Corporate Information 2. Corporate Structure 4. Chairman s Statement 5. Management Review and Analysis 9

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2 CONTENTS Page Corporate Information 2 Corporate Structure 4 Chairman s Statement 5 Management Review and Analysis 9 Biographical Details of Directors and Company Secretary 12 Report of the Directors 15 Report of the Auditors 25 Combined Profit and Loss Account 27 Revenue Account of Non-life Non-proportional Business 29 Revenue Account of Non-life Proportional Business 30 Revenue Account of Life Business 31 Combined Balance Sheet 32 Balance Sheet 33 Combined Cash Flow Statement 34 Notes on the Accounts 36 Four Year Financial Summary 80 Unaudited Supplementary Financial Information 82 Notice of the Annual General Meeting 85 ANNUAL REPORT 2000

3 CORPORATE INFORMATION DIRECTORS Executive Directors Yang Chao, Chairman Zhang Xiaoshu, Vice Chairman Miao Jianmin, Chief Executive Officer Ng Yu Lam Kenneth, Deputy Chief Executive Officer Dong Ming, Deputy Chief Executive Officer Lau Siu Mun Sammy Non-Executive Directors Zheng Changyong Wu Jiesi* Lau Wai Kit* * Independent FINANCIAL CONTROLLER AND COMPANY SECRETARY Tam Chiu Tai Richard AUTHORISED REPRESENTATIVES Miao Jianmin Ng Yu Lam Kenneth REGISTERED OFFICE 12/F, Ming An Plaza Phase II 8 Sunning Road Causeway Bay Hong Kong Telephone: (852) Facsimile: (852) mail@ciih.com CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

4 CORPORATE INFORMATION REGISTRAR AND TRANSFER OFFICE HKSCC Registrars Limited 2/F, Vicwood Plaza 199 Des Voeux Road Central Hong Kong AUDITORS KPMG Certified Public Accountants 8/F, Prince s Building 10 Chater Road Central Hong Kong PRINCIPAL BANKERS Hang Seng Bank Limited The China State Bank, Limited, Hong Kong Branch Citibank, N.A., Hong Kong Citibank, N.A., London WEBSITE STOCK MARKET LISTING The Mainboard of The Stock Exchange of Hong Kong Limited (Stock Code : 966) ANNUAL REPORT 2000

5 CORPORATE STRUCTURE China Insurance Company, Limited (The People s Republic of China) 100% 100% China Insurance H.K. (Holdings) Company Limited 52.94% The Ming An Insurance Company (Hong Kong), Limited The Public 37.80% 9.26% China Insurance International Holdings Company Limited 100% 100% China International Reinsurance Company Limited SINO-RE Reinsurance Brokers Limited CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

6 CHAIRMAN S STATEMENT 2000 is a very important year for China Insurance International Holdings Company Limited (the Company or CIIH ) and its subsidiaries (collectively the Group ). The Company was incorporated in Hong Kong with limited liability on 18 February 2000 and through a reorganisation scheme became the holding company of the Group on 26 May The Group has been treated as a continuing entity and accordingly the combined accounts have been prepared on the basis that the Company was the holding company of the Group for both years presented rather than from 26 May It gives me great pleasure to announce the first annual result of the Group since our Company s Mr. Yang Chao Chairman listing on the Mainboard of The Stock Exchange of Hong Kong Limited ( The Stock Exchange ) (Stock Code: 966) on 29 June Our first year as a listed company was productive and fruitful. I am very pleased with the performance of the Group and of our dedicated staff. FINANCIAL RESULTS For the year ended 31 December 2000, the Group s turnover increased by 7.3% to HK$691.0 million compared to 1999 (1999: HK$644.3 million). The turnover composed of HK$683.4 million (1999: HK$640.1 million) in reinsurance premium and HK$7.6 million (1999: HK$4.2 million) in brokerage income. Net profit attributable to shareholders was HK$117.7 million, an increase of 15.5% when compared with that of the previous year. Meanwhile, earnings per share were HK15 cents, the same level as the previous year. The Group has maintained a strong financial position throughout the year, with cash and deposits at bank amounting to approximately HK$457.5 million as at 31 December 2000, which enables the Group flexibility to invest at the right time when investment opportunity arises. ANNUAL REPORT 2000

7 CHAIRMAN S STATEMENT DIVIDENDS The directors have recommended the payment of a final dividend of HK4 cents per share for the year ended 31 December USE OF NET PROCEEDS FROM ISSUE OF SHARES The net proceeds from the share offering after deducting expenses amounted to approximately HK$294.9 million. It has been used for the following purposes: a. HK$184.0 million has been used to increase the paid-up capital of China International Reinsurance Company Limited ( CIRe ) and SINO-RE Reinsurance Brokers Limited ( SINO-RE ) respectively. (HK$180.0 million in CIRe and HK$4.0 million in SINO-RE). b. The rest of the proceeds have been kept to increase the working funds of the Company and to acquire high quality bonds to produce steady interest income PROSPECT After a period of weak market conditions due to excessive supply of reinsurance capacity, the reinsurance market eventually turned around at 1 January 2001 with rate increases and restrictions in coverage being broadly applied in treaty renewals. Reinsurance business will also benefit from the increasing rates in the Non-life direct insurance market. Assuming that there is no unusual claims, the underwriting result and underwriting cash flow are expected to improve. In line with reinsurance underwriting, the revenue from the reinsurance brokerage is also anticipated to grow satisfactorily. The Company is optimistic with the prospect of its core reinsurance businesses. Looking north of the border, with the services of the newly formed CIIH s Shanghai Representative Office and more marketing activities devoted to the China market, the Company has good reasons to anticipate a healthy growth of its core business from the emerging China market. The United States of America is facing a possible economic slow-down that has caused adverse effects on the recent performance of the major stock markets will be a year of great challenge for the Company to achieve results better than market performance in investment. In 2001, the Company will continue its prudent investment philosophy as in the past with strong emphasis on quality bond and cash holdings, to be supplemented by a suitable portion of equity investments. As a large portion of the investment portfolio is vested in bonds that are intended for long-term holding till maturity, the Company enjoys steady investment income despite the recent unsteady global economic outlook. The improvement in cash flow position from underwriting will also partly offset the reduction in interest income due to the falling interest rates. As far as investment income is concerned, the Group expects another healthy year. CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

