HKAS 28 (as revised in 2011)	Investments in associates and joint ventures1
Amendments to HKAS 1	Presentation of items of other comprehensive
	income4
Amendments to HKAS 32	Offsetting financial assets and financial
	liabilities2

IIC – 11

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

1 Effective for annual periods beginning on or after 1 January 2013.

2 Effective for annual periods beginning on or after 1 January 2014.

3 Effective for annual periods beginning on or after 1 January 2015.

4 Effective for annual periods beginning on or after 1 July 2012.

Amendments to HKAS 32 Offsetting financial assets and financial liabilities and amendments to HKFRS 7 Disclosures – Offsetting financial assets and financial liabilities

The CTIH directors anticipate that the application of these amendments to HKAS 32 and HKFRS 7 will have no material impact on the Financial Information.

HKFRS 9 Financial instruments

IIC – 12

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Key requirements of HKFRS 9 are described as follows:

HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

HKFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

The CTIH directors anticipate that the adoption of HKFRS 9 in the future may have significant impact on amounts reported in respect of the Company’s financial assets and financial liabilities. Regarding the Company’s financial assets, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

IIC – 13

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

HKFRS 13 Fair value measurement

HKFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

The CTIH directors anticipate that HKFRS 13 will be adopted by the Company in the annual period beginning 1 January 2013 and that the application of the new standard may affect certain amounts reported in the Financial Information and result in more extensive disclosures in the Financial Information.

Amendments to HKAS 1 Presentation of items of other comprehensive income

IIC – 14

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

3. Significant accounting policies

The Financial Information has been prepared under the historical cost basis, except for certain financial instruments, which are measured at fair values, and in accordance with the following accounting policies which conform with HKFRSs. In addition, the Financial Information includes the applicable disclosures required by the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and Companies Ordinance.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts and sales related taxes.

Provided it is probable that the economic benefits will flow to the Company and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in the statement of comprehensive income as follows:

Gross premiums written from insurance contracts

The accounting policies for the recognition of revenue from insurance contracts are disclosed in the sub-section under the heading “recognition and measurement of insurance contracts” in note 3.

Reinsurance commission income

Reinsurance commission income is recognised as revenue when received or receivable from reinsurers.

IIC – 15

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Dividend income

Dividend income from investments is recognised when the shareholder’s right to receive payment is established.

Interest income

Financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Company’s financial assets are classified into one of the four categories, including financial assets at fair value through profit or loss, loans and receivables, held-to-maturity securities and available-for-sale securities. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

IIC – 16

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Effective interest method

Interest income is recognised on an effective interest basis.

Financial assets at fair value through profit or loss.

A financial asset is classified as held for trading if:
it has been acquired principally for the purpose of selling in the near future; or
it is a part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at fair value through profit or loss upon initial recognition if:

such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

IIC – 17

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

it forms part of a contract containing one or more embedded derivatives, and HKAS 39 “Financial instruments: Recognition and measurements” permits the entire combined contract (asset or liability) to be designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are measured at fair value, with changes in fair value arising from measurement recognised directly in profit or loss in the period in which they arise. The net gain or loss recognised in profit or loss excludes any dividend or interest earned on the financial assets and is included in the net realised and unrealised investment gains (losses) in the statement of comprehensive income.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including amounts due from related companies, other debtors, deposits at banks with original maturity more than three months and bank balances and cash) are measured at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Held-to-maturity securities

Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Company’s management has the positive intention and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity securities are measured at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Available-for-sale securities

IIC – 18

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Equity and debt securities held by the Company that are classified as availablefor-sale securities and are traded in an active market are measured at fair value at the end of each reporting period. Changes in the carrying amount of availablefor-sale debt securities relating to interest income calculated using the effective interest method and dividends on available-for-sale equity securities are recognised in statement of comprehensive income. Other changes in the carrying amount of available-for-sale securities are recognised in other comprehensive income and accumulated under the heading of fair value reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the fair value reserve is reclassified to statement of comprehensive income (see the accounting policy in respect of impairment of financial assets below).

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost less any identified impairment losses (see accounting policy on impairment of financial assets below).

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

For an available-for sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
a breach of contract, such as default or delinquency in interest or principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
disappearance of an active market for that financial asset because of financial difficulties.

IIC – 19

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

For certain categories of financial assets, such as other debtors, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of other debtors, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a receivable is considered to be uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to statement of comprehensive income.

IIC – 20

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods. Any increase in fair value subsequent to an impairment loss is recognised directly in other comprehensive income and accumulated in fair value reserve. For available-for-sale debt investments, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities including interest-bearing notes, amounts due to related companies and other payables are subsequently measured at amortised cost, using the effective interest method.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

IIC – 21

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

Derecognition

The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entity, the difference between the asset’s carrying amount and the sum of the consideration received and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Financial liabilities are derecognised when, and only when, the Company’s obligation is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Securities sold under repurchases agreements/securities purchased under resale agreements

IIC – 22

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Property and equipment

Depreciation is recognised to write off the cost of items of property and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives.

Properties in the course of construction for administrative purposes are carried at cost, less any recognised impairment loss. Costs include professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Company’s accounting policy. Such properties are classified to the appropriate categories of property and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets and ready for their intended use.

Gains or losses arising from the retirement or disposal of an item of property and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in the statement of comprehensive income on the date of retirement or disposal.

Prepaid lease payments

When a lease includes both land and building elements, the Company assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Company, unless it is clear that both elements are operating leases in which case the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any lumpsum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

IIC – 23

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as “prepaid lease payments” in the statement of financial position and is amortised over the lease term on a straight-line basis. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease and accounted for as property and equipment.

Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Impairment of non-financial assets

At the end of the reporting period, the Company reviews the carrying amounts of its non-financial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. The recoverable amount of an asset is the greater of its fair value less cost to sell and value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, deposits with banks and other financial institutions and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.

Government grants

Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.

IIC – 24

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Company should purchase, construct or otherwise acquire noncurrent assets are recognised as a deduction from the carrying amount of the relevant asset in the statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in profit or loss in the period in which they become receivable.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

IIC – 25

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Current and deferred tax is recognised in statement of comprehensive income, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively.

Provisions and contingent liabilities

Provisions are recognised when the Company has a present obligation as a result of a past event, and it is probable that the Company will be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

IIC – 26

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Classification of contracts

Insurance contracts

Contracts under which the Company accepts significant insurance risk from another party (“the policyholder”) by agreeing to compensate the policyholder or other beneficiary if a specified uncertain future event (“the insured event”) adversely affects the policyholder or other beneficiary are classified as insurance contracts. Insurance risk is risk other than financial risk that is transferred from the policyholder of a contract to the issuer. Financial risk is the risk of a possible future change in one or more of a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party of the contract.

Insurance risk is significant if, and only if, an insured event could cause the Company to pay significant additional benefits. Once a contract is classified as an insurance contract it remains classified as an insurance contract until all rights and obligations are extinguished or have expired.

Recognition and measurement of insurance contracts

Recognition of gross premium written

Gross premiums written in respect of property and casualty insurance contracts are recognised as revenue when the amount is determined, which is generally when the risk commences.

Unearned premium provisions

Commission income

Commission income is recognised as revenue when received or receivable from reinsurers.

IIC – 27

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

Outstanding claims provisions

Outstanding claims provisions comprise provisions for the Company’s estimate of the ultimate cost of settling all claims incurred but unpaid at the end of the reporting period, whether reported or not, and related internal and external claims handling expenses and an appropriate prudential margin. Outstanding claims provisions is assessed by reviewing individual claims and making allowance for claims incurred but not yet reported, the effect of both internal and external foreseeable events, such as changes in claims handling procedures, inflation, judicial trends, legislative changes and past experience and trends. Adjustments to claims provisions established in prior years are reflected in the Financial Information for the year in which the adjustments are made and disclosed separately if material. The methods used, and the estimates made, are reviewed regularly.

Liability adequacy test

At the end of each reporting period, the Company assesses its insurance liabilities to determine whether they are adequate, using current estimates of future cash flows under its insurance contracts. If the assessment shows that the carrying amounts of its insurance liabilities are inadequate in the light of estimated future cash flows, the entire deficiency is recognised in the statement of comprehensive income for the year.

Provision is made for unexpired risks arising from property and casualty insurance contracts and reinsurance contracts where the expected value of claims and expenses attributable to the unexpired periods of policies in force at the end of the reporting period exceeds the unearned premium provisions in relation to such policies. The unexpired risk provision, which is included in provision for outstanding claims at the reporting date, is calculated by reference to classes of business which are managed together, after taking into account the future investment return on investments held to back the unearned premium provisions and the unexpired risk provision.

Policyholders’ benefits

Policyholders’ benefits comprise claims and claims handling expenses. Claims are recognised when notified and an estimate is made for claims incurred but not reported at the reporting date.

IIC – 28

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Insurance debtors

Insurance creditors

Insurance creditors are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method.

Commission expense

Commission expense is accounted for when paid or payable and therefore varies in line with insurance premiums written.

Reinsurance contracts held

The Company cedes insurance in the normal course of business for the purpose of limiting its net loss potential through the diversification of its risks. Assets, liabilities and income and expenses arising from ceded insurance contracts are presented separately from the assets, liabilities, income and expenses from the related insurance contracts because the reinsurance arrangements do not relieve the Company from its direct obligations to policyholders.

IIC – 29

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

The benefits to which the Company is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of balances due from reinsurers, as well as other receivables (classified as reinsurance assets) that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts, which are recognised as an expense when due.

Amounts due/recoverable under reinsurance and the reinsurers’ share of insurance contract provisions are assessed for impairment at the end of the reporting period. Such assets are deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Company may not recover all amounts due and that the event has a reliably measurable impact on the amounts that the Company will receive from the reinsurers. The impairment loss is calculated following the same method used for financial assets held at amortised cost and the carrying amount is reduced through the use of an allowance account similar to insurance debtors.

Translation of foreign currencies

Foreign currency transactions during the Relevant Periods are translated into the functional currency of the Company at the exchange rates prevailing on the transaction dates. At the end of reporting period, monetary assets and liabilities denominated in foreign currencies are retranslated into the functional currency of the Company at the exchange rates prevailing at that date. Exchange gains and losses arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in the income statement in that period in which they arise.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into the functional currency of respective entities in the Company using the foreign exchange rates ruling on the transaction dates. Nonmonetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into the functional currency of respective entities in the Company using the foreign exchange rates ruling at the dates the fair value was determined. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in other comprehensive income, in which cases, the exchange differences are also recognised directly in other comprehensive income.

IIC – 30

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Leasing

The Company as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

Borrowing costs

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

4. Insurance, financial and capital risk management

Risk management objectives, policies and processes for mitigating insurance risk

The Company is principally engaged in the underwriting of property and casualty insurance business in the PRC. The Company’s management of insurance and financial risk is a critical aspect of the business. Insurance risks are managed through the application of various policies and procedures relating to underwriting, pricing, claims and reinsurance as well as experience monitoring.

The Company uses several methods to assess and monitor insurance risk exposures both for individual types of risks insured and overall risks. These methods include internal risk measurement models, sensitivity analyses and scenario analyses.

IIC – 31

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

Underwriting Strategy

The Company focuses its property and casualty insurance business by offering a wide range of insurance products covering different types of property insurance (including compulsory motor insurance), short-term accident and health insurance and other property and casualty insurance business. The Company has formulated strict operational procedures on underwriting and claims settlement to control risks on insurance underwriting.

Reinsurance strategy

The Company purchases reinsurance protection from other reinsurers in the normal course of business in order to limit the potential for losses arising from unexpected and concentrated exposures. In assessing the credit worthiness of reinsurers, the Company takes into account, among other factors, ratings and evaluation performed by recognised credit rating agencies, their claims-paying and underwriting track record, as well as the Company’s past experience with them.

Asset and liability matching

The objective of the Company’s asset and liability management is to match the Company’s assets with liabilities on the basis of duration. The Company actively manages its assets using an approach that balances quality, diversification, asset and liability matching, liquidity and investment return. The goal of the investment process is to maximise investment returns at a tolerable risk level, whilst ensuring that the assets and liabilities are managed on a cash flow and duration basis.

Insurance risk

IIC – 32

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Company faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits may be greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the estimate established using statistical techniques.

Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Company has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.

The concentration and management of insurance risk are set out below:

(i) Management of risks

The Company delegates underwriting authority to experienced underwriters. Each underwriting department has an underwriting manual for each class of business. The underwriting manual is approved by the Underwriting Committee and specifies the authority of underwriters at each level. Each underwriting manual states clearly the minimum gross premium per policy, the maximum sum insured per policy and the aggregate exposure per zone as well as the probable maximum loss which underwriters at each level can underwrite. Risks that exceed the underwriting authority of the head of the underwriting department have to be reviewed and approved by the Underwriting Committee. For claims handling, there is a procedure manual that lays down the operational procedures and controls required to mitigate the insurance risk.

IIC – 33

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

The Company also arranges both treaty reinsurance and facultative reinsurance in accordance with international practice. Treaty reinsurance provides automatic reinsurance cover under specific reinsurance contract terms and conditions. Facultative reinsurance is reinsurance of individual risk. Each contract is arranged separately. The choice of reinsurance contract depends on market conditions, market practice and the nature of business. Facultative reinsurance is arranged when an individual risk is not covered by treaty reinsurance or exceeds treaty reinsurance capacity and its own underwriting capacity.

(ii) Concentration of insurance risks

Within the insurance process, concentration of risk may arise where a particular event or series of events could impact heavily upon the Company’s liabilities. Such concentrations may arise from a single insurance contract or through a small number of related contracts, and relate to circumstances where significant liabilities could arise.

The concentration of insurance risk before and after reinsurance by classes of business is summarised below, with reference to premiums written in the years ended 31 December 2010, 2011 and 2012.

Motor Health and casualty Others Total	Year ended 31 December 2010 Gross Premiums written ceded to Net written Ceding premiums reinsurers premiums ratio RMB’000 RMB’000 RMB’000 % 4,377,633 322,326 4,055,307 7.4% 150,396 21,374 129,022 14.2% 825,653 357,777 467,876 43.3% 5,353,682 701,477 4,652,205 13.1%	Year ended 31 December 2010 Gross Premiums written ceded to Net written Ceding premiums reinsurers premiums ratio RMB’000 RMB’000 RMB’000 % 4,377,633 322,326 4,055,307 7.4% 150,396 21,374 129,022 14.2% 825,653 357,777 467,876 43.3% 5,353,682 701,477 4,652,205 13.1%
		13.1%

IIC – 34

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Motor Health and casualty Others Total Motor Health and casualty Others Total	Year ended 31 December 2011 Gross Premiums written ceded to Net written Ceding premiums reinsurers premiums ratio RMB’000 RMB’000 RMB’000 % 4,610,621 344,911 4,265,710 7.5% 187,973 36,889 151,084 19.6% 1,008,027 388,312 619,715 38.5% 5,806,621 770,112 5,036,509 13.3% Year ended 31 December 2012 Gross Premiums written ceded to Net written Ceding premiums reinsurers premiums ratio RMB’000 RMB’000 RMB’000 % 6,275,626 763,986 5,511,640 12.2% 331,387 77,376 254,011 23.3% 1,203,884 445,705 758,179 37.0% 7,810,897 1,287,067 6,523,830 16.5%	Year ended 31 December 2011 Gross Premiums written ceded to Net written Ceding premiums reinsurers premiums ratio RMB’000 RMB’000 RMB’000 % 4,610,621 344,911 4,265,710 7.5% 187,973 36,889 151,084 19.6% 1,008,027 388,312 619,715 38.5% 5,806,621 770,112 5,036,509 13.3% Year ended 31 December 2012 Gross Premiums written ceded to Net written Ceding premiums reinsurers premiums ratio RMB’000 RMB’000 RMB’000 % 6,275,626 763,986 5,511,640 12.2% 331,387 77,376 254,011 23.3% 1,203,884 445,705 758,179 37.0% 7,810,897 1,287,067 6,523,830 16.5%
		16.5%

Claims development

Claims development information for the property and casualty insurance business is disclosed below in order to illustrate the insurance risk inherent in the Company. The tables provide a review of current estimates of the cumulative claims and demonstrate how the estimated claims have changed at subsequent reporting or underwriting year-ends. The estimates increased or decreased as losses are paid and more information becomes known about the frequency and severity of unpaid claims.

IIC – 35

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Analysis of claims development – gross of reinsurance

For the year ended 31 December 2010

Estimate of cumulative claims At the end of accident year One year later Two years later Three years later Four years later Estimate of cumulative claims Cumulative payments to date Liabilities in respect of accident years 2005 and earlier Total liabilities included in the statement of financial position	2006 RMB’000 1,073,633 974,891 1,106,279 1,102,672 1,102,785 1,102,785 (1,090,882) 11,903	2007 RMB’000 1,685,276 1,580,369 1,581,974 1,581,479 – 1,581,479 (1,546,743) 34,736	Accident year 2008 2009 RMB’000 RMB’000 2,768,025 2,648,785 2,703,232 2,548,966 2,710,610 – – – – – 2,710,610 2,548,966 (2,554,140) (2,212,914) 156,470 336,052	2010 RMB’000 2,861,176 – – – – 2,861,176 (1,381,152) 1,480,024	Total RMB’000
					10,805,016 (8,785,831)
					2,019,185 125,695
					2,144,880

IIC – 36

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

For the year ended 31 December 2011

Estimate of cumulative claims At the end of accident year One year later Two years later Three years later Four years later Estimate of cumulative claims Cumulative payments to date Liabilities in respect of accident years 2006 and earlier Total liabilities included in the statement of financial position	2007 RMB’000 1,685,276 1,580,369 1,581,974 1,581,479 1,584,224 1,584,224 (1,562,529) 21,695	2008 RMB’000 2,768,025 2,703,232 2,710,610 2,710,826 – 2,710,826 (2,640,794) 70,032	Accident year 2009 2010 RMB’000 RMB’000 2,648,785 2,861,176 2,548,966 2,587,549 2,576,208 – – – – – 2,576,208 2,587,549 (2,405,243) (2,157,519) 170,965 430,030	2011 RMB’000 3,136,096 – – – – 3,136,096 (1,584,168) 1,551,928	Total RMB’000
					12,594,903 (10,350,253)
					2,244,650 134,332
					2,378,982

IIC – 37

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

For the year ended 31 December 2012

Estimate of cumulative claims At the end of accident year One year later Two years later Three years later Four years later Estimate of cumulative claims Cumulative payments to date Liabilities in respect of accident years 2007 and earlier Total liabilities included in the statement of financial position	2008 RMB’000 2,768,025 2,703,233 2,710,610 2,710,826 2,697,865 2,697,865 (2,653,856) 44,009	2009 RMB’000 2,648,785 2,548,966 2,576,208 2,513,836 – 2,513,836 (2,447,710) 66,126	Accident year 2010 2011 RMB’000 RMB’000 2,861,176 3,136,096 2,587,549 2,781,305 2,507,402 – – – – – 2,507,402 2,781,305 (2,354,026) (2,371,157) 153,376 410,148	2012 RMB’000 3,808,559 – – – – 3,808,559 (2,031,069) 1,777,490	Total RMB’000
					14,308,967 (11,857,818)
					2,451,149 165,482
					2,616,631

IIC – 38

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Analysis of claims development – net of reinsurance

For the year ended 31 December 2010

Estimate of cumulative claims At the end of accident year One year later Two years later Three years later Four years later Estimate of cumulative claims Cumulative payments to date Liabilities in respect of accident years 2005 and earlier Total liabilities included in the statement of financial position	2006 RMB’000 813,012 831,295 846,411 839,971 839,189 839,189 (830,107) 9,082	2007 RMB’000 1,349,033 1,264,976 1,271,754 1,274,013 – 1,274,013 (1,249,501) 24,512	Accident year 2008 2009 RMB’000 RMB’000 2,100,324 2,296,288 2,137,042 2,241,936 2,143,568 – – – – – 2,143,568 2,241,936 (2,057,663) (1,972,556) 85,905 269,380	2010 RMB’000 2,498,892 – – – – 2,498,892 (1,247,815) 1,251,077	Total RMB’000
					8,997,598 (7,357,642)
					1,639,956 111,505
					1,751,461

IIC – 39

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

For the year ended 31 December 2011

Estimate of cumulative claims At the end of accident year One year later Two years later Three years later Four years later Estimate of cumulative claims Cumulative payments to date Liabilities in respect of accident years 2006 and earlier Total liabilities included in the statement of financial position	2007 RMB’000 1,349,033 1,264,976 1,271,754 1,274,013 1,277,064 1,277,064 (1,259,698) 17,366	2008 RMB’000 2,100,324 2,137,042 2,143,568 2,159,961 – 2,159,961 (2,106,664) 53,297	Accident year 2009 2010 RMB’000 RMB’000 2,296,288 2,498,892 2,241,936 2,280,435 2,272,148 – – – – – 2,272,148 2,280,435 (2,140,266) (1,934,863) 131,882 345,572	2011 RMB’000 2,759,832 – – – – 2,759,832 (1,427,417) 1,332,415	Total RMB’000
					10,749,440 (8,868,908)
					1,880,532 119,252
					1,999,784

IIC – 40

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

For the year ended 31 December 2012

Estimate of cumulative claims At the end of accident year One year later Two years later Three years later Four years later Estimate of cumulative claims Cumulative payments to date Liabilities in respect of accident years 2007 and earlier Total liabilities included in the statement of financial position	2008 RMB’000 2,100,324 2,137,042 2,143,568 2,159,961 2,143,353 2,143,353 (2,115,971) 27,382	2009 RMB’000 2,296,288 2,241,936 2,272,148 2,229,024 – 2,229,024 (2,176,306) 52,718	Accident year 2010 2011 RMB’000 RMB’000 2,498,892 2,759,832 2,280,435 2,454,271 2,223,783 – – – – – 2,223,783 2,454,271 (2,104,454) (2,119,305) 119,329 334,966	2012 RMB’000 3,299,371 – – – – 3,299,371 (1,813,661) 1,485,710	Total RMB’000 12,349,802 (10,329,697)
					2,020,105 141,412
					2,161,517

IIC – 41

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Sensitivity analysis

Outstanding claim reserves:

The sensitivity analysis below has been determined based on the exposure to insurance risks at the end of the reporting periods and management’s assessment of the reasonable possible change in the development factor of claims outstanding.

Impact on net outstanding claim provisions

		Year	ended 31 December	ended 31 December
	Change	2010	2011	2012
		RMB’000	RMB’000	RMB’000
Claim development
factors of
compulsory third-
party liability
insurance for the	+3%	61	53	74
last 4 quarters	–3%	(61)	(55)	(77)
Claim development
factors of third
party liability
insurance for the	+3%	29	24	37
last 4 quarters	–3%	(29)	(24)	(37)
Claim development
factors of motor
insurance for the	+3%	56	65	79
last 4 quarters	–3%	(57)	(65)	(81)

IIC – 42

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Categories of financial instruments

The carrying amounts of the Company’s financial assets at the reporting date were as follows:

Financial assets – held-to-maturity securities – available-for-sale securities – held-for-trading securities – designated at fair value through profit or loss – loans and receivables – debt schemes – debt securities – others (including bank balances and cash)	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 748,244 669,869 981,443 2,311,595 2,504,379 2,626,407 84,323 9,449 – – – 200,000 195,200 424,526 592,667 50,000 280,000 280,000 2,095,492 2,720,226 3,400,715 5,484,854 6,608,449 8,081,232	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 748,244 669,869 981,443 2,311,595 2,504,379 2,626,407 84,323 9,449 – – – 200,000 195,200 424,526 592,667 50,000 280,000 280,000 2,095,492 2,720,226 3,400,715 5,484,854 6,608,449 8,081,232
		8,081,232

IIC – 43

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Financial risk management objective and policies

The carrying amounts of the Company’s financial liabilities at the reporting date were as follows:

Financial liabilities measured at amortised cost – Interest-bearing notes – Securities sold under repurchase agreements – Amounts due to related companies – Other payables	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 700,000 700,000 700,000 – 500,000 280,000 10,246 11,632 9,597 509,667 600,431 727,508 1,219,913 1,812,063 1,717,105	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 700,000 700,000 700,000 – 500,000 280,000 10,246 11,632 9,597 509,667 600,431 727,508 1,219,913 1,812,063 1,717,105
		1,717,105

Transactions in financial instruments and insurance assets/liabilities may result in the Company assuming financial risks. These include market risk, credit risk and liquidity risk. Each of these financial risks is described below, together with a summary of the ways in which the Company manages these risks.

Market risk

Market risk can be described as the risk of change in fair value of a financial instrument due to changes in interest rates, equity prices or foreign currency exchange rates or in cash flows from a financial instrument due to changes in interest rate.

Interest rate risk

Interest rate risk is risk to future cashflows or fair value of a financial instrument due to uncertain future market interest rates.

The Company monitors this exposure through periodic reviews of its financial instruments. Estimates of cash flows, as well as the impact of interest rate fluctuations, relating to the investment portfolio are modelled and reviewed periodically.

IIC – 44

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Fair value interest rate risk

The Company is exposed to fair value interest rate risk in relation to the fixed deposits at banks and debt investments classified as held-to-maturity, loans and receivables, held-for-trading, available-for-sale and designated as at fair value through profit or loss.

Sensitivity analysis

The sensitivity analysis below has been determined assuming that the change in interest rates had occurred at the end of the reporting period and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date. The analysis is prepared assuming the financial instruments outstanding at the end of the Relevant Periods were outstanding for the whole year. The basis point increase or decrease as stated below is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible charge in interest rate.

If interest rate of the debt investment classified as available-for-sale increased/ decreased by 100 basis points, with all other variables held constant, the Company’s total equity for the Relevant Periods would decrease/increase as follows:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Change in fair value reserve
(+ 100 basis points)	(26,618)	(60,584)	(50,477)
Change in fair value reserve
(– 100 basis points)	71,673	58,686	54,822

The fair value interest rate risk arising from debt investments classified as heldfor-trading or designated as at fair value through profit or loss is considered to be insignificant.

Cash flow interest rate risk

The Company is exposed to cash flow interest rate risk in relation to deposits with banks which carry variable-rate interest.

IIC – 45

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Sensitivity analysis

If interest rate of variable-rate bank deposits had been increased/decreased by 10 basis points, with all other variables held constant, the Company’s post-tax profit for the Relevant Periods would increase/decrease as follows:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Post-tax profit for the year	998	1,066	827

Equity price risk

The Company has a portfolio of marketable securities, which is carried at fair value and is exposed to price risk. This risk is defined as the potential loss in market value resulting from an adverse change in prices. The Company manages the equity price risk by investing in a diverse portfolio of high quality and liquid securities.

Sensitivity analysis

The sensitivity analyses below are determined based on the exposure to equity price risks at 31 December 2010, 2011 and 2012. If the prices of the respective equity securities and investment funds had been 10% higher/lower, the Company’s fair value reserve as a result of the changes in fair value of available-for-sale securities would increase/decrease as follows:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Fair value reserve	43,820	27,238	26,732

IIC – 46

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Foreign exchange risk

The Company’s exposure to foreign currency risk arises primarily from investments and bank balances in US dollars (“US$”) and HK Dollars (“HK$”). The Company currently does not have a foreign currency hedging policy. The table below summarises the Company’s exposure to foreign currency risk. The Company’s monetary assets and liabilities at carrying amounts which mainly are bank balances and cash and insurance creditors, categorised by currency, are included in the table below:

Assets/liabilities denominated in

As at 31 December 2010 Total assets Total liabilities Net position As at 31 December 2011 Total assets Total liabilities Net position As at 31 December 2012 Total assets Total liabilities Net position	US$ RMB’000 229,921 31,640 198,281 112,054 68,841 43,213 317,097 76,526 240,571	HK$ RMB’000 231,811 3,057 228,754 50,663 2,063 48,600 126,252 27,282 98,970	Other currencies RMB’000 411 29 382 569 125 444 472 153 319	Total RMB’000 462,143 34,726
				427,417

				163,286 71,029
				92,257

				443,821 103,961
				339,860

IIC – 47

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Sensitivity analysis

The following table details the Company’s sensitivity to a 5% increase or decrease in RMB against the foreign currency, which is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates.

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Post-tax profit for the year	16,669	3,506	12,744

Credit risk

Credit risk is the risk of economic loss resulting from the failure of one of the obligors to make any payment of principal or interest when due.

The Company’s maximum exposure to credit risk which will cause a financial loss to the Company due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the statement of financial position.

The Company is exposed to credit risks primarily associated with bank deposits, insurance debtors, investments in debt securities, reinsurance arrangements with reinsurers and other debtors.

IIC – 48

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Statutory deposits and deposits with banks Investments in debt securities and debt schemes Amount due from related companies Reinsurers’ share of insurance contract provisions Insurance debtors Other debtors	31 December 2010 RMB’000 % of total 2,293,011 38% 2,757,669 46% 748 1% 656,122 11% 136,397 2% 115,680 2% 5,959,627 100.00%	31 December 2011 RMB’000 % of total 2,948,308 39% 3,529,826 47% 310 1% 645,918 8% 251,628 3% 185,593 2% 7,561,583 100.00%	31 December 2012 RMB’000 % of total 3,627,052 38% 4,324,201 45% 304 1% 989,504 10% 311,636 3% 247,345 3% 9,500,042 100.00%	31 December 2012 RMB’000 % of total 3,627,052 38% 4,324,201 45% 304 1% 989,504 10% 311,636 3% 247,345 3% 9,500,042 100.00%
				100.00%

To reduce the credit risk associated with the investments in debt securities, the Company has established detailed credit control policy. In addition, the risk level of the various investment sectors is continuously monitored with the investment mix adjusted accordingly. In respect of the debt securities in the PRC, the investment procedures manual, which is managed by an investment committee, includes the minimum acceptable domestic credit rating of the issuers as required by The China Insurance Regulatory Commission (“CIRC”). Any non-compliance or violation of the manual will be followed up and rectification action will be taken immediately.

No less than 95% of the Company’s investments in debt securities from banks and other financial institutions has a credit rating of A or above, while for debt securities from corporate entities no less than 97% has a credit rating of A or above. The credit ratings for debt securities refer to domestic credit ratings.

The Company’s liquid funds have been deposited with banks of high credit rating, so the credit risk related to liquid funds is considered to be low.

In order to minimise the credit risk arising from insurance and other debtors, the Company has designated personnel to monitor and chase overdue receivables. In addition, the Company monitors the recoverability of its receivables, and for those receivables deemed uncollectable, adequate bad debt provision has been provided. The Company also spreads out the credit risk on reinsurance receivables by reinsuring with a number of reinsurers. As a result of these measures, the Company’s management believes that its exposure to credit risk has been minimised.

IIC – 49

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Liquidity risk

The Company has to meet daily calls on its cash resources, notably from claims arising from its property and casualty insurance contracts and reinsurance contracts. There is, therefore, a risk that cash will not be available to settle liabilities when due.

The Company manages this risk by formulating policies and general strategies of liquidity management to ensure that the Company can meet its financial obligations in normal circumstances and that an adequate stock of high-quality liquid assets is maintained in order to contain the possibility of a liquidity crisis.

Apart from liquidity management and regulatory compliance, the Company always strives to maintain a comfortable liquidity cushion as a safety net for coping with unexpected large funding requirements and to maintain a contingency plan to be enacted should there be a company specific crisis.

The following table details the remaining contractual obligations for its financial and insurance related financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial and insurance related liabilities by reference to the earliest date on which the Company can be required to pay and includes both interest and principal cash flows.

At 31 December 2010 Financial liabilities: Interest-bearing notes Amounts due to related companies Other payables Outstanding claims provisions Insurance creditors	1 year or less RMB’000 44,100 10,246 509,667 2,144,880 577,711 3,286,604	5 years or less but over 1 year RMB’000 176,400 – – – – 176,400	After 5 years RMB’000 832,300 – – – – 832,300	Total undiscounted cashflows RMB’000 1,052,800 10,246 509,667 2,144,880 577,711 4,295,304	Carrying value at 31 December RMB’000 700,000 10,246 509,667 2,144,880 577,711
					3,942,504

IIC – 50

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

At 31 December 2011 Financial liabilities: Interest-bearing notes Securities sold under repurchase agreements Amounts due to related companies Other payables Outstanding claims provisions Insurance creditors At 31 December 2012 Financial liabilities: Interest-bearing notes Securities sold under repurchase agreements Amounts due to related companies Other payables Outstanding claims provisions Insurance creditors	1 year or less RMB’000 44,221 500,523 11,632 600,431 2,378,982 823,542 4,359,331 1 year or less RMB’000 44,100 280,126 9,597 727,508 1,916,852 1,044,651 4,022,834	5 years or less but over 1 year RMB’000 232,400 – – – – – 232,400 5 years or less but over 1 year RMB’000 232,400 – – – 682,620 – 915,020	After 5 years RMB’000 816,200 – – – – – 816,200 After 5 years RMB’000 758,100 – – – 17,159 – 775,259	Total undiscounted cashflows RMB’000 1,092,821 500,523 11,632 600,431 2,378,982 823,542 5,407,931 Total undiscounted cashflows RMB’000 1,034,600 280,126 9,597 727,508 2,616,631 1,044,651 5,713,113	Carrying value at 31 December RMB’000 700,000 500,000 11,632 600,431 2,378,982 823,542
					5,014,587

					Carrying value at 31 December RMB’000 700,000 280,000 9,597 727,508 2,616,631 1,044,651
					5,378,387

IIC – 51

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Capital management

The Company’s key business operations are its property and casualty insurance business. The Company manages its capital to ensure that it will be able to meet statutory solvency requirements for property and casualty insurance business, which are set out in the Solvency Reporting Standards for Insurance Companies issued by CIRC. The Company’s capital management initiatives also strive to maintain a surplus for future business expansion opportunities. The Company’s overall capital management strategy remains unchanged throughout the Relevant Periods. The Company’s capital includes the components of total equity and interest-bearing notes. The Company complied with the various solvency requirements throughout the Relevant Periods.

5. Gross premiums written

Revenue represents gross premiums written from property and casualty insurance.

6. Investment income

Net investment income (note (a)) Net realised investment losses (note (b)) Net unrealised investment losses and impairment (note (c))	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 200,699 229,195 309,517 (5,633) (10,599) (74,908) – (6,487) (279) 195,066 212,109 234,330

IIC – 52

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

(a)
Net investment income
Interest income from debt
securities (note (i)):
– Held-to-maturity
– Available-for-sale
– Designated at fair value
through profit or loss
– Loans and receivables
Dividend income from equity
securities (note (ii)):
– Available-for-sale
Dividend income from investment
funds (note (iii)):
– Available-for-sale
– Held-for-trading
Interest income from bank deposits
Interest income from securities
purchase under resale agreement
Interest expenses on securities sold
under repurchase agreements

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
36,297
33,798
35,372
49,431
72,741
90,731
–
–
12,074
7,972
28,146
46,320
93,700
134,685
184,497
1,538
4,306
4,324
55,173
7,930
6,135
20
–
–
55,193
7,930
6,135
53,810
83,216
115,612
317
420
620

(3,859)
(1,362)
(1,671)
200,699
229,195
309,517

IIC – 53

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Notes:
(i)
Interest income from debt
securities and debt
schemes:
Listed
Unlisted
(ii) Dividend income from
equity securities:
Listed
(iii) Dividend income from
investment funds:
Listed
Unlisted
(b)
Net realised investment losses
Debt securities (note (i)):
– Available-for-sale
– Held-for-trading
Equity securities (note (ii)):
– Available-for-sale
Investment funds (note(iii)):
– Available-for-sale

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
13,657
25,602
43,790
80,043
109,083
140,707
93,700
134,685
184,497
1,538
4,306
4,324
44,491
3,869
–
10,702
4,061
6,135
55,193
7,930
6,135
Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
(570)
(11,423)
(3,158)
–
236
(943)
(570)
(11,187)
(4,101)
10,257
39,562
(19,705)
(15,320)
(38,974)
(51,102)
(5,633)
(10,599)
(74,908)

IIC – 54

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Notes: (i) Net realised investment gains (losses) on debt securities: Listed Unlisted (ii) Net realised investment gains (losses) on equity securities: Listed Unlisted, at cost (note 34(a)(iii)) (iii) Net realised investment gains (losses) on investment funds: Listed Unlisted	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (1,239) 238 (944) 669 (11,425) (3,157) (570) (11,187) (4,101) 10,257 25,130 (19,705) – 14,432 – 10,257 39,562 (19,705) (31,347) (34,136) (45,790) 16,027 (4,838) (5,312) (15,320) (38,974) (51,102)

IIC – 55

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

(c) Net unrealised investment (losses) gains and impairment Debt securities (note (i)): – Held-for-trading – Designated at fair value through profit or loss Impairment loss recognised: – Available-for-sale equity securities and investment funds Notes: (i) Net unrealised investment (losses) gains on debt securities: Listed	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – (1,092) – – – 1,449 – (1,092) 1,449 – (5,395) (1,728) – (6,487) (279) – (1,092) 1,449	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – (1,092) – – – 1,449 – (1,092) 1,449 – (5,395) (1,728) – (6,487) (279) – (1,092) 1,449
		1,449 (1,728)
		(279)

		1,449

7. Other income/other (losses) gains

(a) Other income

Other commission income Government grants	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 11,635 16,565 21,551 1,288 1,492 2,343 12,923 18,057 23,894	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 11,635 16,565 21,551 1,288 1,492 2,343 12,923 18,057 23,894
		23,894

IIC – 56

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

(b) Other (losses) gains

Gain (loss) on disposal of property and equipment Recognition (reversal) of impairment loss on insurance debtors and other debtors Net exchange loss Others	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 213 (232) (45) (14,710) (1,179) 2,278 (17,963) (21,240) (316) (11,732) 4,350 5,353 (44,192) (18,301) 7,270

8. Net policyholders’ benefits and net commission expenses

(a) Net policyholders’ benefits

Claims and claim adjustments expenses Less: Reinsurers’ and retrocessionaires’ share	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 2,788,059 2,843,641 3,496,084 (317,225) (250,473) (434,728) 2,470,834 2,593,168 3,061,356

(b) Net commission expenses

Gross commission expenses Less: Reinsurance commission income	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 381,400 454,768 686,654 (229,683) (306,155) (573,757) 151,717 148,613 112,897

IIC – 57

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

9. Profit before taxation

Profit before taxation is arrived at after charging:

(a) Finance costs: Interest on interest-bearing notes (b) Staff costs (including directors’ remuneration): Salaries, wages, bonuses and other benefits Contributions to defined contribution retirement plans (c) Other items: Auditor’s remuneration Depreciation of property and equipment Amortisation of prepaid lease payments Operating lease charges in respect of properties Business tax and additional charges	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 44,100 44,100 44,221 507,244 598,148 731,446 32,535 38,127 53,739 539,779 636,275 785,185 720 730 790 51,833 52,659 55,114 1,823 1,823 1,823 63,047 50,381 57,628 296,918 325,991 432,310 414,341 431,584 547,665	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 44,100 44,100 44,221 507,244 598,148 731,446 32,535 38,127 53,739 539,779 636,275 785,185 720 730 790 51,833 52,659 55,114 1,823 1,823 1,823 63,047 50,381 57,628 296,918 325,991 432,310 414,341 431,584 547,665

		731,446 53,739
		785,185

		790 55,114 1,823 57,628 432,310
		547,665

10. Directors’ and chief executive’s remuneration and individuals with highest emoluments

IIC – 58

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

11. Income tax credit (charge)

(a) Income tax (credit) charge in the statement of comprehensive income represents:

Current tax – Enterprise Income Tax Provision for the year Under (over) provision in respect of prior years Deferred tax (note 22) Income tax (credit) charge	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – – 8,944 184 221 (1,050) 184 221 7,894 (20,291) 2,642 – (20,107) 2,863 7,894

Taxation outside Hong Kong is calculated at the rates prevailing in the relevant jurisdictions. Under the Enterprise Income Tax Law of the PRC, the enterprise income tax rates for domestic companies in the PRC is 22%, 24% and 25% for the years ended 31 December 2010, 2011 and 2012, respectively.

(b) Reconciliation between tax charge and accounting profit at applicable tax rates:

Profit before taxation Tax at the domestic income tax rates Tax effect of non-deductible expenses Tax effect of non-taxable income Tax effect of deductible temporary differences not recognised Utilisation of tax loss not previously recognised Under (over) provision in prior years Tax (credit) charge for the year	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 26,267 143,866 202,711 5,779 34,528 50,678 3,396 5,390 8,767 (12,174) (4,303) (6,089) 62,903 13,285 (44,412) (80,195) (46,258) – 184 221 (1,050) (20,107) 2,863 7,894

IIC – 59

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

12. Property and equipment and prepaid lease payments

Property and equipment Land and buildings Construction in progress Other fixed assets RMB’000 RMB’000 RMB’000 242,517 12,621 301,766 777 67,563 19,263 – – (17,283) 28,801 (33,566) 4,765 272,095 46,618 308,511 4,764 44,469 58,195 – – (36,091) 14,684 (35,754) 21,070 291,543 55,333 351,685 2,032 46,412 51,716 – – (20,528) – (7,928) 7,928 293,575 93,817 390,801 18,079 – 160,629 6,973 – 44,860 – – (12,762) 25,052 – 192,727 7,218 – 45,441 – – (14,023) 32,270 – 224,145 7,993 – 47,121 – – (15,748) 40,263 – 255,518 247,043 46,618 115,784 259,273 55,333 127,540 253,312 93,817 135,283	Property and equipment Land and buildings Construction in progress Other fixed assets RMB’000 RMB’000 RMB’000 242,517 12,621 301,766 777 67,563 19,263 – – (17,283) 28,801 (33,566) 4,765 272,095 46,618 308,511 4,764 44,469 58,195 – – (36,091) 14,684 (35,754) 21,070 291,543 55,333 351,685 2,032 46,412 51,716 – – (20,528) – (7,928) 7,928 293,575 93,817 390,801 18,079 – 160,629 6,973 – 44,860 – – (12,762) 25,052 – 192,727 7,218 – 45,441 – – (14,023) 32,270 – 224,145 7,993 – 47,121 – – (15,748) 40,263 – 255,518 247,043 46,618 115,784 259,273 55,333 127,540 253,312 93,817 135,283	Total RMB’000 648,059 87,603 (17,283) –
Land and buildings RMB’000 242,517 777 – 28,801 272,095 4,764 – 14,684 291,543 2,032 – – 293,575 18,079 6,973 – 25,052 7,218 – 32,270 7,993 – 40,263 247,043 259,273 253,312	Construction in progress RMB’000 12,621 67,563 – (33,566) 46,618 44,469 – (35,754) 55,333 46,412 – (7,928) 93,817 – – – – – – – – – – 46,618 55,333 93,817
		718,379 107,428 (36,091) –
		789,716 100,160 (20,528) –
		869,348

		181,899 53,656 (12,762)
		222,793 54,482 (14,023)
		263,252 56,937 (15,748)
		304,441
		495,586

		526,464

		564,907

IIC – 60

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Land and buildings

The analysis of net book value of land and buildings was as follows:

Outside Hong Kong – Medium-term leases Prepaid lease payments Prepaid lease payments comprises: Leasehold land outside Hong Kong – Long lease Current Non-current	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 247,043 259,273 253,312 Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 86,141 84,318 82,495 1,823 1,823 1,823 84,318 82,495 80,672 86,141 84,318 82,495	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 247,043 259,273 253,312 Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 86,141 84,318 82,495 1,823 1,823 1,823 84,318 82,495 80,672 86,141 84,318 82,495

		1,823 80,672
		82,495

The prepaid lease payments are depreciated over the shorter of the unexpired terms of the leases and their estimated useful lives.

The above items of property and equipment other than construction in progress are depreciated on a straight-line basis at following rates per annum:

Land and buildings	2.7%
Other fixed assets including motor vehicles,
furniture and fixtures, and computer equipment	15.8% – 31.7%

IIC – 61

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

13. Investments in securities

Held-to-maturity securities Debt securities, at amortised cost – Listed outside Hong Kong – Unlisted Sub-total of held-to-maturity securities Fair value of securities Available-for-sale securities: Debt securities, at fair value – Listed outside Hong Kong – Unlisted Equity securities, at fair value – Listed in Hong Kong – Listed outside Hong Kong Equity securities, at cost – Unlisted (Note 1) Investment funds, at fair value (Note 2) – Listed outside Hong Kong – Unlisted Sub-total of available-for-sale securities Fair value of securities	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 240,003 161,506 472,950 508,241 508,363 508,493 748,244 669,869 981,443 753,127 668,889 979,289 16,884 569,162 818,842 1,663,018 1,576,820 1,451,249 1,679,902 2,145,982 2,270,091 97,739 68,019 17,616 318,941 138,021 78,775 416,680 206,040 96,391 69,900 – – 31,937 70,280 122,754 113,176 82,077 137,171 145,113 152,357 259,925 2,311,595 2,504,379 2,626,407 2,326,018 2,504,379 2,626,407	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 240,003 161,506 472,950 508,241 508,363 508,493 748,244 669,869 981,443 753,127 668,889 979,289 16,884 569,162 818,842 1,663,018 1,576,820 1,451,249 1,679,902 2,145,982 2,270,091 97,739 68,019 17,616 318,941 138,021 78,775 416,680 206,040 96,391 69,900 – – 31,937 70,280 122,754 113,176 82,077 137,171 145,113 152,357 259,925 2,311,595 2,504,379 2,626,407 2,326,018 2,504,379 2,626,407
		981,443
		979,289
		818,842 1,451,249
		2,270,091
		17,616 78,775
		96,391
		–
		122,754 137,171
		259,925
		2,626,407
		2,626,407

IIC – 62

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Notes:

(1) The unlisted equity securities are issued by private entities incorporated in the PRC. They are measured at cost at the end of the reporting period as the management considers that their fair values cannot be measured reliably.
(2) The Company invests in open-ended or close-ended investment funds with underlying assets of equity, bond or composite funds.

Held-for-trading securities: Debt securities, at fair value – unlisted Sub-total of held-for-trading investments Securities designated at fair value through profit or loss: Debt securities, at fair value – Unlisted Sub-total of securities designated at fair value through profit or loss Loans and receivables – Debt schemes – unlisted – Debt securities – unlisted Sub-total of securities classified as loans and receivables Fair value of securities classified as loans and receivables Total Analysed for reporting purpose as: Current Non-current Total investments in securities	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 84,323 9,449 – 84,323 9,449 – – – 200,000 – – 200,000 195,200 424,526 592,667 50,000 280,000 280,000 245,200 704,526 872,667 235,687 673,299 870,182 3,389,362 3,888,223 4,680,517 338,557 9,449 633,448 3,050,805 3,878,774 4,047,069 3,389,362 3,888,223 4,680,517	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 84,323 9,449 – 84,323 9,449 – – – 200,000 – – 200,000 195,200 424,526 592,667 50,000 280,000 280,000 245,200 704,526 872,667 235,687 673,299 870,182 3,389,362 3,888,223 4,680,517 338,557 9,449 633,448 3,050,805 3,878,774 4,047,069 3,389,362 3,888,223 4,680,517
		–
		200,000
		200,000
		592,667 280,000
		872,667
		870,182
		4,680,517

		633,448 4,047,069
		4,680,517

IIC – 63

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

The debt schemes relate to finance for infrastructure projects in the PRC. The debt schemes as at 31 December 2010 will mature from 2015 to 2020 and bear interest at rates ranging from 5% to 6% per annum. The debt schemes as at 31 December 2011 will mature from 2015 to 2021 and bear interest at rates ranging from 5% to 6% per annum. The debt schemes as at 31 December 2012 will mature from 2015 to 2021 and bear interest at rates ranging from 5% to 7% per annum. The fair value of the debt schemes are determined with reference to the estimated cashflows discounted using current market interest rates as at the end of the each reporting period.

The maturity date of the debt securities which were outstanding as at 31 December 2010, 2011 and 2012 range from 2011 to 2020, 2012 to 2020 and 2013 to 2020, respectively and their interest rates range from 0.5% to 5.7%, 0.8% to 5.7%, 0.8% to 5.7% per annum, respectively.

None of the held-to-maturity securities and securities classified as loans and receivables are past due or impaired.

14. Amounts due from (to) related companies

(a) Due from related companies

Amount due from the ultimate holding company Amounts due from fellow subsidiaries	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 448 – – 300 310 304 748 310 304	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 448 – – 300 310 304 748 310 304
		304

The amounts from related companies are unsecured, interest-free and repayable on demand.

IIC – 64

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

(b) Due to related companies

Amount due to the ultimate holding company Amount due to the immediate holding company Amounts due to fellow subsidiaries	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,030 – 1,716 556 276 207 8,660 11,356 7,674 10,246 11,632 9,597	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,030 – 1,716 556 276 207 8,660 11,356 7,674 10,246 11,632 9,597
		9,597

The amounts due to related companies are unsecured, interest-free and repayable on demand.

15. Insurance debtors

Amounts due from insurance customers, reinsurers and intermediaries Less: allowance for impaired debts (note (b))	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 216,113 331,514 388,979 (79,716) (79,886) (77,343) 136,397 251,628 311,636	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 216,113 331,514 388,979 (79,716) (79,886) (77,343) 136,397 251,628 311,636
		311,636

Included in the amounts of insurance debtors is an amount of RMB125,255,000, RMB251,591,000 and RMB308,708,000 as at 31 December 2010, 2011 and 2012 respectively, which is expected to be recovered within one year.

As at 31 December 2010, 2011 and 2012 amounts due from insurance customers, reinsurers and intermediaries include amounts due from fellow subsidiaries of RMB3,414,000, RMB4,997,000 and RMB9,905,000, respectively.

IIC – 65

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

(a) Ageing analysis

The following is an ageing analysis of the amounts due from insurance customers, reinsurers and intermediaries:

Not yet due Within 3 months More than 3 months but less than 12 months More than 12 months	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 62,108 192,095 171,568 39,975 38,565 59,414 23,172 20,931 77,726 11,142 37 2,928 136,397 251,628 311,636	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 62,108 192,095 171,568 39,975 38,565 59,414 23,172 20,931 77,726 11,142 37 2,928 136,397 251,628 311,636
		311,636

Amounts due from insurance customers, reinsurers and intermediaries that were neither past due nor impaired relate to a wide range of counterparties for whom there was no recent history of default. The credit terms on insurance debtors is repayable on demand up to 30 days. No interest is charged on the insurance debtors.

Amounts due from insurance customers, reinsurers and intermediaries that were past due but not impaired relate to a number of independent policyholders and reinsurers that have a good track record with the Company. Based on past experience, the directors believe that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Company does not hold any collateral over these balances.

The amount of impaired debt is RMB79,716,000, RMB79,886,000 and RMB79,343,000 as at 31 December 2010, 2011 and 2012, respectively. Various actions have been taken to recover the debts, but these debts have not been recovered and hence full impairment is provided.

IIC – 66

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

(b) Movement in the allowance for impaired debts

At 1 January Recognition (reversal) of impairment losses Exchange difference	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 67,131 79,716 79,886 12,585 175 (2,546) – (5) 3 79,716 79,886 77,343	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 67,131 79,716 79,886 12,585 175 (2,546) – (5) 3 79,716 79,886 77,343
		77,343

16. Reinsurers’ share of insurance contract provisions

The reinsurers’ share of insurance contract provisions represents the reinsurers’ share of unearned premium provisions and outstanding claims provisions arising from the property and casualty insurance.

Unearned premium provisions (note 20) Outstanding claims provisions (note 21)	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 262,703 266,720 534,390 393,419 379,198 455,114 656,122 645,918 989,504	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 262,703 266,720 534,390 393,419 379,198 455,114 656,122 645,918 989,504
		989,504

IIC – 67

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

17. Other debtors

Interest receivable Other debtors, deposits and prepayments Less: allowance for impaired debts	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 61,592 102,736 143,729 104,593 150,246 184,088 (18,296) (19,300) (19,568) 147,889 233,682 308,249	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 61,592 102,736 143,729 104,593 150,246 184,088 (18,296) (19,300) (19,568) 147,889 233,682 308,249
		308,249

The amount of impaired debts are RMB18,296,000, RMB19,300,000 and RMB19,568,000 as at 31 December 2010, 2011 and 2012, respectively. The Company has taken various actions to recover the debts, but these debts have not yet been recovered and hence full impairment is recognised.

Movement in the allowance for impaired debts

At 1 January Impairment losses recognised At 31 December	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 16,171 18,296 19,300 2,125 1,004 268 18,296 19,300 19,568	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 16,171 18,296 19,300 2,125 1,004 268 18,296 19,300 19,568
		19,568

18. Statutory deposits

The Company placed deposits with banks as capital guarantee funds, pursuant to the relevant PRC insurance rules and regulations. The funds can only be used with the prior approval of the relevant authorities in the event that the Company cannot meet the statutory solvency requirements or goes into liquidation.

IIC – 68

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

19. Bank balances and cash

Deposits with banks and other financial institutions with original maturity less than three months Cash at bank and in hand Bank balances and cash Less: restricted bank deposits – cash received for capital contribution (note) Cash and cash equivalents in the statements of cash flows	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,279,011 1,402,803 1,102,448 63 15 14 1,279,074 1,402,818 1,102,462 (426,417) – – 852,657 1,402,818 1,102,462	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,279,011 1,402,803 1,102,448 63 15 14 1,279,074 1,402,818 1,102,462 (426,417) – – 852,657 1,402,818 1,102,462
		1,102,462 –
		1,102,462

Note:

The amount represents the capital contribution received by the Company in 2009 and was restricted since the necessary legal and administrative procedures for capital registration were not completed as at 31 December 2010. The capital registration was subsequently completed on 18 July 2011.

20. Unearned premium provisions

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As at 31 December 2010 As at 31 December 2011 As at 31 December 2012
Reinsures’ Reinsures’ Reinsures’
Gross Share Net Gross Share Net Gross Share Net
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
2,149,575 (262,703) 1,886,872 2,334,741 (266,720) 2,068,021 3,258,099 (534,390) 2,723,709
----- End of picture text -----

IIC – 69

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

Analysis of movement in the unearned premium provisions:

Balance as at 1 January Premiums written during the year Premiums earned during the year Balance as at 31 December	As a	t 31 December 2	010 Net RMB’000 1,617,359 4,652,205 (4,382,692) 1,886,872	As a	t 31 December 2	011 Net RMB’000 1,886,872 5,036,509 (4,855,360) 2,068,021	As a	t 31 December 2	012
	Gross RMB’000 1,832,613 5,353,682 (5,036,720) 2,149,575	Reinsures’ Share RMB’000 (215,254) (701,477) 654,028 (262,703)		Gross RMB’000 2,149,575 5,806,621 (5,621,455) 2,334,741	Reinsures’ Share RMB’000 (262,703) (770,112) 766,095 (266,720)		Gross RMB’000 2,334,741 7,810,897 (6,887,539) 3,258,099	Reinsures’ Share RMB’000 (266,720) (1,287,067) 1,019,397 (534,390)	Net RMB’000 2,068,021 6,523,830 (5,868,142)
									2,723,709

21. Outstanding claim provisions

As at 31 December 2010 Reinsures’ Gross Share Net RMB’000 RMB’000 RMB’000 2,144,880 (393,419) 1,751,461	As at 31 December 2011 Reinsures’ Gross Share Net RMB’000 RMB’000 RMB’000 2,378,982 (379,198) 1,999,784	As at 31 December 2012
		Reinsures’ Gross Share Net RMB’000 RMB’000 RMB’000 2,616,631 (455,114) 2,161,517

Analysis of movement in the outstanding claims provisions:

Balance as at 1 January Claims paid during the year Claims incurred during the year Balance as at 31 December	As a	t 31 December 2	010 Net RMB’000 1,307,107 (2,026,480) 2,470,834 1,751,461	As a	t 31 December 2	011 Net RMB’000 1,751,461 (2,344,845) 2,593,168 1,999,784	As a	t 31 December 2	012
	Gross RMB’000 1,652,058 (2,295,237) 2,788,059 2,144,880	Reinsures’ Share RMB’000 (344,951) 268,757 (317,225) (393,419)		Gross RMB’000 2,144,880 (2,609,539) 2,843,641 2,378,982	Reinsures’ Share RMB’000 (393,419) 264,694 (250,473) (379,198)		Gross RMB’000 2,378,982 (3,258,435) 3,496,084 2,616,631	Reinsures’ Share RMB’000 (379,198) 358,812 (434,728) (455,114)	Net RMB’000 1,999,784 (2,899,623) 3,061,356
									2,161,517

IIC – 70

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

22. Deferred tax assets and liabilities

Deferred tax assets recognised

The components of deferred tax assets recognised in the statement of financial position and the movements during the Relevant Periods were as follows:

At 1 January 2010 Credit to profit or loss (note 11) Charge to other comprehensive income At 31 December 2010 and 1 January 2011 (Charge) credit to profit or loss (note 11) Credit to other comprehensive income At 31 December 2011 and 1 January 2012 Credit (charge) to profit or loss (note 11) Charge to other comprehensive income At 31 December 2012	Fair value adjustment of available- for-sale securities RMB’000 (17,352) – (2,939) (20,291) – 26,956 6,665 426 (5,231) 1,860	Fair value adjustment of held-for- Unused trading tax losses securities RMB’000 RMB’000 – – 20,291 – – – 20,291 – (3,004) 362 – – 17,287 362 (17,287) (362) – – – –	Accrued expense RMB’000 – – – – – – – 10,889 – 10,889	Deferred revenue RMB’000 – – – – – – – 6,334 – 6,334	Total RMB’000 (17,352) 20,291 (2,939)
					– (2,642) 26,956
					24,314 – (5,231)
					19,083

At 31 December 2010 and 2011, the Company has unused tax losses of approximately RMB86 million and RMB69 million respectively, available for offset against future profits. A deferred tax asset has been recognised in respect of such losses. No deferred tax asset has been recognised in respect of the remaining RMB185 million at 31 December 2010 due to the unpredictability of future profit streams. The amount can be carried forward up to five years after the year in which the loss was originated to offset future taxable profits.

