2013 Annual Report CHINA TAIPING INSURANCE (MACAU) CO.,LTD.

CONTENTS PAGES REPORT OF THE CHAIRMAN 2 GENERAL INFORMATION 4 DIRECTORS REPORT 5 INDEPENDENT AUDITOR S REPORT 7 INCOME STATEMENT 10 BALANCE SHEET 11 STATEMENT OF CHANGES IN EQUITY 12 CASH FLOW STATEMENT 14 16 A.M. Best A.M. BEST AFFIRMS RATINGS OF CHINA TAIPING INSURANCE (MACAU) CO., LTD. 71 Annual Report 2013 01

REPORT OF THE CHAIRMAN Meng Zhaoyi Chairman 2013 20132012 18.61 9.3% 2013 5 11.4% 26.9% SUMMARY OF 2013 BUSINESS DEVELOPMENT In 2013, the general economic growth of Macau remained on track backed by the continual solid development of the tourism and gambling industries and the commencement of a number of mega gambling projects, which also brought positive effect to the insurance premium income of the general insurance market. However, the competition of the insurance industry has become more intense and growing more international, with lower growth in gross premiums of the Macau insurance industry recorded in 2013 as compared to that in 2012. According to the provisional statistics released, premiums from non-life insurance amounted to 1,861 million, representing a growth of 9.3% over the previous year. China Taiping Insurance (Macau) Co., Ltd. have been closely monitoring the changes of the market and the business development trends so as to provides its clients with diversified range of and comprehensive financial and insurance services. In 2013, the company maintained its leading position in the insurance market and recorded gross premiums of over 500 million, representing a growth of 11.4% and accounting for 26.9% of the total income in the nonlife insurance market in Macau. 02 China Taiping Insurance (Macau) Co., Ltd.

REPORT OF THE CHAIRMAN A.M. Best Co. Aa On the strengths of its stringent underwriting risk-screening strategies and pricing power, sustained and robust underwriting performance and sound corporate image, A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of a of the company. The outlook for both ratings, which are the highest among all locally registered insurance companies, is stable. China Taiping Insurance (Macau) Co., Ltd. will continue to vitalize its development on new products, develop new channels such as online sales, identify new breakthroughs in its scale of business activities; intensify its business analysis and avert operational risks; reinforce workflow and cost controls as well as improve their efficiency; promote training on professional knowledge towards its staff for better quality services. The excellent services of China Taiping serving Macau society for sixty-two years further ensure its brand name and guarantee satisfactory performance. I hereby express my deepest thanks to different sectors of the community who have supported our development for years and to all clients for their supports to the company in the past years. By Order of the Board Chairman Meng Zhaoyi 25 April 2014 Annual Report 2013 03

GENERAL INFORMATION LEADERSHIP STRUCTURE Executive Committee to the General Assembly Chairman: China Taiping International Company Limited (Representative: Meng Zhaoyi) Secretary: Wong Kuok Iong BOARD Chairman: Meng Zhaoyi Director: Jiang Yidao Director: Yang Yamei SUPERVISORY Chairman: Chen Mo Committee: Leung Kwok Kit Committee: Cheong Sio Tong MAJOR SHAREHOLDERS Name of Shareholder Shareholding % 948,000 79% China Taiping International Company Limited 04 China Taiping Insurance (Macau) Co., Ltd.

DIRECTORS REPORT 10 The directors present their annual report and the audited financial statements of China Taiping Insurance (Macau) Company Limited (the Company ) for the year ended 31 December 2013. PRINCIPAL ACTIVITY The principal activity of the Company is the underwriting of general insurance business. RESULTS AND APPROPRIATION The results of the Company for the year ended 31 December 2013 are set out in the income statement on page 10. 62.5 64.4 50,000,00051,500,000 An dividend of HK$62.5 (64.4) per share amounting to HK$50,000,000 (51,500,000) in aggregate was proposed by Board of Directors and approved by the shareholders during the year. DIRECTORS The directors of the Company during the year and up to the date of this report were: Meng Zhaoyi Jiang Yidao Yu Xiaodong (resigned on 6 November 2013) Yang Yamei (appointed on 7 November 2013) 10 11 There being no provision to the contrary in the Company s Articles of Association, all existing directors continue in office. PROPERTY AND EQUIPMENT AND INVESTMENT PROPERTIES Details of the movements during the year in property and equipment and investment properties of the Company are set out in notes 10 and 11 respectively to the financial statements. Annual Report 2013 05