8 CHAIRMAN S STATEMENT 2001 PROSPECT (Continued) Expansion in the Chinese domestic insurance market is the Company s major strategic goal. Based on the progresses made in 2000, it is expected that the Company will make significant steps towards its Chinese expansion plan this year. The Shanghai Representative Office will facilitate the Company in widening its business contacts in Mainland China. The Company has an ambitious China expansion plan that is in line with its parent company, China Insurance H.K. (Holdings) Company Limited ( CIHK or the China Insurance Group ). As committed by the parent company at the time of the Initial Public Offering, the China Insurance Group will fully support the Company in its business expansion especially in the Chinese domestic insurance market. It is encouraging that The Tai Ping Life Insurance Company Limited and The Tai Ping Insurance Company Limited, subsidiaries of the China Insurance Group, have been approved to resume insurance underwriting in the mainland China in the fields of life and general insurance respectively. The Company will be actively involved in the parent company s domestic insurance expansion plans and will benefit therefrom. Furthermore, the parent company has rationalised the asset management of its subsidiaries, which will enable future injection of quality assets into the Company. The Company, like its parent company, the China Insurance Group, has accumulated valuable experience, management skills and a team of quality staff through its experience in the overseas markets. Besides insights and prowess in the international insurance and capital markets, it also understands well the Chinese domestic insurance market. The huge potential of the Chinese domestic insurance market attracts attention from many international insurers and investors and will continue to be an investment focus after China becomes a member of the World Trade Organization. Along with the expansion of the China Insurance Group, the Company will maximise its unique advantageous position in the China insurance market in the near future. It is anticipated that our Chinese domestic business will include life insurance, general insurance, asset management and insurance brokerage. The weighting from these business streams will gradually increase and eventually they will become the core business of the Company. With strong support from the China Insurance Group, the Company will endeavour to develop towards this goal, bearing a clear objective of profit consciousness, which is the common desire and expectation of the shareholders. ANNUAL REPORT 2000

9 CHAIRMAN S STATEMENT APPRECIATION On behalf of the board of directors, I would like to express my gratitude to our clients, management team and staff for their valuable support. Last but not least, I would like to bid welcome to our new shareholders and thank them for their support. We will continue to plan well and work hard to build value for your investment. Yang Chao Chairman Hong Kong, 9 April 2001 Opening ceremony of Shanghai Representative Office of CIIH on 28 February CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

10 MANAGEMENT REVIEW AND ANALYSIS FINANCIAL RESULTS The Company is pleased to announce that the audited profit attributed to shareholders of the Group for the year ended 31 December 2000 was HK$117.7 million, an increase of 15.5% when compared with that of the previous year. Earnings per share were HK15 cents, the same level as the previous year. The directors have recommended the payment of a final dividend of HK4 cents ordinary share for the year ended 31 December The turnover of the Group reached HK$691.0 million representing an increase of 7.3% as compared with that of the previous year. The turnover composed of HK$683.4 million (1999: HK$640.1 million) in reinsurance premium and HK$7.6 million (1999: HK$4.2 million) in brokerage income. OPERATION REVIEW Reinsurance Underwriting CIRe registered an increase of its gross premium incomes on Non-life Non-proportional and Nonlife Proportional reinsurance business by 20.9% and 3.2% respectively over that of the previous year. CIRe also recorded an increase of 37.7% on its Life premium income over the previous year. The increase of booked premium income in the year 2000 reversed the trend of premium reduction since CIRe ranked second among Hong Kong based professional reinsurance companies on local reinsurance business and is also one of the important market-force in Asia. During 2000, 42.0% of the annual premium came from Hong Kong and Macau, 8.6% from the People s Republic of China ( PRC ) (other than Hong Kong and Macau), 8.4% from Japan and 21.0% from the rest of Asia. The remaining 20.0% of the premium was derived from Europe, North America and other countries. In the Non-life reinsurance business, where the three-year fund accounting policy was adopted, it reflected an underwriting profit of HK$73.0 million (1999: underwriting deficit HK$47.0 million). The improved result of the Non-life reinsurance mainly came from savings in claim settlement for 1997 and prior years. In the Life reinsurance business, where the annual accounting policy was adopted, it produced an underwriting profit of HK$213,472 (1999: HK$975,812). ANNUAL REPORT 2000