IIC – 71

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

At 31 December 2010, 2011 and 2012, the Company has deductible temporary differences primarily in respect of outstanding claims provisions and accrued expenses of approximately RMB856 million, RMB911 million and RMB733 million, respectively. No deferred tax asset has been recognised in relation to such deductible temporary differences as it is uncertain whether these can be utilised.

23. Interest-bearing notes

In 2008, the Company issued 6.3% subordinated notes at par for the principal amount of RMB700,000,000. The notes will mature in October 2018 but the notes can be redeemed at the fifth anniversary year of the issue date at par value at the discretion of the Company. Interest on the notes is payable annually in arrears.

The notes issued by the Company are free of any collateral but are unconditionally and irrevocably guaranteed by TPG.

The fair value of the interest-bearing notes is RMB701,103,000, RMB723,748,000 and RMB746,640,000 as at 31 December 2010, 2011 and 2012, respectively.

24. Insurance creditors

Amounts due to insurance customers and reinsurers Amounts due to insurance intermediaries Prepaid premiums received	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 220,130 276,684 407,390 79,318 82,842 127,916 278,263 464,016 509,345 577,711 823,542 1,044,651	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 220,130 276,684 407,390 79,318 82,842 127,916 278,263 464,016 509,345 577,711 823,542 1,044,651
		1,044,651

All of the amounts due to the insurance creditors are expected to be settled within one

year.

As at 31 December 2010, 2011 and 2012, amounts due to insurance customers, reinsurers and insurance intermediaries include amounts due to fellow subsidiaries of RMB20,116,000, RMB17,846,000 and RMB174,210,000, respectively.

All the amounts due to insurance creditors are current.

IIC – 72

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

25. Other payables and accruals

All of the other payables and accruals are expected to be settled within one year.

26. Insurance protection fund

The amount represents the amount payable to the insurance protection fund at end of the reporting period. According to the CIRC’s Order (2008) No. 2 “Administration rule on insurance protection fund”, the insurance protection fund is calculated on the basis of 0.8% of retained premium for accident and short-term health policies. The ceiling of the fund for a property and casualty insurance company is 6% of its total assets.

27. Securities sold under repurchase agreements

The Company entered into transactions in which it transferred financial assets directly to third parties. As the Company has not transferred the significant risks and rewards relating to these securities, it continues to recognise the full carrying amount of such securities and has recognised the cash received on the transfer as securities sold under repurchase agreements. The following were the Company’s available-for-sale securities as at 31 December 2010, 2011 and 2012 that were transferred to an entity with terms to repurchase these securities at the agreed dates and prices. These securities are measured at fair value in the Company’s statement of financial position.

Carrying amount of transferred assets Carrying amount of associated liabilities – securities sold under repurchase agreements Net position	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 506,770 280,625 – 500,000 280,000 – 6,770 625	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 506,770 280,625 – 500,000 280,000 – 6,770 625
		625

All of the securities sold under repurchase agreements are denominated in RMB and will be settled within one year from the end of the reporting period. The carrying amount of the securities sold under repurchase agreements approximate to their fair value.

As at 31 December 2011 and 2012, most of the securities sold under repurchase agreements will mature within 5 days and 4 days respectively, with interest rates of 5.5% and 4.1% per annum, respectively.

IIC – 73

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

28. Paid-in capital

Paid-in capital As at 1 January Addition As at 31 December	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,570,000 1,570,000 2,070,000 – 500,000 500,000 1,570,000 2,070,000 2,570,000	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,570,000 1,570,000 2,070,000 – 500,000 500,000 1,570,000 2,070,000 2,570,000
		2,570,000

During each of the year ended 31 December 2011 and 2012, the Company increased its paid-in capital each by RMB500 million.

29. Maturity profile

The following table details the Company’s contractual maturity for some of its financial assets and financial liabilities.

At 31 December 2010

Assets Deposits at banks and other financial institutions (including statutory deposits) Debt securities (under held-to-maturity) Debt securities (under available-for-sale) Debt securities (under held-for-trading) Debt securities (under loans and receivables) Debt schemes (under loans and receivables) Liabilities Interest-bearing notes	Repayable on demand RMB’000 882,110 – – – – – –	3 months or less RMB’000 456,901 – – – – – –	1 year or less but over 3 months RMB’000 – 79,976 174,258 – – – –	5 years or less but over 1 year RMB’000 – 378,513 1,087,750 – – – –	After 5 years RMB’000 954,000 289,755 417,894 84,323 50,000 195,200 700,000	Total RMB’000 2,293,011 748,244 1,679,902 84,323 50,000 195,200

						700,000

IIC – 74

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

At 31 December 2011

Assets Deposits at banks and other financial institutions (including statutory deposits) Debt securities (under held-to-maturity) Debt securities (under available-for-sale) Debt securities (under held-for-trading) Debt securities (under loans and receivables) Debt schemes (under loans and receivables) Liabilities Interest-bearing notes Securities sold under repurchase agreements At 31 December 2012 Assets Deposits at banks and other financial institutions (including statutory deposits) Debt securities (under held-to-maturity) Debt securities (under available-for-sale) Debt securities (under designated at fair value through profit or loss) Debt securities (under loans and receivables) Debt schemes (under loans and receivables) Liabilities Interest-bearing notes Securities sold under repurchase agreements	Repayable on demand RMB’000 1,140,612 – – – – – – – Repayable on demand RMB’000 1,102,448 – – – – – – –	3 months or less RMB’000 293,696 – 69,907 – – – – 500,000 3 months or less RMB’000 475,462 – 64 100,000 – – – 280,000	1 year or less but over 3 months RMB’000 – – – – – – – – 1 year or less but over 3 months RMB’000 25,142 43,058 390,326 100,000 – 50,000 – –	5 years or less but over 1 year RMB’000 1,314,000 330,094 1,522,998 9,449 – 370,000 – – 5 years or less but over 1 year RMB’000 2,024,000 438,696 1,611,479 – – 396,667 – –	After 5 years RMB’000 200,000 339,775 553,077 – 280,000 54,526 700,000 – After 5 years RMB’000 – 499,689 268,222 – 280,000 146,000 700,000 –	Total RMB’000 2,948,308 669,869 2,145,982 9,449 280,000 424,526

						700,000 500,000

						Total RMB’000 3,627,052 981,443 2,270,091 200,000 280,000 592,667

						700,000 280,000

IIC – 75

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

30. Fair values of financial instruments

All financial instruments are stated at fair value or carried at amounts not materially different from their fair values as of 31 December 2010, 2011 and 2012, except for held-tomaturity investments and investment in securities classified as loans and receivables as set out in note 13 and interest-bearing notes as set out in note 23.

The fair values of financial assets and financial liabilities are determined as follows:

The fair values of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to recent transaction price or quoted market bid prices respectively;
The fair values of unlisted investment funds and unlisted debt securities included in financial assets at fair value through profit or loss and available-forsale investments are established by reference to the prices quoted by respective fund administrators or by using valuations techniques including the use of recent arm’s length transaction prices, and
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities.
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

IIC – 76

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Financial assets at FVTPL Available-for-sale financial assets Total Financial assets at FVTPL Available-for-sale financial assets Total Financial assets at FVTPL Available-for-sale financial assets Total	Level 1 RMB’000 84,323 578,677 663,000 Level 1 RMB’000 9,449 927,559 937,008 Level 1 RMB’000 – 1,123,903 1,123,903	As at 31 December 2010 Level 2 Level 3 RMB’000 RMB’000 – – 1,663,018 – 1,663,018 – As at 31 December 2011 Level 2 Level 3 RMB’000 RMB’000 – – 1,576,820 – 1,576,820 – As at 31 December 2012 Level 2 Level 3 RMB’000 RMB’000 200,000 – 1,502,504 – 1,702,504 –	Total RMB’000 84,323 2,241,695
			2,326,018

			Total RMB’000 9,449 2,504,379
			2,513,828

			Total RMB’000 200,000 2,626,407
			2,826,407

31. Capital commitments

(a) Capital commitments for property and equipment are as follows:

Contracted for but not provided Authorised but not contracted for	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 25,894 149,464 102,622 111,783 5,527 313 137,677 154,991 102,935	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 25,894 149,464 102,622 111,783 5,527 313 137,677 154,991 102,935
		102,935

IIC – 77

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

(b) The total future minimum lease payments under non-cancellable operating leases are payable as follows:

Within 1 year After 1 year but within 5 years After 5 years	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 42,901 47,029 75,995 52,983 53,255 73,404 1,425 609 – 97,309 100,893 149,399	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 42,901 47,029 75,995 52,983 53,255 73,404 1,425 609 – 97,309 100,893 149,399
		149,399

The Company leases properties under operating leases which run for initial periods of one to six years.

32. Contingent liabilities

There was no outstanding litigation nor any other contingent liabilities as of 31 December 2012, other than those incurred in the normal course of the Company’s insurance business.

33. Operating segments

According to the Company’s internal organisational structure, management requirements, and internal reporting system, the Company’s operating business has three operating segments, based on insurance types. Management reviews the operating results of the segment periodically to determine their allocation of resources and evaluate their performance. The main products and services provided by the Company’s segments are motor insurance, health and casualty insurance and other insurance.

Segment revenue representing gross premium written for insurance business and segment profit or loss representing profit (loss) before taxation earned by each segment are reported to management for the purpose of resource allocation and assessment of segment performance.

IIC – 78

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

For the year ended 31 December 2010

Gross premiums written Less: Premium ceded to reinsurers and restrocessionaires Changes in unearned premium provisions, net of reinsurance Net earned premiums Net investment income Net realised and unrealised investment losses and impairment Other income Other (losses) gains Net policyholders’ benefits Net commission expense Administrative and other expenses Total benefits, losses and expenses Profit from operations Finance costs Profit before taxation Segment assets Segment liability Other segment information Depreciation and amortisation Additions to non-current assets Non-cash expenses other than depreciation and amortisation	Motor insurance RMB’000 4,377,633 (322,326) (241,797) 3,813,510 – – – (3,916) 3,809,594 (2,226,186) (140,903) (241,678) (2,608,767) 1,200,827 – 1,200,827 199,792 3,345,500 – – 3,916	Health and casualty insurance RMB’000 150,396 (21,374) (18,181) 110,841 – – – (614) 110,227 (48,894) (10,335) (8,303) (67,532) 42,695 – 42,695 30,616 122,554 – – 614	Other insurance RMB’000 825,653 (357,777) (9,535) 458,341 – – – (8,054) 450,287 (195,754) (479) (45,582) (241,815) 208,472 – 208,472 528,968 870,310 – – 8,054	Unallocated RMB’000 – – – – 200,699 (5,633) 12,923 (31,608) 176,381 – – (1,558,008) (1,558,008) (1,381,627) (44,100) (1,425,727) 6,359,802 1,878,961 53,656 87,603 2,126	Total RMB’000 5,353,682 (701,477) (269,513)
					4,382,692
					200,699 (5,633) 12,923 (44,192)
					4,546,489
					(2,470,834) (151,717) (1,853,571)
					(4,476,122)
					70,367 (44,100)
					26,267

					7,119,178

					6,217,325

					53,656 87,603 14,710

IIC – 79

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

For the year ended 31 December 2011

Gross premiums written Less: Premium ceded to reinsurers and retrocessionaries Changes in unearned premium provision, net of reinsurance Net earned premium Net investment income Net realised and unrealised investment losses and impairment Other income Other (losses) gains Net policyholders’ benefits Net commission expense Administrative and other expenses Total benefits, losses and expenses Profit from operations Finance cost Profit before taxation Segment assets Segment liability Other segment information Depreciation and amortisation Additions to non-current assets Non-cash expenses other than depreciation and amortisation	Motor insurance RMB’000 4,610,621 (344,911) (114,557) 4,151,153 – – – 707 4,151,860 (2,309,276) (132,447) (260,242) (2,701,965) 1,449,895 – 1,449,895 101,636 3,847,473 – – (707)	Health and casualty insurance RMB’000 187,973 (36,889) (7,903) 143,181 – – – (559) 142,622 (50,811) (13,944) (8,000) (72,755) 69,867 – 69,867 20,909 143,607 – – 559	Other insurance RMB’000 1,008,027 (388,312) (58,689) 561,026 – – – (323) 560,703 (233,081) (2,222) (53,328) (288,631) 272,072 – 272,072 262,674 1,216,643 – – 323	Unallocated RMB’000 – – – – 229,195 (17,086) 18,057 (18,126) 212,040 – – (1,815,908) (1,815,908) (1,603,868) (44,100) (1,647,968) 8,133,643 2,291,125 54,482 107,428 6,399	Total RMB’000 5,806,621 (770,112) (181,149)
					4,855,360
					229,195 (17,086) 18,057 (18,301)
					5,067,225
					(2,593,168) (148,613) (2,137,478)
					(4,879,259)
					187,966 (44,100)
					143,866

					8,518,862

					7,498,848

					54,482 107,428 6,574

IIC – 80

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

For the year ended 31 December 2012

Gross premiums written Less: Premium ceded to reinsurers and retrocessionaries Changes in unearned premium provisions, net of reinsurance Net earned premium Net investment income Net realised and unrealised investment losses and impairment Other income Other (losses) gains Net policyholders’ benefits Net commission expense Administrative and other expense Total benefit, losses and expenses Profit for operations Finance costs Profit before taxation Segment assets Segment liability Other segment information Depreciation and amortisation Additions to non-current assets Non-cash expenses other than depreciation and amortisation	Motor insurance RMB’000 6,275,626 (763,986) (534,961) 4,976,679 – – – 1,130 4,977,809 (2,708,822) (73,072) (354,380) (3,136,274) 1,841,535 – 1,841,535 312,416 4,778,857 – – (1,130)	Health and casualty insurance RMB’000 331,387 (77,376) (38,647) 215,364 – – – 124 215,488 (53,984) (29,747) (12,803) (96,534) 118,954 – 118,954 44,552 181,974 – – (125)	Other insurance RMB’000 1,203,884 (445,705) (82,080) 676,099 – – – 1,292 677,391 (298,550) (10,078) (63,885) (372,513) 304,878 – 304,878 366,905 1,448,266 – – (1,292)	Unallocated RMB’000 – – – – 309,517 (75,187) 23,894 4,724 262,948 – – (2,281,383) (2,281,383) (2,018,435) (44,221) (2,062,656) 9,798,262 2,379,870 56,937 100,160 1,997	Total RMB’000 7,810,897 (1,287,067) (655,688)
					5,868,142
					309,517 (75,187) 23,894 7,270
					6,133,636
					(3,061,356) (112,897) (2,712,451)
					(5,886,704)
					246,932 (44,221)
					202,711

					10,522,135

					8,788,967

					56,937 100,160 (550)

IIC – 81

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

34. Material related party transactions and balances

(a) Significant balances with related parties

The significant balances with related parties were disclosed in respective notes.

(b) Significant transactions with related parties

The following is a summary of significant recurring transactions entered into between the Company and its related parties during the reporting periods:

		Year	ended 31 December
		2010	2011	2012
	Notes	RMB’000	RMB’000	RMB’000
Ultimate holding company
Training fee paid	(i)	1,659	1,775	–
Internal audit service fee paid	(ii)	10,413	15,200	15,040
Immediate holding company
Gain on disposal of the equity
interest in fellow subsidiaries	(iii)	–	14,432	–
Fellow subsidiaries
Business ceded by related
companies	(iv)
– Gross premiums written		(3,513)	(2,331)	(6,715)
– Commission expenses		549	351	515
– Claims expenses		20	–	1,444
Business ceded to related companies	(iv)
– Gross premiums		139,666	171,496	533,385
– Commission income		(45,949)	(58,092)	(225,711)
– Claims recovered		(56,461)	(71,125)	(96,844)
Agency fee expense	(v)	49,053	61,540	84,416
Back office service fee paid	(vi)	40,527	56,202	62,145
Investment management fee paid	(vii)	3,859	4,811	5,289
Rental expense	(viii)	–	1,994	2,989
Employee benefit insurance
service fee paid	(ix)	–	1,980	3,934

IIC – 82

FINANCIAL INFORMATION OF TPI

APPENDIX IIC

Notes:

(i) The Company has entered into agreements with the ultimate holding company in respect of the provision of training services by the ultimate holding company to the Company.
(ii) The ultimate holding company of the Company provides internal audit services to the Company and receives service fee from the Company.
(iii) The Company transferred its equity interest in fellow subsidiaries, classified as availablefor-sale securities, with carrying amount of RMB69,900,000 to the immediate holding company at a consideration of RMB84,332,000, resulting in a gain of RMB14,432,000.
(iv) Certain fellow subsidiaries of the Company ceded business (to) from and (received) paid premiums, commission and claims (from) to the Company.
(v) The Company paid agency fee to fellow subsidiaries for referred-in insurance business.
(vi) A fellow subsidiary of the Company provides back office services to the Company and receives service fee from the Company.
(vii) Fellow subsidiaries of the Company provide investment consultancy services to and receive investment management fees from the Company.
(viii) A fellow subsidiary of the Company leases a number of offices to the Company and receives rental income.
(ix) A fellow subsidiary of the Company provides employee benefit insurance services to the Company and receives premium from the Company.

(c) Compensation of key management personnel

The remuneration of directors and other members of key management during the reporting periods were as follows:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Salaries and benefits	948	809	760

Key management personnel represents those with the responsibility of planning, directing and controlling the Company’s activities, including the Company’s directors, general manager, financial director, deputy general manager who supervises various corporate matters and other executives.

IIC – 83

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

35. Accounting judgements and key sources of estimation

In the application of the Company’s accounting policies, which are described in note 3, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimations (see below), that the directors have made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.

(a) Held-to-maturity investments

If the Company fails to hold these investments to maturity other than for certain specific circumstances, the Company would have to reclassify the entire portfolio of held-to-maturity investments as available-for-sale investments, as such portfolio of investments would be deemed to have been tainted. This would result in the held-tomaturity investments being measured at fair value instead of at amortised cost.

(b) Impairment of available-for-sale and held-to-maturity financial assets

The Company follows the guidance of HKAS 39 when determining whether there has been a significant or prolonged decline in the fair value of an availablefor-sale investment below its cost and whether the held-to-maturity financial assets are impaired. This determination requires significant judgement. In making this judgement, regarding impairment of an available-for-sale investment, the Company evaluates, among other factors, the duration and extent to which the fair value of an available-for-sale investment is less than its cost.

IIC – 84

APPENDIX IIC

FINANCIAL INFORMATION OF TPI

Key sources of estimation uncertainty

(a) Determination of insurance liabilities

The Company’s insurance liabilities are mainly comprised of unearned premium provisions of RMB2,149,575,000, RMB2,334,741,000 and RMB3,258,099,000 as at 31 December 2010, 2011 and 2012, respectively and outstanding claims provisions of RMB2,144,880,000, RMB2,378,982,000 and RMB2,616,631,000 as at 31 December 2010, 2011 and 2012, respectively. The Company determines estimates for premiums and provision for outstanding claims at the end of the Relevant Periods on the basis of historical information, actuarial analyses and other analytical techniques. The management continually reviews the estimates and make adjustments as necessary, but actual results could differ significantly from what is envisioned when these estimates are made.

(b) Income taxes

As at 31 December 2010 and 2011, a deferred tax asset in relation to unused tax losses of RMB20,291,000 and RMB17,287,000, respectively and as at 31 December 2012, a deferred tax asset of RMB10,889,000 and RMB6,334,000 in relation to accrued expense and deferred revenue, respectively, has been recognised in the Company’s statement of financial position. As at 31 December 2010, 2011 and 2012, no deferred tax has been recognised on temporary differences primarily in respect of outstanding claims provisions and accrued expenses of approximately RMB856 million, RMB911 million and RMB733 million, respectively. Furthermore, no deferred tax has been recognised on unused tax losses of RMB185 million as at 31 December 2010. The recognition of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are less than or more than expected, a material reversal or recognition of deferred tax asset may arise, which would be recognised in profit or loss for the period in which such a reversal or recognition takes place.

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APPENDIX IIC

FINANCIAL INFORMATION OF TPI

(B) SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Company have been prepared in respect of any period subsequent to 31 December 2012.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

IIC – 86

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

The following is the text of accountants’ report of TPAM, prepared for the purpose of inclusion in this circular, received from the reporting accountants of the Company, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong.

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31 May 2013

The Directors

China Taiping Insurance Holdings Company Limited

Dear Sirs,

We set out below our report on the financial information relating to Taiping Asset Management Company Limited (“TPAM”) for each of the three years ended 31 December 2012 (the “Relevant Periods”) (the “Financial Information”) for inclusion in the circular of China Taiping Insurance Holdings Company Limited (“CTIH”) dated 31 May 2013 (the “Circular”) in connection with the major acquisition and connected transaction (the “Proposed Acquisition”) of CTH, which includes the proposed acquisition of 20% of equity interest in TPAM from China Taiping Insurance Group Co. (“TPG”), the ultimate holding company of CTIH. Details of the Proposed Acquisition are set out in the Circular. TPAM is a 60% non wholly-owned subsidiary of CTIH. During the Relevant Periods and up to the date of this report, the equity interest in TPAM directly held by TPG was 20%.

During the Relevant Periods and as at the date of this report, particulars of TPAM are as follows:

Name of company Place of establishment Date of establishment TPAM The People’s Republic of China (the “PRC”) 1 September 2006	Registered/paid-in capital Principal activities 31 December The date of this report 2010 2011 2012 RMB’000 RMB’000 RMB’000 RMB’000 100,000 100,000 100,000 100,000 Provision of asset management services

The statutory financial statements of TPAM for each of the three years ended 31 December 2012 were prepared in accordance with relevant accounting principles and financial regulations applicable in the PRC, and were audited by Deloitte Touche Tohmatsu CPA LLP.

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

We have examined the audited statutory financial statements of TPAM for the Relevant Periods (“Underlying Financial Statements”) in accordance with the Auditing Guideline 3.340 “Prospectuses and the reporting accountants” as recommended by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

The Financial Information for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements on the basis set out in Note 1 of Section A of the accountants’ report “General Information and Basis of Preparation”, with no adjustments made thereon, for the inclusion in the Circular.

The directors of TPAM are responsible for the Underlying Financial Statements and the directors of CTIH are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, on the basis of preparation set out in Note 1 of Section A of the accountants’ report “General Information and Basis of Preparation”, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the TPAM as at 31 December 2010, 2011 and 2012, and of the results and cash flows of TPAM for the Relevant Periods.

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

A. FINANCIAL INFORMATION

STATEMENTS OF COMPREHENSIVE INCOME

NOTES Revenue 4 Investment income 5a Net realised and unrealised investment (losses) gains 5b Other income 6 Administrative expenses Profit before taxation 7 Income tax expense 8 Profit after taxation Other comprehensive income (expense) for the year Available-for-sale securities – Net fair value gain (loss) during the year – Reclassification adjustment to profit or loss on disposal – Net deferred tax Other comprehensive expense, net of income tax Total comprehensive income for the year	Year 2010 RMB’000 86,586 4,396 (3,522) 16,561 (92,124) 11,897 (3,398) 8,499 131 (131) – – 8,499	ended 31 December 2011 2012 RMB’000 RMB’000 118,739 136,782 5,536 7,065 (527) 59 5,856 8,092 (101,182) (121,073) 28,422 30,925 (8,860) (7,458) 19,562 23,467 353 (185) (370) 122 4 17 (13) (46) 19,549 23,421

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

STATEMENTS OF FINANCIAL POSITION

NOTES ASSETS Equipment 10 Intangible asset 11 Investments in securities 12 Deferred tax assets 18 Securities purchased under resale agreements 13 Trade and other receivables 15 Amounts due from related companies 14 Deposits at banks with original maturity more than three months Cash and cash equivalents 16 Total assets LIABILITIES Amounts due to related companies 14 Securities sold under repurchase agreements 13 Other payables and accruals 17 Tax payable Total liabilities Net assets Capital and reserves Paid-in capital 19 Reserves Total equity	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 7,079 8,833 19,744 482 382 282 81,424 124,945 149,999 1,421 1,187 2,320 45,500 4,200 – 25,787 34,202 35,128 599 356 134 – – 10,000 10,085 22,375 29,251 172,377 196,480 246,858 746 541 1,427 – – 18,600 34,253 39,818 48,026 4,801 3,995 3,258 39,800 44,354 71,311 132,577 152,126 175,547 100,000 100,000 100,000 32,577 52,126 75,547 132,577 152,126 175,547	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 7,079 8,833 19,744 482 382 282 81,424 124,945 149,999 1,421 1,187 2,320 45,500 4,200 – 25,787 34,202 35,128 599 356 134 – – 10,000 10,085 22,375 29,251 172,377 196,480 246,858 746 541 1,427 – – 18,600 34,253 39,818 48,026 4,801 3,995 3,258 39,800 44,354 71,311 132,577 152,126 175,547 100,000 100,000 100,000 32,577 52,126 75,547 132,577 152,126 175,547
		246,858
		1,427 18,600 48,026 3,258
		71,311
		175,547

		100,000 75,547
		175,547

IID – 4

APPENDIX IID

FINANCIAL INFORMATION OF TPAM

STATEMENTS OF CHANGES IN EQUITY

At 1 January 2010 Profit for the year Other comprehensive income (expense) for the year Available-for-sale securities – Net fair value gain during the year – Reclassification adjustment to the profit or loss on disposal Total comprehensive income for the year At 31 December 2010 and 1 January 2011 Profit for the year Other comprehensive income (expense) for the year Available-for-sale securities – Net fair value gain during the year – Reclassification adjustment to the profit or loss on disposal – Net deferred tax Total comprehensive (expense) income for the year At 31 December 2011 and 1 January 2012	Paid-in capital RMB’000 100,000 – – – – 100,000 – – – – – 100,000	Fair value reserve RMB’000 (note) – – 131 (131) – – – 353 (370) 4 (13) (13)	Retained profits RMB’000 24,078 8,499 – – 8,499 32,577 19,562 – – – 19,562 52,139	Total RMB’000 124,078 8,499 131 (131) 8,499 132,577 19,562 353 (370) 4 19,549 152,126

IID – 5

APPENDIX IID

FINANCIAL INFORMATION OF TPAM

Profit for the year Other comprehensive income (expense) for the year Available-for-sale securities – Net fair value loss during the year – Reclassification adjustment to the profit or loss on disposal – Net deferred tax Total comprehensive (expense) income for the year At 31 December 2012	Paid-in capital RMB’000 – – – – – 100,000	Fair value reserve RMB’000 (note) – (185) 122 17 (46) (59)	Retained profits RMB’000 23,467 – – – 23,467 75,606	Total RMB’000 23,467 (185) 122 17 23,421 175,547

Note: The fair value reserve comprises of the cumulative net change in the fair value of available-for-sale securities held at the end of the Relevant Periods and is dealt with in accordance with the accounting policy set out in note 3.

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

STATEMENTS OF CASH FLOWS

OPERATING ACTIVITIES Profit before taxation Adjustments for: Depreciation of equipment Amortisation of intangible assets Dividend income Interest income Interest expense on securities sold under repurchase agreements (Gain) loss on disposal of equipment Net realised investment losses (gains) on available-for-sale investments Operating profit before changes in working capital Decrease (increase) in held-for-trading securities (Increase) decrease in trade and other receivables Decrease in amounts due from related companies Increase (decrease) in amounts due to related companies Increase in other payables and accruals Cash generated from operations Income tax paid NET CASH GENERATED FROM OPERATING ACTIVITIES	Year 2010 RMB’000 11,897 4,579 100 – (4,381) 53 (29) 131 12,350 55,013 (12,685) 197 114 4,026 59,015 (5,870) 53,145	ended 31 December 2011 2012 RMB’000 RMB’000 28,422 30,925 3,839 4,457 100 100 – (149) (5,536) (6,800) 36 186 10 47 370 (122) 27,241 28,644 9,472 (2,002) (5,114) 3,108 243 222 (205) 886 5,565 8,208 37,202 39,066 (9,428) (9,311) 27,774 29,755

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APPENDIX IID

FINANCIAL INFORMATION OF TPAM

INVESTING ACTIVITIES Payment for purchase of debt securities and debt schemes classified as loans and receivables Payment for purchase of debt securities classified as held-to-maturity Payment for purchase of available-for-sale securities Proceeds from sales of available-for-sale securities Dividend income received Interest income received Decrease (increase) in deposits at banks with original maturity more than three months (Increase) decrease in securities purchased under resale agreements Proceeds from disposal of equipment Payments for purchase of equipment NET CASH USED IN INVESTMENT ACTIVITIES FINANCING ACTIVITIES Increase in securities sold under repurchase agreements Interest expense on securities sold under repurchase agreements NET CASH (USED IN) FROM FINANCING ACTIVITIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT 1 JANUARY CASH AND CASH EQUIVALENTS AT 31 DECEMBER 16 Note	(50,000) (11,470) (20,773) 20,642 – 5,667 30,000 (25,500) 58 (3,671) (55,047) – (53) (53) (1,955) 12,040 10,085 Year 2010 RMB’000	(28,260) – (4,962) (17,902) (63,705) (29,807) 43,602 24,727 – 149 2,180 2,755 – (10,000) 41,300 4,200 33 – (5,636) (15,415) (15,448) (41,293) – 18,600 (36) (186) (36) 18,414 12,290 6,876 10,085 22,375 22,375 29,251 ended 31 December 2011 2012 RMB’000 RMB’000

IID – 8

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

NOTES TO THE FINANCIAL INFORMATION

1. General information and basis of preparation

Pursuant to the Framework Acquisition Agreement entered between TPG and its directly wholly-owned subsidiary, China Taiping Insurance Group (HK) Company Limited (“TPG(HK)”), as vendor and CTIH as purchaser, CTIH will acquire certain subsidiaries of TPG and TPG(HK), 25.05% equity interest of Taiping Life Insurance Company Limited (“TPL”), 38.79% equity interest of Taiping General Insurance Company Limited (“TPI”), 20% equity of TPAM and 4% of equity interest of Taiping Pension Company Limited (“TPP”) from TPG and TPG(HK). TPL, TPI, TPAM and TPP are existing non wholly-owned subsidiaries of CTIH.

Details of the proposed restructuring are set out in the section headed “The Restructuring of the TPG Group and the Proposed Transfer” in the Letter from the Board.

The Financial Information of TPAM has been prepared using the same accounting policies adopted by CTIH in the preparation of its consolidated financial statements for the Relevant Periods, which conform with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the HKICPA.

The Company is a limited liability company established in PRC. Its immediate holding company is CTIH, a company incorporated in Hong Kong and listed on The Main Board of the Stock Exchange of Hong Kong Limited and its ultimate holding company is TPG, a stateowned enterprise established in the PRC.

The principal activity of the Company is the provision of asset management services.

The Financial Information is presented in Renminbi (“RMB”), which is also the functional currency of the Company.

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

2. Application of Hong Kong Financial Reporting Standards

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Company has consistently applied HKFRSs, amendments and interpretations, which are effective for the accounting periods beginning on 1 January 2012, throughout the Relevant Periods.

New and revised HKFRSs, amendments and interpretations issued but not yet effective

The Company has not early applied the following new and revised HKFRSs, amendments or interpretations that have been issued but are not yet effective:

Amendments to HKFRSs	Annual improvements to HKFRSs 2009-2011
	cycle1
Amendments to HKFRS 7	Disclosures – Offsetting financial assets and
	financial liabilities1
Amendments to HKFRS 9 and	Mandatory effective date of HKFRS 9 and
HKFRS 7	transition disclosures2
Amendments to HKFRS 10,	Consolidated financial statements, joint
HKFRS 11 and HKFRS 12	arrangements and disclosure of interests in
	other entities: Transition guidance1
Amendments to HKFRS 10	Investments entities4
HKFRS 12 and HKAS 27
HKFRS 9	Financial instruments2
HKFRS 10	Consolidated financial statements1
HKFRS 11	Joint arrangements1
HKFRS 12	Disclosure of interests in other entities1
HKFRS 13	Fair value measurement1
Amendments to HKAS 1	Presentation of items of other comprehensive
	income3
HKAS 19 (Revised 2011)	Employee benefits1
HKAS 27 (Revised 2011)	Separate financial statements1
HKAS 28 (Revised 2011)	Investments in associates and joint ventures1
Amendments to HKAS 32	Offsetting financial assets and financial
	liabilities4

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

1 Effective for annual periods beginning on or after 1 January 2013

2 Effective for annual periods beginning on or after 1 January 2015

3 Effective for annual periods beginning on or after 1 July 2012

4 Effective for annual periods beginning on or after 1 January 2014

Amendments to HKAS 32 Offsetting financial assets and financial liabilities and amendments to HKFRS 7 Disclosures – Offsetting financial assets and financial liabilities

The CTIH directors anticipate that the application of these amendments to HKAS 32 and HKFRS 7 will have no material impact on the Financial Information.

HKFRS 9 Financial instruments

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Key requirements of HKFRS 9 are described as follows:

HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

HKFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

IID – 12

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

HKFRS 13 Fair value measurement

HKFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

Amendments to HKAS 1 Presentation of items of other comprehensive income

IID – 13

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

3. Significant accounting policies

The Financial Information has been prepared on the historical cost basis, except for certain financial instruments which are measured at fair values, and in accordance with the following accounting policies which conform with HKFRSs. In addition, the Financial Information includes the applicable disclosure required by the Rule Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Companies Ordinance.

Equipment

Equipment held for use in supply of services or for administrative purposes are stated at cost less subsequent accumulated depreciation and impairment losses.

Depreciation is recognised so as to write off the cost of items of equipment less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of equipment determined as the difference between the sales proceeds and the carrying amount of the asset is recognised in profit or loss.

IID – 14

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and any accumulated impairment losses. Amortisation for intangible assets with finite useful lives is recognised on a straightline basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset are measured at the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss in the period when the asset is derecognised.

Securities purchased under resale agreements/Securities sold under repurchase agreements

Financial instruments

Financial assets and financial liabilities are recognised in the statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition or issue of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

IID – 15

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Financial assets

The Company’s financial assets are classified into one of the four categories, including financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

Effective interest method

Interest income is recognised on an effective interest basis for debt instruments.

Financial assets at fair value through profit or loss

A financial asset is classified as held for trading if:

it has been acquired principally for the purpose of selling in the near future; or
it is a part of a portfolio of identified financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
it is a derivative that is not designated and effective as a hedging instrument.

IID – 16

APPENDIX IID

FINANCIAL INFORMATION OF TPAM

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables (including trade and other receivables, amounts due from related companies, deposits at bank and cash and cash equivalents) are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Held-to-maturity securities

Held-to-maturity securities are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company’s management has the positive intention and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity securities are measured at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial assets below).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or not classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments.

Equity and debt securities held by the Company that are classified as availablefor-sale and are traded on an active market are measured at fair value at the end of the reporting period. Changes in fair value are recognised in other comprehensive income and accumulated in fair value reserve, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously accumulated in the fair value reserve is reclassified to profit or loss (see accounting policy in respect of impairment loss on financial assets below).

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Impairment of financial assets

Financial assets other than those at fair value through profit or loss are assessed for indicators of impairment at the end of the reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

For an available-for-sale equity investment, a significant or prolonged decline in the fair value of that investment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

significant financial difficulty of the issuer or counterparty; or
breach of contract, such as default or delinquency in interest and principal payments; or
it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or
the disappearance of an active market for that financial asset because of financial difficulties.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss in subsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly in other comprehensive income and accumulated in fair value reserve. For available-for-sale debt investments, impairment losses are subsequently reversed if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

Financial liabilities and equity instruments

Equity instruments

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or where appropriate, a shorter period to the net carrying amount on initial recognition.

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Financial liabilities

Financial liabilities including other payables and amount due to related companies are subsequently measured at amortised cost, using the effective interest method.

Derecognition

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

IID – 20

APPENDIX IID

FINANCIAL INFORMATION OF TPAM

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary difference to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable.

Asset and product management fee income, consultancy fee income, commission, handling and service fee income are recognised when the service is rendered.

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand and with banks and other financial institutions.

Government grants

Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.

Leasing

Leases are classified as operating leases whenever the terms of the lease do not transfer substantially all the risks and rewards of ownership to the lessee.

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

The Company as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

Impairment of assets other than financial assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that other assets (including equipment) may be impaired or an impairment loss previously recognised no longer exists or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated.

Calculation of recoverable amount

Recognition of impairment losses

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FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

Short term employee benefits and contributions to defined contribution retirement plans

4. Revenue

Asset management fee income (Note i) Product management fee income (Note ii)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 73,504 93,600 95,707 13,082 25,139 41,075 86,586 118,739 136,782	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 73,504 93,600 95,707 13,082 25,139 41,075 86,586 118,739 136,782
		136,782

Notes:

(i) Asset management fee income is derived from managing assets of entrusted funds.

(ii) Product management fee income is derived from structuring and managing entrusted funds of the debt schemes.

IID – 24

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

5. Investment income

Net investment income (Note (a)) Net realised and unrealised investment (losses) gains (Note (b))	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 4,396 5,536 7,065 (3,522) (527) 59 874 5,009 7,124	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 4,396 5,536 7,065 (3,522) (527) 59 874 5,009 7,124
		7,124

Notes:

(a) Net investment income

Interest income from debt securities (note i) – Held-to-maturity – Available-for-sale – Held-for-trading – Loans and receivables Subtotal Dividend income from investment funds (note ii) – Available-for-sale – Held-for-trading Subtotal Interest income from bank deposits Interest income from securities purchased under resale agreements Interest expense on securities sold under repurchase agreements Subtotal	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 314 672 1,055 185 655 952 1,392 193 122 804 3,506 3,923 2,695 5,026 6,052 – – 149 68 36 302 68 36 451 1,479 339 741 207 171 7 (53) (36) (186) 1,633 474 562 4,396 5,536 7,065	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 314 672 1,055 185 655 952 1,392 193 122 804 3,506 3,923 2,695 5,026 6,052 – – 149 68 36 302 68 36 451 1,479 339 741 207 171 7 (53) (36) (186) 1,633 474 562 4,396 5,536 7,065
		6,052
		149 302
		451
		741 7 (186)
		562
		7,065

IID – 25

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Interest income from debt securities and dividend income from investment funds analysed by: Listed investments – Debt securities – Investment funds Unlisted investments – Debt securities – Investment funds Subtotal (i) Interest income from debt securities – Listed – Unlisted (ii) Dividend income from investment funds: – Listed – Unlisted	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 307 526 1,502 68 36 90 375 562 1,592 2,388 4,500 4,550 – – 361 2,388 4,500 4,911 2,763 5,062 6,503 307 526 1,502 2,388 4,500 4,550 2,695 5,026 6,052 68 36 90 – – 361 68 36 451	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 307 526 1,502 68 36 90 375 562 1,592 2,388 4,500 4,550 – – 361 2,388 4,500 4,911 2,763 5,062 6,503 307 526 1,502 2,388 4,500 4,550 2,695 5,026 6,052 68 36 90 – – 361 68 36 451
		1,592
		4,550 361
		4,911
		6,503
		1,502 4,550
		6,052

		90 361
		451

IID – 26

APPENDIX IID

FINANCIAL INFORMATION OF TPAM

(b) Net realised and unrealised investment (losses) gains

Net realised investment losses Net unrealised investment (losses) gains Net realised investment (losses) gains on: Debt securities (note i) – Available-for-sale – Held-for-trading Subtotal Investment funds (note ii) – Available-for-sale – Held-for-trading Subtotal (i) Net realised investment gains (losses) on debt securities: – Listed – Unlisted (ii) Net realised investment losses on investment funds: – Listed	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (3,185) (828) (15) (337) 301 74 (3,522) (527) 59 (131) 42 66 (564) (433) (64) (695) (391) 2 – (412) 56 (2,490) (25) (73) (2,490) (437) (17) (3,185) (828) (15) 304 109 (63) (999) (500) 65 (695) (391) 2 (2,490) (437) (17)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (3,185) (828) (15) (337) 301 74 (3,522) (527) 59 (131) 42 66 (564) (433) (64) (695) (391) 2 – (412) 56 (2,490) (25) (73) (2,490) (437) (17) (3,185) (828) (15) 304 109 (63) (999) (500) 65 (695) (391) 2 (2,490) (437) (17)
		59

		66 (64)
		2
		56 (73)
		(17)
		(15)

		(63) 65
		2

		(17)

IID – 27

APPENDIX IID

FINANCIAL INFORMATION OF TPAM

Net unrealised investment (losses) gains on: Debt securities – Held-for-trading Investment funds – Held-for-trading (i) Net unrealised investment (losses) gains on debt securities: – Listed – Unlisted (ii) Net unrealised investment losses on investment funds: – Listed Other income Consultancy fee income Distribution, subscription and handling income (Note) Commission income Government grants Others	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (169) 301 92 (168) – (18) (337) 301 74 (3) 13 92 (166) 288 – (169) 301 92 (168) – (18) Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 532 – 2,440 12,000 – – – 2,035 – 3,999 3,772 5,164 30 49 488 16,561 5,856 8,092	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (169) 301 92 (168) – (18) (337) 301 74 (3) 13 92 (166) 288 – (169) 301 92 (168) – (18) Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 532 – 2,440 12,000 – – – 2,035 – 3,999 3,772 5,164 30 49 488 16,561 5,856 8,092
		8,092

6. Other income

Note: Amount represents income arising from distribution, subscription and handling of a debt scheme managed by the Company. This income was one-off in nature, and hence no such income for the reporting periods ended 2011 and 2012.

IID – 28

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

7. Profit before taxation

Profit before tax has been arrived at after charging: Staff costs, including directors: Salaries, wages and other benefits Contributions to defined contribution retirement plan Other items: Auditor’s remuneration Depreciation Amortisation of intangible asset (included in administrative expenses) Gain (loss) on disposal of equipment Operating lease charges in respect of properties	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 51,995 62,343 65,698 1,978 3,013 3,946 53,973 65,356 69,644 122 120 165 4,579 3,839 4,457 100 100 100 29 (10) (47) 4,177 3,215 11,170

8. Income tax expense

(a) Income tax charge in the statements of comprehensive income represents:

PRC Enterprise Income Tax Current tax Provision for the year Underprovision in respect of prior years Deferred tax (note 18)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 4,801 7,931 8,532 – 691 42 4,801 8,622 8,574 (1,403) 238 (1,116) 3,398 8,860 7,458

The income tax rate applicable to the Company during the Relevant Periods is 25%.

IID – 29

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

(b) The income tax charge for the year can be reconciled to the profit before taxation per the statements of comprehensive income as follows:

Profit before taxation Tax at income tax rate of 25% Tax effect of expenses not deductible for tax purpose Tax effect of income not taxable for tax purpose Underprovision in respect of prior years Income tax charge	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 11,897 28,422 30,925 2,974 7,105 7,731 608 1,879 709 (184) (815) (1,024) – 691 42 3,398 8,860 7,458

9. Directors’ and chief executive’s remuneration and individuals with highest emoluments

IID – 30

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

10. Equipment

COST At 1 January 2010 Additions Disposals At 31 December 2010 and 1 January 2011 Additions Disposals At 31 December 2011 and 1 January 2012 Additions Disposals At 31 December 2012 ACCUMULATED DEPRECIATION At 1 January 2010 Provided for the year Eliminated on disposals At 31 December 2010 and 1 January 2011 Provided for the year Eliminated on disposals At 31 December 2011 and 1 January 2012 Provided for the year Eliminated on disposals At 31 December 2012 CARRYING VALUES At 31 December 2010 At 31 December 2011 At 31 December 2012	Computer equipment RMB’000 8,177 1,610 (39) 9,748 4,317 (174) 13,891 10,016 (347) 23,560 3,731 1,909 (27) 5,613 2,059 (158) 7,514 2,693 (320) 9,887 4,135 6,377 13,673	Office and other equipment RMB’000 1,733 2,061 (8) 3,786 921 – 4,707 5,399 (140) 9,966 612 1,922 (6) 2,528 909 – 3,437 1,178 (120) 4,495 1,258 1,270 5,471	Motor vehicles RMB’000 4,559 – (287) 4,272 398 (249) 4,421 – – 4,421 2,110 748 (272) 2,586 871 (222) 3,235 586 – 3,821 1,686 1,186 600	Total RMB’000 14,469 3,671 (334)
				17,806 5,636 (423)
				23,019 15,415 (487)
				37,947

				6,453 4,579 (305)
				10,727 3,839 (380)
				14,186 4,457 (440)
				18,203
				7,079

				8,833

				19,744

IID – 31

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

The above items of property and equipment are depreciated on a straight-line basis at following rates per annum with 5% residue value:

Computer equipment 31.67% Office and other equipment 19.00% Motor vehicles 23.75%

11. Intangible asset

RMB’000

COST

At 1 January 2010, 2011 and 2012 and 31 December 2010, 2011 and 2012 AMORTISATION At 1 January 2010 Charge for the year At 31 December 2010 and 1 January 2011 Charge for the year At 31 December 2011 and 1 January 2012 Charge for the year At 31 December 2012 CARRYING AMOUNT At 31 December 2010 At 31 December 2011 At 31 December 2012	1,000 (418) (100) (518) (100) (618) (100) (718) 482 382 282

The above intangible asset is a stock exchange membership which had finite useful lives. The intangible asset is amortised on straight-line basis over 10 years.

IID – 32

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

12. Investment in securities

Held-to-maturity securities Debt securities, at amortised cost Listed – outside Hong Kong Unlisted Sub-total of held-to-maturity securities Fair value of securities Available-for-sale securities Debt securities, at fair value Listed – outside Hong Kong Unlisted (Note) Investment funds, at fair value Unlisted (Note) Sub-total of available-for-sale securities Held-for-trading investments Debt securities, at fair value Listed – outside Hong Kong Unlisted (Note) Investment funds, at fair value Listed – outside Hong Kong Unlisted (Note) Sub-total of held-for-trading investments	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 3,513 8,524 16,437 7,961 7,967 17,967 11,474 16,491 34,404 11,166 16,191 34,027 – 3,803 14,106 – 15,913 4,996 – 19,716 19,102 – – 5,753 – 19,716 24,855 1,819 2,455 3,180 13,131 – – 14,950 2,455 3,180 – 3,023 – – – 4,300 – 3,023 4,300 14,950 5,478 7,480	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 3,513 8,524 16,437 7,961 7,967 17,967 11,474 16,491 34,404 11,166 16,191 34,027 – 3,803 14,106 – 15,913 4,996 – 19,716 19,102 – – 5,753 – 19,716 24,855 1,819 2,455 3,180 13,131 – – 14,950 2,455 3,180 – 3,023 – – – 4,300 – 3,023 4,300 14,950 5,478 7,480
		34,404
		34,027

		14,106 4,996
		19,102
		5,753
		24,855

		3,180 –
		3,180
		– 4,300
		4,300
		7,480

Note: The fair values of the unlisted securities are estimated based on recent transaction prices provided by financial institutions.

IID – 33

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Loans and receivables, at amortised cost Debt securities, unlisted Debt schemes (Note a) Subtotal of loans and receivables (Note b) Total Analysed for reporting purposes as: Current Non-current	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 50,000 78,260 78,260 5,000 5,000 5,000 55,000 83,260 83,260 81,424 124,945 149,999 14,950 24,711 72,322 66,474 100,234 77,677 81,424 124,945 149,999	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 50,000 78,260 78,260 5,000 5,000 5,000 55,000 83,260 83,260 81,424 124,945 149,999 14,950 24,711 72,322 66,474 100,234 77,677 81,424 124,945 149,999
		83,260

		149,999

		72,322 77,677
		149,999

Notes:

(a) The debt schemes related to finance for infrastructure projects in PRC. The fair value of the debt schemes are determined with reference to estimated cash flow discounted using current market interest rate at the end of each reporting period.

(b) The carrying amount of loans and receivables approximate their fair value.

13. Securities purchased under resale agreements/securities sold under repurchase agreements

The Company entered into transactions in which it transferred financial assets directly to third parties. These transfer will not give rise to derecognition of the financial assets concerned as all risks and rewards of ownership are not transferred and control is retained.

Conversely, the Company also enters into short-term investment arrangements secured by the securities purchased. The securities purchased are not recognised on the statement of financial position.

IID – 34

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

The following were the Company’s held-to-maturity securities and available-for-sale securities as at 31 December 2012 (31 December 2011 and 2010: nil) that were transferred to an entity with terms to repurchase these securities at the agreed dates and prices.

Carrying amount of transferred assets Carrying amount of associated liabilities – securities sold under repurchase agreements Net position	As at 31 December 2012 Held-to- Available- maturity for-sale securities securities Total RMB’000 RMB’000 RMB’000 16,437 17,263 33,700 9,072 9,528 18,600 7,365 7,735 15,100	As at 31 December 2012 Held-to- Available- maturity for-sale securities securities Total RMB’000 RMB’000 RMB’000 16,437 17,263 33,700 9,072 9,528 18,600 7,365 7,735 15,100
		15,100

As at 31 December 2012, most of the securities sold under repurchase agreements matured within 7 days, with interest rates of 4.47%-7.59% per annum respectively.

Securities purchased under resale agreements held by the Company as at 31 December 2011 and 2010 matured within 7 days with interest rate of 4.97% and 3.13% to 8.08%, respectively. The Company did not hold any securities purchased under resale agreements as at 31 December 2012.

IID – 35

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

14. Amount due from/to related companies

Amounts due from intermediate holding company Amounts due from fellow subsidiaries Amounts due to intermediate holding company Amount due to a shareholder Amounts due to fellow subsidiaries	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 390 356 – 209 – 134 599 356 134 – – 32 273 541 190 473 – 1,205 746 541 1,427	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 390 356 – 209 – 134 599 356 134 – – 32 273 541 190 473 – 1,205 746 541 1,427
		134

		32 190 1,205
		1,427

Amounts are unsecured and interest-free and repayable on demand, except for amounts due to fellow subsidiaries of RMB473,000 and RMB1,205,000 as at 31 December 2010 and 2012, respectively, which are repayable after 1 year and within 1 year, respectively.

15. Trade and other receivables

Trade receivables Interest receivable Other debtors, deposits and prepayments	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 19,007 19,461 21,798 1,152 4,453 8,487 5,628 10,288 4,843 25,787 34,202 35,128	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 19,007 19,461 21,798 1,152 4,453 8,487 5,628 10,288 4,843 25,787 34,202 35,128
		35,128

IID – 36

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

All trade receivables arise from the Company’s asset management business. Included in the trade receivables, amounts of approximately RMB10,920,000, RMB11,436,000 and RMB13,134,000 are due from fellow subsidiaries as at 31 December 2010, 2011 and 2012 respectively. These balances are unsecured, interest-free and repayable in accordance with contract terms.

Included in other debtors, deposits and prepayments, amounts of approximately RMB943,000, RMB579,000 and RMB633,000 are statutory deposits placed with Shanghai Stock Exchange and Shenzhen Stock Exchange as at 31 December 2010, 2011 and 2012 respectively. Included in other debtors, deposits and prepayments as at December 2011 is a rental deposit of approximately RMB2,622,000 paid to a fellow subsidiary.

The following is an ageing of trade receivables which are past due but not impaired as the end of the reporting period:

Within 3 months More than 3 months but less than 12 months	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 17,139 17,192 19,882 1,868 2,269 1,916 19,007 19,461 21,798	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 17,139 17,192 19,882 1,868 2,269 1,916 19,007 19,461 21,798
		21,798

Trade receivables that were past due but not impaired relate to a number of customers that have a good track record with the Company. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Company does not have any collateral in respect of these balances.

IID – 37

APPENDIX IID

FINANCIAL INFORMATION OF TPAM

Analysed for reporting purpose as:

Current Non-current 16. Cash and cash equivalents Cash in hand and at bank and other financial institutions	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 23,165 29,783 27,014 2,622 4,419 8,114 25,787 34,202 35,128 As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 10,085 22,375 29,251

The deposits with banks bear interest at commercial rates and mature within one year.

17. Other payables and accruals

Salary, bonus and subsidies payable Other staff benefits payable Accrued charges and others	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 26,090 30,702 29,988 668 1,152 1,037 7,495 7,964 17,001 34,253 39,818 48,026	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 26,090 30,702 29,988 668 1,152 1,037 7,495 7,964 17,001 34,253 39,818 48,026
		48,026

All of the other payables and accrued charges are expected to be settled within one year.

IID – 38

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

18. Deferred tax assets

The major deferred tax assets recognised and movements thereon during the current and prior years are as follows:

Fair value Fair value change on change on securities available-for- held for sale equities trading RMB’000 RMB’000 At 1 January 2010 – 18 Credit to profit or loss (note 8) – 86 At 31 December 2010 and 1 January 2011 – 104 Charge to profit or loss (note 8) – (78) Credit to other comprehensive income 4 – At 31 December 2011 and 1 January 2012 4 26 (Charge) credit to profit or loss (note 8) – (18) Credit to other comprehensive income 17 – At 31 December 2012 21 8 19. Paid-in capital Paid-in and registered capital At 1 January 2011, 31 December 2011 and 31 December	Salaries and welfare payable RMB’000 – 1,317 1,317 (160) – 1,157 1,134 – 2,291 2012	Total RMB’000 18 1,403 1,421 (238) 4 1,187 1,116 17 2,320 Amount RMB’000 100,000

	2012

IID – 39

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

20. Financial instruments

Categories of financial instruments

	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Financial assets
Held-to-maturity investments	11,474	16,491	34,404
Available-for-sale financial assets	–	19,716	24,855
Held-for-trading investments	14,950	5,478	7,480
Loans and receivables
(including cash and cash equivalents)	131,814	137,626	157,005
Financial liabilities
Amortised cost	2,302	1,034	23,482

Financial risk management

Exposure to credit, liquidity and interest rate risks arises in the normal course of the Company’s business. The Company is also exposed to equity price risk arising from its equity investments. These risks are limited by the Company’s financial management policies and practices described below.

Credit risk

The Company’s maximum exposure to credit risk which will cause a financial loss to the Company due to failure by the counterparties to discharge their obligations is as follows:

Deposits with banks and other financial institutions Investments in debt securities and debt schemes Securities purchased under resale agreements Trade and other receivables	2010 RMB’000 % of total 10,077 6.3% 81,424 51.2% 45,500 28.6% 22,172 13.9% 159,173 100%	2011 RMB’000 % of total 22,373 12.7% 121,922 68.9% 4,200 2.4% 28,370 16.0% 176,865 100%	2012 RMB’000 % of total 39,226 18.3% 139,946 65.3% – – 35,127 16.4% 214,299 100%	2012 RMB’000 % of total 39,226 18.3% 139,946 65.3% – – 35,127 16.4% 214,299 100%
				100%

IID – 40

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

In order to minimise credit risk, the management of the Company has delegated a team responsible for credit analysis, determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Company reviews the recoverable amount of each individual trade debt and debt investment at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts.

The Company’s funds are placed with banks of high credit rating to reduce the credit risk associated with these funds.

The Company has concentration risk as 61.4% (31 December 2011 and 2010: 64.2% and 55.9%) of the total debt securities are PRC government bonds. As all debt securities has credit rating of BBB or above based on external domestic credit rating, management considers the credit risk arising from such securities to be significantly reduced. Other than concentration of credit risk on PRC government bonds, the Company does not have any other significant concentration of credit risk.

Liquidity risk

The Company is responsible for its own cash management. The Company’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and long term.

As the Company had sufficient liquid assets in terms of listed securities and cash and cash equivalents, the Company is not subject to significant liquidity risk to meet its financial liabilities. The financial liabilities comprise amounts due to related companies and other payables, which are repayable on demand or within 3 months, and securities sold under repurchase agreements which are expected to be settled within 7 days after the end of the Relevant Periods.