DIRECTORS REPORT 18 SHARE CAPITAL Details of the share capital of the Company are set out in note 18 to the financial statements. 400,000 100 80,000,000120,000,000 400,000100 During the year, the authorised share capital of the Company was increased from 80,000,000 to 120,000,000 by the creation of an additional 400,000 shares of 100 each. At the same time, the Company issued 400,000 shares of 100 each by capitalising retained earnings of 40,000,000 in order to meet regulatory capital requirements. The issued shares rank pari passu with existing shares in all respects. DIRECTORS INTERESTS IN CONTRACTS OF SIGNIFICANCE No contract of significance, to which the Company or any of its holding companies or fellow subsidiaries was a party and 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. ARRANGEMENTS TO ACQUIRE SHARES AND DEBENTURES At no time during the year was the Company or any of its holding companies or fellow subsidiaries a party to any arrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. AUDITOR Messrs. Deloitte Touche Tohmatsu shall retire as auditor upon the expiration of its current term of office. A resolution for the reappointment or appointment of auditor of the Company for the financial year ended 31 December 2014 is to be proposed at the forthcoming annual general meeting. By order of the board Chairman Meng Zhaoyi Macau 25 April 2014 06 China Taiping Insurance (Macau) Co., Ltd.

INDEPENDENT AUDITOR S REPORT TO THE SHAREHOLDERS OF CHINA TAIPING INSURANCE (MACAU) COMPANY LIMITED (Incorporated in Macau with limited liability by shares) 1070 We have audited the financial statements of China Taiping Insurance (Macau) Company Limited (the Company ) set out on pages 10 to 70, which comprise the balance sheet as at 31 December 2013, and the income statement, the statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information. MANAGEMENT S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and the true and fair presentation of these financial statements in accordance with Financial Reporting Standards of Macau Special Administrative Region, the People s Republic of China ( Macau SAR ) and the Macau Insurance Ordinance. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; making accounting estimates that are reasonable in the circumstances; and maintaining adequate and accurate accounting records. In addition, Management has responsibilities to ensure that proper records have been maintained in accordance with the Macau Insurance Ordinance and to apply the Company s assets guaranteeing the technical reserves in accordance with the provisions of the Macau Insurance Ordinance. Annual Report 2013 07

INDEPENDENT AUDITOR S REPORT AUDITOR S RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit and to report our opinion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with the Auditing Standards approved by the Chief Executive of Macau SAR and the Technical Auditing Standards approved by the Secretary for Economy and Finance. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement. In addition, we are required to assess whether proper accounting records have been maintained in accordance with the Macau Insurance Ordinance and whether the economic transactions of the Company are properly and timely recorded in such records, and to report whether the Company has provided us with all the necessary information and explanations required, and whether we are aware of any contraventions of the Macau Insurance Ordinance with respect to assets guaranteeing the technical reserves. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company s preparation and true and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 08 China Taiping Insurance (Macau) Co., Ltd.

INDEPENDENT AUDITOR S REPORT OPINION In our opinion, the financial statements give a true and fair view, in all material respects, of the financial position of the Company as at 31 December 2013, and of its financial results and its cash flows for the year then ended in accordance with Financial Reporting Standards of Macau SAR and have been properly prepared in accordance with the Macau Insurance Ordinance. REPORT ON MATTERS UNDER THE MACAU INSURANCE ORDINANCE In our opinion, the Company s accounting records have been properly maintained in accordance with the Macau Insurance Ordinance and the economic transactions of the Company are properly and timely recorded in the Company s accounting records in respect of the year ended 31 December 2013. In addition, the Company has provided us with all the necessary information and explanations required. We are not aware of any instances during the year where any part of the Company s assets guaranteeing the technical reserves were applied in contravention of the provisions of the Macau Insurance Ordinance. Quin Va Quin Va Registered Auditor Partner Deloitte Touche Tohmatsu Sociedade de Auditores Macau 25 April 2014 Annual Report 2013 09

