Satisfying Interests of International Investors and Stakeholders Presented

Satisfying Interests of International Investors and Stakeholders Presented by Davy Lee Past President (2002) The Hong Kong Institute of Chartered Secretaries May 2008

CONCERNS OF INVESTORS/STAKEHOLDERS 1. RISKS 2. LAW ENFORCEMENT 3. CORPORATE GOVERNANCE -1 -

LAW ENFORCEMENT 1. Common Law vs. Code Law Ball, R. , S. P. Kothari and A. Robin 2000. “The Effect of International Institutional Factors on Properties of Accounting Earnings”. Journal of Accounting and Economics 29, pp. 1 -51 Common Law : Better timeliness and higher conservatism : Disclosure based 2. Protection of Investors Ø Ø Property Laws: protection of ownership Protection of minority’s right 3. Regulators Ø Ø The Stock Exchange SEC -2 -

CORPORATE GOVERNANCE 1. Disclosure/Transparency Ø Information aymmetry (Information Risk) Ø Stock price informativeness (SPI) − Developed markets: higher SPI : less volatility - Emerging markets : lower SPI : more volatility 2. IFRS/Int’l Accounting Standards l Kim, J. -B. and H. Shi, 2007. “ International Financial Reporting Standards, Institutional Infrastructures, and Cost of Equity Capital around the World” SSRN Working Paper (The Hong Kong Polytechnic University) l Kim, J. -B. , J. S. L. Tsui and C. H. Yi, 2007. “The Voluntary Adoption of International Accounting Standards and Loan Contracting arcound the World. ” SSRN Working Paper (The Hong Kong Polytechnic University) -3 -

CORPORATE GOVERNANCE 3. Audit Quality l De. Angelo, L. , 1981. “Auditor Szie and Auditor Quality”, Journal of Accounting and Economics 1, pp 113 -127 l Hay, D. and Davis, D. , 2004. “The Voluntary Choice of an Auditor of any Level of Quality”, Journal of Practice & Theory 23, 2 (September), pp 37 -53 4. Foreign Institutional Investors l Gul, F. , J. -B. Kim, and A. Qiu, 2007. “Ownership Concentration, Foreign Shareholding, Audit Quality and Firm-specific Return Variation: Evidence from China. ” SSRN Working Paper (The Hong Kong Polytechnic University). l Kim, J. -B and C. H. Yi, 2007. “Does Trading by Foreign Investors Contribute more to Stock Price Informativeness then trading by Domestic Institutional Investors? Evidence from Korea. ” SSRN Working Paper (The Hong Kong Polytechnic University) -4 -

China Life Corporate Governance towards international best practice Oct. , 2006, Hong Kong -5 -

Agenda 1. Ownership Structure 2. Share Price Performance 3. Structural Governance 4. Changes in Corporate Governance since IPO 5. Stakeholders’ Focus 6. Indications of China Life Practice 7. What Next -6 -

Ownership structure China Life Insurance (Group) Company Public Shareholder 72. 2％ 20％ 40％ China Life Asset Management Company Limited 60％ 25％ 27. 8％ 60％ Pension Company 55％ P&C Company 40％ -7 -

Share price performance China Life vs. market indexes As of Sept. 19, 2006： Performance since Dec. 17, 2003: 2628 HK：+313. 8% HSCEI： + 66. 5% HSI： + 42. 3% Class action 2628 HK closed at HKD 15 per share China Life’s total capitalization reached HKD 401. 5 billion, which made China Life the largest listed life insurer and the 6 th largest listed insurer in the world First time to disclose EV in annual report corporate strategy conveyed to the capital market HSCEI HSI The global largest IPO in 2003 Announcement of appointing 3 additional independent non-executive directors on June 18, 2004 China Life Announcement of appointing Mr. Yang Chao as President on June 1, 2005 HSCEI Announcement of separating roles of Chairman and President on January 6, 2006 HSI source：Bloomberg；data as Sept. 19, 2006 -8 -

Structural governance Complete corporate governance structure Attributes General Meeting Board of Directors Audit Committee 3 INEDs Supervisory Committee Nomination and Remuneration Committee Risk Control Strategy Committee 2 INEDs 1 Non-executive Director 1 INED 1 Non-executive Director 1 Executive Director n 5 INEDs among 10 Directors of the board n All committees chaired by INEDs n The structure an principles of the corporate governance fully comply with regulations n Harmonization of corporate governance in line with regulatory requirements in China, Hong Kong and US n Strong supportive platform n Effective complementary by-laws, rules and policies regarding corporate governance Company Secretary, Board Secretary, Qualified Accountant Board Secretariat -9 -

Changes in corporate governance since IPO n Built up a complete corporate governance structure n Set up a decision making mechanism with board of directors at the core n Established a business development model focusing on profitability and value growth n Formulated clear strategy, objective and guideline policies n Transparent, timely and consistent disclosure policy n Strengthened risk management, internal control and compliance n Active investor relations -10 -

Stakeholders’ focus Stakeholders Shareholders ü Fundamentals performance üValue growth Policyholders Regulators ü Credibility ü Compliance ü Service ü Solvency ü Protection ü Policyholder Margin Employees ü Corporate Development ü Personal career dividend -11 -

Indications of China Life practice What good corporate governance matters n Add premium to share price n Establish an effective mechanism of check and balance n Ensure consistent strategy, sustainable growth and clear objectives n Improve transparency, internal control and compliance n Cultivate a corporate governance culture focusing on execution n Retain its corporate personality while acting in line with the international best practice 12

What next n Further optimize shareholder structure ü domestic listing in A share market ü introduce strategic investors n Further clarify role of the board and establish an effective corporate governance mechanism n Further identify governance boundaries n Continue to cultivate a corporate governance culture 13

Thank you！ -14 -

Recent Development of China Life 1. Concentrate on Investors Relationship − Regular visits with international institutional investors − Responsive in answering their questions − Roadshows to major financial markets 2. Foreign Institutional investors: Long Position in H-Shares (%) Deusche Bank 11. 06 HSBC 5. 32 JP Morgan 7. 50 KBC Group 5. 72 UBS 6. 24 - 15 -

Other Major Listed Companies in PRC Bank of Communication Co. Ltd. Foreign Investors HSBC Shareholding at IPO 19. 90% China Construction Bank Corp. Bank of America 8. 739% China CITIC Bank Corp. Ltd. Banco Bilbao Vizcaya Argentaria S. A. 7% (approx. ) - 16 -

Thank You - 17 -