Market risks

Interest rate risk

The Company adopts sensitivity analysis techniques to analyse how the entity’s profit and loss for the period and owners’ equity would be affected by possible changes in the relevant risk variables. As it is unlikely that risk variables will change in an isolated manner, and the interdependence between risk variables will have significant effect on the amount ultimately influenced by the changes in a single risk variable, the following items are based on the assumption that each risk variable changes on a stand-alone basis.

IID – 41

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

The Company is exposed to fair value interest rate risk in relation to the debt securities and deposits at bank with original maturity more than three months.

Sensitivity analysis of interest risk is based on the following analysis.

Changes in the market interest rate are expected to influence the interest cash flows arising from variable rate financial instruments;
For fixed rate financial instruments measured at fair value, changes in the market interest rate are expected to influence their fair value;

On the basis of the above assumptions, where all other variables are held constant, the reasonably possible changes in the interest rate may have the following after-tax effect on the profit or loss for the year or fair value reserve from debt securities classified as held-for-trading and available-for-sale respectively:

Change in interest rate Financial assets with fixed rates +100 basis points Financial assets with fixed rates –100 basis points	Year ended 31 December 2010 Impact on profit after tax Impact on fair value reserve RMB’000 RMB’000 (560) – 605 –	Year ended 31 December 2011 Impact on profit after tax Impact on fair value reserve RMB’000 RMB’000 (93) (538) 102 571	Year ended 31 December 2012 Impact on profit after tax Impact on fair value reserve RMB’000 RMB’000 (23) (253) 24 264	Year ended 31 December 2012 Impact on profit after tax Impact on fair value reserve RMB’000 RMB’000 (23) (253) 24 264

				264

The Company is exposed to cash flow interest rate risk in relation to variable interest-bearing bank balances. The CTIH directors consider that the Company is not subject to significant interest rate risk due to insignificant fluctuation in prevailing level of market interest rate.

Currency risk

The Company’s financial instruments are mainly denominated in RMB which is also functional currency of the Company. Management is of the opinion that the currency risk to the Company is insignificant.

IID – 42

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Equity price risk

The Company has a portfolio of marketable equity securities, which is carried at fair value and is exposed to price risk. This risk is defined as the potential loss in market value resulting from an adverse change in prices. The Company manages the equity price risk by investing in a diverse portfolio of high quality and liquid securities.

The sensitivity analyses below are determined based on the exposure to equity price risks at the end of the Relevant Periods. If the prices of the respective equity securities and investment funds had been 10% higher/lower, the Company’s post-tax profit and fair value reserve as a result of the changes in fair values of securities held for trading and available-for-sale securities respectively would increase/decrease as follows:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Post-tax profit for the year	–	227	322
Fair value reserve	–	–	431

Fair value

The fair value of financial assets and financial liabilities are determined as follows:

the fair value of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market bid prices; and
the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

IID – 43

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Level 1 fair value measurements are those derived from quoted price (unadjusted) in active markets for identical assets;
Level 2 fair value measurements are those derived from input other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

– Level 3 fair value measurements are those derived from valuation techniques that include inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

Financial assets at FVTPL Held for trading investments Financial assets at FVTPL Held for trading investments Available-for-sale financial assets Listed debt securities Unlisted debt securities	Level 1 RMB’000 14,950 Level 1 RMB’000 5,478 3,803 – 9,281	As at 31 December 2010 Level 2 Level 3 RMB’000 RMB’000 – – As at 31 December 2011 Level 2 Level 3 RMB’000 RMB’000 – – – – 15,913 – 15,913 –	Total RMB’000 14,950

			Total RMB’000 5,478 3,803 15,913
			25,194

IID – 44

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

Financial assets at FVTPL Held for trading investments Available-for-sale financial assets Listed debt securities Unlisted debt securities Unlisted investment funds	Level 1 RMB’000 7,480 14,106 – – 21,586	As at 31 December 2012 Level 2 Level 3 RMB’000 RMB’000 – – – – 4,996 – 5,753 – 10,749 –	Total RMB’000 7,480 14,106 4,996 5,753
			32,335

There were no transfers between Levels 1 and 2 in the Relevant Periods.

21. Maturity profile

The following table details the Company’s contractual maturity for some of its financial assets and financial liabilities:

At 31 December 2010 ASSETS Deposits with bank and other financial institutions Debt securities (under held-to-maturity) Debt securities (under held-for-trading) Debt securities (loans and receivables) Debt schemes (loans and receivables) Securities purchased under resale agreements	Repayable on demand RMB’000 10,077 – – – – – 10,077	3 months or less RMB’000 – – – – – 45,500 45,500	1 year or less but over 3 months RMB’000 – – 2,987 – – – 2,987	5 years or less but over 1 year RMB’000 – 1,421 – 50,000 – – 51,421	After 5 years RMB’000 – 10,053 11,963 – 5,000 – 27,016	Total RMB’000 10,077 11,474 14,950 50,000 5,000 45,500
						137,001

IID – 45

APPENDIX IID

FINANCIAL INFORMATION OF TPAM

At 31 December 2011 ASSETS Deposits with bank and other financial institutions Debt securities (under held-to-maturity) Debt securities (under available-for-sale) Debt securities (under held-for-trading) Debt securities (loans and receivables) Debt schemes (loans and receivables) Securities purchased under resale agreements At 31 December 2012 ASSETS Deposits with bank and other financial institutions Debt securities (under held-to-maturity) Debt securities (under available-for-sale) Debt securities (under held-for-trading) Debt securities (loans and receivables) Debt schemes (loans and receivables) LIABILITIES Securities sold under repurchase agreements	Repayable on demand RMB’000 22,373 – – – – – – 22,373 29,226 – – – – – 29,226 –	3 months or less RMB’000 – – 3,320 – – – 4,200 7,520 – – – – – – – 18,600	1 year or less but over 3 months RMB’000 – – 15,913 635 – – – 16,548 10,000 1,420 13,422 3,180 50,000 – 78,022 –	5 years or less but over 1 year RMB’000 – 13,395 – 700 78,260 5,000 – 97,355 – 17,827 5,514 – 28,260 5,000 56,601 –	After 5 years RMB’000 – 3,096 483 1,120 – – – 4,699 – 15,157 166 – – – 15,323 –	Total RMB’000 22,373 16,491 19,716 2,455 78,260 5,000 4,200
						148,495

						39,226 34,404 19,102 3,180 78,260 5,000
						179,172

						18,600

IID – 46

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

22. Operating lease commitments

The total future minimum lease payments under non-cancellable operating leases are payable as follows:

Within 1 year After 1 year but within 5 years	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 3,509 1,787 11,991 881 – 11,990 4,390 1,787 23,981	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 3,509 1,787 11,991 881 – 11,990 4,390 1,787 23,981
		23,981

The Company leases properties under operating leases which run for initial periods of two to three years. The operating lease commitment as at 31 December 2012 arises from contracts entered with certain fellow subsidiaries.

23. Material related party transactions

In addition to the transactions and balances disclosed elsewhere in the Financial Information, the Company entered into the following material related party transactions:

		As at 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Asset management income (note (i))	69,647	84,899	90,671
Operating lease charges and
management fee (note (ii))	–	–	9,522
Training fee expense (note (iii))	287	375	–
Back office service fee (note (iv))	580	439	1,203
Internal audit service fee (note (v))	–	281	387

Notes:

(i) The Company provided investment management services to, and received investment management fee income from, certain fellow subsidiaries.

(ii) The Company leased office premises from a fellow subsidiary, and paid rent and management fee to two fellow subsidiaries of the Company amounting of approximately RMB7,955,000 and RMB1,567,000 respectively.

IID – 47

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

(iii) The Company entered into agreements with ultimate holding company and a fellow subsidiary in respect of the provision of training services by the ultimate holding company and the fellow subsidiary. For the year ended 31 December 2010, RMB285,000 and RMB2,000 were paid to the ultimate holding company and a fellow subsidiary, respectively. For the year ended 31 December 2011, the amount was paid to the ultimate holding company.
(iv) A fellow subsidiary of the Company provided back office services to the Company and received service fee from the Company.
(v) A fellow subsidiary of the Company provided internal audit services and received service fee from the Company.

Compensation of key management personnel

The remuneration of directors and other members of key management during the Reporting Periods was as follows:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Salaries and welfare	927	1,167	1,001

The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends.

24. Segment information

Based on its organisation structure, management requirement and internal reporting requirements, the Company only had one single segment which is the provision of asset and product management services.

Geographical information

The Company’s operation and external customers are located in PRC.

IID – 48

FINANCIAL INFORMATION OF TPAM

APPENDIX IID

B. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Company have been prepared in respect of a period subsequent to 31 December 2012.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

IID – 49

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

The following is the text of accountants’ report of TPP, prepared for the purpose of inclusion in this circular, received from the reporting accountants of the Company, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong.

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31 May 2013

The Directors

China Taiping Insurance Holdings Company Limited

Dear Sirs,

We set out below our report on the financial information relating to Taiping Pension Company Limited (“TPP”) for each of the three years ended 31 December 2012 (the “Relevant Periods”) (the “Financial Information”) for inclusion in the circular of China Taiping Insurance Holdings Company Limited (“CTIH”) dated 31 May 2013 (the “Circular”) in connection with the major acquisition and connected transaction (the “Proposed Acquisition”) of CTIH, which includes the proposed acquisition of 4% of equity interest in TPP from China Taiping Insurance Group Co. (“TPG”), the ultimate holding company of CTIH. Details of the Proposed Acquisition are set out in the Circular. TPP is a non-wholly owned subsidiary of CTIH during the Relevant Periods and up to the date of this report. During the Relevant Periods and as at the date of this report, the equity interest in TPP directly held by TPG was 4%.

During the Relevant Periods and as at the date of this report, particulars of TPP are as follows:

Name of company Place of establishment Date of establishment TPP The People’s Republic of China (“PRC”) 26 January 2005	Registered/paid-in capital Principal activities 31 December The date of this report 2010 2011 2012 RMB’000 RMB’000 RMB’000 RMB’000 800,000 1,500,000 1,500,000 1,700,000 Pension business

The statutory financial statements of TPP for each of the three years ended 31 December 2012 were prepared in accordance with relevant accounting principles and financial regulations applicable in the PRC and were audited by Deloitte Touche Tohmatsu CPA LLP.

IIE – 1

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

We have examined the audited statutory financial statements of TPP for the Relevant Periods (“Underlying Financial Statements”) in accordance with the Auditing Guideline 3.340 “Prospectuses and the reporting accountants” as recommended by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

The Financial Information for the Relevant Periods set out in this report has been prepared from the Underlying Financial Statements on the basis set out in Note 1 of Section A of the accountants’ report “General Information and Basis of Preparation”, with no adjustments made thereon, for the inclusion in the Circular.

The directors of TPP are responsible for the Underlying Financial Statements and the directors of CTIH are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, on the basis of preparation set out in Note 1 of Section A of the accountants’ report “General Information and Basis of Preparation”, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of TPP as at 31 December 2010, 2011 and 2012, and of the results and cash flows of TPP for the Relevant Periods.

IIE – 2

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(A) FINANCIAL INFORMATION

INCOME STATEMENTS

Notes Income Gross premiums written from group life insurance business Less: Premiums ceded to reinsurers Net premiums written Change in unearned premium provisions, net of reinsurance Net earned premiums Net investment income 5(a) Net realised and unrealised investment losses and impairment 5(b)(c) Other income 6(a) Other losses 6(b) Total income Benefits, losses and expenses Net policyholders’ benefits 7(a) Net commission expenses 7(b) Administrative and other expenses Change in life insurance contract liabilities, net of reinsurance Total benefits, losses and expenses Loss before taxation 8 Income tax 10 Loss for the year	Year 2010 RMB’000 22,162 – 22,162 (13,969) 8,193 6,053 (1,827) 193,065 (88) 205,396 (896) (1,499) (356,995) – (359,390) (153,994) – (153,994)	ended 31 December 2011 2012 RMB’000 RMB’000 532,042 924,606 (105,194) (240,181) 426,848 684,425 (118,440) (42,239) 308,408 642,186 24,781 83,265 (4,418) (22,326) 212,580 196,621 (14,257) (32) 527,094 899,714 (111,615) (332,755) (34,401) (53,641) (442,861) (529,946) (99,049) (87,987) (687,926) (1,004,329) (160,832) (104,615) – – (160,832) (104,615)

IIE – 3

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

STATEMENTS OF COMPREHENSIVE INCOME

Note Loss for the year Other comprehensive (expense) income: Available-for-sale securities – Net fair value changes during the year – Reclassification adjustment to profit or loss on impairment 5(c) – Reclassification adjustment to profit or loss on disposal Total comprehensive expense for the year	Year 2010 RMB’000 (153,994) – – – – (153,994)	ended 31 December 2011 2012 RMB’000 RMB’000 (160,832) (104,615) (5,687) (15,628) – 4,153 3,625 17,670 (2,062) 6,195 (162,894) (98,420)

IIE – 4

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

STATEMENTS OF FINANCIAL POSITION

Notes
ASSETS
Statutory deposits
11
Property and equipment
12
Investments in securities
13
Securities purchased under resale
agreements
14
Insurance debtors
15
Reinsurers’ share of insurance
contract provisions
16
Other debtors
17
Amounts due from related
companies
18(a)
Deposits at banks with original
maturity of more than three
months
Bank balances and cash
19
LIABILITIES
Life insurance contract liabilities
20
Unearned premium provisions
21
Provision for outstanding claims
22
Investment contract liabilities
23
Securities sold under repurchase
agreements
14
Amount due to related companies
18(b)
Insurance creditors
24
Other payables and accruals
25
Insurance protection fund
26
NET ASSETS
CAPITAL AND RESERVES
Paid-in capital
27
Reserves
TOTAL EQUITY

As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
160,000
250,000
300,000
28,929
28,794
35,399
48,006
367,487
848,763
–
2,500
65,000
162
55,139
120,591
–
54,088
134,927
63,000
93,162
150,329
157
38,183
25,046
–
280,000
552,143
523,899
678,540
375,813
824,153
1,847,893
2,608,011
–
99,049
187,036
13,969
175,724
264,100
349
58,142
198,043
22,374
347,134
465,631
–
–
98,800
30,912
12,180
2,092
60,416
182,897
421,243
132,874
317,673
415,874
228
5,833
4,351
261,122
1,198,632
2,057,170
563,031
649,261
550,841
800,000
1,500,000
1,500,000
(236,969)
(850,739)
(949,159)
563,031
649,261
550,841

IIE – 5

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

STATEMENTS OF CHANGES IN EQUITY

Note At 1 January 2010 Loss for the year and total comprehensive expense for the year Capital contribution At 31 December 2010 Loss for the year Other comprehensive (expense) income Available-for-sale securities – net fair value changes during the year – reclassification adjustment to profit or loss on disposal Total comprehensive expense for the year Capital contribution 27 Increase in paid-in capital 27 At 31 December 2011 Loss for the year Other comprehensive (expense) income Available-for-sale securities – net fair value changes during the year – reclassification adjustment to profit or loss on impairment – reclassification adjustment to profit or loss on disposal Total comprehensive income (expense) for the year At 31 December 2012	Paid-in capital RMB’000 800,000 – – 800,000 – – – – 250,000 450,000 1,500,000 – – – – – 1,500,000	Capital reserve RMB’000 (note (i)) – – 450,876 450,876 – – – – – (450,876) – – – – – – –	Fair value reserve RMB’000 (note (ii)) – – – – – (5,687) 3,625 (2,062) – – (2,062) – (15,628) 4,153 17,670 6,195 4,133	Accumulated losses RMB’000 (533,851) (153,994) – (687,845) (160,832) – – (160,832) – – (848,677) (104,615) – – – (104,615) (953,292)	Total RMB’000 266,149
					(153,994)
					450,876
					563,031
					(160,832) (5,687) 3,625
					(162,894)
					250,000 (876)
					649,261
					(104,615) (15,628) 4,153 17,670
					(98,420)
					550,841

Notes:

(i) Capital reserve

The capital reserve represents the capital contributions received from shareholders of the Company and subsequently transferred to paid-in capital upon the completion of all the necessary legal and administrative procedures.

(ii) Fair value reserve

The fair value reserve comprises of the cumulative change in the fair value of available-for-sale securities held at the end of the Relevant Periods and is dealt with in accordance with the accounting policy set out in note 3.

IIE – 6

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

STATEMENTS OF CASH FLOWS

Operating activities Loss before taxation Adjustments for: – Depreciation of property and equipment – Loss (gain) on disposal of property and equipment – Interest income from debt securities and bank deposits – Interest income from securities purchased under resale agreements – Interest expense on securities sold under repurchase agreements – Dividend income – Net realised losses on available- for-sale securities – Impairment on available-for-sale investments Operating loss before changes in working capital Increase in insurance debtors Decrease (increase) in other debtors Increase in insurance creditors Increase in other payables and accruals (Increase) decrease in amounts due from related companies Increase (decrease) in amounts due to related companies Increase in reinsurers’ share of insurance contract provisions Increase in life insurance contract liabilities Increase in unearned premium provisions Increase in provision for outstanding claims Increase in investment contract liabilities Increase (decrease) in insurance protection fund	Year 2010 RMB’000 (153,994) 11,271 10 (5,903) (2) – (148) – – (148,766) (162) 18,582 60,416 565 (70) 6,671 – – 13,969 349 22,374 228	ended 31 December 2011 2012 RMB’000 RMB’000 (160,832) (104,615) 11,245 12,100 (4) (22) (22,881) (83,068) (1,837) (774) 11 2,738 (74) (2,161) 3,625 17,670 – 4,153 (170,747) (153,979) (54,977) (65,452) (15,165) (25,949) 122,481 238,346 184,799 98,201 (38,026) 13,137 (18,732) (10,088) (54,088) (80,839) 99,049 87,987 161,755 88,376 57,793 139,901 324,760 118,497 5,605 (1,482)

IIE – 7

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

Cash (used in) from operations Interest income received Income tax paid Net cash (used in) from operating activities Investing activities Interest income received Dividend received Proceeds from sale of property and equipment Increase in deposits at banks with original maturity of more than three months Payments for acquisition of property and equipment Payment for purchase of investments in securities Proceeds from sale of investments in securities Decrease (increase) in securities purchased under resale agreements Increase in statutory deposits Net cash from (used in) investing activities Financing activities Proceeds received in respect of paid-in capital Decrease in restricted bank deposits 19 Interest paid Increase in securities sold under repurchase agreements Net cash from financing activities Effect of change in exchange rate Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December, represented by bank balances and cash 19 Note	(25,844) 3,927 – (21,917) 3,745 148 833 – (12,484) (92,745) 109,541 10,000 – 19,038 – – – – – 1,572 (1,307) 74,330 73,023 Year 2010 RMB’000	604,507 446,656 442 24,544 – – 604,949 471,200 9,279 28,080 74 2,161 115 263 (280,000) (272,143) (11,221) (18,946) (613,869) (983,623) 272,449 486,511 (2,500) (62,500) (90,000) (50,000) (715,673) (870,197) 250,000 – 450,000 – (11) (2,738) – 98,800 699,989 96,062 16,252 208 605,517 (302,727) 73,023 678,540 678,540 375,813 ended 31 December 2011 2012 RMB’000 RMB’000

IIE – 8

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

NOTES TO THE FINANCIAL INFORMATION

1. General information and basis of preparation

Pursuant to the Framework Acquisition Agreement entered between TPG and its directly wholly-owned subsidiary, TPG(HK), as vendor and CTIH as purchaser, CTIH will acquire certain subsidiaries of TPG and TPG(HK), 25.05% equity interest of TPL, 38.79% equity interest of TPI, 20% equity of TPAM and 4% of equity interest of TPP from TPG and TPG(HK). TPL, TPI, TPAM and TPP are existing non wholly-owned subsidiaries of CTIH.

Details of the proposed restructuring are set out in the section headed “The Restructuring of the TPG Group and the Proposed Transfer” in the Letter from the Board.

The Financial Information of TPP has been prepared using the same accounting policies adopted by CTIH in the preparation of its consolidated financial statements for the Relevant Periods, which conform with applicable Hong Kong Financial Reporting Standards (“HKFRS”) issued by the HKICPA.

TPP is principally engaged in corporate and personal retirement insurance and annuity businesses, and group life insurance business in PRC.

The financial information is presented in Renminbi (“RMB”), which is also the functional currency of the company.

2. Application of Hong Kong Financial Reporting Standards

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Company has consistently applied Hong Kong Financial Reporting Standards (“HKFRSs”), amendments and interpretations, which are effective for the accounting period beginning on 1 January 2012 throughout the Relevant Periods.

IIE – 9

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

New and revised HKFRS’s, amendments and interpretations issued but not yet effective

The Company has not early applied the following new and revised HKFRS’s amendments and interpretations that have been issued but are not yet effective:

Amendments to HKFRSs Annual improvements to HKFRSs 2009-2011 cycle[1] Amendments to HKFRS 7 Disclosures – Offsetting financial assets and financial liabilities[1] Amendments to HKFRS 9 Mandatory effective date of HKFRS 9 and and HKFRS 7 transition disclosures[2] Amendments to HKFRS 10, Consolidated financial statements, joint HKFRS 11 and HKFRS 12 arrangements and disclosure of interests in other entities: Transition guidance[1] Amendments to HKFRS 10, Investments entities[4] HKFRS 12 and HKAS 27 HKFRS 9 Financial instruments[2] HKFRS 10 Consolidated financial statements[1] HKFRS 11 Joint arrangements[1] HKFRS 12 Disclosure of interests in other entities[1] HKFRS 13 Fair value measurement[1] Amendments to HKAS 1 Presentation of items of other comprehensive income[3] HKAS 19 (Revised 2011) Employee benefits[1] HKAS 27 (Revised 2011) Separate financial statements[1] HKAS 28 (Revised 2011) Investments in associates and joint ventures[1] Amendments to HKAS 32 Offsetting financial assets and financial liabilities[4]

1 Effective for annual periods beginning on or after 1 January 2013

2 Effective for annual periods beginning on or after 1 January 2015

3 Effective for annual periods beginning on or after 1 July 2012

4 Effective for annual periods beginning on or after 1 January 2014

Amendments to HKAS 32 Offsetting financial assets and financial liabilities and amendments to HKFRS 7 Disclosures – Offsetting financial assets and financial liabilities

IIE – 10

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

The CTIH directors anticipate that the application of these amendments to HKAS 32 and HKFRS 7 will have no material impact on the Financial Information.

HKFRS 9 Financial instruments

Key requirements of HKFRS 9 are described as follows:

HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held-for-trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

IIE – 11

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

HKFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

The CTIH directors anticipate that the adoption of HKFRS 9 in the future may have significant impact on amounts reported in respect of the Company’s financial assets. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

HKFRS 13 Fair value measurement

HKFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.

IIE – 12

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

Amendments to HKAS 1 Presentation of items of other comprehensive income

3. Significant accounting policies

IIE – 13

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(a) Classification of contracts

(i) Insurance contracts

Contracts under which the Company accepts significant insurance risk from another party (“the policyholder”) by agreeing to compensate the policyholder or other beneficiary if a specified uncertain future event (“the insured event”) adversely affects the policyholder or other beneficiary are classified as insurance contracts. Insurance risk is risk other than financial risk that is transferred from the holder of a contract to the issuer. Financial risk is the risk of a possible future change in one or more of a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a nonfinancial variable that the variable is not specific to a party of the contract.

Some contracts of the Company have both the insurance and investment components. These contracts are required to be unbundled into the respective components as set out in note 3(b)(viii).

(ii) Investment contracts

Insurance policies that are not considered insurance contracts under HKFRS 4 are classified as investment contracts, which are accounted for under HKAS 39.

(b) Recognition and measurement of contracts

(i) Recognition of gross premiums written

Gross premiums written in respect of investment contracts and the investment component of unbundled contracts are accounted for as deposits and booked directly to a liability account.

IIE – 14

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(ii) Life insurance contract liabilities

Life insurance contract liabilities, other than pension products, are determined using a gross premium approach plus a residual margin. Under the gross premium approach, the assumptions used in the actuarial valuation of life insurance contract liabilities reflect the management’s assessment of the expected best estimate of future policy cash flows subject to market based allowance for risk. The residual margin is estimated so that, after considering the effects of acquisition costs related to the acquisition of new business, including but not limited to commissions, underwriting, marketing and policy issue expenses, no gain or loss will be recognised on the initial recognition of the life insurance contract. Profits are expected to emerge over the life of the insurance contracts as the residual margins are released over the life of the contracts in proportion to insurance policies in force and allowance for risk is released.

(iii) Unearned premium provisions

(iv) Provision for outstanding claims

Provision for outstanding claims comprises provision for the Company’s estimate of the ultimate cost of settling all claims incurred but unpaid at the end of each reporting period, whether reported or not, and related internal and external claims handling expenses and an appropriate prudential margin. Provision for outstanding claims is assessed by reviewing individual claims and making allowance for claims incurred but not yet reported, the effect of both internal and external foreseeable events, such as changes in claims handling procedures, inflation, judicial trends, legislative changes and past experience and trends. Adjustments to claims provisions established in prior years are reflected in the Financial Information for the Relevant Periods in which the adjustments are made and disclosed separately if material. The methods used, and the estimates made, are reviewed regularly.

IIE – 15

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(v) Liability adequacy test

(vi) Investment contracts liabilities

Investment contract liabilities of the Company include liabilities arising from investment contracts that carry no significant insurance risk. Investment contract liabilities are measured at amortised cost using effective interest rate.

(vii) Policyholders’ benefits

Policyholders’ benefits include maturities, annuities, surrenders, claims and claims handling expenses, and policyholder dividend allocated in anticipation of a dividend declaration. Maturity and annuity claims are recognised as an expense when due for payment. Surrender claims are recognised when paid. Claims are recognised when notified but not settled and an estimate is made for claims incurred but not reported at the end of the Relevant Periods. Policyholder dividends are recognised when declared.

(viii) Unbundling

The Company unbundles the investment component of insurance contracts when the Company can measure separately the investment component. Receipts and payments such as premiums, policy benefit and claims relating to the investment component, except for the policy fee income which is recognised in accordance with HKAS 18, are not recognised in the income statement but as financial assets and financial liabilities. The financial assets or financial liabilities arising from the investment component are accounted for under HKAS 39.

IIE – 16

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(ix) Reinsurance

The Company cedes insurance in the normal course of business for the purpose of limiting its net loss potential through the diversification of its risks. Assets, liabilities, income and expense arising from ceded insurance contracts are presented separately from the assets, liabilities, income and expense arising from the related insurance contracts because the reinsurance arrangements do not relieve the Company from its direct obligations to its policyholders.

The benefits to which the Company is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of balances due from reinsurers, as well as other receivables (classified as reinsurance assets) that are dependent on the expected claims and benefits arising under related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts, which are recognised as an expense when due.

Amounts due/recoverable under reinsurance and the reinsurers’ share of insurance contract provisions are assessed for impairment at end of each reporting period. Such assets are deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Company may not recover all amounts due and that the event has a reliably measurable impact on the amounts that the Company will receive from the reinsurers. The impairment loss is calculated following the same method used for financial assets held at amortised cost and the carrying amount is reduced through the use of an allowance account similar to insurance receivables.

(x) Commission expense

Commission expense is accounted for when paid or payable and therefore varies in line with insurance premiums written.

(xi) Commission income

Commission income is recognised as revenue when received or receivable from reinsurers.

IIE – 17

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(c) Investments in securities

Investments in securities are initially measured at fair value, which is their transaction price unless fair value can be more reliably estimated using valuation techniques whose variables include only data from observable markets. Attributable transaction costs are included in the fair value, except where indicated otherwise below. These investments are subsequently accounted for as follows, depending on their classification:

(i) Financial assets at fair value through profit or loss

A financial asset is classified as held-for-trading if:

(1) it has been acquired principally for the purpose of selling in the near future; or
(2) it is a part of an identified portfolio of financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or
(3) it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held-for-trading may be designated as at fair value through profit or loss upon initial recognition if:

(1) such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
(2) the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

IIE – 18

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(3) it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire combined contract (asset or liability) to be designated as at fair value through profit or loss.

(ii) Loans and receivables

(iii) Available-for-sale securities

Investments in securities which do not fall into financial assets at fair value through profit or loss, loans and receivables or held-to-maturity financial assets are classified as available-for-sale securities. Equity and debt securities held by the Company that are classified as available-for-sale and are traded in an active market are measured at fair value at the end of each reporting period. Changes in the carrying amount of available-for-sale debt securities relating to interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognised in income statement. Other changes in the carrying amount of available-for-sale securities are recognised in other comprehensive income and accumulated under the heading of fair value reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the fair value reserve is reclassified to profit or loss (see note 3(i)).

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FINANCIAL INFORMATION OF TPP

APPENDIX IIE

All regular way purchases or sales of investments in debt and equity securities are recognised and derecognised on a trade date basis.

Effective interest method

(d) Securities sold under repurchase agreements/securities purchased under resale agreements

(e) Property and equipment

Property and equipment held for use in supply of services or for administrative purposes are stated at cost less subsequent accumulated depreciation and impairment losses (see note 3(i)).

Depreciation is recognised to write off the cost of items of property and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives.

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FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(f) Revenue recognition

Provided it is probable that the economic benefits will flow to the Company and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in the income statement as follows:

(i) Gross premiums written from insurance contracts

The accounting policies for the recognition of revenue from insurance contracts are disclosed in note 3(b).

(ii) Commission income

Commission income is recognised as revenue when received or receivable from reinsurers.

(iii) Income from annuity management, insurance brokerage and policy management businesses

Income from annuity management, insurance brokerage and policy management businesses is recognised when the service is rendered.

(iv) Dividends

Dividend income from investments is recognised when the shareholder’s right to receive payment is established.

(v) Interest income

Interest income is recognised as it accrues using the effective interest method.

IIE – 21

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(g) Insurance debtors, other debtors and amounts due from related companies

Insurance debtors, other debtors and amounts due from related companies are initially recognised at fair value and thereafter stated at amortised cost using effective interest method less allowance for impairment (see note 3(i)), except where the receivables are interest-free or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment.

(h) Insurance creditors, other payables and amounts due to related companies

Insurance creditors, other payables and amounts due to related companies are initially recognised at fair value and thereafter stated at amortised cost using effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

Effective interest method

(i) Impairment of assets

(i) Impairment of financial assets other than those at fair value through profit or loss

Financial assets other than those at fair value through profit or loss are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Company about one or more of the following loss events:

significant financial difficulty of the debtor;
a breach of contract, such as a default or delinquency in interest or principal payments;

IIE – 22

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor; and
a significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

If any such evidence exists, any impairment loss is determined and recognised as follows:

For insurance and other debtors and other financial assets carried at amortised cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material.

For available-for-sale securities, the cumulative loss that has been recognised directly in other comprehensive income and accumulated in fair value reserve is removed from fair value reserve and is recognised in the income statement when the available-for-sale securities are disposed of or are determined to be impaired. The amount of the cumulative loss that is recognised in the income statement is the excess of the acquisition cost (net of any principal repayment and amortisation) over the current fair value, less any impairment loss on that asset previously recognised in the income statement.

IIE – 23

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

For certain categories of financial assets, such as insurance and other debtors, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired:

property and equipment; and
reinsurers’ share of insurance contract provisions.

If any such indication exists, the asset’s recoverable amount is estimated.

IIE – 24

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(i) Calculation of recoverable amount

(ii) Recognition of impairment losses

(iii) Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

(j) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are also included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

IIE – 25

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(k) Government grants

Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.

(l) Short term employee benefits and contributions to defined contribution retirement plans

(m) Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the respective years. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of each reporting period.

IIE – 26

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the statement of financial position and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

(n) Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

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FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(o) Leasing

The Company as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

(p) Translation of foreign currencies

Foreign currency transactions during the Relevant Periods are translated into the functional currency of the Company at the exchange rates prevailing on the transaction dates. At the end of reporting period, monetary assets and liabilities denominated in foreign currencies are retranslated into the functional currency of the Company at the exchange rates at that date. Exchange gains and losses arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in the income statement in the period in which they arise.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into the functional currency of the Company using the foreign exchange rates ruling on the transaction dates.

4. Insurance, financial and capital risk management

(a) Risk management objectives, policies and processes for mitigating insurance risk

The Company is principally engaged in corporate and personal retirement insurance and annuity business and group life insurance business in the PRC. The Company’s management of insurance and financial risk is a critical aspect of the business. Insurance risks are managed through the application of various policies and procedures relating to underwriting, pricing, claims and reinsurance as well as experience monitoring.

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FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(b) Underwriting strategy

The Company operates in the PRC’s insurance market, offering a wide range of insurance products covering different types of corporate and personal retirement insurance, group life insurance and annuity. With regard to the control of quality of the insurance policies underwritten, the Company has formulated strict operational procedures on underwriting and claims settlement to control risks on insurance underwriting.

(c) Reinsurance strategy

The Company purchases reinsurance protection from other reinsurers in the normal course of business in order to limit the potential for losses arising from unexpected and concentrated exposures. In assessing the credit worthiness of reinsurers, the Company takes into account, among other factors, ratings and evaluation performed by recognised credit rating agencies, their claims-paying and underwriting track records, as well as the Company’s past experience with them.

(d) Asset and liability matching

The objective of the Company’s asset and liability management is to match the Company’s assets with liabilities on the basis of duration. The Company actively manages its assets using an approach that balances quality, diversification, asset and liability matching, liquidity and investment return. The goal of the investment process is to maximize investment returns at a tolerable risk level, whilst ensuring that the assets and liabilities are managed on a cash flow and duration basis.

IIE – 29

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

However, under the current regulatory and market environment in the PRC, the Company is unable to invest in assets with a duration of sufficient length to match the duration of its insurance liabilities. When the regulatory and market environment permits, the Company intends to gradually lengthen the duration of its assets. The Company monitors the duration gap between the assets and liabilities closely and prepares cash flow projections from assets and liabilities on a regular basis. Currently, the Company reduces the level of the asset-liability mismatch by:

actively seeking to acquire longer dated fixed rate debt investments with an acceptable level of yield;
upon the maturity dates of fixed rate debt investments, rolling over the proceeds to longer dated fixed rate debt investments;
disposing of some of the shorter dated fixed rate debt investments, particularly those with lower yields, and rolling over the proceeds to longer dated fixed rate debt investments; and
investing in equities for the long term.

(e) Insurance risk

Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Company has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.

IIE – 30

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

The concentration and mitigation of insurance risk are set out below:

Concentration of insurance risks

Concentration risk is the risk of incurring a major loss as a result of having a significant mortality or other insurance coverage on a particular person or a group of persons due to the same event.

The concentration of insurance liabilities, comprising life insurance contract liabilities, unearned premium provision and provision for outstanding claims by type of insurance policies is as follows:

Life insurance Medical and health insurance Accident insurance Total	2010 RMB’000 % 471 3.29 10,952 76.49 2,895 20.22 14,318 100.00	As at 31 December 2011 RMB’000 % 114,820 34.49 153,684 46.16 64,411 19.35 332,915 100.00	2012 RMB’000 % 144,233 22.22 402,020 61.93 102,926 15.85 649,179 100.00	2012 RMB’000 % 144,233 22.22 402,020 61.93 102,926 15.85 649,179 100.00
				100.00

Management of risks

The key risk associated with insurance contracts is the risk of potential loss arising with respect to a particular insurance product as a result of actual market conditions and loss experience being different from the assumed market conditions and loss experience used when designing and pricing the product.

The Company manages the risks by centralising the product design function at the head office level, headed by the chief appointed actuary and senior management in other key functional departments. Standards and guidelines are established to ensure that the risks associated with particular products are within the acceptable level. The pricing method, the solvency requirement, the profit margin, the loss experience, etc., are key considerations in designing a product.

In addition, the underwriting and claim processing departments strictly follow the established standards and procedures.

IIE – 31

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(f) Financial risk

The carrying amounts of the Company’s financial assets at the reporting date were as follows:

Financial assets: Available-for-sale securities Designated at fair value through profit or loss Held-for-trading securities Loans and receivables – Debt schemes – Debt securities – Others (including bank balances and cash)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 255,495 705,645 30,000 30,000 30,000 8,006 18,040 – 10,000 14,000 64,000 – 49,952 49,118 747,056 1,342,385 1,468,331 757,056 1,406,337 1,581,449 795,062 1,709,872 2,317,094

The carrying amounts of the Company’s financial liabilities at the reporting date were as follows:

Financial liabilities at amortised cost: Securities sold under repurchase agreements Amounts due to related companies Other payables Investment contract liabilities	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – – 98,800 30,912 12,180 2,092 130,357 313,897 410,877 22,374 347,134 465,631 183,643 673,211 977,400	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – – 98,800 30,912 12,180 2,092 130,357 313,897 410,877 22,374 347,134 465,631 183,643 673,211 977,400
		977,400

IIE – 32

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

There is no significant change in the Company’s exposures to risk and how they arise, nor in the Company’s objectives, policies and processes for managing each of these risks.

(i) Market risk

Market risk can be described as the risk of change in fair value of a financial instrument due to changes in interest rates, equity prices or foreign currency exchange rates and a change in cash flows arising from a financial instrument due to changes in interest rates.

(a) Interest rate risk

Interest rate risk is risk to the earnings or market value of a fixed-rate financial instrument and to the cash flows from variable-rate financial instrument due to uncertain future market interest rates.

The Company monitors this exposure through periodic reviews of its financial instruments. Estimates of cash flows, as well as the impact of interest rate fluctuations relating to the investment portfolio, are modelled and reviewed periodically.

The Company is exposed to fair value interest rate risk in relation to the (i) time deposits and (ii) debt investments classified as held-fortrading, available-for-sale, loans and receivables and designated at fair value through profit or loss.

The Company is exposed to cash flow interest rate risk in relation to variable-rate financial instruments, which are primarily bank balances. The management considers such risk exposure is not significant.

IIE – 33

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

Sensitivity analysis

The sensitivity analysis below has been determined assuming that the change in interest rates had occurred at the end of each reporting period and had been applied to the exposure to interest rate risk for both derivative and non-derivative financial instruments in existence at that date. The analysis is prepared assuming the financial instruments outstanding at the end of each reporting period were outstanding for the whole year. The basis point increase or decrease as stated below is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible charge in interest rate.

If interest rates of the fixed-rate debt investments classified as held-for-trading, designated at fair value through profit or loss and available-for-sale had been increased/decreased by 100 basis points during the Relevant Periods, with all other variables held constant, the Company’s post-tax profit and fair value reserve would increase/decrease as follows:

Post-tax profit for the year (+100Bp) Post-tax profit for the year (-100Bp) Fair value reserve (+100Bp) Fair value reserve (-100Bp)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (2,094) (834) (446) 2,701 866 643 – (7,061) (27,072) – 7,549 27,242

IIE – 34

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(b) Equity price risk

Sensitivity analysis

The sensitivity analyses below are determined based on the exposure to equity price risks at 31 December 2010, 2011 and 2012. If the prices of the respective equity securities and investment funds had been 10% higher/lower, the Company’s post-tax profit and fair value reserve as a result of the changes in fair value of securities at held-for-trading and available-for-sale securities respectively would increase/decrease as follows:

	Year	ended 31 December	ended 31 December
	2010	2011		2012
	RMB’000	RMB’000	RMB’000
Post-tax profit
for the year	770	1,774		–
Fair value reserve	–	2,760		7,538

(c) Foreign exchange risk

The Company’s exposure to foreign currency risk arises primarily from other debtors and bank balances in the United States dollars (“US$”) and Hong Kong Dollars (“HK$”). The Company currently does not have a foreign currency hedging policy. The table below summarises the Company’s exposure to foreign currency risk. The Company’s monetary assets, which are primarily bank balances and cash, denominated in foreign currencies are included in the table below, categorised by currency at their carrying amounts.

IIE – 35

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

As at 31 December 2010 Total assets As at 31 December 2011 Total assets As at 31 December 2012 Total assets Sensitivityanalysis	Assets/liabilities denominated in US$ HK$ Total RMB’000 RMB’000 RMB’000 327,006 126,363 453,369 25,768 – 25,768 1,153 – 1,153	Assets/liabilities denominated in US$ HK$ Total RMB’000 RMB’000 RMB’000 327,006 126,363 453,369 25,768 – 25,768 1,153 – 1,153

		25,768

		1,153

The sensitivity analyses below are determined based on the exposure to foreign exchange rates for balances denominated in foreign currencies at 31 December 2010, 2011 and 2012. If the foreign exchange rates had been 5% higher/lower, the Company’s post-tax profit would increase/decrease as follows:

Post-tax profit for the year	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 22,668 1,288 58

(ii) Credit risk

Credit risk is the risk of economic loss resulting from the failure of one of the obligors to make full payment of principal or interest when due.

The Company is exposed to credit risks primarily associated with bank deposits, securities purchased under resale agreements, insurance debtors, investments in debt securities, reinsurance arrangements with reinsurers and other debtors.

IIE – 36

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

The maximum exposure to credit risk which will cause a financial loss to the Company due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the respective recognised financial assets as stated in the statement of financial position.

To reduce the credit risk associated with the investments in debt securities, the Company has established detailed credit control policy. In addition, the risk level of the various investment sectors is continuously monitored with the investment mix adjusted accordingly. In respect of the debt securities, the investment procedures manual, which is managed by an Investment committee, includes the minimum acceptable domestic credit rating of the issuers as required by the China Insurance Regulatory Commission (“CIRC”). Any non-compliance or violation of the manual will be followed up and rectification action will be taken immediately.

The Company does not have any significant concentration of credit risk arising from the investments in debt securities since the investment portfolio is well diversified and the relevant debt securities are with investment grade of A or above.

The credit risk on bank balances is limited because the relevant banks are with high credit ratings.

The credit risk associated with insurance debtors, reinsurance arrangements with reinsurers and other debtors will not cause a material impact on the Company’s financial performance, after taking into consideration factors such as credit quality, portfolio size, concentrations and economic factors.

(iii) Liquidity risk

The Company has to meet daily calls on its cash resources, notably from claims arising from its insurance contracts. There is, therefore, a risk that cash will not be available to settle liabilities when due.

IIE – 37

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

The following table details the remaining contractual obligations for its non-derivative financial liabilities based on the agreed repayment terms, except for investment contract liabilities which are based on expected maturity dates. It has been drawn up based on the undiscounted cash flows of financial liabilities by reference to the earliest date on which the Company can be required to pay and includes both interest and principal cash flows. The table excludes life insurance contract liabilities, however, assuming that all surrender and transfer options are exercised would result in all life insurance contracts being presented as falling due within one year.

At 31 December 2010 Financial and insurance liabilities: Investment contract liabilities Other payables Amounts due to related companies Insurance creditors Provision for outstanding claims At 31 December 2011 Financial and insurance liabilities: Investment contract liabilities Other payables Amounts due to related companies Insurance creditors Provision for outstanding claims	1 year or less RMB’000 4,696 130,157 30,912 60,416 349 226,530 74,732 313,687 12,180 182,897 58,142 641,638	5 years or less but over 1 year RMB’000 17,980 200 – – – 18,180 297,914 210 – – – 298,124	After 5 years RMB’000 2,219 – – – – 2,219 15,354 – – – – 15,354	Total Carrying undiscounted value at cash flows 31 December RMB’000 RMB’000 24,895 22,374 130,357 130,357 30,912 30,912 60,416 60,416 349 349 246,929 244,408 388,000 347,134 313,897 313,897 12,180 12,180 182,897 182,897 58,142 58,142 955,116 914,250	Total Carrying undiscounted value at cash flows 31 December RMB’000 RMB’000 24,895 22,374 130,357 130,357 30,912 30,912 60,416 60,416 349 349 246,929 244,408 388,000 347,134 313,897 313,897 12,180 12,180 182,897 182,897 58,142 58,142 955,116 914,250
					244,408

					347,134 313,897 12,180 182,897 58,142
					914,250

IIE – 38

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

At 31 December 2012 Financial and insurance liabilities: Investment contract liabilities Securities sold under repurchase agreements Other payables Amounts due to related companies Insurance creditors Provision for outstanding claims	1 year or less RMB’000 99,452 99,022 345,378 2,092 421,243 198,043 1,165,230	5 years or less but over 1 year RMB’000 391,948 – 65,499 – – – 457,447	After 5 years RMB’000 17,719 – – – – – 17,719	Total Carrying undiscounted value at cash flows 31 December RMB’000 RMB’000 509,119 465,631 99,022 98,800 410,877 410,877 2,092 2,092 421,243 421,243 198,043 198,043 1,640,396 1,596,686	Total Carrying undiscounted value at cash flows 31 December RMB’000 RMB’000 509,119 465,631 99,022 98,800 410,877 410,877 2,092 2,092 421,243 421,243 198,043 198,043 1,640,396 1,596,686
					1,596,686

(g) Capital management

The Company’s key business operations are its insurance business. The Company manages its capital to ensure it will be able to meet statutory solvency requirements for insurance business set out in the Solvency Reporting Standards for Insurance Companies issued CIRC. The Company’s capital management initiatives also strive to maintain a surplus for future business expansion opportunities. The Company’s overall capital management strategy remained unchanged throughout the Relevant Periods. The Company’s capital includes the components of total equity. The Company complied with the various solvency requirements throughout the Relevant Periods.

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FINANCIAL INFORMATION OF TPP

APPENDIX IIE

5. Investment income

Net investment income (note (a))
Net realised investment losses
(note (b))
Net unrealised investment gains (losses)
and impairment (note (c))
(a)
Net investment income
Interest income from debt
securities (note (i)):
– Available-for-sale
– Held-for-trading
– Designated at fair value through
profit or loss
– Loans and receivables
Dividend income from equity
securities (note (ii)):
– Available-for-sale
– Held-for-trading
Dividend income from investment
funds (note (iii)):
– Held-for-trading
Interest income from bank deposits
Interest income from securities
purchased under resale
agreements
Interest expense on securities sold
under repurchase agreements

Year ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
6,053
24,781
83,265
(791)
(5,072)
(18,598)
(1,036)
654
(3,728)
4,226
20,363
60,939
–
4,279
20,592
300
13
–

1,200
1,198
1,199
476
1,952
5,515
1,976
7,442
27,306
–
24
1,986
24
44
17
24
68
2,003
124
6
158
124
6
158
3,927
15,439
55,762
2
1,837
774
–
(11)
(2,738)
6,053
24,781
83,265

IIE – 40

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

(i) Interest income from debt securities Listed Unlisted (ii) Dividend income from equity securities Listed (iii) Dividend income from investment fund Listed Unlisted	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 40 3,082 14,355 1,936 4,360 12,951 1,976 7,442 27,306 24 68 2,003 70 – – 54 6 158 124 6 158	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 40 3,082 14,355 1,936 4,360 12,951 1,976 7,442 27,306 24 68 2,003 70 – – 54 6 158 124 6 158
		27,306

		2,003

		– 158
		158

IIE – 41

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(b) Net realised investment gains (losses) Debt securities (note (i)): – Available-for-sale – Held-for-trading Equity securities (note ii)): – Available-for-sale – Held-for-trading Investment funds (note iii)): – Available-for-sale – Held-for-trading	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 8 490 (184) – 162 (184) 8 652 – (3,633) (15,862) 220 (1,445) (1,090) 220 (5,078) (16,952) – – (2,298) (827) (2) – (827) (2) (2,298) (791) (5,072) (18,598)

IIE – 42

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

(i) Net realised (losses) gains on debt securities Listed Unlisted (ii) Net realised gains (losses) on equity securities Listed (iii) Net realised losses on investment funds Unlisted	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (79) 8 284 (105) – 368 (184) 8 652 220 (5,078) (16,952) (827) (2) (2,298)

IIE – 43

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(c) Net unrealised investment gains (losses) and impairment Debt securities (note (i)): – Held-for-trading Equity securities (note (ii)): – Held-for-trading Investment funds (note (iii)): – Held-for-trading Impairment loss recognised – Available-for-sale equity securities (i) Net unrealised gain (losses) on debt securities Listed Unlisted (ii) Net unrealised (losses) gains on equity securities Listed (iii) Net unrealised losses on investment fund Unlisted	Year 2010 RMB’000 247 (1,167) (116) – (1,036) 119 128 247 (1,167) (116)	ended 31 December 2011 2012 RMB’000 RMB’000 (5) 8 659 417 – – – (4,153) 654 (3,728) (5) 8 – – (5) 8 659 417 – –

IIE – 44

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

6. Other income/other losses

(a) Other income

Fee income from pension management services Fee income from policy management services Insurance brokerage income Government grants Others	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 76,236 81,654 92,624 888 11,400 15,304 110,843 111,834 82,618 1,796 2,361 3,047 3,302 5,331 3,028 193,065 212,580 196,621	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 76,236 81,654 92,624 888 11,400 15,304 110,843 111,834 82,618 1,796 2,361 3,047 3,302 5,331 3,028 193,065 212,580 196,621
		196,621

(b) Other losses

(Losses) gains on disposal of property and equipment Net exchange losses Others	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (10) 4 22 (78) (14,345) (54) – 84 – (88) (14,257) (32)	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (10) 4 22 (78) (14,345) (54) – 84 – (88) (14,257) (32)
		(32)

IIE – 45

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

7. Net policyholders’ benefits and net commission expenses

(a) Net policyholders’ benefits

Claims and claim adjustment expenses Less: Reinsurers’ and retrocessionaires’ share Surrenders Annuity, dividends and maturity payments Interest allocated to investment contracts	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 810 140,785 453,988 – (36,183) (146,926) 810 104,602 307,062 – – 1,177 86 7,013 12,754 – – 11,762 896 111,615 332,755

(b) Net commission expenses

Gross commission expenses Less: Reinsurance commission income Net commission expenses	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 1,499 53,792 92,390 – (19,391) (38,749) 1,499 34,401 53,641

IIE – 46

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

8. Loss before taxation

Loss before taxation is arrived at after charging:

(a) Staff costs (including directors’ remuneration): Salaries, wages, bonuses and other benefits (b) Other items: Auditor’s remuneration Business taxes and additional charges Depreciation of property and equipment Operating lease charges in respect of properties	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 216,001 263,159 281,852 383 456 458 11,783 18,834 31,980 11,271 11,245 12,100 22,962 26,991 38,398 46,399 57,526 82,936	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 216,001 263,159 281,852 383 456 458 11,783 18,834 31,980 11,271 11,245 12,100 22,962 26,991 38,398 46,399 57,526 82,936

		458 31,980 12,100 38,398
		82,936

9. Directors’ and chief executive’s remuneration and individuals with highest emoluments

10. Income tax

Under the Enterprise Income Tax Law of the PRC, the enterprise income tax rate for domestic companies is 25% for the Relevant Periods.

No provision for taxation has been made as the Company incurred a tax loss during the Relevant Periods.

IIE – 47

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

Reconciliation between tax charge and accounting profit at applicable tax rates:

Loss before taxation Tax at domestic income tax rate Tax effect of non-deductible expenses Tax effect of non-taxable income Tax effect of temporary differences not recognised Tax effect of tax losses not recognised Income tax charges	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (153,994) (160,832) (104,615) (38,498) (40,208) (26,154) 4,204 4,745 4,714 (331) (655) (1,021) 7,751 10,225 17,619 26,874 25,893 4,842 – – –

The Company did not recognise deferred tax assets in respect of tax losses of approximately RMB517,383,000, RMB609,066,000 and RMB576,104,000 and other deductible temporary differences, relating primarily to outstanding claims provisions and accrued bonus, of RMB31,004,000, RMB73,967,000 and RMB138,249,000 as at 31 December 2010, 2011 and 2012, respectively. The tax losses can be carried forward up to five years after the year in which the loss was originated to offset future taxable profits. The tax losses balance as at 31 December 2010, 2011 and 2012 will be expiring in 2011 to 2015, 2012 to 2016 and 2013 to 2017 respectively. No deferred tax assets were recognised as the management considered future profit streams to offset against the unutilised tax losses and taxable temporary differences to be uncertain.

11. Statutory deposits

The Company has placed deposits with banks, amounting to RMB160,000,000, RMB250,000,000 and RMB300,000,000 as at 31 December 2010, 2011 and 2012, respectively as capital guarantee funds, pursuant to the relevant PRC insurance rules and regulations. The funds can only be used with the prior approval of the relevant authorities in the event that the Company cannot meet the statutory solvency requirements or goes into liquidation.

IIE – 48

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

12. Property and equipment

Cost: At 1 January 2010 Additions Disposals At 31 December 2010 and 1 January 2011 Additions Disposals At 31 December 2011 and 1 January 2012 Additions Disposals At 31 December 2012 Accumulated depreciation: At 1 January 2010 Charge for the year Eliminated on disposals At 31 December 2010 and 1 January 2011 Charge for the year Eliminated on disposals At 31 December 2011 and 1 January 2012 Charge for the year Eliminated on disposals At 31 December 2012 Net book values: At 31 December 2010 At 31 December 2011 At 31 December 2012	Furniture and fixtures RMB’000 7,895 876 (80) 8,691 2,048 (116) 10,623 3,056 (440) 13,239 3,305 2,090 (67) 5,328 1,651 (71) 6,908 2,084 (378) 8,614 3,363 3,715 4,625	Computer equipment RMB’000 29,901 10,607 (1,335) 39,173 9,173 (1,169) 47,177 15,890 (917) 62,150 13,268 6,921 (506) 19,683 7,312 (1,117) 25,878 7,950 (798) 33,030 19,490 21,299 29,120	Motor vehicles RMB’000 12,900 1,001 (15) 13,886 – (281) 13,605 – (1,212) 12,393 5,564 2,260 (14) 7,810 2,282 (267) 9,825 2,066 (1,152) 10,739 6,076 3,780 1,654	Total RMB’000 50,696 12,484 (1,430) 61,750 11,221 (1,566) 71,405 18,946 (2,569) 87,782 22,137 11,271 (587) 32,821 11,245 (1,455) 42,611 12,100 (2,328) 52,383 28,929 28,794 35,399

IIE – 49

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

–	Furniture and fixtures	5 years
–	Computer equipment	3 years
–	Motor vehicles	5 years

13. Investments in securities

Available-for-sale securities Debt securities, at fair value Listed – outside Hong Kong Unlisted (note (i)) Equity securities, at fair value Listed – outside Hong Kong Investment funds, at fair value Unlisted (note (ii)) Sub-total of available-for-sale securities Designated at fair value through profit or loss Debt securities Unlisted (note (i))	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 143,715 366,676 – 84,178 263,586 – 227,893 630,262 – 27,602 50,334 – – 25,049 – 255,495 705,645 30,000 30,000 30,000	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 143,715 366,676 – 84,178 263,586 – 227,893 630,262 – 27,602 50,334 – – 25,049 – 255,495 705,645 30,000 30,000 30,000
		630,262 50,334 25,049
		705,645
		30,000

IIE – 50

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

Held-for-trading investments Debt securities Listed – outside Hong Kong Equity securities Listed – outside Hong Kong Unlisted investment funds (note (ii)) Sub-total of held-for-trading investments Loans and receivables Debt securities – unlisted Debt schemes – unlisted (note (iii)) Sub-total of loans and receivables (note (iv)) Total	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 305 300 – 7,701 2,740 – – 15,000 – 8,006 18,040 – – 49,952 49,118 10,000 14,000 64,000 10,000 63,952 113,118 48,006 367,487 848,763	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 305 300 – 7,701 2,740 – – 15,000 – 8,006 18,040 – – 49,952 49,118 10,000 14,000 64,000 10,000 63,952 113,118 48,006 367,487 848,763
		–
		49,118 64,000
		113,118
		848,763

Notes:

(i) The fair value of the unlisted debt securities is estimated based on recent transaction prices provided by financial institutions.
(ii) The Company invests in open-ended or close-ended investment funds with underlying assets of equities, bonds or composite funds.
(iii) The debt schemes relate to finance for infrastructure projects in the PRC. The debt schemes as at 31 December 2010 will mature in 2016 and bear interest at rate of 4.87% per annum. The debt schemes as at 31 December 2011 will mature from 2016 to 2020 and bear interest at rates ranging from 5.64% to 5.78% per annum. The debt schemes as at 31 December 2012 will mature from 2016 to 2020 and bear interest at rates ranging from 5.58% to 6.60% per annum. The fair values of the debt schemes are determined with reference to the estimated cashflows discounted using market interest rates as at the end of the Relevant Periods.
(iv) The fair value of the loans and receivables is RMB10,825,716, RMB67,087,797 and RMB122,601,847 as at 31 December 2010, 2011 and 2012, respectively

IIE – 51

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

Analysed for reporting purposes as:

Current Non-current	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 81,956 140,201 48,006 285,531 708,562 48,006 367,487 848,763	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 81,956 140,201 48,006 285,531 708,562 48,006 367,487 848,763
		848,763

The following table shows an analysis of investment in debt and equity securities recorded at fair value by level of the fair value hierarchy:

At 31 December 2010 Designated at fair value through profit or loss Held-for-trading At 31 December 2011 Available-for-sale Designated at fair value through profit or loss Held-for-trading At 31 December 2012 Available-for-sale Designated at fair value through profit or loss	Level 1 RMB’000 – 8,006 8,006 171,317 – 18,040 189,357 442,059 – 442,059	Level 2 RMB’000 30,000 – 30,000 84,178 30,000 – 114,178 263,586 30,000 293,586	Level 3 RMB’000 – – – – – – – – – –	Total RMB’000 30,000 8,006
				38,006

				255,495 30,000 18,040
				303,535
				705,645 30,000
				735,645

Notes:

Level 1 – Quoted market price

Level 2 – Valuation techniques using observable inputs

Level 3 – Valuation techniques with significant unobservable inputs

IIE – 52

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

14. Securities purchased under resale agreements/securities sold under repurchase agreements

The Company entered into transactions in which it transferred financial assets directly to third parties. As the Company has not transferred the significant risks and rewards relating to these securities, it continues to recognise the full carrying amount of such securities and has recognised the cash received on the transfer as securities sold under repurchase agreements. The following were the Company’s available-for-sale securities as at 31 December 2012 that were transferred to third parties with terms to repurchase these securities at the agreed dates and prices. These securities are measured at fair value in the Company’s statement of financial position.

