great eastern holdings limited annual report 2007 · great eastern holdings limited annual report...

Great eastern HoldinGs limited annual report 2007

our missionTo make life great by providing financial security, and promoting good health and meaningful relationships.

our visionTo be the leading financial service provider in Asia, recognised for our excellence.

our core valuesIntegrityInitiativeInvolvement

contents08 Financial Highlights10 Chairman’s Statement14 Board of Directors18 Key Executives of the Group21 Corporate Governance Report33 CEO’s Report42 Year in Review45 Corporate Information46 Embedded Value

50 Directors’ Report and

Financial Statements145 List of Major Properties147 Shareholding Statistics149 Management Team151 Group Network156 Notice of AGM Proxy Form

We’re 100. Andit’snoaccident.We’velivedalonglifethroughgoodgovernance,betterplanningandbestpractices.Infact,iflastyear’sresultsareanythingtogoby,weexpecttokeepgoingforanothercentury.Attheveryleast.

Great eastern Holdings limited annual report 2007 1

Keep in sHapeMuscle–useitorloseit.Mostpeoplelose22%oftheirmusclemassbyage70throughinactivity.Wehoweverkeepinshapebymanagingourinvestmentsprudently.Pre-taxprofitfrominvestmentsintheShareholders’Fundtotalled$111.5millionlastyear.

GreatEastern’sstaffkeepinginshapeatFitnessFirst,OneGeorgeStreet.

nurture your friendsHip

Wehavemademanyfriendsandenrichedliveswithfinancialsecurityandpeaceofmind.Today,wearethelargestinsurancegroupinSingaporeandMalaysiawithoverthreemillionpolicyholders.

broaden your Horizon

Travellingbroadensthemindandrefreshesthespirit.Andweremainalerttonewoverseasmarketpossibilities.WehaveconsolidatedourfootholdinChongqing,ChinaandobtainedanoperatinglicenceinVietnam.

financial HiGHliGHts of tHe Group

Footnotes: (1) Turnover for the Group is derived from the summation of components as follows: (i) Gross

investment income, Interest income, Gain/(loss) on sale of investments (excluding fair value changes on fair value through profit and loss investments and investment properties) and Fees and other income from the Profit and Loss Statement; (ii) Gross premiums, Commission income, Gross investment income, Interest income, Rental income and Gain/(loss) on sale of investments (excluding fair value changes on fair value through profit and loss investments and investment properties) from the Life Assurance Revenue Statement and (iii) Gross premiums, Commission income, Gross investment income, Interest income and Gain/(loss) on sale of investments (excluding fair value changes on fair value through profit and loss investments and investment properties) from the General Insurance Revenue Statement.

(2) Effective from 1 January 2002, the Group adopted the Singapore Financial Reporting Standard No. 39, (“FRS 39”), Financial Instruments: Recognition and Measurement (previously known as Singapore Statement of Accounting Standard No.33, Financial Instruments: Recognition and Measurement) before its effective date (1 January 2005). From year 2002 onwards, all the financial highlights included the effects of adopting FRS 39, which accounts for all financial instruments at fair value in the financial statements.

In accordance with the transitional provisions of FRS 39, the pre-existing accounting policies

related to the recognition, derecognition and measurement of financial instruments, for periods prior to the adoption of FRS 39, are not reversed. Consequently, the financial highlights for the years 1997 to 2001 have not been restated.

(3) For year 2000, Turnover, Gross Premiums, Profit Attributable to Shareholders, Return on Equity, Gross Premium Growth, Basic Earnings per share and Diluted Earnings per share do not include those of OAC as the post acquisition results of OAC between 23 and 31 December 2000 were considered to be not material. However, Total Assets as at 31 December 2000 included those of OAC.

(4) Profit attributable to shareholders is derived after accounting for income tax and exceptional items.

1997 profit attributable to shareholders included an exceptional item of S$51.5 million. (5) With the adoption of the Singapore Financial Reporting Standard No. 10: Events after the

Balance Sheet Date (previously known as Singapore Statement of Accounting Standard No. 10: Events after the Balance Sheet Date) in 2001, Dividend Proposed for the year henceforth has been accounted for as an event after the balance sheet date. Shareholders’ Fund, Return on Equity, Net Asset Value per share and Dividend per share paid during the year for the years 1997 to 2000 have been restated accordingly.

(6) The Stock Exchange Prices and Market Capitalisation were obtained from Bloomberg.

(7) The average of the opening (1 January) and closing (31 December) balances of Shareholders’ Fund has been used in the computation of Return on Equity. As described in Footnote (3) above, the Profit Attributable to Shareholders for the year ended 31 December 2000 does not include that of OAC, hence the computation of Return on Equity for the year 2000 has been adjusted for the exclusion of equity from OAC (S$313.6 million) which was consolidated as at 31 December 2000.

(8) The Basic Earnings per share were based on the Group’s Profit Attributable to Shareholders

divided by total paid-up shares.

(9) The total number of ordinary paid-up shares for the years 1997 to 2000 was adjusted for the bonus issue and sub-division of ordinary shares of S$1 each, which took effect from 10 May 2000 and 25 May 2000 respectively. The two events resulted in the total number of paid-up ordinary shares of S$0.50 each, to be increased from 97,175,882 to 388,703,528. The Basic Earnings per share, Diluted Earnings per share, Net Asset Value per share and Dividend per share paid during the year and Dividend per share declared for the year has been recomputed to account for these changes.

For the year 2000, in addition to the two events, the acquisition of OAC which was effective on 23 December 2000, led to a further increase in the total number of paid-up ordinary shares of S$0.50 each as at 31 December 2000 from 388,703,528 to 471,290,369. As described in Footnote (3) above, the Profit Attributable to Shareholders for the year ended 31 December 2000 does not include that of OAC, hence the computation of Basic Earnings per share and Diluted Earnings per share for the year 2000 was based on 388,703,528 ordinary paid-up shares. However, Total Assets as at 31 December 2000 included those of OAC, hence the computation of Net Asset Value per share for the year 2000 was based on 471,290,369 ordinary paid-up shares.

(10) There were no dilutive or potentially dilutive shares prior to 1999.

(11) The economic value of one year’s new business per share tabulated above does not include the new business written in Brunei, Indonesia and China.

financial year ended 31 december 2007(2) 2006(2) 2005(2) 2004(2) 2003(2) 2002(2) 2001(2) 2000(2)&(3) 1999(2) 1998(2)

GROUPSTATISTICS (1) Turnover (S$millions) 9,225.3 7,922.2 7,098.8 7,904.9 6,052.4 6,555.4 6,535.9 3,928.4 4,084.4 2,202.5

Gross Premiums (S$millions) 5,997.7 5,417.5 5,030.2 5,374.9 5,055.9 5,271.7 5,680.5 3,037.6 2,593.8 2,225.8 (4) Profit Attributable

to Shareholders (S$millions) 546.9 476.9 372.9 402.0 312.2 233.8 202.2 180.1 221.1 76.7

Total Assets (S$millions) 46,515.4 42,025.9 39,228.6 36,323.3 32,351.7 27,346.3 23,833.7 19,119.5 13,800.0 10,887.7 (5) Shareholders’ Fund (S$millions) 3,285.8 2,935.4 2,629.3 2,324.7 2,024.0 1,630.0 1,531.2 1,407.5 971.8 763.1 (6) Stock Exchange Prices (S$) 16.60 17.00 14.70 13.00 10.70 8.50 9.95 5.55 4.85 2.25 (6) Market Capitalisation (S$millions) 7,857.1 8,046.4 6,957.8 6,153.1 5,044.6 4,006.0 4,689.3 2,615.7 1,885.2 874.6

Embedded Value (S$millions) 6,265.3 5,625.4 5,016.2 4,657.5 4,407.2 3,687.8 3,535.1 – – –

Economic Value of One

Year’s New Business (S$millions) 268.1 215.2 204.3 186.5 183.0 156.2 125.9 – – –

GROUPFINANCIALRATIOS (5) & (7) Return on Equity 17.6% 17.1% 15.1% 18.5% 17.1% 14.8% 13.8% 17.4% 25.5% 11.4%

Gross Premium Growth 10.7% 7.7% –6.4% 6.3% –4.1% –7.2% 87.0% 17.1% 16.5% 7.0%(8) & (9) Basic Earnings per share (S$) 1.16 1.01 0.79 0.85 0.66 0.49 0.43 0.46 0.57 0.20 (9) & (10) Diluted Earnings per share (S$) 1.16 1.01 0.79 0.85 0.66 0.49 0.43 0.46 0.57 – (5) & (9) Net Asset Value per share (S$) 6.94 6.20 5.56 4.91 4.29 3.46 3.25 2.99 2.50 1.96

Embedded Value per share (S$) 13.237 11.885 10.598 9.840 9.348 7.825 7.501 – – – (11) Economic Value of One Year’s

New Business per share (S$) 0.564 0.454 0.432 0.394 0.388 0.330 0.266 – – – (5) & (9) Gross dividend per share

paid during the year (cents) 70.0 50.0 35.0 30.0 21.0 17.0 17.0 17.1 4.5 4.7

8

GrOSSPrEMIuMSS$Billions

PrOFITATTrIbuTAblETOShArEhOldErSS$Millions

ShArEhOldErS’FundS$Billions

TurnOVErS$Billions

1998

2003

2004

2005

2006

2007

2.20

6.05

7.90

7.10

7.92

9.23

1998

2003

2004

2005

2006

2007

2.23

5.06

5.37

5.03

5.42

6.00

1998

2003

2004

2005

2006

2007

76.7

312.2

402.0

372.9

476.9

546.9

1998

2003

2004

2005

2006

2007

0.76

2.02

2.32

2.63

2.94

3.29

ECOnOMICVAluEOFOnEyEAr’SnEWbuSInESSS$Millions

EMbEddEdVAluES$Billions

2002

2003

2004

2005

2006

2007

3.69

4.41

4.66

5.02

5.63

6.27

2002

2003

2004

2005

2006

2007

156.2

183.0

186.5

204.3

215.2

268.1

TOTAlASSETSS$Billions

1998

2003

2004

2005

2006

2007

10.89

32.35

36.32

39.23

42.03

46.52

GrOSSdIVIdEndPErShArECents

1998

2003

2004

2005

2006

2007

4.7

21.0

30.0

35.0

50.0

70.0


micHael WonG paKsHonGChairman

cHairman’s statement

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FInAnCIAlPErFOrMAnCEWith the increased Group profit for 2007, our Group’s earnings

per share increased 15% to S$1.16 at 31 December 2007 (2006: S$1.01), and return on equity was 17.6% (2006: 17.1%).

The stellar performance for 2007 was due principally to a 33% increase in profit from insurance operations to S$537.3 million, compared with S$403.5 million in 2006, contributed mainly by the Participating and the Non-participating Life Insurance Funds of our Group’s principal insurance subsidiaries, The Great Eastern Life Assurance Company Limited (“Great Eastern Life”) and The Overseas Assurance Corporation Limited in Singapore and Great Eastern Life Assurance (Malaysia) Berhad in Malaysia.

The strong results have special significance to us as our Group celebrates Great Eastern’s centenary this year. In the light of this, we have announced that the above insurance subsidiaries will be giving a one-off special bonus for the year 2007. The special bonus will be given to eligible Participating Regular Premium Whole Life and Endowment policies bought by policyholders. This will be given in addition to the usual annual reversionary and cash bonuses declared for all Participating Life policies. The substantial increase in profit from the Participating Fund for the financial year 2007 was largely attributable to the shareholders’ proportionate share of profit after declaration of the one-off special bonus in December 2007. Increased profit from the Non-participating Fund included profits from sale of investments.

Fees and other income for 2007 increased 31% to S$105.6 million (2006: S$80.9 million) due mainly to increase in assets under management of our Group’s asset management subsidiary, Lion Capital Management Limited, and increase in performance incentive fees received from certain of its managed accounts.

Our Group’s total assets as at 31 December 2007 grew 11% over the previous year to S$46.5 billion (31 December 2006: S$42.0 billion). Net asset value improved 12% to S$6.94 per share as at 31 December 2007, up from S$6.20 per share a year ago.

I am pleased to report that the financial year 2007 was another successful year for Great Eastern Holdings Limited Group. Our Group achieved a new record profit attributable to shareholders of S$546.9 million, an increase of 15% over S$476.9 million in 2006.

dIVIdEndSThe Board is pleased to recommend, for approval at the

Annual General Meeting (“AGM”), the payment of a final tax exempt (one-tier) dividend of 16 cents per ordinary share and a special final tax exempt (one-tier) dividend of 26 cents per ordinary share.

The total dividend payout in respect of financial year 2007, including an interim dividend of 16.12 cents net of tax per ordinary share paid on 6 September 2007, would amount to 58.12 cents per ordinary share (2006: 48.96 cents). The total payment in respect of financial year 2007 would be S$275.1 million, compared to S$231.73 million in respect of 2006.

rEGulATOrydEVElOPMEnTSInSInGAPOrEAndMAlAySIAAFFECTInGThEInSurAnCEInduSTry

On 29 June 2007, The Monetary Authority of Singapore (“MAS”) issued MAS Notice 320 for an enhanced framework relating to the governance and disclosure of Participating (“Par”) Life insurance business. It aims to strengthen the internal governance practices on the management of the Par fund, and to enhance the disclosure standards to Par policyholders. Under the new framework, insurers are required to put in place, with effect from 1 January 2008, Board-approved internal governance policies on the management of Par business, and provide more information in the annual bonus update to Par policyholders, including information on how the Par fund has performed, the projected outlook and how the past experience and future outlook will impact bonuses to be declared in the future. In addition, with effect from 1 March 2008 insurers are required to provide more comprehensive product summaries at the point of sale.

Sales charges on products qualifying to be included under the Central Provident Fund Investment Scheme have since 1 July 2007 been subject to a lower sales charge cap of 3% of invested amounts, as compared to previous sales charges of up to 5%.


In Malaysia, Bank Negara Malaysia introduced the Risk Based Capital (“RBC”) framework in April 2007 for implementation by Malaysian insurers, with full implementation by 1 January 2009. The RBC framework aims to provide a more realistic measure of an insurer’s financial strength by requiring an insurer to maintain a capital adequacy level that is commensurate with its risk profile.

In September 2007, the Malaysian Finance Ministry announced a tax allowance against double taxation on the shareholders’ portion on the investment income and profit from the realisation of investments of the Life Insurance Fund. This will take effect from the year of assessment 2008.

ACCOlAdESIn2007Great Eastern Holdings Limited is, for the third year running, one

of the top 100 ranked companies in the Singapore International 100 Ranking 2007, held in July 2007 by IE Singapore with DP Information in collaboration with The Business Times. We are in the 13th position in overall ranking, with S$2.7 billion in overseas turnover in 2006, and in the 2nd position in the Southeast Asia sector.

Great Eastern Life’s electronic point-of-sale system, Electronic Mobile Advisory Solution (“E-MAS”), won the Financial Insights Innovation Award 2007 for “Innovation in Operational Process”. It is one of only 10 financial institutions in the Asia Pacific region to receive this prestigious award. Great Eastern Life is the first insurer in the region to have received accolades in recognition of its achievement in implementing the E-MAS and going paperless in relation to insurance proposals which are e-submitted by its agents and life planners, greatly improving operational efficiency and enhancing customer service.

COrPOrATESOCIAlrESPOnSIbIlITyThrough the years, our Group has reinforced its corporate social

responsibility, and our staff, agents and life planners have continued to organise charitable and fund raising events, including the Great Eastern Charity Golf Challenge, for the Group’s community projects, ChildrenCare in Singapore and Malaysia and also GoldenCare in

Singapore. In particular, Great Eastern has raised funds annually for two children charities and two elderly homes under the Community Chest in Singapore. As part of Great Eastern’s centennial celebrations this year, it targets to raise S$1 million for charity.

lOOKInGAhEAdrEInFOrCInGOPErATIOnSInESTAblIShEdMArKETS

Amidst a backdrop of intense competition and a more uncertain economic environment in 2008, our Group will continue to expand, enhance and reinforce our operations, including product innovation, in our established markets in Singapore and Malaysia where Great Eastern has maintained its market leadership. The Group’s overall performance will continue to be affected by local, regional and global economic conditions. Interest rate trends will have a direct impact on our Non-participating Fund.

We will continue to look for value-accretive opportunities and growth in profit, and further enhance co-operation with our parent company, Oversea-Chinese Banking Corporation Limited (“OCBC Bank”), to strengthen synergies in revenue-generation and cost-reduction, and maintain our position as the leading distributor of bancassurance products in Singapore.

STrEnGThEnInGrEGIOnAlPrESEnCERegionally, besides Malaysia, we will continue to build and

strengthen our regional presence in China, Indonesia and Vietnam. Our 50%-held joint venture in Chongqing, Great Eastern Life Assurance (China) Ltd, has recently received approval from the China Insurance Regulatory Commission to set up its first branch office in Chongqing and we have increased efforts to enhance the operations and build up its agency force. In Indonesia, our Indonesian subsidiary, PT Great Eastern Life Indonesia (“GELIndo”), has entered into an exclusive partnership with OCBC Bank’s Indonesian subsidiary, PT Bank NISP Tbk, in late 2007 to distribute certain of our insurance products exclusively throughout their branches in Indonesia. This exclusive partnership is expected to give a significant boost to GELIndo’s business premiums in

12

2008, and improve its profitability. In Vietnam, Great Eastern Life received the Establishment and Operating Licence in December 2007 and its wholly-owned subsidiary, Great Eastern Life (Vietnam) Co Ltd, is expected to commence insurance business operations in the later part of 2008.

ACKnOWlEdGEMEnTSAt the Company’s AGM in 2007, Mr Ho Tian Yee stepped

down as the Company’s Director due to other increased demands on his time. He had served as a Director of the Company since December 2000. I wish to thank him on behalf of the Board for his invaluable contribution to our Group over the years and wish him well in his endeavours.

It is with much sadness that we record the passing of Mr Howe Yoon Chong on 21 August 2007. The late Mr Howe was a former Director of Great Eastern Life since mid-October 1991 and was the former Executive Chairman of the Group from May 1992 till late April 2000. We are deeply indebted to him for being a visionary leader to our Group during his chairmanship, for his wise counsel and the strategic changes that he made to the Group’s insurance subsidiaries to consolidate the operations and strengthen the management, positioning the Group to take on the challenges of the 21st century. I wish to place on record our gratitude, and we pay tribute to the late Mr Howe Yoon Chong.

The Board extends a very warm welcome to our new Director, Mr Koh Beng Seng, who joined the Board on 2 January 2008. Mr Koh has wide experience in the banking and financial services sector. We look forward to his contribution to the Group.

I would like to thank my fellow Board members for their constructive comments in our deliberations, and for their unstinting support. It has been a privilege for me to have served on the Board of Great Eastern for the past twenty five years, eight of which as Chairman of the Group. Together we have continued to strengthen the Group and its brand name. On my retirement as a Director (under section 153 of the Companies Act) at this coming AGM, I do not intend to seek re-appointment as a Director. During

this year of Great Eastern’s centennial celebrations it is opportune for me to pass the baton to my successor to lead the Group into our second century.

I also wish to express my appreciation and thanks to management, staff and agency force whose conscientious commitment, zeal and dedication are equally important ingredients to the Group’s achievements and success. The able leadership of the Group CEO Mr Tan Beng Lee has inspired a vibrant team spirit and the Group is well placed to meet all challenges and competition.

Another Chairman will be appointed to lead the Group to greater heights. It leaves me now to place on record my gratitude to our shareholders, customers and business partners for their strong and continuing support all these years.

micHael WonG paKsHonGChairman12 March 2008


board of directors

micHael WonG paKsHonGChairmanMr Wong was first appointed to the Board of Great Eastern Holdings Limited (the “Company”) on 28 September 1999, and last re-appointed as the Company’s Director on 17 April 2007. He has been the Company’s Chairman since April 2000. Mr Wong is a Director of The Great Eastern Life Assurance Company Limited (“Great Eastern Life”) since 1983, and its Chairman since April 2000, and Chairman of The Overseas Assurance Corporation Limited (“OAC”) since January 2001. He is also Chairman of the Company’s principal Malaysian subsidiaries, Great Eastern Life Assurance (Malaysia) Berhad (“GELM”) and Overseas Assurance Corporation (Malaysia) Berhad (“OACM”). He is Vice Chairman of Oversea-Chinese Banking Corporation Limited (“OCBC Bank”). He also serves as a Director in several companies, including The Straits Trading Company Limited, WBL Corporation Limited and Bukit Sembawang Estates Limited. He was previously Chairman of Robinson & Company Limited (till mid-October 2006), Director of Jaya Holdings Limited (till early January 2007) and Director of Sime Darby Berhad (till 26 November 2007).

Mr Wong holds a Bachelor of Arts (Hons) and a Hon LLD from the University of Bristol, United Kingdom. He is also a Fellow of the Institute of Chartered Accountants in England & Wales and a Member of the Institute of Certified Public Accountants in Singapore.

tan benG leeGroupChiefExecutiveOfficerMr Tan was first appointed to the Company’s Board on 23 November 2000 and last re-elected as the Company’s Director on 29 March 2005. He is the Executive Director and Group Chief Executive Officer of the Company, of Great Eastern Life and OAC and has been on the Board of Great Eastern Life since November 1997 and of OAC since January 2001. He is Chairman of Lion Capital Management Limited, the Company’s wealth management subsidiary, and a Director on the Board of GELM and OACM, and Chairman of Alpha Financial Advisers Private Limited. He also serves as a Director of Singapore Reinsurance Corporation Limited. He was formerly a Director of Singapore Health Services Private Limited (till mid-April 2006), and was a former Governor of the Singapore College of Insurance.

Mr Tan holds a Bachelor of Science (First Class Hons) in Mathematics from the University of Singapore and a Master of Science from Northeastern University, USA, and is a Fellow of the Society of Actuaries, USA.

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dr cHeonG cHoonG KonGDr Cheong was first appointed to the Board of the Company and its principal Singapore insurance subsidiaries, Great Eastern Life and OAC, on 7 January 2005 and was last re-elected as the Company’s Director on 17 April 2007. He is Chairman of OCBC Bank and OCBC Management Services Private Limited. He was previously a Director of United Eagle Airlines Co Limited (till 14 July 2006), Singapore Press Holdings Limited (up to 4 December 2007) and Singapore Airlines Limited (“SIA”) till June 2003, the last 19 years of which as SIA’s Managing Director and Chief Executive Officer.

Dr Cheong holds a Bachelor of Science (First Class Hons) in Mathematics from the University of Adelaide and a Master of Science and a Ph.D in Mathematics from the Australian National University, Australia.

david connerMr Conner was first appointed to the Board of the Company and its principal Singapore insurance subsidiaries, Great Eastern Life and OAC, on 7 January 2005 and was last re-elected as the Company’s Director on 17 April 2007. Mr Conner is the Chief Executive Officer and Director of OCBC Bank, a Director of OCBC Bank (Malaysia) Berhad, OCBC Overseas Investments Pte Ltd, the International Monetary Conference and KTB Ltd. He is Chairman and Director of Bank of Singapore Limited, Deputy Chairman and Director of Lion Capital Management Limited, Commissioner of PT Bank NISP Tbk, Indonesia and Chairman of the Council of the Association of Banks in Singapore. He also serves as a member of the Advisory Committee of the MAS Financial Sector Development Fund, the Council of the Singapore Business Federation, the Advisory Board of the Lee Kong Chian School of Business, the Asia Pacific Bankers Club, and The f-Next Council of the Institute of Banking & Finance. He is on the Board of Trustees of Washington University in St. Louis and Chairman of its International Advisory Council for Asia. Before joining OCBC Bank in 2002, Mr Conner previously worked for more than 25 years with Citibank N.A., where he served as Managing Director and Market Manager for Citibank Japan from 1999 to early 2002.

Mr Conner holds a Bachelor of Arts from Washington University in St. Louis and a Master of Business Administration from Columbia University, USA.

KoH benG senGMr Koh was appointed to the Board of the Company on 2 January 2008. Mr Koh is the Chief Executive Officer of Octagon Advisors Pte Ltd. He is also a Director of Singapore Technologies Engineering Limited, Fraser and Neave, Limited, BOC Hong Kong (Holdings), Bank of China (Hong Kong) Limited, Sing-Han International Financial Services Limited and Japan Wealth Management Securities Co Ltd. He was previously Deputy President of United Overseas Bank Ltd (“UOB”) (till 31 January 2005) and a Director of UOB and Far Eastern Bank Ltd (till 15 February 2005). Mr Koh was previously, for 24 years till 1998 with the Monetary Authority of Singapore (“MAS”), his last appointment being Deputy Managing Director, Banking and Financial Institution Group. After he left MAS in 1998, he was an advisor to the International Monetary Fund (from 1998 to 2000) to reform Thailand’s financial sector. Mr Koh holds a Bachelor of Commerce (First Class Hons) from the former Nanyang University, Singapore, and a Master of Business Administration from Columbia University, USA.


lee senG WeeMr Lee was first appointed to the Board of the Company on 28 September 1999 and last re-appointed as the Company’s Director on 17 April 2007. He has been on the Board of Great Eastern Life since February 1975 and of OAC since January 2001. Mr Lee is a Director of OCBC Bank since 1966 and was previously its Chairman from August 1995 to June 2003. He is also a Director of GIC Real Estate Private Limited, Lee Rubber Group of companies and Lee Foundation.

Mr Lee holds a Bachelor of Applied Science in Engineering from the University of Toronto and a Master of Business Administration from the University of Western Ontario, Canada.

lee cHien sHiHMr Lee was first appointed to the Board of the Company and its principal Singapore insurance subsidiaries, Great Eastern Life and OAC, on 7 July 2005 and was last re-elected as the Company’s Director on 18 April 2006. He is a Director of the Lee Rubber Group of companies, Lee Foundation, Bukit Sembawang Estates Limited and West Pacific Medical Services Pte Ltd. He was previously a Director of Frasers Centrepoint Limited (formerly Centrepoint Properties Limited) (till 22 February 2007).

Mr Lee holds a MBBS from the National University of Singapore.

tan sri dato’ dr lin see-yanTan Sri Dato’ Dr Lin was first appointed to the Board of the Company on 28 September 1999 and last re-elected as the Company’s Director on 18 April 2006. He is also on the Board of Great Eastern Life and OAC. He is Chairman of Cabot (Malaysia) Sdn. Bhd. and KrisAssets Holdings Berhad, and a Director of several companies in Singapore and Malaysia, including The Straits Trading Company Limited, Silverlake Axis Limited, Fraser & Neave Holdings Berhad, Ancom Berhad, Genting Berhad, Resorts World Berhad, Wah Seong Corporation Berhad and JobStreet Corporation Berhad. He serves as Advisor to the Private Investment Panel (of the Malaysian Prime Minister’s Department) and is a Member of the National Committee to Transform Higher Education in Malaysia; he is also Pro-Chancellor of Universiti Sains Malaysia, Professor of Economics (Adjunct) of Universiti Utara Malaysia, and Economic Advisor to the Associated Chinese Chambers of Commerce and Industry in Malaysia. He is President of the Harvard Club of Malaysia, Regional Director for Asia Harvard Alumni Association, and a Member of Graduate School Alumni Association Council at Harvard University.

Tan Sri Dato’ Dr Lin has a BA (Hons) from the University of Malaya in Singapore and holds, from Harvard University, USA, a MPA (Finance), MA (Economics) & Ph.D (Economics). He is also a Chartered Statistician, Fellow of the Royal Statistical Society, London, Fellow (Hon) of the Malaysian Insurance Institute, and Fellow of the Malaysian Institute of Bankers.

16

professor neo boon sionG Professor Neo was first appointed to the Board of the Company on 23 November 2000 and last re-elected as the Company’s Director on 18 April 2006. He is also a Director of Great Eastern Life and OAC. He is presently Director of the Asia Competitiveness Institute at the Lee Kuan Yew School of Public Policy, National University of Singapore. Professor Neo is also a Director of OCBC Bank, Keppel Offshore & Marine Limited, J.Lauritzen Singapore Private Limited and English Xchange Private Limited, and a Member of Securities Industry Council, Goods and Services Tax Board of Review and Income Tax Board of Review. He was previously Professor and Dean at the Nanyang Business School, Nanyang Technological University, Singapore.

Professor Neo holds a Bachelor of Accountancy (Hons) from the National University of Singapore and a Master of Business Administration and Ph.D from the University of Pittsburgh, USA.

tan yam pinMr Tan was first appointed to the Board of the Company and its principal Singapore insurance subsidiaries, Great Eastern Life and OAC, on 7 January 2005 and last re-elected as the Company’s Director on 17 April 2007. Mr Tan is also non-executive Chairman of Power Seraya Limited and Singapore Food Industries Limited, and a Director of Singapore Post Limited, Keppel Land Limited, Certis Cisco Security Private Limited and Blue Scope Steel Limited (Australia). He is also a Member of the Singapore Public Service Commission since 1990. He was previously a Director of East Asiatic Company Limited A/S (Denmark) (till end March 2006).

Mr Tan holds a Bachelor of Arts (Hons) from the University of Singapore and a Master of Business Administration from the University of British Columbia, Canada. He is a Fellow of the Canadian Institute of Chartered Accountants, Canada.


Key executives of tHe Group

tan benG lee

alex foonG

HauW soo Hoon

tan HocK lye

loH sooK mee tan cHinG Guei

cHianG boon KonG

tan HaK leH

nG KoK KHenGKoH yaW Hui

18

tan benG leedirector&GroupChiefExecutiveOfficer

HauW soo Hoon (mrs)SeniorManagingdirector,EstablishedMarketsJoined Great Eastern in 2006. Responsible for overseeing and strengthening the leadership in the Group’s insurance business in the established markets which currently cover Singapore and Malaysia. Has about 30 years of experience in the insurance industry in Singapore and the United Kingdom, having serviced in both the public and private sectors. Was formerly the Executive Director of the Insurance Supervision Department in the Monetary Authority of Singapore. Qualifications: BSc (Econs) Hons, London School of Economics & Political Science; Fellow of the Institute of Actuaries, UK; Fellow of the Life Insurance Management Institute, USA; Distinguished Fellow of the International Association of Insurance Supervisors

cHianG boon KonGManagingdirector,StrategicresourceManagementJoined Great Eastern in 1997. Head, Strategic Resource Management (Human Capital, IT and Corporate Communications), and responsible for the change programmes and development of human capital and IT within the Group. Qualifications:BBA Hons, National University of Singapore

loH sooK mee (mrs)Managingdirector,Finance&CorporateAffairsJoined Great Eastern in 1997. Responsible for statutory and regulatory financial reporting for the Singapore operations and the Group, as well as financial control and governance, regional actuarial, and capital management of the Group. Responsible for real estate portfolio management and performance. Also responsible for driving certain strategic projects of the Group.Qualifications: B Accountancy, University of Singapore; FCPA, Institute of Certified Public Accountants of Singapore

tan cHinG GueiManagingdirector,Strategy&InvestmentManagementJoined Great Eastern in 2003. Responsible for the investment of life insurance and shareholders’ funds. Also responsible for the strategic planning process of the Group. Qualifications: BEng Hons (Civil), National University of Singapore; MBA (Accountancy), Nanyang Technological University; Chartered Financial Analyst; CPA, Institute of Certified Public Accountants of Singapore

tan HaK leHManagingdirector,SingaporeJoined Great Eastern in 2005. Responsible for driving and growing insurance business (including life, group and general insurance) for both GEL and OAC in Singapore. Qualifications: Fellow of the Institute of Actuaries, UK; BSc Hons, Heriot-Watt University, UK

tan HocK lyeManagingdirector,OperationsJoined Great Eastern in 1997. Responsible for the Group’s operations in the insurance value chain starting from New Business Underwriting to Claims. Also responsible for re-engineering the processes in keeping with industry changes. Qualifications:BBA Hons, University of Singapore

alex foonGChiefExecutiveOfficer,GreatEasternCapital(Malaysia)SdnbhdJoined Great Eastern in 1996. Responsible for overseeing the corporate affairs of the Group’s operations in Malaysia. Was CEO of GELM from 1996 to 2007.Qualifications:Bachelor of Science (Hons) in Mathematics, University of Malaya; Master of Actuarial Science, Northeastern University, USA; Fellow of Society of Actuaries, USA; Fellow of Life Management Institute, USA; Member of American Academy of Actuaries, USA

KoH yaW HuiChiefExecutiveOfficer,GreatEasternlifeAssurance(Malaysia)bhdJoined Great Eastern in 2002. Responsible for the operations and bottom line of GELM.Qualifications: Bachelor of Social Science (Hons) in Economics, Universiti Sains Malaysia; Fellow of Life Management Institute, USA.

nG KoK KHenGChiefExecutiveOfficer,OverseasAssuranceCorporation(Malaysia)bhdJoined Great Eastern in 2002. Responsible for the operations and bottom line of OACM. Was previously with RHB Insurance Berhad.Qualifications: MSc, Universiti Putra Malaysia; BEng (Civil), RMIT University, Australia; Member of the Malaysian Insurance Institute


loWer your stress level

relaxationreducesstress.however,atGreatEastern,weneverrelax–whenitcomestoobservinggoodcorporategovernance.

corporate Governance report

Great Eastern Holdings Limited (“GEH” or the “Company”) places great importance on high standards of corporate conduct, governance and integrity in its business operations and dealings. The Directors are committed to and uphold high standards of corporate governance. The Company and its subsidiaries (collectively, the “Group”) adopt corporate governance practices which are in conformity with the Singapore Code of Corporate Governance 2005 (“Code”). This report describes GEH’s corporate governance practices with specific reference to the principles and guidelines of the Code.

bOArdMATTErSbOArd’SCOnduCTOFAFFAIrSPrinciple 1: Company headed by an effective Board to lead and control the company.

BoardofDirectorsThe Company’s present Board consists of ten Directors

comprising a non-executive Chairman, Mr Michael Wong Pakshong, eight other non-executive Directors, and an executive Director who is the Group Chief Executive Officer (“CEO”), Mr Tan Beng Lee. The other eight non-executive Directors are Dr Cheong Choong Kong, Mr David Conner, Mr Koh Beng Seng, Mr Lee Seng Wee, Mr Lee Chien Shih, Tan Sri Dato’ Dr Lin See-Yan, Professor Neo Boon Siong and Mr Tan Yam Pin. (Mr Koh Beng Seng was appointed on 2 January 2008).

The Board members are from diverse backgrounds and qualifications, and bring a wide range of business, management, financial and strategic planning experience to the Board. Collectively they provide the necessary business acumen, knowledge, capabilities and core competencies to the Company and the Group, including industry knowledge in insurance and actuarial science and specialist knowledge in banking, finance, accounting, investment and asset management, consumer marketing, real estate and property development. The diversity of experience and competencies of the Directors enhance the effectiveness of the Board in discharging its responsibilities.

BoardSizeThe Board considers that the present Board size of ten is an

appropriate size and facilitates effective decision making, taking into account the composition of the Board and the scope and nature of the operations of the Company and the Group.

BoardresponsibilitiesandaccountabilityThe Board provides strategic direction to the Company and the

Group and its principal functions include the following: • review and approve the Group’s strategic direction, overall

policies, long term goals and financial objectives and business plans recommended by Management;

• provide Board oversight over the business affairs and financial performance of the Group;

• provide oversight over the setting of the Company’s values and standards with emphasis on the Company’s core value of integrity and proper conduct of the Company’s business affairs at all times;

• oversee the establishment of frameworks of adequate, prudent and effective internal controls and processes and effective risk assessment and management; and

• oversee the succession planning for key senior executive positions within the Group and is responsible for the selection and appointment of the Group CEO.

The Company has adopted internal guidelines setting forth matters which require Board approval. Matters requiring Board’s approval, besides overall business strategy, direction and policies governing the operations of the Group and those set out above, include strategic or significant acquisitions, investments and divestments by the Group, corporate restructuring and major corporate initiatives, dividend policy and declaration, the quarterly and year-end financial reporting and other significant matters in relation to the Group’s activities and announcement of financial results and financial statements of the Company and the Group.

The Directors are expected to take decisions objectively in the interests of the Company. The Board meets regularly and at least six times a year, more often if warranted. During 2007 the Board held eight scheduled meetings. Telephonic attendance and conference via audio-visual communication at meetings of the Board and Board Committees are permitted under the Company’s Articles

G 1.5

Specific Guidelines in the Code on disclosure in the Annual Report:

G 1.5 – Guideline 1.5 of the Code: Disclosure of material transactions requiring board approval under internal guidelines.


of Association. Directors’ attendance at meetings of the Board and Board Committees in 2007 is set out below. In addition to the scheduled meetings, the Directors also attended and participated in an offsite one-and-a-half days workshop/retreat with senior Management for a more detailed overview of the Group’s operations, key issues arising and strategies and plans for the mid-term.

BoardCommitteesThe Board has established various board committees (“Board

Committees”) to assist it to carry out more effectively its oversight of the operations, business and affairs of the Company and the Group. These Board Committees consist of the Nominating Committee, Remuneration Committee, Audit Committee, Risk Committee and a new committee established in January 2008 – the Executive Committee. All the Board Committees have been constituted with clear Board-approved written terms of reference.

Such Board oversight of the Group through these Board Committees include, inter alia – through the Audit Committee, overseeing Management’s establishment of a framework of prudent and effective controls that ensures, in particular, the quality and integrity of the accounting and financial reporting systems; through the Remuneration Committee, reviewing policies governing the compensation of senior executives and reviewing remuneration of senior management executives; through the Nominating Committee, reviewing nomination of senior management positions including the position of CEO, and recommending all such appointments to the Board, besides identifying and nominating suitable competent individuals to recommend to the Board for appointment as new Directors; and through the Risk Committee, reviewing the overall risk management philosophy and policies and reviewing the quality and effectiveness of risk management processes, systems and controls and the risk management framework established. The Executive Committee assists the Board to oversee the business and affairs of the Company and the Group, within the terms of reference set by the Board.

All the Board Committees are actively engaged in ensuring good corporate governance practices in the Company and in the Group. Details of the principal responsibilities of the Nominating, Remuneration and Audit Committees are described in the relevant sections of this Report.

MeetingsandDirectors’AttendanceThe number of meetings of the Board and Board Committees

held in 2007 and the attendance of the Directors at these meetings are as follows:

dIrECTOrS’ATTEndAnCEATbOArdAndbOArdCOMMITTEEMEETInGSIn2007

board audit nominating remuneration riskname of director committee committee committee committee

No of meetings No of meetings No of meetings No of meetings No of meetings Held Attended Held Attended Held Attended Held Attended Held Attended

Michael Wong Pakshong(1) 8 8 4 4 2 2 3 3 6 6

Tan Beng Lee 8 8 – – – – – – 6 6

Dr Cheong Choong Kong(2) 8 8 – – 2 2 3 3 – –

David Conner 8 8 – – – – – – 6 6

Lee Seng Wee 8 8 – – 2 2 – – – –

Lee Chien Shih 8 7 – – – – – – – –

Tan Sri Dato’ Dr Lin See–Yan 8 7 4 4 – – – – – –

Professor Neo Boon Siong 8 8 4 4 – – 3 3 6 6

Tan Yam Pin(3) 8 8 4 4(3) 2 2 – – – –

Ho Tian Yee (4) 2 2 1(4) – (4) – – 2(4) 2(4) 2(4) 1(4)

(1) Mr Michael Wong Pakshong stepped down as Chairman of the Audit Committee in May 2007 while remaining as a member.

(2) Dr Cheong Choong Kong was appointed as a member of the Nominating Committee on 17 April 2007.

(3) Mr Tan Yam Pin was appointed Chairman of the Audit Committee with effect from 7 May 2007.

(4) Mr Ho Tian Yee resigned from the Board with effect from 17 April 2007.

G 1.4

G 1.3


G 1.3 – Guideline 1.3 of the Code: Disclosure on delegating of authority by the Board to Board Committees to make decisions on certain Board matters.

G 1.4 – Guideline 1.4 of the Code: No. of Board and Board Committee meetings held in the year, and attendance of every Director.