11 MANAGEMENT REVIEW AND ANALYSIS OPERATION REVIEW (Continued) Reinsurance Brokerage business The brokerage income of SINO-RE registered an impressive increase of 81.5% to HK$7.6 million compared to the previous year (1999: HK$4.2 million). The increase in brokerage income was due to the increases in reinsurance orders in addition to price increases. LIQUIDITY AND FINANCIAL RESOURCES The group s cash and bank deposits as at 31 December 2000 amounted to approximately HK$457.5 million, which was 42.8% increase over the previous year. The liquid cash enables the Group flexibility to invest at the right time when investment opportunity arises. For the year ended 31 December 2000, the Group had no outstanding borrowings. The Group has sufficient working capital to satisfy the present requirement of its core reinsurance business. INVESTMENT PORTFOLIO AND INVESTMENT INCOME The total investment portfolio held as at 31 December 2000, amounted to HK$1,775.2 million, composed of HK$933.9 million (52.6%) in bonds and fixed income securities, HK$457.5 million (25.8%) in cash and bank deposits, HK$183.1 million (10.3%) in listed equities, HK$122.9 million (6.9%) in investment properties, HK$44.7 million (2.5%) in loan, HK$23.5 million (1.3%) in listed unit trust and mutual funds and HK$9.6 million (0.6%) in unlisted equities. The investment portfolio represented 84.4% of the total assets of the Group. During the year, investment income, which consisted of dividend, interest income from listed and unlisted securities, rental income and other interest income, amounted to HK$87.5 million, representing an increase of 8.9% over that of the previous year. (1999: HK$80.4 million). Other income resulted in net loss of HK$16.5 million (1999: net income HK$75.3 million). The main reason for the reduction was due to net realised and unrealised losses on listed securities amounting to HK$25.8 million; whereas there was a net realised and unrealised gain of HK$62.3 million in the previous year. CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

12 MANAGEMENT REVIEW AND ANALYSIS INVESTMENT PORTFOLIO AND INVESTMENT INCOME (Continued) The total investment and other incomes during the year amounted to approximately HK$71.1 million which was not as good as HK$155.7 million of the previous year. The drop in investment income was mainly attributed to the net realised and unrealised losses on listed and unlisted securities. During the year, there was general weakening of foreign currencies against US dollars and Hong Kong dollars. The Company booked net losses of HK$14.9 million (1999: HK$2.3 million) arising from translation of the foreign currencies denominated assets and liabilities into Hong Kong dollars. It is the Company s policy to maintain adequate foreign currencies denominated assets to match with corresponding liabilities. ANNUAL REPORT 2000

13 BIOGRAPHICAL DETAILS OF DIRECTORS AND COMPANY SECRETARY EXECUTIVE DIRECTORS Mr. Yang Chao, aged 51, is the Chairman of the Company and joined the Company in March He is responsible for its overall business and strategy. He is also the Chairman and President of China Insurance Company, Limited ( China Insurance (PRC) ) and CIHK. From 1976 to 1979, Mr. Yang worked in The Bank of China, Shanghai Branch. In 1980 he joined the People's Insurance Company of China ( PICC ) and later became a Director of PICC and the General Manager of its Business Department. From 1996, Mr. Yang has been the Chairman and General Manager of CIC Holdings Limited. CIC Holdings Limited is a company incorporated in the United Kingdom responsible for overseeing the interests of China Insurance (PRC) in Europe. Mr. Yang has over 20 years experience in banking and insurance. Mr. Zhang Xiaoshu, aged 57, is the Vice Chairman of the Company and joined the Company in March He is responsible for assisting the Chairman and supervising the implementation of the Company s business strategy. Mr. Zhang was born in Shanghai where he worked until 1992 when he became the Executive Director and Vice President of China Travel Service (Holdings) Hong Kong Limited and the General Manager of China Travel Service (Hong Kong) Limited. Mr. Zhang joined CIHK in 1997 as a Director and the Vice President. Mr. Zhang is also the Chairman of CIG-WH International (Holdings) Limited and a Director of each of CIRe, New Century Securities Limited, Toplap Investments Limited and China Insurance Group Assets Management Limited. Mr. Miao Jianmin, aged 36, is the Chief Executive Officer of the Company and joined the Company in March He is responsible for the implementation of the Company s strategy. Mr. Miao graduated with a Masters degree in Economics from the Postgraduate School of the People's Bank of China. Mr. Miao joined PICC in 1989 and was the Deputy Manager of the International Department of PICC from 1989 to He was the Deputy General Manager of CIRe from 1995 to Since September 1997, he was the Deputy General Manager of the Investment Department of CIHK. Since August 1999, Mr. Miao has been a Director of China Insurance Company, Limited; and the Director and Assistant President of CIHK. Mr. Miao is also a Director of CIRe. Since January 2001, he becomes the Director and Chief Executive Officer of China Insurance Group Assets Management Limited. CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