INCOME STATEMENT For the year ended 31 December 2013 2013 2012 NOTES Revenue gross premiums 5 478,087,135 426,298,523 Written premiums ceded to reinsurers (198,411,158) (162,439,667) Net premiums written 279,675,977 263,858,856 Increase in gross unearned premium reserve 14(b) (53,398,497) (64,096,132) Reinsurers share of change in unearned premium reserve 14(b) 33,053,462 29,604,780 (20,345,035) (34,491,352) Net premiums earned 259,330,942 229,367,504 Claims incurred (152,852,495) (154,538,426) Reinsurers share of claims incurred 21,937,646 36,453,550 Net claims incurred (130,914,849) (118,084,876) Commission expense (94,876,541) (77,952,199) Commission recoverable from reinsurers 58,248,745 39,183,788 Net commission expense (36,627,796) (38,768,411) Underwriting profit 91,788,297 72,514,217 Other income 6 22,203,552 17,914,667 Other gains or losses 6 (11,434,348) 24,058,670 Management expenses (50,926,238) (42,385,475) Profit before tax 51,631,263 72,102,079 Income tax expense 7 (5,711,460) (8,423,044) Profit for the year 8 45,919,803 63,679,035 Other comprehensive income Fair value gain on available-for-sale investments 2,198,177 44,385 Total comprehensive income for the year 48,117,980 63,723,420 10 China Taiping Insurance (Macau) Co., Ltd.

BALANCE SHEET At 31 December 2013 2013 2012 NOTES Assets Property and equipment 10 9,309,177 9,813,929 Investment properties 11 4,513,918 4,648,528 Club debenture 545,900 545,900 Investments in securities 12 484,966,023 316,874,905 Insurance receivables 13 78,548,614 58,927,411 Other receivables 24,032,399 6,358,472 Reinsurers share of insurance contracts provisions 14 145,915,501 110,929,279 Pledged and restricted deposits and bank balances 15 76,242,149 111,466,408 Cash at banks and in hand 16 112,602,765 142,423,460 Total assets 936,676,446 761,988,292 Liabilities Insurance contracts provisions 14 534,606,728 434,939,640 Insurance payables 17 68,818,449 48,289,767 Other payables 25,557,940 16,883,536 Tax liabilities 6,300,000 8,600,000 Dividend payable 9 51,500,000 Total liabilities 686,783,117 508,712,943 Net assets 249,893,329 253,275,349 Capital and reserves Share capital 18 120,000,000 80,000,000 Legal reserve 15,000,000 15,000,000 Investment revaluation reserve 2,242,562 44,385 Retained earnings 112,650,767 158,230,964 Total capital and reserves 249,893,329 253,275,349 10 70 The financial statements on pages 10 to 70 were approved and authorised for issue by the Board of Directors on 25 April 2014 and are signed on its behalf by: Meng Zhaoyi Chairman Jiang Yidao Managing Director Annual Report 2013 11

STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2013 Share capital Legal reserve Investments revaluation reserve Retained earnings Total NOTES At 1 January 2012 80,000,000 15,000,000 94,551,929 189,551,929 Profit for the year 63,679,035 63,679,035 Other comprehensive income for the year 44,385 44,385 Total comprehensive income for the year 44,385 63,679,035 63,723,420 At 31 December 2012 80,000,000 15,000,000 44,385 158,230,964 253,275,349 Profit for the year 45,919,803 45,919,803 Other comprehensive income for the year 2,198,177 2,198,177 Total comprehensive income for the year 2,198,177 45,919,803 48,117,980 Capitalisation of retained earnings 18 40,000,000 (40,000,000) Dividend declared 9 (51,500,000) (51,500,000) At 31 December 2013 120,000,000 15,000,000 2,242,562 112,650,767 249,893,329 12 China Taiping Insurance (Macau) Co., Ltd.

STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2013 Legal reserve Pursuant to Article 84 of the Macau Insurance Ordinance, the Company is required to set up a legal reserve based on the following percentages of net profit computed for each financial year: (i) 20% (i) 20%, until the total of this reserve equals one half of the minimum insurance share capital of 15,000,000 fixed 15,000,000 under Article 17 of the Macau Insurance Ordinance; and then (ii) 10% (ii) 10%, until the total of this reserve equals such minimum share capital. For the years ended 31 December 2013 and 2012, no reserve was transferred from retained earnings as the minimum legal reserve requirement was met. This reserve is non-distributable. 2 Investments revaluation reserve The investments revaluation reserve is comprised of the cumulative net change in the fair value of available-for-sale investments held at the end of the reporting period and is dealt with in accordance with the accounting policy set out in note 2. Annual Report 2013 13

CASH FLOW STATEMENT For the year ended 31 December 2013 2013 2012 NOTE Operating activities Profit for the year 45,919,803 63,679,035 Adjustments for: Income tax 5,711,460 8,423,044 Net unrealised losses (gains) on investments in securities 15,796,016 (30,701,490) Depreciation and amortisation 1,044,222 971,206 Interest income from bank deposits (2,685,357) (3,418,173) Interest income from listed and unlisted securities (17,038,370) (11,649,744) Dividend income from listed securities (1,303,871) (1,799,699) Rental income from investment properties (882,058) (787,635) Operating cash flows before movements in working capital 46,561,845 24,716,544 Decrease (increase) in investments held-for-trading and designated as at fair value through profit or loss 17,428,217 (8,396,864) Increase in insurance receivables (19,621,203) (37,071,099) (Increase) decrease in other receivables (16,062,974) 4,883,926 Increase in reinsurers share of insurance contract provisions (34,986,222) (36,545,181) Decrease (increase) in pledged and restricted deposits and bank balances 35,224,259 (29,439,685) Increase in insurance contract provisions 99,667,088 103,542,307 Increase in insurance payables 20,528,682 10,628,626 Increase in other payables 8,674,404 1,019,773 14 China Taiping Insurance (Macau) Co., Ltd.

CASH FLOW STATEMENT For the year ended 31 December 2013 2013 2012 NOTE Cash generated from operations 157,464,096 33,338,347 Interest received 18,112,774 11,106,576 Tax paid (8,011,460) (4,573,044) Net cash from operating activities 167,515,410 39,871,879 Investing activities Dividends received 1,303,871 1,799,699 Rental income received 882,058 787,635 Purchases of investments classified as loans and receivables and held-to-maturity investments (178,716,667) Purchases of available-for-sale investments (20,451,152) (23,133,800) Purchases of property and equipment (404,860) (429,381) Decrease in bank deposits with original maturity of more than 3 months 16,740,349 1,901,641 Net cash used in investing activities (180,595,756) (19,074,206) Cash used in financing activity Dividend paid (16,480,000) Net (decrease) increase in cash and cash equivalents (13,080,346) 4,317,673 Cash and cash equivalents at 1 January 84,190,109 79,872,436 Cash and cash equivalents at 31 December 16 71,109,763 84,190,109 Annual Report 2013 15

For the year ended 31 December 2013 1. 39810 1. GENERAL The Company is a private limited company incorporated in Macau Special Administrative Region, the People s Republic of China ( Macau SAR ). Its immediate holding company is China Taiping Insurance Holdings Company Limited and its ultimate holding company is China Taiping Insurance Group Ltd. ( TPG ), which are incorporated and listed in Hong Kong and the People s Republic of China, respectively. The address of the registered office and principal place of business of the Company is Alameda Dr. Carlos D Assumpcao, No. 398, Edificio CNAC, 10-andar, Macau. The Company is registered under the Macau Insurance Ordinance as an insurer to underwrite general insurance business in Macau. 2. The financial statements are presented in Macau Patacas ( ), which is also the functional currency of the Company. 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared on historical cost basis except for certain financial instruments, which are measured at fair values, as explained in the accounting policies set out below. 16 China Taiping Insurance (Macau) Co., Ltd.