22

bOArdCOMPOSITIOnAndGuIdAnCEPrinciple 2: Strong and independent element on the Board; exercise objective judgement on corporate affairs independently.

BoardIndependenceThe Board has a majority of independent Directors. The

Code requires that at least one-third of the Board consists of independent Directors.

The Nominating Committee determines annually whether a Director is independent. (The definition of an independent director is set out in the Code and includes a director being independent from management and business relationships with the company so as to be able to exercise objective and independent judgement on the company’s affairs).

The Company’s independent Directors in 2007 as determined by the Nominating Committee, taking into consideration the definition of an independent director set out in the Code, are: Mr Michael Wong Pakshong, Mr Koh Beng Seng, Mr Lee Seng Wee, Mr Lee Chien Shih, Tan Sri Dato’ Dr Lin See-Yan, Professor Neo Boon Siong and Mr Tan Yam Pin.

ChAIrMAnAndChIEFEXECuTIVEOFFICErPrinciple 3: Clear division of responsibilities at the top of the company – the working of the Board and the executive responsibility of the company’s business – to ensure a balance of power and authority.

The positions and roles of the Company’s Chairman Mr Michael Wong Pakshong and the Group CEO Mr Tan Beng Lee are distinct and separate, with clear division of responsibilities between them. The Chairman and the Group CEO are not related to each other.

The Chairman Mr Michael Wong Pakshong is an independent and non-executive Director. His principal responsibilities include leading the Board to ensure its effectiveness on various aspects of its role, approving the meeting agenda of the Board, monitoring the quality and timeliness of the flow of information from Management to the Board and promoting effective communication with shareholders. The Chairman also facilitates robust discussions and deliberations in Board meetings, encourages constructive relations between executive and non-executive Directors and between the Board and Management and promotes high standards of corporate governance with the full support of the other Directors, the Company Secretary and Management.

The CEO manages the Company and oversees the Group’s operations and implementation of the Group’s strategies, plans and policies to achieve the planned corporate performance and financial goals, ensuring, inter alia, operational and organisational efficiency, profit performance and effective risk management. His management of the Group’s businesses, including implementing the Board’s decisions, is carried out with the assistance of the senior management executives of the Group. Collectively they are responsible for the day-to-day operations and administration of the Company and the Group.

bOArdMEMbErShIPPrinciple 4: Formal and transparent process for the appointment of new directors to the Board.

NominatingCommitteeThe Nominating Committee comprises four Directors, being

Mr Michael Wong Pakshong (Chairman), Dr Cheong Choong Kong, Mr Lee Seng Wee and Mr Tan Yam Pin. The majority of the members, including the Chairman, are non-executive and independent Directors. The responsibilities of the Nominating Committee are set out in its terms of reference. The Chairman of the Nominating Committee is not, and is not directly associated with, a substantial shareholder of the Company. (A director will be considered “directly associated” with a substantial shareholder when the director is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the substantial shareholder).

ProcessforAppointmentofNewDirectorsThe Company has established a formal and transparent

process for the appointment of new Directors to the Board. Proposals for the appointment of new Directors are reviewed by the Nominating Committee. The Nominating Committee meets with short-listed candidates to assess their suitability and commitment. Competent individuals are nominated for approval by the Board after the Nominating Committee has assessed their suitability taking into consideration their professional qualifications, integrity, business experience and field of expertise, potential to contribute to the effectiveness of the Board and to complement the skills, knowledge and expertise of the Board.

G 3.1

G 4.1

G 4.5

G 3.1 – Guideline 3.1 of the Code: Disclosure of relationship between the Chairman and CEO where they are related to each other.

G 4.1 – Guideline 4.1 of the Code: Composition of Nominating Committee.

G 4.5 – Guideline 4.5 of the Code: Selection and appointment process of new directors on the Board.


Upon the appointment of a new Director, the newly-appointed Director is apprised of the relevant statutory obligations and responsibilities of a Director, and is briefed on the Group’s principal activities and the insurance business operations, industry practices, key regulatory requirements and the Group’s corporate governance practices. The Company is in the process of reviewing and enhancing the contents of such briefings to new Directors to enable the new Directors to have a more comprehensive understanding of the insurance business, practices and the Group’s financial statements.

Re-nominationofDirectorsThe Nominating Committee also has the responsibility of

re-nomination of Directors. All Directors of the Board are required to submit themselves for re-nomination and re-election at regular intervals, at least once every three years. At each annual general meeting (“AGM”) of the Company, one-third of the Directors are required to retire by rotation in accordance with the Company’s Articles of Association, being one-third of those who have been longest in office since their last re-election. Such retiring Directors are eligible for re-election when re-nominated by the Nominating Committee, taking into account the Directors’ attendance at meetings and their contributions to Board discussions and to the effectiveness of the Board.

The Nominating Committee also reviews annually whether Directors who have multiple board representations have been adequately carrying out their duties as the Company’s Directors during the year.

KEyInFOrMATIOnOndIrECTOrSKey information regarding the Directors, including their

academic and professional qualifications, date of first appointment as Directors, date of last re-election or re-appointment as Directors of the Company, other directorships or chairmanships both present and held over the preceding three years in other listed companies and other major appointments are disclosed in the Company’s Annual Report. Details of Board Committees that the Directors served on are disclosed in this Report. The Directors’ shareholdings in the Company and in the Company’s parent company, Oversea-Chinese Banking Corporation Limited (“OCBC Bank”) and interests in share options granted are disclosed in the Directors’ Report. Non-executive Directors are not granted share options. The Directors do not hold shares in the Company’s subsidiaries.

bOArdPErFOrMAnCEPrinciple 5: Formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.

The Board has implemented formal processes for assessing the effectiveness of the Board as a whole, and the contribution by each individual Director to the effectiveness of the Board. The Nominating Committee oversees the annual assessment process, which includes evaluation by each Director. Each Director evaluates the performance of the Board and Board Committees and conducts a self-assessment and a peer-assessment of the other members of the Board. Such assessments are made against established performance criteria consistent with those approved by the Board and used in the previous years, with relevant updates for 2007. An independent consultant was appointed by the Nominating Committee to assist and facilitate this evaluation process and to assist in collating and analysing the returns and feedback of the Directors.

The Board has found that such collective assessments by the Directors are useful and constructive since the implementation of such evaluation process a few years ago. This process has also provided an opportunity to obtain insightful feedback from each Director on suggestions to enhance the effectiveness of the Board and has helped Directors to be more focused on their duties, responsibilities and contributions to the effectiveness of the Board.

ACCESSTOInFOrMATIOnPrinciple 6: Board members be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.

For meetings of the Board and Board Committees, Management provides the Directors with relevant information on matters to be discussed or considered. For proposals for approval, information furnished by Management usually includes background explanatory information, relevant facts and analysis to support the proposals, implications or merits of the case, the budget if applicable and the recommendations. Senior management executives who can provide additional information and insight or provide clarifications to queries raised are usually present during discussions on such matters. External consultants engaged on specific projects may be invited to brief the Board.


G 4.6 – Guideline 4.6 of the Code: Key information regarding Directors.

G 5.1 – Guideline 5.1 of the Code: Process for assessing effectiveness of Board and contribution of each Director.

G 5.1

G 4.6

24

Regular reports furnished to the Board include the Group financial performance, with explanations of material variances between actual results and the business plans/budgets.

The Board is apprised on a timely basis of relevant regulatory changes, in particular, changes in the Companies Act and the Insurance Regulations, and any major changes or events in the industry. From time to time, the Company organises talks or training by external professionals, consultants and advisers on relevant topics such as updates on enterprise risk management, especially those affecting the insurance industry, asset and liability management and developments in the insurance industry locally and in other developed countries, and on the impact and implications that such developments may have on the Group and/or on the Directors’ responsibilities. Continued training and development programmes for the Directors are more flexible and the Directors may attend appropriate courses, conferences and seminars conducted by professional bodies within the industry or other external professional organisations.

The Directors have separate and independent access to the Group Company Secretary and to other senior management executives of the Company and of the Group at all times.

The Group Company Secretary attends all Board meetings and prepares minutes of Board proceedings. She assists the Chairman to ensure that appropriate Board procedures are followed and that applicable rules and regulations are complied with, including the requirements of the Companies Act, Securities and Futures Act and Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”). Her responsibilities include ensuring good information flows between the Board and senior management, and assisting the Chairman and the Board in implementing and strengthening corporate governance practices and processes.

The Directors take independent professional advice as and when necessary to enable them, in particular the independent Directors, to discharge their respective duties effectively; the cost of such professional advice is borne by the Company and the Group, as applicable.

rEMunErATIOnMATTErSPrOCEdurESFOrdEVElOPInGrEMunErATIOnPOlICIESPrinciple 7: Formal and transparent procedure for developing policy on executive remuneration and for fixing remuneration packages of individual directors.

lEVElAndMIXOFrEMunErATIOnPrinciple 8: Remuneration of directors should be appropriate to attract, retain and motivate the directors. A significant proportion of executive directors’ remuneration be linked to corporate and individual performance.

dISClOSurEOnrEMunErATIOnPrinciple 9: Disclosure in company’s annual report of remuneration policy, level and mix of remuneration.

RemunerationCommitteeThe Remuneration Committee ensures that the Company

implements a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors and senior management.

The Remuneration Committee comprises three Directors who are non-executive Directors – Mr Michael Wong Pakshong (Chairman), Dr Cheong Choong Kong and Professor Neo Boon Siong. The majority of the Remuneration Committee members are independent Directors.

The Remuneration Committee members are knowledgeable in the field of executive compensation, and also have access to expert advice from external independent compensation consultants, where necessary.

The principal responsibilities of the Remuneration Committee are: 1 recommending to the Board for endorsement a framework of

Directors’ fees, as well as remuneration of executive Directors and the senior management executives. For executive Directors and senior management, the framework covers all aspects of remuneration including salaries, allowances, bonuses, share options and other benefits;

2 recommending the specific remuneration package for the Group CEO and the CEOs of the Company’s principal insurance subsidiaries; and

3 ensuring that the Group’s remuneration policies and practices are sound and the remuneration package are appropriate to attract, retain and motivate the executive Directors and senior management without being excessive.

No Director is involved in deciding his own remuneration.

G 9.1

G 9.1 – Guideline 9.1 of the Code: Composition of Remuneration Committee.


RemunerationofNon-executiveDirectorsThe non-executive Directors are paid Directors’ fees, which

take into account factors such as the Directors’ contributions, effort and time spent, attendance at meetings and the frequency of meetings, the respective responsibilities of the Directors, market practices and need to pay competitive fees to attract, retain and motivate the Directors.

The Remuneration Committee performs an annual review of the Directors’ fees and submits its recommendations for endorsement and approval by the Board. The Directors’ fees proposed by the Board each year are subject to shareholders’ approval at the Company’s AGM.

The Board has decided to adopt the following fee structure to compute the fee for each non-executive Director:• Annual fee for Board Chairman: S$50,000• Annual retainer fee for each Board member: S$50,000• Annual fee for Committee chairperson: S$40,000 for Audit

Committee, Executive Committee and Risk Committee, and S$25,000 for Nominating Committee and Remuneration Committee

• Annual fee for Committee Members (who are not Committee chairperson): S$20,000 for Audit Committee, Executive Committee and Risk Committee, and S$15,000 for Nominating Committee and Remuneration Committee

• Attendance fee: S$2,000 per Board or Board Committee meeting. These attendance fees are paid to non-executive Directors to

recognise their commitment and time spent in attending meetings.

RemunerationPolicyinrespectofExecutiveDirectorandkeyseniormanagementexecutives

The objective of the remuneration policy is to attract, motivate, reward and retain quality executives. The Group CEO, being an executive Director of the Company, is not paid a Director’s fee, but receives an annual remuneration. The remuneration of the Group CEO, the respective CEOs of the Company’s principal insurance subsidiaries and the senior management executives who report directly to the Group CEO are reviewed annually by the Remuneration Committee, based on the overall remuneration framework approved by the Board. Such remuneration generally comprises a basic component and a variable performance-related component.

The basic component is the basic salary, which is subject to annual review. The performance-related elements of the remuneration are designed to link rewards to corporate and individual performance, based on appropriate and meaningful performance measures set up by the Company and approved by the Remuneration Committee. The variable components of the remuneration comprise the performance-based variable bonus and the long term incentives.

The variable bonus of each senior management executive takes into account the individual performance besides the financial performance of the Group as a whole and the specific performance of the respective principal insurance subsidiaries. The award of long term incentives including grant of share options take into account, inter alia, senior executives’ performance, contribution to the Group and also their potential for future development within the Group.

The Remuneration Committee reviews annually the respective remuneration of key senior management executives considering factors such as being market competitive and ensuring that the remuneration is commensurate with performance and contribution of the executives. The annual budget for salary increment, performance-related variable bonus and long term incentives, reviewed and approved by the Remuneration Committee, is submitted to the Board for endorsement and approval.

ShareOptionSchemeMembers of the Remuneration Committee and all the non-

executive Directors of the Company are not granted share options. In 2007 (as in the previous few years), no share options had

been granted pursuant to the Great Eastern Holdings’ Executives Share Option Scheme. Instead, the Company’s holding company, OCBC Bank, grants share options pursuant to the OCBC Share Option Scheme 2001 (“OCBC Scheme”) to selected senior executives of the GEH Group, including the Group CEO, based on recommendations of GEH’s Remuneration Committee. Details of the options granted are disclosed in the financial statements; details of the OCBC Scheme are set out in OCBC Bank’s Annual Report.


G 9.4 – Guideline 9.4 of the Code: Details of employee share schemes.

G 9.4

26

DisclosureonDirectors’RemunerationThe total Directors’ remuneration in respect of the financial

year 2007 is disclosed in the financial statements for 2007 (in the notes to the financial statements). The level and mix of each Director’s remuneration, in percentage terms and in remuneration bands of S$250,000 are set out below:

variable or directors’ base/ performance long term other fees fixed salary -related bonus incentives benefits total % % % % % %

Non-executive Directors(1)

S$250,000 to S$499,999 Michael Wong Pakshong 89 – – – 11 100

Below S$250,000 Dr Cheong Choong Kong 100 – – – – 100

David Conner(2) 100 – – – – 100

Lee Seng Wee 100 – – – – 100

Lee Chien Shih 100 – – – – 100

Tan Sri Dato’ Dr Lin See–Yan 100 – – – – 100

Professor Neo Boon Siong 100 – – – – 100

Tan Yam Pin 100 – – – – 100

Ho Tian Yee(3) 100 – – – – 100

Executive DirectorS$2,500,000 to S$2,749,999 Tan Beng Lee – 34 18 36 (4) 12 100

(1) Non-executive Directors are paid Directors’ fees totalling S$1,101,100

in respect of the financial year ended 31 December 2007, subject to

approval at the Company’s AGM. (2) The Director fee in relation to Mr David Conner’s directorship is paid to

OCBC Bank.(3) Mr Ho Tian Yee resigned from the Board with effect from 17 April 2007.(4) Included fair value of share options granted. In 2007, 112,000 options

were granted to Mr Tan Beng Lee under the OCBC Scheme at an exercise

price of S$8.59 per share; exercise period: 15.03.2008 to 13.03.2017.

After careful consideration, the Company decided not to disclose information on the names and remuneration of the top five key executives as the disadvantages to the Group’s business interests would far outweigh the benefits of such disclosure, in view of the disparities in remuneration in the industry and the competitive pressures that are likely to result from such disclosure.

The remuneration of an employee of the Group who is an immediate family member of the Chairman is within the remuneration band of S$250,000 to S$499,999 for the financial year ended 31 December 2007.

ACCOunTAbIlITyAndAudITACCOunTAbIlITyPrinciple 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.

The Board is responsible for providing to shareholders a balanced and understandable assessment of the performance of the Company and the Group, position and prospects, including furnishing financial statements and other reports.

The Board provides to shareholders, on a quarterly basis, the financial statements of the Company and the Group for the first, second and third quarters and for the year, as applicable, together with a review of the Company’s performance, position and prospects. These financial reports and other price-sensitive information are disseminated to shareholders through announcements via SGXNET to the SGX-ST. After making such announcements, the information is also made available in press releases and on the Company’s website. The Company’s Annual Report is sent to all shareholders and the contents are also accessible from the Company’s website.

To keep the Board members informed and updated, Management provides the Board with regular management accounts which contain financial updates on the performance and position of the Group and which present a balanced and understandable assessment of the Group’s performance, position and prospects. The Board is also updated on any significant events that have occurred in or affecting the industry during the year.

G 9.2

G 9.3

G 9.2

G 9.2 – Guideline 9.2 of the Code: Directors’ remuneration within bands of S$250,000, and breakdown of composition of remuneration in percentage

terms. Also to disclose names and remuneration of the top five key executives (who are not Directors), in bands of S$250,000.

G 9.3 – Guideline 9.3 of the Code: Remuneration of employees who are immediate family members of a Director or the CEO and whose remuneration exceed

S$150,000 during the year.


AudITCOMMITTEEPrinciple 11: Establish an Audit Committee with written terms of reference.

The Audit Committee comprises four Directors who are all non-executive and independent Directors, being Mr Tan Yam Pin (Chairman), Mr Michael Wong Pakshong, Tan Sri Dato’ Dr Lin See-Yan and Professor Neo Boon Siong. Members of the Audit Committee are appropriately qualified to discharge their responsibilities. Three members of the Audit Committee have accounting and financial management knowledge and experience. They are Mr Tan Yam Pin, Mr Michael Wong Pakshong and Professor Neo Boon Siong.

The Audit Committee operates within Board-approved written terms of reference which set out the Audit Committee’s authority and duties, and carries out functions prescribed in Section 201B(5) of the Companies Act (Chapter 50) and in the Code.

The Audit Committee has explicit authority to investigate any matter within its terms of reference, and has full access to and the co-operation of Management. The Audit Committee has full discretion to invite any Director or executive officer to attend its meetings. The Audit Committee has resources to enable it to discharge its functions properly.

The functions performed by the Audit Committee and details of the Audit Committee’s activities during the financial year 2007 included the following:1. Reviewed with the internal and external auditors –

1.1 their audit plans, their evaluation of the system of internal controls and their audit reports;

1.2 the scope and results of the internal audit procedures; and

1.3 the assistance given by the officers of the Company and the Group to the auditors.

2. Reviewed with the external auditors –2.1 the audited financial statements of the Company and the

Group for the financial year for submission to the Board for consideration and approval;

2.2 their scope and overall audit procedures and cost effectiveness, and their independence and objectivity taking into consideration various factors including the nature and extent of non-audit services provided by them;

2.3 the implications and impact on the financial statements of proposed implementation of new financial reporting standards and any changes in accounting policies and regulatory requirements; and

2.4 any significant financial reporting issues, and to ensure the integrity of the financial statements of the Company and the Group, and any formal announcements relating to the financial performance of the Company and the Group.

3. Reviewed the findings of the internal and external auditors on their reviews of the adequacy and effectiveness of the internal controls of the Company and its principal subsidiaries, including internal financial controls, operational and compliance controls and risk management policies and systems established by Management.

4. Reviewed the effectiveness of the internal audit functions of the Company and its principal subsidiaries.

5. Made recommendations to the Board on the re-appointment of the external auditors, and approved the remuneration and terms of engagement of the external auditors.

6. Performed the annual review of the independence of the external auditors.

The Group has also instituted a whistle-blowing policy under which staff of the Group may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters. The Audit Committee ensures that arrangements are in place for the independent investigation of such matters and for appropriate follow-up action.

The number of meetings of the Audit Committee and Audit Committee members’ attendance at these meetings are disclosed in this Report. The internal and external auditors were present at these meetings and the CEO of the Company and certain senior management executives were also present. The Audit Committee, in performing its functions, has met at least annually with the internal and external auditors without the presence of Management. The auditors, both internal and external, have unrestricted access to the Audit Committee.


G 11.8 – Guideline 11.8 of the Code: Composition of Audit Committee and details of Committee’s activities.

G 11.8

28

InTErnAlCOnTrOlSPrinciple 12: Maintaining sound system of internal controls.

Management has set up and maintained a sound system of internal controls to safeguard shareholders’ investments and the assets of the Company and the Group.

The Company’s internal and external auditors conduct reviews annually of the effectiveness of the internal controls of the Company and the Group, including financial, operational and compliance controls, and risk management systems. Any material weaknesses or non-compliance in internal controls are reported to the Audit Committee, with recommendations for improvements.

In the course of performing its functions during the financial year, including reviewing the adequacy of the internal controls, the Audit Committee is satisfied with the adequacy of the internal controls, including financial, operational and compliance controls and overall risk management systems. Further details on the Group’s risk management are set out in the financial statements.

InTErnAlAudITPrinciple 13: Internal audit function independent of activities it audits.

The internal audit function is independent of the activities it audits. The terms of reference of the Internal Audit are approved by the Audit Committee. The Head of the Group Internal Audit’s primary line of reporting is to the Chairman of the Audit Committee, although she also reports administratively to the Group CEO. The Internal Audit Department is staffed by suitably qualified executives, and the Audit Committee ensures that the internal audit function is adequately resourced.

During the year, Group Internal Audit carried out audits on selected significant business units in the Group, including audit review of the IT systems. Group Internal Audit’s summary of major findings and recommendations and Management’s responses were discussed at the Audit Committee meetings.

The Audit Committee reviews annually the adequacy of the internal audit function.

RiskCommitteeandRiskManagementThe Risk Committee assists the Board in assessing the

effectiveness of the risk management processes and systems. The Risk Committee comprises four Directors. They are

Mr Michael Wong Pakshong (Chairman), Mr David Conner,

Professor Neo Boon Siong and Mr Tan Beng Lee. The Risk Committee reviews the overall risk management

framework. The terms of reference for the Risk Committee include overview and periodic review of policies on asset-liability and investment management, overview on enterprise risk management, major risk management initiatives and approval of significant investment, property and other financial transactions that exceed the authorisation limits of the Management Committees that the Risk Committee oversees – the Group Asset-Liability and Investment Committee and the Singapore Credit Risk Committee. Investment-related activities of material consequence are reviewed by the Risk Committee and, where applicable, reported to the Board for information or for endorsement.

Details on the Group’s risk governance and management objectives and policies are set out in the financial statements in this Annual Report.

COMMunICATIOnWIThShArEhOldErSPrinciple 14: Regular, effective and fair communication with shareholders.Principle 15: Encourage greater shareholder participation at AGMs.

The Company places great importance on regular, effective and fair communication with shareholders. The Company makes quarterly announcements of the financial results of the Company and the Group within the time frame prescribed in the Listing Manual of the SGX-ST; balanced and comprehensive assessments of the performance and position of the Company and the Group are furnished where applicable. Pertinent material information is disclosed on a comprehensive and timely basis via SGXNET and no unpublished price-sensitive information is disclosed to a selected group.

The Company’s Annual Report containing the financial statements of the Company and the Group for the financial year also contains other pertinent information and disclosures including a review of the annual operations and activities, to enable shareholders and investors to have a better understanding of the Group’s business and performance. The Company’s Annual Report is also available on the Company’s website, together with announcements made via the SGXNET during the year on quarterly financial results and other announcements and disclosures, including dividend declaration, notice of books closure and notice of AGM.

G 12.2

G 12.2 – Guideline 12.2 of the Code: Adequacy of internal controls, including financial, operational and compliance controls, and risk management systems.


Shareholders and the public can access the website of the Company for information, media releases and other corporate information on the Company. The Company has investor relations personnel who communicate with the Company’s investors and attend to their queries on published information.

The Company’s Annual Report containing the notice of AGM is sent to every registered shareholder of the Company. Notice of the AGM is announced by the Company via the SGXNET, giving the requisite notice for the AGM. It is also published in Singapore newspapers. At the AGM, shareholders are given the opportunity to raise any questions they may have or to seek clarifications on the Company’s financial statements or on the resolutions to be passed at the AGM. Shareholders may vote in person at the Company’s AGM or at any extraordinary general meeting (“EGM”) or by proxy if they are unable to attend. The Company’s Articles of Association provide that shareholders may appoint one or two proxies to attend AGM or EGM and to vote in their stead.

For AGMs and EGMs, separate resolutions are set out on distinct issues, such as proposed Directors’ fees, proposed dividend or proposed corporate action or transaction if applicable, for approval by the shareholders. The Board members and the chairpersons of all Board Committees are present and available to address queries from shareholders. The external auditors are also present at these meetings to answer any shareholders’ queries about the conduct of the audit and the preparation and content of the auditors’ report.

MAnAGEMEnTCOMMITTEESGrOuPMAnAGEMEnTTEAM,GrOuPASSET-lIAbIlITyCOMMITTEE

The following Management Committees, which are not Board committees, have been set up by the Company and the Company’s insurance subsidiaries in Singapore, The Great Eastern Life Assurance Company Limited (“Great Eastern Life”) and The Overseas Assurance Corporation Limited (“OAC”), to enhance Management’s review of the Group’s operations and the Group’s risk governance and management.

GroupManagementTeamThis consists of key senior Management executives of Great

Eastern Life and OAC, including the Group CEO who is the Chairman of the Group Management Team (“GMT”), Senior MD (Established Markets), MD (Finance & Corporate Affairs), MD (Strategy & Investment Management), MD (Operations), MD (Singapore), Group Company Secretary and Head, Group Secretariat and Legal, Head, Group Risk Management, and the CEOs of Great Eastern Life’s Malaysian subsidiaries. The GMT provides overall Management governance and oversight over the principal insurance subsidiaries within the Group, covering all business and operational issues of the Group.

GroupAsset-liabilityCommitteeThe present members of the Group Asset-Liability Committee

(“Group ALC”) consist of certain senior Management executives of Great Eastern Life and OAC and their Malaysian subsidiaries, and include the Group CEO who is the Chairman of Group ALC, MD (Finance & Corporate Affairs), MD (Strategy & Investment Management), MD (Singapore), Head, Group Risk Management, Regional Actuary, Heads of Investment Management (Singapore and Malaysia), Head, Customer Management (Malaysia) and the CEO of Lion Capital Management Limited.

Group ALC’s focus includes the financial and capital management of the Group, overseeing the formulation and execution of investment strategy and reviewing the asset mix and pricing/re-pricing of insurance products to determine the appropriate asset/liability match. The Group ALC is also responsible for conducting periodic reviews of approved investment policy and to recommend changes required, taking into consideration changes in the business and economic environment and ensuring that investment policies relating to the insurance funds of Great Eastern Life and OAC and of other principal insurance subsidiaries are consistent with the asset-liability management strategies required to support new insurance products; reviewing and approving (within given authorised limits) investment proposals, asset allocation, risk management activities, and reviewing performance of the investment portfolio and performance of fund managers. The Group ALC reports to the Risk Committee on all its major decisions.

30

dEAlInGSInSECurITIESThe Company has adopted internal codes and policy on

dealings in securities in the Company in line with the relevant rule set out in the Listing Manual of the SGX-ST. The Directors and executives of the Company and of the Group are advised, and periodically reminded, not to deal in the Company’s shares for the period commencing one month before the Company’s announcement of the financial results for the year and ending on the date of the announcement of the results, and for the period of two weeks before the announcement of the quarterly results during the financial year. They are also reminded not to deal in the Company’s shares on short term considerations, and of the applicability, at all times, of insider trading laws.

AddITIOnAlInFOrMATIOnrEQuIrEdundErThElISTInGMAnuAlOFThESInGAPOrEEXChAnGESECurITIESTrAdInGlIMITEd

1. InTErESTEdPErSOnTrAnSACTIOnSThere were no material interested person transactions

(excluding transactions of less than S$100,000 each) and transactions conducted under a shareholders’ mandate pursuant to Rule 920 of Listing Manual entered into by the Company and its subsidiary companies from the period 1 January 2007 to 31 December 2007.

2.OThErInFOrMATIOnSince the end of the previous financial year, the Company and

its subsidiary companies did not enter into any material contract involving interests of the Directors or the controlling shareholder and no such contract subsists as at the end of the financial year, save as disclosed in the Directors’ Report and in the financial statements for the year ended 31 December 2007.


maintain a HealtHy diet

Eatingtherightfoodboostsyouroverallwell-beinganddevelopment.Ourstrategicplanstogrowdiverserevenuesourcescontinuetoproduceahealthybottomline.

ceo’s report

The Group had a profit attributable to shareholders of $546.9 million for 2007, an increase of 15% over $476.9 million for 2006. We have achieved, and even exceeded, our Group’s 2008 target of $500 million. This is good news especially in the year when we celebrate our 100th anniversary.

Our insurance subsidiaries, Great Eastern Life Assurance Co Ltd, Great Eastern Life Assurance (Malaysia) Bhd (GELM) and Overseas Assurance Corporation Ltd (OAC), will give a One-Off Special Bonus for 2007. This Special Bonus will be given to Participating Regular Premium Whole Life and Endowment Policies bought on or before 31 December 2006. In Singapore, the full amount of this Special Bonus amounts to $287 million. The combined bonus payout, inclusive of the annual bonuses of $799 million for 2007, amounts to $1.086 billion for 2007. In Malaysia, the face amount of this Special Bonus is close to RM 900 million.

The payment of this Special Bonus is in line with our commitment to give the best value to our customers. The favourable investment returns and subsequently stronger surplus position of the Par Funds in recent years have allowed us to distribute part of the surplus back to policyholders.

Our total assets as at 31 December 2007 amounted to $46.52 billion, an increase of 11% over $42.03 billion a year earlier. The net asset value per share was $6.94, about 12% higher than $6.20 at end-2006.

InSurAnCEOPErATIOnS,InVESTMEnTS&FEESThe Group gross premiums totalled $5,998 million for 2007,

an increase of 11% from $5,418 million for 2006. Profit from insurance operations (both life and general), on a re-stated basis net of tax, increased by 30% from $351.5 million to $457.4 million. The increase came largely from both the Participating and Non-participating Funds, due largely to the one-off special bonus declared for policyholders in December 2007 and the realisation of some investment profit from the Non-participating fund in Malaysia.

Pre-tax profit from investments in the Shareholders’ Fund totalled $111.5 million, a drop of 17% over $134.2 million for 2006, mainly because the last quarter of 2006 had included a one-off tax exempt dividend and capital reduction payment totalling $31.5 million.

Pre-tax fees and other income totalled $105.6 million, 31% higher than $80.9 million in 2006, due mainly to an increase in assets under management and performance incentive fees received from certain managed accounts.

The Group retained its leadership position in the life insurance business in Singapore and Malaysia. It is also the bancassurance

distribution leader in Singapore with 41% of the market share. We have consistently grown our Embedded Value each year.

Based on 473.3 million shares, our Embedded Value rose 11.4% to $13.237 per share in 2007.

COnSOlIdATInGOurFOOThOldInThErEGIOnWe powered ahead in our regional expansion, building a

regional growth platform and management structure. Following the establishment of our business operations in Chongqing, China in 2006, we obtained the licence to set up a wholly-owned life insurance subsidiary in Vietnam in December 2007. This marked another important milestone in our regional strides beyond Singapore and Malaysia.

Great Eastern continued to be recognised for its overseas ventures. For the third year running, we were one of the top-ranked companies in the Singapore International 100 Ranking 2007 organised by IE Singapore. With $2.7 billion in overseas turnover, we were in the 13th position in the overall ranking and in 2nd position in the Southeast Asia market ranking. This placed Great Eastern among the top Singapore companies that have made internationalisation and international businesses an integral part of their corporate strategy.

ChInAGreat Eastern Life Assurance (China) Co Ltd (GELC),

our joint-venture life insurance company with Chongqing Land Properties Group, made steady progress in enhancing its management structure, risk management and operations. A focused business strategy was developed to strengthen its overall competitiveness. During the year, GELC received the approval from the China Insurance Regulatory Commission to set up its first branch office in Chongqing.

GELC enjoyed stable growth in its business. Premium income totalled RMB 24 million, due to our efforts to enhance our business foundation and professionalism. For bancassurance, we focused on our strategic partnership with Bank of Chongqing to develop our bancassurance network; we achieved RMB 1.5 million in total weighted premium.

Our group business was launched in August and achieved RMB 2 million in renewable premium income by year-end.


The Farmers’ Pension Scheme, our group insurance scheme, achieved good sales results with over RMB 60 million in premium income, surpassing its full-year target by two-fold. We also established a telemarketing unit to grow new business channels.

In September, Zhang Xiaodong was appointed as the CEO of GELC. By leveraging on his extensive experience and understanding of China’s insurance market, GELC is set to grow and strengthen its competitiveness. His appointment is in line with the Group’s strategy to localise key management appointments in its overseas ventures where possible.

We fortified our sales force through intensive recruitment and raised their competency with professional training courses for different levels. At the end of 2007, the Company’s agency size stood at 305. We also obtained the approval to set up our sales office in Jiulong Po district.

GELC continued with its strategic activities to promote its corporate image. We participated in the inaugural Chongqing Financial Exhibition in conjunction with our first year anniversary celebrations. We also donated RMB100,000 to Chongqing Red Cross to aid those who have lost their homes in a flood in July. Scholarships were given to 10 deserving students at the second annual GELC Actuarial Scholarship Presentation Ceremony. In December, GELC was named the “Insurance Company with the Best Risk Management 2007” in Chongqing in the Top Chinese Financial Brands Ranking, jointly organised by the Chongqing Daily and the Major Media Promotions Alliance for China’s Financial Sector.

IndOnESIAThe strategic partnership between PT Great Eastern Life

Indonesia (GELIndo) and PT Bank NISP Tbk strengthened further with the signing of an Exclusive Partnership Agreement in October. GELIndo and Bank NISP will jointly develop insurance solutions to meet the needs of the customers, and the products will be sold exclusively through the Bank.

Two bancassurance products were launched: PERDANA NISP, a single premium investment linked product with whole life protection, and PRIMA NISP, an all-in-one plan that caters to the changing needs of customers during different life stages while maximising their investment. Roadshows were organised to bolster sales for these two products. Bank NISP introduced Saturday and Sunday banking to enhance customer service and boost sales. For the agency channel, we launched GreatLink InvestPro, a single premium investment linked plan and GreatLink FlexiPro, a regular premium investment linked plan.

Our agency distribution channel benefited from the intensive recruitment efforts. We organised seminars to recruit new agents to augment our sales force, as well as improved their competency and professionalism through the Great Silver Training Programme.

By end-2007, we have 216 agents, more than double that in 2006. New business premiums turned in IDR 256 billion, a 200% increase from 2006.

In November, Tan Jiak Hiang was appointed the President Director of GELIndo. He leads the team to grow our business in Indonesia through both the bancassurance and agency distribution channels.

VIETnAMGreat Eastern’s customer reach expanded to Vietnam when it

obtained the licence on 28 December 2007 to set up a wholly-owned life insurance company from the Vietnamese Ministry of Finance (MOF). This achievement paves the way for us to tap into Vietnam’s thriving life insurance industry. With an initial capital of VND 600 billion (about $60 million), the new subsidiary company is known as Great Eastern Life (Vietnam) Co Ltd. It is targeted to commence business operations by the middle of 2008. Hanoi, the capital city of the country, will be the bridgehead for our expansion into the vibrant Vietnamese market. The Company has plans to expand its business to the south of Vietnam, particularly Ho Chi Minh City.

Our Hanoi and Ho Chi Minh City Representative Offices, set up in 2004 and 2006 respectively, have been actively involved in gaining a deep understanding of the business practices and socio-economic environment in Vietnam. In March, we sponsored and co-organised an insurance-related seminar in Hanoi with the Association of Vietnamese Insurers. Providing insights into the process of developing and managing investment linked products, a new product category in Vietnam, the seminar was further testament to our commitment to contribute to the insurance industry.

Our Representative Offices have also been working closely with the Vietnamese authorities and companies to jointly develop the insurance industry. We organised networking activities and facilitated bilateral visits to forge closer ties with the Vietnamese authorities and strengthen our understanding of the local industry. We hosted visits for delegates from the Insurance Department of Vietnam’s MOF and from Vietnam’s largest insurance company, Bao Viet Life, to Singapore.

As part of our corporate branding strategy in Vietnam, we pushed on with our community involvement and education support. In April, 100 study grants were awarded to outstanding students in five local universities. We were also the main sponsor of the community project to improve the living standards in Huu Nghi Village in North Vietnam.

brunEIOur Brunei operations ended the year with total sales of

$3.4 million, up 32% from 2006. Our market share was 30%. We are the market leader in bancassurance with a market share of 63% by leveraging on our strategic partnership with Standard

34

Chartered Bank. On the community front, our bursary scheme for deserving pupils was given to four local private schools in 2007. Looking ahead to 2008, the Company will embark on expanding its bancassurance channel to include a local bank. We also have plans to donate a portable training pool to the disability charity, Pusat Ehsan, as well as to move into our new office at Kiulap.

MAKInGSErVICEEXCEllEnCEOurWAyOFlIFEGreat Eastern works towards delivering world-class customer

service to our 1.4 million policyholders in Singapore and 1.9 million in Malaysia. We continue to maintain our competitive edge by going the extra mile to delight our customers at every contact point.

In line with our strategy to go paperless, policyholders were able to receive their statements electronically at the start of the year. Our GreatLink Club membership doubled after a special invitation to our major customers for investment linked policies to receive their monthly statements and company updates via e-mail. Statements were also sent to our single premium policyholders to keep them abreast of the developments in the Company.

Delivering a great service experience comes from within. We continued to inculcate the service excellence culture among our staff through company-wide programmes. An internal award scheme, modelled after the national Excellent Service Award, was set up to recognise staff for their service excellence. Our annual Customer Service Excellence Week was held in October to encourage staff to consistently deliver outstanding service.

Our award-winning Call Centre continues to be a showcase for “Call Centre Excellence” for site visits from both overseas and local organisations. Several technological improvements were made to our Call Centre, including the automation of caller feedback. We are on course to obtain the approval of the Workforce Development Agency in becoming an assessment centre for call centre competency training.

Our emphasis on business excellence, operational efficiency and quality customer service has been recognised industry-wide. We were once again awarded the Singapore Service Class (for another three years) by SPRING Singapore for our customer service excellence, after having become the first insurance company to attain the prestigious certification in 2004. Our operational departments servicing policyholders have also been re-certified ISO 9001:2000 compliant.

Great Eastern’s service standards are benchmarked against market leaders in the regional financial industry. We were one of the top-ranked companies among insurers in Asia in the 2007 Life Office Management Association (LOMA), USA Service Turnaround Times Survey. Providing assistance to its members to improve their management and operations, LOMA is an international association comprising more than 1,200 insurance and financial service companies from over 80 countries.

In Malaysia, our emphasis on business efficiency and excellent customer service continued with enhancements to our operational systems. We improved the Phonelink service, our Interactive Voice Recorder, to enable agents and customers to have access to standard policy enquiries. We also introduced WOW (Word On Web), our pilot system to standardise Customer Service correspondence, at three branches. Our tracking system was upgraded to display important information via ePartner for our field force to follow up with their clients. As further testimony of our commitment to maintain staff competency at the highest standards, four team leaders from our Call Centre obtained the “Certification of Excellence in Frontline Customer Service” and another four staff from Claims obtained the certification from the International Claim Association. In addition, we launched the “Heart2Heart” campaign as part of our initiative to gather feedback from the agency force to continuously improve our operations.

Our aspiration to be the premier healthcare provider in Malaysia received a boost with the launch of our Health Care Services to facilitate hospital admissions through the issuance of guarantee letters. Staffed by trained medical personnel, it has a robust infrastructure to provide a complete customer experience for agents and policyholders. This includes a call centre which offers round-the-clock access to inquiries related to hospital admissions and claims; an Interactive Voice Recognition system and Short Message System Service to facilitate quick self-help, and a customer-centric Managed Care System.

MAInTAInInGOurCOMPETITIVEEdGEWIThCuSTOMEr-CEnTrICPrOduCTS

Great Eastern is the market leader in Singapore and Malaysia, distinguished by its suite of comprehensive and innovative solutions to meet customer needs.