14 BIOGRAPHICAL DETAILS OF DIRECTORS AND COMPANY SECRETARY EXECUTIVE DIRECTORS (Continued) Mr. Ng Yu Lam Kenneth, aged 52, is the Deputy Chief Executive Officer of the Company and joined the Company in March He is responsible for the investment and underwriting activities of the Company. Mr. Ng is also a member of the Investment Committee since Mr. Ng is a Fellow of the Chartered Insurance Institute of the United Kingdom and has more than 30 years of experience in the insurance industry. Mr. Ng joined The Ming An Insurance Company (Hong Kong), Limited ( Ming An ) in From 1968 to 1980, he worked in the Marine Hull Department and in the Reinsurance Department of Ming An. In December 1980, Mr. Ng joined CIRe as a Manager, and has since held positions as Assistant General Manager and Deputy General Manager. Since 1996, Mr. Ng has been the General Manager of CIRe. Mr. Ng is also a Director of CIRe, SINO-RE, CIHK and China America Insurance Company Limited. Mr. Ng is not involved in the day to day management of these companies other than the Company, CIRe and SINO-RE. Dr. Dong Ming, aged 44, joined the Company in April 2000 as a Deputy Chief Executive Officer of the Company. Dr. Dong received a Doctorate degree from the London School of Economics and Political Science in Prior to joining the Company, Dr. Dong was an Executive Director and the Executive Deputy General Manager of Tianjin Development Holdings Limited, a company listed on The Stock Exchange. Dr. Dong was responsible for assisting the President and the General Manager in handling the overall business and strategy of Tianjin Development Holdings Limited and for its investment and finance. He was also responsible for the development and maintenance of the relationship with shareholders and public investors of Tianjin Development Holdings Limited. Prior to joining Tianjin Development Holdings Limited in March 1998, Dr. Dong was a Director of the Corporate Finance Division of Merrill Lynch (Asia Pacific) Limited, responsible for China corporate finance marketing, focusing on equity and debt underwriting, for participating and coordinating execution and advising corporate clients to identify and pursue business opportunities. Dr. Dong has substantial corporate finance, investment management and administrative experience both in Hong Kong and the PRC capital markets. He is also a director of China Insurance Group Assets Management Limited. Mr. Lau Siu Mun Sammy, aged 43, joined the Company in March He is responsible for the underwriting activities of the Company. Mr. Lau obtained a Bachelor of Business Administration degree from the Chinese University of Hong Kong in Mr. Lau is a Fellow of the Chartered Insurance Institute of the United Kingdom. Mr. Lau joined CIRe in July He was the Submanager, Manager of the Treaty Reinsurance Department, Assistant General Manager and Deputy General Manager of CIRe. Mr. Lau is also an Executive Director of SINO-RE. ANNUAL REPORT 2000

15 BIOGRAPHICAL DETAILS OF DIRECTORS AND COMPANY SECRETARY NON-EXECUTIVE DIRECTORS Mr. Zheng Changyong, aged 36, joined the Company in March Mr. Zheng joined CIHK in August 1997 and is currently the General Manager of the Finance and Accounts Department of CIHK. Mr. Zheng graduated from the University of Industry and Commerce of Beijing with a Masters degree in Economics. He has over 10 years experience in the insurance and accounting field. Dr. Wu Jiesi, aged 49, holds a Doctorate degree in Economics and was President of the Industrial and Commercial Bank of China, Shenzhen from 1992 to 1995, Deputy Mayor of Shenzhen Municipal Government (responsible for finance, tax revenue, securities, banking and education) from 1995 to 1998 and Assistant to the Governor of Guangdong Province from 1998 to February 2000, then he became the Chairman of Guangdong Enterprises (Holdings) Limited. He is also the Chairman of GDH Limited ( GDH ) and a director and the Honorary President of Guangdong Investment Limited, a subsidiary of GDH. Mr. Lau Wai Kit, aged 38, holds a Bachelor of Law degree and a Postgraduate Certificate in Law from the University of Hong Kong. Mr. Lau has over twelve years of experience in practising law and is a solicitor of the High Court of Hong Kong, an attorney and counselor at law of the Supreme Court of the State of California, a solicitor of the Supreme Court of England and Wales, and an advocate and solicitor of the Supreme Court of Singapore. Mr. Lau is currently the Chief Financial Officer of Asia2B.com Limited and an Independent Non-executive Director of Tianjin Development Holdings Limited. He also sits on the Innovation and Technology Fund (Biotechnology Projects) Vetting Committee and the Small Entrepreneur Research Assistance Programme Project Assessment Panel of the Hong Kong Government. COMPANY SECRETARY Mr. Tam Chiu Tai Richard, aged 47, is the Company Secretary and Financial Controller of the Company. Mr. Tam graduated from the Asia International Open University (Macau) in 1993 with a Masters degree in Business Administration. Mr. Tam is a Fellow of The Association of Chartered Certified Accountants of the United Kingdom and an Associate of the Hong Kong Society of Accountants. He is also a member of the British Institute of Management. Mr. Tam has been a Senior Manager of Toplap Investments Limited. Prior to April 1996, Mr. Tam was the Financial Controller of Hopewell Power (China) Limited for over six years. CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

16 REPORT OF THE DIRECTORS The directors have pleasure in submitting their annual report together with the audited accounts for the year ended 31 December GROUP REORGANISATION The Company was incorporated in Hong Kong with limited liability on 18 February 2000 under the Hong Kong Companies Ordinance. Pursuant to a reorganisation scheme to rationalise the Group structure in preparation for the listing of the shares of the Company on The Stock Exchange, the Company became the holding company of the Group on 26 May Details of the Group reorganisation are set out in note 1(b) to the accounts. The Group has been treated as a continuing entity and accordingly, the accompanying combined accounts have been presented on the basis set out in note 1(b) to the accounts. On 29 June 2000, the dealing in shares of the Company commenced on The Stock Exchange. PRINCIPAL ACTIVITIES The principal activity of the Company is investment holding. The principal activities of the Group are the underwriting of treaty and facultative reinsurance of all classes of general business, including non-marine and marine, and certain classes of long term business. The Group also carries on reinsurance broking and, to support its reinsurance activities, holds security, investments in money market and property investments. An analysis of the turnover and contribution to profit before taxation of the Group by principal activities and geographical area of operations for the year ended 31 December 2000 is as follows: Contribution Group to profit from turnover operations HK$ HK$ By principal activities: Reinsurance business 683,452,557 73,180,019 Brokerage business 7,591,722 5,764, ,044,279 78,944,668 Other group income, net of other expenses 39,869, ,814,491 ANNUAL REPORT 2000