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) These financial statements have been prepared in accordance with Financial Reporting Standards of Macau SAR and the Macau Insurance Ordinance. Financial Reporting Standards of Macau SAR comprise the following International Financial Reporting Standard ( IFRS ) and International Accounting Standards (IAS) (the April 2004 edition) adopted in Macau SAR: 1 1 2 7 8 10 11 12 16 17 18 21 23 36 37 38 Framework IFRS 1 IAS 1 IAS 2 IAS 7 IAS 8 IAS 10 IAS 11 IAS 12 IAS 16 IAS 17 IAS 18 IAS 21 IAS 23 IAS 36 IAS 37 IAS 38 Framework for the preparation and presentation of financial statements First-time adoption of IFRS Presentation of financial statements Inventories Cash flow statements Accounting policies, change in accounting estimates and errors Event after the balance sheet date Construction contracts Income taxes Property, plant and equipment Leases Revenue The effects of change in foreign exchange rates Borrowing costs Impairment of assets Provisions, contingent liabilities and contingent assets Intangible assets The Company has applied generally accepted accounting principles which are comparable with the latest IFRSs for those items where the recognition or measurement basis is not specified in the Financial Reporting Standards of Macau SAR. Annual Report 2013 17

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. Premiums from insurance contracts Premiums written on direct business are recognised as income when the risk of an insurance policy is incepted. Premium written on inward reinsurance business are recognised based on the latest information received from ceding companies. Dividend income Dividend income from investments is recognised when the shareholders rights to receive payment have been established. Interest income Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Classification of 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. 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 to the contract. Insurance contracts may also transfer some financial risk. 18 China Taiping Insurance (Macau) Co., Ltd.

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Classification of insurance contracts (Continued) 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 expire. Recognition and measurement of insurance contracts Unearned premium reserve Unearned premium reserve comprises the proportion of gross premiums written relating to the period of risk subsequent to the balance sheet date calculated on a time-apportioned basis. Reinsurers share of unearned premium reserve is calculated and presented separately in the financial statements. Claims Claims incurred in respect of general business consist of claims and claims handling expenses paid during the year together with the movement in the provision for outstanding claims. Outstanding claims reserve Provision is made for the estimated cost of claims notified but not settled at the balance sheet date and for the estimated cost of claims incurred but not reported ( IBNR ) by that date. Provision is also made for the estimated cost of servicing claims notified but not settled at the balance sheet date and IBNR at the balance sheet date. Annual Report 2013 19

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Recognition and measurement of insurance contracts (Continued) Reinsurance The Company cedes reinsurance in the normal course of business for the purpose of limiting its net loss exposure through the diversification of its risks. Assets, liabilities and income and expenses arising from ceded reinsurance contracts are presented separately from the assets, liabilities, income and expenses of the related insurance contracts because the reinsurance arrangements do not relieve the Company from its direct obligations to its policyholders. 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. Reinsurance premiums and claims recoverable are recognised on a gross basis. Reinsurance commissions recoverable are recognised as income in the income statement, when the related reinsurance contracts are accepted by the reinsurers. Premiums ceded to reinsurers are recognised as an expense on a basis that is consistent with the recognition basis for the gross premiums written on the related insurance contracts. Premiums ceded to reinsurers are expensed over the period that the reinsurance cover is provided based on the expected pattern of the reinsured risks. The unexpired portion of premiums ceded to reinsurers is included in the reinsurers share of unearned premium reserve. 20 China Taiping Insurance (Macau) Co., Ltd.

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Recognition and measurement of insurance contracts (Continued) Reinsurance (Continued) Recoveries due from reinsurance companies in respect of claims paid are classified as receivables and are included within the insurance receivables in the balance sheet. Reinsurers share of insurance contracts provisions represents the balance due from reinsurance companies for ceded insurance liabilities. It includes the reinsurers share of provision for unearned premiums and provision for outstanding claims reserve. Recoveries due from reinsurance companies are assessed for impairment at each balance sheet date (see accounting policy on impairment of financial and insurance-related financial assets). Liability adequacy test At each balance sheet date, the Company assesses its recognised 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 the estimated future cash flows, the entire deficiency is recognised in profit or loss. Annual Report 2013 21

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Property and equipment Property and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses. Depreciation is provided to write off the cost of items of property and equipment over their estimated useful lives and after taking into account of their estimated residual value, using the straight-line method. 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 income statement in the year in which the item is derecognised. Investment properties Investment properties are properties held to earn rentals. On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are stated at cost less subsequent accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost of investment properties over their estimated useful lives using the straight-line method. An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. 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 income statement in the year in which the item is derecognised. 22 China Taiping Insurance (Macau) Co., Ltd.