We broadened our range of investment linked funds to meet the varied needs of our customers with the launch of GreatLink Lion Series – GreatLink Lion Japan Growth Fund, GreatLink Lion China Growth Fund and GreatLink Lion India Fund. Leveraging on the expertise of our subsidiary, Lion Capital Management, the series feeds into its unit trusts, selected for their excellent track record. We expanded our GreatLink Lion Series with the introduction of GreatLink Lion Global Flexi Fund, the first absolute return fund.

We also launched GreatLink Choice (Tranche 5) with a total initial investment amount of $186 million. It is a single premium investment linked product that seeks to provide policyholders with an annual payout of 4% over five years and to return 100% of the principal amount at maturity. We expanded our product offerings for the risk averse clientele with Cash Saver, a participating single premium endowment plan that provides attractive yet stable returns in just 4 or 5 years. Other new investment plans include Choice Investment and GreatLink Growth Plan which reward our


policyholders with high return potential when they invest their Central Provident Fund (CPF) savings with us.

Responding to the focus on Singaporeans being severely under-insured and the importance of sufficient life coverage, we enhanced our offering of term plans to our customers to suit their different financial goals and insurance needs. We launched Essential Term Assurance, a level premium term plan with a policy term that ranges from 6 to 40 years (subject to last coverage age of 80 years at next birthday). We also enhanced Smart Term Assurance, our five-year renewable and convertible plan. Our customers can be further protected against 30 critical illnesses by taking up the Essential Living Term Assurance and Smart Living Term Assurance.

Moving in tandem with the rise in expectations for accident and healthcare protection, we developed a balanced portfolio which is the most comprehensive in the market. We focused on strengthening our product offering for accident, health and income protection. For personal accident, we re-launched our AccidentCare Plus II plan and Accident Care II Riders with enhanced benefits. For income protection, we launched PaySecure to provide a monthly benefit to policyholders during their disability periods. For health, we became the only insurer to have a standalone plan that covers the deductible and co-insurance portions of any Shield plan in the market with the launch of TotalShield and TotalShield Plus Rider. Complementing our existing SupremeHealth (As-Charged) plan, these two products provide our customers with complete medical coverage at home and overseas.

In August, Great Eastern was once again appointed by the Ministry of Health as one of the insurers to offer ElderShield, the national disability insurance scheme. It has been revamped to give monthly payouts of $400 over a maximum of six years, instead of $300 over five years under the old scheme. We were the first insurer to unveil our suite of supplementary plans, ElderShield ValuePlus 300/400 and ElderShield Comprehensive, to the market. In conjunction with our centennial celebrations, a premium waiver of one–year was offered to our existing 400,000 ElderShield policyholders to encourage them to upgrade their basic plans and to purchase our supplements.

Following the success of our segment marketing efforts for women, we moved on to two new target groups – youths and parents with young kids. We set out to instil in youths the importance of financial planning at an early age so that they can attain their financial goals and enjoy their golden years. Our GR8 Perks All Life programme was launched to reward our youth policyholders with a slew of privileges all-year-round. For parents with young kids (below 6 years old), we organised pro-parenting activities to promote family bonding and position Great Eastern as their choice insurer. We introduced two plans for children – Junior Living Assurance Rider Plus, an enhanced rider which provides coverage against an unbeatable 18 child-related critical illnesses

(currently the highest number in the market) at very affordable premium rates, and GreatLittleOne, a comprehensive plan that covers 18 child-related illnesses with flexible protection as the child grows older and guarantees continued payment of the child’s insurance premiums should the parent (the payer) be diagnosed with any of the 30 critical illnesses.

For group insurance, we launched SupremeCare Plan, a group managed care insurance product for corporate clients. This comprehensive product provides outpatient care, ancillary services and inpatient benefits to insured members with hassle-free administration.

In Singapore, our maturity rollover programme remained the key pillar of our insight-driven marketing initiatives with a re-investment rate of 37%, contributing 21% to our new business by weighted premium. In Malaysia, our customer relationship marketing forms 11% of our total new business by weighted premium. During the year, two key initiatives were introduced – direct marketing for personal accident riders and online tools for our agents to target customers of their choice through direct mail.

In Malaysia, we developed medical and health plans to meet the rising demand for comprehensive insurance planning with accident and health protection. Our “Health for Life” campaign was launched to position Great Eastern as the premier healthcare provider in the industry. A Health Carnival was also held at Great Eastern Mall as part of our awareness drive to coincide with World Health Day. Through the campaign, we aimed to raise public awareness on the importance of health and planning ahead for medical needs.

In March, we launched Medicare 100, an innovative plan and the first of its kind in the market that provides comprehensive health protection until the age of 100. In addition, we introduced our new Premier series of products – Premier Accidental Death and Dismemberment Benefits Rider, Premier Comprehensive Accident Benefits Rider, and Premier Medical Reimbursement and Hospital Income Benefits Rider – which contributed to over 23% growth in accident and health riders. Our spectrum of competitive and innovative medical and health plans, combined with our marketing strategies and positioning, helped us to achieve an overall increase of 38% in accident and health business.

For life protection, we launched Great Prime Life in Malaysia, a term insurance plan to provide financial protection against death, disability and dreaded diseases, with a unique selling proposition of guaranteed refund of premiums upon the maturity of the policy.

GELM unveiled in September the first of its centennial product series – the limited edition range of Great Life 100 Series for life protection and savings, as well as Great Care 100 Series for health protection. Our centennial product series comes with special benefits and exclusive privileges that will be rolled out throughout 2008.

36

rEFInInGOurAGEnCydISTrIbuTIOnChAnnElAs we strive to boost the productivity and competency of our

2,300 life planners in Singapore and 17,000 agents in Malaysia, a number of initiatives were put in place.

In Singapore, we revised the agency structure and offered a more competitive compensation scheme to increase the productivity of our life planners. The revisions, together with our endeavours in agency building and leadership development, resulted in a 40% increase in promotions across all ranks.

Benefits@Worksite (B@W)and ONESTOP, our sales support schemes for life planners, were successful in improving their competitiveness and sales performance. B@W provides an optimal channel for them to multiply their sales opportunities by servicing companies and their employees instead of relying on one-to-one contacts, while ONESTOP offers a platform for them to cross-sell a wide range of OCBC banking products and services. The ONESTOP scheme has also been instrumental in attracting fresh graduates to join the agency force by promoting the assurebank business model, which enables our life planners to manage the diverse needs of consumers with a comprehensive range of banking products on top of insurance plans.

We continued to hone the professionalism and competency of our life planners through programmes organised by our agency training arm, Centre for Excellence. The monthly Sound Advice Seminars helped to raise awareness on wealth accumulation, insurance and health planning, as well as to boost sales for life planners. A string of new courses were also organised for life planners, such as MindTools for Selling, the Presentation Skills Certification Workshop and the 6 Stage Sales Advisory Process programme.

In Malaysia, we recorded over 11% of new business growth despite a challenging year, with 95% contribution from the agency channel. Our focus on enhancing the competency and productivity of our agency force continued through various initiatives and motivational programmes. We started the year with a powerful tagline, “Strive For 10 Be the 1st” and launched the Centennial Excellence Award to motivate agents to achieve their sales targets within 10 months. Our Great MDRT Achievers Programme to spur agents to reach their MDRT goals within 10 months saw a 26% growth in the number of MDRT achievers. Our Life Planning Advisor programme, an in-house certification course specially designed to mould our agents into qualified life planning specialists, saw its first batch of 279 graduates. We also introduced the Great Investment Linked Starter Programme to train ILP-focused agents and jointly developed a platform with OCBC Bank for our agents to cross-sell the OCBC Mortgage Loan. Our recognition awards, including the Central Region CHAMP Challenge Trophy, Great Leo Awards and Supremacy Awards, were also pivotal in driving the sales of our agents.

COMMAndInGThElIOn’SShArEInbAnCASSurAnCEGreat Eastern was the first insurer in Singapore to establish

a bancassurance network in an exclusive arrangement with OCBC Bank in 1992. After the merger of Great Eastern Holdings and OAC in December 2000, our bancassurance business has been conducted exclusively through, and underwritten by, OAC. In spite of stiff competition in 2007, we achieved sales of $128 million in total weighted premium, an increase of 10%. We are the undisputed leader in the bancassurance sector with 41% of the market share.

During the year, we achieved remarkable sales of more than $100 million for two of our products: AssetLink, our new single premium investment linked plan, and MaxGuarantee, a one-year plan with a guaranteed return of 1.5%.

We continued to seek new distribution channels for our products to maintain our competitive edge. MaxProtector, a term insurance plan which provides refund of premium upon survival to the end of the policy term, was launched through the direct and telemarketing channels. In addition, the Commercial Property Loan Shield, a reducing term assurance plan, was distributed via the Business Development Managers of Enterprise Banking at OCBC Bank.

In Malaysia, our bancassurance business registered positive growth as a result of our successful partnership with Public Bank Berhad and OCBC Bank on the sale of mortgage-related as well as regular premium products. We promoted our Mortgage Reducing Term Assurance business through innovative packaging of riders and enhancements to product features with better coverage for our customers. Our credit card balance protection plan also turned in a good performance in terms of new business premiums.

STEErInGOurGEnErAlInSurAnCEbuSInESSTOGrEATErhEIGhTS

Our general insurance business is underwritten and managed by OAC in Singapore and Overseas Assurance Corporation (Malaysia) Bhd (OACM) in Malaysia.

In Singapore, general insurance registered $47.5 million in gross premium and $8.3 million in net profit-after-tax due to better performance in underwriting and investment. OAC distributes a wide range of commercial and personalised insurance products through agents, brokers, bancassurance and direct channels. Our general insurance business continued to expand through close collaboration with the tied agency force and OCBC Bank.

Continuous review and enhancement to products and services are vital to boosting OAC’s competitive footing in the market. We launched the eMotor system to enable life planners to generate, save and print motor insurance quotations for their customers round-the-clock, thereby providing faster turnaround time for motor quotations. An OAC branch office was also set up at Great


Eastern@Changi to provide greater convenience and more efficient service to life planners.

In Malaysia, total gross written premium income grew 3% to RM 176.8 million. Overall underwriting profit for the year was RM 14.8 million, up 16% from 2006. Profit from general insurance business achieved RM 55.4 million, an increase of 65%.

OACM leveraged on the Annual Agency Conference, the Agency Reaching Out project and regular workshops to build close collaboration with the agents to grow its business. It also partnered Cryocord Sdn Bhd, Malaysia’s first internationally-certified premier cord blood stem cells bank, to launch CryoCare, an insurance plan that helps to pay for the cost of cord blood stem cell transplants.

In September, Ng Kok Kheng was appointed the new CEO of OACM.

AlPhAFInAnCIAlAdVISErSPTElTdBolstered by a sales force of 74 professional financial

consultants, Alpha Financial Advisers Pte Ltd experienced remarkable sales and revenue growth, exceeding its full-year revenue budget by October, with unit trust and life insurance the two key growth engines. In addition, revenue from advisory fees grew almost 80% from 2006.

Top line sales showed extremely strong performance, led by unit trust sales which grew close to two and a half times that of 2006. Alpha’s assets under management also doubled with over 90% in wrap accounts. Sales from regular premium and general insurance registered robust growth at two-fold and 35% respectively.

Alpha continued to leverage on marketing initiatives to enhance its branding. It was regularly featured as a subject matter expert on investment in a host of television programmes as well as in the local press. Alpha also conducted several private client wealth management workshops and participated in the CPF Board’s “Retirement Ready” launch roadshow. Following the launch of its proprietary Education Calculator in mid-2007, Alpha will unveil another version of its proprietary financial planning tool, Infinitum, which features an enhanced investment and wealth accumulation module.

MAKInGbuOyAnTGAInSFrOMrEAlESTATEWe achieved strong returns in 2007 through active asset

management of our properties and investments in regional real estate funds. Our real estate investments are diversified across eight countries in different sectors to enhance portfolio returns. As at 31 December 2007, the Group exposure to real estate was $3.3 billion.

In Singapore, Great Eastern Centre at 1 Pickering Street houses the Group’s corporate head office and enjoyed 100% occupancy, with about a third of the space leased to external tenants. Great Eastern House and Great Eastern @ Changi are used mainly by our

life planners, supervisors and group managers. Orchard Emerald is a mixed commercial building with retail and office space achieving strong rental yields. Plans for enhancement works to 3 Pickering Street, China Square Central are in the pipeline to improve returns from the 65 units of office and retail shophouses.

Major residential investment properties which enjoyed close to 100% occupancy include Newton.GEMS, a 190-unit condominium, Holland.GEMS, a 64-unit condominium, and Gallop Court, a 25-unit condominium. The eight good-class bungalows at Gallop Gardens were fully leased.

In Malaysia, we continued to enhance our branch premises for consistent corporate branding and acquire suitable properties to house our branch offices. Branch offices which moved into their new premises include the Penang and Batu Pahat branch offices in 2007, as well as the Sibu branch in January 2008 upon the completion of its refurbishment in December 2007. At the end of 2007, 13 out of a total of 24 branches are located in company-owned premises throughout Malaysia.

Great Eastern Mall, having established itself as the favourite neighbourhood mall in Kuala Lumpur, continued to attract many discerning patrons. At the end of 2007, the occupancy rate at the mall and the adjoining office tower, Menara Great Eastern, achieved 99% and 100% respectively. Menara Weld, acquired in 2004, enjoyed a healthy occupancy of 91%. Enhancements to The Weld’s retail podium were completed in the third quarter of 2007. Its occupancy as at end-2007 reached 83%. Wisma Great Eastern, Penang, which opened in August, had an occupancy of 65%.

Seri Hening Residence, a development consisting of 113 units of low-density luxurious apartments, was officially launched on 16 August 2007 with an occupancy of 35% by year-end.

TrAnSFOrMInGOurbuSInESSWIThTEChnOlOGICAlInnOVATIOn

Great Eastern pushes the envelope in innovation to remain competitive in the market. We integrate advanced technology with our business processes and operations to enhance customer service and deliver greater business value to our stakeholders.

Our electronic point-of-sale system, Electronic Mobile Advisory Solution (E-MAS), added a feather to our cap – the Financial Insights Innovation Award (FIIA) 2007 for “Innovation in Operational Process”. We were one of only 10 financial institutions in the Asia Pacific region to receive this prestigious award. The FIIA recognises companies for effectively using technology to transform, enhance and grow their business. E-MAS is key to growing our brand name and strengthening our market leader position, thereby delivering long-term value and growth both locally and regionally. With most of the insurance proposals submitted electronically via E-MAS, we are the first insurer in the region to achieve this level of success in going paperless.

38

We were one of four Singapore companies among the 12 ASEAN firms shortlisted for the inaugural ASEAN Business Awards and one of the three finalists in the “Innovation” category. The Awards recognise the most outstanding and successful ASEAN companies which have contributed to the region’s economic growth and prosperity.

2007 was a significant year for the transformation of our IT infrastructure. We have successfully rolled out the state-of-the-art Financial Products Management System (FPMS) in Singapore in early-January 2008, and in Malaysia, the system will be implemented in the first quarter of 2008. The advantages of this implementation are far-reaching. It helps us to manage costs and resources effectively through the streamlining of business processes. It also enhances customer service and provides an effective platform to support our regional operations in the next leap of growth.

LifeHub is a secure platform from which life planners access business-critical information and web-based applications. The integration of FPMS with LifeHub has provided life planners with the convenience of round-the-clock access to product and service information, policy details and policyholder’s information, and enabled them to deliver professional financial advice more effectively and efficiently to their customers.

As Great Eastern spreads its regional wings, its IT architecture is being transformed to enable shared service capabilities across regional offices. Business analysis is one of the key competencies being developed that will help to shape our regional business operations. A project in the pipeline is the integration of various communication platforms – e-mail, instant messaging, voice over IP, facsimile, mobile devices, audio and video conferencing – to streamline and enhance our communication with life planners, policyholders and staff.

rEInVIGOrATInGOur“lIFEISGrEAT!”brAndInGA strong brand conveying a consistent message is one of our

most valuable assets. It drives future growth opportunities in a globalised marketplace and forms the backbone of our credibility as we enter other markets in the region.

We launched a “Thumbs up!” corporate branding campaign in Singapore in February. The campaign aimed to increase Great Eastern’s visibility and to communicate our ability to help our customers fulfil their goals. Rolled out through print, television, radio and outdoor media, the branding campaign increased the awareness of Great Eastern, with more people considering Great Eastern as an insurer to purchase a life insurance policy and/or to increase coverage. We also ran a series of advertorials in The Sunday Times which had a positive impact on our image. In addition, we harnessed the Internet to raise awareness on financial planning through the launch of the “Walk of Life 2” e-game in October.

Our “Life is great!” Photo Competition returned for its 7th year and attracted some 2,000 high quality entries from all walks of life. The competition, which offered the highest total prize money in the local photographic circle with $23,500, continued to effectively promote our brand philosophy, that with financial security, good health and meaningful relationships, life will be great.

The annual Great Eastern Women 10K, Singapore’s largest all-women road race, was another successful corporate branding event in 2007 with more than 8,200 runners. As the event’s title sponsor, we effectively used this platform to promote the two pillars of our “Life is great!” philosophy – good health and meaningful relationships – by urging women to pursue a healthy lifestyle, and bond with their families and friends. The Women 10K is a way for Great Eastern to reach out to women as part of our Women Segment Marketing efforts to help them achieve their financial independence, live well and stay healthy.

In Malaysia, we kicked off our centennial celebrations with the successful launch of our “live100percent” campaign which will run throughout 2008 with a series of television commercials, print advertising, on-the-ground promotion, outdoor advertising and 52 amazing experiences for policyholders to enjoy each week. The campaign underpins our mission to make life great by providing financial security and protection, thereby enabling people to live life to the fullest, and enjoy real experiences and different opportunities with no worries. We also introduced 100 Privileges, our rewards programme exclusively for new policyholders of our centennial product series, to augment the “live100percent” campaign. During the year, our strong brand status was reaffirmed when we clinched the Trusted Brand Gold Award 2007 for the fourth year in a row. Organised by Reader’s Digest Malaysia, the award further reinforces Great Eastern’s status as a market leader and premium brand in the insurance sector.

MAKInGlIFEGrEATFOrThECOMMunITyGreat Eastern, in its commitment towards making life great for

the less privileged in our society, organised a number of corporate citizenship programmes and fund-raising activities during the year.

In October, we were again awarded the prestigious Special Events Platinum Award by the Community Chest in Singapore. It marked the 16th year that we have received this recognition for our long-standing community projects, ChildrenCare and GoldenCare. Since the inception of these two projects, we have raised over $8 million for two children charities and two elderly homes under the umbrella of the Community Chest.

2008 marks the year of Great Eastern’s 100th anniversary. As part of our centennial celebrations, we aim to raise $1 million for ChildrenCare and GoldenCare by August 2008. To help contribute towards this target amount, we launched WE CARE (We Embrace Children And Respect Elders) Fund and commenced our fund-


raising efforts with the Great Eastern Women 10K and the Great Eastern Charity Lunch (in conjunction with the Singapore Turf Club Charity Race Day) in October and November respectively. Approximately $250,000 was raised through these two initiatives.

Our role as a responsible corporate citizen stretches beyond financial giving. Demonstrating our resolution to spread our “Life is great!” cheer to the community, we organised an array of activities for our beneficiaries under ChildrenCare and GoldenCare: MINDS Yio Chu Kang Gardens School, Metta School, AWWA Community Home for Senior Citizens and Bright Hill Evergreen Home.

In Malaysia, we dedicated time and effort to raise funds for ChildrenCare, our charity project which benefits needy and under-privileged children. Great Eastern also extended a helping hand to families whose lives were affected by the tragic floods which hit the Southern region in early-2007. We donated gas cylinders and stoves to over 200 families in flood-stricken Kampung Tembioh, Kota Tinggi and Johor. Various teams of staff and agents also volunteered their services to assist in cleaning and relief works in Kota Tinggi.

PurSuInGPEOPlEEXCEllEnCEOur Group staff strength rose 11% in 2007 to 2,873, with most

of the growth coming from our regional operations. This is in line with the increased resources being deployed for our overseas expansion.

Human capital is one of our most vital and valuable assets. Recognising that staff engagement is the cornerstone of the Group’s future expansion, we focused on engaging our staff and instilling their passion for working in Great Eastern. We are pleased that staff satisfaction in Singapore and Malaysia improved from 2006.

In the face of a challenging environment marked by talent shortage and stiff competition for hot jobs, we were successful in retaining talents and recruiting professionals by leveraging on our strong brand name. We enhanced staff productivity and efficiency, and encouraged creative thinking by adopting culture changing programmes viz. the Making Life Great workshops. These efforts were pivotal in improving staff satisfaction.

We also saw the need to equip our senior management with the necessary skills to harness the strengths of their subordinates. Their business skills were enhanced through programmes conducted by renowned business schools. We also introduced, for the first time, coaching programmes for middle management to educate them on the importance of coaching their subordinates as part of effective leadership. Leadership and coaching programmes will continue to front our human capital strategy in 2008.

Leadership grooming forms an essential part of human capital development and we are committed to the nurturing of our high-

potential executives. We revamped the Management Associate and Scholarship Programmes to encompass courses on inculcating engagement and passion among the participants. We implemented a revised career track system for our Management Associate scheme with programmes focusing on leadership and emotional intelligence. We also continued to award scholarships to staff to pursue their Master’s and Doctorate degrees. These efforts underpin our strategy to fortify and retain our talents.

In Malaysia, Alex Foong was appointed the CEO of Great Eastern Capital (Malaysia) Sdn Bhd, the immediate holding company of GELM in January 2008. He was the CEO of GELM from 1996 to 2007. In his new role, Alex Foong oversees the corporate affairs of the Group’s operations in Malaysia. Koh Yaw Hui succeeded him as the new CEO of GELM, and is responsible for the Company’s operations and bottom line.

lIOnCAPITAlMAnAGEMEnTlTdLion Capital closed the year with a pre-tax profit of $59.5

million at group level, up 15% from 2006. Lion Capital’s assets under management (AUM) increased by 5.6% to $34.2 billion at end-2007. Besides starting the year with two new retail funds, the Company further expanded its footprint in the region.

In January, the Company launched the Lion Capital Multi Income Fund, which invests in global equities, fixed income instruments and real estate investment trusts, as well as the much-anticipated Lion Capital Vietnam Fund, which aims to achieve medium to long-term capital appreciation by investing in companies listed in Vietnam and other companies listed elsewhere that have operations in, or derived part of their revenue from Vietnam and the Indo-China region. The response to both the funds was highly positive, generating more than $200 million in fresh inflows.

Lion Capital was once again recognised for the strong performance of its funds in 2006 with 17 local and overseas awards. For the second year running, it garnered the prestigious title of “Best Fund Group over 3 years – Mixed Asset Group” at the Edge-Lipper Singapore Fund Awards 2007. It was also named the “Best Fund Group over 5 years” at the Standard & Poor’s Singapore Fund Awards. These achievements continued to underscore the Company’s strong standing as an Asian Fund Specialist.

It also expanded its presence locally and regionally. More distribution channels were established for Lion Capital’s retail funds, particularly in Singapore and Taiwan. Many of Lion Capital’s unit trusts experienced good fund inflows, especially for the Lion Capital China Growth Fund, Lion Capital India Fund, Lion Capital Singapore/

40

Malaysia Fund and Lion Capital Singapore Balanced Fund. On the institutional front, further progress was made in Brunei,

Malaysia, Taiwan, China, Korea, Japan and Australia. The Company also expanded its local clientele for its Institutional Business by actively building strong relations with private corporations, charities, town councils and educational institutions.

Lion Fairfield Capital Management Ltd (Lion Fairfield), the 65%-owned hedge fund subsidiary of Lion Capital, achieved an AUM growth of over 56% from 2006 and crossed the $1 billion mark at the end of 2007. During the year, Lion Fairfield co-launched four new hedge funds, namely the Fairfield Baron Absolute Return Fund, Ltd; Fairfield MT Japan Long-Short Fund, Ltd; Fairfield Lion Japan Equity Fund, Ltd, and Fairfield Asian Era Fund, Ltd.

buIldInGSuSTAInAblEVAluEFOrOurShArEhOldErS

Our good corporate governance has enabled us to continue to deliver long-term value for our stakeholders. We scored a total of 69 points in The Business Times Corporate Transparency Index for 2007 published in The Business Times on 18 April 2007, up two points from 67 in the last ranking. This score puts us at 55th position out of 475 companies.

In a Total Shareholder Return (TSR) study undertaken by LEK Consulting of 631 companies with over $1 billion in market capitalisation as at 30 December 2006, published in The Business Times on 29 May 2007, Great Eastern ranked No. 56 with a five-year TSR of 14% and No. 13 with a 10-year TSR of 14.1%.

JOurnEyInGInTOThEnEXT100yEArSAndbEyOnd2007 has been a sterling year for the Group. We are very

pleased that our profit-after-tax has surpassed the $500 million mark, one year ahead of our 2008 business goal, despite rising competition and operational costs. It is an achievement made possible with the unstinting support of our stakeholders, namely our policyholders, staff, life planners and agents, shareholders and business partners.

We continued to deepen and broaden our presence in the emerging markets of China, Vietnam and Indonesia. Our vision to be the leading financial service provider in Asia received another boost when we obtained the licence to set up a wholly-owned life insurance company in Vietnam, with a target to commence operations by the middle of 2008.

But even as we take greater strides further afield, we have not overlooked our core markets of Singapore and Malaysia. We

reinforced our leadership position in both markets which have been marked by intense competition. This can be attributed to our concerted efforts in building on our distribution capabilities, venturing into new market segments and pushing on with product innovation.

The Group focused on improving the operational efficiency of our businesses with advanced technology and strengthening our relationships with customers through quality service. Forward-looking human resource management including expanding and edifying our talent pool remains an important factor for the success of our operations. By holding fast to our tradition of a high standard of corporate governance, we continue to create long-term value to our shareholders.

Backed by this growth blueprint as well as our brand name of financial strength and dynamism, we are confident that we can achieve sustainable success as we journey into the next 100 years and beyond. We will remain committed to making life great for our stakeholders with financial security, good health and meaningful relationships.

OurGrATITudESince joining Great Eastern in July 1996, I have personally

benefited from my two Chairmen (Mr Wong Pakshong since 2000 and the late Mr Howe Yoon Chong from 1996 to 2000). They were my mentors and have provided me with good advice and guidance. Mr Howe, who helped steer Great Eastern during the challenging years, passed away in August 2007.

Mr Wong Pakshong has expressed his desire to retire. It is therefore with regret that we bid him farewell as our Chairman. Our shareholders, staff, life planners and business partners owe a great debt to Mr Wong as he has always placed the greatest importance on maintaining the highest standards of corporate governance and integrity in our business operations and dealings. On behalf of all the staff and life planners, we wish him good health and all the very best in his retirement.

tan benG leeDirector and Group CEO12 March 2008


year in revieW

JAnuAry• Great Eastern was among the top three Employee Benefit

Insurers by annualised premium, based on statistics published by the Life Insurance Association.

• In Malaysia, we launched our “Health for Life” campaign to position Great Eastern as the premier healthcare provider in the industry.

FEbruAry• Our “Thumbs up!” corporate branding campaign was

launched to enhance customer perception and awareness of Great Eastern.

• Lion Capital won the prestigious title of “Best Fund Group over 3 years - Mixed Asset Group” at the Edge-Lipper Singapore Fund Awards 2007.

MArCh• We won the award for “Innovation in Operational Process” in

the Financial Insights Innovation Award 2007 for Electronic Mobile Advisory Solution (E-MAS), our electronic point-of-sale system.

• Our Vietnam Representative Offices sponsored and co-organised the “Developing and Managing Investment Linked Products” seminar with the Association of Vietnamese Insurers to promote Great Eastern and demonstrate our commitment to contribute to the local insurance industry.

• Lion Capital was named the “Best Fund Group over 5 years” at the Standard & Poor’s Singapore Fund Awards.

APrIl• In keeping with our commitment to support education in

Vietnam, we awarded 100 study grants to outstanding students in five local universities.

MAy• Our annual bonus statements were sent to half a million

policyholders.

• In Malaysia, we were conferred the Trusted Brand Gold Award 2007 by Reader’s Digest Malaysia for the fourth year in a row.

• Great Eastern Life Assurance (China) Co Ltd (GELC) received the approval to set up its sales office in Jiulong Po district in Chongqing.

JunE• In conjunction with its first year anniversary celebrations, GELC

participated in the inaugural Chongqing Financial Exhibition to promote its corporate image.

July• For the third year running, Great Eastern was one of the top-

ranked companies in the Singapore International 100 Ranking 2007 organised by IE Singapore. With $2.7 billion in overseas turnover, we were in the 13th position in the overall ranking and in 2nd position in the Southeast Asia market ranking.

• For group insurance, we entered into an exclusive partnership with Generali Employee Benefits (GEB) Network, which became our new pooling network partner in Singapore and Malaysia. GEB is one of the top three multi-national pooling networks with a global presence spanning over 70 countries.

AuGuST• We were re-appointed by the Ministry of Health as the one

of the three insurers to offer ElderShield, the national severe disability insurance scheme. It has been revamped to give monthly payouts of $400 over a maximum of six years, instead of $300 over five years under the old scheme. Our existing 400,000 ElderShield policyholders received our invitation to upgrade their ElderShield coverage and take up our supplementary plans.

• We held our 7th “Life is great!” Photo Competition in Singapore to build brand awareness.

• GELC launched its group insurance business.

• As part of its corporate social responsibility, GELC donated RMB100,000 to Chongqing Red Cross to aid those who have lost their homes in a flood in July.

SEPTEMbEr• As testimony to our emphasis on business excellence and

quality customer service, our operational departments have been re-certified ISO 9001:2000 compliant.

• We launched the eMotor system to enable life planners to generate, save and print motor insurance quotations for their customers round-the-clock, thereby providing faster turnaround time for motor quotations.

• An OAC branch office was set up at Great Eastern@Changi to provide greater convenience and more efficient service to our life planners.

42

OCTObEr• Great Eastern was once again awarded the Singapore Service

Class (for another three years) by SPRING Singapore, in recognition of our corporate customer service excellence. We were the first insurance company to have attained this prestigious recognition in 2004.

• We organised our annual Customer Service Excellence Week with service-related activities to strengthen our customer-centric corporate culture.

• Our second annual Great Eastern Women 10K successfully raised the profile of the Company. As the title sponsor of this biggest all-women road race in Singapore, we have effectively leveraged on this platform to promote our “Life is great!” philosophy.

• We harnessed the Internet to raise awareness on financial planning through the “Walk of Life 2” e-game.

• Great Eastern was awarded the prestigious Special Events Platinum Award by the Community Chest in Singapore for the 16th time for its long-standing charity projects, ChildrenCare and GoldenCare.

• PT Great Eastern Life Indonesia and PT Bank NISP Tbk signed an Exclusive Partnership Agreement to jointly develop insurance solutions to meet the needs of the customers, and the products will be sold exclusively through the Bank.

nOVEMbEr• Our experiential reward campaign, live100percent,

was launched to the public in Malaysia to kick-start our centennial celebrations.

• GELC received a financial capital reward of RMB 6 million from the Chongqing Government.

dECEMbEr• We were one of the top-ranked companies among insurers in

Asia in the 2007 Life Office Management Association (LOMA), USA Service Turnaround Times Survey.

• For group insurance, we launched e-Claims notification, an automated system to keep our Employee Benefit policyholders/intermediaries informed about claims settlements and remind them about outstanding claims documents.

• GELC was named the “Insurance Company with the Best Risk Management 2007” in Chongqing in the Top Chinese Financial Brands Ranking, jointly organised by the Chongqing Daily and the Major Media Promotions Alliance for China’s Financial Sector.

• Scholarships were presented to 10 deserving students at the second annual GELC Actuarial Scholarship Presentation Ceremony.

• GELC received the approval from the China Insurance Regulatory Commission to establish its first branch office in Chongqing.

• We obtained the licence to set up a wholly-owned life insurance company in Vietnam. With an initial capital of VND 600 billion (about $60 million), the new subsidiary company will be known as Great Eastern Life (Vietnam) Co Ltd.


stay mentally alert

Anactivemindpacksmorelifeintoliving.Weconstantlyinnovateourworkprocessesasawayoflife.Weareoneofonly10financialinstitutionsintheAsiaPacificregiontoreceivetheprestigiousFinancialInsightsInnovationAward2007.

bOArdOFdIrECTOrSMr Michael Wong Pakshong, ChairmanMr Tan Beng Lee, Group CEODr Cheong Choong KongMr David ConnerMr Koh Beng SengMr Lee Seng WeeMr Lee Chien ShihTan Sri Dato’ Dr Lin See-YanProfessor Neo Boon SiongMr Tan Yam Pin

nOMInATInGCOMMITTEEMr Michael Wong Pakshong, ChairmanDr Cheong Choong KongMr Lee Seng WeeMr Tan Yam Pin

EXECuTIVECOMMITTEEMr Michael Wong Pakshong, ChairmanDr Cheong Choong KongMr David ConnerMr Tan Beng LeeMr Tan Yam Pin

corporate information

AudITCOMMITTEEMr Tan Yam Pin, ChairmanMr Michael Wong PakshongTan Sri Dato’ Dr Lin See-YanProfessor Neo Boon Siong

rEMunErATIOnCOMMITTEEMr Michael Wong Pakshong, ChairmanDr Cheong Choong KongProfessor Neo Boon Siong

rISKCOMMITTEEMr Michael Wong Pakshong, ChairmanMr David ConnerProfessor Neo Boon SiongMr Tan Beng Lee

GrOuPCOMPAnySECrETAryMrs Elizabeth Teoh Pek Har

rEGISTErEdOFFICE1 Pickering Street #16-01Great Eastern CentreSingapore 048659Telephone: (65) 6248 2846Facsimile: (65) 6438 3889Website: www.lifeisgreat.com.sgEmail: [email protected]

ShArErEGISTrArM & C Services Private Limited138 Robinson Road #17-00The Corporate OfficeSingapore 068906Telephone: (65) 62233036

AudITOrSErnst & YoungOne Raffles QuayNorth Tower, Level 18Singapore 048583

PartnerInChargeMr Mak Keat Meng(from financial year 2003)


embedded value

EMbEddEdVAluEAn actuarial embedded value is a commonly used technique

to estimate the economic value of the existing business of a life insurance company. Looking at a company’s distributable profits for a year, or even a few years, is not a reliable guide to its long-term value. This is because the timing of distributable profits arising from a policy, even for a profitable business, may result in losses in the first policy year even though there may be profits in later years and the policy is profitable overall. The loss in the first year is due to the initial expenses of writing new business, combined with the need to set aside capital to meet regulatory solvency requirements. As a result, in any one year, high growth of business may tend to lower distributable profits. Embedded values have therefore been developed as a way to estimate the long-term economic value of a life insurance company for the existing blocks of business.

The embedded value of Great Eastern Holdings Limited has been determined using the traditional deterministic methodology that has been adopted historically for embedded value reporting, and comprises the sum of the value of In-Force Business and the value of the adjusted Shareholders’ Funds.

VAluEOFIn-FOrCEbuSInESSThis represents an estimate of the economic value of projected

distributable profits to shareholders, i.e. after-tax cash flows less increases in statutory reserves and solvency margins attributable to shareholders, from the In-Force Business at the valuation date, i.e. 31 December 2007. The cash flows represent a deterministic projection, using best estimate assumptions as to future operating experience and are discounted at a risk-adjusted discount rate.

The use of a risk-adjusted discount rate, together with an allowance for the cost of holding statutory reserves and solvency margins represents the allowance for risk in the value of In-Force business together with an implicit allowance for the cost of options and guarantees provided to policyholders. It should be noted that this allowance for risk is approximate and may not correspond precisely with the allowance determined using capital market consistent techniques.

In projecting the value of In-Force Business, the statutory reserve valuation and solvency margin bases are assumed to be based on the Risk Based Capital and Capital Adequacy Requirement bases for Singapore and on the minimum basis allowed under the regulations for Malaysia.

AdJuSTEdShArEhOldErS’FundThis represents the value of the Shareholders’ Funds from the

various entities of the Group that can be distributed to shareholders, after allowing for tax. These are the amounts over and above the assets required to meet statutory reserves, solvency margins and other liabilities. Included in this are surpluses from the non-life funds.

ASSuMPTIOnSuSEdThe assumptions adopted for the calculations have been

determined taking into account the recent experience of, and expected future outlook for, the life insurance business of the companies involved, i.e. The Great Eastern Life Assurance Company Limited (“GEL”) and The Overseas Assurance Corporation Limited (“OAC”) in Singapore and Great Eastern Life Assurance (Malaysia) Berhad (“GELM”) in Malaysia.

Investment returns assumed are based on the long term strategic asset mix and their expected future returns. The returns assumed, after investment expenses, are 5.25%, 4.25% and 7.0% for GEL’s participating fund, non-participating fund and linked fund respectively, 5.15%, 4.25% and 7.0% for OAC’s participating fund, non-participating fund and linked fund respectively and 6.5%, 6.0% and 7.0% for GELM’s participating fund, non-participating fund and linked fund respectively. The risk-adjusted discount rate used is 8.0% for Singapore and 9.5% for Malaysia.

EMbEddEdVAluECAlCulATIOnThe value of In-Force Business has been calculated for the life

insurance business of GEL and OAC in Singapore and GELM in Malaysia, along with the adjusted Shareholders’ Funds for the Group. Based on 473,319,069 Great Eastern Holdings Limited shares, the results of the calculations as at 31 December 2007 are as follows:

EmbeddedValue(S$pershare) Singapore* Malaysia Total

Value of In-Force Business 3.151 3.069 6.220

Adjusted Shareholders’ Funds 6.117 0.900 7.017

Total Embedded Value 9.268 3.969 13.237

* “Singapore” column includes values from the businesses in Brunei, Hong Kong, Sri Lanka, Indonesia and China.

ECOnOMICVAluEOFOnEyEAr’SnEWbuSInESSThe economic value of one year’s new business, defined as

the value of projected shareholder distributable profits from new business sold in the year prior to the valuation date, can be used to determine the estimated value of future distributable profits from new sales. Using the same best estimate and reserving and solvency margin assumptions as those used for the In-Force Business, the value of business written for the year ended 31 December 2007 has been calculated as follows:

(S$pershare) Singapore Malaysia Total

Economic Value of One Year’s New Business 0.317* 0.247 0.564

* Note: Includes S$0.012 per share value of policy enhancement requests from policies inforce as at 31 December 2006.

The economic value of one year’s new business tabulated above does not include the new business written in Brunei, Indonesia and China.

46

IndEPEndEnTrEVIEWThe embedded value and the value of one year’s new business

were determined by the Company. The Tillinghast business of Towers Perrin performed a review of the assumptions used, the calculation methods (relative to the traditional deterministic embedded value reporting approach), the analysis of change in embedded value and the reasonableness of the results of the embedded value and the value of one year’s new business.

AnAlySISOFChAnGEInEMbEddEdVAluEThe chart shows various components accounting for the change in embedded value from the start to the end of the year. The table

below the chart provides comparison of the individual components against 2006 analysis results.