17 REPORT OF THE DIRECTORS PRINCIPAL ACTIVITIES (Continued) Group turnover HK$ By geographical locations of operations Hong Kong and Macau 290,516,522 PRC (other than Hong Kong and Macau) 60,570,473 Japan 57,607,210 Rest of Asia 143,389,321 Sub-total for Asia 552,083,526 Europe 98,926,310 North America 20,007,215 South America 14,056,142 Australia 4,204,777 Africa 1,766, ,044,279 MAJOR CEDANTS AND RETROCESSIONAIRES The information in respect of the Group s gross premiums written and outward retrocession premiums attributable to the major cedants and retrocessionaires respectively during the financial year is as follows: Percentage of the Group s total Gross Outward premiums retrocession written premiums The largest cedant 7.1% Five largest cedant in aggregate 24.9% The largest retrocessionaire 6.3% Five largest retrocessionaires in aggregate 24.8% CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

18 REPORT OF THE DIRECTORS MAJOR CEDANTS AND RETROCESSIONAIRES (Continued) The five largest cedants in aggregate included amounts ceded by certain related parties. The aggregate amount ceded by them represent 16.3% of total gross premiums written. The directors confirm that these cedants are under the common control of China Insurance Company, Limited which is the ultimate holding company of the Company. Apart from the above, at no time during the year have the directors, their associates or any shareholder of the Company (which to the knowledge of the directors owns more than 5% of the Company s share capital) has any interest in these major cedants and retrocessionaires. ACCOUNTS The profit of the Group for the year ended 31 December 2000 and the state of the Company s and the Group s affairs at that date are set out in the accounts on pages 27 to 79. The directors have recommended the payment of a final dividend of HK4 cents per ordinary share in respect of the year ended 31 December FIXED ASSETS Details of the movements in fixed assets are set out in note 12 on the accounts. SHARE CAPITAL Details of the movements in share capital of the Company during the year are set out in note 25 on the accounts. Shares were issued during the year to broaden the capital base of the Company. RESERVES Details of movements in the reserves of the Company and the Group during the year are set out in note 26 to the accounts. ANNUAL REPORT 2000

19 REPORT OF THE DIRECTORS DISTRIBUTABLE RESERVES As at 31 December 2000, the Company s reserves available for cash distribution and/or distribution in specie amounted to HK$42.4 million. In addition, the Company s share premium account of HK$282.6 million as at 31 December 2000 may be distributed in the form of fully paid bonus shares. DIRECTORS The directors during the financial year were: Executive directors Yang Chao (appointed on 23 March 2000) Zhang Xiaoshu (appointed on 23 March 2000) Miao Jianmin (appointed on 23 March 2000) Ng Yu Lam Kenneth (appointed on 23 March 2000) Dong Ming (appointed on 25 May 2000) Lau Siu Mun Sammy (appointed on 23 March 2000) Non-executive directors Zheng Changyong (appointed on 23 March 2000) Wu Jiesi * (appointed on 25 May 2000) Lau Wai Kit * (appointed on 25 May 2000) * Independent In accordance with Articles 92, 96 to 100 of the Company s Articles of Association, Messrs Dong Ming, Zheng Changyong, Wu Jiesi and Lau Wai Kit retire from office and, being eligible, offer themselves for re-election at the forthcoming Annual General Meeting. The biographical details of directors and company secretary are set out in pages 12 to 14. CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

20 REPORT OF THE DIRECTORS DIRECTORS SERVICE CONTRACTS Messrs Yang Chao, Zhang Xiaoshu, Miao Jianmin, Ng Yu Lam Kenneth, Dong Ming and Lau Siu Mun Sammy have entered into service contracts with the Company on 29 May 2000 for an initial period of three years commencing from 1 April The respective contracts shall continue after their respective initial period unless and until terminated by either party to such contracts by giving three months written notice to the other party. No director proposed for re-election at the forthcoming Annual General Meeting has an unexpired service contract which is not determinable by the Company or any of its subsidiaries within one year without payment of compensation, other than normal statutory obligations. DIRECTORS INTERESTS IN SHARES As at 31 December 2000, none of the directors or their associates had any personal, family, corporate or other beneficial interests in the share capital of the Company or any of its associated corporations (within the meaning of the Securities (Disclosure of Interests) Ordinance (the SDI Ordinance )), which had been entered in the register kept by the Company pursuant to section 29 of the SDI Ordinance. As at 31 December 2000, the directors and their associates of the Company had the following personal interests in options to subscribe for shares of the Company (market value per share is HK$1.14 at the balance sheet date) granted at nominal consideration under a share option scheme of the Company as recorded in the register required under section 29 of the SDI Ordinance. Each option gives the holder the right to subscribe for one share. ANNUAL REPORT 2000

21 REPORT OF THE DIRECTORS DIRECTORS INTERESTS IN SHARES (Continued) No. of shares Price Market No. of acquired on per share value per options exercise to be share at outstanding Period during of options paid on date of at the which options during exercise grant of year end Date granted exercisable the year of options options Yang Chao 3,000, September September 2000 HK$1.11 HK$1.37 to 25 September 2010 Zhang Xiaoshu 2,500, September September 2000 HK$1.11 HK$1.41 to 27 September 2010 Miao Jianmin 2,000, September September 2000 HK$1.11 HK$1.37 to 25 September 2010 Ng Yu Lam 1,800, September September 2000 HK$1.11 HK$1.41 Kenneth to 27 September 2010 Dong Ming 1,500, September September 2000 HK$1.11 HK$1.40 to 26 September 2010 Lau Siu Mun 1,500, September September 2000 HK$1.11 HK$1.40 Sammy to 26 September 2010 Zheng Changyong 1,200, September September 2000 HK$1.11 HK$1.41 to 27 September 2010 No share options were exercised by the directors during the year. Apart from the foregoing, at no time during the year was the Company, any of its holding company, subsidiaries or fellow subsidiaries a party to any arrangement to enable the directors of the Company or any of their spouses or children under eighteen years of age to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