Carrying amount of transferred assets Carrying amount of associated liabilities – securities sold under repurchase agreements Net position	RMB’000 268,397 (98,800) 169,597

Conversely, the Company also enters into short-term investment arrangements secured by the securities purchased. The securities purchased are not recognised on the statement of financial position.

All of the securities purchased under resale agreements and securities sold under repurchase agreements are denominated in RMB and will be settled within one year from the end of each reporting period. The carrying amount of the securities purchased under resale agreements and securities sold under repurchase agreements approximate to their fair value.

As at 31 December 2012 and 2011, most of the securities purchased under resale agreements will mature within 4 days and 5 days respectively, with interest rates of 6.00% and 2.20% per annum, respectively. As at 31 December 2012, most of the securities sold under repurchase agreements will mature in 4 to 7 days, with interest rates of 4.55% to 5.45% per annum.

IIE – 53

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

15. Insurance debtors

Insurance premiums receivable Amount receivable under reinsurance contracts ceded	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 162 33,656 62,130 – 21,483 58,461 162 55,139 120,591	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 162 33,656 62,130 – 21,483 58,461 162 55,139 120,591
		120,591

Insurance debtors are related to a wide range of customers for whom there was no recent history of default. All insurance debtors are expected to be recovered within one year and are interest free.

As at 31 December 2010, insurance debtors include amounts due from fellow subsidiaries of RMB925,760. There were no such balances with related companies as at 31 December 2011 and 2012.

The following is an ageing analysis of the amounts due from insurance customers, reinsurers and intermediaries that are not individually considered to be impaired:

Net yet due Within 3 months More than 3 months but less than 12 months More than 12 months	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 162 54,846 114,575 – 179 3,133 – 114 2,880 – – 3 162 55,139 120,591	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 162 54,846 114,575 – 179 3,133 – 114 2,880 – – 3 162 55,139 120,591
		120,591

Insurance debtors that are past due but not impaired relate to a number of customers that have a good track record with the Company. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Company does not have any collateral in respect of these balances.

IIE – 54

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

16. Reinsurers’ share of insurance contract provisions

The reinsurers’ share of insurance contract provisions represents the reinsurers’ share of unearned premium provisions and provision for outstanding claims as follows:

Unearned premium provisions (note 21) Provision for outstanding claims (note 22)	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 43,315 89,452 – 10,773 45,475 – 54,088 134,927	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 43,315 89,452 – 10,773 45,475 – 54,088 134,927
		134,927

17. Other debtors

Interest receivable Other receivables Management fee receivable from pension business Rental and utility deposits Prepayments Others	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 4,681 19,678 50,896 32,890 49,408 52,886 19,844 15,307 23,115 3,310 5,422 5,951 479 807 927 1,796 2,540 16,554 63,000 93,162 150,329	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 4,681 19,678 50,896 32,890 49,408 52,886 19,844 15,307 23,115 3,310 5,422 5,951 479 807 927 1,796 2,540 16,554 63,000 93,162 150,329
		150,329

All other debtors are expected to be recovered within one year.

IIE – 55

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

18. Amounts due from/(to) related companies

(a) Due from related companies

==> picture [342 x 225] intentionally omitted <==

----- Start of picture text -----

As at 31 December
2010 2011 2012
RMB’000 RMB’000 RMB’000
Amounts due from fellow
subsidiaries 157 38,183 25,046
Due to related companies
As at 31 December
2010 2011 2012
RMB’000 RMB’000 RMB’000
Amounts due to fellow
subsidiaries 30,912 12,180 2,092
----- End of picture text -----

(b) Due to related companies

The amounts due from/(to) related companies are unsecured, interest free and repayable on demand.

IIE – 56

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

19. Bank balances and cash

Deposits with banks and other financial institutions with original maturity less than three months Cash at bank and in hand Bank balances and cash in the statement of financial position Less: restricted bank deposits – cash received for capital contribution (note) Cash and cash equivalents in the statement of cash flows	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 483,368 60,000 80,000 40,531 618,540 295,813 523,899 678,540 375,813 (450,876) – – 73,023 678,540 375,813	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 483,368 60,000 80,000 40,531 618,540 295,813 523,899 678,540 375,813 (450,876) – – 73,023 678,540 375,813
		375,813 –
		375,813

Note:

The amount represents the capital contribution received by the Company in 2010 and was restricted since the necessary legal and administrative procedures for capital registration were not completed as at 31 December 2010. The capital registration was subsequently completed on 11 July 2011.

20. Life insurance contract liabilities

Balance as at 1 January Premiums written during the year Surrenders Annuity, dividend and maturity payments Other movements Balance as at 31 December	As at 31 December 2011 Gross Reinsurers’ share Total RMB’000 RMB’000 RMB’000 – – – 101,911 – 101,911 – – – (3,005) – (3,005) 143 – 143 99,049 – 99,049	As at 31 December 2012 Gross Reinsurers’ share Total RMB’000 RMB’000 RMB’000 99,049 – 99,049 102,802 – 102,802 (1,177) – (1,177) (6,481) – (6,481) (7,157) – (7,157) 187,036 – 187,036	As at 31 December 2012 Gross Reinsurers’ share Total RMB’000 RMB’000 RMB’000 99,049 – 99,049 102,802 – 102,802 (1,177) – (1,177) (6,481) – (6,481) (7,157) – (7,157) 187,036 – 187,036
			187,036

IIE – 57

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

Key assumptions used in estimating the life insurance contract liabilities

The insurance contract provisions have been established based upon the following key assumptions:

Discount rates which vary by the type of contract;
Mortality/morbidity rates based on the China Life Insurance Mortality Table (2000-2003); and
Lapse rates based on 100% of pricing assumptions.

Sensitivities of changes in key assumptions:

		Decrease in loss
		after tax and
		increase in
		total equity
		RMB’000
31	December 2012
	1% increase in interest rate	9,855
	10% decrease in mortality/morbidity rate	1,911
31	December 2011
	1% increase in interest rate	99
	10% decrease in mortality/morbidity rate	42

During the Relevant Periods, there were no significant changes in the key assumptions used in estimating the life insurance contract liabilities.

IIE – 58

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

21. Unearned premium provisions

Analysis of movements in the unearned premium provisions:

At 1 January Premiums written during the year Premiums earned during the year At 31 December	As a Gross RMB’000 – 22,162 (8,193) 13,969	t 31 December 2 Reinsurers’ share RMB’000 – – – –	010 Total RMB’000 – 22,162 (8,193) 13,969	As a Gross RMB’000 13,969 430,131 (268,376) 175,724	t 31 December 2 Reinsurers’ share RMB’000 – (105,194) 61,879 (43,315)	011 Total RMB’000 13,969 324,937 (206,497) 132,409	As a Gross RMB’000 175,724 821,804 (733,428) 264,100	t 31 December 2 Reinsurers’ share RMB’000 (43,315) (240,181) 194,044 (89,452)	012 Total RMB’000 132,409 581,623 (539,384)
									174,648

22. Provision for outstanding claims

Analysis of movement in the provision for outstanding claims:

At 1 January Claims paid during the year Claims incurred during the year At 31 December	As a Gross RMB’000 – (461) 810 349	t 31 December 2 Reinsurers’ share RMB’000 – – – –	010 Total RMB’000 – (461) 810 349	As a Gross RMB’000 349 (82,992) 140,785 58,142	t 31 December 2 Reinsurers’ share RMB’000 – 25,410 (36,183) (10,773)	011 Total RMB’000 349 (57,582) 104,602 47,369	As a Gross RMB’000 58,142 (314,087) 453,988 198,043	t 31 December 2 Reinsurers’ share RMB’000 (10,773) 112,224 (146,926) (45,475)	012 Total RMB’000 47,369 (201,863) 307,062
									152,568

23. Investment contract liabilities

At 1 January Premiums received during the year Interest allocated to investment contracts, net of management fee Surrenders and others At 31 December	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 22,374 347,134 22,399 430,386 163,018 32 2,292 16,063 (57) (107,918) (60,584) 22,374 347,134 465,631	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 – 22,374 347,134 22,399 430,386 163,018 32 2,292 16,063 (57) (107,918) (60,584) 22,374 347,134 465,631
		465,631

IIE – 59

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

24. Insurance creditors

Amounts due to insurance customers Amounts due to insurance intermediaries Prepaid premiums received	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 50 51,622 196,193 1,507 11,218 19,327 58,859 120,057 205,723 60,416 182,897 421,243	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 50 51,622 196,193 1,507 11,218 19,327 58,859 120,057 205,723 60,416 182,897 421,243
		421,243

All of the amounts due to the insurance creditors are current and expected to be settled within one year.

25. Other payables and accruals

Deposits for policy administration (note) Business and other PRC tax payable Salaries and staff benefits payable Others	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 4,937 166,635 248,050 3,840 5,351 5,976 75,476 87,466 87,912 48,621 58,221 73,936 132,874 317,673 415,874	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 4,937 166,635 248,050 3,840 5,351 5,976 75,476 87,466 87,912 48,621 58,221 73,936 132,874 317,673 415,874
		415,874

All of the other payables and accruals are expected to be settled within one year.

Note: The amount represents deposits placed by customers of a particular health protection product for reimbursement of employees’ medical claims. The Company provides policy administration services and handles the medical claims made by the employees of its customers. Any accumulated unutilised balance will be refunded to the customers upon termination of the services.

IIE – 60

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

26. Insurance protection fund

27. Paid-in capital

Paid-in capital At beginning of year Addition (Note) At end of the year	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 800,000 800,000 1,500,000 – 700,000 – 800,000 1,500,000 1,500,000	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 800,000 800,000 1,500,000 – 700,000 – 800,000 1,500,000 1,500,000
		1,500,000

Note:

During 2011, capital contribution of RMB450,000,000 which had been received from shareholders of the Company in 2010 was subsequently transferred to paid-in capital upon the completion of all the necessary legal and administrative procedures. In addition, there was a further capital contribution of RMB250,000,000 from existing shareholders in 2011, which resulted in an increase in paid-in capital of RMB700,000,000 during the year.

28. Employee retirement benefits

As stipulated by the labour regulations of the PRC, the Company participates in various defined contribution retirement plans authorized by municipal and provincial governments for its staff. These subsidiaries are required to contribute at a rate of 10% to 22% of the salaries, bonuses and certain allowances of their staff to the retirement plans. A member of the plans is entitled to a pension equal to a fixed proportion of the salary prevailing at his or her retirement date.

The Company has no other material obligations for the payment of its staff’s retirement and other post-employment benefits other than the contributions described above.

IIE – 61

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

29. Maturity profile

The following table details the Company’s contractual maturity for some of its financial assets and financial liabilities.

31 December 2010 Assets Deposits at banks and other financial institutions (including statutory deposits) Debt securities (under held-for- trading) Debt securities (under designated at fair value through profit or loss) Debt schemes (under loans and receivables) 31 December 2011 Assets Deposits at banks and other financial institutions (including statutory deposits) Debt securities (under available- for-sale) Debt securities (under held-for- trading) Debt securities (under designated at fair value through profit or loss) Debt securities (under loans and receivables) Debt schemes (under loans and receivables) Securities purchased under resale agreements	Repayable on demand RMB’000 40,531 – – – 40,531 Repayable on demand RMB’000 618,540 – – – – – – 618,540	3 months or less RMB’000 543,368 – – – 543,368 3 months or less RMB’000 60,000 50,208 – – – – 2,500 112,708	1 year or less but over 3 months RMB’000 100,000 – – – 100,000 1 year or less but over 3 months RMB’000 110,000 30,614 300 – 834 – – 141,748	5 years or less but over 1 year RMB’000 – 305 30,000 – 30,305 5 years or less but over 1 year RMB’000 420,000 107,643 – 30,000 49,118 – – 606,761	After 5 years RMB’000 – – – 10,000 10,000 After 5 years RMB’000 – 39,428 – – – 14,000 – 53,428	Total RMB’000 683,899 305 30,000 10,000
						724,204

						Total RMB’000 1,208,540 227,893 300 30,000 49,952 14,000 2,500
						1,533,185

IIE – 62

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

31 December 2012 Assets Deposits at banks and other financial institutions (including statutory deposits) Debt securities (under available- for-sale) Debt securities (under designated at fair value through profit or loss) Debt securities (under loans and receivables) Debt schemes (under loans and receivables) Securities purchased under resale agreements Liabilities Securities sold under repurchase agreements	Repayable on demand RMB’000 295,813 – – – – – 295,813 –	3 months or less RMB’000 80,000 20,001 – – – 65,000 165,001 98,800	1 year or less but over 3 months RMB’000 2,143 120,200 – – – – 122,343 –	5 years or less but over 1 year RMB’000 850,000 247,012 30,000 39,118 – – 1,166,130 –	After 5 years RMB’000 – 243,049 – 10,000 64,000 – 317,049 –	Total RMB’000 1,227,956 630,262 30,000 49,118 64,000 65,000
						2,066,336

						98,800

30. Fair values of financial instruments

(a) Fair value

All financial instruments are stated at fair value or carried at amounts not materially different from their fair values as of 31 December 2010, 2011 and 2012.

(b) Estimation of fair values

The fair values of financial assets and financial liabilities are determined as follows:

The fair values of financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to recent transaction price or quoted market bid prices respectively;

IIE – 63

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

The fair values of unlisted investment funds and unlisted debt securities included in financial assets at fair value through profit or loss, heldfor-trading and available-for-sale investments are established by reference to the prices quoted by respective fund administrators or by using valuations techniques including the use of recent arm’s length transactions; and
The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis or using prices or rates from observable current market transactions as input.

31. Commitments

As of 31 December 2010, 2011 and 2012, the total future minimum lease payments under non-cancellable operating leases are payable as follows:

Within 1 year After 1 year but within 5 years	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 14,062 18,927 25,531 9,459 28,374 71,177 23,521 47,301 96,708	As at 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 14,062 18,927 25,531 9,459 28,374 71,177 23,521 47,301 96,708
		96,708

The Company leases a number of office premises under operating leases. The leases typically run for an initial period of 1 to 5 years, with an option to renew the leases when all terms are renegotiated. None of the leases includes contingent rentals.

32. Contingent liabilities

There was no outstanding litigation nor any other contingent liabilities as of 31 December 2010, 2011 and 2012, other than those incurred in the normal course of the Company’s insurance businesses.

IIE – 64

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

33. Material related party transactions and balances

(a) Significant balances with related parties

The significant balances with related parties were disclosed in respective notes.

(b) Significant transaction with related parties

The following is a summary of significant recurring transactions entered into between the Company and its related parties during the Relevant Periods:

		Year	ended 31 December
		2010	2011	2012
	Note	RMB’000	RMB’000	RMB’000
Fellow subsidiaries
Gross premiums written	(i)	–	3,412	33,710
Agency fee expenses	(ii)	–	(412)	(18,150)
Premiums ceded to
reinsurer	(i)	–	–	(76)
Agency fee income	(iii)	333	1,834	82,618
Back office service fee	(iv)	(9,706)	(12,784)	(16,558)
Internal audit service fee	(v)	(2,177)	(3,791)	(3,028)
Investment management fee
and redemption expense	(vi)	(308)	(449)	(1,028)
Rental and management fee
expense	(vii)	(1,377)	(499)	(21,048)
		Year	ended 31 December
		2010	2011	2012
	Note	RMB’000	RMB’000	RMB’000
Immediate holding
company
Gross premiums written	(i)	–	22,306	–
Agency fee expense	(ii)	–	(7,655)	–
Agency fee income	(iii)	110,500	110,000	–
Rental and management
fee expense	(vii)	(3,223)	(11,689)	–

IIE – 65

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

Notes:

(i) The Company underwrote staff insurance benefit policies and received premiums from related companies of the Company. The Company also ceded out premiums to a fellow subsidiary under a reinsurance arrangement.
(ii) The Company paid agency fee to related companies for referred-in insurance.
(iii) The Company provided agency services in selling the insurance products of the related companies on their behalf and received agency income.
(iv) The Company received back office services from and paid service fee to a fellow subsidiary.
(v) The Company received internal audit services from and paid service fee to a fellow subsidiary.
(vi) The Company received investment consultancy services from and paid investment management fees and redemption expense to certain fellow subsidiaries.
(vii) The Company leased a number of offices from related parties and paid rental and management expenses to the related companies.

(c) Compensation of key management personnel

The remuneration of directors and other members of key management during the reporting periods were as follows:

	Year	ended 31 December
	2010	2011	2012
	RMB’000	RMB’000	RMB’000
Salaries and benefits	745	849	771

IIE – 66

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

34. Operating segments

According to the Company’s internal organisational structure, management requirements, and internal reporting system, the Company’s operating business has three operating segments, based on insurance types. Management reviews the operating results of the segment periodically to, determine their allocation of resources and evaluate their performance. The main products and services provided by the Company’s segments are group insurance, pension management and insurance agency.

Segment revenue representing gross premiums written for insurance business and fees from pension management and insurance agency and segment profit or loss representing profit (loss) before taxation earned by each segment are reported to the Board of TPP for the purpose of resource allocation and assessment of segment performance.

Segment information is as follows:

For the year ended 31 December 2010

Income Gross premiums written from group life insurance business Change in unearned premium provisions, net of reinsurance Net earned premiums Net investment income Net realised and unrealised investment losses and impairment Other income Other losses Total income Benefits, losses and expenses Net policyholders’ benefits Net commission expenses Administrative and other expenses Total benefits, losses and expenses Loss before taxation Segment assets Segment liabilities Other segment information Depreciation Addition to non-current assets	Group insurance RMB’000 22,162 (13,969) 8,193 – – 944 – 9,137 (896) (2,697) (16,440) (20,033) (10,896) 162 102,587 – –	Pension management RMB’000 – – – – – 76,236 – 76,236 – 1,198 (162,770) (161,572) (85,336) 22,145 35,183 – –	Insurance agency RMB’000 – – – – – 110,834 – 110,834 – – (177,444) (177,444) (66,610) 46 14,567 – –	Unallocated RMB’000 – – – 6,053 (1,827) 5,051 (88) 9,189 – – (341) (341) 8,848 801,800 108,785 11,271 12,484	Total RMB’000 22,162 (13,969)
					8,193 6,053 (1,827) 193,065 (88)
					205,396
					(896) (1,499) (356,995)
					(359,390)
					(153,994)

					824,153

					261,122

					11,271 12,484

IIE – 67

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

For the year ended 31 December 2011

Income Gross premiums written from group life insurance business Less: Premiums ceded to reinsurers Net premiums written Change in unearned premium provisions, net of reinsurance Net earned premiums Net investment income Net realised and unrealised investment (losses) gains and impairment Other income Other losses Total income Benefits, losses and expenses Net policyholders’ benefits Net commission expenses Administrative and other expenses Change in life insurance contract liabilities, net of reinsurance Total benefits, losses and expenses Loss before taxation Segment assets Segment liabilities Other segment information Depreciation Addition to non-current assets	Group insurance RMB’000 532,042 (105,194) 426,848 (118,440) 308,408 18,455 (5,073) 11,406 – 333,196 (111,615) (34,401) (188,772) (99,049) (433,837) (100,641) 801,227 1,041,507 – –	Pension management RMB’000 – – – – – – – 82,476 – 82,476 – – (146,483) – (146,483) (64,007) 63,956 46,040 – –	Insurance agency RMB’000 – – – – – – – 111,950 – 111,950 – – (107,163) – (107,163) 4,787 38,158 1,749 – –	Unallocated RMB’000 – – – – – 6,326 655 6,748 (14,257) (528) – – (443) – (443) (971) 944,552 109,336 11,245 11,221	Total RMB’000 532,042 (105,194)
					426,848 (118,440)
					308,408 24,781 (4,418) 212,580 (14,257)
					527,094
					(111,615) (34,401) (442,861) (99,049)
					(687,926)
					(160,832)

					1,847,893

					1,198,632

					11,245 11,221

IIE – 68

APPENDIX IIE

FINANCIAL INFORMATION OF TPP

For the year ended 31 December 2012

Income Gross premiums written from group life insurance business Less: Premiums ceded to reinsurers Net premiums written Change in unearned premium provisions, net of reinsurance Net earned premiums Net investment income Net realised and unrealised investment gains and impairment Other income Other losses Total income Benefits, losses and expenses Net policyholders’ benefits Net commission expenses Administrative and other expenses Change in life insurance contract liabilities, net of reinsurance Total benefits, losses and expenses Loss before taxation Segment assets Segment liabilities Other segment information Depreciation Addition to non-current assets	Group insurance RMB’000 924,606 (240,181) 684,425 (42,239) 642,186 27,276 – 14,749 – 684,211 (332,755) (53,641) (290,651) (87,987) (765,034) (80,823) 1,340,755 1,877,403 – –	Pension management RMB’000 – – – – – – – 93,483 – 93,483 – – (152,012) – (152,012) (58,529) 75,976 55,952 – –	Insurance agency RMB’000 – – – – – – – 82,618 – 82,618 – – (86,358) – (86,358) (3,740) 24,759 (159) – –	Unallocated RMB’000 – – – – – 55,989 (22,326) 5,771 (32) 39,402 – – (925) – (925) 38,477 1,166,521 123,974 12,100 18,946	Total RMB’000 924,606 (240,181)
					684,425 (42,239)
					642,186 83,265 (22,326) 196,621 (32)
					899,714
					(332,755) (53,641) (529,946) (87,987)
					(1,004,329)
					(104,615)

					2,608,011

					2,057,170

					12,100 18,946

35. Accounting judgements and key sources of estimation uncertainty

In the application of the Company’s accounting policies, which are described in note 3, the management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

IIE – 69

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimations (see below), that the management has made in the process of applying the Company’s accounting policies and that have the most significant effect on the amounts recognised in the Financial Information.

(a) Impairment of available-for-sale financial assets

The Company follows the guidance of HKAS 39 when determining whether there has been a significant or prolonged decline in the fair value of an investment in available-for-sale financial assets below its cost. This determination requires significant judgement. In making this judgement, the Company evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost. The carrying amount of available-for-sale financial assets were approximately RMB Nil, RMB255 million and RMB706 million as at 31 December 2010, 2011 and 2012, respectively.

Key sources of estimation uncertainty

(a) Determination of insurance liabilities

The Company’s insurance liabilities are mainly comprised of unearned premium provisions of approximately RMB14 million, RMB176 million and RMB264 million, provision for outstanding claims of approximately RMB0.3 million, RMB58 million and RMB198 million and life insurance contract liabilities approximately RMB Nil, RMB99 million and RMB187 million, as at 31 December 2010, 2011 and 2012, respectively. The Company determines these estimates on the basis of historical information, actuarial analyses, financial modeling and other analytical techniques. Management continually reviews the estimates and makes adjustments as necessary, but actual results could differ significantly from what is envisioned when these estimates are made.

IIE – 70

FINANCIAL INFORMATION OF TPP

APPENDIX IIE

(b) Income taxes

As at 31 December 2010, 2011 and 2012, no deferred tax asset has been recognised in respect of unutilised tax losses of approximately RMB517,383,000, RMB609,066,000 and RMB576,104,000 and other deductible temporary differences, relating primarily to outstanding claims provisions and accrued bonus of RMB31,004,000, RMB73,967,000 and RMB138,249,000, respectively. The recognition of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are more than expected, a material recognition of deferred tax asset may arise, which would be recognised in profit or loss for the period in which such a recognition takes place.

(B) SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Company have been prepared in respect of any period subsequent to 31 December 2012.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

IIE – 71

PROFIT AND LOSS STATEMENT OF THE TARGET ASSETS

APPENDIX IIF

PROFIT AND LOSS STATEMENT OF THE TARGET ASSETS

In accordance with Rule 14.67(6)(b)(i) of the Listing Rules, a profit and loss statement of the assets (other than businesses or companies) to be acquired by the Company for the three financial years ended 31 December 2012 (“Relevant Financial Years”) is required to be included in this circular. The Company was provided with the related information of the property interest of TPG and TPG(HK) comprising the Target Assets (the “Properties”) to be acquired from the Vendors which cover the Relevant Financial Years. The financial information of the Properties for each of the Relevant Financial Years set out below has been prepared by the Directors solely based on the related information provided by the Vendors.

Gross rental income Less: Direct expenses Net rental income	For the year ended 31 December 2012 HK$’000 7,664 97 7,567	For the year ended 31 December 2011 HK$’000 6,630 52 6,578	For the year ended 31 December 2010 HK$’000 6,180 39
			6,141

The financial information of the Properties set out above is prepared using accounting policies which are materially consistent with those of the Company.

The following procedures have been undertaken by Deloitte Touche Tohmatsu (“Deloitte”), the auditor of the Company, in accordance with the Hong Kong Standard on Related Services 4400 “Engagements to Perform Agreed Upon Procedures Regarding Financial Information” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), with respect to the financial information of the Properties set out above.

Deloitte:

(1) We obtained from the management of the Company a schedule (the “Schedule”) containing details as to the gross rental income (the “Gross Rental Income) and direct expenses (the “Direct Expenses”) attributable to the Properties;
(2) We obtained from the management of the Company the rental agreements provided by the Vendors, where available, attributable to the Properties;

IIF – 1

APPENDIX IIF

PROFIT AND LOSS STATEMENT OF THE TARGET ASSETS

(3) For amounts of Gross Rental Income without any rental agreement available as mentioned in procedure (2), we obtained from the management of the Company two e-mails received by the Company dated 5 September 2012 and 22 January 2013 containing details as to the gross rental income attributable to the Properties (the “Gross Rental Income E-mails”) and read the names of the senders;
(4) For amounts of Direct Expenses, we obtained from the management of the Company two e-mails with attached schedules containing details as to the direct expenses attributable to the Properties received by the Company dated 5 September 2012 and 22 January 2013 (the “Direct Expense E-mails”) and read the names of the senders;
(5) We verbally enquired of the receptionist of the Vendors whether the senders of the e-mails mentioned in procedure (3) are the staff of the Vendors;
(6) We verbally enquired of the receptionist of the Vendors whether the senders of the e-mails mentioned in procedure (4) are the staff of the Vendors;
(7) We verbally confirmed with the senders identified in procedure (3) that (i) the amounts as stated in the Gross Rental Income E-mails represented the gross rental income of the Properties for the three years ended 31 December 2012 and (ii) the amounts as stated in the schedules attached to the Direct Expense E-mails represented the direct expenses of the Properties for the three years ended 31 December 2012;
(8) We compared the amounts of Gross Rental Income as shown in the Schedule obtained in procedure (1) for the three years ended 31 December 2012 to the details contained in the respective rental agreements as mentioned in procedure (2) or to the details in the Gross Rental Income E-mails as mentioned in procedure (3);
(9) We compared the amounts of Direct Expenses as shown in the Schedule obtained in procedure (1) for the three years ended 31 December 2012 to the details contained in the Direct Expense E-mails;
(10) We recalculated the Gross Rental Income and Direct Expenses in Renminbi (“RMB”) for Properties located in PRC by using the exchange rate used in the Schedule to translate the Gross Rental Income and Direct Expenses into Hong Kong Dollar (“HKD”). However, we make no representation that the RMB amounts could have been, or could be, converted into HKD amounts at that rate or at any certain rate for that period, or at any other dates;

IIF – 2

APPENDIX IIF

PROFIT AND LOSS STATEMENT OF THE TARGET ASSETS

(11) We checked the arithmetical accuracy of calculation of the amounts of Net Rental Income for the three years ended 31 December 2012 as shown in the Schedule; and
(12) We compared the total amount of Gross Rental Income, Direct Expenses and Net Rental Income as shown in the Schedule to the financial information of the Properties.

We report our findings below:

a. With respect to procedure 1, we obtained the Schedule from management;
b. With respect to procedure 2, we obtained the rental agreements provided by the Vendors attributable to the Properties from management;
c. With respect to procedure 3, we found the names of the senders stated on the Gross Rental Income E-mails to be Mr. Ng King Bun and Mr. Jiang Yong An;
d. With respect to procedure 4, we found the names of the senders stated on the Direct Expenses E-mails to be Mr. Ng King Bun and Mr. Jiang Yong An;
e. With respect to procedure 5, we were advised that Mr. Ng King Bun and Mr. Jiang Yong An are employed as Accounting Manager of the respective Vendors;
f. With respect to procedure 6, we were advised that Mr. Ng King Bun and Mr. Jiang Yong An are employed as Accounting Manager of the respective Vendors;
g. With respect to procedure 7, Mr. Ng King Bun and Mr. Jiang Yong An confirmed that (i) the amounts as stated in the Gross Rental Income E-mails represented the gross rental income of the Properties for the three years ended 31 December 2012 and (ii) the amounts as stated in the Schedule attached to the Direct Expense E-mails represented the direct expenses of the Properties for the three years ended 31 December 2012;
h. With respect to procedure 8, we found the amounts of gross rental income as shown in the Schedule for the three years ended 31 December 2012, after taking account of the rounding differences to thousand, to be in agreement with the corresponding amounts as shown in the respective rental agreements, if available or Gross Rental Income E-mails;

IIF – 3

PROFIT AND LOSS STATEMENT OF THE TARGET ASSETS

APPENDIX IIF

i. With respect to procedure 9, we found the amounts of direct expenses as shown in the Schedule for the three years ended 31 December 2012, after taking account of rounding differences to thousand, was in agreement with the corresponding amounts as shown in the Schedule attached to the Direct Expense E-mails;
j. With respect to procedure 10, we found the translation of the RMB amounts into HKD amounts to be arithmetically accurate based on the exchange rates stated in the Schedule;
k. With respect to procedure 11, we found the calculation of the amounts of Net Rental Income for the three years ended 31 December 2012 as shown in the Schedule to be arithmetically accurate; and
l. With respect to procedure 12, we found that Gross Rental Income, Direct Expenses and Net Rental Income as shown in Schedule are in agreement with the financial information of the Properties.

Because the above procedures do not constitute an assurance engagement performed in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements, Hong Kong Standards on Assurance Engagements, or Hong Kong Standards on Investment Circular Reporting Engagements issued by the HKICPA, Deloitte does not express any assurance on the financial information of the Properties.

IIF – 4

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

A. INTRODUCTION TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Pursuant to the Framework Agreement entered into on 27 May 2013 with China Taiping Insurance Group Co. (“TPG”) and China Taiping Insurance Group (HK) Company Limited (“TPG(HK)), TPG and TPG(HK) have contractually agreed to sell and China Taiping Insurance Holdings Company Limited (the “Company”) and its subsidiaries (collectively refer as the “Group”) have contractually agreed to purchase the Acquisition Targets as stated in the Framework Agreement (collectively referred to as “Acquisitions”).

The following unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group (the “Unaudited Pro Forma Financial Information”) has been prepared in accordance with Rule 4.29 and Rule 14.69(4)(a)(ii) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited for the purpose of illustrating the effect of the Acquisitions to the financial position of the Group as if the Acquisitions had been completed on December 31, 2012.

The Unaudited Pro Forma Financial Information of the Enlarged Group is based on (a) the audited consolidated statement of financial position of the Group as at December 31, 2012 as extracted from the published 2012 annual report of the Company as set out in Appendix I to this Circular; and (b) the combined statement of financial position of the Target Group as at December 31, 2012 as extracted from the accountants’ report of TPG subsidiaries and TPG Associate as set out in Appendix II to this Circular (which have been converted to HK$ assuming a conversion rate of RMB1 to HK$1.23327), after making pro forma adjustments that are (i) directly attributable to the Acquisitions; and (ii) factually supportable.

The Unaudited Pro Forma Financial Information has been prepared by the Directors for illustrative purposes only and is based on a number of assumptions, estimates and uncertainties. Accordingly, because of its nature, it does not purport to describe the net assets position of the Enlarged Group that would have been attained had the Transactions been completed at the date stated, nor does it purport to predict the financial position of the Enlarged Group at December 31, 2012 or at any future dates.

III – 1

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

ASSETS Statutory deposits Property and equipment Investment properties Goodwill Intangible assets Interests in associates Interest in a jointly controlled entity Deferred tax assets Investment in debt and equity securities Securities purchased under resale agreements Amounts due from group companies Insurance debtors Reinsurers’ share of insurance contract provisions Policyholder account assets in respect of unit-linked products Tax recoverable Assets classified as held for sale Derivative financial assets Other debtors Pledged deposits at banks Deposits at bank with original maturity more than 3 months Cash and cash equivalents TOTAL ASSETS LIABILITIES Life insurance contract liabilities Unearned premium provisions Provision for outstanding claims Investment contract liabilities Liabilities directly associated with non-current assets held for sale Deferred tax liabilities Interest-bearing notes Securities sold under repurchase agreements Bank and other borrowings Amounts due to group companies Insurance creditors Other payables and accruals Current taxation Insurance protection fund Derivative financial instruments TOTAL LIABILITIES NET ASSETS	The Group as at 31 December 2012 HK$’000 2,504,822 4,019,891 3,990,218 303,647 264,509 1,669,870 – 140,721 159,659,338 80,163 13,395 2,570,318 2,574,748 3,141,049 25,737 – – 8,347,689 223,159 36,091,607 17,317,630 242,938,511 (121,422,778) (6,092,431) (10,031,555) (25,981,726) – (904,957) (13,334,736) (35,426,815) – (34,699) (4,309,983) (4,041,891) (302,043) (62,480) – (221,946,094) 20,992,417	The Target Group as at 31 December 2012 RMB’000 84,680 192,707 5,246,670 – – 38 169 4,407 1,591,122 – 2,455,997 183,453 410,604 – – 896,914 20 113,147 58,540 357,253 924,729 12,520,450 – (489,754) (1,047,036) – (62,452) (726,986) – – (3,510,952) (364,961) (217,660) (477,043) (24,213) – (5,294) (6,926,351) 5,594,099	Translation of Target Group to HKD @1.23327 HK$’000 104,433 237,660 6,470,561 – – 47 208 5,435 1,962,283 – 3,028,907 226,247 506,386 – – 1,106,137 25 139,541 72,196 440,589 1,140,441 15,441,096 – (603,999) (1,291,278) – (77,020) (896,570) – – (4,329,952) (450,096) (268,434) (588,323) (29,861) – (6,529) (8,542,062) 6,899,034	Sub-Total HK$’000 2,609,255 4,257,551 10,460,779 303,647 264,509 1,669,917 208 146,156 161,621,621 80,163 3,042,302 2,796,565 3,081,134 3,141,049 25,737 1,106,137 25 8,487,230 295,355 36,532,196 18,458,071 258,379,607 (121,422,778) (6,696,430) (11,322,833) (25,981,726) (77,020) (1,801,527) (13,334,736) (35,426,815) (4,329,952) (484,795) (4,578,417) (4,630,214) (331,904) (62,480) (6,529) (230,488,156) 27,891,451	Pro forma adjustment 1 HK$’000 – 120,123 – – – (1,643,611) – – – – – – – – – – – – – – – (1,523,488) – – – – – – – – – – – – – – – – (1,523,488)	Pro forma adjustment 2 HK$’000 – 15,285 222,276 – – – – – – – 377,441 – – – – – – 2,850 – – – 617,852 – – – – – – – – – (2,992,277) – (11,150) – – – (3,003,427) (2,385,575)	Pro forma adjustment 3 HK$’000 – – – – – – – – – – 91,402 – – – – (1,106,137) – – – – – (1,014,735) – – – – 77,020 – – – – – – – – – – 77,020 (937,715)	Pro forma adjustment 4 HK$’000 – (44,535) – – – – – 11,136 – – – – – – – – – – – – – (33,399) – – – – – – – – – – – – – – – – (33,399)	Pro forma adjustment 5 HK$’000 – 706,426 (1,036,496) – – – – – – – – – – – – – – – – – – (330,070) – – – – – 67,932 – – – – – – – – – 67,932 (262,138)	Pro forma adjustment 6 HK$’000 – – – – – – – – – – (3,461,338) – – – – – – – – – – (3,461,338) – – – – – – – – – 3,461,338 – – – – – 3,461,338 –	Total Pro forma adjustments HK$’000 – 797,299 (814,220) – – (1,643,611) – 11,136 – – (2,992,495) – – – – (1,106,137) – 2,850 – – – (5,745,178) – – – – 77,020 67,932 – – – 469,061 – (11,150) – – – 602,863 (5,142,315)	The Enlarged Group HK$’000 2,609,255 5,054,850 9,646,559 303,647 264,509 26,306 208 157,292 161,621,621 80,163 49,807 2,796,565 3,081,134 3,141,049 25,737 – 25 8,490,080 295,355 36,532,196 18,458,071
												252,634,429
												(121,422,778) (6,696,430) (11,322,833) (25,981,726) – (1,733,595) (13,334,736) (35,426,815) (4,329,952) (15,734) (4,578,417) (4,641,364) (331,904) (62,480) (6,529)
												(229,885,293)
												22,749,136

III – 2

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

C. NOTES TO THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Acquisitions comprise the acquisitions of the Target Interests and Target Assets. The Target Interests include 25.05% equity interest in TPL, 38.79% interest in TPI, 20% equity interest in TPAM and 4% equity interest in TPP and other equity interests. As TPL, TPI, TPAM and TPP are the non-wholly owned subsidiaries of CTIH before the Acquisitions, their respective assets and liabilities as of December 31, 2012 are already consolidated by the Group and the respective financial impact of their additional equity interest is being illustrated in pro forma adjustment 2. Therefore, the assets and liabilities financial information of Target Group is only extracted from the Accountants’ Report set out in the Appendix IIB for the preparation of the Unaudited Pro Forma Financial Information of the Enlarged Group.

The Acquisitions also include a 61% equity interest in Taiping Real Estate Shanghai Company Limited (“TP Real Estate”). The remaining 39% equity interest of TP Real Estate is held by TPL. Together with the acquisition of 25.05% equity interest in TPL as mentioned above, the additional effective equity interest in TP Real Estate acquired by the Group through the acquisition of Target Interests is 70.77% in total. TP Real Estate will become a subsidiary of the Group upon the completion of the Acquisitions. On the other hand, the Group held 19.52% effective equity interest in TP Real Estate prior to the Acquisitions through its holding of 50.05% equity interest in TPL. TP Real Estate was accounted for as an associate in the consolidated financial statements of the Group and was consolidated as a subsidiary in the combined statement of financial position of the Target Group with non-controlling interest of 39%. Upon completion of the Acquisitions, TP Real Estate will become a 90.29% non-wholly owned subsidiary under the Enlarged Group. For the purpose of the preparation of the Unaudited Pro Forma Financial Information, the 39% of TP Real Estate which is accounted for in the consolidated financial statements of the Group as an interest in associate held by TPL, with carrying amount of approximately HK$1,643,611,000, is reversed.

Moreover, the unrealised profit of approximately HK$120,123,000 arising from the disposal of properties from TP Real Estate to TPL recognised in the properties and equipment as stated in the consolidated financial statements of the Group as at December 31, 2012 is reversed.

III – 3

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

In accordance with the Framework Agreement dated 27 May 2013, the sale and purchase of the Acquisition Targets shall be completed in three tranches by issuing new shares by the Company as payment for the consideration (“Consideration Shares”) as follows:

Tranche A: transfer of 25.05% equity interest in TPL;

Tranche B: transfer of 38.79% equity interest in TPI, 4% equity interest in TPP and 20% equity interest in TPAM;

Tranche C: Remaining Acquisition Targets, as defined under definition of the Circular, other than 25.05% equity interest in TPL, 38.79% equity interest in TPI, 4% equity interest in TPP and 20% equity interest in TPAM.

Assuming the three tranches are all completed on December 31, 2012, 841,214,519 Consideration Shares (being total Consideration Shares of 862,735,270 excluding 21,520,751 Consideration Shares for Post-Agreement Capital Increase in investment of TPI and TPAM contributed by TPG as mentioned in the Letter from the Board set out in this Circular) would be issued on that date at an assumed issue price of HK$15.39 per share which was the Issue Price stated in the Circular.

Tranches A and B

Regarding the acquisition of additional interest in the subsidiaries, TPL, TPI, TPAM and TPP by the Company, the changes in the Company’s ownership interest in these four subsidiaries will be accounted for as equity transactions (i.e. transactions with owners in their capacity as owners) in accordance with Hong Kong Accounting Standard (“HKAS”) 27 (Revised), “Consolidated and Separate Financial Statements” (“HKAS 27 (Revised)”). The related carrying amounts of the non-controlling interests are adjusted to reflect the changes in their relative interests in each of the subsidiaries. Any difference between (i) the amount by which the non-controlling interests will adjust and (ii) the fair value of the consideration paid are recognised directly in equity and attributed to the owners of the Company.

For Tranche A, the Company will satisfy the consideration by issuance of 571,656,306 new shares (as stated in Circular) at an assumed issue price of HK$15.39 per share with an increase in share capital and share premium of approximately HK$28,583,000 (note (i)) and HK$8,769,208,000 (note (ii)) respectively on a pro forma basis.

III – 4

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes:

(i) the amount is calculated based on 571,656,306 number of shares multiplied by par value of HK$0.05 per share.
(ii) the amount represents the difference between the total consideration calculated based on 571,656,306 number of shares multiplied by issue price of HK$15.39 per share and the share capital in (i) above.

The pro forma adjustments to non-controlling interest and capital reserve in respect of the additional equity interests in TPL acquired during the Acquisitions are set out below:

Net asset value of TPL extracted from accountants’ report of TPL in appendix IIA (RMB10,102,659,000 converted into HK$ at an exchange rate of RMB1 to HK$1.23327) 25.05% of TPL acquired to be adjusted on a pro forma basis to non-controlling interest Add: subsequent capital injection to TPL by TPG (RMB626,250,000) (note) Pro forma fair value of consideration based on 571,656,306 number of shares multiplied by Issue Price of HK$15.39 Pro forma adjustment to capital reserve	HK$’000 12,459,306

	3,121,056 772,335 8,797,791
	4,904,400

Note: TPG has made a capital injection of RMB626,250,000 into TPL in March 2013 as disclosed in note 46(b) of the 2012 annual report of the Company as set out in Appendix I to this Circular.

For Tranche B, the Company will satisfy the consideration by issuance of 130,958,519 new shares (as stated in Circular) at an assumed issue price of HK$15.39 per share with an increase in share capital and share premium of approximately HK$6,548,000 (note (i)) and HK$2,008,904,000 (note (ii)) respectively on a pro forma basis. The net asset value of TPI, TPP and TPAM extracted from their respective accountants’ reports as set out in appendix IIC, IIE and IID are RMB1,733,168,000 (equivalent to HK$2,137,464,000), RMB550,841,000 (equivalent to HK$679,336,000) and RMB175,547,000 (equivalent to HK$216,497,000) respectively.

Notes:

(i) the amount is calculated based on 130,958,519 number of shares multiplied by par value of HK$0.05 per share.
(ii) the amount represents the difference between the total consideration calculated based on 130,958,519 number of shares multiplied by issue price of HK$15.39 per share and the share capital in (i) above.

III – 5

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

The pro forma adjustments to non-controlling interests in respect of the additional equity interests of 38.79%, 4% and 20% of TPI, TPP and TPAM being acquired during the Acquisitions are as follows:

Amounts to be adjusted on a pro forma basis to non-controlling interest: 38.79% of TPI acquired 4% of TPP acquired 20% of TPAM acquired Add: subsequent capital contribution by TPG to TPP (RMB8,000,000) (note) Pro forma fair value of consideration based on 130,958,519 number of shares multiplied by Issue Price of HK$15.39 Pro forma adjustment to capital reserve	HK$’000 829,122 27,173 43,300 9,866 2,015,452
	1,105,991

note: TPG has made a capital injection of RMB8,000,000 into TPP in January 2013 as disclosed in note 46(c) of the 2012 annual report of the Company as set out in Appendix I to this Circular.

The issuance of Consideration Shares under Tranche A and Tranche B would have no impact to the assets and liabilities of the Enlarged Group.

The consideration of 130,958,519 new shares in Tranche B as mentioned above has not taken into account the Post-Agreement Capital Increase as mentioned in the Letter from the Board set out in this Circular of HK$331,204,000, made by TPG to TPI and TPAM subsequent to December 31, 2012. Therefore, 21,520,751 additional Consideration Shares will be issued to acquire additional interest of TPI and TPAM after the date of Framework agreement entered, assuming the issue price of HK$15.39.

III – 6

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Tranche C

The Target Interests as defined under definition of the Circular, other than 25.05% in TPL, 38.79% equity interest in TPI, 4% equity interest in TPP and 20% equity interest in TPAM as mentioned above, are accounted for using merger accounting for “common control combinations” as the Company considers the Target Interests and the Group are ultimately controlled by the same party (i.e. TPG) before and after the business combination, and that control is not transitory. Accordingly, the Company adopts merger accounting to consolidate the Target Interests acquired under Tranche C in the Enlarged Group by reference to Hong Kong Accounting Guideline 5 at the carrying amounts of their respective assets and liabilities as originally included in the consolidated financial statements of TPG. The total net assets of Target Interests under Tranche C is approximately RMB5,594,099,000 (extracted from the Accountants’ report of Target Group), equivalent to HK$6,899,034,000. For the purpose of the preparation of the Unaudited Pro Forma Financial Information, the assets and liabilities of the Target Interests are consolidated based on their respective carrying amounts of approximately HK$5,869,917,000, after excluding HK$1,029,117,000 of the net assets of Tellon subgroup as at December 31, 2012 from Target Group. Details of pro forma adjustment related to Tellon subgroup is mentioned in pro forma adjustment 3 below.

The Target Assets as defined under the definition section of the Circular, with amounts being extracted from the management accounts of TPG(HK) and TPG as of 31 December 2012, include (i) various real estate properties with carrying amount of approximately HK$222,276,000, (ii) car parking spaces and certain electronic equipment with carrying amount of approximately HK$15,285,000, (iii) other debtors and other payables with carrying amount of approximately HK$2,850,000 and HK$11,150,000 respectively and (iv) amounts due from Target Group and the Group of HK$377,441,000 and amounts due to Target Group and the Group of HK$2,992,277,000 extracted from TPG and TPG(HK) management accounts as of December 31, 2012. The amounts in (iv) above would be eliminated against the corresponding amounts due to TPG(HK) and TPG of HK$377,441,000 and amounts due from TPG(HK) and TPG of HK$2,992,277,000 by Target Group and Group as mentioned in pro forma adjustment 6. Based on the Framework Agreement, the Target Assets would be acquired at their respective fair values on Completion Date. As the valuation of Target Assets will be further carried out as at the Completion Date, for the purpose of the preparation of the Unaudited Pro Forma Financial Information, it is assumed that the carrying amounts of the Target Assets as at December 31, 2012 approximate their fair values as at December 31, 2012. For the purpose of the preparation of the Unaudited Pro Forma Financial Information, it is assumed that the Target Assets are acquired at fair value as at December 31, 2012 based on Consideration Shares and the assumed issue price of the Consideration Shares stated in the Circular.

III – 7

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

For the acquisition of Target Interests and Target Assets in Tranche C, the Company will satisfy the consideration by issuance of 138,599,694 new shares at an assumed issue price of HK$15.39 per share with an increase in share capital and share premium of approximately HK$6,930,000 (note (i)) and HK$2,126,119,000 (note (ii)) respectively on a pro forma basis. The difference of HK$122,291,000 between the pro forma fair value of the Consideration Shares of approximately HK$2,133,049,000 and the carrying amounts of net assets of the Target Interests in Tranche C of approximately HK$5,869,917,000 and further excluding the noncontrolling interests of RMB1,194,859,000 extracted from the Accountants’ Report of Target Group, equivalent to HK$1,473,584,000 translated at an exchange rate of RMB1 to HK$1.2337, representing 39% non-controlling interest of TP Real Estate and 45% non-controlling interest of TP Indonesia, and the carrying amount of net liabilities of HK$2,385,575,000 relating to Target Assets as mentioned in the previous paragraph, is recognised in various reserves including Merger Reserve. The issuance of Consideration Shares under Tranche C for Target Interests would have no impact on the assets and liabilities of the Enlarged Group.

Notes:

(i) the amount is calculated based on 138,599,694 number of shares multiplied by par value of HK$0.05 per share.
(ii) the amount represents the difference between the total consideration calculated based on 138,599,694 number of shares multiplied by issue price of HK$15.39 per share and the share capital in (i) above.

Since the fair value of the Company’s shares at Completion Date may be substantially different from the assumed issue price used in the preparation of this unaudited pro forma consolidated statement of financial position of the Enlarged Group, the final amounts of the fair value of the new shares to be recognised in connection with the Restructuring at the Completion Date could be different from the estimated amount stated herein.

III – 8

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Tellon Development Limited (“Tellon”), a wholly owned subsidiary of Taiping Investment Holdings Company Limited (“TPIH”, which is a wholly owned subsidiary of TPG (HK) and which is to be acquired under Tranche 3), and its subsidiaries (referred to as “Tellon subgroup”), are excluded from the Target Interests to be acquired by the Group as disclosed in note 17(b) of the Accountants’ Report set out in Appendix II. In the Accountants’ Report of the Target Group, Tellon subgroup is accounted for as disposal group classified as held for sale, with assets amounting to approximately RMB896,914,000, equivalent to HK$1,106,137,000, and total liabilities directly associated with non-current assets held for sale amounting to approximately RMB62,452,000, equivalent to HK$77,020,000, using exchange rate of RMB1 to HK$1.23327. The disposal of Tellon subgroup from TPIH to TPG (HK) was completed in March 2013. TPG (HK) issued a promissory note of a principal amount of HK$3,391,402,000 to TPIH as a consideration for the acquisition of Tellon subgroup. On 28 March 2013, TPIH distributed a dividend of approximately HK$3,300,000,000 to TPG (HK) prior to completion of the Acquisitions as disclosed in note 46(b) of the Accountant’s Report in Appendix II. For the purpose of the preparation of the unaudited pro forma financial information, under merger accounting, the carrying amounts of assets and liabilities of Tellon subgroup as at December 31, 2012 will be excluded as the Target Interests acquired under the Acquisitions do not include any equity interests in Tellon. The difference between the carrying value of the promissory note and net assets value of Tellon subgroup is recognised as contribution from shareholders of TPIH. According to the offsetting agreement between TPG (HK) and TPIH entered before the completion of the Acquisitions, the dividend payable will be offset against the promissory note and result in a net balance of HK$91,402,000, which is included as part of the Target Assets as mentioned in pro forma adjustment 2.
Adjustment represents the elimination of the gain of approximately RMB36,111,000, equivalent to approximately HK$44,535,000, arising from disposal of properties from the Target Group to the Group in 2011 against the carrying value of building. The amount being eliminated is calculated on the portion of the total gain of RMB43,333,000 (extracted from note 14(b) of Accountants’ Report of Target Group), related to properties classified as properties and equipment in the Group after taking into account the accumulated depreciation from the date when the properties first became held for own use within the Enlarged Group. Related deferred tax asset of HK$11,136,000 is recognised based on 25% local tax rate of the gain from disposal upon the elimination against properties and equipment as of December 31, 2012.

III – 9

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Certain investment properties of the Group with carrying amount of approximately HK$439,444,000 rented out to Target Group are reclassified as property and equipment with carrying amount of approximately HK$255,374,000, after taking into account the reversal of accumulated fair value appreciation of HK$169,462,000, based on independent properties valuation result, and accumulated depreciation of HK$14,608,000, extracted from the management accounts of the respective Taiping Group entities, from the date when the properties first became held for own use within the Enlarged Group up to December 31, 2012. The net impact of the fair value reversal of investment properties, the accumulated depreciation expense of the properties after the date of reclassification and the related deferred tax liabilities impact of HK$31,432,000 based on the respective statutory tax rate would be debited to retained profits of the Group.

In addition, certain investment properties of the Target Group with carrying amount of approximately RMB484,121,000, as set out in note 15 of Accountants’ Report set out in Appendix IIB, equivalent to approximately HK$597,052,000, which are rented out to the Group are reclassified as property and equipment with carrying amount of approximately HK$451,052,000, after taking into account the accumulated fair value appreciation of HK$141,100,000, based on independent properties valuation result, and accumulated depreciation of HK$4,900,000, from the date when the properties first became held for own use within the Enlarged Group up to December 31, 2012, extracted from the TPL management accounts. The net impact of the reversal of fair value appreciation of these investment properties, the accumulated depreciation expense of the properties after the date of reclassification and the related deferred tax impact of HK$36,500,000, based on the statutory tax rate of 25%, is adjusted to the reserves as this represents an adjustment to the net asset value of the assets and liabilities of Target Interests being acquired in Tranche C as mentioned in pro forma adjustment 2.

Adjustment represents elimination of inter-company amounts receivable and payable between the Group and Target Group.

III – 10

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

For illustrative purpose only, the non-controlling interests are quantified based on the equity interest of 24.9%, 20% and 45% of non-controlling interests in TPL, TPAM and TP Indonesia and after eliminating certain intra Enlarged Group transactions assuming the Acquisitions were completed as of December 31, 2012. The total equity attributable to owners of the Enlarged Group and non-controlling interest as of December 31, 2012 are as follows:

Total net assets of the Enlarged Group Less: non-controlling interests of: TPL (note (i)) TPAM (note (ii)) TP Indonesia (note (iii)) Impact to non-controlling interests arising from investment properties reclassified to properties for own use (note (iv)) Notes:	Equity for Enlarged Group HK$’000 22,749,136 3,042,321 43,300 35,446 (34,113) 3,086,954 19,662,182

(i) Being net asset value extracted from accountants’ report of TPL multiplied by 24.9%, after adjusting the 24.9% of unrealised profit of HK$120,123,000 as set out in pro forma adjustment 1 and goodwill recognised by TPL on the acquisition of TP Real Estate as extracted from management accounts of TPL.
(ii) Being net asset value extracted for accountants’ report of TPAM multiplied by 20%.
(iii) Being net asset value extracted from management accounts of TP Indonesia multiplied by 45%.
(iv) The reason of adjustment was mentioned in pro forma adjustment 5.

III – 11

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

For illustrative purpose only, the table below also sets out the unaudited pro forma consolidated profit after taxation of the Enlarged Group for the year ended December 31, 2012 after Acquisitions as if the Acquisitions had been completed on January 1, 2012.