SEnSITIVITyTESTInGSIn addition, some sensitivity testings were conducted

using different interest and discount rates. The results are summarised below:

discount discount

base rate+1% rate-1%

S$pershare Scenario yield+0.50% yield-0.50%

Total Embedded Value 13.237 13.102 13.355

Economic Value of One Year’s New Business 0.564 0.533 0.597

14.0

13.5

13.0

12.5

12.0

11.5

11.0

10.5

10.0EmbeddedValueasat

31dec2006

OpeningAdjustment

Investmentreturnon

Shareholders’Fund

ExpectedreturnonInforce

business

Valueofnewbusiness

lifeFundInvestmentExperienceVariance

lifeFundOperating

ExperienceVariance

dividendsPaid OperatingAssumption

Changes

balancing EmbeddedValueasat

31dec2007

11.885 0.009

13.237

0.382

0.458

0.585

0.3650.080

(0.555)

0.021 0.007

2007 11.885 0.009 0.382 0.458 0.585 0.365 0.080 (0.555) 0.021 0.007 13.237

2006 10.598 (0.182) 0.344 0.435 0.475 0.253 (0.055) (0.400) 0.348 0.069 11.885


live a balanced lifestyle

lifeisbestlivedinequilibrium.AtGreatEastern,work-lifebalancehasalwaysbeenoneofthekeydriversofouraward-winninghumanCapitalpractices.

contents50 Directors’ Report54 Statement By Directors55 Auditors’ Report56 Profit & Loss Statements57 Balance Sheets58 Statements of Changes in Equity61 Consolidated Statement of Cash Flows63 Life Assurance Revenue Statement64 General Insurance Revenue Statement65 Notes to the Financial Statements

The Directors have pleasure in presenting their report to the members together with the audited financial statements of Great Eastern Holdings Limited (“GEH” or the “Company”) and its subsidiaries (collectively the “Group”) for the financial year ended 31 December 2007.

1. directorsThe Directors of the Company in office at the date of this report are:

Mr Michael Wong Pakshong, ChairmanMr Tan Beng Lee, Group CEODr Cheong Choong KongMr David Conner Mr Koh Beng Seng (appointed on 2 January 2008)Mr Lee Seng WeeMr Lee Chien ShihTan Sri Dato’ Dr Lin See-YanProfessor Neo Boon SiongMr Tan Yam Pin

Mr Tan Beng Lee, Tan Sri Dato’ Dr Lin See-Yan and Professor Neo Boon Siong retire by rotation in accordance with Article 91 of the Company’s Articles of Association, and, being eligible, offer themselves for re-election.

Mr Koh Beng Seng retires pursuant to Article 97 and, being eligible, offers himself for re-election.

Mr Lee Seng Wee and Mr Michael Wong Pakshong will retire pursuant to section 153 of the Companies Act, Chapter 50. Resolution will be proposed for re-appointment of director under section 153(6) of the Companies Act to hold office until the next annual general meeting (“AGM”) of the Company.

2. arranGements to enable directors to acQuire sHares or debenturesNeither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object was 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, save as disclosed in this report.

directors’ report

50

3. directors’ interests in sHares or debenturesAccording to the register of Directors’ shareholdings, none of the Directors who held office at the end of the financial year have any interests in shares or debentures of the Company. Their interests in shares in or debentures of the Company’s holding company, Oversea-Chinese Banking Corporation Limited (“OCBC Bank”), are as follows:

Shareholdings registered in the name of Directors or in Shareholdings in which Directors which Directors have a direct interest are deemed to have an interest As at 1. 1. 2007 as at 31. 12. 2007 As at 1. 1. 2007 as at 31. 12. 2007

(i) OrdinarysharesinthecapitalofOCBCBankMr Michael Wong Pakshong 127,198 131,998 59,998(1) 59,998(1)

Mr Tan Beng Lee 350,000 420,000 – –Dr Cheong Choong Kong 88,471 97,179 76,522 (3) 69,487(2)

Mr David Conner 573,919 1,009,393 285,145 (5) 288,018(4)

Mr Lee Seng Wee 6,644,394 6,649,194 3,901,094 (1) 3,901,094(1)

Mr Lee Chien Shih 1,771,888 1,771,888 – –Professor Neo Boon Siong 4,800 9,600 – –

(ii)4.2%non-cumulativenon-convertibleClassGpreferencesharesinOCBCBank

Mr Michael Wong Pakshong 22,000 22,000 – –Mr Tan Beng Lee 1,050 1,050 – –Dr Cheong Choong Kong 15,000 15,000 – –Mr David Conner 50,000 50,000 – –Mr Lee Seng Wee 800,000 800,000 600,000 (1) 600,000(1)

Mr Lee Chien Shih 176,000 176,000 – –

Holdings registered in the name of Directors or in Holdings in which Directors which Directors have a direct interest are deemed to have an interest As at 1. 1. 2007 as at 31. 12. 2007 As at 1. 1. 2007 as at 31. 12. 2007

(iii)OCBCBankSGDSubordinated Notes5%Due06.09.2011

Mr Tan Yam Pin – – 500,000 (1) 500,000(1)

(1) Ordinary shares/preference shares/Notes held by spouse. (2) Comprises deemed interest over 59,887 ordinary shares under the OCBC Deferred Share Plan and 9,600 ordinary shares held

by spouse. (3) Comprises deemed interest over 66,922 ordinary shares under the OCBC Deferred Share Plan and 9,600 ordinary shares held

by spouse. (4) Comprises deemed interest over 276,856 ordinary shares under the OCBC Deferred Share Plan and subscription rights over 11,162

ordinary shares under the OCBC Employee Share Purchase Plan. (5) Comprises deemed interest over 273,983 ordinary shares under the OCBC Deferred Share Plan and subscription rights over 11,162

ordinary shares under the OCBC Employee Share Purchase Plan.

directors’ report


3. directors’ interests in sHares or debentures (continued)(iv)Shareoptions

According to the register of Directors’ shareholdings, none of the Directors who held office at the end of the financial year have any interests in share options to subscribe for ordinary shares in the capital of the Company under the Great Eastern Holdings Executives’ Share Option Scheme (“GEH Scheme”). The following Directors have interests in share options to subscribe for ordinary shares in the capital of OCBC Bank under the OCBC Share Option Scheme 2001, as follows:

Options held by Directors Options in which Directors are deemed in their own name to have an interest As at 1. 1. 2007 as at 31. 12. 2007 As at 1. 1. 2007 as at 31. 12. 2007

Mr Tan Beng Lee 365,400 321,406 – –Dr Cheong Choong Kong 514,800 714,800 – –Mr David Conner 3,464,000 3,395,000 – –

Save as aforesaid, the Directors did not have any interests in shares in, or debentures of, the Company or any related corporation either at the beginning or at the end of the financial year.

There was no change in any of the above-mentioned interests between the end of the financial year and 21 January 2008.

4. directors’ contractual benefitsSince the end of the previous financial year, no Director has received or become entitled to receive benefits by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member or with a company in which he has a substantial financial interest, except as disclosed in the financial statements and in this report, and except for employment remuneration/benefits received by a Director in his capacity as the Chief Executive Officer of the Company’s holding company, OCBC Bank.

One of the Company’s non-executive Directors, Dr Cheong Choong Kong (“Dr Cheong”), who is also a non-executive Director and Chairman of OCBC Bank, had on 12 June 2006 entered into an agreement with one of the Company’s related corporations, OCBC Management Services Private Limited (which is a subsidiary of OCBC Bank). Under the agreement, Dr Cheong is appointed as consultant to oversee and supervise the strategic planning of OCBC Bank and its subsidiaries with respect to customer service, talent identification, and the development and succession of senior management within the OCBC Group. For such services rendered, Dr Cheong is entitled to payments and benefits, including a variable bonus of S$100,000 per annum or an additional bonus as may be determined by the Remuneration Committee and the Board of Directors of OCBC Bank. In respect of the financial year ended 31 December 2007, Dr Cheong has received payments and benefits under the agreement amounting to S$1,090,562, and will receive a variable bonus of S$100,000, or any additional bonus as may be determined by the Remuneration Committee and Board of Directors of OCBC Bank. (For the previous financial year ended 31 December 2006, Dr Cheong received (on a pro-rated basis in respect of the period July to December 2006) aggregate payments and benefits of S$556,071 and a variable bonus of a total amount of S$325,860 comprising a pro-rated bonus of S$50,000 and an additional bonus of S$275,860). In his capacity as a Director of OCBC Bank, Dr Cheong is also eligible for any Directors’ fees or share options from OCBC Bank that are recommended by the OCBC Board of Directors. For his services as a non-executive Director of GEH and certain of its subsidiaries, Dr Cheong receives Director’s fees and the amount of his Director’s fees for the financial year ended 31 December 2007 has been included in the amount of Directors’ remuneration disclosed in the financial statements.

directors’ report

52

directors’ report

5. sHare optionsNo share options have been granted under the GEH Scheme since 18 November 2004. There were no options outstanding under the GEH Scheme as at 31 December 2007. No options have been granted pursuant to the GEH Scheme to controlling shareholders of the Company and their associates. No participants in the GEH Scheme had previously received 5% or more of the total number of options available under the GEH Scheme. No options had been granted at a discount since the commencement of the GEH Scheme.

During the financial year ended 31 December 2007, the Company’s holding company, OCBC Bank, granted share options under the OCBC Share Option Scheme 2001 to selected senior executives (including the Group CEO) of the Company and its Group. Certain Directors of the Company who are also Directors of OCBC Bank are participants of the OCBC Share Option Scheme 2001 and certain other plans implemented by OCBC Bank, including the OCBC Deferred Share Plan and the OCBC Employee Share Purchase Plan. Directors’ interests in shares and share options in OCBC Bank are set out in item 3 above.

6. audit committeeThe Audit Committee (“AC”) comprises four non-executive independent Directors. The AC members at the date of this report are Mr Tan Yam Pin (AC Chairman), Mr Michael Wong Pakshong, Tan Sri Dato’ Dr Lin See-Yan and Professor Neo Boon Siong. The AC convened four meetings during the financial year under review.

The AC performs the functions specified under section 201B(5) of the Companies Act, Chapter 50, including review with the auditors their audit plan, their evaluation of the system of internal accounting controls and their audit report, review the assistance given by the Company’s officers to the auditors, review the scope and results of the internal audit procedures, review the financial statements of the Company and of the Group and the auditors’ report thereon, and thereafter submits them to the Company’s Board of Directors. Details of the functions performed by the AC, including functions specified in the Listing Manual and the Code of Corporate Governance 2005, are set out in the Report on Corporate Governance included in the Company’s Annual Report for the financial year ended 31 December 2007.

The AC has nominated Ernst & Young for re-appointment as auditors at the Annual General Meeting of the Company.

7. auditors The auditors, Ernst & Young, have expressed their willingness to accept re-appointment.

On behalf of the Board of Directors

MichaelWongPakshong TanBengLeeChairman Director

Singapore19 February 2008


statement by directorsPursuanttoSection201(15)

We, Michael Wong Pakshong and Tan Beng Lee, being two of the Directors of Great Eastern Holdings Limited (the “Company”), do hereby state that, in the opinion of the Directors:

(i) the accompanying financial statements of the Company and its subsidiaries (collectively, the “Group”), which comprise the balance sheets of the Group and of the Company as at 31 December 2007, the profit and loss statements and the statements of changes in equity of the Group and of the Company and the statement of cash flows, the life assurance revenue statement and general insurance revenue statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes, are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2007, the results and changes in equity of the Group and of the Company and the cash flows and results of the insurance operations of the Group for the financial year ended on that date; and

(ii) at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the Board of Directors

MichaelWongPakshong TanBengLeeChairman Director


54

auditors’ reportTotheMembersofGreatEasternHoldingsLimited

We have audited the accompanying financial statements of Great Eastern Holdings Limited (the “Company”) and its subsidiaries (collectively, the “Group”) set out on pages 56 to 144, which comprise the balance sheets of the Group and of the Company as at 31 December 2007, the profit and loss statements and the statements of changes in equity of the Group and of the Company and the statement of cash flows, the life assurance revenue statement and general insurance revenue statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes.

directors’ responsibility for tHe financial statementsThe Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

auditors’ responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

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 judgement, 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 entity’s preparation 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors, 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.

opinionIn our opinion,

(a) the accompanying financial statements are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2007, the results and changes in equity of the Group and of the Company and the cash flows and results of the insurance operations of the Group for the financial year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

ernst & younGCertified Public Accountants



profit & loss statementsForthefinancialyearended31December

Group company in singapore dollars (millions) Note 2007 2006 2007 2006

Turnover 8 9,225.3 7,922.2 – – Gross Premiums 8 5,997.7 5,417.5 – –

Life assurance profit from: Participating Fund 142.9 103.1 – – Non-participating Fund 302.0 218.5 – – Investment-linked Fund 64.3 54.6 – –Profit from life assurance 509.2 376.2 – –Profit from general insurance 28.1 27.3 – –Profitfrominsuranceoperations 537.3 403.5 – – Dividend from subsidiaries – – 37.3 33.1Investment income, net 4 92.8 98.1 1.0 1.0 Gain on sale of investments and changes in fair value 5 36.2 45.7 1.8 – (Increase)/decrease in provision for impairment of assets 6 (4.6) 0.6 – (1.3)Loss in exchange differences (12.9) (10.2) – –Profitfrominvestments 111.5 134.2 40.1 32.8

Feesandotherincome 105.6 80.9 – –

Profitbeforeexpenses 754.4 618.6 40.1 32.8

less: Management and other expenses 81.1 53.1 5.5 3.1 Depreciation 25 1.2 1.1 – – Expenses 82.3 54.2 5.5 3.1

Profitafterexpenses 8 672.1 564.4 34.6 29.7 Share of (loss)/profit of associates (0.6) 9.0 – – Share of loss of joint ventures (2.0) (2.5) – – 8 669.5 570.9 34.6 29.7

less: Income tax 9 106.3 80.2 (0.1) 4.3 Netprofitafterincometax 563.2 490.7 34.7 25.4

Attributableto: Shareholders 546.9 476.9 34.7 25.4 Minority interest 16.3 13.8 – – 563.2 490.7 34.7 25.4

Basic and diluted earnings per share (in Singapore dollars) 10 $1.16 $1.01

The accompanying significant accounting policies and explanatory notes form an integral part of the financial statements.

56

balance sHeetsAsat31December

Group company shareholders’ andin singapore dollars (millions) Note total General insurance funds life assurance fund shareholders’ fund 2007 2006 2007 2006 2007 2006 2007 2006

Sharecapital 11 247.4 247.4 247.4 247.4 – – 247.4 247.4 Reserves Merger reserve 12 15.8 125.8 15.8 125.8 – – 435.0 545.0 Translation reserve 12 (17.4) (20.3) (17.4) (20.3) – – – – Fair value reserve 12 210.0 146.8 210.0 146.8 – – – – Accumulated profit 2,830.0 2,435.7 2,830.0 2,435.7 – – 709.6 827.5 SHAREHOLDERS’FUND 3,285.8 2,935.4 3,285.8 2,935.4 – – 1,392.0 1,619.9 MINORITYINTEREST 32.9 33.0 32.9 33.0 – – – – TOTALEQUITY 3,318.7 2,968.4 3,318.7 2,968.4 – – 1,392.0 1,619.9

LIABILITIESIncometax 259.3 219.1 152.3 121.3 107.0 97.8 (0.7) – Othercreditorsandinterfundbalances 13 1,443.9 996.9 501.6 30.2 942.3 966.7 4.5 2.5 Reinsuranceliabilities 14 67.8 50.4 16.1 12.9 51.7 37.5 – – Unexpiredriskreserve 15 59.7 55.6 59.7 55.6 – – – – Policybenefits 1,645.2 1,474.5 – – 1,645.2 1,474.5 – – Claimsadmittedorintimated 165.3 148.8 – – 165.3 148.8 – – Agents’retirementbenefits 7 183.6 168.4 – – 183.6 168.4 – – Deferredtax 9 1,019.1 834.2 54.5 52.4 964.6 781.8 – – Generalinsurancefund 16 109.1 99.4 109.1 99.4 – – – – Lifeassurancefund 17 38,243.7 35,010.2 – – 38,243.7 35,010.2 – – TOTALEQUITYANDLIABILITIES 46,515.4 42,025.9 4,212.0 3,340.2 42,303.4 38,685.7 1,395.8 1,622.4 ASSETS Cashandcashequivalents 2,768.3 3,823.9 419.0 888.0 2,349.3 2,935.9 19.1 36.2 Otherdebtorsandinterfundbalances 18 1,365.8 878.4 619.1 423.2 746.7 455.2 – 0.4 Outstandingpremiums 168.7 154.5 10.8 10.3 157.9 144.2 – – Reinsuranceassets 19 79.0 57.2 65.6 54.3 13.4 2.9 – – Loans 20 3,469.2 2,977.9 143.3 3.1 3,325.9 2,974.8 – – Investments 20 36,060.0 32,067.2 2,855.4 1,820.8 33,204.6 30,246.4 – 2.0 Associatesandjointventures 21 581.9 587.5 77.3 118.9 504.6 468.6 – – Subsidiaries 22 – – – – – – 635.6 745.6 Amountsduefromsubsidiaries, associatesandjointventures 23 – – – – – – 740.8 838.2 Goodwill 24 25.5 25.5 18.7 18.7 6.8 6.8 – – Property,plantandequipment 25 818.7 686.2 2.8 2.9 815.9 683.3 0.3 – Investmentproperties 26 1,178.3 767.6 – – 1,178.3 767.6 – – TOTALASSETS 46,515.4 42,025.9 4,212.0 3,340.2 42,303.4 38,685.7 1,395.8 1,622.4



statements of cHanGes in sHareHolders’ eQuity – GroupForthefinancialyearended31December

minority total attributable to shareholders of the company interest equity share merger translation fair value accumulatedin singapore dollars (millions) Note capital reserve reserve reserve profit total

Balanceat1January2007 247.4 125.8 (20.3) 146.8 2,435.7 2,935.4 33.0 2,968.4Netprofit/(loss)recogniseddirectlyinequityforyearended31December2007: Exchangedifferencesarising ontranslationofoverseasentities – – 2.9 – – 2.9 (0.8) 2.1Currentyearmovementsin FairValueReserve: Fairvaluechangesonremeasuring available-for-saleinvestments – – – 99.8 – 99.8 1.5 101.3 FairvaluechangestransferredtoProfit andLossStatementduringtheyear – – – (28.5) – (28.5) – (28.5) Deferredtaxonfairvaluechanges – – – (13.2) – (13.2) (0.3) (13.5) Deferredtax–effectofchangeintaxrate – – – 5.1 – 5.1 – 5.1Netprofitrecogniseddirectlyinequity – – 2.9 63.2 – 66.1 0.4 66.5Netprofitfortheyear – – – – 546.9 546.9 16.3 563.2Totalrecognisedprofitfortheyear – – 2.9 63.2 546.9 613.0 16.7 629.7TransferfromMergerReserve toAccumulatedProfit1 – (110.0) – – 110.0 – – –Dividendspaidduringtheyear: Finalandspecialfinaldividends forthepreviousyear (netof18%SingaporeTax) 32 – – – – (186.3) (186.3) –(186.3) Interimdividend (netof18%SingaporeTax) 32 – – – – (2.5) (2.5) – (2.5) Interimdividend (netof27%MalaysiaTax) 32 – – – – (73.8) (73.8) – (73.8)Dividendspaidtominorityinterest – – – – – –(16.8) (16.8)Balanceat31December2007 247.4 15.8 (17.4) 210.0 2,830.0 3,285.8 32.9 3,318.7


58

statements of cHanGes in sHareHolders’ eQuity – GroupForthefinancialyearended31December

minority total attributable to shareholders of the company interest equity share share merger translation fair value accumulatedin singapore dollars (millions) Note capital premium reserve reserve reserve profit total

Balance at 1 January 2006 236.7 10.7 200.8 (10.1) 118.1 2,073.1 2,629.3 31.7 2,661.0Net profit/(loss) recognised directly in equity for year ended 31 December 2006: Exchange differences arising on translation of overseas entities – – – (10.2) – – (10.2) 0.8 (9.4)Current year movements in Fair Value Reserve: Fair value changes on remeasuring available-for-sale investments – – – – 79.6 – 79.6 – 79.6 Fair value changes transferred to Profit and Loss Statement during the year – – – – (48.6) – (48.6) – (48.6) Deferred tax on fair value changes – – – – (2.3) – (2.3) – (2.3)Net (loss)/profit recognised directly in equity – – – (10.2) 28.7 – 18.5 0.8 19.3 Net profit for the year – – – – – 476.9 476.9 13.8 490.7 Total recognised (loss)/profit for the year – – – (10.2) 28.7 476.9 495.4 14.6 510.0 Transfer from Merger Reserve to Accumulated Profit1 – – (75.0) – – 75.0 – – – Dividends paid during the year: Final and special final dividends for the previous year (net of 20% Singapore Tax) 32 – – – – – (143.9) (143.9) – (143.9) Interim dividend (net of 20% Singapore Tax) 32 – – – – – (45.4) (45.4) – (45.4)Dividends paid to minority interest – – – – – – – (13.3) (13.3)Transfer of share premium to share capital 11 10.7 (10.7) – – – – – – – Balance at 31 December 2006 247.4 – 125.8 (20.3) 146.8 2,435.7 2,935.4 33.0 2,968.4

1 The Group’s subsidiary, The Overseas Assurance Corporation Limited (“OAC”), declared a tax exempt (one-tier) dividend of $110.0

million (2006: $75.0 million, net of tax), from its pre-acquisition reserve to the Group. A corresponding transfer was made from the merger reserve to accumulated profit to reflect the release of OAC’s pre-acquisition reserve from the distribution.



statements of cHanGes in eQuity – companyForthefinancialyearended31December

share share merger accumulatedin singapore dollars (millions) Note capital premium reserve profit total

Balanceat1January2007 247.4 – 545.0 827.5 1,619.9Netprofitfortheyear – – – 34.7 34.7TransferfromMergerReservetoAccumulatedProfit1 – – (110.0) 110.0 –Dividendspaidduringtheyear: Finalandspecialfinaldividendsforthepreviousyear (netof18%SingaporeTax) 32 – – – (186.3) (186.3) Interimdividend(netof18%SingaporeTax) 32 – – – (2.5) (2.5) Interimdividend(netof27%MalaysiaTax) 32 – – – (73.8) (73.8)Balanceat31December2007 247.4 – 435.0 709.6 1,392.0

Balance at 1 January 2006 236.7 10.7 620.0 916.4 1,783.8Net profit for the year – – – 25.4 25.4 Transfer from Merger Reserve to Accumulated Profit1 – – (75.0) 75.0 – Dividends paid during the year: Final and special final dividends for the previous year (net of 20% Singapore Tax) 32 – – – (143.9) (143.9) Interim dividend (net of 20% Singapore Tax) 32 – – – (45.4) (45.4)Transfer of share premium to share capital 11 10.7 (10.7) – – – Balance at 31 December 2006 247.4 – 545.0 827.5 1,619.9 1 The Group’s subsidiary, The Overseas Assurance Corporation Limited (“OAC”), declared a tax exempt (one-tier) dividend of $110.0

million (2006: $75.0 million, net of tax), from its pre-acquisition reserve to the Group. A corresponding transfer was made from the merger reserve to accumulated profit to reflect the release of OAC’s pre-acquisition reserve from the distribution.


60

consolidated statement of casH floWsForthefinancialyearended31December

in singapore dollars (millions) Note 2007 2006 CASHFLOWSFROMOPERATINGACTIVITIESProfit before income tax 669.5 570.9 Amount from life assurance revenue statement 1,319.1 1,054.6Retained in life assurance fund (509.7) 24.0Excess of income over expenses before income tax from general insurance revenue statement 38.5 35.2

Adjustments for non-cash items: Surplus transferred from life assurance fund but not yet withdrawn (509.2) (376.2) Profit transferred from general insurance fund but not yet withdrawn (28.1) (27.3) Share of profit of associates and joint ventures (27.1) (50.3) Amortisation of difference in purchase consideration over nominal value of government securities, loan stocks and bonds 4 (3.1) 25.5 Gain on sale of investments and changes in fair value 5 (1,711.7) (1,027.8) Loss on sale of properties held for sale 5 – 4.7 Increase/(decrease) in provision for impairment of assets 6 2.8 (5.5) Increase in provision for agents’ retirement benefits 7 22.7 19.9 Gain on disposal of property, plant and equipment and investment properties 8 (0.5) (1.8) Depreciation 25,26 44.8 41.9 Unrealised loss in exchange differences 65.5 97.8 Dividend income 4 (393.0) (413.3) Interest income 4 (1,253.2) (1,180.0) Interest on policy benefits 59.8 53.0 Share based payments 2.1 1.5 (2,210.8) (1,153.2)Changes in working capital: Reinsurance assets (21.9) 0.8 Outstanding premiums (14.2) 7.5 Other debtors and interfund balances (487.4) 38.1 Insurance contract liabilities 17 2,492.8 856.2 Loss reserves 16 18.0 1.2 Claims admitted and intimated 16.5 2.1 Policy benefits 170.7 122.2 Unexpired risk reserve 15 4.3 4.5 Reinsurance liabilities 17.4 9.1 Other creditors and interfund balances 430.2 79.4Cash generated from/(used in) operations 415.6 (32.1)

Income tax paid (235.0) (187.1)Interest paid on policy benefits (59.8) (53.0)Agents’ retirement benefits paid 7 (7.2) (6.5)Netcashflowsfrom/(usedin)operatingactivities 113.6 (278.7)



consolidated statement of casH floWsForthefinancialyearended31December

in singapore dollars (millions) Note 2007 2006

CASHFLOWSFROMINVESTINGACTIVITIES Proceeds from sale of investments 20,165.4 16,785.4 Purchase of investments (22,604.4) (16,819.5) Proceeds from sale of properties held for sale 5 – 5.8 Proceeds from transfer of Dependents’ Protection Scheme business from Central Provident Fund Board 17 – 124.1 Capital injection in associated and joint venture companies 21 (56.6) (574.2) Proceeds from disposal of associated company 21 64.7 – Net cash outflow from acquisition of a subsidiary 24 – (4.1) Repayment of loan by subsidiary company 14.7 (13.6) Proceeds from sale of property, plant and equipment and investment properties 9.9 58.0 Purchase of property, plant and equipment and investment properties 25,26 (107.5) (119.3) Interest income received 4 1,253.2 1,180.0 Dividend received 4 393.0 413.3 Netcashflows(usedin)/frominvestingactivities (867.6) 1,035.9 CASHFLOWSFROMFINANCINGACTIVITIES Dividends paid 32 (262.6) (189.3) Dividends paid to minority interest (16.8) (13.3) Netcashflowsusedinfinancingactivities (279.4) (202.6) Neteffectoftranslationreserveadjustment (22.2) (122.7)

Net(decrease)/increaseincashandcashequivalents (1,055.6) 431.9 Cashandcashequivalentsatthebeginningoftheyear 3,823.9 3,392.0Cashandcashequivalentsattheendoftheyear 2,768.3 3,823.9

Cashandcashequivalentscomprise:Cashandbankbalances 427.0 318.5Cashondeposit 1,539.6 3,281.5Shortterminstruments 801.7 223.9 2,768.3 3,823.9


62

life assurance revenue statementForthefinancialyearended31December

Groupin singapore dollars (millions) Note 2007 2006

IncomeGross PremiumsAnnual 3,494.2 3,289.4Single 2,378.5 2,009.3

5,872.7 5,298.7less: Reassurances 79.6 73.2

5,793.1 5,225.5Commissions received from reinsurers 9.2 9.5 Investment income, net 4 1,466.8 1,390.8Rental income, net 47.3 39.1 Gain on sale of investments and changes in fair value 5 1,651.1 964.2 Loss on sale of properties held for sale 5 – (4.7)Decrease in provision for impairment of assets 6 1.8 4.9 Loss in exchange differences (100.6) (131.7)

8,868.7 7,497.6 less: Expenses Gross claims, surrenders and annuities 4,874.9 4,969.5less: Claims, surrenders and annuities recovered from reinsurers 31.5 29.6

4,843.4 4,939.9 Commissions and agency expenses 491.0 430.4 Management expenses 196.0 176.1 Agents’ retirement benefits 7 22.7 19.9 Depreciation 25,26 43.1 40.3 Change in life assurance fund contract liabilities 17 1,983.1 880.2

7,579.3 6,486.81,289.4 1,010.8

Share of profit of associates 30.4 42.4 Share of (loss)/profit of joint ventures (0.7) 1.4

8 1,319.1 1,054.6less: Income tax 9 300.2 702.4

17 1,018.9 352.2

Retainedinlifeassurancefund 509.7 (24.0)Transferredtoprofitandlossstatement 509.2 376.2

1,018.9 352.2



General insurance revenue statementForthefinancialyearended31December

Groupin singapore dollars (millions) Note 2007 2006

IncomeGross premiums 125.0 118.8 less: Reinsurances 54.5 56.1 Premiums less reinsurances 70.5 62.7 less: Increase in unexpired risk reserve during the year 15 3.5 2.8 Netearnedpremiums 67.0 59.9 Commissions received from reinsurers 16.1 15.6 Totalincome 83.1 75.5

less: ExpensesGross claims and increase in loss reserves 67.8 47.1 less: Claims recovered from reinsurance and increase in reinsurance loss reserve 29.1 17.2Net claims and increase in loss reserves 38.7 29.9 Commissions and agency expenses 19.1 18.0 Management expenses 19.1 18.6 Depreciation 25 0.5 0.5 Totalexpenses 77.4 67.0

Netunderwritingprofit 5.7 8.5

Investment income, net 4 8.3 8.8 Gain on sale of investments and changes in fair value 5 24.4 17.9 Gain in exchange differences 0.1 - Profitfrominvestments 32.8 26.7

Excessofincomeoverexpensesbeforeincometax 38.5 35.2

less: Income tax 9 10.4 7.9

Profitfromgeneralinsurancetransferredtoprofitandlossstatement 28.1 27.3


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notes to tHe financial statements

1. General Great Eastern Holdings Limited (the “Company” or “GEH”) is a limited liability company which is incorporated in the Republic of

Singapore. The notes refer to the Company and the Group unless otherwise stated. The registered office and principal place of business of the Company is located at 1 Pickering Street, #16-01, Great Eastern Centre, Singapore 048659.

The principal activity of the Company is that of an investment holding company. The principal activities of the subsidiaries within the Group are stated in Note 3. There have been no significant changes in the nature of these activities during the financial year.

The Company’s immediate and ultimate holding company is Oversea-Chinese Banking Corporation Limited (“OCBC Bank”), which prepares financial statements for public use.

2. summary of siGnificant accountinG policies2.1 BasisofAccounting

The consolidated financial statements have been prepared in accordance with the Singapore Financial Reporting Standard (“FRS”) and Interpretations of FRS (“INT FRS”) as required by the Companies Act, Chapter 50. The basis for preparation of the financial statements is fund accounting and the profit determination of the insurance funds is determined in accordance with the Insurance Regulations of the respective jurisdictions in which the insurance subsidiaries operate. The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.

The accounting policies have been consistently applied by the Company and the Group and except for the changes in accounting policies as disclosed below, are consistent with those used in the previous financial year.

The financial statements are presented in Singapore Dollars (SGD or $) and all values are rounded off to the nearest $0.1 million except as otherwise stated.

2.2 Changesinaccountingpolicies2.2.1 ThefollowingFRSandInterpretationstoFRS(“INTFRS”)wereappliedwitheffectfrom1January2007:

frs title FRS 1 (issued in 2006) Presentation of Financial Statements (Capital Disclosures)FRS 40 (issued in 2005) Investment PropertyFRS 107 (issued in 2006) Financial Instruments: DisclosuresINT FRS 108 (issued in 2006) Scope of FRS 102 Share-based PaymentINT FRS 109 (issued in 2006) Reassessment of Embedded DerivativesINT FRS 110 (issued in 2006) Interim Financial Reporting and Impairment

Under FRS 40, investment property may be measured using the fair value model or the cost model. On 1 January 2007, the Group adopted the fair value model for investment properties held under Life Assurance Fund. As a result of adopting FRS 40, investment properties are measured at fair value and gains or losses arising from changes in the fair value of investment properties are included in the Life Assurance Revenue Statement in the period in which they arise. Under the transitional provision of FRS 40, the revaluation gain of $147.7 million (net of deferred tax of $6.2 million) has been taken to Life Assurance Fund at 1 January 2007. The comparatives have not been restated, as permitted by FRS 40.

During the financial year, the adoption of FRS 40 resulted in an increase of $334.5 million in the Group’s Life Assurance Revenue Statement from the fair value adjustment of investment properties.


2. summary of siGnificant accountinG policies (continued)2.2 Changesinaccountingpolicies(continued)

2.2.1 ThefollowingFRSandInterpretationstoFRS(“INTFRS”)wereappliedwitheffectfrom1January2007:(continued)The INT FRS 108 and INT FRS 109 are mainly clarifications on the application of FRS 102 Share-based Payment and FRS 39 Financial Instruments: Recognition and Measurement in respect of accounting for embedded derivatives and have no significant impact on the Group’s financial statements.

The INT FRS 110 prohibits the reversal of an impairment loss recognised in an interim period during the financial year in respect of goodwill, an investment in an equity instrument or a financial asset carried at cost. This standard does not have any significant impact on the Group’s financial statements.

With effect from 1 January 2007, the Group changed its accounting policy for software development costs to comply with that of its immediate holding company. Previously, software development costs which were capitalised as intangible assets have since been reclassified as property, plant and equipment. The reclassification was made retrospectively and the comparatives as at 31 December 2006 were accordingly restated.

2.2.2 FRSandINTFRSnotyeteffectiveThe Group and the Company have not applied the following FRS and INT FRS that have been issued but not yet effective:

effective date frs title (annual periods beGinninG on or after)FRS 23 Amendment to FRS 23 Borrowing Costs 1 January 2009FRS 108 Operating Segments 1 January 2009INT FRS 111 Group and Treasury Share Transactions 1 March 2007INT FRS 112 Service Concession Arrangements 1 January 2008

The Directors expect that the adoption of the above pronouncement will not have material impact to the financial statements in the period of initial application, except for FRS 108 as indicated below.

FRS 108 requires entities to disclose segment information based on the information reviewed by the entity’s chief executive officer. The impact of this standard on the other segment disclosures is still to be determined. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in 2009.

2.3 BasisofConsolidationThe consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries as at the balance sheet date, after the elimination of all material intercompany transactions. The financial statements of subsidiaries are prepared on the basis of accounting policies consistently applied to all transactions and accounting events. A list of the Company’s subsidiaries is shown in Note 3.

2.3.1 SubsidiariesSubsidiaries are entities over which the Group has power to govern the financial and operating policies to determine economic beneficial interests. The Group generally has such power when it, directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting rights, or controls the composition of the board of directors. The existence and effect of potential voting rights that are presently exercisable or convertible are considered when assessing whether the Group controls another entity.


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2. summary of siGnificant accountinG policies (continued)2.3 BasisofConsolidation(continued)

2.3.1 Subsidiaries(continued)The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus cost directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent of any minority interest. Any excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the fair value of the net identifiable assets, liabilities and contingent liabilities over the cost of a business combination is recognised in the Profit and Loss Statement at the date of acquisition. Please refer to Note 2.21.1 for the accounting policy on goodwill on acquisition of subsidiaries.

Subsidiaries are consolidated from the date on which control is transferred to the Group and to the date that control ceases. In preparing the consolidated financial statements, intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

At the Company level, investments in subsidiaries are accounted for at cost less impairment losses.

2.3.2 AssociatesandJointVenturesAssociates are entities over which the Group has significant influence, but not control, generally accompanying a shareholding of between and including 20% and 50% of the voting rights, or has representation on the board of directors. Joint ventures are entities whereby the Group and its joint venture partners have entered into a contractual arrangement to undertake an economic activity, which is jointly controlled and none of the parties involved unilaterally have control over the entity.

Investments in associates and joint ventures are accounted for in the consolidated financial statements using the equity method of accounting. Investment in associates in the Consolidated Balance Sheet includes goodwill (net of accumulated amortisation) identified on acquisition, where applicable.

Equity accounting involves recording investments in associates and joint ventures initially at cost plus post-acquisition changes in the Group’s share of net assets of the associates and joint ventures. The Group’s share of the profits or losses of the associates and joint ventures are recognised in the Consolidated Profit and Loss Statement. Where there has been a charge recognised directly in the equity of the associates and joint ventures, the Group determines whether it is necessary to recognise any impairment loss with respect to the Group’s net investment in the associates and joint ventures. The associates and joint ventures are equity accounted for from the date the Group obtains significant influence over the associates or obtains joint control over the joint ventures until the date the Group ceases to have significant influence over the associates or the Group ceases to have joint control over the joint ventures. When the Group’s share of losses equals or exceeds its interest in the associates and joint ventures, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the companies.

In applying the equity method of accounting, unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in the associates and joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of associates and joint ventures to ensure consistency of accounting policies with those of the Group.



2. summary of siGnificant accountinG policies (continued)2.3 BasisofConsolidation(continued)

2.3.2 AssociatesandJointVentures(continued)The results of associates and joint ventures are taken from audited financial statements or unaudited management accounts of the entities concerned, made up to the date not more than three months prior to the reporting date of the Group.

At the Company level, investments in associates and joint ventures are accounted for at cost less impairment losses.

2.3.3 TransactionswithMinorityInterestsMinority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in the Consolidated Profit and Loss Statement and within equity in the Consolidated Balance Sheet, separately from Shareholders’ Equity. Transactions with minority interests are accounted for using the entity concept method, whereby, transactions with minority interests are accounted for as transactions with equity holders. On acquisition of minority interests, the difference between the consideration and book value of the share of the net assets acquired is reflected as being a transaction between shareholders and recognised directly in total equity. Gain or loss on disposal to minority interests is recognised directly in total equity.

2.4 ForeignCurrencyConversionandTranslation2.4.1 FunctionalandPresentationCurrency Items included in the financial statements of each of the Group’s entities are measured using the currency of the

primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in Singapore dollars, which is the Company’s functional and presentation currency.

2.4.2 TransactionsandBalancesForeign currency transactions are translated into the functional currency of the respective companies within the Group using the exchange rates prevailing at the date of transactions. Exchange differences resulting from the settlement of such transactions and the translation of monetary assets and liabilities denominated in foreign currencies at exchange rates prevailing at the balance sheet date, are recognised in the respective Profit and Loss Statement or Revenue Statements. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date the fair value was determined.

Exchange differences arising on the settlement of monetary items or translation of monetary items at the balance sheet date are recognised in the Profit and Loss Statement. However, exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in a separate component of equity as foreign currency translation reserve in the Consolidated Balance Sheet would be recognised in the Consolidated Profit and Loss Statement on disposal of the subsidiary. At Company level, such exchange differences are recognised in the Profit and Loss Statement.

Exchange differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation are taken directly to the foreign currency translation reserve until the disposal of the net investment, at which time they are recognised in the Profit and Loss Statement. Tax charges and credits attributable to exchange differences on those borrowings are recognised in the foreign currency translation reserve.


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2. summary of siGnificant accountinG policies (continued)2.4 ForeignCurrencyConversionandTranslation(continued)

2.4.3 ConsolidationofForeignEntitiesThe assets and liabilities of foreign branch operations and subsidiaries are translated to Singapore dollars at the rates of exchange prevailing at the balance sheet date whilst the income and expense items are translated at average exchange rates, which approximates the exchange rates at dates of the transactions. All resulting exchange differences are taken directly to translation reserves as a separate component in the Statement of Changes in Equity, Life Assurance Fund or General Insurance Fund respectively.

Goodwill and fair value adjustments which arose on acquisitions of foreign subsidiaries before 1 January 2005 are deemed to be assets and liabilities of the parent company and are recorded in SGD at the rates prevailing at the date of acquisition.

Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the balance sheet date. On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that foreign operation is recognised in the Profit and Loss Statement or Revenue Statements as a component of the gain or loss on disposal.

2.5 InsuranceContracts2.5.1 The insurance subsidiaries within the Group issue insurance contracts in accordance with the local Insurance

Regulations prevailing in the respective jurisdictions in which these insurance subsidiaries operate.

Disclosures on the various insurance contracts and their liabilities are classified into the principal components as follows:

(a) Life Assurance Fund contract liabilities; comprising – Participating Fund contract liabilities; – Non-Participating Fund contract liabilities; and – Investment Linked Fund contract liabilities.(b) General Insurance Fund contract liabilities.(c) Reinsurance contracts.

2.5.2 The Group is not required to un-bundle any insurance contract as the current accounting policy recognises all insurance premiums, claims and benefit payments, expenses and valuation of future benefit payments, inclusive of the investment component, through the insurance Revenue Statements.

