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Satisfying Interests of International Investors and Stakeholders

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. RISKS LAW ENFORCEMENT 3. CORPORATE GOVERNANCE. LAW ENFORCEMENT.

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Satisfying Interests of International Investors and Stakeholders

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

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

  3. LAW ENFORCEMENT • 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 • Protection of Investors • Property Laws: protection of ownership • Protection of minority’s right • Regulators • The Stock Exchange • SEC

  4. CORPORATE GOVERNANCE • Disclosure/Transparency • Information aymmetry (Information Risk) • Stock price informativeness (SPI) • Developed markets : higher SPI : less volatility • Emerging markets : lower SPI : more volatility • IFRS/Int’l Accounting Standards • 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) • 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)

  5. CORPORATE GOVERNANCE 3. Audit Quality • DeAngelo, L., 1981. “Auditor Szie and Auditor Quality”, Journal of Accounting and Economics 1, pp113-127 • 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 • Foreign Institutional Investors • 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). • 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)

  6. mruszczy: NEED LOGOS!! China Life Corporate Governance towards international best practice Oct., 2006, Hong Kong

  7. 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

  8. Ownership structure China Life Insurance (Group) Company Public Shareholder 72.2％ 27.8％ 20％ 60％ 40％ 25％ Pension Company China Life Asset Management Company Limited P&C Company 55％ 40％ 60％

  9. China Life vs. market indexes Share price performance As of Sept. 19, 2006： 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 6th largest listed insurer in the world 2628 HK Performance since Dec. 17, 2003: 2628 HK：+313.8% HSCEI： + 66.5% HSI： + 42.3% corporate strategy conveyed to the capital market Class action First time to disclose EV in annual report HSCEI HSI The global largest IPO in 2003 Announcement of appointing 3 additional independent non-executive directors on June 18, 2004 Announcement of appointing Mr. Yang Chao as President on June 1, 2005 Announcement of separating roles of Chairman and President on January 6, 2006 HSCEI HSI China Life source：Bloomberg；data as Sept. 19, 2006

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

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

  12. Stakeholders’ focus Stakeholders Shareholders Policyholders Regulators Employees • Fundamentals performance • Value growth • Credibility • Service • Protection • Policyholder dividend • Compliance • Solvency Margin • Corporate Development • Personal career

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

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

  15. Thank you！

  16. Recent Development of China Life • Concentrate on Investors Relationship • Regular visits with international institutional investors • Responsive in answering their questions • Roadshows to major financial markets • 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

  17. Other Major Listed Companies in PRC Foreign InvestorsShareholding at IPO Bank of Communication Co. Ltd. HSBC 19.90% China Construction Bank Corp. Bank of America 8.739% China CITIC Bank Corp. Ltd. Banco Bilbao Vizcaya 7% (approx.) Argentaria S.A.

  18. Thank You

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