22 REPORT OF THE DIRECTORS SUBSTANTIAL INTERESTS IN THE SHARE CAPITAL OF THE COMPANY As at 31 December 2000, according to the register maintained by the Company under section 16(1) of the SDI Ordinance, the shareholders who had or were deemed to have interest in 10% or more of the ordinary shares in issue were as follow: Ordinary shares held Percentage of total issued shares China Insurance Company, Limited 555,872, % (note 1) China Insurance H.K. (Holdings) Company Limited 555,872, % (note 2) Notes: 1. China Insurance (PRC) s beneficial interest in the Company is held by CIHK and The Ming An Insurance Company (Hong Kong), Limited ( Ming An ), both of which are wholly-owned subsidiaries of China Insurance (PRC) ,794,000 shares are held by Ming An, a wholly-owned subsidiary of CIHK. Save as disclosed above, there was no person known to the directors who at 31 December 2000 was directly or indirectly interested in 10% or more of the ordinary shares in issue of the Company. DIRECTORS INTEREST IN CONTRACTS No contracts of significance to which the Company, any of its holding companies, subsidiaries or fellow subsidiaries was a party in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year. PURCHASE, SALE OR REDEMPTION OF THE COMPANY S LISTED SECURITIES During the year ended 31 December 2000, other than the allotment and issue of shares in connection with the Company s Initial Public Offering, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company s listed securities. ANNUAL REPORT 2000

23 REPORT OF THE DIRECTORS CONNECTED TRANSACTIONS Details of connected transaction under Chapter 14 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited ( The Listing Rules ) are set out in note 30 on the accounts. In the opinion of the independent non-executive directors, these transactions were entered into by the Group: (i) in the ordinary and usual course of its business; (ii) on terms that are fair and reasonable so far as the shareholders of the Company are concerned; (iii) on normal commercial terms and either (1) in accordance with the terms of the agreements governing such transactions; or (2) if there is no such agreement, on terms no less favourable than terms available to third parties; and (iv) within the proposed limits as laid down by The Stock Exchange which are applicable to the Company. A letter dated 6 April 2001 was received from the auditors of the Company confirming that the connected transactions of the Group received the approval of the Company s board of directors and have been conducted in the manner as stated in (iii) and (iv) stated above. FOUR YEAR SUMMARY A summary of the results and of the assets and liabilities of the Group for the last four financial years is set out on pages 80 to 81 of the accounts. PROPERTIES Particulars of the Group s properties held for own use and for investment purposes are set out in note 12 on the accounts. CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

24 REPORT OF THE DIRECTORS RETIREMENT SCHEMES The Group operates a defined contribution staff provident fund scheme ( The Scheme ) for its employees whereby the Group contributes to The Scheme at a rate ranging from 5.0% to 15.0% of the monthly salary of the eligible employees. The applicable rate of contribution depends on the completed years of service of the respective employees with the Group. The Group has no obligation for the payment of retirement benefits beyond the contributions described above. For any forfeited amount due to resignation prior to vesting of the benefits, the amount will be used to reduce the contributions made in that corresponding financial year. Contributions to The Scheme are charged to the profit and loss account as and when incurred. Contributions amounted to HK$1.2 million for the year ended 31 December 2000 (1999: HK$1.2 million). PRE-EMPTIVE RIGHTS There are no provisions for pre-emptive rights under the Company s Articles of Association which would oblige the Company to offer new shares on a pro rata basis to existing shareholders. CODE OF BEST PRACTICE No director of the Company is aware of any information which would reasonably indicate that the Company is not, or was not, at any time since the Company s shares were listed on The Stock Exchange on 29 June 2000, in compliance with the Code of Best Practice as set out in Appendix 14 to the Listing Rules, except that the non-executive directors were not appointed for a specific term, but are subject to retirement by rotation and re-election at the Company s Annual General Meeting in accordance with the Company s Articles of Association. AUDIT COMMITTEE In accordance with paragraph 14 of the Code of Best Practice as set out in Appendix 14 to the Listing Rules, the board of directors has established an audit committee on 29 May 2000 comprising two independent non-executive directors and a non-executive director. The audit committee is delegated with the responsibility of reviewing the Company s financial reporting and internal control systems. ANNUAL REPORT 2000

25 REPORT OF THE DIRECTORS USE OF PROCEEDS OF THE SHARE OFFER On 28 July 2000, the Company used HK$184.0 million from the proceeds of the share offer to increase the paid-up capital of CIRe and SINO-RE to HK$780.0 million and HK$5.0 million respectively. The rest of the proceeds have been kept to increase the working fund of the Company and to acquire high quality bonds to produce steady interest income. OVER-ALLOTMENT OPTION The Global Coordinator of the Company s initial public offering exercised the over-allotment option on 14 July 2000, which resulted in an additional issue of 44,580,000 ordinary shares of the Company at HK$1.43 per share. The additional shares issued represented approximately 5.0% of the Company s enlarged issued share capital immediately after the share offer and the exercise of the over-allotment option. AUDITORS KPMG were first appointed as auditors of the Company on 29 May KPMG will retire and, being eligible, offer themselves for reappointment. A resolution for the reappointment of KPMG as auditors of the Company is to be proposed at the forthcoming Annual General Meeting. By order of the board Zhang Xiaoshu Director Hong Kong, 9 April 2001 CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