2.5.3 The Group does not adopt a policy of deferring acquisition costs for its insurance contracts.

LifeAssuranceFundContractLiabilities2.5.4 The Group issues a variety of short and long duration insurance contracts which transfer risks from the policyholders

to the Group to protect policyholders from the consequences of insured events such as death, disability, illness, accident, including survival. These contracts may transfer both insurance and investment risk or insurance risk alone, from the policyholders to the Group.

For non-participating policy contracts, both insurance and investment risks are transferred from policyholders to the Group. For non-participating policy contracts other than medical insurance policy contracts, the payout to policyholders upon the occurrence of the insured event is pre-determined and the transfer of risk is absolute. For medical insurance policy contracts, the payout is dependent on the actual medical costs incurred upon the occurrence of the insured event.



2. summary of siGnificant accountinG policies (continued)2.5 InsuranceContracts(continued)

LifeAssuranceFundContractLiabilities(continued)Contracts which transfer insurance risk alone from policyholders to the Group are commonly known as investment linked policies. As part of the pricing for these contracts, the insurance subsidiaries within the Group would include fees to cover for expenses and insured risk. The investment returns derived from the variety of investment funds as elected by the policyholder accrue directly to the policyholder.

2.5.5 A significant portion of insurance contracts issued by subsidiaries within the Group contain a discretionary participating feature. These contracts are classified as participating policies. In addition to benefits payable upon insured events associated with human life such as death or disability, the contract entitles the policyholder to receive benefits, commonly referred to as policyholder bonus, which is derived from the investment performance of the pool of assets and operating experience of all the participating policies managed by each insurance subsidiary within the Group.

In addition to guaranteed benefits, set out in the participating policy contract which includes a representation, by the insurance subsidiaries within the Group, to the effect that the amount and timing of payment or vesting of payables are at the sole discretion of the insurance subsidiaries within the Group and are based on the performance of the pool of assets, including but not limited to the investment performance, the long term sustainability of the policyholder bonus scale, policyholders’ expectations, and surplus or capital strength of the participating fund. Fund surplus, not distributed to shareholders or policyholders, of the participating life fund is classified as liability.

2.5.6 The Group does not recognise the guaranteed component separately from the discretionary participating feature; hence the Group classifies the whole contract as a liability in the financial statements.

2.5.7 For the purpose of FRS 104, the Group adopts maximum policy benefits as the proxy for insurance risk and cash surrender value as the proxy for deposit component. The Group defines insurance risk to be significant when the ratio of the insurance risk over the deposit component is not less than 105% of the deposit component at any point of the insurance contract in force. Based on this definition, all policy contracts issued by insurance subsidiaries within the Group are insurance contracts as at the date of this balance sheet.

2.5.8 Insurance contracts are recognised and measured in accordance with the terms and conditions of the respective contracts and are based on guidelines laid down by the respective insurance regulations. Premiums, claims and benefit payments, acquisition and management expenses and valuation of future policy benefit payments or premium reserves as the case may be, are recognised in the Revenue Statements of the respective insurance funds.

2.5.9 The valuation of insurance contract liabilities is determined according to: (a) Singapore Insurance Act (Chapter 142), Insurance (Valuation and Capital) Regulations 2004 for insurance funds

regulated in Singapore; and (b) Malaysia Insurance Act and Regulations 1996 for insurance funds regulated in Malaysia.


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LifeAssuranceFundContractLiabilities(continued)TABLE2.5 below provides the key underlying assumptions used for valuation of life insurance contract liabilities.

sinGapore malaysia

ValuationMethod Gross Premium Net Premium

InterestRate Singapore Government Bond yields for cash flows prior to 10 years, the Long Term Risk Free Discount Rate (LTRFDR) for cash flows after 15 years, and an interpolation of the 10-year Singapore Government Bond yield and the LTRFDR for cash flows between 10 to 15 years.

Data source: SGS website

Mortality Best estimates plus provision for adverse deviation.

Data source: internal experience studies

Disability Best estimates plus provision for adverse deviation.


Dreaddisease Best estimates plus provision for adverse deviation.


Expenses Best estimates plus provision for adverse deviation.


Lapse&surrenders Best estimates plus provision for adverse deviation.



Rates equal to or more conservative than the minimum rate prescribed by the Insurance Act and Regulations.

Participating Fund: Either 3.5% or 4.0% for regular premium within respective product groups, 4.5% for single premium products.

Non-Participating Fund: 4.0% for regular premium and 4.5% for single premium products.

Prescribed table per regulationTable: 100% SMVT1996Adjustment for females: 3 years setback

Included in death rates

Table: 150% Cologne Re male smoker mortality rates

Not applicable

Not applicable



LifeAssuranceFundContractLiabilities(continued)2.5.10Each insurance subsidiary within the Group is required by the Insurance Regulations to carry out a liability adequacy test

using current estimates of future cash flows under its insurance contracts; the process is referred to as the gross premium valuation or bonus reserve valuation, depending on the jurisdiction in which the insurance subsidiary operates.

The liability adequacy test is applied to both the guaranteed and the discretionary participation feature; the assumptions are based on best estimates, the basis adopted is prescribed by the Insurance Regulations of the respective jurisdiction in which the insurance subsidiary operates. The Group performs liability adequacy tests on its actuarial reserves to ensure that the carrying amount of provisions is sufficient to cover estimated future cash flows. When performing the liability adequacy test, the Group discounts all contractual cash flows and compares this amount against the carrying value of the liability. Any deficiency is charged to the Revenue Statements.

2.5.11 The Group issues investment linked contracts as an insurance contract which insure human life events such as death or survival over a long duration; coupled with an embedded derivative linking death benefit payments on the contract to the value of a pool of investments within the investment linked fund set up by the insurance subsidiary. As this embedded derivative meets the definition of insurance contract it need not be separately accounted for from the host insurance contract. The liability valuation for such contracts is adjusted for changes in the fair value of the underlying assets at frequencies as stated under the terms and conditions of the insurance contracts.

GeneralInsuranceFundContractLiabilities2.5.12 The Group issues short term property and casualty contracts which protect the policyholder against the risk of loss of

property premises due to fire or theft in the form of fire or burglary insurance contract and/or business interruption contract; risk of liability to pay compensation to a third party for bodily harm or property damage in the form of public liability insurance contract. The Group also issues short term medical and personal accident general insurance contracts.

2.5.13Claims on general insurance contracts are payable on a claim-occurrence basis. The Group is liable for insured events

that occurred during the term of the contract, even if the loss is discovered after the end of the contract term. Hence, liability claims could be settled over a long period of time. The provision for incurred but not reported (IBNR) claims is classified as liability and included in the General Insurance Fund Contract Liabilities.

2.5.14The Group uses a combination of estimates derived from loss-ratio estimate and actual claims experience, to estimate the loss reserves and IBNR claims reserves.

2.5.15The valuation of general insurance contract liabilities at balance sheet date, is based on best estimates of the ultimate settlement cost of claims plus a provision for adverse deviation. For Singapore, as required by the local Insurance Regulations, the provision for adverse deviation is set at 75 per cent sufficiency. For Singapore, the valuation methods used include the Paid Claim Development method, the Incurred Claim Development method, the Bornhuetter-Ferguson Method, the Mack’s Method and the Expected Loss Ratio Method. For Malaysia, the Link Ratio method is used.


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ReinsuranceContracts2.5.16 Contracts entered into by the insurance subsidiaries within the Group with reinsurers where it is compensated for losses

on one or more contracts issued are classified as insurance contracts. The benefits to which the Group is entitled under these contracts are recognised as reinsurance assets. Assets consisting of short term balances due from reinsurers, are classified as other debtors. Longer term receivables that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts are classified as reinsurance assets. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts. These amounts are assessed for impairment at reporting date. The Group gathers objective evidence to ascertain that insurance receivable is impaired using the same process adopted for financial assets held at amortised cost. The impairment loss is calculated on the same basis used for loans and receivables. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognised as an expense when due.

2.6 ProfitfromInsuranceFunds Profit derived from the insurance funds is categorised as follows:

2.6.1 LifeAssurance–ParticipatingFundProfits to shareholders from the participating fund are allocated from the surplus or surplus capital, determined from the results of the annual actuarial valuation (such valuation also determines the liabilities relating to all the policyholders’ benefits of the participating fund) parameters which are set out in the Insurance Regulations of the respective jurisdiction in which the insurance subsidiaries operate. The provisions in Articles of Association of the insurance subsidiaries within the Group are applied in conjunction with the prescriptions in the respective Insurance regulations, such that the distribution for any year to policyholders of the participating fund and shareholders approximate 90% and 10% respectively of total distribution from the participating fund. The annual declaration of the quantum of policyholder bonus and correspondingly the profits to shareholders to be distributed out of the participating fund is approved by the Board of Directors of each insurance subsidiary under the advice of the Appointed Actuary of the respective insurance subsidiary, in accordance with the Insurance Regulations and the Articles of Association of the respective insurance subsidiaries.

2.6.2 LifeAssurance–Non-ParticipatingFundRevenue consists of premiums, investment and interest income; including fair value movements of certain assets as prescribed by the appropriate Insurance Regulations. Expenses include reinsurance costs, acquisition costs, benefit payments and management expenses. Profit or loss from the non-participating fund is determined from the revenue and expenses of non-participating fund and the results of the annual actuarial valuation of the liabilities in accordance with the requirements of the Insurance Regulations of the respective jurisdictions in which the insurance subsidiaries operate. In addition, profit transfers from the Singapore non-participating funds include fair value change of asset values measured in accordance with the Singapore Insurance Regulations.

2.6.3 LifeAssurance–InvestmentLinkedFundRevenue essentially consists of bid-ask spread and fees for mortality and other insured event, policy administration and surrender charges. Expenses include reinsurance costs, acquisition costs, benefit payments and management expenses. Profit is derived from revenue net of expenses and provision for the annual actuarial valuation of liabilities in accordance with the requirements of the Insurance Regulations, in respect of the non-unit-linked part of the fund.



2. summary of siGnificant accountinG policies (continued)2.6 ProfitfromInsuranceFunds(continued)

2.6.4 GeneralInsuranceFundRevenue consists of premiums and investment income. Expenses include reinsurance costs, acquisition costs, benefit payments and management expenses. Loss reserves or reserves for claims incurred but not reported are reviewed and provisions made at each reporting date. The sum of premium, expenses and reserves is underwriting performance for the period. Investment and interest income include changes in fair value of assets valued in accordance with the requirements of the appropriate Insurance Regulations. Profit or loss from the General Insurance Fund is derived from the sum of underwriting and investment performance.

2.7 RecognitionofIncomeandExpense2.7.1 PremiumsandCommissions

Life Assurance BusinessPremiums from policyholders are recognised on their respective due dates. Premiums not received on due date are recognised as revenue in the Life Assurance Revenue Statement with the corresponding outstanding premiums reported in the balance sheet. The commission expense arising from these outstanding premiums is accrued in the same reporting period.

Premiums due after but received before the end of the financial year are recorded as advance premiums and this item is included as other creditors in the balance sheet. The commissions arising from these advance premiums, if any, are not accrued in the financial statements until the premiums are due and recognised as revenue in the Revenue Statement. Policy benefits are recorded as an expense as and when they are incurred.

General Insurance BusinessPremiums from the general insurance business are recognised as revenue upon commencement of insurance cover, in the General Insurance Revenue Statement. Premiums pertaining to periods outside of the financial reporting period are adjusted through the movement in unexpired risk reserves. The commission expense is accrued in full upon the risk underwritten as reflected in the premium recognised (see note 2.10).

Premiums ceded out and the corresponding commission income from general insurance contracts are recognised in the General Insurance Revenue Statement upon receipt of acceptance confirmation from the ceding company or in accordance with provisions incorporated in the treaty contracts. Premiums ceded out pertaining to periods outside of the financial reporting period are adjusted through the unexpired risk reserves.

2.7.2 InterestIncomeInterest income is recognised as interest accrues (using the effective interest method), unless collectibility is in doubt.

2.7.3 DividendsDividend income, other than dividend income from the Company’s subsidiaries, is recognised when the right to receive the payment is established. This is shown as investment income. Dividend income from the Company’s subsidiaries is recognised when the dividend is declared payable.

2.7.4 RentalRental income from operating leases is recognised on a straight-line basis over the lease term. The aggregate cost of incentives provided to lessees is recognised as a reduction of rental income over the lease term on a straight-line basis.


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2. summary of siGnificant accountinG policies (continued)2.7 RecognitionofIncomeandExpense(continued)

2.7.5 Gain/LossonSaleofInvestmentsandChangesinFairValueSale of investments is recognised on the respective trade dates i.e. the date on which the Company or any of its subsidiaries within the Group commit to sell the asset.

For available-for-sale investments, gain or loss on sale of investment is determined by the difference between the sale proceeds and the average carrying cost or amortised cost. The investments are measured/valued at the end of each calendar month and the changes in fair value of these investments are reported in the Statement of Changes in Equity or respective Insurance Funds. At the time of disposal, the cumulative fair value changes in respect of these investments previously recognised in the Statement of Changes in Equity or Insurance Funds are transferred to the respective Profit and Loss Statement or Revenue Statements.

For held-for-trading investments, gain or loss on sale of investment is determined by the difference between the sale proceeds and the fair value approximating at the time of sale.

2.7.6 ProvisionforImpairmentofNon-FinancialAssetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value-in-use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses are recognised in the Revenue Statements or Profit and Loss Statement.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the Revenue Statements or Profit and Loss Statement. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

2.7.7 FeesandOtherIncomeManagement and advisory fee income is recognised upon services rendered in accordance with the terms and conditions of the respective contracts.

2.7.8 EmployeeBenefitsDefined contribution plans under statutory regulationsThe Company and its subsidiary companies incorporated in Singapore are required to make contributions on the basis of its employees’ wages in accordance with the Central Provident Fund Act (“CPF”). Similarly, subsidiary companies incorporated in Malaysia are required to make contributions on the basis of its employees’ wages in accordance with the Employee Provident Fund Act (“EPF”). Both CPF and EPF contributions are recognised as staff costs in the periods that correspond with the employment.



2. summary of siGnificant accountinG policies (continued)2.7 RecognitionofIncomeandExpense(continued)

2.7.8 EmployeeBenefits(continued)Employee Leave EntitlementsAn employee’s entitlement to annual leave and long-service leave is estimated according to the terms of the employment contracts and accrued on the balance sheet date.

Share OptionsWith effect from April 2005, senior executives of the Group are granted share options in the OCBC Bank’s Share Option Scheme. Options granted generally vest in one-third increments over a 3-year period and expire between 5 and 10 years from date of grant. The fair value of the share options is recognised as staff costs in the Profit and Loss Statement or Revenue Statements of the respective insurance funds. The Group uses the binomial model to derive the fair value of share options granted by OCBC Bank. The value of the share options is recognised in the Profit and Loss Statement or Revenue Statements over the vesting period of the share options. At each balance sheet date, the Group revises its estimates of number of options that are expected to become exercisable, and the change to the original estimates, if any, is recognised in the Profit and Loss Statement or Revenue Statements accordingly.

In addition to the OCBC Bank’s Share Option Scheme, certain employees within the Group are granted OCBC shares under the OCBC Deferred Share Plan (“DSP”). Shares granted under DSP will vest three years from the grant date and will lapse when the staff ceases employment during the vesting period. The remuneration expense of the DSP Plan is amortised and recognised in the Profit and Loss or Revenue Statements on the straight-line basis over the vesting period of the DSP.

At each balance sheet date, the cumulative expense recognised takes into account the estimated number of shares granted under the DSP plan that ultimately vest as well as those shares under the DSP plan whose vesting period have expired.

2.7.9 Leases

Operating LeasesLeases where the lessor effectively retains substantially all the risks and rewards of ownership of the leased item are classified as operating leases. Operating lease payments are recognised as an expense in the Profit and Loss Statement or Revenue Statements on a straight-line basis over the lease term.

2.8 IncomeTaxCurrent tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements.

Deferred tax liabilities are recognised for all taxable temporary differences; and future policyholders’ bonus in the participating fund of the Singapore insurance subsidiaries. Exceptions include:• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that

is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• In respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.


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2. summary of siGnificant accountinG policies (continued)2.8 IncomeTax(continued)

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:• Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of

an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• In respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled based on tax rates (and applicable tax laws and jurisdictions) that have been enacted or substantively enacted at the balance sheet date.

At each balance sheet date, the Group re-assesses unrecognised deferred tax assets and the carrying amount of deferred tax assets. The Group recognises a previously unrecognised deferred tax asset to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Conversely, the Group reduces the carrying amount of a deferred tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of the deferred tax asset to be utilised.

Income tax relating to items recognised directly in Equity or Insurance Funds is recognised in Equity or Insurance Funds as the case may be.

Deferred tax assets and liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Revenues, expenses and assets are recognised net of amount of sales tax except where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable. Receivables and payables are stated with the amount of sales tax included. The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

2.9 ProvisionsandOtherCreditorsProvisions are recognised when the Group has an obligation, either legal or constructive, where it is probable that an outflow of resources will be required to settle the obligation which can be reliably estimated. Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Profit and Loss Statement or Revenue Statements, net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance costs.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

Other creditors are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received.



2. summary of siGnificant accountinG policies (continued)2.10 UnexpiredRiskReserve

Unexpired Risk Reserve (“URR”) represents the portion of the written premiums of general insurance policies, gross of commission payable to intermediaries attributable to periods after the financial year, in the form of unearned premium. The change in the provision for unearned premium is taken to the Revenue Statements in the order that revenue is recognised over the period of the risk exposure. Further provisions are made for claims anticipated under unexpired insurance contracts which may exceed the unearned premiums and the premiums due in respect of these contracts.

URR is computed using the 1/24th method reduced by the corresponding percentage of accounted gross direct business, commissions and agency related expenses not exceeding limits specified by regulators in the respective jurisdictions in which the Group operates.

2.11 PolicyBenefitsPolicy benefits are recognised when the policyholder exercises the option to deposit the survival benefits with the life assurance subsidiary companies when the benefit falls due. Policy benefits are interest bearing at rates adjusted from time to time by the life assurance subsidiary companies. Interest on policy benefits are recognised in the Revenue Statements as incurred.

2.12 ClaimsAdmittedorIntimatedFull provision is made for the estimated cost of all life assurance claims notified but not settled at balance sheet date. Provision is made for claims incurred but not reported for all classes of general insurance business written, using a mathematical method for deriving the estimates.

2.13 CashandCashEquivalentsCash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

2.14 OtherDebtorsOther debtors are stated at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written-off as and when incurred. Both bad and doubtful debt provisions are accounted for in the Profit and Loss Statement or Revenue Statements, as the case may be.

2.15 OutstandingPremiumsOutstanding premiums are carried at cost, which approximate fair value.

Premiums of life assurance business which remained outstanding beyond the contractual date would automatically trigger premium loans which are taken against the cash value standing to the credit of the policy. Where the cash value is insufficient to activate a premium loan, the policy lapses and the insurance contract between the life assurance subsidiary company and the policyholder is deemed cancelled without further liabilities accruing from either party.

Outstanding premiums of general insurance business which are outstanding for 90 days would lead to termination of insurance cover and the entire amount would be written off to General Insurance Revenue Statement in the year in which the 90-day credit expires.

2.16 PropertiesHeldforSaleProperties held for sale are stated at the lower of cost and estimated net realisable value, net of progress billings. Cost of properties for sale include related expenditure which are capitalised as and when the cost of activities necessary to complete the property for its intended purpose and in progress. Net realisable value represents the estimated selling price less costs to be incurred in selling the property.


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2. summary of siGnificant accountinG policies (continued)2.17 FinancialAssets

Financial assets within the scope of FRS 39 are classified as either financial assets at fair value through Revenue Statements of Insurance Funds and Profit and Loss Statement, loans and receivables or available-for-sale financial assets, as appropriate. Financial assets are only recognised on the balance sheet when, and only when, the Group becomes party to the contractual provisions of the financial instrument. The Group designates financial assets as available-for-sale only if they are non-derivatives that do not qualify to be classified in other categories.

When financial assets are initially recognised, they are measured at fair value (or cost representing fair value on trade date) which would include transaction costs directly attributable to the acquisition of the financial assets. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, evaluates this designation at year end.

All regular way purchases and sales of financial assets and liabilities are recognised on the trade date i.e., the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.

2.17.1 FinancialAssetsatFairValuethroughRevenueStatementsofInsuranceFundsandProfitandLossStatementClassificationThis category includes held-for-trading financial assets, derivatives and embedded derivatives.

Held-for-trading financial assets are acquired as part of a portfolio of identified financial instruments that are managed together and where there is evidence of short-term profit-taking activity. Derivatives and embedded derivatives are classified under this category.

Investments under unit-linked funds are designated as fair value through profit and loss at inception as they are managed and evaluated on a fair value basis, in accordance with the respective investment strategy and mandate. Information about these financial assets is provided internally on a fair value basis.

Derivatives, except for those that are designated as hedges, are financial instruments or contracts where its values change in response to the change in a specified interest rate, foreign exchange rate, index of equity or bond prices or rates, credit rating or other variable. The Group uses derivatives such as interest rate swaps and foreign exchange contracts to hedge its risks associated primarily with interest rate and foreign currency fluctuations. The Group did not adopt hedge accounting during the financial year.

Embedded derivatives are hybrid financial instruments that include also a non-derivative host contract; where some or all of the cash flows are modified according to a specified interest rate, foreign exchange rate, index of equity or bond prices or rates, credit rating or other variables.

MeasurementHeld-for-trading financial assets are initially carried at cost, being the fair value at trade date. Held-for-trading financial assets are valued at the end of each business day. Fair value of quoted financial assets is based on open market valuation on bid price on exchange at the close of business on the balance sheet date. Derivatives and embedded derivatives are initially recognised at values paid or received, as applicable, being the fair value on the date on which a derivative contract is transacted but are subsequently remeasured at fair value at each balance sheet date. Fair value of the derivatives, at the end of each reporting period, is derived from the indicative bid prices obtained from intermediaries or brokers.

The changes in fair value for all held-for-trading financial assets, derivatives and embedded derivatives are reported in the respective Revenue Statements of Insurance Funds and Profit and Loss Statement.



2. summary of siGnificant accountinG policies (continued)2.17 FinancialAssets(continued)

2.17.2 LoansandReceivablesClassificationThis category includes policy loans, premium loans, secured loans and unsecured loans. Policy loans and premium loans are loans extended by the life assurance subsidiary companies within the Group to the policyholders. These loans are secured on the cash value of the policies of these policyholders. Secured loans, extended largely to corporations, are secured on real estate and/or equity shares.

MeasurementPolicy loans are carried at unpaid principal balances, which approximate fair value. Premium loans are carried at balances outstanding at reporting date. Secured and unsecured loans are carried at amortised cost, less provision for impairment. Amortised cost is the unpaid principal balance adjusted for amortisation of the difference between the original loan and the maturity amount. Amortisation is computed on the basis of effective interest rates.

2.17.3 Available-for-saleFinancialAssetsClassificationAvailable-for-sale financial assets are non-derivative financial assets designated as available-for-sale or financial assets not classified in any of the other categories. This category includes financial assets which are acquired by the Group not held for trading but with the intent to sell or redeem at the appropriate time. They include quoted equity in corporations and quoted government securities and bonds and fixed income instruments, unquoted equity in corporations, unquoted collective investment schemes such as private equity and private real estate investment funds.

Assets of the Life Assurance Participating and Non Participating funds, General Insurance funds and the Shareholders’ funds are predominately classified under this category. MeasurementAvailable-for-sale financial assets are initially carried at cost, being the fair value at transaction date. After initial recognition, available-for-sale financial assets are measured at fair value with gains or losses being recognised in the fair value reserve in the Statement of Changes in Equity or Insurance Funds until the financial assets are derecognised or until the financial assets are determined to be impaired at which the cumulative gain or loss previously reported in equity or insurance funds are included in the Revenue Statements or Profit and Loss Statement accordingly.

Quoted investments are valued at bid price where practicable. For unquoted investments where there are no trading markets, fair value is determined by computing the simple average of two or more price quotes from the intermediaries or brokers. Foreign currency denominated investments are translated to home currency at the last traded foreign exchange rate at the end of each reporting period.

The changes in the fair value of available-for-sale assets are reported at the end of each reporting period in the Statement of Changes in Equity and the respective insurance funds. At the time of disposal, the cumulative fair value changes in respect of these investments previously recognised in the Statement of Changes in Equity are transferred to the Profit and Loss Statement or in the insurance funds are transferred to the respective Revenue Statements. Where there is prolonged and significant deterioration or impairment of fair value of the financial asset below its cost, the difference between the acquisition cost and the current fair value, less any impairment loss on the financial asset previously recognised in the Profit and Loss Statement, is removed from the Statement of Changes in Equity and recognised in the Profit and Loss Statement. A similar treatment would apply to an asset of the insurance funds with respect to the Revenue Statements and the fair value changes taken to the insurance funds. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment losses.


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2. summary of siGnificant accountinG policies (continued)2.17 FinancialAssets(continued)

2.17.3 Available-for-saleFinancialAssets(continued)Fair valueFair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices of respective exchange at close of business on balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include recent arm’s length transactions; reference to the current market value of another instrument, with similar characteristics; discounted cashflow analyses or other valuation models.

2.18 FinancialLiabilitiesFinancial liabilities include trade payables, which are normally settled on 30 – 90 day terms, other amounts payable and payables to related parties. Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. Financial liabilities are initially recognised at fair value of consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in the Revenue Statements or Profit and Loss Statement when the liabilities are derecognised as well as through the amortisation process. The liabilities are derecognised when the obligation under the liability is discharged, cancelled or expired.

2.19 ImpairmentofFinancialAssetsThe Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.

(a) Assetscarriedatamortisedcost If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the

amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the Revenue Statements or Profit and Loss Statement.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the Revenue Statements or Profit and Loss Statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(b) Assetscarriedatcost If there is objective evidence that an impairment loss on a financial asset carried at cost has been incurred, the amount

of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

(c) Available-for-saleFinancialAssets If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any

principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the Revenue Statements or Profit and Loss Statement, is transferred from equity to Revenue Statements or the Profit and Loss Statement. Reversals of impairment loss in respect of equity instruments are not recognised in the Revenue Statements or Profit and Loss Statement. Reversals of impairment losses on debt instruments are reversed through the Revenue Statements or Profit and Loss Statement, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in the Revenue Statements or Profit and Loss Statement.



2. summary of siGnificant accountinG policies (continued)2.20 FinancialInstruments:DerecognitionofFinancialAssetsandLiabilities

A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• The contractual right to receive cash flows from the asset has expired; or• The Group retains the contractual rights to receive cash flows from the asset, but has assumed an obligation to pay them

in full without material delay to a third party under a ‘pass-through’ arrangement; or• The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all

the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Where continuing involvement takes the form of a written and/or purchased option on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that in the case of a written put option on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of (a) the consideration received (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the Profit and Loss Statement. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the Revenue Statements or Profit and Loss Statement.

2.21 GoodwillandOtherIntangibleAssets2.21.1Goodwill

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less an accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:


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2. summary of siGnificant accountinG policies (continued)2.21 GoodwillandOtherIntangibleAssets(continued)

2.21.1Goodwill(continued)• Represents the lowest level within the Group at which the goodwill is monitored for internal management purposes;

and• Is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format.

A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated are tested for impairment annually and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. The Group determines whether goodwill is impaired on an annual basis. This requires an estimation of the value in use of the cash generating-unit to which the goodwill is allocated. Estimating the value in use requires management to make an estimate of the expected future cash flows from the cash-generating unit and also choose a suitable discount rate in order to calculate the present value of those cash flows. More details are provided in Note 24.

Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. Impairment loss on goodwill is not reversed in subsequent periods.

2.21.2OtherIntangibleAssetsIntangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. The amortisation expense on intangible assets with finite lives is recognised in the Profit and Loss Statement or Revenue Statements through the ‘depreciation and amortisation expenses’ line item.

Gain or loss arising from derecognition of an intangible asset is measured as the difference between the net disposal proceed and the carrying amount of the asset and is recognised in the Profit and Loss Statement or Revenue Statements when the asset is derecognised.



2. summary of siGnificant accountinG policies (continued)2.22 Property,PlantandEquipment

Property, plant and equipment are stated at cost or valuation, less accumulated depreciation and impairment losses. The initial cost of property, plant and equipment comprises its purchase price, including non-refundable taxes and any costs to enhance the working condition of the asset for its intended use. Expenditure incurred after the property, plant and equipment have been put into operation, such as repairs and maintenance and overhaul costs, is charged to the Profit and Loss Statement or Revenue Statements in the period in which the costs are incurred. Where the expenditure has resulted in an increase in the future economic benefit expected to be obtained from the use of an item of property, plant and equipment beyond its originally assessed standard of performance, the expenditure is capitalised as an additional cost of property, plant and equipment. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. When the carrying values exceed the recoverable amount, the cost or valuation of the assets is written down as an impairment provision on property, plant and equipment.

Depreciation of an asset begins when it is available for use and is calculated on a straight-line basis over the estimated useful life of an asset as follows. No depreciation is provided for freehold land, 999-year leasehold land and capital works in progress. The annual depreciation rates are:

Leasehold land Term of lease (no depreciation is provided for 999-year leasehold land)Buildings 50 yearsOffice furniture, fittings and equipment 5 to 10 yearsRenovation 3 to 5 yearsComputer equipment and software development 3 to 10 yearsMotor vehicles 5 years

The majority of the Group’s properties is freehold land and buildings except for a few which are on 99 years’ lease.

Included in the Life Assurance Fund’s freehold land, leasehold land and buildings are properties occupied for own use for the operations of the Group. The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset is included in the Profit and Loss Statement or Revenue Statements in the year the asset is derecognised. On disposal of a property, plant and equipment, the difference between the net disposal proceed and its carrying amount is taken to Profit and Loss Statement or Revenue Statements accordingly. Costs incurred for property development up to the date of approval / receipt of Temporary Occupancy Permit are capitalised and included in the carrying amount of the asset. Costs for repair and maintenance are taken to the Profit and Loss Statement or Revenue Statements during the financial year in which they are incurred. The costs of major renovation and restoration is included in the carrying amount of an asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the asset will flow to the Group, and depreciated over the remaining life of the asset.

Costs incurred for the development of software for the life assurance administration system and the distribution channel management system are classified as part of property, plant and equipment and depreciated over a period of 10 years on a straight line basis from the date of system commissioning.


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2. summary of siGnificant accountinG policies (continued)2.23 InvestmentProperty

On 1 January 2007, the Group adopted the fair value model for investment properties held under Life Assurance Fund. As a result of adopting FRS 40, investment properties are measured at fair value and gains or losses arising from changes in the fair value of investment properties are included in the Life Assurance Revenue Statement in the period in which they arise. Under the transitional provision of FRS 40, the revaluation gains of $147.7 million (net of deferred tax of $6.2 million) have been taken to Life Assurance Fund at 1 January 2007. The comparatives have not been restated, as permitted by FRS 40.

Investment properties are held for rentals income and / or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met but exclude routine repair and maintenance costs. Subsequent to initial recognition, investment properties are stated at fair value, at the balance sheet date. Fair value is determined based on objective valuation undertaken by independent valuers. Gains or losses arising from changes in the fair values of investment properties are included in the Profit and Loss Statement or Revenue Statements in the period in which they arise.

Investment properties are derecognised when they are disposed of or when the investment property is permanently withdrawn from use and no future economic benefit can be expected. Any gains or losses on retirement or disposal are recognised in the Profit and Loss Statement or Revenue Statements in the period of retirement or disposal.

2.24 Agents’RetirementBenefitsProvision for agents’ retirement benefits is a defined contribution plan set aside for agents from the Malaysian operations and is calculated in accordance with the terms and conditions in the respective Life Assurance Sales Representative’s Agreement.

2.25 RelatedPartyTransactionsReceivables from related parties are recognised and carried at cost less impairment losses on any uncollectible amounts. Payables to related parties are carried at cost.

In the Company’s financial statements, interest-free loans to subsidiaries are stated at fair value at inception. The difference between the fair value and the loan amount at inception is recognised as additional investments in subsidiaries in the Company’s financial statements. Subsequently, these loans are measured at amortised cost using the effective interest method. The unwinding of the difference is recognised as interest expense in the Profit and Loss Statement over the expected repayment period.

2.26 TurnoverTurnover for the Group is derived from the summation of components as follows: (i) Gross investment income, Interest income, Gain/(loss) on sale of investments (excluding fair value changes of financial assets at fair value through Profit and Loss Statement and investment properties) and Fees and other income from the Profit and Loss Statement; (ii) Gross premiums, Gross investment income, Interest income, Rental income and Gain/(loss) on sale of investments (excluding fair value changes of financial assets at fair value through Revenue Statements and investment properties) from the Life Assurance Revenue Statement and (iii) Gross premiums, Gross investment income, Interest income and Gain/(loss) on sale of investments (excluding fair value changes of financial assets at fair value through Revenue Statements and investment properties) from the General Insurance Revenue Statement.

2.27 CriticalAccountingEstimatesandJudgementsThe Group makes estimates, assumptions and judgements that affect the reported amounts of assets and liabilities. Estimates, assumptions and judgements are continually evaluated and based on internal studies of actual or historical experience and other factors, including expectations of future events and reinsurance premiums levels that are believed to be reasonable with knowledge and information then available. Best estimates and assumptions are constantly reviewed to ensure that they remain relevant and valid.



2. summary of siGnificant accountinG policies (continued)2.27 CriticalAccountingEstimatesandJudgements(continued)

2.27.1 CriticalAccountingEstimatesandAssumptions(a)Liabilitiesofinsurancebusiness

The estimation of the ultimate liability arising from claims made under life and general insurance contracts is the Group’s most critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimation of the liabilities that the Group will ultimately be required to pay as claims.

For life insurance contracts, estimates are made for future deaths, disabilities, voluntary terminations, investment returns and administration expenses. The Group relies on standard industry and national mortality tables which represent historical mortality experience, and makes appropriate adjustments for its respective risk exposures in deriving the mortality and morbidity estimates. These estimates provide the basis in the valuation of the future benefits to be paid to policyholders, ensures adequate provision of reserve which are monitored against current and future premiums. For those contracts that insure risk on longevity and disability, estimates are made based on recent past experience and emerging trends. Epidemics and changing patterns of lifestyle could result in significant changes to the expected future exposures. At each reporting date, these estimates are assessed for adequacy and changes will be reflected as adjustments to insurance fund contract liabilities. In addition to the expected outcome, solvency margins prescribed by regulations are included in these insurance fund contract liabilities and the changes during the year are reported in the Revenue Statements.

(b)ShareoptioncostsThe Group calculates the fair value of share options using the binomial model which requires input of certain variables which are determined based on assumptions made.

(c)IncometaxesThe Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which the determination is made.

2.27.2CriticalJudgementsinApplyingAccountingPolicies(a)Estimatedimpairmentofgoodwill

The Group conducts impairment tests on the carrying value of goodwill in accordance with the accounting policy stated in Note 2.21.1. The recoverable amounts of cash-generating units are determined based on the value-in-use method, which adopts a discounted cash flow approach on projections, budgets and forecasts over a 5-year period. Cash flows beyond the fifth year are extrapolated using estimated terminal growth rates not exceeding the long-term average growth of the industry and country in which the cash-generating unit operates. The discount rates applied to the cash flow projections are derived from the Group’s weighted average cost of capital at the date of assessment. Changes to the assumptions, particularly the discount rate and terminal growth rate, may significantly affect the results of the impairment test.

(b)Impairmentofloans

The Group determines impairment of loans by calculating the present value of future recoverable cash flows and the fair value of the underlying collaterals for impaired loans against the carrying value of the loan. The future recoverable cash flows is determined based on credit assessment on a loan-by-loan basis for impaired loans.


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2. summary of siGnificant accountinG policies (continued)2.27 CriticalAccountingEstimatesandJudgements(continued)

2.27.2CriticalJudgementsinApplyingAccountingPolicies(continued)(c)Impairmentofavailable-for-saleassets

The Group adopts FRS 39 (revised 2006) in the value assessment of an investment which is other-than-temporarily impaired. This assessment requires significant judgement to be exercised. The Group evaluates the duration and extent to which the fair value of an investment is less than cost; and the financial health and near-term business outlook for the investee, including but not limited to factors such as industry and sector performance, changes in technology and operational and financial cash flow.

(d)InsurancecontractclassificationContracts are classified as insurance contracts where they transfer significant insurance risk from the policyholder to the Group. There are contracts sold where the Group exercises judgement about the level of insurance risk transferred. Typically, these contracts contain a significant savings component. The level of insurance risk is assessed by considering whether the Group is required to pay significant additional benefits in excess of amounts payable when the insured event occurs. These additional amounts include claims liability and assessment costs, but exclude the loss of the ability to charge the policyholder for future services. The assessment covers the whole of the expected term of the contract where such additional benefits could be payable. Some contracts contain options for the policyholder to purchase insurance risk protection at a later date, these insurance risks are deemed not significant.




3 subsidiaries, associates and Joint ventures

country of principal effective interest incorporation activities cost held by GeH 2007 2006 2007 2006 s$ ‘000 S$ ‘000 % %

(i) SUBSIDIARIESHeldbytheCompany The Great Eastern Life Assurance Company Limited Singapore Life assurance 97,176 97,176 100.0 100.0 The Overseas Assurance Corporation Limited Singapore Composite insurance 774,668 774,668 100.0 100.0

(3.1) Straits Lion Asset Management Limited Singapore Asset management 29,758 29,758 70.0 70.0 Great Eastern International Private Limited Singapore Investment holding 10 10 100.0 100.0 The Great Eastern Trust Private Limited Singapore Investment holding 10 10 100.0 100.0Island Securities Private Limited Singapore Dormant 10 10 100.0 100.0

901,632 901,632 Heldthroughsubsidiaries

Alpha Financial Advisers Private Limited Singapore Financial advisory – – 100.0 100.0(3.2) Lion Fairfield Capital Management Limited Singapore Asset management – – 45.5 45.5 Lion Capital Management Limited Singapore Asset management – – 70.0 70.0(3.3) Great Eastern Capital (Malaysia) Sendirian Berhad (formerly known as Great Eastern Capital (Malaysia) Berhad) Malaysia Investment holding – – 100.0 100.0(3.3) Great Eastern Life Assurance (Malaysia) Berhad Malaysia Life assurance – – 100.0 100.0(3.3) Straits Lion Management (Malaysia) Sendirian Berhad Malaysia Dormant – – 85.3 85.3 (3.3) The Great Eastern General Insurance Company Sendirian Berhad Malaysia Dormant – – 100.0 100.0 (3.3) Overseas Assurance Corporation (Holdings) Berhad Malaysia Investment holding – – 100.0 100.0(3.3) Overseas Assurance Corporation (Malaysia) Berhad Malaysia General insurance – – 100.0 100.0 (3.3) P.T. Great Eastern Life Indonesia Indonesia Life assurance – – 97.3 94.7 Straits Eastern Square Private Limited Singapore Property development and investment – – 100.0 100.0(3.4) Great Eastern Life (Vietnam) Company Limited Vietnam Life assurance – – 100.0 –

Special Purpose Vehicle: (3.4) One George CDO Pte Ltd Singapore Investment holding – – 100.0 –

88


3 subsidiaries, associates and Joint ventures (continued)

country of principal effective interest incorporation activities cost held by GeH 2007 2006 2007 2006 s$ ‘000 S$ ‘000 % %

(ii) ASSOCIATES Heldthroughsubsidiaries(3.5) Fairfield Lion Investment Fund (Asia) Ltd Cayman Collective investment Islands scheme 106,683 100,322 43.2 68.1(3.6) Fairfield Investment Fund Ltd British Collective investment Virgin scheme Island 378,320 442,917 34.9 45.7(3.6) Ascendas China Commercial Fund Singapore Real Estate Investment Trust 50,103 – 28.5 – 535,106 543,239

(iii) JOINTVENTURES Heldthroughsubsidiaries (3.3) Great Eastern Life Assurance People’s (China) Company Limited Republic

of China Life assurance 31,033 31,033 50.0 50.0 (3.5) Lion Global Infrastructure Fund Limited Guernsey Investment Holding – – 50.0 50.0 31,033 31,033

(3.1) Under Members’ Voluntary Liquidation. (3.2) Lion Fairfield Capital Management Limited is considered a subsidiary of the Group by virtue of management control established

over the financial and operating policies of the company.(3.3) Audited by associated firms of Ernst & Young, Singapore.(3.4) Incorporated during the year and not required to be audited.(3.5) Audited by KPMG.(3.6) Audited by PriceWaterhouseCoopers.