Consolidated profit after taxation of the Group for the year ended
December 31, 2012 (note (i))
Consolidated profit after taxation of the Target Group for the year
ended December 31, 2012 (note (ii))
Combined profit after taxation
Less:
Share of results of TP Real Estate for the year ended
December 31, 2012 included in the Group (note (iii))
Profit or loss related to investment properties reclassified
to properties for own use for the year ended December 31,
2012 (note (iv))
Profit or loss related to adjustment of carrying value of
building (note (v))
Profit after taxation of Tellon subgroup for the year ended
December 31, 2012 (note (vi))
Profit or loss related to Target Assets for the year ended
December 31, 2012 (note (vii))
Profit for the year attributable to:
Owners of the Enlarged Group
Non-controlling interests

Profit after
taxation for
Enlarged Group
HK$’000
1,473,745
845,606
2,319,351
(125,464)
(44,121)
648
(111,621)
11,337
2,050,130
1,824,404
225,726
2,050,130

III – 12

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

Notes:

(i) Extracted from the published 2012 annual report of the Company as set out in Appendix I to this Circular.
(ii) Extracted from accountants’ report of the Target Group as set out in Appendix IIB with amount of RMB687,988,000, equivalent to approximately HK$845,606,000.
(iii) Share of results of TP Real Estate recognised by the Group for the year ended 31 December 2012 are reversed as the results are already consolidated in the Target Group, in which TP Real Estate is a subsidiary.
(iv) Please refer to pro forma adjustment 5 for the reason of adjustment, which comprises the reversal of the fair value gain of investment properties of HK$40,073,000, the depreciation expenses and deferred tax expenses of HK$4,048,000 for the year ended 31 December 2012, extracted from the respective management accounts.
(v) The reason of adjustment of depreciation expense and the related deferred tax expense is due to the adjustment for the carrying value of building as mentioned in pro forma adjustment 4.
(vi) Since Tellon subgroup is not part of the Target Interests to be acquired, as mentioned in pro forma adjustment 3, the related profit after taxation amounting to HK$111,621,000 (RMB90,815,000 extracted from accountants’ report of Target Group as set out in Appendix IIB note 17(b)) is also excluded.
(vii) The reason of adjustment is due to incorporation of net profit of Target Assets including the fair value gain of HK$56,680,000, net rental income of HK$7,567,000, interest expense of HK$52,616,000, depreciation expense of HK$3,434,000, tax expense of HK$1,772,000 and interest income of HK$4,912,000 recorded by TPG and TPG(HK) for the year ended 31 December 2012. The amounts are extracted from management accounts of TPG and TPG(HK) for the year ended 31 December 2012.
(viii) The items stated in notes (i) to (vii) are translated into Hong Kong dollars, where applicable, using the average exchange rate for the year ended December 31, 2012 of RMB1 to HK$1.2291.

III – 13

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

If TPG and TPG(HK) exercised their right to segregate the Overseas P & C Targets from acquisition under Tranche C, the total assets, total liabilities and net asset of Tranche C Targets and net assets attributable to the owners of the Enlarged Group will be reduced by HK$3,577,439,000, HK$2,312,691,000, HK$1,264,748,000 and HK$1,229,302,000 respectively. The total consideration and the number of shares to be issued for Tranche C Targets will be reduced by approximately HK$1,860,741,000 and 120,905,845 shares respectively, based on the assumed issue price of HK$15.39 per share. Accordingly, the reserves resulted from acquisition of Tranche C Targets as mentioned in pro forma adjustment 2 will be reduced by HK$631,439,000.

Overseas P & C Targets Percentage of equity interest to be acquired TP Macau 100.00% TP Singapore 100.00% TP UK 100.00% TP Indonesia 55.00%	As Total assets HK$’000 757,157 1,785,652 776,082 258,548 3,577,439	at 31 December 2012 Total liabilities Net assets HK$’000 HK$’000 483,785 273,372 1,125,079 660,573 524,048 252,034 179,779 78,769 2,312,691 1,264,748	Net assets attributable to owners of the Enlarged Group HK$’000 273,372 660,573 252,034 43,323
			1,229,302

The above figures are derived from respective audited financial statements, after taking into accounts appropriate adjustments to align with the Group’s accounting policies regarding the investment properties and insurance liabilities, translated at exchange rates of MOP1 to HK$0.96245, SGD1 to HK$6.28094, GBP1 to HK$12.53142 and IDR1 to HK$0.00081, respectively.

III – 14

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

D. REPORT FROM THE REPORTING ACCOUNTANTS ON THE UNAUDITED PROFORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the texts of the accountants’ report prepared for the purpose of inclusion into this circular, received from the reporting accountants of the Company, Deloitte Touche Tohmatsu, Certified Public Accountants, Hong Kong.

==> picture [74 x 57] intentionally omitted <==

ACCOUNTANTS’ REPORT ON UNAUDITED PROFORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

TO THE DIRECTORS OF CHINA TAIPING INSURANCE HOLDINGS COMPANY LIMITED

We report on the unaudited pro forma financial information of China Taiping Insurance Holdings Company Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the proposed major acquisition and connected transaction from controlling shareholder (the “Acquisitions”) might have affected the financial information presented, for inclusion in Appendix III of the circular dated 31 May 2013 (the “Circular”). The basis of preparation of the unaudited pro forma financial information is set out in Section A of Appendix III to the Circular.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS OF THE COMPANY AND REPORTING ACCOUNTANTS

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

III – 15

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

BASIS OF OPINION

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited pro forma financial information is for illustrative purpose only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in future and may not be indicative of the consolidated statement of assets and liabilities of the Enlarged Group as at December 31, 2012 or any future date.

OPINION

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group so far as such policies related to the transactions; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong 31 May 2013

III – 16

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

In respect of the Tranche A Targets and Tranche B Targets, which are the existing consolidated but non-wholly-owned subsidiaries of the Group, namely TPL, TPI, TPAM and TPP, the financial performance of TPL, TPI and TPP over the past three years are discussed in the MR&A/MD&A section of the Company’s publicly available annual and interim reports as extracted below, and the financial performance of TPAM over the past three years prepared based on and in line with the relevant Company’s publicly available annual and interim reports MR&A/MD&A section are disclosed below for reference.

In respect of the Tranche C Targets, the discussion focuses on the target companies with continuing operating activities. Such discussion is divided into five parts: (1) Overseas P&C insurance business carried out by TP Macau, TP Singapore, TP UK and TP Indonesia; (2) Property investment carried out by TPIH, Dragon Jade and Ming Lee; (3) Securities broking business carried out by TPFH; (4) Financial support services business carried out by TPFAS and TPFSC; and (5) Other businesses carried out by TP Japan, CIG Trustees and Savills TPML. Their financial performance over the past three years is discussed as follows.

For illustration purpose only, the exchange rate of RMB against HKD applied in the discussion in this Appendix IV in respect of balance sheet items as of 31 December 2012, 2011 and 2010 are 1:1.23327, 1:1.2335 and 1:1.17518, respectively and the exchange rate of RMB against HKD applied in the discussion in this Appendix IV in respect of income statement items for the three years ended 31 December 2012, 2011 and 2010 are 1:1.2291, 1:1.2057 and 1:1.14688, respectively.

IV – 1

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

A. LIFE INSURANCE BUSINESS

The below management discussion and analysis is extracted from the 2012 annual report of the Company:

The Group’s life insurance segment is operated by TPL, which is a PRC-incorporated company and is 50.05% owned by the Group. TPL is principally engaged in the underwriting of life insurance policies in Mainland China.

The figures below are the results of TPL from its operations, before intra-group eliminations.

The key financial data of the life insurance business is summarized below:

For the year ended 31 December, HK$ million

Gross premiums written and premium deposits Less: Premium deposits of universal life products Premium deposits of unit-linked products Premium deposits of other products Gross premiums written recognized in income statement Policy fees Net premiums written and policy fees Net earned premiums and policy fees Net policyholders’ benefits Net commission expenses Change in life insurance contract liabilities, net of reinsurance Total investment income Administrative and other expenses Finance costs Profit from operation before taxation Profit from operation after taxation Profit from operation attributable to the owners	2012 45,478.38 280.36 118.96 271.61 44,807.45 145.11 44,759.17 44,779.67 (8,682.97) (3,941.25) (30,166.19) 4,651.18 (6,075.58) (443.21) 546.32 861.76 431.31	2011 Change 38,529.75 +18.0% 28.51 +8.8 times 285.81 –58.4% 286.59 –5.2% 37,928.84 +18.1% 208.33 –30.4% 37,888.49 +18.1% 37,973.05 +17.9% (6,182.01) +40.5% (3,452.91) +14.1% (27,039.28) +11.6% 4,491.55 +3.6% (5,136.99) +18.3% (432.17) +2.6% 604.83 –9.7% 780.60 +10.4% 390.69 +10.4%

IV – 2

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The key operational data of the life insurance business is summarized below:

	2012	2011	Change
Market share1	3.7%	3.3%	+0.4 pt
Number of provincial branches	34	34	–
Number of sub-branches and marketing centers	856	798	+58
Number of customers
– Individual	6,556,334	5,995,262	+561,072
– Corporate	2,599	6,502	–3,903
Distribution network
– Number of individual agents	57,860	46,064	+11,796
– Number of bancassurance outlets	22,105	18,938	+3,167
Agent productivity
– First year premium per agent and
per month (HK$)	7,931.38	7,897.34	+34.04
– Number of new policies per agent and
per month	1.80	2.00	–0.20
Persistency ratios
– 13th month2
– Individual	92.3%	92.0%	+0.3 pt
– Bancassurance	92.9%	93.2%	–0.3 pt
Compound persistency ratios
– 25th month2
– Individual	88.5%	84.5%	+4.0 pts
– Bancassurance	90.2%	91.5%	–1.3 pts

1 Based on premiums published by the CIRC.

2 Based on the amount of premiums.

IV – 3

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

APPENDIX IV

Operating Profit

The life insurance business produced a net operating profit of HK$861.76 million during 2012 (2011: HK$780.60 million), representing an increase of 10.4% compared to 2011. The net operating profit attributable to the owners amounted to HK$431.31 million (2011: HK$390.69 million).

Gross Premiums Written and Premium Deposits

TPL’s gross premiums written recognized in the consolidated income statement increased by 18.1% to HK$44,807.45 million from HK$37,928.84 million in 2011. This growth was primarily driven by the improving agency force sales, which offset the continued low levels of sales in TPL’s bancassurance channel.

TPL’s gross premiums written and premium deposits by line of business were as follows:

For the year ended 31 December 2012, HK$ million

Individual Bancassurance Group Other Channels1	Gross premiums written recognized in the consolidated income statement 18,243.19 25,399.47 147.59 1,017.20 44,807.45	Premium deposits of universal life products 266.21 14.15 – – 280.36	Premium deposits of unit-linked products 37.85 81.11 – – 118.96	Premium deposits of other products 184.32 1.62 85.67 – 271.61	Total 18,731.57 25,496.35 233.26 1,017.20 45,478.38	% of Total 41.2% 56.1% 0.5% 2.2%
						100.0%

For the year ended 31 December 2011, HK$ million

Individual Bancassurance Group Other Channels1	Gross premiums written recognized in the consolidated income statement 14,409.79 22,294.53 609.84 614.68 37,928.84	Premium deposits of universal life products – 28.51 – – 28.51	Premium deposits of unit-linked products 89.71 196.10 – – 285.81	Premium deposits of other products 165.28 1.57 119.74 – 286.59	Total 14,664.78 22,520.71 729.58 614.68 38,529.75	% of Total 38.1% 58.4% 1.9% 1.6%
						100.0%

1 Other Channels is comprised of mainly telemarketing.

IV – 4

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Traditional product sales were strong in the individual agency distribution channel, increasing by 26.6% to HK$18,243.19 million from HK$14,409.79 million in 2011. This strong growth was primarily due to high levels of persistency and renewals. In 2012, TPL heightened its efforts to grow its agency force, and the number of TPL individual agents increased by 25.6% to 57,860 as of 31 December 2012 (2011: 46,064). Agent productivity remained satisfactory, which allowed the overall sales force to generate and support increasingly higher levels of premium. Despite continued challenging conditions in bank sales for the entire life insurance industry, premiums from the bank distribution channel increased to HK$25,399.47 million from HK$22,294.53 million in 2011, representing an increase of 13.9%.

During 2012, TPL continued to focus on the sales of products with regular premium features. The detailed breakdown of TPL’s single premium products and regular premium products by line of business is summarized as follows:

For the year ended 31 December, HK$ million

Individual

Single Premium Regular Premium – First Year – Renewal Year Bancassurance Single Premium Regular Premium – First Year – Renewal Year	2012 42.38 4,420.01 13,780.80 18,243.19 2012 11,116.80 2,387.75 11,894.92 25,399.47	% of Total 0.2% 24.2% 75.6% 100.0% % of Total 43.8% 9.4% 46.8% 100.0%	2011 79.42 4,290.17 10,040.20 14,409.79 2011 10,130.65 2,730.91 9,432.97 22,294.53	% of Total 0.5% 29.8% 69.7%
				100.0%

				% of Total 45.4% 12.3% 42.3%
				100.0%

IV – 5

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Group

Employee Benefit (“EB”) Annuity Other Channels Single Premium Regular Premium – First Year – Renewal Year	2012 147.59 – 147.59 2012 – 459.37 557.83 1,017.20	% of Total 100.0% – 100.0% % of Total – 45.2% 54.8% 100.0%	2011 606.10 3.74 609.84 2011 0.28 361.03 253.37 614.68	% of Total 99.4% 0.6%
				100.0%

				% of Total 0.1% 58.7% 41.2%
				100.0%

In 2012, the business sold through the agency force continued to be of high quality, with a high proportion of sales in products with longer duration and protection features. For individual first year regular premium, the premium by payment term and feature were as follows:

For the year ended 31 December, HK$ million

Individual first year regular premium – by payment term

3 – 9 years 10 – 19 years 20 – 29 years 30 years+	2012 887.38 1,007.27 2,294.27 231.09 4,420.01	% of Total 20.1% 22.8% 51.9% 5.2% 100.0%	2011 490.58 1,321.44 2,148.51 329.64 4,290.17	% of Total 11.4% 30.8% 50.1% 7.7%
				100.0%

IV – 6

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Individual first year regular premium – by feature

Short term savings Long term savings Long term protection Others	2012 348.02 2,132.61 1,524.48 414.90 4,420.01	% of Total 7.9% 48.2% 34.5% 9.4% 100.0%	2011 926.35 1,667.71 1,269.30 426.81 4,290.17	% of Total 21.6% 38.9% 29.6% 9.9%
				100.0%

Despite the challenging operating environment in bank branches, most of the products sold through the bank channel continued to be of long duration. For bancassurance first year regular premium, the premium by payment term was as follows:

Bancassurance first year regular premium – by payment term

5 – 9 years 10 – 14 years Others	2012 424.61 1,949.04 14.10 2,387.75	% of Total 17.8% 81.6% 0.6% 100.0%	2011 580.44 2,140.41 10.06 2,730.91	% of Total 21.2% 78.4% 0.4%
				100.0%

TPL’s gross premiums written by region were as follows:

For the year ended 31 December, HK$ million

Sichuan Guangdong Shandong Beijing Henan Others Total	2012 4,988.53 3,936.90 3,805.09 2,956.27 2,798.96 26,321.70 44,807.45	% of Total 11.1% 8.8% 8.5% 6.6% 6.2% 58.8% 100.0%	2011 4,421.20 3,529.89 3,211.67 2,391.67 2,247.55 22,126.86 37,928.84	% of Total 11.7% 9.3% 8.5% 6.3% 5.9% 58.3% 100.0%

IV – 7

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Highlight on Embedded Value

Despite the lower bancassurance first year regular premium sales, TPL’s resilient agency force and its strong focus on quality and profitability supported the embedded value and new business value to increase. The embedded value of TPL (expressed in terms of HKD) increased 35.7% to HK$29,286 million from HK$21,574 million at the end of 2011. The new business value after cost of capital for 2012 increased to HK$2,304 million from HK$2,244 million at the end of 2011, representing a growth of 2.7%. These latest actuarial figures of TPL are disclosed below in the section titled “Embedded Value of TPL”.

Investment Performance

The composition of investments held by TPL was as follows:

At 31 December, HK$ million

Debt securities Debt schemes Equity securities Investment funds Cash and bank deposits Investment properties Total investments	2012 108,769.46 19,748.76 7,372.51 8,731.25 44,693.42 2,601.22 191,916.62	% of Total 56.7% 10.3% 3.8% 4.5% 23.3% 1.4% 100.0%	2011 96,382.92 9,012.33 7,667.81 5,391.91 29,559.17 2,023.90 150,038.04	% of Total 64.3% 6.0% 5.1% 3.6% 19.7% 1.3%
				100.0%

During 2012, TPL continued to be very cautious in its asset allocation for its investment portfolio. Equity investments were maintained at a relatively low percentage of the asset allocation, while debt securities, debt schemes and cash and bank deposits constituted a combined total of approximately 90.3% of the total invested assets as at 31 December 2012 (2011: 90.0%).

IV – 8

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The classification of TPL’s investments in securities under HTM, AFS, HFT and LR was as follows:

At 31 December 2012, HK$ million

Debt securities Debt schemes Equity securities Investment funds	HTM 87,660.70 – – – 87,660.70	AFS 20,794.27 – 7,372.51 7,817.94 35,984.72	HFT – – – 913.31 913.31	LR 314.49 19,748.76 – – 20,063.25	Total 108,769.46 19,748.76 7,372.51 8,731.25
					144,621.98

At 31 December 2011, HK$ million

Debt securities Debt schemes Equity securities Investment funds	HTM 79,962.02 – – – 79,962.02	AFS 16,106.35 – 7,667.81 5,391.48 29,165.64	HFT – – – 0.43 0.43	LR 314.55 9,012.33 – – 9,326.88	Total 96,382.92 9,012.33 7,667.81 5,391.91
					118,454.97

The debt securities classified by type and class were as follows:

At 31 December, HK$ million

Governments and central banks Banks and other financial institutions Corporate entities	2012 32,014.37 51,648.59 25,106.50 108,769.46	2011 28,921.80 44,376.71 23,084.41
		96,382.92

IV – 9

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The total investment income and the investment yield of TPL on a pre-tax basis recognized in the consolidated income statement were as follows:

For the year ended 31 December, HK$ million

Net investment income1 Net realized investment gains/(losses) Net unrealized investment gains/ (losses) Net impairment gains/(losses) on securities Total investment income2 Net investment yield1 Total investment yield2	2012 7,284.17 (1,035.09) 100.45 (1,698.35) 4,651.18 5.0% 3.1%	2011 Change 4,973.22 +46.5% 124.60 – 85.35 +17.7% (691.62) +1.5 times 4,491.55 +3.6% 4.1% +0.9 pt 3.6% –0.5 pt

1 Net investment income mainly consists of fixed investment income such as interest income from debt securities and bank deposit. Net investment yield is derived from such net investment income.

2 Total investment income is the summation of net investment income and the realized/unrealized investment gains/losses plus impairments. The total investment yield is derived from such total investment income.

TPL’s total investment income was a gain of HK$4,651.18 million during 2012, representing a slight increase from the gain of HK$4,491.55 million in 2011. Although equity investments were maintained at a relatively low percentage of the asset allocation, the volatile equity market conditions in the PRC increased the net realized investment losses and impairment loss of the equity investment portfolio, leading to a lower total investment yield.

IV – 10

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The details of TPL’s investment income/(loss) on a pre-tax basis was as follows:

For the year ended 31 December 2012, HK$ million

		Recognized in th	e consolidated in	come statement		Grand total 3,756.03 602.87 2.39 17.94 759.44 500.61 138.25 0.97 1,616.92 145.11 (577.68)
Net	investment inco	me Rental income – – – – – – – – – 44.66 – 44.66	Net realized gains/(losses) – 4.17 2.38 – – (959.21) (82.43) – – – – (1,035.09)	Net unrealized gains/(losses) – – – – – – – – – 100.45 – 100.45	Net impairment gains/(losses) – – – – – (552.59) (1,145.76) – – – – (1,698.35)
Interest income/ (expense) 3,756.03 818.97 0.01 17.94 759.44 – – – 1,616.92 – (577.68) 6,391.63	Dividend income – – – – – 147.74 699.17 0.97 – – – 847.88
						6,962.85

For the year ended 31 December 2011, HK$ million

		Recognized in th	e consolidated in	come statement		Grand total 3,113.79 837.20 19.01 9.21 334.30 (2,596.39) (6.17) (1,839.46) 0.01 845.02 118.03 (254.99)
Net	investment inco	me Rental income – – – – – – – – – – 32.68 – 32.68	Net realized gains/(losses) – 29.59 18.84 – – 169.39 (7.68) (85.54) – – – – 124.60	Net unrealized gains/(losses) – – – – – – – – – – 85.35 – 85.35	Net impairment gains/(losses) – – – – – (375.69) – (315.93) – – – – (691.62)
Interest income/ (expense) 3,113.79 638.55 0.17 9.21 334.30 – – – – 845.02 – (254.99) 4,686.05	Dividend income – – – – – 79.47 1.51 173.50 0.01 – – – 254.49
						579.56

IV – 11

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Net Policyholders’ Benefits

The net policyholders’ benefits of TPL are summarized as follows:

For the year ended 31 December, HK$ million

Net claims Surrenders Annuity, dividends and maturity payments Interest allocated to investment contract	2012 563.18 3,920.40 3,107.74 1,091.65 8,682.97	2011 Change 651.37 –13.5% 2,706.98 +44.8% 1,707.76 +82.0% 1,115.90 –2.2% 6,182.01 +40.5%

Administrative and Other Expenses

The administrative and other expenses of TPL are summarized as follows:

For the year ended 31 December, HK$ million

Staff costs Rental expenses Others	2012 3,419.31 358.41 2,297.86 6,075.58	2011 Change 2,588.29 +32.1% 283.68 +26.3% 2,265.02 +1.5% 5,136.99 +18.3%

IV – 12

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Financial Strength and Solvency Margin

The solvency margin ratios of TPL under the CIRC regulations were as follows:

At 31 December, RMB million

Actual Solvency Margin Minimum Statutory Solvency Margin Solvency Margin Ratio1	2012 9,167 5,581 164%	2011 8,096 4,556
		178%

1 After the balance sheet date, the shareholders of TPL contributed additional capital in cash of RMB2,500 million into TPL. If such additional capital is incorporated, the pro forma solvency margin ratio as of 31 December 2012 would be 209%.

The below management discussion and analysis is extracted from the 2011 annual report of the Company:

The Group’s life insurance segment is operated by TPL, which is a PRC-incorporated company and is 50.05%-owned by the Group. TPL is principally engaged in the underwriting of life insurance policies in Mainland China.

IV – 13

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The figures below are the results of TPL from its operations, before intra-group eliminations.

The key financial data of the life insurance business is summarized below:

For the year ended 31 December, HK$ million

	2011	2010	Change
Gross premiums written and premium
deposits	38,529.75	37,875.20	+1.7%
Less: Premium deposits of universal
life products	28.51	204.05	–86.0%
Premium deposits of unit-linked
products	285.81	118.69	+1.4 times
Premium deposits of other
products	286.59	518.80	–44.8%
Gross premiums written recognized in
income statement	37,928.84	37,033.66	+2.4%
Policy fees	208.33	184.47	+12.9%
Net premiums written and policy fees	37,888.49	36,912.40	+2.6%
Net earned premiums and policy fees	37,973.05	36,891.82	+2.9%
Net policyholders’ benefits	(6,182.01)	(4,649.76)	+33.0%
Net commission expenses	(3,452.91)	(3,322.16)	+3.9%
Change in life insurance contract
liabilities, net of reinsurance	(27,039.28)	(27,543.76)	–1.8%
Total investment income	4,491.55	4,431.61	+1.4%
Administrative and other expenses	(5,136.99)	(4,527.72)	+13.5%
Finance costs	(432.17)	(222.73)	+94.0%
Profit from operation before taxation	604.83	1,067.43	–43.3%
Profit from operation after taxation	780.60	939.88	–16.9%
Profit from operation attributable to
the owners	390.69	470.41	–16.9%

IV – 14

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The key operational data of the life insurance business is summarized below:

	2011	2010	Change
Market share1	3.3%	3.1%	+0.2 pt
Number of provincial branches	34	33	+1
Number of sub-branches and marketing
centers	798	707	+91
Number of in-force policies	8,207,781	6,845,183	+1,362,598
Number of individual agents	46,064	50,527	–4,463
Persistency ratio
– 13th month2
– Individual	92.0%	88.2%	+3.8 pts
– Bancassurance	93.2%	94.0%	–0.8 pt
Compounded persistency ratio
– 25th month2
– Individual	84.5%	81.0%	+3.5 pts
– Bancassurance	91.5%	89.6%	+1.9 pts

1 Based on premiums published by the CIRC.

2 Based on the amount of premiums.

Operating Profit

The life insurance business produced a net operating profit of HK$780.60 million during 2011 (2010: HK$939.88 million), representing a decrease of 16.9% compared to 2010. The lower earnings was primarily due to decreased premium sales through the bank channel and lower investment yields on the investment portfolio. The net operating profit attributable to the owners amounted to HK$390.69 million (2010: HK$470.41 million).

IV – 15

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

APPENDIX IV

Gross Premiums Written and Premium Deposits

TPL’s gross premiums written recognized in the consolidated income statement increased by 2.4% to HK$37,928.84 million from HK$37,033.66 million in 2010. Such a growth rate was much slower than that of previous years, and was primarily due to significant decreases in TPL’s bancassurance sales. Sales through the agency channel, however, increased strongly.

TPL’s gross premiums written and premium deposits by line of business were as follows:

For the year ended 31 December 2011, HK$ million

Individual Bancassurance Group Other Channels1	Gross premiums written recognized in the consolidated income statement 14,409.79 22,294.53 609.84 614.68 37,928.84	Premium deposits of universal life products – 28.51 – – 28.51	Premium deposits of unit-linked products 89.71 196.10 – – 285.81	Premium deposits of other products 165.28 1.57 119.74 –		Total 14,664.78 22,520.71 729.58 614.68 38,529.75	% of Total 38.1% 58.4% 1.9% 1.6%
				286.59			100.0%

For the year ended 31 December 2010, HK$ million

Individual Bancassurance Group Other Channels1	Gross premiums written recognized in the consolidated income statement 10,318.63 25,472.35 977.95 264.73 37,033.66	Premium deposits of universal life products – 204.05 – – 204.05	Premium deposits of unit-linked products 84.74 33.95 – – 118.69	Premium deposits of other products 134.36 1.04 383.40 –		Total 10,537.73 25,711.39 1,361.35 264.73 37,875.20	% of Total 27.8% 67.9% 3.6% 0.7%
				518.80			100.0%

1 Other Channels is comprised of mainly telemarketing.

IV – 16

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Traditional product sales were strong in the individual agency distribution channel, increasing by 39.6% to HK$14,409.79 million from HK$10,318.63 million in 2010. This strong growth was primarily due to strong persistency levels for renewals. Although the number of individual agents decreased to 46,064 as of 31 December 2011 (2010: 50,527), TPL was able to retain most of its best and highest quality agents, which allowed the overall sales force to continue generating and supporting increasingly higher levels of premium. In the bank distribution channel, traditional product sales decreased to HK$22,294.53 million from HK$25,472.35 million in 2010, representing a decrease of 12.5%. In 2011, sales of insurance products through bank channels occurred in a difficult operating environment for the entire industry. Rising interest rates and higher reserve requirements at banks led to tighter liquidity conditions, and made the sale of insurance products through bank branches very difficult. At the same time, new regulatory requirements on the sale of bancassurance also led to a period of adjustment to the new rules and a slowdown of insurance sales and marketing at banks.

During 2011, TPL continued to focus on the sales of products with regular premium features. TPL continued to prioritize bottom-line profitability over top-line figures during the difficult sales environment. The detailed breakdown of TPL’s single premium products and regular premium products by line of business is summarized as follows:

For the year ended 31 December, HK$ million

Individual

Single Premium Regular Premium – First Year – Renewal Year	2011 79.42 4,290.17 10,040.20 14,409.79	% of Total 0.5% 29.8% 69.7% 100.0%	2010 103.71 4,139.23 6,075.69 10,318.63	% of Total 1.0% 40.1% 58.9%
				100.0%

IV – 17

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Bancassurance

Single Premium Regular Premium – First Year – Renewal Year Group Employee Benefit (“EB”) Annuity Other Channels Single Premium Regular Premium – First Year – Renewal Year	2011 10,130.65 2,730.91 9,432.97 22,294.53 2011 606.10 3.74 609.84 2011 0.28 361.03 253.37 614.68	% of Total 45.4% 12.3% 42.3% 100.0% % of Total 99.4% 0.6% 100.0% % of Total 0.1% 58.7% 41.2% 100.0%	2010 16,090.17 3,440.47 5,941.71 25,472.35 2010 970.56 7.39 977.95 2010 0.01 179.96 84.76 264.73	% of Total 63.2% 13.5% 23.3%
				100.0%

				% of Total 99.2% 0.8%
				100.0%

				% of Total 0.0% 68.0% 32.0%
				100.0%

IV – 18

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

In 2011, the business sold through the agency force increased in quality, with more longer duration and protection products sold. For individual single and first year regular premium, the premium by payment term and feature were as follows:

For the year ended 31 December, HK$ million

By Payment Term

Single 2 – 9 years 10 – 19 years 20 – 29 years 30 years+ By Feature Short term savings Long term savings Long term protection Others	2011 79.42 490.58 1,321.44 2,148.51 329.64 4,369.59 2011 926.35 1,695.40 1,275.92 471.92 4,369.59	% of Total 1.8% 11.2% 30.3% 49.2% 7.5% 100.0% % of Total 21.2% 38.8% 29.2% 10.8% 100.0%	2010 103.71 798.76 1,533.84 1,585.10 221.53 4,242.94 2010 1,875.38 1,234.70 746.76 386.10 4,242.94	% of Total 2.4% 18.8% 36.2% 37.4% 5.2%
				100.0%

				% of Total 44.2% 29.1% 17.6% 9.1%
				100.0%

Despite the difficult operating conditions in the bank channel, most of the products sold at bank branches continued to be of long duration. For bancassurance first year regular premium, the premium by payment term was as follows:

By Payment Term

5 years 10 years Other	2011 580.44 2,140.41 10.06 2,730.91	% of Total 21.2% 78.4% 0.4% 100.0%	2010 181.77 3,247.19 11.51 3,440.47	% of Total 5.3% 94.4% 0.3%
				100.0%

IV – 19

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

TPL’s persistency ratio continued to improve during 2011. In 2011, the persistency ratio was at 92.0% and 93.2% at 13th months and 84.5% and 91.5% at 25th months for the individual agency and bancassurance channels, respectively. All of these figures were improvements over 2010 and were better than the actuarial assumptions.

The higher level of sales of regular premium products through the agency force and their higher levels of quality and profitability are reflected in the higher embedded value and new business value figures of TPL for 2011, despite the sharply lower bancassurance regular premium sales. It is encouraging to note that the embedded value of TPL (expressed in terms of HKD) has increased 23.2% to HK$21,574 million from HK$17,511 million at the end of 2010. Likewise, the new business value after cost of capital for 2011 increased to HK$2,244 million from HK$1,827 million at the end of 2010, representing a strong growth of 22.8%. These latest actuarial figures of TPL are disclosed below in the section titled “Embedded Value of TPL”.

Investment Performance

The composition of investments held by TPL was as follows:

At 31 December, HK$ million

Debt securities Equity securities Investment funds Cash and bank deposits Investment properties Total investments	2011 105,395.25 7,667.81 5,391.91 29,559.17 2,023.90 150,038.04	% of Total 70.3% 5.1% 3.6% 19.7% 1.3% 100.0%	2010 77,656.00 10,825.23 3,963.34 23,764.74 – 116,209.31	% of Total 66.8% 9.3% 3.4% 20.5% –
				100.0%

During 2011, TPL continued to be very cautious in its asset allocation for its investment portfolio. Equity investments were maintained at a relatively low percentage of the asset allocation, while debt securities and cash and bank deposits constituted a combined total of approximately 90.0% of the total invested assets as at 31 December 2011 (2010: 87.3%).

IV – 20

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The classification of TPL’s investments in securities under HTM, AFS, HFT and LR was as follows:

At 31 December 2011, HK$ million

Debt securities Equity securities Investment funds	HTM 79,962.02 – – 79,962.02	AFS 16,106.35 7,667.81 5,391.48 29,165.64	HFT – – 0.43 0.43	LR 9,326.88 – – 9,326.88	Total 105,395.25 7,667.81 5,391.91
					118,454.97

At 31 December 2010, HK$ million

Debt securities Equity securities Investment funds	HTM 59,222.83 – – 59,222.83	AFS 14,544.51 10,683.21 3,963.34 29,191.06	HFT 33.13 142.02 – 175.15	LR 3,855.53 – – 3,855.53	Total 77,656.00 10,825.23 3,963.34
					92,444.57

The debt securities classified by type and class were as follows:

At 31 December, HK$ million

Central governments and central banks Public sector entities Banks and other financial institutions Corporate entities	2011 28,921.80 9,012.33 44,376.71 23,084.41 105,395.25	2010 24,325.96 3,855.53 28,000.93 21,473.58
		77,656.00

IV – 21

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The total investment income and the investment yield of TPL on a pre-tax basis recognized in the consolidated income statement were as follows:

For the year ended 31 December, HK$ million

Net investment income Net realized investment gains/(losses) Net unrealized investment gains/(losses) Net impairment gains/(losses) on securities Total investment income Total investment yield	2011 4,973.22 124.60 85.35 (691.62) 4,491.55 3.6%	2010 Change 3,530.90 +40.8% 1,043.14 –88.1% 46.36 +84.1% (188.79) +2.7 times 4,431.61 +1.4% 5.0% –1.4 pts

TPL’s total investment income was a gain of HK$4,491.55 million during 2011, representing a slight increase from the gain of HK$4,431.61 million in 2010. Although equity investments were maintained at a relatively low percentage of the asset allocation, unfavorable equity market conditions in the PRC lowered the total investment income of TPL.

IV – 22

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The details of TPL’s investment income/(loss) on a pre-tax basis was as follows:

For the year ended 31 December 2011, HK$ million

		Recognized in th	e consolidated in	come statement		Grand total 3,113.79 837.20 19.01 343.51 (2,596.39) (6.17) (1,839.46) 0.01 845.02 118.03 (254.99)
Net	investment inco	me Rental income – – – – – – – – – 32.68 – 32.68	Net realized gains/(losses) – 29.59 18.84 – 169.39 (7.68) (85.54) – – – – 124.60	Net unrealized gains/(losses) – – – – – – – – – 85.35 – 85.35	Net impairment gains/(losses) – – – – (375.69) – (315.93) – – – – (691.62)
Interest income/ (expense) 3,113.79 638.55 0.17 343.51 – – – – 845.02 – (254.99) 4,686.05	Dividend income – – – – 79.47 1.51 173.50 0.01 – – – 254.49
						579.56

For the year ended 31 December 2010, HK$ million

Recognized in the consolidated income st	Recognized in the consolidated income st	Recognized in the consolidated income st	atement	Grand total 2,076.15 850.19 0.05 180.06 840.11 46.36 414.40 464.43 (106.18)
Net investment income Interest income/ (expense) Dividend income 2,076.15 – 612.86 – 0.05 – 180.06 – – 54.17 – – – 249.36 464.43 – (106.18) – 3,227.37 303.53	Net realized gains/(losses) – (12.14) – – 663.69 – 391.59 – – 1,043.14	Net unrealized gains/(losses) – – – – – 46.36 – – – 46.36	Net impairment gains/(losses) – – – – (168.19) – (20.60) – – (188.79)
Interest income/ (expense) 2,076.15 612.86 0.05 180.06 – – – 464.43 (106.18) 3,227.37
				4,765.57

IV – 23

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Net Policyholders’ Benefits

The net policyholders’ benefits of TPL are summarized as follows:

For the year ended 31 December, HK$ million

Net claims Surrenders Annuity, dividends and maturity payments Interest allocated to investment contract	2011 651.37 2,706.98 1,707.76 1,115.90 6,182.01	2010 Change 568.20 +14.6% 1,412.94 +91.6% 1,462.72 +16.8% 1,205.90 –7.5% 4,649.76 +33.0%

Administrative and Other Expenses

The administrative and other expenses of TPL are summarized as follows:

For the year ended 31 December, HK$ million

Staff costs Rental expenses Others	2011 2,588.29 283.68 2,265.02 5,136.99	2010 Change 1,776.25 +45.7% 238.60 +18.9% 2,512.87 –9.9% 4,527.72 –13.5%

IV – 24

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Financial Strength and Solvency Margin

The solvency margin ratios of TPL under the CIRC regulations were as follows:

At 31 December, RMB million

Actual Solvency Margin Minimum Statutory Solvency Margin Solvency Margin Ratio	2011 8,096 4,556 178%	2010 10,868 4,020
		270%

The discussion below is supplement of TPL business operations, and the figures are the results of TPL from its operations, before intra-group eliminations.

Financial Position

TPL’s capital and other expenditures are mainly funded by contributions from the shareholders, interest-bearing notes and cash generated from operations. As at 31 December 2012, 2011 and 2010, TPL had bank and cash balances of HK$44,693.42 million, HK$29,559.16 million and HK$23,764.74 million, respectively. As at 31 December 2012, 2011 and 2010, TPL had interest-bearing notes of HK$8,817.88 million, HK$8,819.53 million HK$8,049.98 million, respectively, and had net assets of HK$12,456.55 million, HK$9,740.54 million and HK$10,738.19 million, respectively.

Capital Structure

Share Capital

The paid-in capital of TPL as at 31 December 2012 amounted to HK$4,600.10 million (equivalent to RMB3,730.00 million), TPL did not make any additional capital injection during the three years ended 31 December 2012, 2011 and 2010. Subsequent to 31 December 2012, the shareholders decided to increase the capital of TPL by RMB2,500.00 million to RMB6,230.00 million in proportion to their equity interests in TPL by way of cash. Such capital contribution was completed in March 2013.

IV – 25

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Interest-Bearing Notes

TPL’s interst-bearing notes are principally denominated in Renminbi.

The detail of interest-bearing notes of TPL is set out below:

(HK$ million) Terms Maturity 4.45% subordinated notes November 2013 6.3% subordinated notes September 2018 6.3% subordinated notes October 2018 5.6% subordinated notes March 2019 4.8% subordinated notes October 2020 4.8% subordinated notes February 2021 Total interest-bearing notes	2012 1,849.91 1,233.27 431.64 369.98 4,563.10 369.98 8,817.88	2011 1,850.25 1,233.50 431.73 370.05 4,563.95 370.05 8,819.53	2010 1,762.77 1,175.18 411.31 352.55 4,348.17 –
			8,049.98

Dividend Payout History

No dividend was declared in respect of the three years ended 31 December 2012, 2011 and 2010.

Material Acquisition and Disposal

During the year 2011, TPL disposed of 64.5% and 50.1% equity interest in TPP and TPAM, its non wholly-owned subsidiaries, to CTIH at a total cash consideration of RMB595,204,000. Further details of the disposal of TPP and TPAM are set out in Note 40 to the Financial Information of the Acquisition Targets in Appendix IIA of this circular.

Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	3,419.31	2,588.29	1,776.25
Number of employees	25,304	22,468	20,988

Bonuses are linked to both the performance of the Group and the performance of the individual.

IV – 26

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Details of Charges on Assets

TPL placed the following deposits with banks as capital guarantee funds, pursuant to the relevant PRC insurance rules and regulations:

(HK$ million)	2012	2011	2010
Statutory deposits	1,479.92	1,480.20	883.34

Exposure to Fluctuations in Exchange Rates and Related Hedges

As most of the transactions and financial assets and liabilities of TPL are denominated in the functional currency of the respective entities, TPL is not exposed to significant fluctuations in exchange rates for the three years ended 31 December 2012, 2011 and 2010.

B. PROPERTY AND CASUALTY INSURANCE BUSINESS – PRC OPERATIONS CARRIED OUT BY TPI

The below management discussion and analysis is extracted from the 2012 annual report of the Company:

The Group’s property and casualty insurance segment in the PRC is operated by TPI. TPI is a PRC-incorporated company and is 61.21% owned by the Group. TPI is principally engaged in the underwriting of motor, marine and non-marine policies in Mainland China.

The equity of TPI held by the Group increased from 50.05% to 51.77% with effect from July 2011 upon the completion of the capital contribution agreement of TPI dated 23 December 2009, and further increased from 51.77% to 61.21% with effect from November 2011 upon the completion of the share transfer agreement of TPI dated 17 August 2011. The details of this capital contribution and share transfer are set out in the announcements of the Company dated 27 July 2011 and 17 August 2011, respectively.

The figures below are the results of TPI from its operations, before intra-group eliminations.

IV – 27

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The key financial data of the property and casualty insurance business operated by TPI is summarized below:

For the year ended 31 December, HK$ million

Gross premiums written Net premiums written Net earned premiums Net claims incurred Underwriting expenses Net commission expenses Underwriting profit Total investment income Other gains/(losses) and other income Other administrative expenses Finance costs Profit from operation before taxation Profit from operation after taxation Profit from operation attributable to the owners Technical reserves ratio Retained ratio Earned premiums ratio Loss ratio1 Expense ratio1 Combined ratio2	2012 9,547.83 8,018.44 7,212.53 (3,762.71) (3,293.96) (138.76) 17.10 288.01 39.89 (41.50) (54.35) 249.15 239.45 146.57 83.2% 84.0% 75.5% 52.2% 47.6% 99.8%	2011 Change 6,994.32 +36.5% 6,072.52 +32.0% 5,854.11 +23.2% (3,126.58) +20.3% (2,542.51) +29.6% (179.18) –22.6% 5.83 +1.9 time 238.34 +20.8% (0.29) – (34.65) +19.8% (53.17) +2.2% 156.06 +59.7% 152.61 +56.9% 71.59 +1.0 time 83.8% –0.6 pt 86.8% –2.8 pts 83.7% –8.2 pts 53.4% –1.2 pts 46.5% +1.1 pts 99.9% –0.1 pt

1 Both the loss ratio and expense ratio are based on net earned premiums.

2 The combined ratio is the sum of the loss ratio and the expense ratio.

IV – 28

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The key operational data of the property and casualty insurance business operated by TPI is summarized below:

	2012	2011	Change
Market share1	1.4%	1.2%	+0.2 pt
Number of provincial branches	28	28	–
Number of sub-branches and marketing centers	360	335	+25
Number of customers
– Individual	2,022,276	1,400,465	+621,811
– Corporate	177,654	186,964	–9,310
Distribution network
– Number of direct sales representatives	5,484	3,462	+2,022
– Number of insurance agents2	12,684	8,628	+4,056

1 Based on premiums published by the CIRC.

2 The number of insurance agents includes individual agents, professional agents and ancillary agents.

Operating Profit

The property and casualty insurance business operated by TPI produced a net operating profit of HK$239.45 million during 2012 (2011: HK$152.61 million). The net operating profit attributable to the owners amounted to HK$146.57 million (2011: HK$71.59 million). TPI’s solid earnings growth was driven by a strong increase in premiums, stable underwriting performance, and stable investment returns.

IV – 29

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Gross Premiums Written

As the property and casualty insurance industry in the PRC continued to have strong growth of 18.0% in 2012, TPI’s gross premiums written outperformed the market and achieved an increased of 36.5% to HK$9,547.83 million from HK$6,994.32 million in 2011. The detailed breakdown of TPI’s gross premiums written was as follows:

For the year ended 31 December, HK$ million

Business Line Motor Marine Non-marine	2012 7,713.37 220.35 1,614.11 9,547.83	% of Total 80.8% 2.3% 16.9% 100.0%	2011 5,559.02 193.50 1,241.80 6,994.32	% of Total 79.5% 2.8% 17.7%
				100.0%

TPI’s gross premiums written by region were as follows:

For the year ended 31 December, HK$ million

Sichuan Shenzhen Shanghai Guangdong Zhejiang Others Total	2012 1,183.98 753.79 624.37 527.21 525.41 5,933.07 9,547.83	% of Total 12.4% 7.9% 6.5% 5.5% 5.5% 62.2% 100.0%	2011 1,015.47 537.85 474.50 370.30 360.19 4,236.01 6,994.32	% of Total 14.5% 7.7% 6.8% 5.3% 5.1% 60.6%
				100.0%

IV – 30

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

APPENDIX IV

Combined Ratio

TPI’s expense ratio increased to 47.6% from 46.5% in 2011 primarily due to business expansion. The loss ratio decreased favorably by 1.2 percentage points to 52.2% from 53.4% in 2011 primarily due to the proactive risk selection of TPI’s centralized underwriting platform. TPI’s combined ratio remained stable at 99.8% during 2012 when compared to 99.9% in 2011. TPI’s loss ratios, expense ratios and combined ratios were as follows:

For the year ended 31 December

Loss ratio Expense ratio Combined ratio	2012 52.2% 47.6% 99.8%	2011 53.4% 46.5%
		99.9%

Investment Performance

The composition of investments held by TPI was as follows:

At 31 December, HK$ million

Debt securities Debt schemes Equity securities Investment funds Cash and bank deposits Total invested assets	2012 4,601.99 730.92 118.88 320.55 4,473.15 10,245.49	% of Total 44.9% 7.1% 1.2% 3.1% 43.7% 100.0%	2011 3,830.39 523.65 254.15 187.93 3,636.76 8,432.88	% of Total 45.4% 6.2% 3.0% 2.2% 43.2%
				100.0%

During 2012, TPI continued to be very cautious in its asset allocation for its investment portfolio. Equity investments were kept at a low percentage of the asset allocation, while debt securities, debt schemes and cash and bank deposits constituted a combined total of approximately 95.7% of the total invested assets as at 31 December 2012 (2011: 94.8%).

IV – 31

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The classification of TPI’s investments in securities under HTM, AFS, HFT, DVPL and LR was as follows:

At 31 December 2012, HK$ million

Debt securities Debt schemes Equity securities Investment funds	HTM 1,210.38 – – – 1,210.38	AFS 2,799.64 – 118.88 320.55 3,239.07	HFT/DVPL 246.66 – – – 246.66	LR 345.31 730.92 – – 1,076.23	Total 4,601.99 730.92 118.88 320.55
					5,772.34

At 31 December 2011, HK$ million

Debt securities Debt schemes Equity securities Investment funds	HTM 826.28 – – – 826.28	AFS 2,647.07 – 254.15 187.93 3,089.15	HFT/DVPL 11.66 – – – 11.66	LR 345.38 523.65 – – 869.03	Total 3,830.39 523.65 254.15 187.93
					4,796.12

The debt securities classified by type and class were as follows:

At 31 December, HK$ million

Governments and central banks Banks and other financial institutions Corporate entities	2012 591.59 1,739.83 2,270.57 4,601.99	2011 588.84 1,520.99 1,720.56
		3,830.39

IV – 32

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The total investment income and the investment yield of TPI’s investments on a pretax basis recognized in the consolidated income statement were as follows:

For the year ended 31 December, HK$ million

Net investment income1 Net realized investment gains/ (losses) Net unrealized investment gains/ (losses) Net impairment gains/(losses) on securities Total investment income2 Net investment yield1 Total investment yield2	2012 380.42 (92.07) 1.78 (2.12) 288.01 4.1% 3.1%	2011 Change 276.34 +37.7% (30.18) +2.1 times (1.32) – (6.50) –67.4% 238.34 +20.8% 3.8% +0.3 pt 3.3% –0.2 pt

1 Net investment income mainly consists of fixed investment income such as interest income from debt securities and bank deposit. Net investment yield is derived from such net investment income.

2 Total investment income is the summation of net investment income and the realized/unrealized investment gains/losses plus impairments. The total investment yield is derived from such total investment income.

TPI’s total investment income was HK$288.01 million during 2012, representing a solid increase from the HK$238.34 million in 2011. TPI’s heavy weighting and allocation of assets in fixed income, bank deposits and cash resulted in a satisfactory yield for its investment portfolio.

IV – 33

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The details of TPI’s investment income/(loss) on a pre-tax basis were as follows:

For the year ended 31 December 2012, HK$ million

Recognized in the consolidated income st	Recognized in the consolidated income st	Recognized in the consolidated income st	atement	Grand total 43.48 101.37 15.46 18.81 38.12 8.56 (49.51) 142.08 (1.29)
Net investment income Interest income/ (expense) Dividend income 43.48 – 111.52 – 14.84 – 18.81 – 38.12 – – 5.32 – 7.54 142.08 – (1.29) – 367.56 12.86	Net realized gains/(losses) – (3.88) (1.16) – – (24.22) (62.81) – – (92.07)	Net unrealized gains/(losses) – – 1.78 – – – – – – 1.78	Net impairment gains/(losses) – – – – – (0.10) (2.02) – – (2.12)
Interest income/ (expense) 43.48 111.52 14.84 18.81 38.12 – – 142.08 (1.29) 367.56
				317.08

For the year ended 31 December 2011, HK$ million

Recognized in the consolidated income st	Recognized in the consolidated income st	Recognized in the consolidated income st	atement	Grand total 40.75 110.71 (0.72) 12.05 21.88 (98.62) (85.01) 100.35 (1.14)
Net investment income Interest income/ (expense) Dividend income 40.75 – 87.39 – 0.31 – 12.05 – 21.88 – – 5.19 – 9.56 100.35 – (1.14) – 261.59 14.75	Net realized gains/(losses) – (13.78) 0.29 – – 30.30 (46.99) – – (30.18)	Net unrealized gains/(losses) – – (1.32) – – – – – – (1.32)	Net impairment gains/(losses) – – – – – (1.99) (4.51) – – (6.50)
Interest income/ (expense) 40.75 87.39 0.31 12.05 21.88 – – 100.35 (1.14) 261.59
				100.25

IV – 34

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Underwriting and Other Administrative Expenses

The underwriting and administrative expenses of TPI are summarized as follows:

For the year ended 31 December, HK$ million

Staff costs Rental expenses Business tax and additional charges Others	2012 965.07 70.83 531.35 1,768.21 3,335.46	2011 Change 767.16 +25.8% 60.74 +16.6% 393.05 +35.2% 1,356.21 +30.4% 2,577.16 +29.4%

Financial Strength and Solvency Margin

The solvency margin ratios of TPI under the CIRC regulations were as follows:

At 31 December, RMB million

Actual Solvency Margin Minimum Statutory Solvency Margin Solvency Margin Ratio	2012 1,587 976 163%	2011 1,151 756
		152%

The below management discussion and analysis is extracted from the 2011 annual report of the Company:

The Group’s PRC property and casualty insurance segment is operated by TPI. TPI is a PRC-incorporated company and is 61.21%-owned by the Group. TPI is principally engaged in the underwriting of motor, marine and non-marine policies in Mainland China.

IV – 35

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The figures below are the results of TPI from its operations, before intra-group eliminations.

The key financial data of the property and casualty insurance business operated by TPI is summarized below:

For the year ended 31 December, HK$ million

Gross premiums written Net premiums written Net earned premiums Net claims incurred Underwriting expenses Net commission expenses Underwriting profit/(loss) Total investment income Other administrative expenses Finance costs Profit from operation before taxation Profit from operation after taxation Profit from operation attributable to the owners Technical reserves ratio Retained ratio Earned premiums ratio Loss ratio1 Expense ratio 1 Combined ratio2	2011 6,994.32 6,072.52 5,854.11 (3,126.58) (2,542.51) (179.18) 5.83 238.34 (34.65) (53.17) 156.06 152.61 71.59 83.8% 86.8% 83.7% 53.4% 46.5% 99.9	2010 Change 6,134.73 +14.0% 5,335.52 +13.8% 5,026.42 +16.5% (2,833.75) +10.3% (2,122.41) +19.8% (174.00) +3.0% (103.74) – 229.15 +4.0% (5.04) +5.9 times (50.58) +5.1% 33.93 +3.6 times 56.99 +1.7 times 28.52 +1.5 times 83.0% +0.8 pt 87.0% –0.2 pt 81.9% +1.8 pts 56.4% –3.0 pts 45.7% +0.8 pt 102.1 –2.2 pts

1 Both the loss ratio and expense ratio are based on net earned premiums.

2 The combined ratio is the sum of the loss ratio and the expense ratio.

IV – 36

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The key operational data of the property and casualty insurance business operated by TPI is summarized below:

	2011	2010	Change
Market share1	1.2%	1.3%	–0.1 pt
Number of provincial branches	27	27	–
Number of sub-branches and marketing
centers	363	369	–6
Number of direct sales representatives	3,462	3,804	–342

1 Based on premiums published by the CIRC.

Operating Profit

The property and casualty insurance business operated by TPI produced a net operating profit of HK$152.61 million during 2011 (2010: HK$56.99 million). The net operating profit attributable to the owners amounted to HK$71.59 million (2010: HK$28.52 million). The substantial increase in earnings was the result of solid premium growth and better underwriting results. The improvements in underwriting were due to structural improvements implemented by TPI in recent years and which are now having positive impact. TPI has centralized the underwriting of its motor business and restructured productline management. The underlying fundamentals of the PRC property and casualty insurance sector also improved during 2011, following regulatory measures against malpractices.

Gross Premiums Written

With continuing strong property and casualty insurance fundamentals in the PRC, TPI’s gross premiums written increased by 14.0% to HK$6,994.32 million from HK$6,134.73 million in 2010. The detailed breakdown of TPI’s gross premiums written was as follows:

For the year ended 31 December, HK$ million

Business Line Motor Marine Non-marine	2011 5,559.02 193.50 1,241.80 6,994.32	% of Total 79.5% 2.8% 17.7% 100.0%	2010 5,020.62 156.69 957.42 6,134.73	% of Total 81.8% 2.6% 15.6%
				100.0%

IV – 37

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

APPENDIX IV

Combined Ratio

TPI’s expense ratio slightly increased to 46.5% from 45.7% in 2010. Although there were a few large claims during 2011, the loss ratio decreased favorably by 3.0 percentage points to 53.4% from 56.4% in 2010. TPI’s combined ratio of 99.9 during 2011 was lower than the 102.1 in 2010, and represents a significant underwriting improvement at the PRC property and casualty insurance operations. TPI’s loss ratios, expense ratios and combined ratios were as follows:

For the year ended 31 December

Loss ratio Expense ratio Combined ratio	2011 53.4% 46.5% 99.9	2010 56.4% 45.7%
		102.1

Investment Performance

The composition of investments held by TPI was as follows:

At 31 December, HK$ million

Debt securities Equity securities Investment funds Cash and bank deposits Total invested assets	2011 4,354.04 254.15 187.93 3,636.76 8,432.88	% of Total 51.6% 3.0% 2.2% 43.2% 100.0%	2010 3,240.76 489.67 170.53 2,694.78 6,595.74	% of Total 49.1% 7.4% 2.6% 40.9%
				100.0%

During 2011, TPI continued to be very cautious in its asset allocation for its investment portfolio. Equity investments were kept at a low percentage of the asset allocation, while debt securities and cash and bank deposits constituted a combined total of approximately 94.8% of the total invested assets as at 31 December 2011 (2010: 90.0%).

IV – 38

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The classification of TPI’s investments in securities under HTM, AFS, HFT and LR was as follows:

At 31 December 2011, HK$ million

Debt securities Equity securities Investment funds	HTM 826.28 – – 826.28	AFS 2,647.07 254.15 187.93 3,089.15	HFT 11.66 – – 11.66	LR 869.03 – – 869.03	Total 4,354.04 254.15 187.93
					4,796.12

At 31 December 2010, HK$ million

Debt securities Equity securities Investment funds	HTM 938.08 – – 938.08	AFS 1,974.19 489.67 170.53 2,634.39	HFT 99.09 – – 99.09	LR 229.40 – – 229.40	Total 3,240.76 489.67 170.53
					3,900.96

The debt securities classified by type and class were as follows:

At 31 December, HK$ million

Central governments and central banks Public sector entities Banks and other financial institutions Corporate entities	2011 588.84 523.65 1,520.99 1,720.56 4,354.04	2010 745.67 229.40 1,101.66 1,164.03
		3,240.76

IV – 39

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The total investment income and the investment yield of TPI’s investments on a pretax basis recognized in the consolidated income statement were as follows:

For the year ended 31 December, HK$ million

Net investment income Net realized investment gains/(losses) Net unrealized investment gains/(losses) Net impairment gains/(losses) on securities Total investment income Total investment yield	2011 276.34 (30.18) (1.32) (6.50) 238.34 3.3%	2010 Change 235.61 +17.3% (6.46) +3.7 times – – – – 229.15 +4.0% 4.3% –1.0 pt

TPI’s total investment income was HK$238.34 million during 2011, representing a slight increase from the HK$229.15 million in 2010. The unfavorable equity market conditions in the PRC did not have as much of an impact on TPI due to the very low asset allocation to equities in its investment portfolio.