26 REPORT OF THE AUDITORS Auditors report to the shareholders of China Insurance International Holdings Compan y Limited (Incorporated in Hong Kong with limited liability) We have audited the accounts on pages 27 to 79 which have been prepared in accordance with accounting principles generally accepted in Hong Kong. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The Hong Kong Companies Ordinance requires the directors to prepare accounts which give a true and fair view. In preparing accounts which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently, that judgements and estimates are made which are prudent and reasonable and that the reasons for any significant departure from applicable accounting standards are stated. It is our responsibility to form an independent opinion, based on our audit, on those accounts and to report our opinion to you. BASIS OF OPINION We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the Company s and the Group s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the accounts are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts. We believe that our audit provides a reasonable basis for our opinion. ANNUAL REPORT 2000

27 REPORT OF THE AUDITORS OPINION In our opinion, the accounts give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2000 and of the Group s profit and cash flows for the year then ended and have been properly prepared in accordance with the Hong Kong Companies Ordinance. KPMG Certified Public Accountants Hong Kong, 9 April 2001 CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

28 COMBINED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2000 Note $ $ Turnover 2 691,044, ,314,317 Reinsurance business Amount transferred from/(to) revenue account Non-life Non-proportional 128,641,153 (58,005,878) Proportional (55,674,606) 11,037,186 Life 213, ,812 73,180,019 (45,992,880) Brokerage business 2 7,591,722 4,183,342 Other revenue 3 87,522,848 80,381,045 Other net (loss)/income 4 (16,451,914) 75,282,605 Expenditure relating to non-underwriting activities 151,842, ,854, Administrative expenses (18,110,374) (18,095,830) Net exchange losses (14,917,810) (2,289,034) Provision written back on diminution in value of land and buildings 11,716,046 (33,028,184) (8,668,818) Profit from ordinary activities before taxation 5 118,814, ,185,294 Taxation 6(a) (1,084,847) (3,292,000) Profit attributable to shareholders 9 117,729, ,893,294 Dividends 10 (126,823,127) Retained profit/(loss) for the year 117,729,644 (24,929,833) ANNUAL REPORT 2000

29 COMBINED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2000 Note $ $ Earnings per share 11 Basic 15 cents 15 cents Diluted 15 cents N/A No separate combined statement of recognised gains and losses has been prepared as the net profit for the year would be the only component of this statement. The notes on pages 36 to 79 form part of these accounts. CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

30 REVENUE ACCOUNT OF NON-LIFE NON-PROPORTIONAL BUSINESS For the year ended 31 December 2000 Note $ $ Gross premiums written 2 146,175, ,893,829 Outward retrocession premiums (35,596,570) (23,497,093) Net written premiums 110,578,564 97,396, Insurance funds brought forward 227,722, ,716, Gross claims (112,551,682) (153,105,817) Less: Reinsurers share of claims 71,785,673 48,157,423 Net claims (40,766,009) (104,948,394) Commission expenses (10,674,426) (8,827,126) Interest income on premium deposits 82, , Management expenses (3,249,010) (2,935,045) Insurance funds carried forward (155,053,378) (227,722,712) Amount transferred to/(from) profit and loss account 128,641,153 (58,005,878) The notes on pages 36 to 79 form part of these accounts. ANNUAL REPORT 2000

31 REVENUE ACCOUNT OF NON-LIFE PROPORTIONAL BUSINESS For the year ended 31 December 2000 Note $ $ Gross premiums written 2 531,927, ,351,351 Outward retrocession premiums (111,401,538) (132,321,600) Net written premiums 420,525, ,029, Insurance funds brought forward 285,115, ,123, Gross claims incurred (396,849,773) (340,642,763) Less: Reinsurers share of claims 78,594,214 70,717,040 Net claims (318,255,559) (269,925,723) Commission income 43,180,219 49,819,348 Commission expenses (177,375,248) (171,991,409) Net commission (134,195,029) (122,172,061) Interest income on premium deposits 1,374,176 1,608, Management expenses (11,828,636) (12,511,636) Insurance funds carried forward (298,410,100) (285,115,020) Amount transferred (from)/to profit and loss account (55,674,606) 11,037,186 The notes on pages 36 to 79 form part of these accounts. CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

32 REVENUE ACCOUNT OF LIFE BUSINESS For the year ended 31 December 2000 Note $ $ Gross premiums written 2 5,350,363 3,885,795 Outward retrocession premiums (473,282) (563,820) Net written premiums 4,877,081 3,321, Life assurance fund brought forward 1,196,457 1,460,107 Life assurance fund carried forward (1,854,140) (1,196,457) (Increase)/decrease in life assurance fund (657,683) , Net earned premiums 4,219,398 3,585, Gross claims (3,641,093) (1,783,911) Less: Reinsurers share of claims 580,865 Net claims (3,060,228) (1,783,911) Commission income 115, ,581 Commission expenses (943,140) (910,144) Net commission (827,599) (731,563) Interest income Management expenses (119,033) (94,339) Amount transferred to profit and loss account 213, ,812 The notes on pages 36 to 79 form part of these accounts. ANNUAL REPORT 2000

33 COMBINED BALANCE SHEET At 31 December 2000 Assets Note $ $ Fixed assets Investment properties ,870, ,850,000 Other property, plant and equipment 12 65,261,677 65,919, ,131, ,769,485 Investments in securities 14 1,150,092,525 1,043,082,886 Amounts due from related parties 15 69,303,746 Trade and other receivables ,619, ,127,972 Pledged deposits at bank 18 17,522,378 31,522,024 Deposits at bank with original maturity more than three months 467,421 15,476,737 Cash and cash equivalents ,552, ,520,050 Liabilities 2,101,385,928 1,871,802, Insurance funds ,463, ,837,732 Life assurance fund 1,854,140 1,196,457 Amount due to an immediate holding company 15 4,000 Amount due to a related party 15 7,632 Provision for outstanding claims ,199, ,148,474 Trade and other payables 22 44,024, ,363,425 Taxation 6(b) 13,223,762 10,950,253 Deferred taxation ,829 3,460,000 1,146,092,905 1,327,956, Net assets 955,293, ,846,559 Capital and reserves Share capital 25 44,687, ,000,000 Reserves ,605,623 (57,153,441) Approved by the board of directors on 9 April 2001 ) Zhang Xiaoshu ) ) Directors Miao Jianmin ) ) The notes on pages 36 to 79 form part of these accounts. 955,293, ,846,559 CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