Group company shareholders’ and life General insurance assurance total funds fundin singapore dollars (millions) 2007 2006 2007 2006 2007 2006 2007 2006

4 investment income, net

4.1 ProfitandLossStatementsDividend income 21.8 37.6 21.8 37.6 – – – – Interest income – Investments 51.6 43.8 51.6 43.8 – – 0.1 0.2 – Loans 1.9 – 1.9 – – – – – – Fixed deposits 17.9 22.4 17.9 22.4 – – 0.9 0.8 71.4 66.2 71.4 66.2 – – 1.0 1.0 Amortisation of difference in purchase consideration over nominal value of government securities, loan stocks and bonds 0.1 (5.3) 0.1 (5.3) – – – – 93.3 98.5 93.3 98.5 – – 1.0 1.0less: Investment related expenses (0.5) (0.4) (0.5) (0.4) – – – – 92.8 98.1 92.8 98.1 – – 1.0 1.0

4.2 LifeAssuranceRevenueStatementDividend income 369.6 373.6 – – 369.6 373.6 – – Interest income – Investments 908.9 857.2 – – 908.9 857.2 – – – Loans 183.4 159.2 – – 183.4 159.2 – – – Fixed deposits 82.6 91.0 – – 82.6 91.0 – – 1,174.9 1,107.4 – – 1,174.9 1,107.4 – – Amortisation of difference in purchase consideration over nominal value of government securities, loan stocks and bond 3.0 (20.8) – – 3.0 (20.8) – – 1,547.5 1,460.2 – – 1,547.5 1,460.2 – –less: Investment related expenses (80.7) (69.4) – – (80.7) (69.4) – – 1,466.8 1,390.8 – – 1,466.8 1,390.8 – –

90


4 investment income, net (continued)

4.3 GeneralInsuranceRevenueStatementDividend income 1.6 2.1 1.6 2.1 – – – – Interest income– Investments 4.9 4.4 4.9 4.4 – – – –– Loans 0.1 – 0.1 – – – – –– Fixed deposits 1.9 2.0 1.9 2.0 – – – – 6.9 6.4 6.9 6.4 – – – – Amortisation of difference in purchase consideration over nominal value of government securities, loan stocks and bonds – 0.6 – 0.6 – – – – 8.5 9.1 8.5 9.1 – – – – less: Investment related expenses (0.2) (0.3) (0.2) (0.3) – – – – 8.3 8.8 8.3 8.8 – – – –

Included in the interest income from investments of the Group is an amount of $868.7 million (2006: $878.9 million) pertaining to interest income from financial assets classified as available-for-sale.

5 Gain/(loss) on sale of investments and cHanGes in fair value 5.1 ProfitandLossStatements

Realised gains from sale of investments 4.0 0.2 4.0 0.2 – – 1.8 – Amount transferred from Fair Value

Reserve on sale of investments 28.5 48.6 28.5 48.6 – – – – Changes in fair value on

held-for-trading investments 3.7 (3.1) 3.7 (3.1) – – – – 36.2 45.7 36.2 45.7 – – 1.8 –



Group company shareholders’ and life General insurance assurance total funds fundin singapore dollars (millions) Note 2007 2006 2007 2006 2007 2006 2007 2006

5 Gain/(loss) on sale of investments and cHanGes in fair value (continued) 5.2 LifeAssuranceRevenueStatement (a) Realised gains from sale of investments 337.9 148.2 – – 337.9 148.2 – –

Amount transferred from Fair Value Reserve on sale of investments 17 1,005.4 581.4 – – 1,005.4 581.4 – – Changes in fair value on investments – fair value through revenue statement (48.0) 148.5 – – (48.0) 148.5 – – – held-for-trading 21.3 86.1 – – 21.3 86.1 – – (26.7) 234.6 – – (26.7) 234.6 – –

(1) Changes in fair value on investment properties 334.5 – – – 334.5 – – – 1,651.1 964.2 – – 1,651.1 964.2 – – (b) Proceeds from sale of properties held for sale – 5.8 – – – 5.8 – – Cost of sales – (10.5) – – – (10.5) – – Loss on sale of properties held for sale – (4.7) – – – (4.7) – –

(1) On 1 January 2007, the Group adopted the fair value model for investment properties held under Life Assurance Fund. As a result of adopting FRS 40, investment properties are measured at fair value and gains or losses arising from changes in the fair value of investment properties are included in the Life Assurance Revenue Statement in the period in which they arise. The comparatives have not been restated, as permitted by FRS 40.

5.3 GeneralInsuranceRevenueStatementAmount transferred from Fair Value Reserve on sale of investments 16 24.3 18.1 24.3 18.1 – – – – Changes in fair value on held-for-trading investments 0.1 (0.2) 0.1 (0.2) – – – – 24.4 17.9 24.4 17.9 – – – –


92



6 provisions 6.1 Provisionforimpairmentof securedloans

Balance at the beginning of the year 8.2 8.0 – – 8.2 8.0 – –Increase in provision for the year 0.6 0.2 – – 0.6 0.2 – – Written off during the year (8.8) – – – (8.8) – – – Balance at the end of the year 20 – 8.2 – – – 8.2 – –

6.2 Provisionforimpairmentof unquotedinvestments

Balance at the beginning of the year – – – – – – – – Increase in provision for the year 4.7 – 4.7 – – – – – Balance at the end of the year 20 4.7 – 4.7 – – – – –

6.3 Provisionforimpairmentof investmentinunquotedequity

Balance at the beginning of the year 1.8 3.8 0.1 0.7 1.7 3.1 – –Decrease in provision for the year (1.8) (2.0) (0.1) (0.6) (1.7) (1.4) – – Balance at the end of the year 20 – 1.8 – 0.1 – 1.7 – –

6.4 Provisionforimpairmentof unsecuredloantosubsidiarycompanies

Balance at the beginning of the year – – – – – – 3.6 2.3Increase in provision for the year – – – – – – – 1.3Balance at the end of the year 23 – – – – – – 3.6 3.6

6.5 Provisionforimpairmentof propertiesheldforsale

Balance at the beginning of the year – 1.9 – – – 1.9 – –Decrease in provision for the year – (1.9) – – – (1.9) – –Balance at the end of the year – – – – – – – –

6.6 Provisionforimpairmentofproperty, plantandequipmentand investmentproperties

Balance at the beginning of the year 85.2 87.0 – – 85.2 87.0 – – Decrease in provision for the year 25,26 (0.7) (1.8) – – (0.7) (1.8) – –Balance at the end of the year 84.5 85.2 – – 84.5 85.2 – –Increase/(decrease)inprovision forimpairmentofassets fortheyear 2.8 (5.5) 4.6 (0.6) (1.8) (4.9) – 1.3




7 aGents’ retirement benefitsBalance at the beginning of the year 168.4 156.5 – – 168.4 156.5 – –Translation reserve adjustment (0.3) (1.5) – – (0.3) (1.5) – –Increase in provision for the year 22.7 19.9 – – 22.7 19.9 – –Paid during the year (7.2) (6.5) – – (7.2) (6.5) – –Balance at the end of the year 183.6 168.4 – – 183.6 168.4 – –

8 additional disclosuresBreakdown of Turnover Gross Premiums 5,997.7 5,417.5 125.0 118.8 5,872.7 5,298.7 – – Commissions received from reinsurers 25.3 25.1 16.1 15.6 9.2 9.5 – – Investment income, gross 1,649.3 1,567.8 101.8 107.6 1,547.5 1,460.2 – – Realised gains from sale of investments 341.9 148.4 4.0 0.2 337.9 148.2 – – Amount transferred from Fair Value Reserve on sale of investments 1,058.2 648.1 52.8 66.7 1,005.4 581.4 – – Loss on sale of properties held for sale – (4.7) – – – (4.7) – – Fee and other income 105.6 80.9 105.6 80.9 – – – – Rental income, net 47.3 39.1 – – 47.3 39.1 – – 9,225.3 7,922.2 405.3 389.8 8,820.0 7,532.4 – –

Directors’ remuneration Directors of the Company 8.1 3.7 3.0 0.7 0.6 3.0 2.4 0.5 0.4 Directors of subsidiaries 3.1 2.6 2.2 1.9 0.9 0.7 – – (1) Key management personnel compensation (Including directors’ remuneration) Short-term employee benefits 9.6 8.2 3.0 2.6 6.6 5.6 0.5 0.4 Other long-term benefits 2.5 0.9 0.2 – 2.3 0.9 – – Central Provident Fund/ Employee Provident Fund 0.2 0.2 0.1 0.1 0.1 0.1 – – Share-based payments 0.6 0.6 0.1 0.1 0.5 0.5 – – 12.9 9.9 3.4 2.8 9.5 7.1 0.5 0.4

Auditors’ remuneration Other fees paid to Ernst & Young, Singapore 0.3 0.4 0.1 0.1 0.2 0.3 – –Staff costs and related expenses (Including key management personnel compensation) Salaries, wages, bonuses and other costs 153.5 142.3 43.3 31.3 110.2 111.0 0.1 0.2 Central Provident Fund/ Employee Provident Fund 14.1 13.2 2.3 1.9 11.8 11.3 – – Share-based payments 2.1 1.5 0.3 0.2 1.8 1.3 – – 169.7 157.0 45.9 33.4 123.8 123.6 0.1 0.2

94



8 additional disclosures (continued)(1) Management and performance fees

paid by insurance funds to subsidiaries 42.4 36.9 0.2 0.3 42.2 36.6 – –Rental expense 15.7 17.4 2.7 2.6 13.0 14.8 – – (Gain)/Loss on disposal of property, plant and equipment (0.5) (1.8) (0.1) 0.1 (0.4) (1.9) – –Depreciation 44.8 41.9 1.7 1.6 43.1 40.3 – – Interest on policy benefits 59.8 53.0 – – 59.8 53.0 – –

(1) The Group enters into transactions with its associates and key management personnel in the normal course of business. Transactions are carried out on an arm’s length basis.

8.1 Directors’remunerationbandsThe number of Directors of the Company during the financial year in remuneration bands are as follows:$2,500,000 and $2,749,999 1 – $2,000,000 and $2,249,999 – 1S$250,000 to S$499,999 1 –Below $250,000 8 10 10 11




9 income tax

Major components of income tax expense for the year ended 31 December are: Current 269.8 197.1 118.8 87.5 151.0 109.6 (0.1) 3.5 Deferred 154.2 614.1 (2.5) (0.1) 156.7 614.2 – 0.1 Effects of reduction in tax rate (12.5) – (1.6) – (10.9) – – – Under/(over) provision in respect of previous years 5.4 (20.7) 2.0 0.7 3.4 (21.4) – 0.7 Totaltaxchargefortheyear 416.9 790.5 116.7 88.1 300.2 702.4 (0.1) 4.3 Deferred tax for the year, on fair value changes on available-for-sale investments, charged directly to: – equity (13.2) (2.3) (13.2) (2.3) – – – – – insurance fund (30.8) (74.9) 2.0 1.0 (32.8) (75.9) – – Reconciliationoftaxes:Profit before income tax 672.1 564.4 – – 34.6 29.7 Excess of income over expenses before income tax – – 1,319.1 1,054.6 – – Singapore statutory tax rate 18.0% 20.0% 18.0% 20.0% 18.0% 20.0%Tax calculated at Singapore statutory tax rate 121.0 112.9 237.4 210.9 6.2 5.9 Adjustments: Effect of higher/concessionary tax rate from other jurisdictions and regulations 41.6 1.0 (55.6) (40.0) – – Tax effect of net surplus transferred to Shareholders’ Fund (35.0) (36.7) – – – –

(1) Tax effect of provision against future policyholders’ bonus – – 133.9 612.2 – – Foreign tax paid not recoverable 13.3 46.7 10.5 14.0 – – Local tax deducted at source not recoverable – – 4.4 – – – Permanent differences 0.8 1.8 126.1 35.4 0.5 0.5Tax exempt income (26.1) (38.0) (151.9) (109.2) (6.7) (2.9)Tax rate change (1.6) – (10.9) – – – Under/(over) provision in respect of previous years 2.0 0.7 3.4 (21.4) – 0.7Others 0.7 (0.3) 2.9 0.5 (0.1) 0.1 116.7 88.1 300.2 702.4 (0.1) 4.3 The corporate income tax rate applicable to Singapore companies of the Group was reduced to 18% for the year of assessment 2008 onwards from 20% for year of assessment 2007. The corporate income tax rate applicable to Malaysian companies of the Group was reduced from 28% to 27% and 26% for the year of assessment 2007 and the year of assessment 2008 onwards respectively.

The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.

96



9 income tax (continued)DeferredTaxBalance at the beginning of the year 834.2 271.7 52.4 50.5 781.8 221.2 – (0.1)Effect of adopting FRS 40: revaluation of investment properties 17 6.2 – – – 6.2 – – – Balance at the beginning of the year, as restated 840.4 271.7 52.4 50.5 788.0 221.2 – (0.1)Translation reserve adjustments – 0.1 0.1 0.1 (0.1) – – – Deferred tax charge taken to Profit and Loss or Revenue Statements: Other temporary differences 4.3 1.9 (4.3) (1.0) 8.6 2.9 – – Fair value changes 14.6 – 0.2 0.9 14.4 (0.9) – 0.1 (1) Provision against future policyholders’ bonus 122.8 612.2 – – 122.8 612.2 – – Write back of deferred tax on fair value reserve of Singapore participating fund 17 – (128.5) – – – (128.5) – – Deferred tax on fair value changes on available-for-sale investments 44.0 76.8 11.2 1.9 32.8 74.9 – – Effect of change in tax rate 16, 17 (7.0) – (5.1) – (1.9) – – – Balance at the end of the year 1,019.1 834.2 54.5 52.4 964.6 781.8 – –

Deferredtaxesat31December relatedtothefollowing: BalanceSheetsDeferred tax liabilities:Differences in depreciation 12.9 8.7 0.2 (0.6) 12.7 9.3 – – Accrued investment income 1.8 17.7 0.1 2.3 1.7 15.4 – – Net unrealised exchange gain – 8.3 – 5.8 – 2.5 – – Net unrealised gains on investments 255.8 186.7 46.7 44.5 209.1 142.2 – – Net accretion on fixed income investments 16.3 8.0 7.8 (0.1) 8.5 8.1 – – (1) Provision against future policyholders’ bonus 735.0 612.2 – – 735.0 612.2 – –Deferredtaxliabilities 1,021.8 841.6 54.8 51.9 967.0 789.7 – –




9 income tax (continued)Deferredtaxesat31December relatedtothefollowing:(continued)Deferred tax assets:Other accruals and provisions 0.3 7.4 0.3 (0.5) – 7.9 – – Net unrealised loss on investments 2.4 – – – 2.4 – – – Deferredtaxassets 2.7 7.4 0.3 (0.5) 2.4 7.9 – –

Netdeferredtaxliabilities 1,019.1 834.2 54.5 52.4 964.6 781.8 – –

ProfitandLossStatementsandRevenueStatementsDeferred tax liabilities:Differences in depreciation 4.2 (4.1) 0.8 (2.1) 3.4 (2.0) – – Accrued investment income (15.9) 1.0 (2.2) 0.3 (13.7) 0.7 – – Net unrealised exchange gain (8.3) 7.4 (5.8) 5.8 (2.5) 1.6 – – Net fair value gains on investments 35.3 5.2 (5.6) – 40.9 5.2 – – Net accretion on fixed income investments 8.3 (1.2) 7.9 (0.1) 0.4 (1.1) – –

(1) Provision against future policyholders’ bonus 122.8 612.2 – – 122.8 612.2 – – Deferred tax assets:Net unrealised loss on investments 2.4 (4.1) – (2.4) 2.4 (1.7) – – Other accruals and provisions (7.1) (2.3) 0.8 (1.6) (7.9) (0.7) – – Deferred tax expense/(income) 141.7 614.1 (4.1) (0.1) 145.8 614.2 – –

(1) In 2006, the Inland Revenue of Singapore issued a circular on the new basis for the taxation of the Life Participating Fund in

Singapore which was subsequently enacted in 2007. Under this new tax basis, the surplus of the participating fund would be taxed on actual distribution to policyholders and shareholders. With this change, a deferred tax liability of $735.0 million has been recognised on the future policyholders’ bonus as at 31 December 2007.

The comparative amount of deferred tax liabilities of $612.2 million as at 31 December 2006 which was previously taken up as part of the insurance contract liabilities has been reclassified and recognised separately. Deferred tax of $128.5 million previously provided on the fair value reserve of Singapore participating fund has been adjusted.

98


10 earninGs per sHare Basic earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted

average number of ordinary shares outstanding during the year.

Diluted and basic earnings per share are similar as there are no dilutive potential ordinary shares.

The following reflects the profit for the year attributable to ordinary shareholders and the weighted average number of shares outstanding during the year, used in the computation of basic and diluted earnings per share for the years ended 31 December:

Group 2007 2006 Profit attributable to ordinary shareholders for computation of basic and diluted earnings per share (in millions of Singapore Dollars) 546.9 476.9 Weighted average number of ordinary shares on issue applicable to basic and diluted earnings per share (in millions) 473.3 473.3 Basic and diluted earnings per share (in Singapore Dollars) $1.16 $1.01 There have been no transactions involving ordinary shares since the reporting date and before the completion of these financial

statements.

11 sHare capital in singapore dollars (millions) Group and company number of shares 2007 Number of shares 2006 Ordinaryshares:Issuedandfullypaid

Balance at the beginning of the year 473,319,069 247.4 473,319,069 236.7 Transfer of share premium reserve to share capital – – – 10.7 Balance at the end of the year 473,319,069 247.4 473,319,069 247.4

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction.



12 reserves The merger reserve represents the difference between the fair value and nominal value of shares issued for the acquisition of a

subsidiary. The merger reserve had been utilised in part in prior years to write-off the goodwill on acquisition of the subsidiary.

The currency translation reserve relates to translation differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.

The fair value reserve includes the cumulative net change in the fair value of available-for-sale investments until the investments are derecognised or impaired.


13 otHer creditors and interfund balances Other creditors comprise the following: Accrued expenses and other creditors 327.7 172.1 177.5 30.1 150.2 142.0 4.5 2.5 Premiums in suspense 61.9 39.4 0.1 0.1 61.8 39.3 – – Investment creditors 208.4 384.3 4.0 – 204.4 384.3 – – Interfund balances 845.9 401.1 320.0 – 525.9 401.1 – – 1,443.9 996.9 501.6 30.2 942.3 966.7 4.5 2.5

14 reinsurance liabilities Amounts due to reinsurers 67.8 50.4 16.1 12.9 51.7 37.5

15 unexpired risK reserve Balance at the beginning of the year 34.0 31.4 34.0 31.4 – – Translation reserve adjustment (0.2) (0.2) (0.2) (0.2) – – Increase in unexpired risk reserve during the year, gross 4.3 4.5 4.3 4.5 – – Movement in reinsurer’s share of unexpired risk reserve during the year (0.8) (1.7) (0.8) (1.7) – – Balance at the end of the year 37.3 34.0 37.3 34.0 – –

Unexpired risk reserve, gross 59.7 55.6 59.7 55.6 – – Reinsurers’ share of unexpired risk reserve 19 (22.4) (21.6) (22.4) (21.6) – – Unexpired risk reserve, net 37.3 34.0 37.3 34.0 – –

100


Group shareholders’ and life General insurance assurance total funds fundin singapore dollars (millions) Note 2007 2006 2007 2006 2007 2006

16 General insurance fund

Balance at the beginning of the year 69.1 73.2 69.1 73.2 – – Translation reserve adjustment (0.3) (0.5) (0.3) (0.5) – – Fair value reserve movement (7.9) (4.8) (7.9) (4.8) – – Increase in loss reserve during the year, gross 18.0 (9.7) 18.0 (9.7) – –Movement in reinsurer’s share of loss reserve during the year (8.0) 10.9 (8.0) 10.9 – – Balance at the end of the year 70.9 69.1 70.9 69.1 – – General Insurance Fund comprises: General Insurance Fund Contract Liabilities, net 63.0 53.4 63.0 53.4 – – Reinsurers’ share of loss reserve 19 38.2 30.3 38.2 30.3 – – General Insurance Fund Contract Liabilities, gross 101.2 83.7 101.2 83.7 – – Fair Value Reserve 7.9 15.7 7.9 15.7 – – 109.1 99.4 109.1 99.4 – – Insurance (Valuation and Capital) Regulations 2004 governing Risk-based Capital Framework for insurers in Singapore came into effect on 1 January 2005. The Group’s insurance subsidiaries in Singapore are in compliance with the regulatory provisions, which requires each insurance fund to maintain a minimum 120% of regulatory risk capital within each regulated entity.

Represented by:General Insurance Fund Contract Liabilities Balance at the beginning of the year 53.4 52.6 53.4 52.6 – –Translation reserve adjustment (0.4) (0.4) (0.4) (0.4) – – Increase in loss reserve during the year, gross 18.0 (9.7) 18.0 (9.7) – – Movement in reinsurer’s share of loss reserve during the year (8.0) 10.9 (8.0) 10.9 – – Balance at the end of the year 63.0 53.4 63.0 53.4 – –

Fair Value Reserve Movement1 Balance at the beginning of the year 15.7 20.6 15.7 20.6 – – Translation reserve adjustment 0.1 (0.1) 0.1 (0.1) – – Fair value changes on remeasuring available-for-sale investments 14.4 12.3 14.4 12.3 – – Transfer of fair value reserve to General Insurance Revenue Statement on sale of investments 5 (24.3) (18.1) (24.3) (18.1) – – Deferred tax on fair value changes 2.0 1.0 2.0 1.0 – – Balance at the end of the year 7.9 15.7 7.9 15.7 – – 1 The above fair value reserve is deemed equity of general insurance fund.



Group shareholders’ and life General insurance assurance total funds fundin singapore dollars (millions) 2007 2006 2007 2006 2007 2006

17 life assurance fund Balance at the beginning of the year

as previously reported 35,010.2 33,286.2 – – 35,010.2 33,286.2 Effects of adopting FRS 40 147.7 – – – 147.7 – Balance at the beginning of the year as restated 35,157.9 33,286.2 – – 35,157.9 33,286.2 Translation reserve adjustment (47.3) (159.6) – – (47.3) (159.6) Fair value reserve movement 640.3 898.4 – – 640.3 898.4 Change in life assurance fund contract liabilities 2,105.9 1,492.4 – – 2,105.9 1,492.4 Provision for deferred tax on future policyholders’ bonus (122.8) (612.2) – – (122.8) (612.2) Transferred from life assurance revenue statement 1,018.9 352.2 – – 1,018.9 352.2 Transferred to Profit and Loss Statement (509.2) (376.2) – – (509.2) (376.2) Transfer of contract liabilities (DPS scheme) from CPF Board – 124.1 – – – 124.1 Revaluation of investment property – 4.9 – – – 4.9 Balance at the end of the year 38,243.7 35,010.2 – – 38,243.7 35,010.2

Insurance (Valuation and Capital) Regulations 2004 governing Risk-based Capital Framework for insurers in Singapore came into effect on 1 January 2005. The Group’s insurance subsidiaries in Singapore are in compliance with the regulatory provisions, which requires each insurance fund to maintain a minimum 120% of regulatory risk capital within each regulated entity.

Represented by: Life Assurance Fund Contract Liabilities Balance at the beginning of the year 30,877.9 30,007.1 – – 30,877.9 30,007.1Translation reserve adjustment (19.1) (133.5) – – (19.1) (133.5)Change in life assurance fund contract liabilities 2,105.9 1,492.4 – – 2,105.9 1,492.4

(1) Provision for deferred tax on future policyholders’ bonus (122.8) (612.2) – – (122.8) (612.2)Transfer of contract liabilities

(DPS scheme) from CPF Board – 124.1 – – – 124.1 Balance at the end of the year 32,841.9 30,877.9 – – 32,841.9 30,877.9

102


Group shareholders’ and life General insurance assurance total funds fundin singapore dollars (millions) Note 2007 2006 2007 2006 2007 2006

17 life assurance fund (continued) Unallocated Surplus Balance at the beginning of the year as previously reported 1,346.8 1,385.4 – – 1,346.8 1,385.4Effect of adopting FRS 40 – Reclassification from Property Revaluation Reserve 4.9 – – – 4.9 – Effects of adopting FRS 40 147.7 – – – 147.7 – Balance at the beginning of the year as restated 1,499.4 1,385.4 – – 1,499.4 1,385.4Translation reserve adjustment (32.9) (14.6) – – (32.9) (14.6)Transferred from life assurance revenue statement 1,018.9 352.2 – – 1,018.9 352.2 Transferred to Profit and Loss Statement (509.2) (376.2) – – (509.2) (376.2)Balance at the end of the year 1,976.2 1,346.8 – – 1,976.2 1,346.8

Fair Value ReserveBalance at the beginning of the year 2,780.6 1,893.7 – – 2,780.6 1,893.7Translation reserve adjustment 4.7 (11.5) – – 4.7 (11.5)Fair value changes on remeasuring available-for-sale investments 1,676.6 1,427.2 – – 1,676.6 1,427.2Transfer of fair value reserve to Life Assurance Revenue Statement on sale of investments 5 (1,005.4) (581.4) – – (1,005.4) (581.4)Deferred tax on fair value changes (32.8) (75.9) – – (32.8) (75.9)

(1) Write back of deferred tax on fair value reserve of Singapore participating fund – 128.5 – – – 128.5Deferred tax – effect of change in tax rate 9 1.9 – – – 1.9 – Balance at the end of the year 3,425.6 2,780.6 – – 3,425.6 2,780.6

(2) Property Revaluation Reserve Balance at the beginning of the year as previously reported 4.9 – – – 4.9 – Effect of adopting FRS 40 – Reclassification to Unallocated Surplus (4.9) – – – (4.9) –

Balance at the beginning of the year as restated – – – – – – Revaluation of investment property – 4.9 – – – 4.9

Balance at the end of the year – 4.9 – – – 4.9 The above fair value reserve and property revaluation reserve are deemed equity of Life Assurance Fund.



17 life assurance fund (continued)(1) In 2006, the Inland Revenue of Singapore issued a circular on the new basis for the taxation of the Life Participating Fund in

Singapore which was subsequently enacted in 2007. Under this new tax basis, the surplus of the participating fund would be taxed on actual distribution to policyholders and shareholders. With this change, a deferred tax liability of $735.0 million has been recognised on the future policyholders’ bonus as at 31 December 2007. The comparative amount of deferred tax liabilities of $612.2 million as at 31 December 2006 which was previously taken up as part of the insurance contract liabilities has been reclassified and recognised separately. Deferred tax of $128.5 million previously provided on the fair value reserve of Singapore participating fund has been adjusted.

(2) The revaluation of investment property arose from the fair valuation exercise conducted on the net assets of Straits Eastern

Square Private Limited upon its acquisition. On adoption of FRS 40 on 1 January 2007, the property revaluation reserve has been reclassified to unallocated surplus.


18 otHer debtors and interfund balances Other debtors comprise the following:

Accrued interest receivable 379.0 309.2 74.9 15.8 304.1 293.4 – 0.1Investment debtors 126.4 147.3 13.3 – 113.1 147.3 – –Deposits collected 3.8 3.6 0.4 0.5 3.4 3.1 – –Interfund balances 512.3 390.5 512.3 390.5 – – – – Prepayments and other debtors 344.3 27.8 18.2 16.4 326.1 11.4 – 0.3 1,365.8 878.4 619.1 423.2 746.7 455.2 – 0.4

19 reinsurance assets Reinsurers’ share of insurance liabilities:

Unexpired risk reserve 15 22.4 21.6 22.4 21.6 – – Loss reserve 16 38.2 30.3 38.2 30.3 – – Amounts due from reinsurers 18.4 5.3 5.0 2.4 13.4 2.9 Total assets arising from reinsurance contracts 79.0 57.2 65.6 54.3 13.4 2.9

104


Group companyin singapore dollars (millions) Note 2007 2006 2007 2006

20 investments and loansTOTALAvailable-for-sale financial assets(i) Quoted government securities, loan stocks and bonds 14,158.1 13,382.0 – 2.0(ii) Quoted equity in corporations 8,379.1 7,925.5 – – (iii) Unquoted equity in corporations, at cost 117.7 124.2 – – (iv) Other unquoted investments 7,384.7 6,186.2 – – (v) Collective investment schemes 1,469.1 716.5 – – 31,508.7 28,334.4 – 2.0less: Provision for impairment of investment in unquoted equity 6 – 1.8 – – Provision for impairment of other unquoted investments(1) 6 4.7 – – – 31,504.0 28,332.6 – 2.0

Financial assets at fair value through profit & loss statement or revenue statements Designated as fair value through profit & loss statement or revenue statements (i) Quoted government securities, loan stocks and bonds 427.5 498.4 – – (ii) Quoted equity in corporations 1,712.5 1,525.8 – –(iii) Other unquoted investments 209.4 71.1 – – (iv) Collective investment schemes 807.2 309.5 – – 3,156.6 2,404.8 – – Held-for-Trading (i) Derivatives 128.2 47.3 – – (ii) Embedded derivatives 1,271.2 1,282.5 – – 1,399.4 1,329.8 – – 4,556.0 3,734.6 – – TotalInvestments 36,060.0 32,067.2 – 2.0

Loans(i) Policy loans 2,100.9 2,044.0 – –(ii) Secured loans 1,296.9 915.2 – – (iii) Unsecured loans 71.4 26.9 – – 3,469.2 2,986.1 – – less: Provision for impairment of secured loans 6 – 8.2 – – TotalLoans 3,469.2 2,977.9 – –




20 investments and loans (continued)SHAREHOLDERS’ANDGENERALINSURANCEFUNDS Available-for-sale financial assets(i) Quoted government securities, loan stocks and bonds 1,049.6 824.0 – 2.0 (ii) Quoted equity in corporations 808.7 510.6 – – (iii) Unquoted equity in corporations, at cost 0.4 0.5 – – (iv) Other unquoted investments 831.7 394.1 – –(v) Collective investment schemes 145.4 69.6 – – 2,835.8 1,798.8 – 2.0 less: Provision for impairment of investment in unquoted equity 6 – 0.1 – – Provision for impairment of other unquoted investments(1) 6 4.7 – – – 2,831.1 1,798.7 – 2.0

Financial assets at fair value through profit & loss statement or revenue statementsHeld-for-Trading(i) Derivatives 0.7 0.1 – – (ii) Embedded derivatives 23.6 22.0 – – 24.3 22.1 – – TotalInvestments 2,855.4 1,820.8 – 2.0

Loans(i) Secured loans 117.5 1.8 – –(ii) Unsecured loans 25.8 1.3 – – TotalLoans 143.3 3.1 – –

106



20 investments and loans (continued)LIFEASSURANCEFUND Available-for-sale financial assets(i) Quoted government securities, loan stocks and bonds 13,108.5 12,558.0 – – (ii) Quoted equity in corporations 7,570.4 7,414.9 – – (iii) Unquoted equity in corporations, at cost 117.3 123.7 – – (iv) Other unquoted investments 6,553.0 5,792.1 – – (v) Collective investment schemes(2) 1,323.7 646.9 – – 28,672.9 26,535.6 – – less: Provision for impairment of investment in unquoted equity 6 – 1.7 – – 28,672.9 26,533.9 – –

Financial assets at fair value through profit & loss statement or revenue statements Designated as fair value through profit & loss statement or revenue statements(i) Quoted government securities, loan stocks and bonds 427.5 498.4 – – (ii) Quoted equity in corporations 1,712.5 1,525.8 – –(iii) Other unquoted investments 209.4 71.1 – – (iv) Collective investment schemes 807.2 309.5 – – 3,156.6 2,404.8 – – Held-for-Trading (i) Derivatives 127.5 47.2 – – (ii) Embedded derivatives 1,247.6 1,260.5 – – 1,375.1 1,307.7 – – 4,531.7 3,712.5 – –

TotalInvestments 33,204.6 30,246.4 – –

Loans(i) Policy loans 2,100.9 2,044.0 – – (ii) Secured loans 1,179.4 913.4 – – (iii) Unsecured loans 45.6 25.6 – – 3,325.9 2,983.0 – – less: Provision for impairment of secured loans 6 – 8.2 – – TotalLoans 3,325.9 2,974.8 – –

(1) During the year, a provision for impairment of $4.7 million was made against investments in collateralised debt obligations whose fair values fell below cost.

(2) Collective investment schemes includes an amount of $66 million pertaining to convertible loan notes in a joint venture which mature on 26 April 2009. They are non-interest bearing and enable the investor to participate in the profits of the joint venture.



21 associates and Joint ventures

21.1 Associates Investment in shares, at cost 3 535.2 543.3 50.6 90.0 484.6 453.3 – – Share of post-acquisition results 87.9 58.6 8.1 9.0 79.8 49.6 – –Translation adjustment (68.4) (44.3) (8.0) (8.6) (60.4) (35.7) – – 19.5 14.3 0.1 0.4 19.4 13.9 – –Carrying amount at 31 December 554.7 557.6 50.7 90.4 504.0 467.2 – –

The Group’s interests in its associates, all of which are unlisted, are as follows: non-name country of non-current current current current profit/ % interest incorporation assets assets liabilities liabilities revenue (loss) held

FairfieldLion InvestmentFund Cayman (Asia)Ltd Islands – 271.6 – (6.8) 30.4 29.6 43.2Fairfield Investment BritishVirgin FundLtd Island – 1,140.9 – (11.0) 74.4 66.5 34.9AscendasChina CommercialFund Singapore 335.2 13.0 (131.5) (8.9) 30.6 22.0 28.5Totalasat31December2007 335.2 1,425.5 (131.5) (26.7) 135.4 118.1

Fairfield Lion Investment Fund Cayman (Asia) Ltd Islands – 191.4 – (19.9) 14.3 13.8 68.1 Fairfield Investment British Virgin Fund Ltd Island – 1,034.6 – (15.8) 88.8 79.0 45.7 Total as at 31 December 2006 – 1,226.0 – (35.7) 103.1 92.8


108


21 associates and Joint ventures (continued)21.2 JointVentures

Investment in shares, at cost 3 31.0 31.0 31.0 31.0 – – – – Share of post-acquisition results (3.8) (1.1) (4.4) (2.5) 0.6 1.4 – –Carrying amount at 31 December 27.2 29.9 26.6 28.5 0.6 1.4 – – non- country of non-current current current current profit/ % interest name incorporation assets assets liabilities liabilities revenue (loss) held

GreatEasternLife People’s Assurance(China) RepublicCompanyLimited ofChina 45.2 21.7 (3.5) (13.2) 8.9 (4.0) 50.0LionGlobal Infrastructure FundLimited Guernsey 89.8 12.0 (89.4) (2.0) 15.2 10.3 50.0Totalasat31December2007 135.0 33.7 (92.9) (15.2) 24.1 6.3

Great Eastern Life People’s Assurance (China) Republic Company Limited of China 18.1 37.4 (0.4) (1.3) 1.9 (5.0) 50.0Lion Global Infrastructure Fund Limited Guernsey 80.8 9.5 (87.6) – 0.2 2.8 50.0 Total as at 31 December 2006 98.9 46.9 (88.0) (1.3) 2.1 (2.2)

As at balance sheet date, there are no outstanding capital commitments relating to the above associates and joint ventures.

22 subsidiariesInvestment in shares, at cost 3 901.6 901.6Distribution from pre-acquisition reserve (266.0) (156.0) 635.6 745.6

23 amounts due from subsidiaries, associates and Joint ventures Amounts due from subsidiaries – – – – – – 740.3 837.7Loans to subsidiaries – – – – – – 4.1 4.1Provision for impairment of unsecured loan to subsidiary 6 – – – – – – (3.6) (3.6) – – – – – – 740.8 838.2

The amounts due from subsidiaries and loans to subsidiaries are unsecured, interest-free and repayable on demand.



Group 2007 2006 software Software development developmentin singapore dollars (millions) Note Goodwill costs total Goodwill costs Total

24 GoodWill and intanGible assets TOTALCost at 1 January as previously reported 25.5 – 25.5 18.7 82.5 101.2 Reclassification to Property, Plant and Equipment 25 – – – – (82.5) (82.5)Cost at 1 January as restated 25.5 – 25.5 18.7 – 18.7 AcquisitionofadditionalinterestinSESPL – – – 6.8 – 6.8 Costat31December 25.5 – 25.5 25.5 – 25.5 Accumulated impairment and amortisation at 1 January as previously reported – – – – (7.4) (7.4)Reclassification to Property, Plant and Equipment 25 – – – – 7.4 7.4 Accumulatedimpairmentand amortisationat1Januaryas restatedandat31December – – – – – –

Netbookvalue,at31December 25.5 – 25.5 25.5 – 25.5

SHAREHOLDERS’ANDGENERALINSURANCEFUNDS Cost at 1 January 18.7 – 18.7 18.7 – 18.7 Costat31December 18.7 – 18.7 18.7 – 18.7


LIFEASSURANCEFUNDCost at 1 January as previously reported 6.8 – 6.8 – 82.5 82.5 Reclassification to Property, Plant and Equipment 25 – – – – (82.5) (82.5)Cost at 1 January as restated 6.8 – 6.8 – – – AcquisitionofadditionalinterestinSESPL – – – 6.8 – 6.8 Costat31December 6.8 – 6.8 6.8 – 6.8

Accumulated amortisation at 1 January as previously reported – – – – (7.4) (7.4)Reclassification to Property, Plant and Equipment 25 – – – – 7.4 7.4 Accumulatedamortisation,at1January asrestatedandat31December – – – – – –



110


24 GoodWill and intanGible assets (continued) The acquisition of an additional stake of 9.6% in Straits Lion Asset Management Limited (“SLAM”) in 2005 gave rise to an amount

of $18.7 million of goodwill in Shareholders’ Fund, while the acquisition of an additional 51% of the ordinary shares in Straits Eastern Square Pte Ltd (“SESPL”) in 2006 gave rise to an amount of $6.8 million of goodwill in Life Assurance Fund.

Software development comprising cost as at 1 January 2006 of $82.5 million, additions in 2006 of $1.5 million, reclassification in 2006 of $10.7 million, accumulated amortisation as at 1 January 2006 of $7.4 million and amortisation charge in 2006 of $5.2 million were reclassified from Intangible Assets to Property, Plant and Equipment to comply with the accounting policy of the immediate holding company of GEH. The reclassification was made retrospectively and the comparatives as at 31 December 2006 were accordingly restated.

24.1 Impairmenttestforgoodwill In accordance with FRS 103, the carrying values of the Group’s goodwill on acquisition of subsidiaries was assessed for impairment. In respect of the acquisition of additional interest of Straits Lion Asset Management Limited, goodwill is allocated for impairment testing purposes to the individual entity which is also the cash-generating unit. Goodwill arising from the acquisition of Straits Eastern Square Pte Ltd is allocated for impairment testing to the investment property held which is also the cash-generating unit.

Subsidiary–StraitsLionAssetManagementLimitedCarrying value of capitalised goodwill as at 31 December 2007 $18.7 millionBasis on which recoverable values are determined (1) Value in use Terminal growth rate (2) 2% Discount rate (3) 15%

Subsidiary–StraitsEasternSquarePteLtdCarrying value of capitalised goodwill as at 31 December 2007 $6.8 million Basis on which recoverable values are determined (1) Fair value of investment property held, less cost to sell

A desktop valuation of the investment property held was conducted for the year ended 31 December 2007.