IV – 40

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The details of TPI’s investment income/(loss) on a pre-tax basis were as follows:

For the year ended 31 December 2011, HK$ million

Recognized in the consolidated income st	Recognized in the consolidated income st	Recognized in the consolidated income st	atement	Grand total 40.75 110.71 (0.72) 33.93 (98.62) (85.01) 100.35 (1.14)
Net investment income Interest income/ (expense) Dividend income 40.75 – 87.39 – 0.31 – 33.93 – – 5.19 – 9.56 100.35 – (1.14) – 261.59 14.75	Net realized gains/(losses) – (13.78) 0.29 – 30.30 (46.99) – – (30.18)	Net unrealized gains/(losses) – – (1.32) – – – – – (1.32)	Net impairment gains/(losses) – – – – (1.99) (4.51) – – (6.50)
Interest income/ (expense) 40.75 87.39 0.31 33.93 – – 100.35 (1.14) 261.59
				100.25

For the year ended 31 December 2010, HK$ million

Recognized in the consolidated income st	Recognized in the consolidated income st	Recognized in the consolidated income st	atement	Grand total 41.63 8.64 0.20 9.14 92.23 9.22 67.52 (4.43)
Net investment income Interest income/ (expense) Dividend income 41.63 – 56.49 – 0.20 – 9.14 – – 1.76 – 63.30 67.52 – (4.43) – 170.55 65.06	Net realized gains/(losses) – (0.65) – – 11.76 (17.57) – – (6.46)	Net unrealized gains/(losses) – – – – – – – – –	Net impairment gains/(losses) – – – – – – – – –
Interest income/ (expense) 41.63 56.49 0.20 9.14 – – 67.52 (4.43) 170.55
				224.15

IV – 41

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Underwriting and Other Administrative Expenses

The underwriting and administrative expenses of TPI are summarized as follows:

For the year ended 31 December, HK$ million

Staff costs Rental expenses Business tax and additional charges Others	2011 767.16 60.74 393.05 1,356.21 2,577.16	2010 Change 619.06 +23.9% 72.31 –16.0% 340.53 +15.4% 1,095.55 +23.8% 2,127.45 +21.1%

Financial Strength and Solvency Margin

The solvency margin ratios of TPI under the CIRC regulations were as follows:

At 31 December, RMB million

Actual Solvency Margin Minimum Statutory Solvency Margin Solvency Margin Ratio	2011 1,151 756 152%	2010 1,073 699
		154%

The discussion below is supplement of TPI business operations, and the figures are the results of TPI from its operations, before intra-group eliminations.

Financial Position

TPI’s capital and other expenditures are mainly funded by contributions from the shareholders, interest-bearing notes and cash generated from operations. As at 31 December 2012, 2011 and 2010, TPI had bank and cash balances of HK$4,473.15 million, HK$3,636.76 million and HK$2,694.78 million, respectively. As at 31 December 2012, 2011 and 2010, TPI had interest-bearing notes of HK$863.29 million, HK$863.45 million HK$822.63 million, respectively, and had net assets of HK$2,137.46 million, HK$1,258.19 million and HK$1,059.84 million, respectively.

IV – 42

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Capital Structure

Share Capital

In 2011, TPI increased its registered capital by RMB500.00 million to RMB2,070.00 million from RMB1,570.00 million, and further increased its registered capital to RMB2,570.00 million by an additional capital injection of RMB500.00 million from its shareholders, who are TPG and CTIH. As of 31 December 2012, the paid in capital of TPI amounted to HK$3,169.50 million (equivalent to RMB2,570.00 million). Subsequent to 31 December 2012, the shareholders agreed to increase the capital of TPI by RMB500 million to RMB3,070.00 million in proportion to their existing shareholding in TPI by way of cash, which have not yet been fully paid or the relevant capital inspection procedures of which have not yet been completed by the date of the Framework Agreement.

Interest-Bearing Notes

TPI’s interst-bearing notes are principally denominated in Renminbi.

The detail of interest-bearing notes of TPI is set out below:

(HK$ million) Terms Maturity 6.3% subordinated notes October 2018 Total interest-bearing notes	2012 863.29 863.29	2011 863.45 863.45	2010 822.63
			822.63

Dividend Payout History

No dividend was declared in respect of the three years ended 31 December 2012, 2011 and 2010.

Material Acquisition and Disposal

During the year 2011, TPI disposed of 7.5% and 9.9% equity interest in TPP and TPAM, to CTIH at a total cash consideration of RMB84,332,000.

IV – 43

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	965.07	767.16	619.06
Number of employees	9,698	7,082	7,473

Bonuses are linked to both the performance of the Group and the performance of the individual.

Details of Charges on Assets

TPI placed the following deposits with banks as capital guarantee funds, pursuant to the relevant PRC insurance rules and regulations:

(HK$ million)	2012	2011	2010
Statutory deposits	584.57	510.67	369.01

Exposure to Fluctuations in Exchange Rates and Related Hedges

As most of the transactions and financial assets and liabilities of TPI are denominated in the functional currency of the respective entities, TPI is not exposed to significant fluctuations in exchange rates for the three years ended 31 December 2012, 2011 and 2010.

C. PENSION AND GROUP LIFE INSURANCE BUSINESSES

The below management discussion and analysis is extracted from the 2012 annual report of the Company:

The Group’s pension and group life insurance businesses are operated by TPP. TPP is a PRCincorporated company and is 96% owned by the Group. TPP is principally engaged in corporate and personal retirement insurance and annuity businesses, and group life insurance business in Mainland China.

IV – 44

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

As of 31 August 2011, the Group held an effective interest in TPP of 50.03%. With effect from September 2011, upon the completion of the share transfer agreement of TPP dated 31 December 2010, TPP became a direct 96%-owned subsidiary of the Company.

Beginning in the second half of 2011, TPL’s group life insurance portfolio has been gradually transferred to TPP to be managed and run. Moving the group life insurance business to TPP will best rationalize and utilize the Group’s customer base and resources. It is anticipated that the new business model will enable TPP to achieve the economies of scale which are critical and necessary for operating profitability in the pension business.

The figures below are the results of TPP from its operations, before intra-group eliminations.

The key financial data of the pension and group life insurance businesses is summarized below:

For the year ended 31 December, HK$ million

	2012	2011	Change
Gross premiums written	1,136.43	641.48	+77.2%
Net premiums written	841.23	514.65	+63.5%
Net earned premiums	789.31	371.85	+1.1 times
Net policyholders’ benefits	(394.53)	(134.58)	+1.9 times
Net commission expenses	(65.93)	(41.48)	+59.0%
Change in insurance contract liabilities,
net of reinsurance	(108.14)	(119.42)	–9.4%
Total investment income	74.90	24.55	+2.1 times
Pension administration fee income	113.84	98.45	+15.6%
Agency fee income	101.55	134.84	–24.7%
Administrative and other expenses	(665.91)	(531.38)	+25.3%
Loss from operation before and after taxation	(128.58)	(193.91)	–33.7%
Loss from operation attributable to the owners	(123.44)	(156.96)	–21.4%

IV – 45

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The key operational data of the pension business is summarized below:

	2012	2011	Change
Annuity invested assets (HK$ million)	32,135	26,547	+21.1%
Annuity entrusted assets (HK$ million)	29,596	22,190	+33.4%
Number of enterprises in funds and schemes	6,787	6,703	+84
Number of branches	17	14	+3

With seventeen branches operating in major provinces to serve its customers, TPP increased substantially its group life insurance premiums during 2012. The annuity under management also increased.

Operating Result

The pension and group life insurance businesses incurred a net operating loss of HK$128.58 million during 2012 (2011: loss of HK$193.91 million), representing a decrease of 33.7% compared to 2011. The net operating loss attributable to the owners amounted to HK$123.44 million (2011: loss of HK$156.96 million).

Gross Premiums Written

TPP’s gross premiums written for 2012 increased significantly by 77.2% to HK$1,136.43 million from HK$641.48 million in 2011. The detailed breakdown of TPP’s gross premiums written was as follows:

For the year ended 31 December, HK$ million

Business Line Health Accident Group Life	2012 721.38 326.62 88.43 1,136.43	% of Total 63.5% 28.7% 7.8% 100.0%	2011 317.77 162.67 161.04 641.48	% of Total 49.5% 25.4% 25.1%
				100.0%

IV – 46

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The below management discussion and analysis is extracted from the 2011 annual report of the Company:

The Group’s pension and group life insurance businesses are operated by TPP. TPP is a PRC-incorporated company and is 96%-owned by the Group. TPP is principally engaged in corporate and personal retirement insurance and annuity businesses, and group life insurance business in Mainland China.

In order to best rationalize and utilize the Group’s customer base and resources, modifications have been made during 2011 to gradually transfer the group life insurance portfolio written by TPL to TPP to be managed and run. It is anticipated that the new business model will enable TPP to achieve reasonable economies of scale which are critical and necessary for an operating profit in the pension business.

The figures below are the results of TPP from its operations, before intra-group eliminations.

IV – 47

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The key financial data of the pension and group life insurance businesses is summarized below:

For the year ended 31 December, HK$ million

	2011	2010	Change
Gross premiums written	641.48	25.42	+24.2 times
Net premiums written	514.65	25.42	+19.2 times
Net earned premiums	371.85	9.40	+38.6 times
Net policyholders’ benefits	(134.58)	(1.03)	+129.7 times
Net commission expenses	(41.48)	(1.72)	+23.1 times
Change in insurance contract liabilities,
net of reinsurance	(119.42)	–	–
Total investment income	24.55	5.24	+3.7 times
Pension administration fee income	98.45	87.43	+12.6%
Agency fee income	134.84	130.29	+3.5%
Administrative and other expenses	(531.38)	(412.48)	+28.8%
Loss from operation before taxation	(193.91)	(179.64)	+7.9%
Loss from operation after taxation	(193.91)	(179.64)	+7.9%
Loss from operation attributable to the
owners	(156.96)	(89.87)	+74.7%

The key operational data of the pension business is summarized below:

	2011	2010	Change
Annuity and investments funds
(RMB million)	39,511	32,344	+22.2%
Number of enterprises of funds and
schemes	6,703	6,686	+17

With fourteen branches operating in major provinces to serve its customers, TPP has increased substantially its group life insurance premiums during 2011. The annuity and investment funds under management also increased by 22.2% despite only very modest increases in the number of clients in the pension schemes.

IV – 48

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

APPENDIX IV

Operating Loss

The pension and group life insurance businesses incurred net operating loss of HK$193.91 million during 2011 (2010: HK$179.64 million), representing a increase of 7.9% compared to 2010. The net operating loss attributable to the owners amounted to HK$156.96 million (2010: HK$89.87 million).

The discussion below is supplement of TPP business operations, and the figures are the results of TPP from its operations, before intra-group eliminations.

Financial Position

TPP’s capital and other expenditures are mainly funded by contributions from the shareholders and cash generated from operations. As at 31 December 2012, 2011 and 2010, TPP had bank and cash balances of HK$1,514.40 million, HK$1,490.73 million and HK$803.70 million, respectively. As at 31 December 2012, 2011 and 2010, TPP had no bank or third party borrowings and had net assets of HK$679.34 million, HK$800.86 million and HK$661.66 million, respectively.

Capital Structure

In 2011, TPP increased its registered capital by RMB700.00 million to RMB1,500.00 million from RMB800.00 million from its shareholders in proportion to their equity interest in TPP. TPP did not make any additional capital injection during the years ended 31 December 2012 and 2010. As of 31 December 2012, the paid in capital of TPP amounted to HK$1,849.91 million (equivalent to RMB1,500.00 million). Subsequent to 31 December 2012, the shareholders (including TPG and CTIH) decided to increase the capital of TPP by RMB200.00 million to RMB1,700.00 million in proportion to their equity interests in TPP by way of cash. Such capital contribution was completed in April 2013.

Dividend Payout History

No dividend was declared in respect of the three years ended 31 December 2012, 2011 and 2010.

IV – 49

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	346.42	317.29	247.73
Number of employees	1,585	1,559	1,436

Bonuses are linked to both the performance of the Group and the performance of the individual.

Details of Charges on Assets

TPP placed the following deposits with banks as capital guarantee funds, pursuant to the relevant PRC insurance rules and regulations:

(HK$ million)	2012	2011	2010
Statutory deposits	369.98	308.38	188.03

Exposure to Fluctuations in Exchange Rates and Related Hedges

As most of the transactions and financial assets and liabilities of TPP are denominated in the functional currency of the respective entities, TPP is not exposed to significant fluctuations in exchange rates for the three years ended 31 December 2012, 2011 and 2010.

D. ASSET MANAGEMENT BUSINESS

The management discussion and analysis below is prepared based on and in line with the 2012 annual report of the Company:

The Group’s asset management business is operated by TPAM and TPA (HK), which are mainly engaged in the provision of investment consultancy services to the Group in managing its RMB and non-RMB investment portfolios, respectively. TPAM is a PRC-incorporated company and is 60% owned by the Group, while TPA (HK) is a Hong Kong-incorporated company and is whollyowned by the Group.

IV – 50

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

During 2011, the Group held an effective interest in TPAM of 42.03%. With effect from 28 December 2011 upon the completion of the share transfer agreement of TPAM dated 31 December 2010, TPAM become a direct 60%-owned subsidiary of the Company.

The figures below are the results of TPAM from their operations, before intra-group eliminations.

The key financial data of the asset management business operated in the PRC by TPAM are summarized below:

For the year ended 31 December, HK$ million

	2012	2011	Change
Management fee income	168.12	143.16	+17.4%
Total investment income	8.76	6.04	+45.0%
Administrative and other expenses	(148.81)	(122.00)	+22.0%
Profit from operation before taxation	38.01	34.27	+10.9%
Profit from operation after taxation	28.84	23.59	+22.3%
Profit from operating attributable to the owners	17.31	9.91	+74.7%

The key operational data of the asset management business is summarized below:

HK$ million

	2012	2011	Change
TPAM
Assets under management	177,949	142,790	+24.6%
Including: Assets within the Group	160,663	134,081	+19.8%

Operating Profit

The asset management business in the PRC produced a net operating profit of HK$28.84 million during 2012 (2011: HK$23.59 million), representing an increase of 22.3% compared to 2011. The net operating profit attributable to the owners amounted to HK$17.31 million (2011: HK$9.91 million).

IV – 51

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The management discussion and analysis below is prepared based on and in line with the 2011 annual report of the Company:

The Group’s asset management business is operated by TPAM and TPA (HK), which are mainly engaged in the provision of investment consultancy services to the Group in managing its RMB and non-RMB investment portfolios, respectively. TPAM is a PRCincorporated company and is 60%-owned by the Group, while TPA (HK) is a Hong Kongincorporated company and is wholly-owned by the Group.

The figures below are the results of TPAM from their operations, before intragroup eliminations.

The key financial data of the asset management business operated in PRC by TPAM are summarized below:

For the year ended 31 December, HK$ million

	2011	2010	Change
Management fee income	143.16	99.30	+44.2%
Total investment income	6.04	1.00	+5.0 times
Administrative and other expenses	(122.00)	(105.66)	+15.5%
Profit from operation before taxation	34.27	13.64	+1.5 times
Profit from operation after taxation	23.59	9.75	+1.4 times
Profit from operating attributable to the
owners	9.91	4.10	+1.4 times

The key operational data of the asset management business is summarized below:

(HK$ million)	2011	2010	Change
TPAM
Assets under management	142,790	121,108	+17.9%
Including: Assets within the Group	134,081	110,221	+21.6%

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

APPENDIX IV

Operating Profit

The asset management business in the PRC produced a net operating profit of HK$23.59 million during 2011 (2010: HK$9.75 million), representing an increase of 141.9% compared to 2010. The net operating profit attributable to the owners amounted to HK$9.91 million (2010: HK$4.10 million).

The discussion below is supplement of TPAM business operations, and the figures are the results of TPAM from its operations, before intra-group eliminations.

Financial Position

TPAM’s capital and other expenditures are mainly funded by contributions from the shareholders and cash generated from operations. As at 31 December 2012, 2011 and 2010, TPAM had bank and cash balances of HK$48.41 million, HK$27.60 million and HK$11.85 million, respectively. As at 31 December 2012, 2011 and 2010, TPAM had no bank or third party borrowing and had net assets of HK$216.50 million, HK$187.65 million and HK$155.80 million, respectively.

Capital Structure

The paid-in capital of TPAM as at 31 December 2012 amounted to HK$123.33 million (equivalent to RMB100.00 million), TPAM did not make any additional capital injection during the three years ended 31 December 2012, 2011 and 2010. Subsequent to 31 December 2012, the shareholders agreed to increase the capital of the TPAM by RMB400.00 million to RMB500.00 million in proportion to their existing shareholding in TPAM, of which RMB350.00 million by way of cash and RMB50.00 million by capitalization of retained earnings. The additional capital injection has not yet been fully paid or the relevant capital inspection procedures of which have not yet been completed by the date of the Framework Agreement.

Dividend Payout History

No dividend was declared in respect of the three years ended 31 December 2012, 2011 and 2010.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	85.60	78.80	61.90
Number of employees	168	137	102

Bonuses are linked to both the performance of the Group and the performance of the individual.

Details of Charges on Assets

TPAM placed the statutory deposits at Shanghai Stock Exchange and Shenzhen Stock Exchange:

(HK$ million)	2012	2011	2010
Other deposits	0.78	0.71	1.11

Exposure to Fluctuations in Exchange Rates and Related Hedges

As most of the transactions and financial assets and liabilities of TPAM are denominated in the functional currency of the respective entities, TPAM is not exposed to significant fluctuations in exchange rates for the three years ended 31 December 2012, 2011 and 2010.

IV – 54

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

E. OVERSEAS PROPERTY AND CASUALTY INSURANCE BUSINESS

I) TP Macau

Business Overview

Taiping Insurance (Macau) Company Limited is a limited company incorporated in Macau and commenced operation since 1952. TP Macau is registered under the Macau Insurance Ordinance as an insurer to underwrite general insurance business in Macau, including among others, Property, Liability, Construction All Risks, Motor, and Employee’s Compensation. TP Macau is the market leader in the Macau general insurance industry with the highest market share of 27.2% in terms of premium income as of 31 December 2012.

TP Macau is rated A by international rating agency.

The figures below are the results of TP Macau from its operations, before intragroup eliminations.

i. Performance Analysis

Overall performance

(HK$ million) Gross premiums written Underwriting profit Profit before tax Profit after tax Rate of Equity Return (“ROE”)1 Technical reserves ratio Retained ratio Earned premiums ratio Combined ratio	2012 406.54 29.24 82.67 73.41 31.1% 144.0% 63.0% 54.8% 86.9%	2011 301.51 22.74 31.77 27.94 14.5% 138.3% 65.1% 59.9% 87.4%	2010 268.46 14.22 39.96 35.21
			20.9% 133.0% 62.0% 60.0% 91.2%

1 ROE is calculated by profit after tax based on average shareholders’ equity

IV – 55

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Net Profit and Gross Premiums Written

Net profit increased by 162.7% to HK$73.41 million in 2012 from HK$27.94 million in 2011, as a result of strong premium growth and better investment performance. Net profit decreased by 20.6% to HK$27.94 million in 2011 from HK$35.21 million in 2010, mainly due to poor market conditions in 2011.

Gross premiums written increased by 34.8% to HK$406.54 million in 2012 from HK$301.51 million in 2011 as a result of increased business volumes. Gross premiums written increased by 12.3% to HK$301.51 million in 2011 from HK$268.46 million in 2010, as TP Macau maintained its leading market share.

The detailed breakdown of gross premiums written was as follows:

(HK$ million) Business Line Motor Marine Non-Marine1 Total gross premiums written	2012 74.69 4.04 327.81 406.54	% of Total 18.4% 1.0% 80.6% 100.0%	2011 59.51 3.96 238.04 301.51	% of Total 19.7% 1.3% 79.0% 100.0%	2010 41.76 3.56 223.14 268.46	% of Total 15.6% 1.3% 83.1%
						100.0%

1 Includes fire, engineering, personnel accident, travel insurance, hospital cash and others.

Net Claims Incurred and Combined Ratio

The combined ratio was 86.9%, 87.4% and 91.2% in 2012, 2011 and 2010, respectively. Net claims incurred increased by 26.3% to HK$114.61 million in 2012 from HK$90.73 million in 2011. The expense ratio improved to 35.4% in 2012 from 37.2% in 2011 and 44.1% in 2010, due to higher growth achieved in net earned premiums relative to underwriting expenses. Net claims incurred increased by 19.5% to HK$90.73 million in 2011 from HK$75.95 million in 2010.

IV – 56

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Investment Performance

The composition of investments was as follows:

(HK$ million) Debt securities Cash and bank deposits Equity investment Others１ Total invested assets	2012 245.25 244.36 37.42 56.55 583.58	% of Total 42.0% 41.9% 6.4% 9.7% 100.0%	2011 198.76 215.95 48.87 19.75 483.33	% of Total 41.1% 44.7% 10.1% 4.1% 100.0%	2010 171.30 151.55 63.69 29.51 416.05	% of Total 41.2% 36.4% 15.3% 7.1%
						100.0%

1 Includes investment funds and investment properties.

Due to poor equity market conditions during the reporting periods, investments in equity securities were reduced from 15.3% in 2010 to 6.4% in 2012.

The total investment income on a pre-tax basis recognized in the income statement was as follows:

(HK$ million)	2012	2011	2010
Net investment income1	17.14	14.46	13.11
Total investment income2	49.29	8.54	25.02

1 Net investment income mainly consists of fixed investment income such as interest income from debt securities and bank deposit.

2 Total investment income is the summation of net investment income and net realized/unrealized investment gains/(losses).

Total investment income increased by 477.2% to HK$49.29 million in 2012 from HK$8.54 million in 2011 due to higher net unrealized gains on investments in debt securities. Total investment income decreased by 65.9% to HK$8.54 million in 2011 from HK$25.02 million in 2010 due to poor market conditions.

IV – 57

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Administrative and Other Expenses

Administrative and other expenses were HK$41.02 million, HK$38.77 million and HK$45.99 million in 2012, 2011 and 2010, respectively, which mainly consisted of staff costs and other costs.

Financial Strength and Solvency Margin

The solvency margin ratios of TP Macau under local insurance regulations were as follows:

(HK$ million) Actual Solvency Margin Minimum Statutory Solvency Margin Solvency Margin Ratio	2012 239.59 112.86 212.3%	2011 179.85 86.00 209.1%	2010 164.04 77.61
			211.4%

ii. Financial Position

TP Macau’s capital and other expenditures are mainly funded by contributions from the shareholder and cash generated from operations. As at 31 December 2012, 2011 and 2010, TP Macau had bank and cash balances of HK$244.36 million, HK$215.95 million and HK$151.55 million, respectively. As at 31 December 2012, 2011 and 2010, TP Macau had no bank or third party borrowings and had net assets of HK$273.37 million, HK$198.16 million and HK$186.08 million, respectively.

iii. Capital Structure

TP Macau did not issue any shares during the three years ended 31 December 2012, 2011 and 2010. As at 31 December 2012, the registered and paid in capital of TP Macau was HK$77.00 million. TP Macau is contemplating to increase its paid up capital to HK$115.5 million by capitalization of its reserve of MOP40 million (equivalent to HK$38.5 million).

IV – 58

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

iv. Dividend Payout History

The dividend payout of TP Macau for the three years ended 31 December 2012, 2011 and 2010 are as follows:

(HK$ million)	2012	2011	2010
Dividend	–	16.02	12.02
	(Note 1)

Note 1: Due to the possible restructuring of TPG, the dividend payment was put on hold.

v. Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	29.44	24.32	29.77
Number of employees	64	63	62

The remuneration policies of TP Macau are based on the prevailing market levels and the performance of the employees. These policies are reviewed on a regular basis.

IV – 59

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

APPENDIX IV

vi. Details of Charges on Assets

The following assets have been pledged in favour of Autoriodade Monetária de Macau to guarantee the technical reserves in accordance with the Macau Insurance Ordinance:

(HK$ million) Pledged deposits and bank balances Investment in securities Investment properties Land and buildings Total pledged assets	2012 98.55 273.58 34.25 8.19 414.57	2011 70.04 220.93 19.74 9.21 319.92	2010 52.74 195.57 29.52 9.42
			287.25

vii. Exposure to Fluctuations in Exchange Rates and Related Hedges

TP Macau’s operations are mainly located in Macau and its transactions are denominated in Hong Kong Dollars, Macau Patacas and United States Dollars. TP Macau monitors its foreign exchange exposures and will consider hedging significant currency exposures should the need arise.

II) TP Singapore

Business Overview

China Taiping Insurance (Singapore) PTE Ltd is incorporated in the Republic of Singapore in 1938 with its principal place of business and registered office in Singapore. TP Singapore was registered as a direct general insurer on December 16, 2002 under the Insurance Act, Chapter 142 to underwrite general insurance business, including Motor, Workmen’s Compensation, Marine Cargo, Marine Hull, Fire, Bonds, Personal Accident, Health, Public Liability, Engineering/CAR/EAR, Professional Indemnity and others. As of 31 December 2012, TP Singapore ranks number fourteen in terms of premium income and has achieved a market share of 2.1% in Singapore.

TP Singapore is rated A– by international rating agency.

IV – 60

APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The figures below are the results of TP Singapore from its operations, before intragroup eliminations.

i. Performance Analysis

Overall performance

(HK$ million) Gross premiums written Underwriting profit Profit before tax Profit after tax Rate of Equity Return (“ROE”)1 Technical reserves ratio Retained ratio Earned premiums ratio Combined ratio	2012 451.00 53.26 107.57 89.83 15.1% 204.7% 82.5% 80.7% 85.4%	2011 435.04 51.19 66.22 56.16 10.5% 206.3% 81.3% 71.5% 83.5%	2010 368.14 48.03 83.96 71.04
			16.1% 201.6% 81.2% 85.4% 84.7%

1 ROE is calculated by profit after tax based on average shareholders’ equity

Net Profit and Gross Premiums Written

Net profit increased by 60.0% to HK$89.83 million in 2012 from HK$56.16 million in 2011, mainly due to higher underwriting profits in 2012 and an increase in fair value of investment property in 2012. Net profit decreased by 20.9% to HK$56.16 million in 2011 from HK$71.04 million in 2010, mainly due to impairment loss on securities of HK$9.42 million and higher net realized investment loss in 2011.

Gross premiums written increased slightly by 3.7% to HK$451.00 million in 2012 from HK$435.04 million in 2011, mainly due to a 6.7% growth in non-marine business. Gross premiums written increased by 18.2% to HK$435.04 million in 2011 from HK$368.14 million in 2010, mainly due to a 19.3% growth in non-marine business.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

APPENDIX IV

The detailed breakdown of gross premiums written was as follows:

(HK$ million)

(HK$ million)
Business Line Motor Marine Non-marine1 Total gross premiums written	2012 166.92 40.36 243.72 451.00	% of Total 37.0% 9.0% 54.0% 100.0%	2011 157.98 48.61 228.45 435.04	% of Total 36.3% 11.2% 52.5% 100.0%	2010 132.77 43.81 191.56 368.14	% of Total 36.1% 11.9% 52.0%
						100.0%

1 Includes workmen’s compensation, fire, bonds, personal accident, health, public liability, engineering/CAR/EAR, professional indemnity and other

Net Claims Incurred and Combined Ratio

The combined ratio was 85.4%, 83.5% and 84.7% in 2012, 2011 and 2010, respectively. Net claims incurred increased by 22.4% to HK$181.82 million in 2012 from HK$148.56 million in 2011. The expense ratio improved to 35.4% in 2012 from 35.8% in 2011, mainly because of higher net premiums growth relative to underwriting expenses in 2012. Net claims incurred decreased by 10.9% to HK$148.56 million in 2011 from HK$166.67 million in 2010. The expense ratio increased to 35.7% in 2011 from 31.7% in 2010, mainly attributable to an increase in net commission expenses and underwriting expenses in 2011.

Investment Performance

The composition of investments was as follows:

(HK$ million) Debt securities Cash and bank deposits Equity investment Others1 Total invested assets	2012 741.32 474.69 128.67 150.10 1,494.78	% of Total 49.6% 31.8% 8.6% 10.0% 100.0%	2011 604.37 453.09 129.87 106.95 1,294.28	% of Total 46.7% 35.0% 10.0% 8.3% 100.0%	2010 496.44 475.15 157.44 67.86 1,196.89	% of Total 41.5% 39.7% 13.1% 5.7%
						100.0%

1 Includes investment funds and investment properties.

IV – 62

APPENDIX IV

MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The total investment income on a pre-tax basis recognized in the income statement was as follows:

(HK$ million)	2012	2011	2010
Net investment income1	34.87	36.03	31.71
Total investment income2	59.78	12.81	44.36

1 Net investment income mainly consists of fixed investment income such as interest income from debt securities and bank deposit.

2 Total investment income is the summation of net investment income and net realized/unrealized investment gains/(losses).

Total investment income increased by 366.6% to HK$59.78 million in 2012 from HK$12.81 million in 2011, mainly due to increase in fair value of investment properties recognized in 2012. Total investment income in 2011 decreased to HK$12.81 million from HK$44.36 million in 2010 due to poor equity market conditions.

Administrative and Other Expenses

The administrative and other expenses were HK$69.99 million, HK$61.04 million and HK$66.19 million in 2012, 2011 and 2010, respectively, which mainly consisted of staff costs, rental expenses and other expenses.

Financial Strength and Solvency Margin

The solvency margin ratios of TP Singapore under local insurance regulations were as follows:

(HK$ million) Actual Solvency Margin Minimum Statutory Solvency Margin Solvency Margin Ratio	2012 792.91 368.77 215.0%	2011 598.45 266.03 225.0%	2010 548.11 235.62
			232.6%

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

ii. Financial Position

TP Singapore’s capital and other expenditures are mainly funded by contributions from the shareholder and cash generated from operations. As at 31 December 2012, 2011 and 2010, TP Singapore had bank and cash balances of HK$474.69 million, HK$453.09 million and HK$475.15 million, respectively. As at 31 December 2012, 2011 and 2010, TP Singapore had no bank or third party borrowings and had net assets of HK$660.57 million, HK$522.65 million and HK$505.97 million, respectively.

iii. Capital Structure

TP Singapore did not issue any shares during the three years ended 31 December 2012, 2011 and 2010. As of 31 December 2012, the registered and paid in capital of TP Singapore was HK$314.05 million.

iv. Dividend Payout History

The dividend payout of TP Singapore for the three years ended 31 December 2012, 2011 and 2010 are as follows:

(HK$ million)	2012	2011	2010
Dividend	–	26.97	16.40
	Note 1

Note 1: Due to the possible restructuring of TPG, the dividend payment was put on hold.

v. Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as of 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	49.35	41.71	38.52
Number of employees	94	94	93

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The remuneration policies of TP Singapore are based on the prevailing market levels and the performance of the employees. These policies are reviewed on a regular basis.

vi. Details of Charges on Assets

The following assets were held as cash collateral in respect of insurance bonds issued on behalf of customers and for credit terms granted to agents:

(HK$	million)	2012	2011	2010
Bank	deposits	56.20	52.37	52.87

In addition, a bank deposit of HK$3.01 million was pledged as a statutory deposit and bank covenant as at 31 December 2010, as required by Section 14(1) of the Insurance Act of the Republic of Singapore. The statutory deposit was cancelled during the year 2011.

vii. Exposure to Fluctuations in Exchange Rates and Related Hedges

TP Singapore’s operations are mainly located in Singapore and its transactions are primarily denominated in Singapore Dollars, United States Dollars and Hong Kong Dollars. TP Singapore managed its foreign exchange exposures by using the natural hedges which arise from offsetting assets and liabilities that are denominated in foreign currencies.

viii. Contingent Liabilities

TP Singapore did not have any material contingent liabilities for the three years ended 31 December 2012, 2011 and 2010.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

III) TP UK

Business Overview

China Taiping Insurance (UK) Company Limited is a limited company incorporated in the UK in 1983. It has a registered and paid-in capital of HK$187.97 million as of 31 December 2012. TP UK mainly operates in the small to medium retail market writing Traders Combined Business through appointed brokers or directly with its customers. Such business accounts for more than 90% of its gross premiums written of HK$179.72 million in 2012 (2011: HK$176.66 million) which after reinsurance cessions results in net premiums written of HK$141.04 million in 2012 (2011: HK131.42 million).

The figures below are the results of TP UK from its operations, before intragroup eliminations.

i. Performance Analysis

Overall performance

(HK$ million) Gross premiums written Underwriting profit/(loss) Profit/(Loss) before tax Profit/(Loss) after tax Rate of Equity Return (“ROE”)1 Technical reserves ratio Retained ratio Earned premiums ratio Combined ratio	2012 179.72 3.99 36.86 27.19 11.6% 216.8% 78.5% 77.7% 97.2%	2011 176.66 6.14 9.01 9.34 4.3% 261.5% 74.4% 69.6% 95.0%	2010 162.81 (71.13) (34.99) (28.24) (12.9%) 341.3% 61.3% 59.9% 172.9%

1 ROE is calculated by profit after tax based on average shareholders’ equity

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Net Profit and Gross Premiums Written

Net profit increased by 191.1% to HK$27.19 million in 2012 from HK$9.34 million in 2011, mainly due to significantly higher total investment income from realizing gains in equity investments. Net profit increased to HK$9.34 million in 2011 from a HK$28.24 million net loss in 2010, mainly due to a decline in net claims incurred.

Gross premiums written increased by 1.7% to HK$179.72 million in 2012 from HK$176.66 million in 2011, mainly due to an increase in nonmarine business. Gross premiums written increased by 8.5% to HK$176.66 million in 2011 from HK$162.81 million in 2010, mainly due to the underlying growth in the market.

The detailed breakdown of gross premiums written was as follows:

(HK$ million) Business Line Motor Marine Non-marine1 Total gross premiums written	2012 3.46 0.19 176.07 179.72	% of Total 1.9% 0.1% 98.0% 100.0%	2011 3.01 0.39 173.26 176.66	% of Total 1.7% 0.2% 98.1% 100.0%	2010 2.57 0.23 160.01 162.81	% of Total 1.6% 0.1% 98.3%
						100.0%

1 Includes fire, engineering, personnel accident, travel insurance, hospital cash and others.

Net Claims Incurred and Combined Ratio

The combined ratio was 97.2%, 95.0% and 172.9% in 2012, 2011 and 2010, respectively. Net claims incurred increased by 28.9% to HK$64.18 million in 2012 from HK$49.80 million in 2011. The expense ratio improved to 51.2% in 2012 from 54.5% in 2011, as a result of more strengthened measurers in budget management. Net claims incurred decreased by 53.1% to HK$49.80 million in 2011 from HK$106.24 million in 2010. The expense ratio improved to 54.5% in 2011 from 64.0% in 2010, which was attributable to the implementation of new measures for budget management in 2011.

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Investment Performance

The composition of investments was as follows:

(HK$ million) Debt securities Cash and bank deposits Equity investment Investment funds Total invested assets	2012 290.28 134.02 15.89 26.91 467.10	% of Total 62.1% 28.7% 3.4% 5.8% 100.0%	2011 259.33 117.65 41.40 83.79 502.17	% of Total 51.7% 23.4% 8.2% 16.7% 100.0%	2010 251.94 124.18 41.85 85.73 503.70	% of Total 50.0% 24.7% 8.3% 17.0%
						100.0%

The total investment income on a pre-tax basis recognized in the income statement was as follows:

(HK$ million)	2012	2011	2010
Net investment income1	18.10	17.65	11.66
Total investment income2	44.13	5.52	41.32

Net investment income mainly consists of fixed investment income such as interest income from debt securities and bank deposits.

2 Total investment income is the summation of net investment income and net realized/unrealized investment gains/(losses).

Total investment income increased by 7 times to HK$44.13 million in 2012 from HK$5.52 million in 2011, mainly due to net realized investment gains of HK$12.33 million in 2012 from the sale of equity investments. Total investment income decreased by 86.6% to HK$5.52 million in 2011 from HK$41.32 million in 2010, due to poor equity market conditions.

Administrative and Other Expenses

The administrative and other expenses in 2012, 2011 and 2010 were HK$53.50 million, HK$43.65 million and HK$52.14 million, respectively, which mainly consisted of staff costs, rental expenses and other expenses.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Financial Strength and Solvency Margin

The solvency margin ratios of TP UK under local insurance regulations were as follows:

(HK$ million) Actual Solvency Margin Minimum Statutory Solvency Margin Solvency Margin Ratio	2012 251.41 37.39 672.4%	2011 221.92 36.61 606.2%	2010 205.21 41.00
			500.5%

ii. Financial Position

TP UK’s capital and other expenditures are mainly funded by contributions from the shareholder and cash generated from operations. As at 31 December 2012, 2011 and 2010, TP UK had bank and cash balances of HK$134.02 million, HK$117.65 million and HK$124.18 million, respectively. As at 31 December 2012, 2011 and 2010, TP UK had no bank or third party borrowings and had net assets of HK$252.03 million, HK$216.52 million and HK$203.86 million, respectively.

iii. Capital Structure

TP UK did not issue any shares for the three years ended 31 December 2012, 2011 and 2010. As at 31 December 2012, the registered and paid in capital of TP UK was HK$187.97 million.

iv. Dividend Payout History

No dividend was declared in respect of the three years ended 31 December 2012, 2011 and 2010.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

v. Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	29.59	19.16	21.95
Number of employees	37	39	37

The remuneration policies of TP UK are based on the prevailing market levels and the performance of the employees. These policies are reviewed on a regular basis.

vi. Details of Charges on Assets

The following assets have been pledged to comply with the requirements of Commissariat aux Assurances of Luxembourg for guarantee funds and to comply with the requirement of the landlord of the TP UK’s office in the Netherlands:

(HK$ million) Bank deposits pledged as guarantee fund Bank deposit pledged as required by landlord Total pledged assets	2012 0.08 1.25 1.33	2011 0.07 1.20 1.27	2010 0.07 1.20
			1.27

vii. Exposure to Fluctuations in Exchange Rates and Related Hedges

TP UK’s operations are mainly located in the UK and its transactions are primarily denominated in Pound Sterling. TP UK monitors its foreign exchange exposure and will consider hedging significant currency exposures should the need arise.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

IV) TP Indonesia

Business Overview

PT China Taiping Insurance Indonesia is jointly owned by TPG (55%) and PT Megah Putra Manunggal (45%). TP Indonesia is engaged in general insurance business including Fire, Motor Vehicle, Engineering, Marine Cargo and General. It commenced operations in September 1990 and obtained license to operate as a joint venture non-life insurance business in June 1996. TP Indonesia obtained license to engage in health insurance business in December 2000. TP Indonesia is domiciled in Jakarta, Indonesia.

The figures below are the results of TP Indonesia from its operations, before intra-group eliminations.

i. Performance Analysis

Overall performance

(HK$ million) Gross premiums written Underwriting profit Profit before tax Profit after tax Rate of Equity Return (“ROE”)1 Technical reserves ratio Retained ratio Earned premiums ratio Combined ratio	2012 88.59 5.39 8.20 6.99 10.8% 98.7% 24.6% 23.6% 74.2%	2011 90.48 4.38 5.56 4.80 9.7% 96.1% 24.9% 21.1% 77.1%	2010 61.84 1.74 1.47 1.66
			3.7% 90.3% 28.6% 28.6% 90.1%

1 ROE is calculated by profit after tax based on average shareholders’ equity

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Net Profit and Gross Premiums Written

Net profit increased by 45.6% to HK$6.99 million in 2012 from HK$4.80 million in 2011, mainly due to the steady growth of its underwriting profit and an increase in investment income. Net profit increased by 189.2% to HK$4.80 million in 2011 from HK$1.66 million in 2010 due to solid premium growth and better underwriting performance.

Gross premiums written decreased by 2.1% to HK$88.59 million in 2012 from HK$90.48 million in 2011, primarily due to unfavourable exchange rate fluctuations (excluding the effects of foreign exchange, gross premiums written would have increased by 4.4%). Gross premiums written increased by 46.3% to HK$90.48 million in 2011 from HK$61.84 million in 2010, mainly due to a substantial increase in non-marine business.

The detailed breakdown of gross premiums written was as follows:

(HK$ million) Business Line Motor Marine Non-marine1 Total gross premiums written	2012 7.04 18.34 63.21 88.59	% of Total 7.9% 20.7% 71.4% 100.0%	2011 7.50 14.50 68.48 90.48	% of Total 8.3% 16.0% 75.7% 100.0%	2010 5.53 7.20 49.11 61.84	% of Total 8.9% 11.7% 79.4%
						100.0%

1 Includes fire, engineering, and General

Net Claims Incurred and Combined Ratio

The combined ratio was 74.2%, 77.1% and 90.1% in 2012, 2011 and 2010, respectively. Net claims incurred increased by 15.1% to HK$7.84 million in 2012 from HK$6.81 million in 2011. The expense ratio improved to 36.7% in 2012 from 41.4% in 2011, which was primarily due to effective expense controls. Net claims incurred decreased by 14.9% to HK$6.81 million in 2011 from HK$8.00 million in 2010. The expense ratio improved to 41.4% in 2011 from 44.9% in 2010, which was attributable to higher commission income earned in 2011.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Investment Performance

The composition of investments was as follows:

(HK$ million) Debt securities Equity securities Cash and bank deposits Total invested assets	2012 12.59 0.09 95.00 107.68	% of Total 11.7% 0.1% 88.2% 100.0%	2011 12.33 0.10 63.80 76.23	% of Total 16.2% 0.1% 83.7% 100.0%	2010 12.45 0.10 52.10 64.65	% of Total 19.3% 0.1% 80.6%
						100.0%

The total investment income on a pre-tax basis recognized in the income statement was as follows:

(HK$ million)	2012	2011	2010
Net and total investment
income	4.18	3.32	2.94

1 Net and total investment income mainly consists of fixed investment income such as interest income from debt securities and bank deposit.

Total investment income was HK$4.18 million during 2012, which consisted of interest income from bank deposits and debt securities. Total investment income was relatively stable for the three years ended 31 December 2012, 2011 and 2010, and there was no significant change in the investment environment throughout the years.

Administrative and Other Expenses

Administrative and other expenses were HK$14.78 million, HK$13.67 million and HK$11.48 million for the years ended 31 December 2012, 2011 and 2010, respectively, which mainly consisted of staff costs, rental expenses and other expenses.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Financial Strength and Solvency Margin

The solvency margin ratios of TP Indonesia under local insurance regulations were as follows:

(HK$ million) Actual Solvency Margin Minimum Statutory Solvency Margin Solvency Margin Ratio	2012 63.41 15.58 407.0%	2011 37.09 10.62 349.2%	2010 31.73 9.95
			318.9%

ii. Financial Position

TP Indonesia’s capital and other expenditures are mainly funded by contributions from the shareholders and cash generated from operations. As at 31 December 2012, 2011 and 2010, TP Indonesia had bank and cash balances of HK$95.00 million, HK$63.80 million and HK$52.10 million, respectively. As at 31 December 2012, 2011 and 2010, TP Indonesia had no bank or third party borrowings and had net assets of HK$78.77 million, HK$50.44 million and HK$46.12 million, respectively.

iii. Capital Structure

TP Indonesia did not issue any shares during the two years ended 31 December 2011 and 2010. In the year 2012, the shareholders of TP Indonesia approved the increase of the authorized, issued and paid-up capital from HK$32.56 million to HK$56.98 million. Additional capital was contributed by the existing shareholders, resulting in no change in the ownership structure. These changes were approved by the Minster of Law and Human Rights of the Republic of Indonesia on 23 January 2013. As at 31 December 2012, the registered and paid in capital of TP Indonesia was HK$32.56 million and the cash received on additional capital of HK$24.42 million was recorded as other paid-up capital.

iv. Dividend Payout History

No dividend was declared in respect of the three years ended 31 December 2012, 2011 and 2010.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

v. Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	10.41	9.13	7.62
Number of employees	75	77	72

The remuneration policies of TP Indonesia are based on the prevailing market levels and the performance of the employees. These policies are reviewed on a regular basis.

vi. Details of Charges on Assets

The following assets have been pledged as guarantee fund in accordance with Government Regulation of the Republic of Indonesia:

(HK$ million) Bank deposits Investment in debt securities Total pledged assets	2012 2.85 4.07 6.92	2011 3.02 4.32 7.34	2010 2.17 4.35
			6.52

vii. Exposure to Fluctuations in Exchange Rates and Related Hedges

TP Indonesia’s operations are mainly located in Indonesia and its transactions are primarily denominated in United States Dollars. TP Indonesia has a policy to maintain its assets denominated in foreign currencies at a higher level than its liabilities, and to regularly exchange these assets to local currency at the right moment. TP Indonesia also monitors its foreign exchange exposures by matching the receipts and payments in each individual currency.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

F. PROPERTY INVESTMENT BUSINESS

Companies involved in property investment include TPIH, Dragon Jade and Ming Lee, which derive the majority of their respective book value from various offices and car parking properties spanning tier-1 cities in the PRC as well as Hong Kong and Macau, most of which are for rent (the rest are for self use), providing a constant and stable cash flow stream. The largest holdings include the Shanghai Taiping Finance Tower, located in the heart of the Lujiazui Finance and Trade Zone in Shanghai, the PRC. Collectively, these property investment companies represent a net asset value to be transacted of HK$46.51 million as at 31 December 2012, after adjusting for all inter-group balances between the relevant Target Companies and TPG/TPG(HK), which will be eliminated in the consolidated account of the Enlarged Group.

Set out below is a summary discussion of the key financial statement items of TPIH, Dragon Jade and Ming Lee, which constitute the majority of our property investment operations, for the three years ended 31 December 2010 to 2012.

I) TPIH

Business Overview

Taiping Investment Holdings Company Limited (“TPIH”) is a limited company incorporated in Hong Kong. It has a registered and paid-in capital of HK$215.00 million as of 31 December 2012. TPIH principally acts as an investment holding company and generates its revenue from property rental income, interest income and dividend income. TPIH holds properties in PRC, Hong Kong and Macau. The major properties held by TPIH include Taiping Finance Tower in Shanghai, the PRC, 18 units in Beijing Wangfujing Century Plaza in Beijing, the PRC, 34 residential units in Profit Mansion, Hong Kong and a residential unit in Macau. The properties are leased out to procure rental income.

On 28 December 2012, TPIH had entered the sales and purchases agreement with TPG (HK) in relation to the disposal of its wholly-owned subsidiary, Tellon Development Limited (“Tellon”), including its subsidiary, associates and availablefor-sale investments under segment of other businesses (“Tellon subgroup”). Tellon subgroup had an aggregate net asset value of HK$1,029.12 million, and was sold for a total consideration of HK$3,391.40 million. Subsequent to 31 December 2012, the disposal of Tellon subgroup was completed by the end of March 2013 upon the fulfilment of all required legal procedures. The Tellon subgroup assets and liabilities were recorded in the assets classified as held for sale section of the TPIH accountants’ report for the year ended 31 December 2012.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

For the year ended 31 December 2012, the Tellon subgroup generated total income of HK$126.45 million, representing 15.3% of the consolidated revenue of TPIH for the same period. For the year ended 31 December 2012, the Tellon subgroup generated profit after tax of HK$111.62 million, representing 21.1% of the consolidated profit after tax of TPIH for the same period.

The figures below are the results of TPIH (excluding Tellon subgroup) from its operations, before intra-group eliminations.

i. Performance Analysis

Overall performance

(HK$ million)	2012	2011	2010
Rental income	205.95	68.84	6.07
Interest income and
dividend income	70.03	44.08	17.22
Change in fair value in
investment properties	364.39	1,091.78	403.98
Gain on disposal of an
associate	–	386.16	–
Gain on disposal of properties
and other investment	3.76	137.16	–
Administrative expenses	(87.34)	(164.30)	(27.91)
Finance costs	(82.36)	(39.05)	(33.21)
Profit before tax	530.74	1,582.31	375.30
Profit after tax	418.51	1,272.36	276.12

Revenue

Rental income for the years ended 31 December 2012, 2011 and 2010 amounted to HK$205.95 million, HK$68.84 million and HK$6.07 million, respectively. The substantial increase in rental income over prior years is primarily due to the rental income from Taiping Finance Tower in Shanghai which was available for leasing from 2011.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Profit after tax

Profit after tax for year ended 31 December 2011 was HK$1,272.36 million, which was exceptionally high as compared with 2012 and 2010, primarily due to an extraordinary and non-recurring revaluation gain arising from the completion of construction of the Taiping Finance Tower in Shanghai in 2011. In addition, a gain on disposal of an associate was recorded in 2011 of HK$386.16 million, relating to the sale of TPIH’s 30% equity interest in Shenzhen Futian Gas Turbine Power Co. Ltd, and a gain on disposal of property in 2011 was derived from the disposal of certain gross floor area of Taiping Finance Tower in Shanghai to TPL.

Administrative expense

Administrative expenses was HK$87.34 million, HK$164.30 million and HK$27.91 million for the years ended 31 December 2012, 2011 and 2010, respectively. The significant increase in 2011 was mainly due to the significant business taxes and additional charges incurred for the disposal of certain gross floor area of Taiping Finance Tower in Shanghai to TPL.

Finance costs

Finance costs increased by 110.9% to HK$82.36 million in 2012 from HK$39.05 million in 2011 and increased by 17.6% to HK$39.05 million in 2011 from HK$33.21 million in 2010, primarily due to increase in the size of total borrowings.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

ii. Properties Information

As at 31 December 2012, 2011 and 2010, TPIH had interest in properties with carrying amount of HK$5,324.43 million, HK$4,918.08 million and HK$3,373.46 million. The following table illustrates the detail of TPIH’s investment properties as of 31 December 2012:

(HK$ million) Name of property Location Nature Usage Taiping Finance Tower Pudong New District Shanghai Commercial Mainly leasing out to third parties (the rest for self use) Beijing Wangfujing Century Plaza Beijing Commercial Leasing out to third parties Profit Mansion Kowloon Hong Kong Residential Leasing out to third parties Tung Hip Commercial Building Hong Kong Commercial Leasing out to third party Wu Ye Shi Dai Xin Ju Futian District Shenzhen Residential Leasing out to third parties City Garden Hong Kong Car parking spaces Leasing out to third parties The Residencia Macau Macau Residential Leasing out to third party Wing Wah Building Kowloon Hong Kong Residential Leasing out to third party 425M Queen’s Road West Hong Kong Residential Leasing out to third party 118 Tai Nan Street Kowloon Hong Kong Residential Leasing out to third party Lot No. 2847, Demarcation District No. 1, Tung Chung Lantau Island Hong Kong Residential Vacant – To Lease out to third party Total	Book Value as at 31.12.2012 4,975.64 189.16 71.25 32.20 28.44 13.30 5.33 2.84 2.80 2.05 1.42 5,324.43	Capital Value as at 28.2.20131 Details in Appendix VI 4,980.58 Property No. 20 190.28 Property No. 21 73.19 Property Nos. 2, 3 & 13 32.20 Property No.1 28.54 Property No. 22 13.30 Property No.4 5.78 Property No. 26 2.84 Property No. 5 2.80 Property No. 6 2.05 Property No. 7 1.42 Property No. 8 5,332.98

1 Note: Capital Value is the market value of the property as at 28 February 2013 appraised by an independent professional valuer, the details of which are set out in Appendix VI of this circular. For illustrative purpose only, the capital value as at 28 February 2013 in RMB has been converted into HK$ at the exchange rate of RMB1 to HK$1.23557.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

iii. Financial Position

TPIH’s capital and other expenditures are mainly funded by contributions from the shareholder, bank borrowings and cash generated from operations. As at 31 December 2012, 2011 and 2010, TPIH had bank and cash balances of HK520.40 million, HK$522.18 million and HK$637.52 million, respectively. As at 31 December 2012, 2011 and 2010, TPIH had bank and other borrowings which amounted to HK$4,329.95 million, HK$3,729.63 million and HK$2,719.66 million, respectively. TPIH had net assets of HK$3,578.24 million, HK$3,209.66 million and HK$2,751.84 million as at 31 December 2012, 2011 and 2010, respectively and net assets attributable to shareholders as at 31 December 2012 amounted to HK$2,142.40 million. As at 31 December 2012, 2011 and 2010, TPIH’s gearing ratio (as expressed by borrowing over the summation of borrowing plus equity) was 54.7%, 53.7% and 49.6%, respectively.

iv. Capital Structure

Share Capital

TPIH did not issue any shares during the three years ended 31 December 2012, 2011 and 2010. As at 31 December 2012, the registered and paid in capital of TPIH amounted to HK$215.00 million.

Borrowings

TPIH’s borrowings are principally denominated in Hong Kong dollars.

The detail of net borrowings of TPIH is set out below:

(HK$ million) Total borrowings Less: cash and cash equivalents Net borrowings	2012 4,329.95 520.40 3,809.55	2011 3,729.63 522.18 3,207.45	2010 2,719.66 637.52
			2,082.14

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

APPENDIX IV

The terms of total borrowings as at 31 December 2012 are set out below:

(HK$ million) Term(Note 4) Maturity Bank loans (including bank loans through SPVs (Note 3) HIBOR + 1.2% per annum (Note 1&3) November 2013 HIBOR + 1.2% per annum (Note 1&3) March 2013 HIBOR + 1.7% per annum (Note 2) July 2014 HIBOR + 1.67% per annum (Note 3) November 2014 HIBOR + 2.8% per annum (Note 3) May 2015 Other loans: Interest-free loan from others On demand Total borrowings	Amount 298.80 300.00 2,831.69 300.00 589.80
	4,320.29 9.66
	4,329.95

Note 1: Subsequent to 31 December 2012, the loans were renewed with maturity at May 2016 with HIBOR plus 1.9% per annum.

Note 2: In the process of extending by 3 years.

Note 3: Includes borrowings as of 31 December 2012 represented by amounts due to fellow subsidiaries which are indirect bank loans borrowed through various Special Purpose Vehicles (“SPVs”) of TPG, namely, Pacific Asia, Walkman, Prospect Inc. and Mano.

Note 4: Based on effective interest rate.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Subsequent to 31 December 2012, the bank borrowings were increased by HK$380 million. The proceeds of such additional bank borrowing were used by TPG/TPG(HK) for their normal business operations. This additional bank loan will mature in May 2016 with HIBOR plus 1.9% per annum. Upon the completion of the Acquisition, such additional bank loan will be assumed by the Group. Such additional bank loan was taken into account by the parties to the Framework Agreement in arriving at the consideration attributable to the entire issued share capital of TPIH.

v. Material Acquisitions and Disposals

During the year ended 31 December 2010, TPIH disposed of its 39% stake in a subsidiary to TPL for an aggregate consideration of HK$1,085.87 million. This gain was equal to the excess of the consideration of HK$1,085.87 million over the carrying amount of the 39% of net assets disposed, which amounted to HK$963.94 million.

During the year ended 31 December 2010, TPIH entered into a binding agreement with TPL to sell approximately 17,308.62 square meters of gross floor area of Taiping Finance Tower located in Shanghai upon the completion of construction. During the year ended 31 December 2011, this property was sold to the fellow subsidiary.

Moreover, TPIH sold a 30% equity interest in an associate, Shenzhen Futian Gas Turbine Power Co. Ltd., during the year ended 31 December 2011 at a consideration of HK$397.31 million.

vi. Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	24.73	19.74	13.82
Number of employees	44	45	48

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The remuneration policies of TPIH are based on the prevailing market levels and the performance of the employees. These policies are reviewed on a regular basis.

vii. Exposure to Fluctuations in Exchange Rates and Related Hedges

Certain bank balances, other receivables, other payables and amounts due from/to group companies of TPIH are denominated in foreign currencies other than functional currencies, which expose TPIH to foreign currency risk. TPIH is also exposed to various economic and political risks, including those arising from restrictions on the transfer of funds as a result of actions taken by the PRC government, such as exchange controls and restrictions on the remittance of funds. TPIH currently does not have a foreign currency hedging policy. However, the management monitors its foreign exchange exposures and will consider hedging significant foreign currency exposures should the need arise.

II) Dragon Jade

Business Overview

Dragon Jade Industrial District Management (Shenzhen) Company Limited (“Dragon Jade”) is a limited company incorporated in the PRC. It has a registered and paid-in capital of approximately HK$52.78 million as of 31 December 2012. Dragon Jade principally acts as an investment holding company and generates its revenue from property rental income, interest income, utilities income and property management income. Dragon Jade holds properties in the PRC comprising 25 factory buildings in Dragon Jade Industrial District, Bantain Village, Buji Town, Shenzhen, Guangdong Province, the PRC and Flats A to F on the 18th Floor, Cui Lin Mansion, Yuanling Garden, Hongling Zhong Road, Futian District, Shenzhen, Guangdong Province, the PRC. The properties are leased out to procure rental income.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The figures below are the results of Dragon Jade from its operations, before intra-group eliminations.

i. Performance Analysis

Overall performance

(HK$ million)	2012	2011	2010
Rental income	54.15	50.79	45.68
Property management income	67.96	36.15	10.67
Water and electricity
charge income	24.02	23.36	21.71
Other operating income	4.86	8.72	8.14
Change in fair value in
investment properties	46.36	143.11	23.71
Operating and
administrative expenses	(104.31)	(74.78)	(48.91)
Finance costs	(6.53)	(13.14)	(15.98)
Profit before tax	86.49	174.30	47.62
Profit after tax	64.82	131.17	35.44

Revenue

Rental income remained stable over the years ended 31 December 2012, 2011 and 2010. Property management income increased quite substantially over the past three years primarily due to property management services provided for Taiping Finance Tower located in Shanghai since its completion of construction in the second half of 2011.