34 BALANCE SHEET At 31 December 2000 Note 2000 $ Assets Fixed assets 12 1,718,697 Investments in subsidiaries 13 33,542,008 Investments in securities 14 43,318,610 Amounts due from subsidiaries ,380,511 Trade and other receivables ,578 Cash and cash equivalents 19 16,948,814 Liabilities 442,214, Amount due to a related party 15 7,632 Amount due to a subsidiary 15 70,069,984 Trade and other payables 22 2,471,370 72,548, Net assets 369,665,232 Capital and reserves Share capital 25 44,687,400 Reserves ,977, ,665,232 Approved by the board of directors on 9 April 2001 ) Zhang Xiaoshu ) ) Directors Miao Jianmin ) ) The notes on pages 36 to 79 form part of these accounts. ANNUAL REPORT 2000

35 COMBINED CASH FLOW STATEMENT For the year ended 31 December 2000 Note $ $ $ $ Net cash outflow from operating activities 27(a) (12,675,808) (5,320,801) Returns on investments and servicing of finance Interest received 78,157,485 72,718,752 Interest paid (232) Dividends received from investments 5,575,749 3,709,442 Dividends paid (41,000,000) (24,200,000) Net cash inflow from returns on investments and servicing of finance 42,733,002 52,228,194 Taxation Hong Kong Profits Tax refunded 5,839, ,604 Hong Kong Profits Tax paid (7,794,921) (1,766,449) Tax paid (1,955,509) (1,114,845) Investing activities Payment for purchase of fixed assets (4,051,212) (440,624) Proceeds from sales of fixed assets 3,852,771 36,900 Payment for purchase of investment properties (1,977,297) (1,200,000) Proceeds from sales of investment properties 1,865,698 34,402,559 Payment for purchase of held-to-maturity securities (241,735,030) (308,212,192) Proceeds from sales of held-to-maturity securities 149,362, ,727,685 Payment for purchase of listed securities (326,005,577) (286,074,953) Proceeds from sales of listed securities 216,063, ,829,360 Receipts from repayment of mortgage and staff loans 33,597,318 38,594,121 Increase in loans and advances (15,767,740) (33,857,427) Decrease in pledged deposits at bank 13,999,646 10,665,025 Decrease in deposits at bank with original maturity more than three months 15,009,316 73,162,328 Net cash outflow from investing activities (155,785,677) (58,367,218) Net cash outflow before financing carried forward (127,683,992) (12,574,670) CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED

36 COMBINED CASH FLOW STATEMENT For the year ended 31 December 2000 Note $ $ $ $ Net cash outflow before financing brought (127,683,992) (12,574,670) forward Financing Shares issued 293,716,508 Net cash inflow from financing 293,716,508 Increase/(decrease) in cash and cash equivalents 166,032,516 (12,574,670) Cash and cash equivalents at 1 January 273,520, ,094,720 Cash and cash equivalents at 31 December ,552, ,520,050 The notes on pages 36 to 79 form part of these accounts. ANNUAL REPORT 2000

37 NOTES ON THE ACCOUNTS 1 SIGNIFICANT ACCOUNTING POLICIES (a) Statement of compliance These accounts have been prepared in accordance with all applicable Hong Kong Statements of Standard Accounting Practice ( SSAP ) and Interpretations issued by the Hong Kong Society of Accountants, accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. In so doing, these accounts have opted to adopt SSAP 9 (revised) Events after the balance sheet date and SSAP 14 (revised) Leases, which are mandatory for accounting periods beginning on or after 1 January 2001 and 1 July 2001, instead of SSAP 9 Accounting for post balance sheet events and SSAP 14 Accounting for leases and hire purchase contracts issued in 1984 and 1987 respectively. These accounts also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ( The Listing Rules ). A summary of the significant accounting policies adopted by the Group is set out below. (b) Reorganisation and basis of preparation of accounts The Company was incorporated in Hong Kong with limited liability on 18 February 2000 under the Hong Kong Companies Ordinance and through a reorganisation became the holding company of the Group on 26 May The Group has been treated as a continuing entity and accordingly the combined accounts have been prepared on the basis that the Company was the holding company of the Group for both years presented, rather than from 26 May The results of the Group for the years ended 31 December 1999 and 2000 include the results of the Company and its subsidiaries with effect from 1 January 1999 or since their respective dates of incorporation, where this is a shorter period. The combined balance sheet as at 31 December 1999 is a combination of the balance sheets of all the companies comprising the Group as at 31 December In the opinion of the directors, the resulting combined accounts give a more meaningful view of the results and state of the affairs of the Group as a whole. All material intercompany transactions are eliminated on combination. As the Company was incorporated on 18 February 2000, no comparative figures are presented in respect of the Company s balance sheet. The measurement basis used in the preparation of the accounts is historical cost modified by the revaluation of investment properties and land and buildings, and the marking to market of certain investments in securities as explained in the accounting policies set out below. CHINA INSURANCE INTERNATIONAL HOLDINGS COMPANY LIMITED