(1) The value-in-use calculation applies a discounted cash flow model using cash flow projections based on financial budget and forecast approved by management covering a five-year period. Cash flows beyond the fifth year are extrapolated using the estimated growth rate stated above.

(2) The terminal growth rate used does not exceed the long term average past growth rate of the industry and country in which Straits Lion Asset Management Limited operates.

(3) The discount rate applied to the cash flow projections is pre-tax and is derived from the cost of capital plus a reasonable risk premium. This is the benchmark used by management to assess the operating performance.

No impairment loss was required for the financial year ended 31 December 2007 for the amounts of goodwill recorded above as the recoverable values were in excess of the carrying values.



Group computer capital equipment freehold leasehold Works in and software otherin singapore dollars (millions) Note land land progress buildings development assets total

25 property, plant and eQuipment TOTALCostAt 1 January 2006Cost 62.8 35.1 32.7 610.2 152.0 42.2 935.0Reclassification from Intangible Assets 24 – – – – 82.5 – 82.5Cost at 1 January, restated 62.8 35.1 32.7 610.2 234.5 42.2 1,017.5Additions – 0.8 30.3 3.6 45.2 36.4 116.3Disposals/assets written off (5.3) (2.9) – (15.0) (7.3) (1.2) (31.7)Reclassification – – (17.2) 17.2 – – –Reclassification to investment properties 26 5.1 2.9 (10.9) (127.5) – – (130.4)Translation reserve adjustment (0.1) (0.1) (0.2) (1.8) (1.0) (0.2) (3.4)Cost at 31 December 2006, restated 62.5 35.8 34.7 486.7 271.4 77.2 968.3

(1)Reclassificationfrominvestmentproperties 0.1 2.9 3.5 120.5 – – 127.0Costat1January2007,restated 62.6 38.7 38.2 607.2 271.4 77.2 1,095.3Additions – 1.3 – 13.9 47.7 21.3 84.2Disposals/assetswrittenoff – – – – (56.7) (1.4) (58.1)Reclassification – – (11.3) 11.3 – – –Reclassificationtoinvestmentproperties 26 – – (25.9) – – – (25.9)Translationreserveadjustment – – 0.6 (0.1) (0.3) (0.1) 0.1Costat31December2007 62.6 40.0 1.6 632.3 262.1 97.0 1,095.6

AccumulatedDepreciationAt 1 January 2006 (13.4) (3.2) – (102.9) (98.2) (25.7) (243.4)Reclassification from Intangible Assets 24 – – – – (7.4) – (7.4)Accumulated Depreciation at 1 January, restated (13.4) (3.2) – (102.9) (105.6) (25.7) (250.8)Depreciation charge for the year – – – 4.4 (22.7) (17.7) (36.0)Reclassification 0.3 (0.3) – – – – –Disposals/assets written off – – – 6.2 2.3 1.0 9.5 Reclassification from investment properties 26 – – – (5.3) – – (5.3)Translation reserve adjustment 0.1 – – – 0.5 (0.1) 0.5At 31 December 2006 and 1 January 2007 (13.0) (3.5) – (97.6) (125.5) (42.5) (282.1)Depreciationchargefortheyear – – – (12.6) (23.5) (8.7) (44.8)Disposals/assetswrittenoff – – – – 47.5 1.2 48.7Decreaseinprovisionforimpairment 6 – – – 0.7 – – 0.7Reclassification 11.3 – – (11.3) – – –Translationreserveadjustment – – – (0.5) 0.7 0.4 0.6AccumulatedDepreciation,at31December2007 (1.7) (3.5) – (121.3) (100.8) (49.6) (276.9)

NetBookValueNet Book Value, at 31 December 2006 49.5 32.3 34.7 389.1 145.9 34.7 686.2NetBookValue,at31December2007 60.9 36.5 1.6 511.0 161.3 47.4 818.7

112


Group computer capital equipment freehold leasehold Works in and software otherin singapore dollars (millions) land land progress buildings development assets total

25 property, plant and eQuipment (continued) sHareHolders’ and General insurance fundsCostCost at 1 January 2006 – – – 0.8 10.1 3.6 14.5Additions – – – – 0.2 0.3 0.5Disposals/assets written off – – – (0.5) (0.2) (0.1) (0.8)Cost at 31 December 2006 and 1 January 2007 – – – 0.3 10.1 3.8 14.2Additions – – – – 0.8 0.9 1.7Disposals/assetswrittenoff – – – – (0.7) (0.3) (1.0)Translationreserveadjustment – – – – (0.1) – (0.1)Costat31December2007 – – – 0.3 10.1 4.4 14.8

AccumulatedDepreciationAt 1 January 2006 – – – (0.1) (8.0) (1.7) (9.8)Depreciation charge for the year – – – (0.1) (1.0) (0.5) (1.6)Disposals/assets written off – – – 0.1 – – 0.1At 31 December 2006 and 1 January 2007 – – – (0.1) (9.0) (2.2) (11.3)Depreciationchargefortheyear – – – – (1.0) (0.7) (1.7)Disposals/assetswrittenoff – – – – 0.1 0.1 0.2Translationreserveadjustment – – – – 0.6 0.2 0.8AccumulatedDepreciation,at31December2007 – – – (0.1) (9.3) (2.6) (12.0)

NetBookValueNet Book Value, at 31 December 2006 – – – 0.2 1.1 1.6 2.9 NetBookValue,at31December2007 – – – 0.2 0.8 1.8 2.8



Group computer capital equipment freehold leasehold Works in and software otherin singapore dollars (millions) Note land land progress buildings development assets total

25 property, plant and eQuipment (continued) life assurance fundCostAt 1 January 2006Cost 62.8 35.1 32.7 609.4 141.9 38.6 920.5Reclassification from Intangible Assets 24 – – – – 82.5 – 82.5Cost at 1 January, restated 62.8 35.1 32.7 609.4 224.4 38.6 1,003.0Additions – 0.8 30.3 3.6 45.0 36.1 115.8Disposals/assets written off (5.3) (2.9) – (14.5) (7.1) (1.1) (30.9)Reclassification – – (17.2) 17.2 – – – Reclassification to investment properties 26 5.1 2.9 (10.9) (127.5) – – (130.4)Translation reserve adjustment (0.1) (0.1) (0.2) (1.8) (1.0) (0.2) (3.4)Cost at 31 December 2006, restated 62.5 35.8 34.7 486.4 261.3 73.4 954.1

(1)Reclassificationfrominvestmentproperties 0.1 2.9 3.5 120.5 – – 127.0Costat1January2007,restated 62.6 38.7 38.2 606.9 261.3 73.4 1,081.1Additions – 1.3 – 13.9 46.9 20.4 82.5Disposals/assetswrittenoff – – – – (56.0) (1.1) (57.1)Reclassification – – (11.3) 11.3 – – –Reclassificationtoinvestmentproperties 26 – – (25.9) – – – (25.9)Translationreserveadjustment – – 0.6 (0.1) (0.2) (0.1) 0.2Costat31December2007 62.6 40.0 1.6 632.0 252.0 92.6 1,080.8

AccumulatedDepreciationAt 1 January 2006 (13.4) (3.2) – (102.8) (90.2) (24.0) (233.6)Reclassification from Intangible Assets 24 – – – – (7.4) – (7.4)Accumulated Depreciation at 1 January, restated (13.4) (3.2) – (102.8) (97.6) (24.0) (241.0)Depreciation charge for the year – – – 4.5 (21.7) (17.2) (34.4)Reclassification 0.3 (0.3) – – – – –Disposals/assets written off – – – 6.1 2.3 1.0 9.4Reclassification from investment properties 26 – – – (5.3) – – (5.3)Translation reserve adjustment 0.1 – – – 0.5 (0.1) 0.5At 31 December 2006 and 1 January 2007 (13.0) (3.5) – (97.5) (116.5) (40.3) (270.8)Depreciationchargefortheyear – – – (12.6) (22.5) (8.0) (43.1)Decreaseinprovisionforimpairment 6 – – – 0.7 – – 0.7Disposals/assetswrittenoff – – – – 47.4 1.1 48.5Reclassification 11.3 – – (11.3) – – –Translationreserveadjustment – – – (0.5) 0.1 0.2 (0.2)AccumulatedDepreciation,at31December2007 (1.7) (3.5) – (121.2) (91.5) (47.0) (264.9)

NetBookValueNet Book Value, at 31 December 2006 49.5 32.3 34.7 388.9 144.8 33.1 683.3NetBookValue,at31December2007 60.9 36.5 1.6 510.8 160.5 45.6 815.9

(1) A property with carrying value of $127.0 million as at 31 December 2006 that was previously classified as investment property has been reclassified to property, plant and equipment as it is substantially owner-occupied.

114


Group in singapore dollars (millions) Note 2007 2006

26 investment propertiesLIFEASSURANCEFUNDAt 1 January as previously reported 814.4 586.2Reclassification to property, plant and equipment (127.0) – 687.4 586.2Effects of adopting FRS 40 – Fair value adjustment 153.9 –Effects of adopting FRS 40 – Accumulated depreciation (46.8) –At 1 January as restated 794.5 586.2Additions 23.3 3.0Additions due to acquisition of subsidiary – 130.0Gains from fair value adjustments 334.5 – Disposals/assets written off – (34.0)Reclassification from plant, property and equipment 25 25.9 130.4Translation reserve adjustment 0.1 (1.2)At31December 1,178.3 814.4

Cost na 485.5 Valuation na 328.9At31December na 814.4

AccumulatedDepreciationAt 1 January as previously reported (46.8) (48.1)Effects of adopting FRS 40 – Accumulated depreciation 46.8 – At 1 January as restated – (48.1)Depreciation charge for the year na (5.9)Provision for impairment 6 na 1.8Reclassification to plant, property and equipment 25 na 5.3Translation reserve adjustment na 0.1At31December na (46.8)

NetBookValue na 767.6



26 investment properties (continued)Investment properties within the life assurance funds collectively form an asset class which is an integral part of the overall investment strategy for the asset-liability management of the life insurance business.

On 1 January 2007, the Group adopted the fair value model for investment properties held under Life Assurance Fund. As a result of adopting FRS 40, investment properties are measured at fair value and gains or losses arising from changes in the fair value of investment properties are included in the Life Assurance Revenue Statements in the period in which they arise. Under the transitional provision of FRS 40, the revaluation gain of $147.7 million (net of deferred tax of $6.2 million) has been taken to Life Assurance Fund at 1 January 2007. The 2006 comparatives are stated at cost less depreciation and provision for impairment. The accumulated depreciation of $46.8 million has been reversed.

A property with carrying value of $127.0 million as at 31 December 2006 that was previously classified as investment property has been reclassified to property, plant and equipment as it is substantially owner-occupied. Fair value of the investment properties as at 31 December 2007 is determined based on objective valuation undertaken by independent valuers. Rental income received on investment properties for the year amounted to $67.2 million (2006: $59.6 million). Direct operating expenses (including repairs and maintenance for the year) arising from investment properties amounted to $19.9 million (2006: $20.5 million).

27 executives’ sHare option scHeme 27.1 GEHOptionScheme

The Great Eastern Holdings Executives’ Share Option Scheme (“GEH Option Scheme”) is administered by the Company’s Remuneration Committee. No options were granted under this scheme during the financial year ended 31 December 2007.

27.2 OCBCOptionScheme In April 2005, the GEH Optionholders were nominated to participate in the OCBC Bank Share Option Scheme (2001) (“OCBC Option Scheme”). The acquisition price of the options granted is equal to the average of the last traded price of the ordinary shares of OCBC Bank over five consecutive days immediately prior to the date of the grant. The options vest in one–third increment over a period of three years, and are exercisable after the first anniversary of the date of grant up to the date of expiration of the options. The share options have a validity period of 10 years from date of grant.

The fair value of the share options is recognised by the GEH Group as staff costs in the Profit and Loss Statement or Revenue Statements of the respective insurance funds, as appropriate. The Group uses the binomial model to derive the fair value of share options granted by OCBC Bank. The value of the share options is recognised in the Profit and Loss Statement or Revenue Statements over the vesting period of the share options. At each balance sheet date, the Group revises its estimates of number of options that are expected to become exercisable, and the impact of the change to the original estimates, if any, is recognised in the Profit and Loss Statement or Revenue Statements accordingly.

During 2004, the Group acquired a subsidiary that OCBC Bank had granted the OCBC Share Option Scheme and the OCBC Deferred Share Plan (“DSP”). The value of the share options is recognised in accordance with the above. Details on the deferred share plan are disclosed in 27.2 (b).

At the Extraordinary General Meeting of OCBC Bank held on 19 April 2007, certain alterations proposed by OCBC Bank’s Remuneration Committee to OCBC Option Scheme were approved by its shareholders. These alterations enable option holders to select one of the following alternatives when exercising their options:

116


27 executives’ sHare option scHeme (continued) 27.2 OCBCOptionScheme(continued)

(i) All share election – an election to receive in full the number of ordinary shares upon full payment of the aggregate acquisition cost in respect of options exercised;

(ii) Partial share election – an election to receive ordinary shares representing the notional profit which would have been derived if the ordinary shares in respect of the options exercised had been sold; or

(iii) Cash election – an election to receive in cash the profit derived from the sale of OCBC Bank’s share in respect of the options exercised.

During the year, OCBC Bank granted 1,097,000 (2006: 1,406,000) options to GEH Optionholders. The fair value of share options granted during the financial year ended 31 December 2007 determined using the binomial valuation model was $1.9 million (2006: $1.3 million). There are no market conditions or non-market performance conditions associated with the share option grants. Service conditions are not taken into account in the measurement of the fair value of the services to be received at the grant date. Significant inputs that were used to determine the fair value of options granted were set out below.

2007 2006

Acquisition price ($) 8.59 6.58 Average share price from grant date to acceptance date ($) 9.00 6.25 Expected volatility based on last 250 days historical price volatility as of acceptance date (%) 20.21 17.25 Risk–free rate based on SGS bond yield at acceptance date (%) 2.74 3.85 Expected dividend yield (%) 2.56 3.07 Exercise multiple (times) 1.57 1.57 Option life (years) 10 10

(a) ShareOptionScheme Information with respect to the number of options granted under the OCBC Option Scheme to GEH Optionholders is as follows: 2007 2006 number of options average price Number of options Average Price

Number of shares comprised in options:At beginning of year 4,268,184 $6.022 3,320,232 $5.754 Granted during the year 1,097,000 $8.590 1,406,000 $6.580 Lapsed during the year (73,486) $6.034 (151,080) $5.942 Exercised during the year (1,072,824) $5.989 (306,968) $5.722 Outstanding at end of year 4,218,874 $6.698 4,268,184 $6.022

Exercisable at end of year 1,267,026 $5.950 816,156 $5.729Weighted average share price underlying the options exercised during the financial year $5.989 $5.722



27 executives’ sHare option scHeme (continued)27.2 (a) ShareOptionScheme(continued)

Details of the options outstanding as at 31 December 2007 are as follows: 2007 Grant year Grant date exercise period acquisition price outstanding exercisable 2004 15.03.2004 16.03.2005 – 14.03.2014 $5.142 25,920 25,9202005 14.03.2005 15.03.2006 – 13.03.2015 $5.767 29,688 16,632 2005A 08.04.2005 09.04.2006 – 07.04.2015 $5.784 1,924,596 939,684 2006B 23.05.2006 24.05.2007 – 22.05.2016 $6.580 1,198,670 284,790 2007B 14.03.2007 15.03.2008 – 13.03.2017 $8.590 1,040,000 – 4,218,874 1,267,026

The carrying amount of the liability recognised on the Group’s balance sheet related to the above equity–settled options at 31 December 2007 is $2.4 million (31 December 2006: $2.9 million).

As at 31 December 2007, the weighted average remaining contractual life of outstanding options was 8.1 years (2006: 9.5 years).

The weighted average fair value of options granted during the year was $1.763 (2006: $0.925).

(b) DeferredSharePlanThe DSP is a share-based plan administered by the OCBC Remuneration Committee. The DSP is a discretionary share–based incentive and retention award program extended to executives of the subsidiary at the absolute discretion of the Remuneration Committee. The awards are granted at no cost to the grantees, on a deferred basis as part of their performance bonus. Such awards shall lapse by reason of cessation of service but may be preserved at the absolute discretion of the Remuneration Committee. The DSP does not involve the issue of new shares. Instead, existing shares will be purchased from the market for release to the grantees at the end of the respective vesting periods.

There were no deferred ordinary shares granted during the financial year (2006: NIL).


28 commitments 28.1 Capitalcommitments Commitments for capital expenditure not provided for in the financial statements:

Authorised and contracted for: – properties under construction 9.6 54.0 – – 9.6 54.0 – – – other commitments 72.5 3.6 – – 72.5 3.6 – – Authorised but not contracted for 5.4 247.0 0.4 0.6 5.0 246.4 – – 87.5 304.6 0.4 0.6 87.1 304.0 – –

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28 commitments (continued) 28.2 Operatingleasecommitments

The Group has entered into commercial property leases on its investment property portfolio. These non-cancellable leases have remaining non-cancellable lease terms of between 1 and 5 years. All leases include a clause to enable upward revision of the rental charge on an annual basis based on prevailing market conditions.

Future minimum lease payments receivable under non-cancellable operating leases are as follows as of 31 December: Within one year 32.1 28.2 – – 32.1 28.2 – – After one year but not more than five years 29.4 36.4 – – 29.4 36.4 – – 61.5 64.6 – – 61.5 64.6 – –

The Group has entered into operating lease agreements for computer equipment. These non-cancellable leases have remaining

non-cancellable lease terms of between 1 and 4 years. Operating lease payments recognised in the consolidated Profit and Loss Statement and Revenue Statements during the year amounted to $1.7 million (2006: $4.5 million).

Future minimum lease payments payable under non-cancellable operating leases contracted for as at 31 December 2007 but not recognised as liabilities, are payable as follows: Within one year 1.6 1.1 0.8 – 0.8 1.1 – – After one year but not more than five years 3.5 1.9 1.5 1.1 2.0 0.8 – – 5.1 3.0 2.3 1.1 2.8 1.9 – –



29 seGmental information Reporting formatThe primary segment reporting format is the geographical segment as the Group’s risks and rewards are affected predominantly by operating conditions in different countries and geographical areas. Secondary segment is reported by business category.

Geographical segmentsThe Group’s geographical segments are based on the location of the Group’s assets and are organised in Singapore, Malaysia and Other Asia. Sales to external customers disclosed in geographical segments are based on the respective location of its customers.

Business segmentsThe operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products for the different markets. The Life Assurance segment comprises life insurance, long-term health and accident insurance and annuity business written and includes the unit-linked business. The General Insurance segment provides cover for risks associated mainly with property and casualty related business. The Shareholders segment includes fund management business and general corporate income and expense items.

The business segment information for shareholders’ fund and general insurance fund have not been separately presented below as they are considered single business segments. Disclosures of information can be found in other parts of these financial statements.

Allocation basis and transfer pricing Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, income tax and deferred tax assets and liabilities, interest-bearing loans and related expenses. Inter-segment transfers or transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third party. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation. (1) ByGeographicalSegments

Group in singapore dollars (millions) Singapore Malaysia Other Asia Eliminations Consolidated 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

(a)Shareholders’FundLife assurance profit from: Participating Fund 72.9 63.4 69.5 39.7 0.5 – – – 142.9 103.1 Non-participating Fund 131.2 120.9 170.8 97.6 – – – – 302.0 218.5 Investment-linked Fund 12.8 6.1 55.6 48.5 (4.1) – – – 64.3 54.6Profit/(loss) from life assurance 216.9 190.4 295.9 185.8 (3.6) – – – 509.2 376.2Profit from general insurance 10.6 17.3 17.5 10.0 – – – – 28.1 27.3Profit/(loss)from insuranceoperations(29.1) 227.5 207.7 313.4 195.8 (3.6) – – – 537.3 403.5Investment income, net 226.1 284.2 6.2 4.4 – – (139.5) (190.5) 92.8 98.1Gain on sale of investments and changes in fair value 29.0 43.4 7.2 2.3 – – – – 36.2 45.7(Increase)/decrease in provision for impairment of assets (4.6) 0.6 – – – – – – (4.6) 0.6Loss in exchange differences (12.9) (10.2) – – – – – – (12.9) (10.2)Profitfrominvestments 237.6 318.0 13.4 6.7 – – (139.5) (190.5) 111.5 134.2

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29 seGmental information (continued) (1) ByGeographicalSegments(continued)


(a) Shareholders’Fund(continued)Fees and other income 105.6 80.8 – 0.1 – – – – 105.6 80.9Profit/(loss)beforeexpenses 570.7 606.5 326.8 202.6 (3.6) – (139.5) (190.5) 754.4 618.6Management and other expenses 67.5 52.7 4.0 0.4 9.6 – – – 81.1 53.1Depreciation 1.2 1.1 – – – – – – 1.2 1.1 Totalexpenses 68.7 53.8 4.0 0.4 9.6 – – – 82.3 54.2 Profit/(loss) after expenses 502.0 552.7 322.8 202.2 (13.2) – (139.5) (190.5) 672.1 564.4Share of (loss)/profit of associates (0.6) 9.0 – – – – – – (0.6) 9.0 Share of loss of joint ventures – – – – (2.0) (2.5) – – (2.0) (2.5) 501.4 561.7 322.8 202.2 (15.2) (2.5) (139.5) (190.5) 669.5 570.9 less: Income tax 61.0 85.4 83.5 53.6 – – (38.2) (58.8) 106.3 80.2Profit/(loss)afterincometax 440.4 476.3 239.3 148.6 (15.2) (2.5) (101.3) (131.7) 563.2 490.7

Segment assets 3,493.8 2,761.5 511.0 294.4 9.0 7.4 (85.6) (30.8) 3,928.2 3,032.5Investments in associates and joint ventures 77.3 118.9 – – – – – – 77.3 118.9Totalassetsemployed 3,571.1 2,880.4 511.0 294.4 9.0 7.4 (85.6) (30.8) 4,005.5 3,151.4

Segment liabilities 432.1 22.9 60.5 1.9 – 0.1 – – 492.6 24.9Income tax and deferred tax liabilities 152.5 139.8 41.7 22.0 – – – – 194.2 161.8 Totalliabilities 584.6 162.7 102.2 23.9 – 0.1 – – 686.8 186.7

Capital expenditure: property, plant and equipment 1.2 – – 0.1 – – – – 1.2 0.1

(29.1) On a restated basis for all funds net of tax, profit or loss from insurance operations would be as follows: Profit/(loss) before tax from insurance operations 277.4 259.6 319.9 199.7 (3.6) – – – 593.7 459.3 less: Income tax 49.9 51.9 86.4 55.9 – – – – 136.3 107.8 Profit/(loss) after tax from insurance operations 227.5 207.7 233.5 143.8 (3.6) – – – 457.4 351.5

Profit transferred from Singapore insurance funds and Malaysia general funds are presented net of tax in the Profit and Loss Statement and Revenue Statements. This is done to reflect the substance that the tax liability is borne by the respective insurance funds.

Profit transferred from Malaysia life funds are presented before tax in the Revenue Statements.




(b)GeneralInsuranceFundPremiums less reinsurances 23.4 18.9 47.1 43.5 – 0.3 – – 70.5 62.7less: Increase in unexpired risk reserve during the year, net (2.6) (1.3) (0.9) (1.5) – – – – (3.5) (2.8)Netearnedpremiums 20.8 17.6 46.2 42.0 – 0.3 – – 67.0 59.9Commissions received from reinsurers 7.3 7.0 8.8 8.6 – – – – 16.1 15.6Totalincome 28.1 24.6 55.0 50.6 – 0.3 – – 83.1 75.5

Net claims and increase in loss reserves 14.1 7.4 24.6 22.4 – 0.1 – – 38.7 29.9Commissions and agency expenses 7.3 6.8 11.8 11.1 – 0.1 – – 19.1 18.0Management expenses 7.4 8.2 11.7 10.4 – – – – 19.1 18.6Depreciation 0.1 0.1 0.4 0.4 – – – – 0.5 0.5Totalexpenses 28.9 22.5 48.5 44.3 – 0.2 – – 77.4 67.0Netunderwritingprofit (0.8) 2.1 6.5 6.3 – 0.1 – – 5.7 8.5Investment income, net 3.2 3.4 5.1 5.4 – – – – 8.3 8.8Gain on sale of investments and changes in fair value 11.6 13.7 12.8 4.2 – – – – 24.4 17.9 Gain in exchange differences 0.1 – – – – – – – 0.1 –Profitfrominvestments 14.9 17.1 17.9 9.6 – – – – 32.8 26.7 Excessofincomeoverexpenses beforeincometax 14.1 19.2 24.4 15.9 – 0.1 – – 38.5 35.2less: Income tax 3.5 4.0 6.9 3.9 – – – – 10.4 7.9Profitfromgeneralinsurance transferredtoprofitand lossstatement 10.6 15.2 17.5 12.0 – 0.1 – – 28.1 27.3

Segmentassets/ Totalassetsemployed 85.9 76.3 120.1 111.9 0.5 0.6 – – 206.5 188.8

Segment liabilities 79.2 66.6 114.2 105.9 0.5 0.7 – – 193.9 173.2Income tax and deferred tax liabilities 6.7 6.2 5.9 5.7 – – – – 12.6 11.9Totalliabilities 85.9 72.8 120.1 111.6 0.5 0.7 – – 206.5 185.1

Capital expenditure: property, plant and equipment – 0.1 0.5 0.3 – – – – 0.5 0.4


122



(c)LifeAssuranceFundPremiums less reassurances 3,843.3 3,449.1 1,889.7 1,742.7 60.1 33.7 – – 5,793.1 5,225.5Commissions received from reinsurers 3.6 4.5 5.6 5.0 – – – – 9.2 9.5Investment income, net 726.5 765.0 722.2 617.0 18.1 8.8 – – 1,466.8 1,390.8Rental income, net 37.3 32.6 10.0 6.5 – – – – 47.3 39.1Gain on sale of investments and changes in fair value 985.8 735.1 659.4 223.2 5.9 5.9 – – 1,651.1 964.2Loss on sale of properties held for sale – (4.7) – – – – – – – (4.7)(Increase)/decrease in provision for impairment of assets (0.9) 1.7 2.7 3.2 – – – – 1.8 4.9Loss in exchange differences (100.0) (131.9) – – (0.6) 0.2 – – (100.6) (131.7) 5,495.6 4,851.4 3,289.6 2,597.6 83.5 48.6 – – 8,868.7 7,497.6Claims less reassurances 3,688.8 4,060.7 1,135.5 865.2 19.1 14.0 – – 4,843.4 4,939.9Commissions and agency expenses 192.7 171.4 293.9 256.6 4.4 2.4 – – 491.0 430.4 Management expenses 102.7 87.4 87.4 82.7 5.9 6.0 – – 196.0 176.1Agents’ retirement benefits – – 22.7 19.9 – – – – 22.7 19.9Depreciation 22.4 27.6 20.4 12.6 0.3 0.1 – – 43.1 40.3 Change in life assurance fund contract liabilities 894.9 (17.6) 1,031.4 876.7 56.8 21.1 – – 1,983.1 880.2 4,901.5 4,329.5 2,591.3 2,113.7 86.5 43.6 – – 7,579.3 6,486.8 594.1 521.9 698.3 483.9 (3.0) 5.0 – – 1,289.4 1,010.8 Share of profit of associates 30.4 42.4 – – – – – – 30.4 42.4Share of (loss)/profit of joint ventures (0.7) 1.4 – – – – – – (0.7) 1.4 623.8 565.7 698.3 483.9 (3.0) 5.0 – – 1,319.1 1,054.6less: Income tax 183.9 638.1 115.7 63.5 0.6 0.8 – – 300.2 702.4 439.9 (72.4) 582.6 420.4 (3.6) 4.2 – – 1,018.9 352.2

Retained in life assurance fund 223.0 (262.8) 286.7 234.6 – 4.2 – – 509.7 (24.0)Transferred to profit and loss statement 216.9 190.4 295.9 185.8 (3.6) – – – 509.2 376.2 439.9 (72.4) 582.6 420.4 (3.6) 4.2 – – 1,018.9 352.2





(c)LifeAssuranceFund(continued)Segment assets 24,995.5 23,677.8 16,504.3 14,303.5 299.0 235.8 – – 41,798.8 38,217.1Investments in associates and joint ventures 504.6 468.6 – – – – – – 504.6 468.6Totalassetsemployed 25,500.1 24,146.4 16,504.3 14,303.5 299.0 235.8 – – 42,303.438,685.7

Segment liabilities 24,656.2 23,414.5 16,277.9 14,156.6 297.7 235.0 – – 41,231.8 37,806.1Income tax and deferred tax liabilities 843.9 732.7 226.4 146.9 1.3 – – – 1,071.6 879.6Totalliabilities 25,500.1 24,147.2 16,504.3 14,303.5 299.0 235.0 – – 42,303.4 38,685.7

Capital expenditure: – property, plant and equipment 32.0 24.5 46.3 91.3 4.2 – – – 82.5 115.8 – investment properties – 2.0 23.3 1.0 – – – – 23.3 3.0

(2)ByBusinessSegments

life assurance fund life assurance fundin singapore dollars (millions) (non-linked) (linked) eliminations consolidated 2007 2006 2007 2006 2007 2006 2007 2006

Premiums less reassurances 3,977.6 4,032.6 1,815.5 1,192.9 – – 5,793.1 5,225.5Commissions received from reinsurers 8.8 8.1 0.4 1.4 – – 9.2 9.5Investment income, net 1,368.1 1,329.6 98.7 61.2 – – 1,466.8 1,390.8Rental income, net 47.3 39.1 – – – – 47.3 39.1Gain on sale of investments and changes in fair value 1,456.1 653.8 195.0 310.4 – – 1,651.1 964.2Loss on sale of properties held for sale – (4.7) – – – – – (4.7)Decrease in provision for impairment of assets 1.8 4.9 – – – – 1.8 4.9Loss in exchange differences (95.1) (115.9) (5.5) (15.8) – – (100.6) (131.7) 6,764.6 5,947.5 2,104.1 1,550.1 – – 8,868.7 7,497.6


124

29 seGmental information (continued) (2)ByBusinessSegments(continued)

life assurance fund life assurance fundin singapore dollars (millions) (non-linked) (linked) eliminations consolidated 2007 2006 2007 2006 2007 2006 2007 2006

Claims less reassurances 3,967.1 4,160.2 876.3 779.7 – – 4,843.4 4,939.9Commissions and agency expenses 311.2 288.2 179.8 142.2 – – 491.0 430.4Management expenses 137.0 137.7 59.0 38.4 – – 196.0 176.1Agents’ retirement benefits 19.5 17.6 3.2 2.3 – – 22.7 19.9 Depreciation 41.4 38.9 1.7 1.4 – – 43.1 40.3Change in life assurance fund contract liabilities 1,083.9 358.1 899.2 522.1 – – 1,983.1 880.2 5,560.1 5,000.7 2,019.2 1,486.1 – – 7,579.3 6,486.8 1,204.5 946.8 84.9 64.0 – – 1,289.4 1,010.8 Share of profit of associates 30.4 42.4 – – – – 30.4 42.4 Share of (loss)/profit of joint ventures (0.7) 1.4 – – – – (0.7) 1.4 1,234.2 990.6 84.9 64.0 – – 1,319.1 1,054.6less: Income tax 283.6 693.0 16.6 9.4 – – 300.2 702.4 950.6 297.6 68.3 54.6 – – 1,018.9 352.2Retained in life assurance fund 505.7 (24.0) 4.0 – – – 509.7 (24.0)Transferred to profit and loss statement 444.9 321.6 64.3 54.6 – – 509.2 376.2 950.6 297.6 68.3 54.6 – – 1,018.9 352.2

Segment assets 37,814.3 35,127.8 3,984.5 3,089.3 – – 41,798.8 38,217.1 Investments in associates and joint ventures 504.6 468.6 – – – – 504.6 468.6Totalassetsemployed 38,318.9 35,596.4 3,984.5 3,089.3 – – 42,303.4 38,685.7

Capital expenditure: – property, plant and equipment 82.5 115.8 – – – – 82.5 115.8 – investment properties 23.3 3.0 – – – – 23.3 3.0




30 enterprise risK Governance and manaGement obJectives and policies Governanceframework The underlying premise of the Enterprise Risk Management (“ERM”) Framework is that the Group exists to provide value for its

stakeholders and in growing stakeholder value, the Group will need to undertake risks. The challenge is to strike an optimal balance between building controls to protect against risks while not jeopardizing the Group’s resilience and competitiveness. Risk management is considered an integral part of managing the Group’s core business and the ERM Framework is designed to identify potential events that may affect the Group, and to manage risk within approved risk appetite and to provide reasonable assurance regarding the achievement of the Group’s objectives.

The risk management policies described are generally adopted by the Company and all its operating subsidiaries within the Group. However, certain deviations and modifications exist to comply with specific regulations of the respective country jurisdiction in which the subsidiary operates. Group Risk Management department spearheads the development and implementation of the ERM Framework for the Group.

The Risk Committee (“RiC”) was constituted to provide oversight on the risk management initiatives. At the group level, detailed risk management and oversight activities are undertaken by the following group management committees comprising the Group Chief Executive Officer and key Senior Management Executives of key operating subsidiaries:

– Group Management Team (“GMT”) – Group Asset-Liability Committee (“Group ALC”)

GMT is responsible for formulating the Group’s corporate vision, mission, core values, financial goals, business portfolio mix and risk profile. It also reviews and monitors the execution of the Group’s corporate strategy and oversees the development and deployment of resources for growth in markets which the Group operates. In addition, GMT is responsible for the oversight of operational risks faced by the Group, including the monitoring of related limits and policies such as underwriting limits and business continuity plans. The GMT is supported by the local Senior Management Team (“SMT”) and Product Development Committee (“PDC”) at the key operating subsidiaries. The SMTs oversee business and operational risks at the local level while the PDCs oversee the product development and launch process.

Group ALC is responsible for managing the Group’s balance sheet, including the insurance, market and credit risks faced by the Group. This includes the formulation of the group wide investment strategy, asset mix and group level risk policies such as the risk and capital management policy, asset-liability management policy and credit policy. Group ALC is supported by the local Asset-Liability Committee (“ALC”) at the key operating subsidiaries, which is in turn supported by sub-committees focusing on each asset class such as Credit Risk Committee (“CRC”) and Alternative Investment Committee.

Regulatoryframework Insurers are required to comply with the Insurance Act and Regulations, as applicable, including guidelines on investment limits. The

responsibility for the formulation, establishment and approval of the investment policy rests with the respective Board of Directors (“Board”). The Board exercises oversight on investments to safeguard the interests of policyholders and shareholders.

Riskandcapitalmanagementframework GEH’s capital management policy is to create shareholder value, deliver sustainable returns to shareholders, maintain a strong capital

position with optimum buffer to meet policyholders’ obligations and regulatory requirements and make strategic investments for business growth.

126


30 enterprise risK Governance and manaGement obJectives and policies (continued) Riskandcapitalmanagementframework(continued) The management of capital and risk is guided by the GEH Risk and Capital Management Framework, known as RK20.12, where

R stands for risk, K for capital, and 20 and 12 represent the 20 business and operational risks and 12 financial risks which the framework encompasses. RK 20.12 comprises two distinct components, namely the risk measurement model for financial risks and the control self assessment process for governing business and operational risks. The risk measurement model strives to achieve the dual objectives of consistency and measurements/parameters based on economic factors. The model defines risk using the Value-at-Risk measure calibrated to the 99.5th percentile confidence level over a one-year horizon. The control self assessment is a systematic process by which individual business unit analyses its own business processes methodically to identify the strengths and weaknesses of its risk control environment that could have a potential impact on its ability to achieve the Group’s business objectives. Together, the two components of RK20.12 provide a disciplined risk management framework that guides the Group in the achievement of its goals and objectives through active asset and liability management, as well as strategic and tactical risk and capital allocations.

Regulatory Capital The insurance subsidiaries of the Group are required to comply with capital ratios prescribed in the Insurance Regulations of the

jurisdiction in which the subsidiary operates.

In Singapore, the minimum capital requirement under the Risk-based Capital Framework regulated by the Monetary Authority of Singapore is 120% for each insurance entity. The capital requirements include capital residing in the participating fund which is not fungible. Regulated capital of the consolidated Singapore insurance subsidiaries as at 31 December 2007 comprised Available Capital of $7.45 billion (2006: $6.60 billion), Risk Capital of $2.92 billion (2006: $2.71 billion) and Capital Adequacy Ratio of 255% (2006: 246%).

In Malaysia and other subsidiaries, margins of solvency are prescribed. Assets are not marked to market under this regime. A proxy for measurement of financial soundness and strength is the ratio of fund surplus computed under margin of solvency rules over the long term actuarial liabilities whose valuations are prescribed by the insurance regulations. In Malaysia, the ratio on marked to market basis was 36% as at 31 December 2007 (2006: 32%) based on actuarial liability reserve of S$10.9 billion (2006: S$9.8 billion).

Dividend GEH’s dividend policy aims to provide shareholders with a predictable and sustainable dividend return, payable on a half-yearly basis.

The principal activities of the Group are the provision of financial advisory services coupled with insurance protection against risks such as mortality, morbidity (health, disability, critical illness, personal accident), and property and casualty. Risks inherent in the Group’s activities include but are not limited to the following:

InsuranceRisk Insurance risk comprises both actuarial and underwriting risks resulting from the pricing and acceptance of insurance contracts. The

risks arise when actual claims experience is different from the assumptions used in setting the prices for products and establishing the technical provisions and liabilities for claims. Sources of risks include policy lapses and policy claims such as mortality, morbidity and expenses.

The Group works closely with reinsurers to put in place a prudent underwriting policy to ensure appropriate risk classification and premium levels. The Group’s reinsurance management strategy and policy are reviewed annually by RiC and SMT. Retention limits for mortality risk per life are set up to $700,000 in Singapore and RM350,000 in Malaysia. Retention limits for critical illness per life are set up to $400,000 in Singapore and RM250,000 in Malaysia. Catastrophe reinsurance is procured to limit catastrophic losses. The Group’s exposure to group insurance business is not significant, thus there is no material concentration in insurance risk.

SMT reviews trends and claims experience for insurance risks along with the lapse and surrender experience to ensure that the policies, guidelines and limits put in place to manage the risks remain adequate and appropriate.


30 enterprise risK Governance and manaGement obJectives and policies (continued) InsuranceRisk(continued) A substantial portion of the Group’s life assurance funds is participating in nature. In the event of volatile investment climate and/or

unusual claims experience, the insurer has the option of revising the bonus and dividends payable to policyholders.

Stress Testing (“ST”) is performed annually by the Appointed Actuary (“AA”), for endorsement by the Board. The purpose of the ST is to test the solvency of the life fund under various scenarios according to prescribed statutory valuation basis, simulating drastic changes in major parameters such as new business volume, investment environment, expense patterns, mortality/morbidity patterns and lapse rates.

Gross Premium Valuation (“GPV”) is also carried out annually by the AA. GPV assesses the adequacy of the projected inflows of premiums and investment income vis a vis the long term benefits due to policyholders including but not limited to reversionary bonuses, terminal (or maturity) bonuses and guaranteed returns (for non-participating products/policy benefits) for the in-force block of business. GPV is submitted to the Board for approval and it provides the basis for the annual declaration of bonus to policyholders for vesting to the respective insurance policies and declaration of profits to shareholders through the Profit and Loss Statement.

For investment-linked funds, the risk exposure for the Group is limited only to the underwriting aspect as all investment risks are borne by the policyholders.