Profit after tax

Profit after tax for the year ended 31 December 2011 was HK$131.17 million which was exceptional high as compared with 2012 and 2010, primarily due to the revaluation gain arising from 25 factory buildings in the Dragon Jade Industrial District located in Shenzhen.

Operating and administrative expense

Operating and administrative expenses increased substantially over the past three years, primarily due to increases in staff costs and expenses related to new property management services provided.

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Finance costs

Finance costs decreased by 50.3% to HK$6.53 million in 2012 from HK$13.14 million in 2011, primarily due to a decrease of bank and other borrowings in 2012 and the repayment of loans during the year ended 31 December 2011. Finance costs decreased by 17.8% to HK$13.14 million in the year ended 31 December 2011 from HK$15.98 million in the prior year, primarily due to a decrease of bank and other borrowings from HK$162.17 million as of 31 December 2010 to HK$43.17 million as of 31 December 2011.

ii. Properties Information

As at 31 December 2012, 2011 and 2010, Dragon Jade had investment properties with carrying values of HK$697.68 million, HK$653.36 million and HK$482.99 million, respectively. The following table illustrates the detail of Dragon Jade’s investment properties as of 31 December 2012:

(HK$ million) Name of property Location Nature Usage Dragon Jade Industrial District Buji Town Shenzhen Industrial Mainly Leasing out to third parties (the rest for self use) Cui Lin Mansion, Yuanling Garden Futian District Shenzhen Residential Leasing out to third parties Total	Book Value as at 31.12.2012 685.98 11.70 697.68	Capital Value as at 28.02.2013 2 Detail in Appendix VI 675.86 Property No. 23 11.74 Property No. 24 687.60

iii. Financial Position

Dragon Jade’s capital and other expenditures are mainly funded by contributions from the shareholder, and cash generated from operations. As at 31 December 2012 and 2011, Dragon Jade had no bank borrowings. As at 31 December 2010, Dragon Jade had bank borrowings of HK$68.16 million. As at 31 December 2012, 2011 and 2010, Dragon Jade had cash balances of HK$46.65 million, HK$65.62 million and HK$31.25 million, respectively.

2 Note: Capital Value is the market value of the property as at 28 February 2013 appraised by an independent professional valuer, the details of which are set out in Appendix VI of this circular. For illustrative purpose only, the capital value as at 28 February 2013 in RMB has been converted into HK$ at the exchange rate of RMB1 to HK$1.23557

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

iv. Capital Structure

Share Capital

The paid-in capital of Dragon Jade as at 31 December 2012 amounted to HK$52.78 million (equivalent to RMB42.80 million), Dragon Jade did not make any additional capital injection during the three years ended 31 December 2012, 2011 and 2010.

Borrowings

Dragon Jade’s borrowings were principally denominated in Renminbi.

Dragon Jade continuously repaid its borrowings and did not raise any new loans during the years from 2010 to 2012.

(HK$ million) Bank borrowings Other borrowings1 Total borrowings Less: Cash and cash equivalents Net borrowings (net cash)	2012 – 12.33 12.33 46.65 (34.32)	2011 – 43.17 43.17 65.62 (22.45)	2010 68.16
			94.01
			162.17
			31.25
			130.92

1 Mainly Intra-group borrowings

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

v. Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million) Total remuneration Number of employees	2012 10.81 77	2011 7.56 73	2010 5.70
			69

The remuneration policies of Dragon Jade are based on the prevailing market levels and the performance of the employees. These policies are reviewed on a regular basis.

vi. Exposure to Fluctuations in Exchange Rates and Related Hedges

As most of the transactions and financial assets and liabilities of Dragon Jade are denominated in the functional currency of the respective entities, Dragon Jade is not exposed to significant fluctuations in exchange rates for the three years ended 31 December 2012, 2011 and 2010.

III) Ming Lee

Business Overview

Ming Lee is a property holding company whose property’s carrying value as at 31 December 2012, 2011 and 2010 were HK$315.10 million, HK$270.15 million and HK$256.85 million respectively, while capital value as at 28 February 2013 is HK$315.10 million. The properties are all residential properties located in Hong Kong for staff quarters purpose. The details of such properties are set out in property number 9 to 12 and 19 in Appendix VI.

Revenue of Ming Lee consist of rental income of investment properties of HK$5.63 million, HK$5.04 million and HK$5.36 million for the year 2012, 2011 and 2010, respectively. Administrative expenses for the three years ended 31 December 2012, 2011 and 2010 amounted to HK$2.92 million, HK$3.00 million and HK$2.44 million, respectively.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

IV) Other Companies

Business Overview

Pacific Asia, Walkman, Mano and Prospect Inc are private limited companies incorporated in Hong Kong and have been used by TPG(HK) as special purpose vehicles for entering into loan agreements with banks, and the proceeds from such bank facilities were advanced to TPIH to fulfill its operation needs. The details of such bank borrowings are set out under the “Borrowings” section in the discussion of TPIH above. Pacific Asia, Walkman, Mano and Prospect Inc do not have their own business operations.

Sarley also has loans and receivable with TPIH and Ming Lee. In addition, Sarley held investments in equity securities with a total carrying value of HK$1.58 million as at 31 December 2012.

G. SECURITIES BROKING BUSINESS

I) TPFH

Business Overview

Taiping Financial Holdings Company Limited (“TPFH”) is a private limited company incorporated in Hong Kong. The principal activities of TPFH are investment holding and the provision of management services to its subsidiaries. TPFH, through its wholly-owned subsidiary, carries out the business of securities dealing (Type 1 regulated activity) as approved under the SFO.

The revenue sources of TPFH consist of commission and brokerage income, interest income from clients and dividend income from listed equity investments including available-for-sale securities and held-for-trading securities.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

The figures below are the results of TPFH from its operations, before intragroup eliminations.

i. Performance Analysis

Overall performance

(HK$ million)	2012	2011	2010
Commission and brokerage income	30.45	56.35	67.00
Interest income from clients and
dividend income	10.49	13.09	15.95
Net realized/unrealized gain/(loss)
on investments	2.37	(9.11)	168.86
Other income	3.68	5.40	–
Operating and administrative
expenses	(35.03)	(53.32)	(61.88)
Profit before tax	12.18	12.40	189.86
Profit after tax	10.99	10.00	187.81

Profit after tax

Profit after tax for the year ended 31 December 2010 is HK$187.81 million which is exceptionally high as compared with 2012 and 2011, primarily due to a one-off gain from disposal of a listed investment in 2010.

ii. Financial Position

TPFH’s capital and other expenditures are mainly funded by contributions from shareholders, and cash generated from operations. As at 31 December 2012, 2011 and 2010, TPFH had no bank borrowings and had bank and cash balances of HK$168.41 million, HK$187.21 million and HK$144.01 million, respectively.

iii. Capital Structure

During the year 2012, TPFH increased the authorized ordinary share capital by 980,000,000 of HK$1 each and issued 204,553,150 new ordinary shares to its shareholder by capitalization of its retained earning. TPFH did not issue any new shares during the two years ended 31 December 2011 and 2010. As of 31 December 2012, the registered and paid in capital of TPFH amounted to HK$234.55 million, of which HK$10 million was non-voting deferred shares of HK$1 each.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

iv. Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	19.01	15.30	21.87
Number of employees	40	43	44

The remuneration policies of TPFH are based on the prevailing market levels and the performance of the employees. These policies are reviewed on a regular basis.

v. Details of Charges on Assets

TPFH has pledged the following assets to financial institutions to secure general banking facilities granted to TPFH:

(HK$	million)	2012	2011	2010
Land	and building
(at	carrying amount)	5.25	5.62	5.99
Bank	deposits	16.00	16.00	16.00

vi. Exposure to Fluctuations in Exchange Rates and Related Hedges

As most of the transactions and financial assets and liabilities of TPFH are denominated in the functional currency of the respective entities, TPFH was not exposed to significant fluctuations in exchange rates for the years ended 31 December 2012, 2011 and 2010.

vii. Contingent Liabilities

TPFH did not have any material contingent liabilities for the three years ended 31 December 2012, 2011 and 2010.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

H. FINANCIAL SUPPORT SERVICES BUSINESS

I) TPFAS

Business Overview

Taiping Financial Audit Service (Shenzhen) Company Limited (“TPFAS”) is a limited company incorporated in the PRC. The principal activity of TPFAS is the provision of internal audit services to the group companies of TPG (including the Company and its subsidiaries). The fee charged by TPFAS for its internal audit services is mutually determined by TPFAS and the relevant group companies receiving the services on a cost-sharing basis. TPFAS is positioned as a cost centre within the TPG Group. The key users of the internal audit services, in terms of the service fees charged, are TPL and TPI, which are existing subsidiaries of the Company.

The figures below are the results of TPFAS from its operations, before intragroup eliminations.

i. Performance Analysis

Overall performance

(HK$ million)	2012	2011	2010
Internal audit services income	53.23	46.85	38.53
Operating and
administrative expenses	55.94	49.12	38.52
(Loss)/Profit before tax	(2.69)	(2.21)	0.01
Loss after tax	(2.69)	(2.21)	(0.69)

TPFAS recorded marginal losses after tax for the three years ended 31 December 2012, 2011 and 2010, primarily because of its cost basis pricing policy.

Operating and administrative expense

Operating and administrative expenses increased substantially over the past three years, primarily due to increases in staff costs and expenses related to increased volumes of internal audit services provided.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

ii. Financial Position

TPFAS’s capital and other expenditures are mainly funded by contributions from its shareholder and its service fee income. As at 31 December 2012, 2011 and 2010, TPFAS had no bank borrowings and had cash balances of HK$6.44 million, HK$3.60 million and HK$4.76 million, respectively.

iii. Capital Structure

In 2011, TPFAS increased its registered capital by RMB3.50 million to RMB5.50 million from RMB2.00 million, and further increased its registered capital to RMB10.50 million by an additional capital injection of RMB5.00 million from its shareholder in 2012. As of 31 December 2012, the paid in capital of TPFAS amounted to HK$12.95 million (equivalent to RMB10.50 million).

iv. Employees and Remuneration

Total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	36.98	30.75	24.84
Number of employees	143	138	111

The remuneration policies of TPFAS are based on prevailing market levels and employee performance. These policies are reviewed on a regular basis.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

APPENDIX IV

II) TPFSC

Business Overview

Taiping Financial Service Centre (Shanghai) Company Limited (“TPFSC”) is a limited company incorporated in the PRC. The principal activity of TPFSC is the provision of back office services to the group companies of TPG (including the Company and its subsidiaries). The back office services include (i) operating services, including the underwriting and issuance of new policies, renewal and maintenance of in-force policies, claims handling and settlement and telephone enquiry services etc, and (ii) information technology services, including systems operation and maintenance and systems development.

The fee charged by TPFSC for its back office services is mutually determined by TPFSC and the relevant group companies receiving the services on a cost-sharing basis.

TPFSC is positioned as a cost centre within the TPG Group. The key users of the back office services, in terms of the service fees charged, are TPL and TPI, which are existing subsidiaries of the Company.

The figures below are the results of TPFSC from its operations, before intragroup eliminations.

i. Performance Analysis

Overall performance

(HK$ million)	2012	2011	2010
Back office services income	264.15	211.39	147.81
Other income	0.47	0.36	2.62
Operating and
administrative expenses	260.65	207.44	149.42
Profit before tax	4.70	4.30	1.00
Profit/(Loss) after tax	2.01	1.38	(2.56)

TPFSC recorded marginal profits and losses after tax for the three years ended 31 December 2012, 2011 and 2010 primarily due to its cost basis pricing policy.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

Operating and administrative expense

ii. Financial Position

TPFSC’s capital and other expenditures are mainly funded by contributions from its shareholder and its service fee income. As at 31 December 2012, 2011 and 2010, TPFSC had no bank borrowings and had cash balances of HK$5.44 million, HK$1.02 million and HK$6.74 million, respectively.

iii. Capital Structure

The paid-in capital of TPFSC as at 31 December 2012 amounted to HK$18.50 million (equivalent to RMB15.00 million), TPFSC did not receive any capital injections during the three years ended 31 December 2012, 2011 and 2010.

iv. Employees and Remuneration

The total remuneration of employees for the three years ended 31 December 2012, 2011 and 2010 and the number of employees as at 31 December 2012, 2011 and 2010 were as follows:

(HK$ million)	2012	2011	2010
Total remuneration	142.41	122.55	91.50
Number of employees	1,078	830	991

The remuneration policies of TPFSC are based on prevailing market levels and employee performance. These policies are reviewed on a regular basis.

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APPENDIX IV MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

I. OTHER BUSINESSES

I) TP Japan

Business Overview

China Taiping Insurance Service (Japan) Co. Ltd. (“TP Japan”) is a limited company incorporated in Japan in 1991. The principal activities of TP Japan are the provision of insurance agency services in the Japanese market. In addition, TP Japan also maintains long-term business relationships with major insurance enterprises in Japan for the benefit of TPG. In this regard, TP Japan is a cost centre within the TPG Group. TP Japan also produces rental income from its properties. TP Japan holds properties in Chiba Prefecture, Japan, which has a capital value of approximately HK$14.43 million (equivalent to JPY172 million) as at 28 February 2013. The details of the properties are set out in Property Number 27 and 28 in Appendix VI.

The revenue sources of TP Japan consist of commission income from providing insurance agency services and rental income from the leasing of properties. Revenue for the years ended 31 December 2012, 2011 and 2010 were HK$2.42 million, HK$2.60 million and HK$2.01 million, respectively, while operating expenses were HK$5.55 million, HK$5.25 million and HK$4.29 million, respectively. Because of its above-mentioned business nature, insignificant losses after tax were incurred for the years 31 December 2012, 2011 and 2010 and amounted to HK$3.15 million, HK$2.67 million and HK$2.30 million, respectively.

II) CIG Trustees

Business Overview

CIG Trustees Limited (“CIG Trustees”) is a private limited company incorporated in Hong Kong. The principal activity of CIG Trustees is the provision of trust services to the group companies of TPG (including the Company and its subsidiaries). CIG Trustees provides these services free of charge. No income was generated in the years 2010 to 2012, except for minor amounts of interest earned from deposits in bank. As at 31 December 2012, CIG Trustees deposited a sum of HK$1.68 million in the name of the Director of Accounting Services with a bank pursuant to section 77(2e) of the Hong Kong Trustee Ordinance. The key users of the trustee services are the Company and its subsidiaries in respect of the asset management operations and the incentive share award scheme.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE TARGET COMPANIES

III) Savills TPML

Business Overview

Savills Taiping Property Management Limited (“Savills TPML”) is a private limited company incorporated in Hong Kong and is jointly owned by TPG(HK) (25% ownership), Savills Property Management Limited (45% ownership) and China Life Insurance (Overseas) Company Limited (30% ownership). The principal activity of Savills TPML is the provision of property management services in Hong Kong. The buildings under the management of Savills TPML are China Taiping Tower located in Causeway Bay, Hong Kong (the headquarter of TPG/TPG(HK) and the Company) and CLI Building located in Wanchai, Hong Kong. The profits for the years 31 December 2012, 2011 and 2010 were HK$0.76 million, HK$0.60 million and HK$0.91 million.

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

The following are the texts of the letter and embedded value report received from PricewaterhouseCoopers in connection with their valuation as at 31 December 2012 of TPL, which have been prepared for the purpose of incorporation into this circular.

==> picture [65 x 48] intentionally omitted <==

The Board of Directors

China Taiping Insurance Holdings Co., Ltd.

22/F, China Taiping Tower Phase 1 8 Sunning Road Causeway Bay Hong Kong

Dear Sirs,

Actuarial Review Report on Calculations of Embedded Value of Taiping Life Insurance Company Limited and Group Embedded Value of China Taiping Insurance Holdings Company Limited as at 31 December 2012

1. BACKGROUND AND RESPONSIBILITIES

China Taiping Insurance Holdings Company Limited (“CTIH” or “the Company”) has engaged PricewaterhouseCoopers Limited (“PwC” or “us”) to provide a review report on the calculations of the embedded value (“EV”) of Taiping Life Insurance Company Limited (“TPL”) and the group embedded value of CTIH (“Group EV”) as at 31 December 2012 for inclusion in the circular of CTIH dated 31 May 2013 in connection with the proposed acquisition of additional shares in TPL (the “Circular”).

The directors of the Company and TPL are responsible for the calculations of the embedded value of TPL and the Group EV. This responsibility includes designing, implementing and maintaining internal control process relevant to the maintenance of underlying data and information on the in-force business and preparation of embedded value information which is free from material misstatement, whether due to fraud or error; performing embedded value calculations; selecting and applying appropriate methodologies; and making assumptions that are consistent with market information and are reasonable in the circumstances.

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

This report is prepared for inclusion in the Circular. Section 2 below sets out the scope of the work that we have been engaged to undertake in relation to the embedded value calculations. Section 3 sets out the reliance and limitations of our work. Sections 4, 5, 6 and 7 summarise the methodology, assumptions and results and section 8 sets out the opinion reached based on our work.

This report has been prepared for and only for the Board of Directors of the Company in connection with the proposed acquisition of additional shares in TPL by CTIH, and for no other purpose. We do not accept or assume any liability or responsibility for any other purpose or to any party other than the Board of Directors of the Company.

2. SCOPE OF WORK

Our scope of work was a review of TPL’s embedded value as of 31 December 2012 and new business value of business issued in 2012, as follows:

Consider whether the methodologies used in the embedded value and new business value calculations are consistent with TPL’s business, industry practice and generally accepted international actuarial principles;
Consider whether the chosen assumptions are appropriate to TPL’s EV methodologies and are consistent with TPL’s experience and trends, industry experience and available market information; and
Obtain an analysis of embedded value movements and sensitivity results testing prepared by TPL. Consider whether these show any apparent inconsistencies with model and assumptions changes or other information made available to us regarding TPL’s business operations.

Our review procedures included, but were not limited to, discussing with management of TPL the methodology and assumptions, inspecting documentation related thereto, considering whether the methodologies are consistent with regulatory requirements, considering whether the assumptions are consistent with available market information, and performing testing of actuarial calculations for sample products.

In addition, we also reviewed the post-acquisition Group EV of CTIH, assuming the Acquisitions were completed on 31 December 2012, to consider whether the calculation of Group EV is consistent with industry practice for publicly listed companies in Hong Kong.

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

3. RELIANCE AND LIMITATIONS

In carrying out this review PwC has relied upon the integrity, completeness and accuracy of the data and information provided by CTIH and TPL. We have not performed any audit or otherwise verify the truth or accuracy of the information provided to us during the review process. We do not assume any responsibility and make no representations with respect to the accuracy or completeness of any information provided by CTIH and TPL.

We have relied on the statutory financial statements and Adjusted Net Worth of CTIH and TPL (as defined in Section 4) provided by CTIH and TPL.

This report relates to the embedded value and new business value of TPL as at 31 December 2012. No allowance has been made for changes in circumstances post 31 December 2012 unless explicitly mentioned in this report including the capital injection which has been completed in March 2013.

No assessment of the quality of CTIH’s assets and TPL’s assets has been made by us.

The embedded values are dependent on the underlying assumptions. Different assumptions would give rise to different results.

The preparation of embedded value information requires assumptions and projections to be made about future uncertain events, many of which are outside the control of CTIH and TPL. Therefore, actual experience may differ from these assumptions and projections, and this will affect the value of in-force business and the new business value. This report must be read in its entirety. Individual sections of this report could be misleading if considered in isolation from each other.

The report is intended to be read by person technically competent in the areas to which it relates.

4. VALUATION METHODOLOGY

EV is the present value of shareholders’ interests in the earnings distributable (“distributable earnings”) from assets allocated to the in-force business after sufficient allowance for the aggregate risks in the business.

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

TPL adopted a traditional deterministic discounted cash flow methodology to determine the components of embedded value. This methodology makes implicit allowance for the time value of options and guarantees and other risks associated with the realisation of the expected future distributable earnings through the use of a risk adjusted discount rate and is consistent with the generally accepted traditional embedded value principles.

The embedded value equals to:

Adjusted Net Worth (“ANW”), plus
Value of the in-force business before cost of capital (“VIF before CoC”), minus
Cost of Capital (“CoC”)

The ANW represents the market value of assets in excess of statutory reserve and other liabilities of TPL.

The VIF before CoC is the present value of future estimated after-tax statutory profits from in-force business, discounted at the risk discount rate as at 31 December 2012. Cost of Capital is the difference between the amount of required capital as at 31 December 2012 and the present value of future releases, allowing for future after-tax investment earnings on the capital. The subordinate debt TPL issued is counted as capital resources while calculating CoC.

Similarly, the new business value is calculated as the difference of new business value before CoC and CoC arising from new business sales in the period. The new business value before CoC is the present value, discounted at issue date, of future estimated after-tax statutory profits emerging from new business sales in 2012.

In determining the value of in-force business, TPL’s in-force policy databases as at 31 December 2012 were used. New business volumes and mix were based on the actual business written by TPL in 2012.

It should be noted that, in assessing the total value of a life insurance company, the value attributed to future new business can be determined as the product of the one-year new business value and a multiple which reflects an allowance for future new business sales and the risks associated with it at the assumed profit margin. Our scope of work as set out in Section 2 did not include providing an opinion on such a multiple by which to assess the total value of future new business of TPL.

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REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

APPENDIX V

5. RESULTS

5.1 Post-acquisition Group EV attributable to shareholders of CTIH

Table 1: Post-acquisition Group EV as at 31 December 2012 assuming the Acquisition was completed on 31 December 2012

HK$ million			Risk Discount Rate
		Low	Central	High
		10.0%	11.0%	12.0%
Adjusted Net Worth of CTIH attributable to
Shareholders	(1)	13,406	13,406	13,406
Value of in-force business after CoC for TPL	(2)=(3)-(4)	27,630	25,976	24,506
Value of in-force business before CoC for TPL	(3)	30,956	29,528	28,241
Cost of capital for TPL	(4)	3,326	3,552	3,734
CTIH’s interest in TPL assuming the Acquisitions
were completed on 31 December 2012	(5)	75.10%	75.10%	75.10%
Value of in-force business after CoC for TPL
attributable to shareholders of CTIH	(6)=(2)×(5)	20,750	19,508	18,404
Group Embedded Value attributable to
shareholders of CTIH	(7)=(1)+(6)	34,156	32,914	31,810

Notes: The “Adjusted Net Worth of CTIH attributable to Shareholders” and “CTIH’s interest in TPL assuming the Acquisitions were completed on 31 December 2012” are based on the information provided by CTIH. We have not performed any review work on these items.

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

5.2 Embedded value and new business value of TPL

The components of embedded value of TPL as at 31 December 2012, as calculated by TPL using the methodology and assumptions described in section 4 and 6 of this report, are set out in tables below.

Table 2: Embedded value of TPL as at 31 December 2012

HK$ million			Risk Discount Rate
		Low	Central	High
		10.0%	11.0%	12.0%
Embedded Value	(1)=(2)+(3)	30,941	29,286	27,817
Adjusted Net Worth	(2)	3,310	3,310	3,310
Value of in-force business after CoC	(3)=(4)-(5)	27,630	25,976	24,506
Value of in-force business before CoC	(4)	30,956	29,528	28,241
Cost of capital	(5)	3,326	3,552	3,734

Table 3: New business value of TPL of 2012

HK$ million			Risk Discount Rate
		Low	Central	High
		10.0%	11.0%	12.0%
New business value	(1)=(2)-(3)	2,654	2,304	2,003
New business value before CoC	(2)	3,191	2,869	2,587
Cost of capital	(3)	537	565	584

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REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

APPENDIX V

5.3 Movement analysis of embedded value for TPL

TPL performed movement analysis of the embedded value at the central risk discount rate from 1 January 2012 to 31 December 2012.

Table 4: Movement analysis of TPL’s embedded value from 1 January 2012 to 31 December 2012

Notes Embedded Value as at 1 January 2012 New business value a Expected return on Embedded Value b Assumption and modeling changes c Investment return variance d Dividend variance e Other experience variance f Exchange losses g Embedded Value as at 31 Dec 2012	HK$ million 21,574 2,304 2,263 2,208 242 417 284 (6) 29,286

Notes:

(a) New business contribution from sales of new business in 2012.
(b) Return on value of in-force business plus expected interest on Adjusted Net Worth.
(c) Impact of model improvements and assumption changes on the future distributable earnings of the in-force business.
(d) Differences between the actual investment returns and expected investment returns in 2012.
(e) Differences between the actual and expected policyholder dividend and the changes of accumulated loss in participating fund in 2012, which is assumed to be recovered from future profit.
(f) Differences between the actual experience and expected experience for mortality, morbidity, lapses, expenses, income tax and business taxes in 2012.
(g) Exchange losses arising from the changes in exchange rate of RMB.

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

6. VALUATION ASSUMPTIONS

TPL’s policies state that it adopts a best estimate approach in setting the assumptions which are used in the calculation of its embedded value and new business value. The assumptions were based on the actual experience of TPL and certain industry experience.

The basis and assumptions used in the calculations are summarised below. These assumptions have been made on a “going concern” basis.

6.1 Risk discount rate

The risk discount rate represents the long-term post-tax cost of capital of the hypothetical investor for whom the valuation is made, together with an allowance for risk, taking into account factors such as the political and economic environment in the PRC.

The risk discount rate is set equal to risk-free rate plus a risk premium. The risk free rate is based on yields on PRC ten-year government bond and the risk premium reflects the risk associated with emergence of distributable earnings which is not reflected elsewhere in the valuation.

Currently, TPL uses a risk discount rate of 11% as the base scenario assumption for both in-force and new business. TPL has also computed the embedded value results under risk discount rates of 10% and 12%.

The risk discount rate used by TPL is broadly consistent with those used by other insurers in the industry in China which typically range from 10% to 12%.

6.2 Investment returns

Future investment returns have been calculated as the weighted average of the investment returns on existing assets and new assets. The investment returns on existing assets have been determined by the projected investment income in future years divided by the projected value of the assets. The calculation of projected investment income and the value of assets are based on yield to maturity, term to maturity and the market value of the assets.

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

Assumed future investment returns net of investment expenses are as follows:

Table 5: Investment return assumptions for participating and non-participating business

Calendar Year	2012	2013	2014	2015	2016	2017	2018	2019	2020+
Investment returns rates	4.60%	4.65%	4.70%	4.75%	4.80%	4.85%	4.90%	4.95%	5.00%

Table 6: Investment return assumptions for universal life products

	Taiping	Taiping	Taiping
Product	Yingliduo	Yingliduo2007	Nanshuiyihao
Investment return rates	4.70%	4.60%	5.35%

The investment return rate for unit-linked life products was assumed at 7%.

6.3 Mortality

TPL set the mortality assumption based on both TPL’s emerging experience and industry experience, reflecting its expectation of how experience will emerge.

For life products, the experience mortality rates were 70% of the China Life Insurance Mortality Table (2000-2003) for non-annuitants, with a three-year selection period. For annuity products, they were 80% and 70%, for male and female respectively, of the China Life Insurance Mortality Table (2000-2003) for annuitants.

6.4 Morbidity

Morbidity assumptions were developed based on TPL’s recent historical experience and its expectation of how experience will emerge.

The experience morbidity assumptions were based on TPL’s own pricing tables.

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

6.5 Lapse

The lapse assumptions were based on industry experience and adjusted to reflect the results of its recent experience.

The lapse assumptions vary by distribution channel, product group and policy duration.

6.6 Policyholder dividend

The policyholder dividend for participating business is set as 70% of distributable surplus of participating fund, based on current TPL’s policyholder dividend policy.

6.7 Loss ratios

The loss ratio assumptions for short term business are derived from the actual experience of TPL. The loss ratios for short term accident and health insurance business have been assumed to be in the range of 35% to 53%.

6.8 Commission and other variable costs

Commission and other variable cost assumptions were based on TPL’s agency compensation scheme for agency channel and contracts between TPL and banks for bancassurance channel.

6.9 Operating Expenses

Operating expenses have been projected based on TPL’s experience and industry experience.

6.10 Inflation rate

Future inflation rate was assumed to be 2% per annum, which is consistent with that used by other insurers in China market.

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

6.11 Taxation

The corporate tax rate is assumed to be 25% according to tax authorities in PRC. The taxable income was based on reserve under China Accounting System. The tax-exempt income from government bonds was reflected.

6.12 Required capital

TPL’s embedded value projections assume that it maintains required capital at 100% of minimum solvency margin.

6.13 Statutory valuation

The distributable earnings are based on statutory reserve in accordance to CIRC’s regulation. And it is assumed to be continued as the basis to value policy liabilities for solvency assessment purpose as at 31 December 2012.

6.14 Reinsurance

The reinsurance assumption, the ceded ratio, was based on the actual experience incurred in 2012.

7. SENSITIVITY ANALYSIS

TPL performed sensitivity analysis on the value of in-force business and the new business value, by independently varying certain assumptions regarding future experience. Specifically, the following changes in assumptions have been considered. The central assumptions are those as set out in Section 6.

Investment return increased by 25 basis points every year
Investment return decreased by 25 basis points every year
Investment return increased by 50 basis points every year

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

Investment return increased by 75 basis points every year
10% increase in maintenance expenses (i.e. 110% of the central assumptions)
10% decrease in maintenance expenses (i.e. 90% of the central assumptions)
10% increase in lapse rate (i.e. 110% of the central assumptions)
10% decrease in lapse rate (i.e. 90% of the central assumptions)
10% increase in mortality and morbidity rates (i.e. 110% of the central assumptions)
10% decrease in mortality and morbidity rates (i.e. 90% of the central assumptions)
Tax basis measured based on the PRC statutory basis
Policyholder dividend ratio increased from 70% to 80%
Required capital at 150% of solvency margin

Table 7: Summary of the sensitivity testing results on value of in-force business for TPL as at 31 December 2012

HK$ million	Value of in-force business after cost of capital	Value of in-force business after cost of capital	Value of in-force business after cost of capital
RDR	10%	11%	12%
Base scenario	27,630	25,976	24,506
Investment return increased by 25bp every year	28,701	26,963	25,438
Investment return decreased by 25bp every year	26,554	24,965	23,570
Investment return increased by 50bp every year	29,765	27,953	26,364
Investment return increased by 75bp every year	30,824	28,940	27,285
10% increase in maintenance expenses	27,425	25,772	24,320
10% decrease in maintenance expenses	27,836	26,163	24,694
10% increase in lapse rates	27,521	25,907	24,487
10% decrease in lapse rates	27,740	26,024	24,522
10% increase in mortality and morbidity rates	27,431	25,785	24,340
10% decrease in mortality and morbidity rates	27,833	26,151	24,676
Tax basis measured based on the PRC Statutory basis	26, 012	24,414	23,004
Policyholder dividend increased from 70% to 80%	24,365	22,907	21,628
Required capital at 150% of solvency margin	25,538	23,701	22,091

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APPENDIX V REVIEW REPORT ON EMBEDDED VALUE OF TPL AND GROUP EMBEDDED VALUE OF CTIH

Table 8: Summary of the sensitivity testing results on new business value for TPL in 2012

HK$ million	New business	value after cost of capital	value after cost of capital
RDR	10%	11%	12%
Base scenario	2,654	2,304	2,003
Investment return increased by 25bp every year	2,829	2,465	2,149
Investment return decreased by 25bp every year	2,479	2,146	1,855
Investment return increased by 50bp every year	3,003	2,626	2,296
Investment return increased by 75bp every year	3,177	2,785	2,443
10% increase in maintenance expenses	2,619	2,273	1,971
10% decrease in maintenance expenses	2,689	2,340	2,034
10% increase in lapse rates	2,591	2,257	1,966
10% decrease in lapse rates	2,715	2,352	2,036
10% increase in mortality and morbidity rates	2,597	2,253	1,955
10% decrease in mortality and morbidity rates	2,712	2,358	2,051
Tax basis measured based on the PRC Statutory basis	2,873	2,542	2,257
Policyholder dividend increased from 70% to 80%	2,266	1,958	1,691
Required capital at 150% of solvency margin	2,323	1,952	1,631

8. OPINION

Based on the procedures we have been engaged to perform, in our opinion:

the methodologies used in the embedded value and new business value calculations are consistent with TPL’s business, traditional embedded value principles generally employed by life insurance industry in China and generally accepted international actuarial principles;
the chosen assumptions are appropriate to TPL’s methodologies and consistent with TPL’s experience and trends, industry experience and available market information;
the methodology to calculate the Group EV for CTIH are consistent with industry practice for publicly listed companies in Hong Kong and international practice; and
the results shown in section 5 and 7 were prepared, in all material respects, in accordance with the methodology and assumptions described in this report.

The opinion is subject to the reliance and limitations set out in Section 3.

For and on behalf of PricewaterhouseCoopers Limited

Shuyen Liu

Title: Partner

V – 13

APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

The following is the text of a letter, summary of values and valuation certificates, prepared for the purpose of incorporation in this Circular received from Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an independent valuer, in connection with its valuation as at 28 February 2013 of the property interests of the Target Companies and the property interests of TPG and TPG(HK) comprising the Target Assets.

Jones Lang LaSalle Corporate Appraisal and Advisory Limited 6/F Three Pacific Place 1 Queen’s Road East Hong Kong tel +852 2846 5000 fax +852 2169 6001 Licence No.: C-030171

31 May 2013

The Board of Directors

China Taiping Insurance Holdings Co., Ltd.

22/F, China Taiping Tower Phase 1 8 Sunning Road Causeway Bay Hong Kong

Dear Sirs,

In accordance with your instructions to value the properties in which the TPG Group have interests in Hong Kong, Macau, the People’s Republic of China (the “PRC”) and Japan, we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the capital values of the property interests as at 28 February 2013 (the “date of valuation”).

Our valuation of the property interests represents the market value which we would define as intended to mean “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

We have valued the property interests by direct comparison approach assuming sale of the property interests in their existing state and by making reference to comparable sales transactions as available in the relevant market.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Our valuation has been made on the assumption that the seller sells the property interests in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the values of the property interests.

No allowance has been made in our report for any charge, mortgage or amount owing on any of the property interests valued nor for any expense or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the properties are free from encumbrances, restrictions and outgoings of an onerous nature, which could affect their values.

In valuing the property interests, we have complied with all requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited; paragraph 34(2) of the Third Schedule of Companies Ordinance and section 6 of Companies Ordinance (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice; RICS Valuation Standards published by the Royal Institution of Chartered Surveyors; the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors; and the International Valuation Standards published by the International Valuation Standards Council.

We have relied to a very considerable extent on the information given by the TPG Group and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters.

For the property interests located in Hong Kong, Macau and Japan, we have caused searches to be made at the relevant Land Registries. However, we have not searched the original documents to verify ownership or to ascertain any amendment.

For the property interests located in the PRC, we have been shown copies of various title documents including State-owned Land Use Rights Certificates, Real Estate Title Certificates, Construction Land Use Planning Permits, Construction Works Planning Permits and official plans relating to the property interests and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing title to the property interests in the PRC and any material encumbrance that might be attached to the property interests or any tenancy amendment. We have relied considerably on the advice given by the Company’s PRC legal advisers –Jia Yuan Law Offices concerning the validity of the property interests in the PRC.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

We have not carried out detailed measurements to verify the correctness of the areas in respect of the properties but have assumed that the areas shown on the title documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.

We have inspected the exterior and, where possible, the interior of the properties. However, we have not carried out investigation to determine the suitability of the ground conditions and services for any development thereon. Our valuation has been prepared on the assumption that these aspects are satisfactory. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defect. No tests were carried out on any of the services.

We have had no reason to doubt the truth and accuracy of the information provided to us by the TPG Group. We have also sought confirmation from the TPG Group that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to arrive an informed view, and we have no reason to suspect that any material information has been withheld.

The site inspection was carried out in early 2013 by Mr. Gilbert C.H. Chan, Mr. Alex K. F. Chung, who is a chartered general practice surveyor of HKIS with 8 year experience in the valuation of properties in Asian countries including Greater China region and by Mr. Sunny K. S. Yip, who is a probationer of HKIS with 2 year experience in the valuation of properties in Hong Kong and 1 year experience in property valuation in the PRC.

All monetary figures stated in this report are in Hong Kong Dollars (HKD), Renminbi (RMB), Macau Pataca (MOP) and Japanese Yen (JPY) where appropriate.

Our valuation is summarized below and the valuation certificates are attached.

Yours faithfully, for and on behalf of

Jones Lang LaSalle Corporate Appraisal and Advisory Limited

Gilbert C.H. Chan

MRICS MHKIS RPS(GP)

Director

Note: Gilbert C.H. Chan is a Chartered Surveyor who has 20 years’ experience in the valuation of properties in the PRC and 19 years of property valuation experience in Hong Kong, the United Kingdom as well as relevant experience in the Asia-Pacific region

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

APPENDIX VI

SUMMARY OF VALUES

Group I – Property interests held for investment by the TPG Group in Hong Kong

				Capital value
				attributable
		Capital value		to the
		in existing state	Interest	TPG Group
		as at	attributable	as at
		28 February	to the	28 February
No.	Property	2013	TPG Group	2013
		HKD		HKD
1.	The Office on 11th Floor and the Lavatories on	32,200,000	100%	32,200,000
	11th Floor Tung Hip Commercial Building
	No. 244 Des Voeux Road Central
	Hong Kong
2.	Flat B & D on 6th Floor	34,890,000	100%	34,890,000
	Flat A on 10th Floor
	Flat B on 15th Floor
	Flat C on 18th Floor
	Flat C on 20th Floor
	Flat B on 21st Floor
	Flat A & B on 22nd Floor
	Flat A on 26th Floor
	Flat A & C on 28th Floor
	Flat A on 29th Floor
	Flat A on 30th Floor and
	Flat A & Flat Roof on 31st Floor
	Profit Mansion
	No. 23 Fei Fung Street
	Kowloon
	Hong Kong

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

APPENDIX VI

				Capital value
				attributable
		Capital value		to the
		in existing state	Interest	TPG Group
		as at	attributable	as at
		28 February	to the	28 February
No.	Property	2013	TPG Group	2013
		HKD		HKD
3.	Flat C on 10th Floor	32,300,000	100%	32,300,000
	Flat A & B on 11th Floor
	Flat B on 12th Floor
	Flat A & B on 13th Floor
	Flat A on 16th Floor
	Flat B on 17th Floor
	Flat A on 19th Floor
	Flat B on 28th Floor
	Flat A & B on 7th Floor
	Flat A & B on 8th Floor and
	Flat A & B on 9th Floor
	Profit Mansion
	No. 23 Fei Fung Street
	Kowloon
	Hong Kong
4.	Car Parking Space Nos. 132, 133, 134, 135, 137,	13,300,000	100%	13,300,000
	143, 144, 147, 149, 162, 163, 164, 166, 175,
	185, 187, 192, 196, 201 and 202
	on Level 1 (3B) of the Garage Building
	City Garden
	No. 233 Electric Road
	North Point
	Hong Kong

VI – 5

APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

				Capital value
				attributable
		Capital value		to the
		in existing state	Interest	TPG Group
		as at	attributable	as at
		28 February	to the	28 February
No.	Property	2013	TPG Group	2013
		HKD		HKD
5.	Flat C on 8th Floor	2,840,000	100%	2,840,000
	Wing Wah Building
	Nos. 14-24 Sai Yeung Choi Street South
	No. 40P Shantung Street
	Kowloon
	Hong Kong
6.	1st Floor	2,800,000	100%	2,800,000
	(Rear Portion)
	No. 425M Queen’s Road West
	Hong Kong
7.	2nd Floor	2,050,000	100%	2,050,000
	No. 118 Tai Nan Street
	Kowloon
	Hong Kong
8.	Lot No. 2847 in	1,420,000	100%	1,420,000
	Demarcation District No. 1
	Tung Chung
	Lantau Island
	New Territories
	Hong Kong

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

APPENDIX VI

				Capital value
				attributable
		Capital value		to the
		in existing state	Interest	TPG Group
		as at	attributable	as at
		28 February	to the	28 February
No.	Property	2013	TPG Group	2013
		HKD		HKD
9.	Flats A to C on 1st to 5th, 7th to 8th, 19th and	150,080,000	100%	150,080,000
	21st to 23rd Floors,
	Flats B&C on 20th floor and
	Flat B on 6th and 17th Floor Golden Pavilion
	No. 66 Caine Road
	Mid-levels
	Hong Kong
10.	Flats A to F on 19th and 20th Floors of Block 10	116,800,000	100%	116,800,000
	Car Parking Space Nos. 67 and 68 on Level 2
	(2B) of the Garage Building
	Car Parking Space Nos. 20 and 21 on Level 3
	(1B) of the Garage Building
	City Garden
	No. 233 Electric Road
	North Point
	Hong Kong
11.	Flat A on 21st Floor	26,200,000	100%	26,200,000
	Royal Court
	No. 3 Kennedy Road
	Mid-levels
	Hong Kong
12.	Unit 03 on 16th Floor and Unit 04 on 29th Floor	9,100,000	100%	9,100,000
	of Tower D
	Fortress Metro Tower
	No. 238 King’s Road
	North Point
	Hong Kong

VI – 7

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

APPENDIX VI

					Capital value
					attributable
			Capital value		to the
			in existing state	Interest	TPG Group
			as at	attributable	as at
			28 February	to the	28 February
No.	Property		2013	TPG Group	2013
			HKD		HKD
13.	Flat B on 5th Floor,		6,000,000	100%	6,000,000
	Flat A on 12th Floor and
	Flat A on 15th Floor
	Profit Mansion
	No. 23 Fei Fung Street
	Kowloon
	Hong Kong
14.	14th and 15th Floors		184,000,000	100%	184,000,000
	China Insurance Group Building
	No. 141 Des Voeux Road Central
	No. 73 Connaught Road Central and
	Nos. 61-65 Gilman Street
	Central
	Hong Kong
		Sub-total:	613,980,000		613,980,000

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Group II – Property interests held for occupation by the TPG Group in Hong Kong

				Capital value
				attributable
		Capital value		to the
		in existing	Interest	TPG Group
		state as at	attributable	as at
		28 February	to the	28 February
No.	Property	2013	TPG Group	2013
		HKD		HKD
15	Car Parking Space No.58 on level3 (1B) of	1,000,000	100%	1,000,000
	City Garden
	No. 233 Electric Road
	North Point
	Hong Kong
16	Car Parking Space No. 2 on 4/F	600,000	100%	600,000
	Fortress Metro Tower
	No. 238 King’s Road
	North Point
	Hong Kong
17	Car Parking Space No.57 on	700,000	100%	700,000
	3/F Caine Mansion
	No. 80-88 Caine Road
	Hong Kong
18	Flat B on 13/F	9,300,000	100%	9,300,000
	Dragon Heart Court
	No.11 Dragon Terrace
	Hong Kong
19	Flats A & C on 6th floor and Flat A on 20th floor	12,200,000	100%	12,200,000
	Golden Pavilion
	No. 66 Caine Road
	Mid-levels
	Hong Kong
	Sub-total:	23,800,000		23,800,000

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Group III – Property interests held for investment by the TPG Group in the PRC

				Capital value
				attributable
		Capital value		to the
		in existing	Interest	TPG Group
		state as at	attributable	as at
		28 February	to the	28 February
No.	Property	2013	TPG Group	2013
		RMB		RMB
20.	Taiping Finance Tower (excluding 28-33/F),	4,031,000,000	70.76%	2,852,335,600
	No. 488 Yincheng Zhong Road
	Pudong New District
	Shanghai
	The PRC
21.	Units G00, G01, G05-G08, G11, G12, G15, G16	154,000,000	100%	154,000,000
	G21-G23 and G25-G27 on Level 1 and
	Units A723 and A725 on Level 7
	Beijing Wangfujing
	（北京王府井世紀廣場）
	Century Plaza
	Beijing
	The PRC
22.	Room 103 on Level 1	23,100,000	100%	23,100,000
	Room 902 and 903 on Level 9
	Block 2
	Wu Ye Shi Dai Xin Ju
	（物業時代新居）
	Xinyingge（新穎閣）
	Fuqiang Road
	Futian District
	Shenzhen
	Guangdong Province
	The PRC

VI – 10

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

APPENDIX VI

				Capital value
				attributable
		Capital value		to the
		in existing	Interest	TPG Group
		state as at	attributable	as at
		28 February	to the	28 February
No.	Property	2013	TPG Group	2013
		RMB		RMB
23.	Dragon Jade Industrial District	547,000,000	100%	547,000,000
	（龍璧工業城）
	Bantian Village
	Buji Town
	Shenzhen
	Guangdong Province
	the PRC
24.	Flats A, B, C, D, E and	9,500,000	100%	9,500,000
	F on 18th Floor
	Cui Lin Mansion（翠林閣）
	Yuanling Garden（園嶺花園）
	Hongling Zhong Road
	Futian District
	Shenzhen
	Guangdong Province
	the PRC
25.	Flat A on 10th Floor,	29,300,000	100%	29,300,000
	Flat A on 12th Floor,
	Flat A & C on 16th Floor of Block 2,
	Flat C on 12th Floor of Block 6 and
	7 car parking spaces
	Citichamp Palace（冠城園）
	Haidian District
	Beijing
	the PRC
	Sub-total:	4,793,900,000		3,615,235,600

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Group IV – Property interests held for investment by the TPG Group in Macau

					Capital value
					attributable
			Capital value		to the
			in existing	Interest	TPG Group
			state as at	attributable	as at
			28 February	to the	28 February
No.	Property		2013	TPG Group	2013
			MOP		MOP
26.	Unit C on 21st Floor		6,000,000	100%	6,000,000
	Block 5
	The Residencia Macau
	No. 1043 Rua Central da Areia Preta
	Macau
		Sub-total:	6,000,000		6,000,000
Group V – Property interests held for investment			by the TPG Group in Japan
					Capital value
					attributable
			Capital value		to the
			in existing	Interest	TPG Group
			state as at	attributable	as at
			28 February	to the	28 February
No.	Property		2013	TPG Group	2013
			JPY		JPY
27.	Portions other than Unit Nos. 302	and	142,000,000	100%	142,000,000
	501, 457-banchi-2, 464-banchi-2,
	Shinden 3-chome,
	Ichikawa-shi,
	Chiba Prefecture, Japan
		Sub-total:	142,000,000		142,000,000

VI – 12

APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Group VI – Property interests held for occupation by the TPG Group in Japan

						Capital value
						attributable
			Capital value			to the
			in existing		Interest	TPG Group
			state as at	attributable		as at
			28 February		to the	28 February
No.	Property		2013	TPG Group		2013
			JPY			JPY
28.	Unit Nos. 302 and 501,	457-banchi-2,	30,000,000		100%	30,000,000
	464-banchi-2,
	Shinden 3-chome,
	Ichikawa-shi,
	Chiba Prefecture, Japan
		Sub-total:	30,000,000			30,000,000

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

APPENDIX VI

VALUATION CERTIFICATE

Group I – Property interests held for investment by the TPG Group in Hong Kong

No. Property Description and tenure

The Office on The property comprises the whole 11th Floor and the of 11th Floor of a 27-storey office Lavatories building completed in 1987. on 11th Floor Tung Hip Commercial The gross floor area of the property Building is approximately 4,870 sq.ft. No. 244 Des Voeux (452.43 sq.m.) Road Central Hong Kong The property is held under seven Government Leases for a term of 4,383,000/ 999 years commencing from 133,900,000th parts or 26 December 1866. The Government shares of and in The Rent payable for the subject lots Remaining Portion of is HKD154 per annum. Inland Lot Nos. 1864, 1865, 1866, 1556, 1557 and The Remaining Portion of Section A of Inland Lot Nos. 1556 and 1557.

Capital value in Particulars of existing state as at occupancy 28 February 2013 HKD The property is leased 32,200,000 to an independent third party for a term expiring 100% interest in November 2014 attributable to at a monthly rent of the TPG Group: HKD97,400 inclusive of 32,200,000 management fee.

Notes:

Pursuant to our land search record, the registered owner of the property is “China Bao Lian Investment Company Limited” (now known as “China Insurance Group Investment Company Limited”), a wholly-owned subsidiary of Taiping Investment Holdings Company Limited, vide Memorial No. UB3797467 dated 22 July 1988.
Pursuant to our land search record, the property is subject to, inter alia, the following encumbrances:
a. Occupation Permit No.H99/87(MTR) vide Memorial No. UB3551472 dated 14 September 1987; and
b. Deed of Mutual Covenant & Partition with Plans vide Memorial No. UB3759588 dated 1 June 1988.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

Flat B & D on 6th Floor The property comprises 15 residential Flat A on 10th Floor units on 6th, 10th, 15th, 18th, 20th, Flat B on 15th Floor 21st, 22nd, 26th, 28th, 29th, 30th and Flat C on 18th Floor 31st floors of a 32-storey commercial/ Flat C on 20th Floor residential building completed in 1996. Flat B on 21st Floor Flat A & B on 22nd Floor The total gross floor area of the Flat A on 26th Floor property is approximately 7,723 sq.ft. Flat A & C on 28th Floor (717.48 sq.m.) Flat A on 29th Floor Flat A on 30th Floor and The property is held under Conditions Flat A & Flat Roof on of Grant Nos. UB8982, UB8836 and 31st Floor UB8850, Conditions of Exchange No. Profit Mansion 8916 for a common term of 99 years No. 23 Fei Fung Street commencing from 1 July 1898 and Kowloon thereafter statutorily extended until Hong Kong 30 June 2047 without premium but subject to Government Rent which 907/10,000th equals to 3% of rateable value for the parts or shares of time being of the lot. and in New Kowloon Inland Lot Nos. 4962, 5059, 5025 and 5041

Capital value in existing state as at Particulars of occupancy 28 February 2013 HKD The property is leased to 34,890,000 various independent third parties for various terms 100% interest with the latest expiry attributable to date in February 2015 at the TPG Group: a total monthly rent of 34,890,000 HKD114,800 exclusive of management fee.

Notes:

Pursuant to our land search records, the registered owner of the property is “Fairpoint Limited”, a wholly-owned subsidiary of Taiping Investment Holdings Company Limited, vide Memorial Nos.UB9241201, UB9241202, UB9241203, UB9241204, UB9241205, UB9241206, UB9241207, UB9241208, UB9241210 & UB9241211 dated 27 October 2003, 5082900150036 dated 27 January 2005, 5082501820057 dated 17 February 2005, 9013000750011 dated 31 December 2008 and 9052600890011 (under Deeds Pending Registration) dated 14 April 2009.
Pursuant to our land search record, the property is subject to, inter alia, a Deed of Mutual Covenant and Management Agreement in favour of Full Country Management Limited “The Manager” vide Memorial No. UB6994024 dated 4 February 1997.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 28 February 2013 HKD 3. Flat C on 10th Floor The property comprises 16 residential The property is leased to 32,300,000 Flat A & B on units on 7th, 8th, 9th, 10th, 11th, various independent third 11th Floor 12th, 13th, 16th, 17th, 19th and 28th parties for various terms 100% interest Flat B on 12th Floor floors of a 32-storey commercial/ with the latest expiry attributable to Flat A & B on residential building completed in date in February 2015 at the TPG Group: 13th Floor 1996. a total monthly rent of 32,300,000 Flat A on 16th Floor HKD 115,450 exclusive Flat B on 17th Floor The total gross floor area of the of management fee. Flat A on 19th Floor property is approximately 7,471 sq.ft. Flat B on 28th Floor (694.07 sq.m.) Flat A & B on 7th Floor The property is held under Conditions Flat A & B on of Grant Nos. 8982, 8836 and 8850, 8th Floor and Conditions of Exchange No. 8916 Flat A & B on for a common term of 99 years 9th Floor commencing from 1 July 1898 and Profit Mansion thereafter statutorily extended until No. 23 Fei Fung Street 30 June 2047 without premium but Kowloon subject to Government Rent which Hong Kong equals to 3% of rateable value for the time being of the lot. 897/10,000th part or share of and in New Kowloon Inland Lot Nos. 4962, 5059, 5025 and 5041

Notes:

Pursuant to our land search records, the registered owner of the property is “China Insurance Group Finance Company Limited”, a wholly-owned subsidiary of Taiping Investment Holdings Company Limited, vide Memorial Nos. 5051301990027, 5051301990034, 5051301990040, 5051301990055, 5051301990062 & 5051301990075 dated 27 August 2004, 5082900150047 dated 27 January 2005, 5082501820031 & 5082501820078 both dated 17 February 2005, 6051602550016 & 6051602550047 both dated 18 November 2005, 6051602550027 & 6051602550036 both dated 25 November 2005, 6031100190019 dated 10 January 2006, 9102802120023 dated 25 September 2009 and 9102802120041 dated 28 September 2009.
Pursuant to our land search record, the property is subject to, inter alia, a Deed of Mutual Covenant and Management Agreement in favour of Full Country Management Limited “The Manager” vide Memorial No. UB6994024 dated 4 February 1997.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

Car Parking Space Nos. The property comprises 20 car 132, 133, 134, 135, 137, parking spaces on Level 1 (3B) in 143, 144, 147, 149, 162, City Garden completed in 1983. 163, 164, 166, 175, 185, 187, 192, 196, 201 and City Garden accommodates fourteen 202 on Level 1 (3B) of blocks of 26 to 27-storey residential the Garage Building building with ancillary facilities City Garden such as retail shops, carport and No. 233 Electric Road landscaped garden provided therein. North Point Hong Kong The property is held under Conditions of Exchange No. 11652 for a term

80/100,180th parts or of 75 years commencing on 30 shares of and in September 1914 renewable for Inland Lot No. 8580 a further term of 75 years. The Government Rent payable for Inland Lot No. 8580 is HKD7,676,722 per annum.

Capital value in Particulars of existing state as at occupancy 28 February 2013 HKD The property is leased 13,300,000 to an independent third party for at a 100% interest total monthly rent of attributable to HKD32,790 inclusive of the TPG Group: management fee. 13,300,000

Notes:

Pursuant to our land search records, the registered owner of the property is “Wincott Company Limited”, a wholly-owned subsidiary of Taiping Investment Holdings Company Limited, vide Memorial Nos. UB6014680, UB6014681 and UB6014682 all dated 12 April 1994.
Pursuant to our land search records, the property is subject to, inter alia, the following encumbrances:
a. Deed of Mutual Covenant vide Memorial No. UB2964244 dated 4th February 1983;
b. Sub-deed of Mutual Covenant vide Memorial No. UB3091351 dated 21 June 1986 (Re: Blocks 7-14 Commercial Podiums (comprising shop spaces on G/F & 1/F of Blocks 7-14 & Garage Building); and
c. Certificate of Compliance from Director of Lands, Lands Department, District Lands Office/Hong Kong East vide Memorial No. UB7866592 dated 28 August 1999.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 28 February 2013 HKD 5. Flat C on 8th Floor The property comprises a residential The property is leased 2,840,000 Wing Wah Building unit on the 8th floor of an 11-storey to an independent third Nos. 14-24 Sai Yeung commercial/residential building party for a term with 100% interest Choi Street South completed in 1966. expiry date in November attributable to No. 40P Shantung 2017 at a total monthly the TPG Group: Street The saleable area of the property is rent of HKD10,000 2,840,000 Kowloon approximately 598 sq.ft. inclusive of management Hong Kong (55.56 sq.m.) fee. 1/144th The property is held under two parts or shares of Government Leases for a common and in Sub-Section 1 term of 75 years commencing from of Section A of 28 February 1921 and thereafter Kowloon Inland Lot statutorily extended until 30 June No. 2131 and The 2047 without premium but subject to Remaining Portion of Government Rent which equals to 3% Section A of Kowloon of rateable value for the time being of Inland Lot No. 2131 the lot.

Notes:

Pursuant to our land search record, the registered owner of the property is “Panbillion Finance Company Limited”, a wholly-owned subsidiary of Taiping Investment Holdings Company Limited, vide Memorial No. 06032902000018 dated 10 January 2006.
Pursuant to our land search record, the property is subject to, inter alia, a Deed of Mutual Covenant vide Memorial No. UB5553305 dated 1 October 1966.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

1st Floor The property comprises a residential (Rear Portion) unit on the 1st floor of a 14-storey No. 425M Queen’s residential/commerical building Road West completed in 1963. Hong Kong The saleable area of the property 1/57th part or is approximately 481 sq.ft. share of and in (44.69 sq.m.) The Remaining Portion of The property is held under Conditions Section K of Inland of Exchange No. 7487 of a term of Lot No. 7892 999 years commencing on 25 June 1861. The Government Rent payable for Section K of Inland Lot No. 7892 is HKD30 per annum.

Capital value in Particulars of existing state as at occupancy 28 February 2013 HKD The property is leased 2,800,000 to an independent third party for a term with 100% interest expiry date in July 2017 attributable to at a total monthly rent of the TPG Group: HKD4,700 inclusive of 2,800,000 management fee.