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 Company as lessor Rental income from operating leases is recognised in the income statement 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 straight-line basis over the lease term. Foreign currencies Transactions in currencies other than the functional currency of the Company (foreign currencies) are recorded in its functional currency at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet 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. Retirement benefit costs Payments to defined contribution retirement benefit plans are charged as an expense when employees have rendered service entitling them to the contributions. Annual Report 2013 23

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 of items of income or expense that are taxable or deductible in other years and 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 balance sheet date. 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, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date 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. 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. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. 24 China Taiping Insurance (Macau) Co., Ltd.

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments Financial assets and financial liabilities are recognised on the balance sheet 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 or 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 financial assets at fair value through profit or loss ( FVTPL ), held-to-maturity investments, loans and receivables and available-for-sale financial assets ( AFS ). 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 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 amounts on initial recognition. Interest income is recognised on an effective interest basis. Annual Report 2013 25

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (Continued) Financial assets (Continued) 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 an identified portfolio of financial instruments that the Company manages together and has a recent actual pattern of short-term profittaking; or it is a derivative that is not designated and effective as a hedging instrument. A financial asset other than a financial asset held-fortrading 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; 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 it forms part of a contract containing one or more embedded derivatives and the entire combined contract (asset or liability) is designated as at fair value through profit or loss. 26 China Taiping Insurance (Macau) Co., Ltd.

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (Continued) Financial assets (Continued) Financial assets at fair value through profit or loss (Continued) Financial assets at FVTPL 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 other income/other gains or losses line item in the income statement. 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 investments classified as loans and receivables, other receivables, pledged and restricted deposits and bank balances and cash at banks, are carried at amortised cost using the effective interest method, less any identified impairment losses (see accounting policy on impairment of financial and insurance-related financial assets below). Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Company has the positive intention and ability to hold to maturity other than: a) a) those that the entity upon initial recognition designates as at fair value through profit or loss; b) b) those that the entity designates as available for sale; and c) c) those that meet the definition of loans and receivables. Annual Report 2013 27

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (Continued) Financial assets (Continued) Held-to-maturity investments (Continued) The Company designated listed debt securities as heldto-maturity investments. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method, less any impairment (see accounting policy on impairment of financial and insurance-related financial assets below). Available-for-sale financial assets Available-for-sale ( AFS ) financial assets are nonderivatives that are either designated or not classified as financial assets at FVTPL, loans and receivables or heldto-maturity investments. Equity and debt securities held by the Company that are classified as AFS and are traded in an active market are measured at fair value at each balance sheet date. Changes in the carrying amount of AFS monetary financial assets relating to interest income calculated using the effective interest method and dividends on AFS equity investments are recognised in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognised in other comprehensive income and accumulated under the heading of investments revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss (see the accounting policy in respect of impairment of financial and insurancerelated financial assets below). Dividends on AFS equity instruments are recognised in profit or loss when the Company s right to receive the dividends is established. 28 China Taiping Insurance (Macau) Co., Ltd.

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (Continued) Financial assets (Continued) Available-for-sale financial assets (Continued) AFS 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 investments are measured at cost less any identified impairment losses at each balance sheet date (see the accounting policy in respect of impairment of financial and insurance-related financial assets below). Impairment of financial and insurance-related financial assets Financial assets, other than those at FVTPL, and insurance-related financial assets are assessed for indicators of impairment at each balance sheet date. Financial and insurance-related 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 asset, the estimated future cash flows of the asset have been affected. For the AFS equity investments, a significant or prolonged decline on the fair value of that investment below its cost is considered to be objective evidence of impairment. Annual Report 2013 29

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (Continued) Impairment of financial and insurance-related financial assets (Continued) 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 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 and insurance-related financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and 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. 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. The carrying amount of the financial and insurance-related financial assets is reduced by the impairment loss directly through profit or loss for all financial and insurance-related financial assets. 30 China Taiping Insurance (Macau) Co., Ltd.