Notes:

Pursuant to our land search record, the registered owner of the property is “Wincott Company Limited”, a wholly-owned subsidiary of Taiping Investment Holdings Company Limited, vide Memorial No. UB9060353 dated 23 October 2003.
Pursuant to our land search record, the property is subject to, inter alia, a Deed of Mutual Covenant vide Memorial No. UB406436 dated 9 July 1963.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 28 February 2013 HKD 7. 2nd Floor The property comprises a residential The property is leased 2,050,000 No. 118 Tai Nan Street unit on 2nd floor of 6-storey tenement to an independent third Kowloon building completed in 1966. party for a term with 100% interest Hong Kong expiry date in January attributable to The gross floor area of the property 2014 at a total monthly the TPG Group: 1/7th part or is approximately 638 sq.ft. (59.27 rent of HKD4,500 2,050,000 share of and in sq.m.) inclusive of management The Remaining fee. Portion of The property is held under Kowloon Inland Lot Government Lease for a term of No. 2590 75 years commencing on 15 October 1929 renewable for a further term of 75 years. The Government Rent for The Remaining Portion of Kowloon Inland Lot No. 2590 is HKD14,940 per annum.

Notes:

Pursuant to our land search record, the registered owner of the property is “Wincott Company Limited”, a wholly-owned subsidiary of Taiping Investment Holdings Company Limited, vide Memorial No. UB8936163 dated 28 April 2003.
Pursuant to our land search record, the property is subject to, inter alia, a Deed of Mutual Covenant vide Memorial No. UB562607 dated 16 December 1966.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

No. Property Description and tenure

Lot No. 2847 in The subject property comprises a site Demarcation District with a 2-storey building completed in No. 1 or about 1980’s. Tung Chung Lantau Island According to the relevant Block New Territories Government Lease, the property Hong Kong comprises a house lot with an area of 0.01 acres (435.6 sq.ft./40.5 sq.m.). The total saleable area of the property is approximately 843 sq.ft. (78.3 sq.m.).

Capital value in Particulars of existing state as at occupancy 28 February 2013 HKD The property is vacant. 1,420,000 100% interest attributable to the TPG Group: 1,420,000

The property is held under Government Lease for a term of 75 years commencing on 1 July 1898 and renewed for 24 years. It was thereafter statutorily extended until 30 June 2047 without premium but subject to Government Rent which equals to 3% of rateable value for the time being of the lot.

Notes:

Pursuant to our land search record, the registered owner of the property is “Wincott Company Limited”, a wholly own subsidiary of Taiping Investment Holdings Company Limited, vide Memorial No. IS330086 dated 16 February 2004.
The Property is not subject to encumbrance.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 28 February 2013 HKD 9. Flats A to C on 1st The property comprises 37 domestic The property is leased to 150,080,000 to 5th, 7th to 8th, units of Golden Pavilion completed in various staff for various 19th and 21st to 1993. terms with the latest 100% interest 23rd Floors, expiry date in June 2013 attributable to Flats B&C on Golden Pavilion is a 27-storey at a total monthly rent of the TPG Group: 20th Floor and residential building with ancillary HKD214,100 exclusive 150,080,000 Flat B on 6th and facilities such as retail shops and of management fee. 17th Floor covered playground provided therein. Golden Pavilion As quoted from the developers’ sales No. 66 Caine Road brochure, the property has a total Mid-levels gross floor area of approximately Hong Kong 18,413 sq.ft. (1,710.60 sq.m.). 1,116/2,470th parts The property is held under or shares of and in Government Lease for a term of 999 Sub-section 2 of years commencing on 30 March 1897. Section A, The Government Rent payable for The Remaining Inland Lot No. 1405 is HKD160 per Portion of Section A annum. and The Remaining Portion of Inland Lot No. 1405

Notes:

Pursuant to our land search records, the registered owner of the property is “Ming Lee Investment Limited” vide Memorial No. 05082900370074 dated 10 August 2005.
Pursuant to our land search records, the property is subject to, inter alia, the following encumbrances:
a. Memorandum of Reallocation of Shares vide Memorial No. UB5641628 dated 4 May 1993;
b. Memorandum of Reallocation for Adjustment to the Reallocation of Shares vide Memorial No. UB5876245 dated 14 December 1993;
c. Memorandum supplemental to Memorandum of Reallocation of Shares Memorial No. UB5876245 vide Memorial No. UB6352856 dated 20 June 1995;
d. Deed of Rectification vide Memorial No. UB6352857 dated 20 June 1995; and
e. Deed of Mutual Covenant and Management Agreement vide Memorial No. UB6620287 dated 20 December 1993.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

Flats A to F on 19th The property comprises 12 residential and 20th Floors of units on 19th and 20th floors of Block Block 10 10, two car parking spaces on Level Car Parking Space 2 (2B) and two car parking spaces on Nos. 67 and 68 on Level 3 (1B) of the Garage Building Level 2 (2B) of the in City Garden completed in 1983. Garage Building Car Parking Space City Garden accommodates fourteen Nos. 20 and 21 on blocks of 26 to 27-storey residential Level 3 (1B) of the building with ancillary facilities Garage Building such as retail shops, carport and City Garden landscaped garden provided therein. No. 233 Electric Road North Point As quoted from the developers’ Hong Kong sales brochure, the domestic portion of the property has a total gross

406/100,180th floor area and total saleable area of parts or shares of approximately 12,142 sq.ft. (1,128.03 and in Inland sq.m.) and 10,802 sq.ft. (1,003.54 Lot No. 8580 sq.m.) respectively. The property is held under Conditions of Exchange No. 11652 for a term of 75 years commencing on 30 September 1914 renewable for a further term of 75 years. The Government Rent payable for Inland Lot No. 8580 is HKD7,676,722 per annum.

Capital value in Particulars of existing state as at occupancy 28 February 2013 HKD The property is leased to 116,800,000 various staff for various terms with the latest 100% interest expiry date in June 2013 attributable to at a total monthly rent of the TPG Group: HKD160,700 inclusive of 116,800,000 management fee.

Notes:

Pursuant to our land search records, the registered owner of the property is “Ming Lee Investment Limited” vide Memorial Nos. 05082900370016, 05082900370021 and 05082900370032 all dated 10 August 2005.
Pursuant to our land search records, the property is subject to, inter alia, the following encumbrances:
a. Deed of Mutual Covenant vide Memorial No. UB2964244 dated 4 February 1983;
b. Sub-deed of Mutual Covenant vide Memorial No. UB3091351 dated 21 June 1986 (Re: Blocks 7-14 Commercial Podiums (comprising shop spaces on G/F & 1/F of Blocks 7-14 & Garage Building); and
c. Certificate of Compliance from Director of Lands, Lands Department, District Lands Office/Hong Kong East vide Memorial No. UB7866592 dated 28 August 1999.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

Flat A on 21st Floor The property comprises one of the Royal Court three residential units on 21st floor of No. 3 Kennedy Road Royal Court completed in 1989. Mid-levels Hong Kong Royal Court is a 41-storey residential building with ancillary facilities

3,221/500,000th parts such as carpark and clubhouse or shares of and in provided therein. Inland Lot No. 1875 Inland Lot No. 1881 As quoted from the developers’ and Inland Lot No. sales brochure, the property has a 8634 gross floor area and saleable area of approximately 1,428 sq.ft. (132.67 sq.m.) and 1,157 sq.ft. (107.49 sq.m.) respectively.

Capital value in Particulars of existing state as at occupancy 28 February 2013 HKD The property is leased 26,200,000 to staff for a term expiring in June 2013 at 100% interest a total monthly rent of attributable to HKD39,500 inclusive of the TPG Group: management fee. 26,200,000

The property is held under two Government Leases and a Conditions of Sale No. 11868. Inland Lot Nos. 1875 and 1881 are held under Government Leases for terms of 75 years commencing on 6 March 1911 and 12 June 1911 respectively both renewable for a further term of 75 years, whilst Inland Lot No. 8634 is held under Conditions of Sale No. 11868 for a term commencing on 12 December 1985 and expiring on 30 June 2047. The Government Rents payable for Inland Lot No. 1875, 1881 and 8634 are HKD20,880, HKD522 and three per cent of the Rateable Value per annum respectively.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Notes:

Pursuant to our land search record, the registered owner of the property is “Ming Lee Investment Limited” vide Memorial No. 05082900370081 dated 10 August 2005.
Pursuant to our land search record, the property is subject to, inter alia, the following encumbrances:
a. Deed of Covenants vide Memorial No. UB3334305 dated 27 March 1987;
b. Occupation Permit No. H114/89 vide Memorial No. UB4191889 dated 13 September 1989;
c. Certificate of Compliance of Inland Lot No. 8634 from District Lands Office, Hong Kong West to Sun Hung Kai Real Estate Agency Limited vide Memorial No. UB4237394 dated 13 October 1989;
d. Certificate of Compliance of Inland Lot No. 8634 from Registrar General’s Department The (Land Office) to Sun Hung Kai Real Estate Agency Limited vide Memorial No. UB4237395 dated 24 October 1989; and
e. Sub-deed of Mutual Covenant and Management Agreement in favour of New Town Serviced Apartment Management Company Limited “Manager” vide Memorial No. UB7458311 dated 25 March 1998.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

No. Property

Description and tenure

Capital value in Particulars of existing state as at occupancy 28 February 2013 HKD

Unit 03 on 16th Floor The property comprises two and Unit 04 on 29th residential units of Tower D in Floor of Tower D Fortress Metro Tower completed in Fortress Metro Tower 1987. No. 238 King’s Road North Point Fortress Metro Tower accommodates Hong Kong four blocks of 34-storey residential building erected over a 6-storey

106/54,700th parts commercial and carpark podium. or shares of and in Inland As quoted from the developers’ sales Lot No. 8557 brochure, the property has a total gross floor area and total saleable area of approximately 1,199 sq.ft. (111.39 sq.m.) and 907 sq.ft. (84.26 sq.m.) respectively.

Unit 1603 was vacant. 9,100,000 Unit 2904 was leased to 100% interest staff at a monthly rent of attributable to HKD7,100 exclusive of the TPG Group: management fee. 9,100,000

The property is held under Conditions of Grant No. 11803 for a term of 75 years commencing on 17th May 1985 renewable for a further term of 75 years. The Government Rent payable for Inland Lot No. 8557 is HKD1,000 per annum.

Notes:

Pursuant to our land search records, the registered owner of the property is “Ming Lee Investment Limited” vide Memorial Nos. 05082900370054 and 05082900370042 both dated 10 August 2005.
Pursuant to our land search records, the property is subject to, inter alia, the following encumbrances:
a. Occupation Permit No. H48/87 (MTR) vide Memorial No. UB3367128 dated 1 May 1987;
b. Certificate of Compliance from Director of Buildings & Lands vide Memorial No. UB3367129 dated 7th May 1987;
c. Deed of Mutual Covenant vide Memorial No. UB3396558 dated 16 May 1987;
d. Management Undertaking in favour of The Government of Hong Kong vide Memorial No. UB4750141 dated 18 March 1991; and
e. G.N. 1736 regarding Roads (Works, Use and Compensation) Ordinance (Cap. 370) (Notice under Section 16) in respect of portion of Inland Lot No. 8557 for the Creation of Permanent Easement and Permanent Rights regarding Portion of IL8557 vide Memorial No. 05042501400018 dated 11 April 2005.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

Flat B on 5th Floor The property comprises 3 residential Flat A on 12th Floor units on 5th, 12th and 15th floors of Flat A on 15th Floor a 32-storey commercial/residential Profit Mansion building completed in 1996. No. 23 Fei Fung Street Kowloon The total gross floor area of the Hong Kong property is approximately 7,471 sq.ft. (694.07 sq.m.) 165/10,000th part or share of The property is held under Conditions and in New Kowloon of Grant Nos. UB8982, UB8836 and Inland Lot Nos. 4962, UB8850, Conditions of Exchange No. 5059, 5025 and 5041 UB8916 for a common term of 99 years commencing from 1 July 1898 and thereafter statutorily extended until 30 June 2047 without premium but subject to Government Rent which equals to 3% of rateable value for the time being of the lot.

Capital value in Particulars of existing state as at occupancy 28 February 2013 HKD The property is leased to 6,000,000 various independent third parties for various terms 100% interest with the latest expiry attributable to date in August 2014 at the TPG Group: a total monthly rent of 6,000,000 HKD20,100 exclusive of management fee.

Notes:

Pursuant to our land search records, the registered owner of the property is “Wincott Company Limited”, a wholly owned subsidiary of Taiping Investment Holdings Company Limited, vide Memorial Nos. 05082501820049, 05082900150018 and 09013000750024 dated 17 February 2005, 27 January 2005 and 31 December 2008 respectively.
Pursuant to our land search record, the property is subject to, inter alia, a Deed of Mutual Covenant and Management Agreement in favour of Full Country Management Limited “The Manager” vide Memorial No. UB6994024 dated 4 February 1997.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 28 February 2013 HKD 14. 14th and 15th Floors The property comprises two office The property is leased to 184,000,000 China Insurance Group floors in China Insurance Group various independent third Building Building completed in 1967 and parties for various terms 100% interest No. 141 Des Voeux refurbished in 2001. with the latest expiry attributable to Road Central date in January 2015 at the TPG Group: No. 73 Connaught China Insurance Group Building is a total monthly rent of 184,000,000 Road Central and a 32-storey (plus basement) office HKD 687,617 exclusive Nos. 61-65 Gilman building with retail shops and of management fee, airStreet carpark provided on ground floor and conditioning charges and Central basement. rates. Hong Kong Pursuant to the information made 3,100/44,680th part available to us, the property has a or share of and in total gross floor area of approximately The Remaining Portion 26,034 sq.ft. (2,418.64 sq.m.). of Marine Lot No. 395 and The Extension The property is held under thereto Government Lease for a term of 999 years commencing on 14 July 1903. The Government Rent payable for Marine Lot No. 395 is HKD246 per annum.

Notes:

Pursuant to our land search records, the registered owner of the property is “China Insurance Company, Limited” (now known as “China Taiping Insurance Group Co.”) vide Memorial No. UB8559902 dated 30 November 2001.
Pursuant to our land search records, except for the tenancy agreements and related documents, the property is also subject to, inter alia, the following encumbrances:
a. Deed of Mutual Covenant vide Memorial No. UB2199277 dated 15 December 1981; and
b. Memorandum on Change of Name vide Memorial No. UB6237502 dated 9 March 1995.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

APPENDIX VI

VALUATION CERTIFICATE

Group II – Property interests held for occupation by the TPG Group in Hong Kong

				Capital value in
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	28 February 2013
				HKD
15.	Car Parking Space	The property comprises a car parking	The property is owner-	1,000,000
	No.58 on level 3 (1B)	space on Level 3 in City Garden	occupied.
	of City Garden	completed in 1983.		100% interest
	No. 233 Electric Road			attributable to
	North Point	City Garden accommodates fourteen		the TPG Group:
	Hong Kong	blocks of 27 to 29-storey residential		1,000,000
		building with ancillary facilities
	4/100,180th	such as retail shops, carpark and
	part or share of	landscaped garden provided therein.
	and in Inland
	Lot No. 8580	The property is held under Conditions
		of Exchange No. 11652 for a term of
		75 years commencing on 31 August
		1914 renewable for a further term
		of 75 years. The Government Rent
		payable for Inland Lot No. 8580 is
		HKD7,676,722 per annum.

Notes:

Pursuant to our land search records, the registered owner of the property is “China Insurance H.K. (Holdings) Company Limited” (now known as “China Taiping Insurance Group (HK) Company Limited”) vide Memorial No. UB6195820 dated 19 December 1994.
Pursuant to our land search records, the property is subject to, inter alia, the following encumbrances:
a. Deed of Mutual Covenant vide Memorial Nos. UB2377124 and UB2964244 dated 4 February 1983;
b. Sub-deed of Mutual Covenant vide Memorial No. UB3091351 dated 21 June 1986 (Re: Blocks 7-14 Commercial Podiums (comprising shop spaces on G/F & 1/F of Blocks 7-14 & Garage Building); and
c. Certificate of Compliance from Director of Lands, Lands Department, District Lands Office/Hong Kong East vide Memorial No. UB7866592 dated 28 August 1999.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Capital value in
Particulars of existing state as at
No. Property Description and tenure occupancy 28 February 2013 HKD
1. Car Parking Space The property comprises a car parking The property is owner600,000 No. 2 on 4/F space on 4/F in Fortress Metro Tower occupied. Fortress Metro Tower completed in 1987. 100% interest No. 238 King’s Road attributable to North Point Fortress Metro Tower accommodates the TPG Group: Hong Kong four blocks of 34-storey residential 600,000 building erected over a 6-storey
10/54,700th part commercial and carpark podium. or share of and in Inland The property is held under Conditions Lot No. 8557 of Grant No. 11803 for a term of 75 years commencing on 17th May 1985 renewable for a further term of 75 years. The Government Rent payable for Inland Lot No. 8557 is HKD1,000 per annum.

Notes:

Pursuant to our land search records, the registered owner of the property is “China Insurance H.K. (Holdings) Company Limited” (now known as “China Taiping Insurance Group (HK) Company Limited”) vide Memorial No. UB6206569 dated 31 December 1994.
Pursuant to our land search records, the property is subject to, inter alia, the following encumbrances:
a. Occupation Permit No. H48/87 (MTR) vide Memorial No. UB3367128 dated 1 May 1987;
b. Certificate of Compliance from Director of Buildings & Lands vide Memorial No. UB3367129 dated 7th May 1987;
c. Deed of Mutual Covenant vide Memorial No. UB3396558 dated 16 May 1987;
d. Management Undertaking in favour of The Government of Hong Kong vide Memorial No. UB4750141 dated 18 March 1991; and
e. G.N. 1736 regarding Roads (Works, Use and Compensation) Ordinance (Cap. 370) (Notice under Section 16) with plan in respect of portion of Inland Lot No. 8557 for the Creation of Permanent Easement and Permanent Rights regarding Portion of IL8557 vide Memorial No. 05042501400018 dated 11 April 2005.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 28 February 2013 HKD 17. Car Parking Space The property comprises a car parking The property is owner700,000 No.57 on 3/F space on 3/F in Caine Mansion occupied. Caine Mansion completed in 1973. 100% interest 80-88 Caine Road attributable to Hong Kong Caine Mansion is a 28-storey the TPG Group: residential building with carpark on 700,000 1/990th part 1/F to 3/F. or share of and in the Remaining The property is held under Portion of Inland Government leases for terms of 999 Lot Nos. 4612, 4613, years commencing on 16 November 4614, 4615 and 4616 1855 and 10 October 1859. The Government Rent Payable for Inland Lot Nos. 4612, 4613, 4614, 4615 and 4616 is HKD200 per annum.

Notes:

Pursuant to our land search records, the registered owner of the property is “China Insurance H.K. (Holdings) Company Limited” (now known as “China Taiping Insurance Group (HK) Company Limited”) vide Memorial No. UB6441174 dated 13 October 1995.
Pursuant to our land search records, the property is subject to, inter alia, the following encumbrances:
a. Deed of Mutual Covenant vide Memorial No. UB1942563 dated 20 Aug 1980;
b. Order No. C/TA/004817/11/HK by the Building Authority under section 24(1) of the Building Ordinance regarding structures erected on the canopy over the entrance vide Memorial No. 12062202270023 dated 28 May 2012.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

Flat B on 13th Floor The property comprises a residential Dragon Heart Court unit with total gross floor area of No.11 Dragon Terrace 928 sq.ft in Dragon Heart Court Hong Kong completed in 1984. 10/751th part Dragon Heart Court is a 25-storey or share of and residential building with a carpark in Inland podium. Lot No. 8461 The property is held under Conditions of Grant No. 11299 for a term of 75 years commencing on 12 March 1923 and renewed for a further term of 75 years. The Government Rent payable for Inland Lot No. 8461 is HKD8,172 per annum.

Capital value in Particulars of existing state as at occupancy 28 February 2013 HKD The property is owner9,300,000 occupied. 100% interest attributable to the TPG Group: 9,300,000

Notes:

Pursuant to our land search records, the registered owner of the property is “China Insurance H.K. (Holdings) Company Limited” (now known as “China Taiping Insurance Group (HK) Company Limited”) vide Memorial No. UB7178966 dated 27 June1997.
Pursuant to our land search records, the property is subject to, inter alia, the following encumbrances:
a. Deed of Mutual Covenant vide Memorial No. UB2607645 dated 1 June 1984;
b. Occupation Permit No. H41/84 vide Memorial No. UB2579714 dated 19 April 1984;
c. Deed Extinguishing Rights & Rights of Ways over the Adjoining lots vide Memorial No. UB2333169 dated 7 August 1980.

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VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

No. Property Description and tenure 19. Flats A & C on 6th The property comprises 3 domestic floor and Flat A on units of Golden Pavilion completed in 20th floor Golden or about 1993. Pavilion No. 66 Caine Road Golden Pavilion is a 27-storey Mid-levels residential building with ancillary Hong Kong facilities such as retail shops and covered playground provided therein.
93/2,470th parts or shares of and in As quoted from the developers’ sales Sub-section 2 and brochure, the property has a total The Remaining gross floor area of approximately Portion of Section A 1,493 sq.ft. (138.79 sq.m.). and The Remaining Portion of Inland Lot The property is held under No. 1405 Government Lease for a term of 999 years commencing on 30 March 1897. The Government Rent payable for Inland Lot No. 1405 is HKD160 per annum.

Capital value in Particulars of existing state as at occupancy 28 February 2013 HKD The property is owner12,200,000 occupied. 100% interest attributable to the TPG Group: 12,200,000

Notes:

Pursuant to our land search records, the registered owner of the property is “Ming Lee Investment Limited” vide Memorial No. 05082900370074 dated 10 August 2005.
Pursuant to our land search records, the property is subject to, inter alia, the following encumbrances:
a. Memorandum of Reallocation of Shares vide Memorial No. UB5641628 dated 4 May 1993;
b. Memorandum of Reallocation for Adjustment to the Reallocation of Shares vide Memorial No. UB5876245 dated 14 December 1993;
c. Memorandum supplemental to Memorandum of Reallocation of Shares Memorial No. UB5876245 vide Memorial No. UB6352856 dated 20 June 1995;
d. Deed of Rectification vide Memorial No. UB6352857 dated 20 June 1995; and
e. Deed of Mutual Covenant and Management Agreement vide Memorial No. UB6620287 dated 20 December 1993.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

VALUATION CERTIFICATE

Group III – Property interests held for investment by the TPG Group in the PRC

No. Property Description and tenure

Taiping Finance Tower The property comprises a site with (excluding 28-33/F) area of approximately 9,259.3 sq.m. No. 488 Yincheng and a 38-storey commercial/office Zhong Road building (excluding 28-33/F) erected Pudong New District upon a 3-storey underground podium Shanghai for car parking completed in 2011. The PRC The total gross floor area is approximately 91,438.39 sq.m. The land use rights of the property have been granted for a term of commencing from 11 June 2007 and expiring on 10 June 2057 for office and composite commercial uses.

Capital value in Particulars of existing state as at occupancy 28 February 2013 RMB Portions of 25-26/F and 4,031,000,000 42-43/F with leasable gross floor area of 70.76% interest 9,267.23 sq.m. is leased attributable to to related parties for the TPG Group: various terms expiring 2,852,335,600 on 31 December 2014 at a total monthly rent of HK$2,153,716 inclusive of management fee. Portions of the property with leasable gross floor area of 60,063.88sq. m. is leased to various independent third parties for various terms with the latest expiry date in October 2016 at a total monthly rent of HK$13,831,429 inclusive of management fee.

Notes:

Pursuant to a Shanghai Certificate of Real Estate Ownership – Hu Fang Di Pu Zi (2009) Di No. 108823, the land use rights of a parcel of land with a site area of approximately 9,259.3 sq.m. have been granted to Taiping Realty (Shanghai) Co. Ltd.（太平置業（上海）有限公司）, a non-wholly owned subsidiary of Taiping Investment Holdings Company Limited, for a term of 50 years commencing from 11 June 2007 and expiring on 10 June 2057 for office and composite commercial uses.
Pursuant to a Construction Land Use Planning Permit – Hu Pui Gui Di Lu (2007) 15070305E80038 in favour of Shanghai Ze Peng Realty Co. Ltd.（上海澤鵬置業有限公司）, the project temporarily known as “Tai Ping Jinrong Da Sha” occupying a site of approximately 9,259 sq.m. has been approved for construction.

VI – 34

APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Pursuant to a Construction Work Planning Permit – Hu Pu Gui Jian Lu (2008) 15081022F80264 in favour of Shanghai Ze Peng Realty Co. Ltd.（上海澤鵬置業有限公司）, a building with a total gross floor area of approximately 93,220 sq.m. has been approved for construction.
Pursuant to a Shanghai Certificate of Real Estate Ownership – Hu Fang Di Pu Zi (2012) Di No. 021085, the property with gross floor area of 17,308.62 sq.m. is owned by Taiping Realty (Shanghai) Co. Ltd.（太平置業

（上海）有限公司）.

Pursuant to a Shanghai Certificate of Real Estate Ownership – Hu Fang Di Pu Zi (2012) Di No. 021086, the property with gross floor area of 91,438.39 sq.m. is owned by Taiping Realty (Shanghai) Co. Ltd.（太平置業

（上海）有限公司）.

As advised by the Company, Shanghai Ze Peng Realty Co. Ltd.（上海澤鵬置業有限公司）is the previous name of Taiping Realty (Shanghai) Co. Ltd.（太平置業（上海）有限公司）.
Concerning the relationship between TPG, TPG(HK), TPIH and Taiping Realty (Shanghai) Co. Ltd.（太平置業（上海）有限公司）, TPG holds 100% of TPG(HK), TPG(HK) holds 100% of TPIH, TPIH holds 61% of Taiping Realty (Shanghai) Co. Ltd.（太平置業（上海）有限公司）.
Pursuant to a Real Estate Transfer Framework Agreement dated 23 November 2009 – Taiping Realty (Shanghai) Co. Ltd.（太平置業（上海）有限公司）agrees to sell 28-33/F of Taiping Finance Tower with gross floor area of 16,108 sq.m. to Taiping Life Insurance Co. Ltd.（太平人壽保險有限公司）at a consideration of RMB595,996,000. According to a voluntary announcement from the Company dated 15 April 2010, the gross floor area of the sold portion has been adjusted to 17,160 sq.m. and the consideration has been adjusted to RMB634,920,000. As advised by the TPG Group, the transfer of ownership has been completed in 2010. According to 24 Shanghai Certificates of Real Estate Ownership, the aggregate gross floor area for the sold portion is 17,308.62 sq.m.
The valuation of this property is exclusive of the sold portion, i.e. 28-33/F of Taiping Finance Tower with gross floor area of 17,308.62 sq.m..
We have been provided with a legal opinion on the legality of the tenancy agreement to the property issued by the Company’s PRC legal advisers, which contains, inter alia, the following.
a. The owner of the property has legally obtained the land use rights of the land where the property erected thereon, and has the rights to freely transfer, lease, mortgage and dispose the property.
b. The property is not subject to encumbrance.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

Units G00, G01, The property comprises 16 retail units G05-G08 G11, G12, on Level 1 and 2 office units on Level G15, G16 7 of a 10-storey commercial building G21-G23 and G25-G27 completed in 1996. on Level 1 and Units A723 and A725 on The gross floor area of the property is Level 7 approximately 2,486.73 sq.m. Beijing Wangfujing

（北京王府井 The property is held under land use 世紀廣場） rights for a term commencing from 12 Century Plaza December 2003 and expiring on 24 Beijing December 2063. The PRC

Capital value in Particulars of existing state as at occupancy 28 February 2013 RMB The property is leased to 154,000,000 various independent third parties for various terms 100% interest with the latest expiry attributable to date in February 2020 at the TPG Group: a total monthly rent of 154,000,000 HK$797,817 exclusive of management fee.

Notes:

Pursuant to the Real Estate Title Certificate – Jing Fang Quan Zheng Shi Dong Gang Ao Tai Zi Di No. 0310356 Hao, Jing Fang Quan Zheng Shi Dong Gang Ao Tai Zi Di No. 0310357 Hao and Jing Shi Dong Gang Ao Tai Zi Di No. 0310356 Hao, the properties with a total gross floor area of 2,486.73 sq.m. (26,767 sq.ft.) are owned by Panbillion Finance Company Limited（億茂財務有限公司）, a wholly-owned subsidiary of Taiping Investment Holdings Company Limited, for commercial use.
We have been provided with a legal opinion on the legality of the tenancy agreement to the property issued by the Company’s PRC legal advisers, which contains, inter alia, the following.
a. The owner of the property has legally obtained the land use rights of the land where the property erected thereon, and has the rights to freely transfer, lease, mortgage and dispose the property.
b. The property is not subject to encumbrance.

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APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

Room 103 on Level 1 The property comprises a residential Room 902 and 903 on unit on Level 1 and 2 residential units Level 9 Block 2 on Level 9 of a residential building Wu Ye Shi Dai Xin Ju completed in 1997.

（物業時代新居） Xinyingge（新穎閣） The total gross floor area of the Fuqiang Road property is approximately 786.25 Futian District sq.m. Shenzhen Guangdong Province The property is held under The PRC land use rights for a term of 70 years commencing from 31 December 1996 and expiring on 30 December 2066 for residential use.

Capital value in Particulars of existing state as at occupancy 28 February 2013 RMB A portion of the 23,100,000 property is leased to an independent third party 100% interest for a term with expiry attributable to date in March 2014 at the TPG Group: a total monthly rent of 23,100,000 HK$19,769 exclusive of management fee.

Notes:

Pursuant to the Real Estate Title Certificates – Shen Fang Di Zi Di Nos. 3000356301, 3000357678, 3000356197, the properties with a total gross floor area of 786.25 sq.m. (8,463 sq.ft.) are owned by China Plan Investments Limited（中集投資有限公司）, a wholly-owned subsidiary of Taiping Investment Holdings Company Limited, for residential use.
We have been provided with a legal opinion on the legality of the tenancy agreement to the property issued by the Company’s PRC legal advisers, which contains, inter alia, the following.
a. The owner of the property has legally obtained the land use rights of the land where the property erected thereon, and has the rights to freely transfer, lease, mortgage and dispose the property.
b. The property is not subject to encumbrance.

VI – 37

APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

Dragon Jade Industrial The property comprises 25 industrial District（龍璧工業城） low to middle rise buildings for Bantian Village industrial and its ancillary use Buji Town completed between 2005 and 2009. Shenzhen Guangdong Province The total site area on which the the PRC property is erected is approximately 99,052.43 sq.m. The total gross floor area of the property is approximately 222,093.59 sq.m.
Capital value in
Particulars of existing state as at occupancy 28 February 2013 RMB
A majority part 547,000,000 (226,269 sq.m.) of the property is leased to 100% interest various independent third attributable to parties for various terms the TPG Group: at a total monthly rent of 547,000,000 RMB4,004,751 exclusive of management fee.

The property is held under land use rights for a term of 50 years commencing on 1 November 1990 and expiring on 31 October 2040 for industrial use.

Notes:

Pursuant to Real Estate Title Certificate Shen Fang Di Zi Di 600448297, the property is held by Dragon Jade Industrial District Management (Shenzhen) Co., Ltd.（龍璧工業區管理（深圳）有限公司）for a term of 50 years commencing on 1 November 1990 and expiring on 31 October 2040 for industrial and its ancillary uses.
The Real Estate Title Certificate does not cover block Nos. 1, 16 and 17, and we have assigned no commercial value for these blocks. For reference purpose, the value for these blocks is RMB10,000,000.
We have been provided with a legal opinion on the legality of the tenancy agreement to the property issued by the Company’s PRC legal advisers, which contains, inter alia, the following.
a. Except for block Nos. 1, 16 and 17, the owner of the property has legally obtained the land use rights of the land where the property erected thereon, and has the rights to freely transfer, lease, mortgage and dispose the property.
b. For block Nos. 1, 16 and 17, the owner/occupier has obtained the land use rights, and the Real Estate Title Certificates are under application. Hence, the owner will have clear title of the property upon obtaining Realty Title Certificate; however, the occupier may not have the rights to occupy the property if Realty Title Certificate cannot be obtained.
c. The property is not subject to encumbrance.

VI – 38

APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Description and tenure

No. Property

Flats A, B, C, D, E and The property comprises 6 residential F on 18th Floor units on 18 Floor of a 27-storey Cui Lin Mansion residential building which is erected

（翠林閣）Yuanling over a 3-storey commercial podium Garden（園岭花園） completed in about 1991. The 6 Hongling Zhong Road residential units have a total gross Futian District floor area of approximately 563.82 Shenzhen sq.m. Guangdong Province the PRC The property is held under land use rights for a term of 50 years commencing on 28 March 1991 and expiring on 27 March 2041.

Capital value in Particulars of existing state as at occupancy 28 February 2013 RMB The property is leased to 9,500,000 various independent third parties for various terms 100% interest at a total monthly rent of attributable to RMB44,100 exclusive of the TPG Group: management fee. 9,500,000

Notes:

Pursuant to three Real Estate Title Certificates of Shenzhen (Shen Fang Di Zi Nos. 0081792, 0081793 and 0057710) dated 24 November 1992 and 11 September 1994 respectively, the property is held in the name of Dragon Jade Industrial District Management (Shenzhen) Co., Ltd.（龍璧工業區管理（深圳）有限公司）for land use rights term of 50 years commencing on 28 March 1991 and expiring on 27 March 2041.
We have been provided with a legal opinion on the legality of the tenancy agreement to the property issued by the Company’s PRC legal advisers, which contains, inter alia, the following.
a. The owner of the property has legally obtained the land use rights of the land where the property erected thereon, and has the rights to freely transfer, lease, mortgage and dispose the property.
b. The property is not subject to encumbrance.

VI – 39

APPENDIX VI

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

Capital value in Particulars of existing state as at No. Property Description and tenure occupancy 28 February 2013 RMB 25. Flat A on 10th Floor, The property comprises 5 residential A portion of the property 29,300,000 Flat A on 12th Floor, units and 7 car parking spaces of is leased to various third Flat A & C on 16th Citichamp Palace. The residential parties for various terms 100% interest Floor of Block 2, Flat units have a total gross floor area of at a total monthly rent of attributable to C on 12th Floor of approximately 802.94 sq.m. and the RMB34,600 exclusive of the TPG Group: Block 6 and details are set out as follows: management fee. 29,300,000 7 car parking spaces Citichamp Palace Gross Floor （冠城園） Block Unit Area (sq.m.) Haidian District Beijing 6 12C 214.81 the PRC 2 10A 150.80 2 12A 150.80 2 16A 152.08 2 16C 134.45 Total 802.94

The property is held under land use rights for a term of 70 years commencing on 30 June 1994 and expiring on 29 June 2064.

Notes:

Pursuant to 5 Real Estate Title Certificates – X Jing Fang Quan Zheng Hai Zi Di. 161444, 162601, 162600, 154181, 5 residential units with a total gross floor area of approximately 802.94 sq.m. are owned by China Taiping Insurance Group Co（中國太平保險集團公司）.
Pursuant to 7 Real Estate Title Certificates – X Jing Fang Quan Zheng Hai Zi Di Nos. 112464, 112674, 112467, 112699, 113175, 113176 and 113177, 7 car parking units are owned by China Taiping Insurance Group Co.
We have been provided with a legal opinion on the legality of the tenancy agreement to the property issued by the Company’s PRC legal advisers, which contains, inter alia, the following.
a. The owner of the property has legally obtained the land use rights of the land where the property erected thereon, and has the rights to freely transfer, lease, mortgage and dispose the property.
b. The property is not subject to encumbrance.

VI – 40

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

APPENDIX VI

VALUATION CERTIFICATE

Group IV – Property interests held for investment by the Group in Macau

				Capital value in
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	28 February 2013
				MOP
26.	Unit C on 21st Floor	The property comprises a unit on the	The property is leased	6,000,000
	Block 5	21st Floor of 45-storey residential	to an independent third
	The Residencia Macau	building completed in 2009.	party for a term with the	100% interest
	No. 1043 Rua Central		latest expiry date in May	attributable to
	da Areia Preta	The gross floor area of the property is	2013 at a total monthly	the TPG Group:
	Macau	approximately 112.13 sq.m.	rent of HK$9,500	6,000,000
			exclusive of management
		The property is held under leasehold	fee.
		(Duracão Da Concessão Por
		Arrendamento) for a term of 25 years
		commencing from 6 July 1992.

Notes:

Pursuant to our search record, the registered owner of the property is “Best Exceed Limited”, a wholly-owned subsidiary of Taiping Investment Holdings Company Limited.
The property is not subject to encumbrance.

VI – 41

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

APPENDIX VI

VALUATION CERTIFICATE

Group V – Property interests held for investment by the Group in Japan

				Capital value in
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	28 February 2013
				JPY
27.	Portions other than	The property comprises 10 residential	The property is leased	142,000,000
	Unit Nos. 302 and 501,	units and office area on ground	to various independent
	457-banchi-2,	floor with total gross floor area of	third parties at an annual	100% interest
	464-banchi-2,	approximately 378.88 sq.m. in a	rent of approximately	attributable to
	Shinden 3-chome,	5-storey office/residential building	JPY11,160,000 inclusive	the TPG Group:
	Ichikawa-shi,	completed in 1993 and erected on	of management fee.	142,000,000
	Chiba Prefecture,	a site with registered site area of
	Japan	approximately 395.05 sq.m.
		The property is held under title of Fee
		Simple Estate.

Notes:

The registered owner of the property is China Taiping Insurance Service (Japan) Co., Ltd.（中国太平保険サービス株式会社）.
The property is not subject to encumbrance.

VI – 42

VALUATION REPORT ON THE PROPERTY INTERESTS OF THE TPG GROUP

APPENDIX VI

VALUATION CERTIFICATE

Group VI – Property interests held for occupation by the Group in Japan

				Capital value in
			Particulars of	existing state as at
No.	Property	Description and tenure	occupancy	28 February 2013
				JPY
28.	Unit Nos. 302 and 501,	The property comprises 2 residential	The property is owner-	30,000,000
	457-banchi-2,	units with total gross floor area	occupied.
	464-banchi-2,	of approximately 79.55sq.m. in a		100% interest
	Shinden 3-chome,	5-storey office/residential building		attributable to
	Ichikawa-shi,	completed in 1993 and erected on		the TPG Group:
	Chiba Prefecture,	a site with registered site area of		30,000,000
	Japan	approximately 395.05 sq.m.
		The property is held under title of Fee
		Simple Estate.

Notes:

The registered owner of the property is China Taiping Insurance Service (Japan) Co., Ltd.（中国太平保険サービス株式会社）.
The property is not subject to encumbrance.

VI – 43

GENERAL INFORMATION

APPENDIX VII

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. SHARE CAPITAL

The authorized and issued share capital of the Company as at the Latest Practicable Date and upon allotment and issue of the Consideration Shares are as follows:

	Number
	of Shares		Authorized	Number of
	Authorized	Nominal	Share	Shares	Issued
	to be issued	Value	Capital	in issue	Share Capital
		(HK$)	(HK$)		(HK$)
As at the Latest Practicable Date	2,000,000,000	0.05	100,000,000	1,705,875,092	85,293,754.60
Upon passing of resolution approving the
increase in authorized share capital at the
EGM	3,000,000,000	0.05	150,000,000	1,705,875,092	85,293,754.60
Upon allotment and issue of the maximum
number of Consideration Shares	3,000,000,000	0.05	150,000,000	2,568,610,362	128,430,518.10

All the issued Shares rank pari passu with each other in all respects including the rights as to voting, dividends and return of capital. The Consideration Shares will rank pari passu in all respects with the then existing Shares.

The Shares in issue are listed on the Stock Exchange. No part of the share capital or any other securities of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares or any other securities of the Company to be listed or dealt in on any other stock exchange.

VII – 1

GENERAL INFORMATION

APPENDIX VII

3. DIRECTORS’ AND CHIEF EXECUTIVE’S DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interest and short positions of the Directors and chief executive in the Shares, underlying shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they are taken or deemed to have under such provisions of the SFO), or which were required pursuant to Section 352 of the SFO to be entered in the register maintained by the Company referred to therein, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”) were as follows:

Long position in the Shares as at the Latest Practicable Date

(i) Shares of the Company

	Number of				Percentage of
	Shares	Number of			total issued
	(and Capacity	Underlying			Shares as at
	in which the	Shares	Number of		the Latest
	Shares were	pursuant to	Awarded		Practicable
Name of Director	held)	share options	Shares	Total Interests	Date(%)
Song Shuguang	10,000	800,000	–	810,000	0.05
	(Beneficial
	Owner)
Xie Yiqun	–	500,000	–	500,000	0.03
Peng Wei	70,000	400,000	–	470,000	0.03
	(Beneficial
	Owner)
Li Tao	130,000	–	–	130,000	0.01
	(Beneficial
	Owner)

VII – 2

GENERAL INFORMATION

APPENDIX VII

(ii) Share options in the Company

	Number of
	share options
	outstanding as
	at the Latest		Period during which	Exercise price
Name of Director	Practicable Date	Date of grant	options exercisable	per share
				(HK$)
Song Shuguang	800,000	02/11/2005	23/11/2005-22/11/2015	2.875
Xie Yiqun	500,000	02/11/2005	23/11/2005-22/11/2015	2.875
Peng Wei	400,000	02/11/2005	23/11/2005-22/11/2015	2.875

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive of the Company had any interests or short positions in the Shares, underlying shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO) which were required, (i) pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or (ii) pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or (iii) pursuant to the Model Code of the Listing Rules to be notified to the Company and the Stock Exchange.

As at the Latest Practicable Date, Mr. WANG Bin, Mr. SONG Shuguang, Mr. XIE Yiqun, Mr. PENG Wei and Mr. LI Tao are also directors or senior management of TPG and TPG(HK).

Save as disclosed above, as at the Latest Practicable Date, none of the Directors was a director or employee of a company which had an interest or short position in the Shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

VII – 3

GENERAL INFORMATION

APPENDIX VII

4. SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS AND SHORT POSITIONS

As at the Latest Practicable Date, so far as is known to the Directors and chief executives of the Company, the persons (other than Directors or chief executives of the Company) who had interests or short positions in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who are directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group are as follows:

Long and short positions in the Shares, underlying shares and debentures of the Company as at the Latest Practicable Date

				Approximate
	Number of Shares	Total number		percentage in
Name of	(and capacity in which	of Shares	Long/Short	the Company’s
substantial Shareholder	the Shares were held)	interested	position	share capital
TPG	Interest of controlled corporation	908,689,405	Long Position	53.27%
		(Note 1)
TPG (HK)	643,425,705 shares as beneficial	908,689,405	Long Position	53.27%
	owner and 265,263,700 shares
	(Note 2) as interest of controlled
	corporation
Schroders Plc.	Interest of controlled corporation	119,718,961	Long Position	7.02%
Commonwealth Bank of	Interest of controlled corporation	102,440,688	Long Position	6.01%
Australia

Note 1: TPG’s interest in the Company was held by TPG(HK), Easiwell Limited, Golden Win Development Limited and Manhold Limited, all of which were wholly-owned subsidiaries of TPG.

Note 2: 138,924,700 Shares were held by Easiwell Limited, 71,544,000 Shares were held by Golden Win Development Limited and 54,795,000 Shares were held by Manhold Limited.

VII – 4

APPENDIX VII

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executives of the Company were not aware of any person (other than Directors or chief executives of the Company) who had any interests or short positions in the Shares or underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

5. COMPETING INTERESTS

Mr. WANG Bin, Mr. SONG Shuguang, Mr. XIE Yiqun, Mr. PENG Wei and Mr. LI Tao, are also the directors of TPG and TPG(HK), whose businesses may, either directly or indirectly, compete with businesses of the Group.

As at the Latest Practicable Date, save as disclosed above, in so far as the Directors are aware, none of the Directors or any of their respective associates had an interest in a business that competes or may compete with the business of the Group.

6. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered, or was proposing to enter, into any service contract with any member of the Group or the Enlarged Group which was not expiring or may not be terminated by the relevant company within a year without payment of any compensation (other than statutory compensation).

7. INTERESTS IN ASSETS AND/OR CONTRACTS AND OTHER INTEREST

(a) As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any asset which had been, since 31 December 2012, being the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.
(b) There were no contracts subsisting at the Latest Practicable Date in which a Director was materially interested and which was significant in relation to the business of the Enlarged Group.

VII – 5

GENERAL INFORMATION

APPENDIX VII

8. MATERIAL CONTRACTS

The following are the summary of the material contracts (not being contracts entered into in the ordinary course of business) entered into by members of the Enlarged Group within the two years immediately preceding the issue of this circular:

(a) the termination agreement dated 29 April 2011 CTPI(HK), a wholly-owned subsidiary of the Company, and China Insurance Group Investment Company Limited (“CIGICL”), an indirect wholly-owned subsidiary of TPG in relation to the termination of the share transfer agreement dated 10 December 2010 between CTPI(HK) and CIGICL relating to the acquisition of 30% equity interests in 深圳福田燃機電力有限公司 (Futian Gas Turbine Power Company Limited) at a total consideration of RMB216 million;
(b) the share transfer agreement dated 17 August 2011 between the Company and ICBC (Asia) in relation to the acquisition of 9.44% equity interest in TPI at a total consideration of RMB264 million;
(c) the supplemental agreement dated 28 December 2011 entered into by TPL, TPI and the Company in relation to the amendments to the terms of the share transfer agreement entered into by TPL, TPI and the Company on 31 December 2010, pursuant to which TPL and TPI agreed to sell and the Company agreed to purchase in aggregate 60% equity interests in TPAM at the aggregate consideration of RMB222,684,000;
(d) the supplemental agreement dated 28 December 2011 between TPA(HK) and Ageas in relation to the amendments to the terms of the share transfer agreement entered into by TPA(HK) and Ageas on 31 December 2010, pursuant to which TPA(HK) agreed to sell and Ageas agreed to purchase 12% equity interests in TPAM at the consideration of RMB44,536,800;
(e) the loan agreement dated 30 May 2012 between TPG and CTIH, pursuant to which TPG agreed to provide CTIH with an unsecured loan facility in the principal amount of HK$600 million which is interest-bearing at the rate of HIBOR plus 2.1% for a term of three years;
(f) the termination agreement dated 27 November 2012 between TPG and CTIH, pursuant to which the loan facility mentioned in (e) above was terminated and the principal thereof (with accrued interest) was repaid; and
(g) the Framework Agreement.

VII – 6

GENERAL INFORMATION

APPENDIX VII

9. LITIGATION

No member of the Enlarged Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance is known to the Directors to be pending or threatened against any member of the Enlarged Group as at the Latest Practicable Date.

10. EXPERT

The following are the qualifications of the experts who have given opinion or advice which are contained in this circular:

Name	Qualifications
Deloitte Touche Tohmatsu	Certified public accountants
(“DTT”)
PricewaterhouseCoopers	Actuarial consultant
Limited (“PwC”)
First Shanghai	A corporation licensed to carry out Type 6 regulated
	activity under the SFO
Jones Lang LaSalle Corporate	An independent professional valuer
Appraisal and Advisory
Limited (“JLL”)

Each of DTT, PwC, First Shanghai and JLL has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter(s) and report(s) and references to their name in the form and context in which they appear.

As at the Latest Practicable Date, none of DTT, PwC, First Shanghai and JLL had any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, none of DTT, PwC, First Shanghai and JLL had any direct or indirect interest in any assets which have been, since 31 December 2012 (being the date to which the latest published audited accounts of the Group were made up), acquired or disposed of by or leased to any member of the Enlarged Group, or which were proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

VII – 7

GENERAL INFORMATION

APPENDIX VII

11. GENERAL

(a) The registered office of the Company is at 22nd Floor, China Taiping Tower Phase I, 8 Sunning Road, Causeway Bay, Hong Kong. The administrative office of the Company is at 12th Floor, China Taiping Tower Phase II, 8 Sunning Road, Causeway Bay, Hong Kong.
(b) The registrar and transfer office of the Company is Hong Kong Registrars Limited at 46th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.
(c) The company secretary of the Company is Mr. Chan Man Ko who is a member of the Hong Kong Institute of Certified Public Accountants and an associate of the Institute of Chartered Accountants in England and Wales.
(d) In case of inconsistency, the English text of this circular and the accompanying form of proxy shall prevail over the Chinese text.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the offices of Woo, Kwan, Lee & Lo at 26th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong during normal business hours up to and including the date of the EGM (and any adjournment thereof):

(a) the memorandum and articles of association of the Company;
(b) the material contracts of the Enlarged Group referred to under the section headed “Material Contracts” in this Appendix;
(c) the written consents referred to under the section headed “Expert” in this Appendix;
(d) the letter of recommendation from the Independent Board Committee, the text of which is set out on pages 53 to 54 of this circular;
(e) the letter issued by First Shanghai, the text of which is set out on pages 55 to 86 of this circular;

VII – 8

GENERAL INFORMATION

APPENDIX VII

(f) the annual reports of the Company for the years ended 31 December 2010, 2011 and 2012;
(g) the interim report of the Company for the six months ended 30 June 2012;
(h) the accountants’ reports on the TPL, the Target Group, TPI, TPAM and TPP, the text of which is set out in Appendices IIA to IIE of this circular;
(i) the profit and loss statement of the Target Assets, the text of which is set out in Appendix IIF of this circular;
(j) the report on the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III of this circular;
(k) the statement of adjustments signed by Deloitte Touche Tohmatsu setting out the adjustments made by them in arriving at the figures shown in the accountants’ reports on the Target Companies;
(l) the letter and valuation report of TPL, the text of which is set out in Appendix V of this circular;
(m) the letter and valuation certificates on the property interests of the Target Companies, the text of which is set out in Appendix VI of this circular; and
(n) this circular.

VII – 9

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

==> picture [186 x 93] intentionally omitted <==

(Incorporated in Hong Kong with limited liability) (Stock Code: 966)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting of China Taiping Insurance Holdings Company Limited (the “ Company ”) will be held at 24/F., China Taiping Tower Phase II, 8 Sunning Road, Causeway Bay, Hong Kong on Tuesday, 18 June 2013 at 4:00 p.m. or in the event that a black rainstorm warning or a tropical cyclone warning signal number 8 or above is hoisted or remains hoisted at 12:00 noon or any time after 12:00 noon on that day, at the same time and place on the first Business Day (as defined in note (1) below) after 18 June 2013, to consider, and, if thought fit, pass the following resolution (with or without modifications) as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :
(a) the conditional framework agreement dated 27 May 2013 entered into between 中國太平保險集團公司 (China Taiping Insurance Group Co.) (“ TPG ”) and China Taiping Insurance Group (HK) Limited (“ TPG(HK) ”) as vendors and the Company as purchaser, a copy of which having been produced at the meeting and marked “A” and initialed by the chairman of the meeting for the purpose of identification (the “ Framework Agreement ”) and the transaction contemplated thereunder be and is hereby approved, ratified and confirmed;
(b) conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited granting approval for the listing of, and permission to deal in, a maximum of 862,735,270 shares of the Company (the “ Consideration Shares ”) to be issued and allotted by the Company to TPG and TPG(HK) (or such other persons as any of them may direct) pursuant to the Framework Agreement, the allotment and issue of such Consideration Shares be and is hereby approved; and

EGM – 1

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

(c) the directors of the Company be and are hereby authorized for and on behalf of the Company to negotiate, agree, sign, seal, execute, deliver, perfect and ratify all such documents and agreements (including without limitation, the specific acquisition agreements to be entered into by TPG, TPG(HK) and the Company pursuant to the Framework Agreement) and do such acts or things as they may in their discretion consider to be necessary, desirable or expedient to implement and/or give effect to the terms of the Framework Agreement and the allotment and issue of the Consideration Shares.”
“ THAT
(a) the authorised share capital of the Company be and is hereby increased from HK$100,000,000 divided into 2,000,000,000 shares of HK$0.05 each in the share capital of the Company to HK$150,000,000 divided into 3,000,000,000 Shares by the creation of an additional 1,000,000,000 new shares of HK$0.05 each in the share capital of the Company (the “ Proposed Increase in Authorised Share Capital ”); and
(b) any one or more of the directors of the Company be and is/are hereby authorised for and on behalf of the Company to execute all such documents, instruments and agreements and to do all such acts or things deemed by him/ her/them to be incidental to, ancillary to or in connection with the matters contemplated in and for the completion of the Proposed Increase in Authorised Share Capital.”

By order of the board of directors

China Taiping Insurance Holdings Company Limited WANG Bin

Chairman

Hong Kong, 31 May 2013

EGM – 2

NOTICE OF THE EXTRAORDINARY GENERAL MEETING

Notes:

(1) If a black rainstorm warning or a tropical cyclone warning signal number 8 or above is hoisted or remains hoisted at 12:00 noon on 18 June 2013, the EGM will not be held on that day but will be held at the same time and place on the first Business Day after 18 June 2013 instead. “Business Day” means any day (excluding Saturday) on which no black rainstorm warning or a tropical cyclone warning signal number 8 or above is hoisted or remains hoisted at 12:00 noon on that day and on which banks in Hong Kong are generally open for business.
(2) A member who is entitled to attend and vote at this meeting shall be entitled to appoint up to two proxies if he holds two or more shares in the Company, to attend and vote instead of him, and on a poll, votes may be given either personally (or, in the case a member being a corporation, by its duly authorized representative) or by proxy in accordance with the articles of association of the Company. A proxy need not be a member of the Company but must attend this meeting in person to represent a member.
(3) In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders and for this purpose seniority shall be determined by the order in which the names stand in the register in respect of the joint holding.
(4) To be valid, a form of proxy together with any power of attorney or other authority (if any) under which it is executed, or a notarially certified copy thereof, must be delivered to 12/F., China Taiping Tower Phase II, 8 Sunning Road, Causeway Bay, Hong Kong not less than 48 hours before the time appointed for the holding of this meeting of any adjournment thereof.
(5) The translation into Chinese language of this notice is for reference only. In case of inconsistency, the English version shall prevail.
(6) As at the date of this notice, the board of directors of the Company comprises 8 directors, of which Mr. WANG Bin, Mr. SONG Shuguang, Mr. XIE Yiqun and Mr. Peng Wei are executive directors, Mr. LI Tao is a non-executive director, and Dr. WU Jiesi, Mr. CHE Shujian and Mr. LEE Kong Wai Conway are independent non-executive directors.

EGM – 3

AI assistant

MGM China Holdings Limited — Proxy Solicitation & Information Statement 2013

50495_rns_2013-05-30_164f89f9-1369-4b9c-9958-1087b54e0caa.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

(1) MAJOR ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF ASSETS FROM CONTROLLING SHAREHOLDER AND ISSUE OF CONSIDERATION SHARES

(2) PROPOSED INCREASE IN AUTHORIZED SHARE CAPITAL

Financial advisers to the Company

Financial advisers to TPG and TPG (HK)

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Executive Directors:

Registered Office:

(1) MAJOR ACQUISITION AND CONNECTED TRANSACTION ACQUISITION OF ASSETS FROM CONTROLLING SHAREHOLDER AND ISSUE OF CONSIDERATION SHARES

(2) PROPOSED INCREASE IN AUTHORIZED SHARE CAPITAL

1. INTRODUCTION

LETTER FROM THE BOARD

2. FRAMEWORK AGREEMENT

(A) Principal terms of the Framework Agreement

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

(B) Basis for the Consideration

LETTER FROM THE BOARD

Tranche A Targets:

LETTER FROM THE BOARD

Tranche C Targets:

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

(C) Adjustment to the Consideration

Post-Agreement Capital Increase Adjustment

Segregation of Overseas P&C Targets

LETTER FROM THE BOARD

(D) The Issue Price

LETTER FROM THE BOARD

(E) The Consideration Shares

LETTER FROM THE BOARD

3. INFORMATION ON THE ACQUISITION TARGETS

(A) Overview of the Acquisition Targets

LETTER FROM THE BOARD

LETTER FROM THE BOARD

(B) Segmental information on the Acquisition Targets

(1) Tranche A Targets

LETTER FROM THE BOARD

(2) Tranche B Targets

LETTER FROM THE BOARD

(3) Tranche C Targets

(i) Overseas P&C Targets

LETTER FROM THE BOARD

(ii) Securities broking

(iii) Property investment business

(iv) Financial Support Service

LETTER FROM THE BOARD

(v) Other companies and Target Assets

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

4. REASONS FOR AND BENEFITS OF THE ACQUISITION

A. Enhance financial performance stability and scale of the Company

LETTER FROM THE BOARD

B. Fully capture the high growth potential of the PRC insurance markets

LETTER FROM THE BOARD

i. Life Insurance

ii. P&C

LETTER FROM THE BOARD

C. Establish a more streamlined management structure and further align Shareholders’ interests

MGM China Holdings Limited Proxy Solicitation & Information Statement 2013