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (Continued) Impairment of financial and insurance-related financial assets (Continued) 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. Impairment losses on available-for-sale equity investments will not be reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognised directly in other comprehensive income and accumulated in investments revaluation 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 the Company are classified according to the substance of the contractual arrangements entered into 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. Annual Report 2013 31

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial instruments (Continued) Financial liabilities and equity (Continued) Financial liabilities Financial liabilities, including dividend payable and other payables, are subsequently measured at amortised cost, using the effective interest method. 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 recognises its retained interest in the asset and an associated liability for amounts it may have to pay. 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 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. 32 China Taiping Insurance (Macau) Co., Ltd.

For the year ended 31 December 2013 2. 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of non-financial assets At each balance sheet date, 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 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. Where 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. 3. Cash and cash equivalents Cash and cash equivalents comprise bank balances and other short-term highly liquid investments that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value. 3. CAPITAL, INSURANCE AND FINANCIAL RISK MANAGEMENT Capital risk management The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders. In addition, statutory capital requirements are imposed by the Macau Insurance Ordinance. The Company complied with such requirements throughout the year. The Company s overall strategy remains unchanged from prior year. Annual Report 2013 33

For the year ended 31 December 2013 3. 3. CAPITAL, INSURANCE AND FINANCIAL RISK MANAGEMENT (Continued) Risk management objectives and policies The Company is principally engaged in the underwriting of general insurance business in Macau. The Company maintains a risk management framework which controls exposure to risks in connection with the underwriting business. The Underwriting Committee and Claims Committee identify, control and monitor the Company s exposure to the risks taken, and also recommend and implement necessary and reasonable measures to mitigate them. These committees consist of members from the management office and heads of relevant departments. The guidelines and decisions of these committees are implemented by the relevant departments. It is the Company s policy that these committees hold regular meetings to review and revise the Company s underwriting guidelines, claims procedures and business strategies from time to time. It is the Company s strategy to promote and maintain a culture of high level of professional standard, moral value and integrity. In adopting a rigorous approach to risk management, the Company requires that all employees must strictly observe and comply with the guidelines. Risk management objectives of the Company are: (i) (i) To reduce the uncertainty and volatility by controlling aggregate exposures and arranging adequate reinsurance. (ii) (ii) To have a clear, accurate and thorough understanding of the risks that the Company underwrites. (iii) (iii) To ensure adequate pricing of risks. (iv) (iv) To arrange prudent and adequate reinsurance with the reinsurers, approved by TPG, to protect the capital of the Company. 34 China Taiping Insurance (Macau) Co., Ltd.

For the year ended 31 December 2013 3. (v) 3. CAPITAL, INSURANCE AND FINANCIAL RISK MANAGEMENT (Continued) Risk management objectives and policies (Continued) (v) To ensure adequate reinsurance to support the development of the core insurance business of the Company. (vi) (vi) To observe, satisfy and comply with laws, the requirements of TPG and the internal guidelines. Members of the management office are appointed by TPG. Each member is given a specific delegated authority to conduct business of the Company according to the business plans approved by TPG. The management office follows a system of collective responsibility. The aim of establishing a risk management framework is to allow the Company to manage the following risks effectively: (i) (i) Risks directly associated with the core business of the Company, namely direct insurance underwriting and claims management. (ii) (ii) Risks directly associated with the other non- core operations of the Company, namely human resources, asset valuation, corporate and reinsurers for reinsurance outwards and information technology. (iii) (iii) Risks directly associated with funds management, namely, operational, cash flow, trading and security risks. The Company reviews and improves the risk management framework from time to time to protect the interests of shareholders and policyholders. Annual Report 2013 35