TABLE30(A): Exposure of insurance risks:concentration of insurance risk life assurance as at 31 december 2007 As at 31 December 2006in singapore dollars (millions) singapore malaysia Singapore Malaysia

Grosssumatrisk 92,722 72,208 89,950 65,723Reinsuranceceded 13,737 21,844 6,702 17,044Netsumatrisk 78,985 50,364 83,248 48,679

Sensitivity analyses produced are based on parameters set out as follows:(a) Scenario 1 – Mortality & Major Illness + 25% for all future years(b) Scenario 2 – Mortality & Major Illness – 25% for all future years(c) Scenario 3 – Health & Disability + 25% for all future years(d) Scenario 4 – Health & Disability – 25% for all future years(e) Scenario 5 – Lapse & Surrender + 25% for all future years(f) Scenario 6 – Lapse & Surrender – 25% for all future years(g) Scenario 7 – Expenses + 30% for all future years

TABLE30(B1): Profit After Tax sensitivity for the Singapore segment:Impact on 1-year’s profit after taxin singapore dollars (millions) scenario 1 scenario 2 scenario 3 scenario 4 scenario 5 scenario 6 scenario 7

Gross impact (4.2) (46.1) 109.9 (138.6) 25.9 (37.0) (20.6)Reinsurance ceded – – – – – – –Net impact (4.2) (46.1) 109.9 (138.6) 25.9 (37.0) (20.6)


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30 enterprise risK Governance and manaGement obJectives and policies (continued) InsuranceRisk(continued)

TABLE30(B2): Profit After Tax sensitivity for the Malaysia segment:Impact on 1-year’s profit after taxin singapore dollars (millions) scenario 1 scenario 2 scenario 3 scenario 4 scenario 5 scenario 6 scenario 7

Gross impact – – – – – – –Reinsurance ceded – – – – – – –Net impact – – – – – – –

The impact on profit and loss after tax above does not take into account of changes in other variables. Impact of interest rate on liability is tested concurrently with assets and impact of other variables is considered to be not material. Such assessment and the relative materiality of individual variables may change in the future.

The sensitivity testing on the Malaysia segment was performed by applying the sensitivities to the best estimate assumptions used in the Liability Adequacy Test. The resulting reserves from the Liabilities Adequacy Test were compared to the minimum policy liabilities prescribed by regulator and any shortfall would be charged to revenue accounts. The Liabilities Adequacy Test reserves derived under all scenarios are still lower than the minimum policy liability prescribed by the regulator; therefore should not have any impact on profits.

The effect of sensitivity analyses on reinsurance ceded for the Singapore and Malaysia segments are not material.

MarketandCreditRiskMarket risk arises when the market values of assets and liabilities do not move consistently as financial markets change. Changes in interest rates, foreign exchange rates, equity prices and alternative investment prices can impact present and future earnings of the insurance operations as well as shareholders’ equity.

The Group is exposed to market risk in the investments of the Shareholders’ Fund as well as in the mismatch risk between the asset and liability of the Insurance Funds. As for the funds managed by Lion Capital Management, investment risks are borne by investors and the Group does not assume any liability in the event of occurrence of loss or write-down in market valuation.

Group ALC and local ALCs actively manage market risk through setting of investment policy and asset allocation, approving portfolio construction and risk measurement methodologies, approving hedging and alternative risk transfer strategies. Investment limits monitoring is in place at various levels to ensure that all investment activities are aligned with the Group’s risk management principles and philosophies. Compliance with established financial risk limits forms an integral part of the risk governance and financial reporting framework. Management of market risks resulting from changes in interest rates and currency exchange rates; volatility in equity price; as well as other risks like credit and liquidity risks are briefly described as follows:

(a) Interestraterisk(includingassetliabilitymismatch). The Group is exposed to interest rate risk through (i) investments in fixed income instruments in both the Shareholders’ Funds as well as the Insurance Funds and (ii) policy liabilities in the Insurance Funds. Since the Shareholders’ Funds have exposure to investments in fixed income instruments but no exposure to insurance policy liabilities, it will incur an economic loss when interest rates rise. Given the long duration of policy liabilities and the uncertainty of the cash flows of the Insurance Funds, it is not possible to hold assets that will perfectly match the policy liabilities. This results in a net interest rate risk or asset liability mismatch risk which is managed and monitored by Group ALC and the local ALCs. The Insurance Funds will incur an economic loss when interest rates drop since the duration of policy liabilities is generally longer than the duration of the fixed income assets. With the use of the Long Term Risk Free Discount Rate (“LTRFDR”) formulated under the Singapore Regulations governed by the Monetary Authority of Singapore to discount liability cashflows with duration more than 15 years, the Singapore non-participating funds could have negative earnings impact when the LTRFDR decrease. The management of asset liability mismatch is guided by the Asset-Liability Management Framework.



30 enterprise risK Governance and manaGement obJectives and policies (continued)MarketandCreditRisk(continued)(a) Interestraterisk(includingassetliabilitymismatch)(continued)

TABLE30(C):The tables below show the interest rate exposure of the Group’s financial assets and liabilities.

non-interest in singapore dollars (millions) fixed rate floating rate sensitive totalAsat31December2007FINANCIALASSETSQuotedequity – – 8,379.1 8,379.1Unquotedequity – – 117.7 117.7Quotedgovernmentsecurities,loanstocksandbonds 12,710.8 1,447.3 – 14,158.1Otherunquotedinvestments,netofprovision forimpairment 6,767.5 612.5 – 7,380.0Collectiveinvestmentschemes – – 1,469.1 1,469.1Fairvaluethroughprofitandlossor revenuestatements–bonds 570.2 66.7 – 636.9Fairvaluethroughprofitandlossor revenuestatements–equity – – 1,712.5 1,712.5Fairvaluethroughprofitandlossor revenuestatements–collectiveinvestmentschemes – – 807.2 807.2Derivatives – – 128.2 128.2Embeddedderivatives – – 1,271.2 1,271.2Securedloans 560.8 736.1 – 1,296.9Unsecuredloans 1.1 70.3 – 71.4Policyloans 2,100.9 – – 2,100.9Reinsuranceassets – – 79.0 79.0Outstandingpremiums – – 168.7 168.7Otherdebtorsandinterfundbalances – – 1,365.8 1,365.8Cashandcashequivalents 2,768.3 – – 2,768.3 25,479.6 2,932.9 15,498.5 43,911.0

FINANCIALLIABILITIESOthercreditorsandinterfundbalances – – 1,443.9 1,443.9Reinsuranceliabilities – – 67.8 67.8Unexpiredriskreserve – – 59.7 59.7Policybenefits 1,645.2 – – 1,645.2Claimsadmittedorintimated – – 165.3 165.3Agents’retirementbenefits – – 183.6 183.6Generalinsurancefundcontractliabilities – – 101.2 101.2Lifeassurancefundcontractliabilities 10,797.7 2,811.7 19,232.5 32,841.9 12,442.9 2,811.7 21,254.0 36,508.6


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30 enterprise risK Governance and manaGement obJectives and policies (continued)MarketandCreditRisk(continued)(a) Interestraterisk(includingassetliabilitymismatch)(continued)

TABLE30(C): The tables below show the interest rate exposure of the Group’s financial assets and liabilities. (continued)

non-interest in singapore dollars (millions) fixed rate floating rate sensitive totalAs at 31 December 2006FINANCIAL ASSETSQuoted equity – – 7,925.5 7,925.5Unquoted equity, net of provision for impairment – – 122.4 122.4Quoted government securities, loan stocks and bonds 12,088.7 1,293.3 – 13,382.0Other unquoted investments 5,614.2 572.0 – 6,186.2Collective investment schemes – – 716.5 716.5Fair value through profit and loss or revenue statements – bonds 496.3 73.2 – 569.5Fair value through profit and loss or revenue statements – equity – – 1,525.8 1,525.8Fair value through profit and loss or revenue statements – collective investment schemes – – 309.5 309.5Derivatives – – 47.3 47.3Embedded derivatives – – 1,282.5 1,282.5Secured loans, net of provision for impairment 705.9 201.1 – 907.0Unsecured loans 1.4 25.5 – 26.9 Policy loans 2,044.0 – – 2,044.0Reinsurance assets – – 57.2 57.2Outstanding premiums – – 154.5 154.5Other debtors and interfund balances – – 878.4 878.4Cash and cash equivalents 3,823.9 – – 3,823.9 24,774.4 2,165.1 13,019.6 39,959.1FINANCIAL LIABILITIESOther creditors and interfund balances – – 996.9 996.9Reinsurance liabilities – – 50.4 50.4Unexpired risk reserve – – 55.6 55.6Policy benefits 1,474.5 – – 1,474.5Claims admitted or intimated – – 148.8 148.8Agents’ retirement benefits – – 168.4 168.4General insurance fund contract liabilities – – 83.7 83.7Life assurance fund contract liabilities 9,781.4 2,758.8 18,337.7 30,877.9 11,255.9 2,758.8 19,841.5 33,856.2

(b) Foreigncurrencyrisk.Hedging through currency forwards and swaps is typically used for the fixed income portfolio. Internal limits on foreign exchange exposure ranging from 15% to 35% are applied to investments in fixed income portfolios at a fund level. Currency risk derived from investments in foreign equities is generally not hedged.



30 enterprise risK Governance and manaGement obJectives and policies (continued)MarketandCreditRisk(continued)(b) Foreigncurrencyrisk(continued)

The Group is also exposed to foreign exchange movement on net investment in its foreign subsidiaries. The major item for the Group is in respect of its Malaysian subsidiary companies. The Insurance and Shareholders’ Funds in Malaysia are predominantly held in Malaysian Ringgit, as prescribed by Bank Negara, Malaysia. The Group does not hedge against this exposure.

TABLE30(D): The tables below show the foreign exchange position of the Group’s financial assets and liabilities by major currencies:

in singapore dollars (millions) sGd rm usd others totalAsat31December2007FINANCIALASSETSQuotedequity 2,461.4 3,318.1 646.3 1,953.3 8,379.1Unquotedequity 30.0 87.3 – 0.4 117.7Quotedgovernmentsecurities, loanstocksandbonds 7,843.2 3,831.6 1,616.4 866.9 14,158.1Otherunquotedinvestments, netofprovisionforimpairment 1,572.4 5,383.4 286.6 137.6 7,380.0Collectiveinvestmentschemes 316.2 16.5 861.4 275.0 1,469.1Fairvaluethroughprofitandlossor revenuestatements–bonds 74.7 86.2 237.5 238.5 636.9Fairvaluethroughprofitandlossor revenuestatements–equity 193.5 326.5 418.0 774.5 1,712.5Fairvaluethroughprofitandlossor revenuestatements–collective investmentschemes 648.9 15.4 76.3 66.6 807.2Derivatives 2,929.6 2.5 (2,131.0) (672.9) 128.2Embeddedderivatives 1,016.9 37.9 216.4 – 1,271.2Securedloans 875.2 419.6 – 2.1 1,296.9Unsecuredloans 71.2 – – 0.2 71.4Policyloans 859.6 1,239.8 – 1.5 2,100.9Reinsuranceassets 40.6 38.3 – 0.1 79.0Outstandingpremiums 79.1 89.5 – 0.1 168.7Otherdebtorsandinterfundbalances 970.1 395.5 – 0.2 1,365.8Cashandcashequivalents 1,589.5 853.3 204.8 120.7 2,768.3 21,572.1 16,141.4 2,432.7 3,764.8 43,911.0

FINANCIALLIABILITIESOthercreditorsandinterfundbalances 992.2 450.7 – 1.0 1,443.9Reinsuranceliabilities 33.3 34.3 – 0.2 67.8Unexpiredriskreserve 26.6 33.1 – – 59.7Policybenefits 791.9 853.2 – 0.1 1,645.2Claimsadmittedorintimated 45.1 119.2 – 1.0 165.3Agents’retirementbenefits 1.4 182.2 – – 183.6Generalinsurancefundcontractliabilities 38.9 62.3 – – 101.2Lifeassurancefundcontractliabilities 21,642.0 10,797.7 140.1 262.1 32,841.9 23,571.4 12,532.7 140.1 264.4 36,508.6


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30 enterprise risK Governance and manaGement obJectives and policies (continued)MarketandCreditRisk(continued)(b) Foreigncurrencyrisk(continued)

TABLE30(D): The tables below show the foreign exchange position of the Group’s financial assets and liabilities by major currencies: (continued)

in singapore dollars (millions) sGd rm usd others totalAs at 31 December 2006FINANCIAL ASSETSQuoted equity 2,061.9 3,077.6 612.1 2,173.9 7,925.5Unquoted equity, net of provision for impairment 33.7 88.3 – 0.4 122.4Quoted government securities, loan stocks and bonds 7,502.0 3,605.9 1,367.1 907.0 13,382.0Other unquoted investments 1,437.2 4,274.5 306.0 168.5 6,186.2Collective investment schemes 189.5 12.4 392.1 122.5 716.5Fair value through profit and loss or revenue statements – bonds 55.4 58.5 196.4 259.2 569.5Fair value through profit and loss or revenue statements – equity 162.3 227.0 349.5 787.0 1,525.8Fair value through profit and loss or revenue statements – collective investment schemes 217.1 4.9 72.1 15.4 309.5Derivatives 2,604.2 1.7 (1,780.1) (778.5) 47.3Embedded derivatives 940.0 13.8 258.7 70.0 1,282.5Secured loans, net of provision for impairment 447.0 460.0 – – 907.0Unsecured loans 26.8 0.1 – – 26.9Policy loans 875.5 1,168.4 – 0.1 2,044.0Reinsurance assets 23.3 33.9 – – 57.2Outstanding premiums 65.2 89.0 – 0.3 154.5Other debtors and interfund balances 554.7 321.3 – 2.4 878.4Cash and cash equivalents 3,112.7 499.9 125.7 85.6 3,823.9 20,308.5 13,937.2 1,899.6 3,813.8 39,959.1

FINANCIAL LIABILITIESOther creditors and interfund balances 738.8 257.6 – 0.5 996.9Reinsurance liabilities 26.1 24.1 – 0.2 50.4Unexpired risk reserve 23.8 31.8 – – 55.6Policy benefits 740.9 733.5 – 0.1 1,474.5Claims admitted or intimated 58.1 90.5 – 0.2 148.8Agents’ retirement benefits 1.4 167.0 – – 168.4General insurance fund contract liabilities 28.8 54.9 – – 83.7Life assurance fund contract liabilities 20,652.5 9,781.4 234.1 209.9 30,877.9 22,270.4 11,140.8 234.1 210.9 33,856.2




30 enterprise risK Governance and manaGement obJectives and policies (continued)MarketandCreditRisk(continued)(c)Equitypricerisk. Exposure to equity price risk exists in both assets and liabilities. Asset exposure exists through direct equity

investment, where the Group, through investments in both Shareholders’ Funds and Insurance Funds, bears all or most of the volatility in returns and investment performance risk. Equity price risk also exists in investment-linked products where the revenues of the insurance operations are linked to the value of the underlying equity funds since this has an impact on the level of fees earned. A robust monitoring process is in place to manage equity risk by activating appropriate hedging and risk transfer strategies to limit the downside risk at certain pre-determined levels. Limits are set for single security holdings as a percentage of equity holdings.

(d)Alternativeinvestmentrisk.The Group is exposed to alternative investment risk through investments in direct real estate that it owns in Singapore and Malaysia and through real estate, private equity, infrastructure and hedge funds for exposures in other countries. A monitoring process is in place to manage foreign exchange, country and manager concentration risks. This process and the acquisition or divestment of alternative investments are reviewed and approved by the appropriate committee based on an authority matrix approved by the Board of Directors.

(e) Commodityrisk. The Group does not have a direct or significant exposure to commodity risk.

(f) Cashflowandliquidityrisk. Cash flow and liquidity risk arises when a company is unable to meet its obligations at reasonable cost when required to do so. This typically happens when the investments in the portfolio are illiquid. Demands for funds can usually be met through ongoing normal operations, premiums received, sale of assets or borrowings. Unexpected demands for liquidity may be triggered by negative publicity, deterioration of the economy, reports of problems in other companies in the same or similar lines of business, unanticipated policy claims, or other unexpected cash demands from policyholders.

Expected liquidity demands are managed through a combination of treasury, investment and asset-liability management practices, which are monitored on an ongoing basis. Actual and projected cash inflows and outflows are monitored and a reasonable amount of assets are kept in liquid instruments at all times. The projected cash flows from the in-force insurance policy contract liabilities consist of renewal premiums, commissions, claims, maturities and surrenders. Renewal premiums, commissions, claims and maturities are generally stable and predictable. Surrenders can be more uncertain although it has been quite stable over the past several years.

Unexpected liquidity demands are managed through a combination of product design, diversification limits, investment strategies and systematic monitoring. The existence of surrender penalty in insurance contracts also protects the Group from losses due to unexpected surrender trends as well as reduces the sensitivity of surrenders to changes in interest rates.

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30 enterprise risK Governance and manaGement obJectives and policies (continued)MarketandCreditRisk(continued)(f) Cashflowandliquidityrisk(continued)

TABLE30(E):The following tables show the maturity profile of the Group’s liabilities and the expected recovery or settlement of assets:

in singapore dollars (millions) < 1 year 1 – 5 years > 5 years unit-linked totalAsat31December2007LIABILITIESIncometax 259.3 – – – 259.3Othercreditorsandinterfundbalances 971.8 75.5 396.6 – 1,443.9Reinsuranceliabilities 27.7 35.4 4.7 – 67.8Unexpiredriskreserve 53.7 6.0 – – 59.7Policybenefits 1,626.9 14.6 3.7 – 1,645.2Claimsadmittedorintimated 162.9 2.1 0.3 – 165.3Agents’retirementbenefits 33.9 148.3 1.4 – 183.6Deferredtax – 284.0 735.1 – 1,019.1Generalinsurancefundcontractliabilities 91.1 10.1 – – 101.2Lifeassurancefundcontractliabilities 1,788.2 5,145.8 22,150.2 3,757.7 32,841.9 5,015.5 5,721.8 23,292.0 3,757.7 37,787.0

in singapore dollars (millions) current* non-current unit-linked totalAsat31December2007ASSETSCashandcashequivalents 2,500.2 – 268.1 2,768.3Otherdebtorsandinterfundbalances 892.6 438.4 34.8 1,365.8Outstandingpremiums 168.1 0.6 – 168.7Reinsuranceassets 53.0 26.0 – 79.0Loans 967.4 2,501.8 – 3,469.2Investments 12,261.1 20,189.7 3,609.2 36,060.0Associatesandjointventures – 581.9 – 581.9Goodwill – 25.5 – 25.5Property,plantandequipment – 818.7 – 818.7Investmentproperties – 1,178.3 – 1,178.3 16,842.4 25,760.9 3,912.1 46,515.4

* Expected recovery or settlement within 12 months from the balance sheet date.


30 enterprise risK Governance and manaGement obJectives and policies (continued)MarketandCreditRisk(continued)(f) Cashflowandliquidityrisk (continued)

TABLE30(E):The following tables show the maturity profile of the Group’s liabilities and the expected recovery or settlement of assets (continued):

in singapore dollars (millions) < 1 year 1 – 5 years > 5 years unit-linked totalAs at 31 December 2006LIABILITIESIncome tax 219.1 – – – 219.1Other creditors and interfund balances 738.1 259.9 (1.1) – 996.9Reinsurance liabilities 24.9 23.0 2.5 – 50.4Unexpired risk reserve 50.0 5.6 – – 55.6Policy benefits 378.0 1,094.9 1.6 – 1,474.5Claims admitted or intimated 57.5 91.0 0.3 – 148.8Agents’ retirement benefits – 167.0 1.4 – 168.4Deferred tax – 222.0 612.2 – 834.2General insurance fund contract liabilities 75.3 8.4 – – 83.7Life assurance fund contract liabilities 1,883.8 5,336.2 20,797.6 2,860.3 30,877.9 3,426.7 7,208.0 21,414.5 2,860.3 34,909.5

in singapore dollars (millions) current* non-current unit-linked totalAs at 31 December 2006ASSETSCash and cash equivalents 3,675.8 – 148.1 3,823.9Other debtors and interfund balances 810.5 26.8 41.1 878.4Outstanding premiums 154.3 0.2 – 154.5Reinsurance assets 32.5 24.7 – 57.2Loans 2,111.8 866.1 – 2,977.9Investments 9,902.7 19,362.8 2,801.7 32,067.2Associates and joint ventures – 587.5 – 587.5Goodwill – 25.5 – 25.5Property, plant and equipment – 686.2 – 686.2Investment properties – 767.6 – 767.6 16,687.6 22,347.4 2,990.9 42,025.9

* Expected recovery or settlement within 12 months from the balance sheet date.


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30 enterprise risK Governance and manaGement obJectives and policies (continued)MarketandCreditRisk(continued)(f) Cashflowandliquidityrisk (continued)

Derivative contracts are generally used by the Group for hedging interest rate, currency and equity risk exposures. These contracts are marked to market at the end of each reporting month. Derivatives at year-end are:

in singapore dollars (millions) notional principal Held as assets Held as liabilitiesAsat31December2007Foreignexchange: Forwards 2,859.6 26.1 (0.2) Currencyswaps 1,019.7 111.9 –Interestrates: Swaps 1,967.8 6.3 (20.4) Swaptions 7.4 – (0.1) Options 2.2 0.4 (0.1) Exchangetradedfutures 1,091.3 2.6 (1.7)Equity: Futures 141.5 1.0 (0.1) Options 24.7 2.5 – 7,114.2 150.8 (22.6)

As at 31 December 2006Foreign exchange: Forwards 2,963.1 12.9 (8.8) Currency swaps 800.2 43.2 –Interest rates: Swaps 584.3 2.0 (3.2) Swaptions 2.8 – (0.2) Exchange traded futures 1,405.1 0.4 (1.7)Equity: Futures 4.8 – –

Options 24.7 2.7 – 5,785.0 61.2 (13.9)

(g)Creditrisk.The Group is exposed to credit risk through (i) investments in cash and bonds, (ii) corporate lending activities and (iii) exposure to counterparty’s credit in derivatives transactions and reinsurance contracts. For all three types of exposures, financial loss may materialise as a result of a credit default by the borrower or counterparty. For investments in bonds, financial loss may also materialise as a result of the widening of credit spread or a downgrade of credit rating.

The task of evaluating and monitoring credit risk is undertaken by the local CRCs which in turn report to the local ALCs. Group wide credit risk is managed by Group ALC. The Group has internal limits by issuer or counterparty and by investment grades. These limits are actively monitored to manage the credit and concentration risk. These limits are reviewed on a regular basis. The creditworthiness of reinsurers is assessed on an annual basis by reviewing their financial strength through published credit ratings and other publicly available financial information.

The loans in the Group’s portfolio are generally secured by collateral, with a maximum loan to value of 70% predominantly. The amount and type of collateral required depend on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of the types of collateral and the valuation parameters. The fair value of collaterals, held by the Group as lender, for which it is entitled to sell or pledge in the event of default is as follows:



30 enterprise risK Governance and manaGement obJectives and policies (continued)MarketandCreditRisk(continued)

(g) Creditrisk (continued)

in singapore dollars (millions) type of collaterals carrying amount of loans fair value of collateralsAsat31December2007Securedloans Properties 1,044.1 2,587.8 Shares 215.1 520.2 Bankers’guarantees 33.7 33.7 Others 4.0 7.5Policyloans Cashvalueofpolicies 2,100.9 4,220.9 3,397.8 7,370.1

As at 31 December 2006Secured loans, net of provision for impairment Properties 800.8 2,069.8 Shares 23.0 76.9 Bankers’ guarantees 81.6 86.7 Others 1.6 1.6Policy loans Cash value of policies 2,044.0 4,069.3 2,951.0 6,304.3

Investments lent and collaterals received under securities lending arrangements amounted to $529.0 million and $546.9 million respectively as at 31 December 2007 (2006: $660.5 million and $682.8 million respectively).

As at the balance sheet date, investments of $15.4 million (2006: nil) were placed as collateral for currency hedging purposes.

The tables below show the maximum exposure to credit risk for the components of the balance sheet. The maximum exposure is shown gross, before the effect of mitigation through the use of master netting or collateral agreements and the use of credit derivatives. For derivatives, the fair value shown on the balance sheet represents the current risk exposure but not the maximum risk exposure that could arise in the future as a result of the change in value. The tables also provide information regarding the credit risk exposure of the Group by classifying assets according to the Group’s credit ratings of counterparties.

138




neither past-due nor impaired investment non investment Grade* Grade* not subject past duein singapore dollars (millions) (bbb to aaa) (c to bb) not rated unit-linked to credit risk or impaired totalAsat31December2007Quotedequity – – – – 8,379.1 – 8,379.1Unquotedequity – – – – 117.7 – 117.7Quotedgovernment securities,loanstocks andbonds 13,158.8 150.9 848.4 – – – 14,158.1Otherunquotedinvestments, netofprovisionforimpairment 6,455.8 13.2 911.0 – – – 7,380.0Collectiveinvestmentschemes – – – – 1,469.1 – 1,469.1Fairvaluethroughprofitand lossorrevenuestatements –bonds 0.4 0.1 17.8 618.6 – – 636.9Fairvaluethroughprofitand lossorrevenuestatements –equity – – – 1,712.5 – – 1,712.5Fairvaluethroughprofitand lossorrevenuestatements –collectiveinvestmentschemes – – – 807.2 – – 807.2Derivatives – – 129.6 (1.4) – – 128.2EmbeddedDerivatives 466.0 21.8 311.1 472.3 – – 1,271.2Securedloans – – 1,296.9 – – – 1,296.9Unsecuredloans – – 71.4 – – – 71.4Policyloans – – 2,100.9 – – – 2,100.9Reinsuranceassets – – 38.9 – – 40.1 79.0Outstandingpremiums – – 90.2 – – 78.5 168.7Otherdebtorsand interfundbalances – – 1,231.2 34.8 – 99.8 1,365.8Cashandcashequivalents 2,489.1 3.4 7.7 268.1 – – 2,768.3 22,570.1 189.4 7,055.1 3,912.1 9,965.9 218.4 43,911.0

* Based on public ratings assigned by external rating agencies including S&P, Moody’s, RAM and MARC.




neither past-due nor impaired investment non investment Grade* Grade* not subject past due in singapore dollars (millions) (bbb to aaa) (c to bb) not rated unit-linked to credit risk or impaired totalAs at 31 December 2006Quoted equity – – – – 7,925.5 – 7,925.5Unquoted equity, net of provision for impairment – – – – 122.4 – 122.4Quoted government securities, loan stocks and bonds 12,038.4 133.6 1,210.0 – – – 13,382.0Other unquoted investments 4,920.2 10.7 1,255.3 – – – 6,186.2Collective investment schemes – – – – 716.5 – 716.5Fair value through profit and loss or revenue statements – bonds – – 12.8 556.7 – – 569.5Fair value through profit and loss or revenue statements – equity – – – 1,525.8 – – 1,525.8Fair value through profit and loss or revenue statements – collective investment schemes – – – 309.5 – – 309.5Derivatives – – 46.9 0.4 – – 47.3Embedded Derivatives 421.3 17.9 434.0 409.3 – – 1,282.5 Secured loans, net of provision for impairment – – 905.7 – – 1.3 907.0Unsecured loans – – 26.9 – – – 26.9Policy loans – – 2,044.0 – – – 2,044.0Reinsurance assets – – 34.0 – – 23.2 57.2Outstanding premiums – – 95.6 – – 58.9 154.5Other debtors and interfund balances – – 835.2 41.1 – 2.1 878.4Cash and cash equivalents 3,625.5 4.1 46.2 148.1 – – 3,823.9 21,005.4 166.3 6,946.6 2,990.9 8,764.4 85.5 39,959.1

* Based on public ratings assigned by external rating agencies including S&P, Moody’s, RAM and MARC.


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(g) Creditrisk (continued)Age analysis of financial assets past-due:

Asat31December2007 past due but not impaired 6 mths to past duein singapore dollars (millions) < 6 mths 12 mths > 12 mths total and impaired total

Reinsuranceassets 14.1 – 26.0 40.1 – 40.1Outstandingpremiums 77.2 0.7 0.6 78.5 – 78.5Otherdebtorsandinterfundbalances 39.4 59.3 1.1 99.8 – 99.8 130.7 60.0 27.7 218.4 – 218.4

As at 31 December 2006 past due but not impaired 6 mths to past duein singapore dollars (millions) < 6 mths 12 mths > 12 mths total and impaired total

Secured loans, net of provision for impairment – – – – 1.3 1.3Reinsurance assets 0.3 – 22.9 23.2 – 23.2Outstanding premiums 57.1 1.7 0.1 58.9 – 58.9Other debtors and interfund balances (0.4) 1.9 0.6 2.1 – 2.1 57.0 3.6 23.6 84.2 1.3 85.5

(h)Concentrationrisk. An important element of managing both market and credit risks is to actively manage concentration to specific issuers, counterparties, industry sectors, countries and currencies. Both internal and regulatory limits are put in place and monitored to manage concentration risk. These limits are reviewed on a regular basis by the respective management committees. The Group’s exposures are within the concentration limits set by the respective local regulators.

The analysis below is performed for reasonably possible movements in key variables with all other variables constant. The correlation of variables will have a significant effect in determining the ultimate fair value and/or amortised cost of financial assets, but to demonstrate the impact due to changes in variables, variables have to be changed on an individual basis.

The impact on net profit after tax represents the effect caused by changes in fair value of financial assets whose fair values are recorded in the Profit and Loss Statement, and changes in valuation of insurance contract liabilities. The impact on equity represents the impact on net profit after tax and the effect on changes in fair value of financial assets held in Shareholders’ Funds.




impact on profit after tax impact on equityin singapore dollars (millions) 31 december 2007 31 December 2006 31 december 2007 31 December 2006

Change in variables:Equity+20% 24.8 31.4 157.4 107.6–20% (24.8) (31.4) (157.4) (107.6)

Alternative Investments1

+10% 8.7 4.6 20.8 15.1–10% (8.7) (4.6) (20.8) (15.1)

Foreign Currency+5% 15.4 9.7 31.6 22.1–5% (15.4) (9.7) (31.6) (22.1)

Interest RateYield curve + 100 bps, LTRFDR2 + 10 bps (63.5) (32.0) (93.6) (52.2)Yield curve – 100 bps, LTRFDR2 – 10 bps 60.6 28.8 90.8 48.9

1 Alternative Investments comprise investments in private equity, real estate and hedge funds. 2 LTRFDR refers to Long Term Risk Free Discount Rate formulated under the Singapore regulations governed by the Monetary Authority of

Singapore.

BusinessandOperationalRiskBased on the Group’s ERM Framework, Business and Operational Risks have been grouped into five main categories:(a) Businessriskinclude failure of business strategy, failure of product design, development and pricing strategy, failure of marketing

and communication strategy, and market misconduct.

(b)Operational risk – external events include changes in regulatory requirements, liability and legal disputes, fraud, business interruption, failure of outsourced service providers and vendors, and damage to property and environment.

(c) Operationalrisk–processes include failure of control processes and procedures, expense and cost overrun, and project failure.

(d)Operationalrisk–systems include failure of systems availability, capacity, utilisation and IT infrastructure and failure of systems security.

(e) Operationalrisk–people include lagging customer service quality, lack of core competencies, lack of succession of key positions and fiduciary risk.

The day-to-day management of business and operational risk is through the maintenance of a comprehensive system of internal controls, supported by an infrastructure of systems and procedures to monitor processes and transactions. GMT reviews business and operational issues on a group basis at its monthly meetings while local level issues are managed and monitored by the local SMTs. The Internal Audit team reviews the systems of internal controls to assess their ongoing relevance and effectiveness, and reports at least quarterly to the Audit Committee.


142

31 fair value of financial assets and liabilitiesThe carrying amounts of the Group’s and the Company’s financial assets and liabilities approximate their fair value, except as disclosed below:


Unquoted equity in corporations, at cost 20 117.7 124.2 – –

It is not practicable to determine the fair values of the above unquoted equity investments in corporations because of the lack of unquoted market prices and the assumptions used in valuation models to value these investments cannot be reasonably determined. However, the cash flows from these investments are expected to be in excess of their carrying amounts.

32 dividends Group & companyin singapore dollars (millions) 2007 2006

Final dividend for previous year of 20 cents per ordinary share, net of Singapore income tax at 18% (2006: 20 cents per ordinary share, net of Singapore income tax at 20%) 77.6 75.7

Special final dividend for previous year of 28 cents per ordinary share, net of Singapore income tax at 18% (2006: 18 cents per ordinary share, net of Singapore income tax at 20%) 108.7 68.2

First interim dividend of 0.655 cents per ordinary share, net of Singapore income tax at 18% and 21.345 cents per ordinary share, net of Malaysia income tax at 27% (2006: 12 cents per ordinary share, net of Singapore income tax at 20%) 76.3 45.4 262.6 189.3 The Directors proposed that a final tax exempt (one-tier) dividend of 16 cents and a special final tax exempt (one-tier) dividend of 26 cents, totalling 42 cents per ordinary share amounting to $198.8 million (2006: $186.3 million) be paid in respect of the financial year ended 31 December 2007. These have not been recognised as distributions to shareholders.

There are no income tax consequences attached to the dividend to the shareholders proposed by the Company but not recognised as a liability in the financial statements.

33 autHorisation of financial statements At the Board of Directors’ Meeting held on 19 February 2008, the Board authorised these financial statements for issue and that two

Directors of the Board, Mr Michael Wong Pakshong and Mr Tan Beng Lee, sign the Directors’ Report on behalf of the Board.



34 comparative fiGures Certain comparative figures have been reclassified to be consistent with the presentation requirements of FRS and changes in

accounting policies. Group – 2006 in singapore dollars (millions) Note life assurance fund as previously increase/ as restated reported (decrease)

(a) BalanceSheet Deferred tax 9 781.8 293.0 488.8 Life assurance fund 17 35,010.2 35,499.0 (488.8) Goodwill and other intangible assets 24 6.8 88.9 (82.1)

Property, plant and equipment 25 683.3 601.2 82.1

(b) LifeAssuranceRevenueStatement

Change in life assurance fund contract liabilities 880.2 1,492.4 (612.2) Income tax 702.4 85.0 617.4

Retained in life assurance fund 24.0 18.8 5.2


144

list of maJor properties

sinGapore properties – 100% Held by tHe Great eastern life assurance company limited: location tenure site area (sq m) Gross floor area (sq m) purpose Great Eastern Centre 99 years leasehold 6,600 21,515 Commercial – Offices1 Pickering Street (Commenced date: (strata area) 1 September 1997)

Orchard Emerald Freehold 1,444 6,034 Commercial – Retail 202 & 218 Orchard Road & Offices Great Eastern @ Changi Freehold 3,503 10,891 Commercial – Offices200 Changi Road Great Eastern House 999 years leasehold 730 3,334 Commercial – Offices49 Beach Road (Expiry date: 29 January 2834) Holland GEMS Freehold 8,685 13,895 Residential – 64-unit 1, 3 & 5 Taman Nakhoda condominium Gallop Court Freehold 8,225 5,565 Residential – 25-unit 6, 6A, 6B Gallop Road condominium Gallop Gardens Freehold 12,636 4,805 Residential – 8-unit- 1, 1A, 1B, 1C, 3, 3A, 3B, 3C Good Class BungalowsTyersall Road Newton GEMS 50, 52 & 54 Newton Road Freehold 2,809} 28,819 Residential – 190-unitLot 660 TS 28, Newton Road } condominiumand } Lot 56 TS 28, Lincoln Road 999 years leasehold 6,945} (Expiry date: 12 February 2884) 3 Pickering Street 99 years leasehold 7,086 19,220 Commercial – Retail & (strata area) Offices 65-unit shop houses


malaysia properties - 100% Held by Great eastern life assurance (malaysia) berHad: location tenure site area (sq m) Gross floor area (sq m) purpose Menara Great Eastern Life Freehold 25,600 149,464 Commercial – Retail Lots 102 & 103 and OfficesKuala Lumpur, Federal Territory 40, 44, 50 & 68 Jln Ampang Freehold 2,880 10,673 Commercial – OfficesKuala Lumpur, Federal Territory Seri Hening Residence Freehold 21,484 54,761 Residential – 28, Jln Ampang Hilir, K.Lumpur Condominiums Houses at Port Dickson Freehold 30,899 3,871 Residential– Suara Ombak, Shell Garden andShell Drive, Negeri Sembilan Wisma Great Eastern Life 99 years leasehold 718 8,853 Commercial – OfficesJalan Gaya, Kota Kinabalu, Sabah (Expiry date: 31 December 2093) 25, Lebuh Light, Penang Freehold 4,842 15,050 Commercial – Offices No. 103, 105, 107 & 109 Freehold 980 5,821 Commercial – 5-storey Jalan Yam Tuan, Seremban Retail & OfficesNegeri Sembilan Lot Q169 – Q173 Plz Mahkota 99 years leasehold 531 2,127 Commercial – 4-storey Melaka (Expiry date: 8 July 2101) Retail & Offices 25 Jalan Dato Lim Hoe Lek 99 years leasehold 507 1,525 Commercial – 3-storey Kuantan (Expiry date: Shop Office 2 September 2093) Menara Weld/The Weld Freehold 6,404 75,126 Commercial – 30- 76 Jln Raja Chulan, Kuala Lumpur storey building with a 4 levels basement, 5 levels of shopping & 26 floors of office. 1144, Jalan Lim Poon, Freehold 3,316 – Residential – Vacant Batu Pahat, Johor Land 113, Jalan Tun Haji Openg, 837 years leasehold 3,359 335 Residential – 1 storey Kuching, Sarawak (Expiry date: detached house 31 December 2774)

list of maJor properties

146

sHareHoldinG statisticsasat29February2008

Total Number of Issued Shares : 473,319,069 sharesClass of Shares : Ordinary sharesVoting Rights : The Articles of Association provide for: (a) on a show of hands: 1 vote (b) on a poll: 1 vote for each ordinary share held

distribution of sHareHoldinGs

no. ofsize of Holdings shareholders % no. of shares %

1 – 999 40 5.17 8,656 0.001,000 – 10,000 574 74.26 1,582,529 0.3310,001 – 1,000,000 146 18.89 13,606,202 2.881,000,001 and above 13 1.68 458,121,682 96.79Total 773 100.00 473,319,069 100.00

tWenty larGest sHareHolders (accordinG to tHe reGister of members)

shareholders (members) no. of shares %

1 Oversea-Chinese Bank Nominees Private Limited 401,892,489 84.912 DBS Nominees (Private) Limited 17,207,223 3.643 HSBC (Singapore) Nominees Private Limited 10,626,400 2.244 Eastern Realty Company Limited 9,425,619 1.995 Wong Hong Yen 3,086,668 0.656 Wong Hong Sun 3,085,500 0.65 7 Kuchai Development Berhad 3,032,000 0.648 Citibank Nominees Singapore Private Limited 2,308,300 0.499 DBSN Services Private Limited 2,020,041 0.4310 Sungei Bagan Rubber Company (Malaya) Berhad 1,733,120 0.3711 United Overseas Bank Nominees (Private) Limited 1,459,522 0.3112 Shaw Vee Meng 1,208,000 0.2513 Shaw Vee Foong 1,036,800 0.2214 Lee Joo Har 829,508 0.1815 Lee Hak Heng 728,150 0.1516 Asia Chemical Corporation Sendirian Berhad 658,677 0.1417 The Bank Of East Asia (Nominees) Private Limited 500,000 0.1118 Yeap Holdings (Private) Limited 487,238 0.1019 The Estate of Alan Loke (Deceased) 455,094 0.1020 Merrill Lynch (Singapore) Private Limited 440,720 0.09 Total 462,221,069 97.66


sHareHoldinG statisticsasat29February2008

substantial sHareHolder (accordinG to tHe reGister of substantial sHareHolders as at 29 february 2008)

direct interest deemed interest total interest percentage no. of shares no. of shares no. of shares of issued shares

Oversea-Chinese Banking Corporation Limited (“OCBC Bank”) 401,243,889(1) 10,059,219(2) 411,303,108 86.90

Notes:(1) Shares registered in the name of Oversea-Chinese Bank Nominees Private Limited(2) OCBC Bank is deemed to have an interest in 10,059,219 shares held by the following:

name of company no. of shares

Eastern Realty Company Limited 9,425,619

Singapore Building Corporation Limited

(shares registered in the name of Oversea-Chinese Bank Nominees Private Limited) 633,600

Total deemed interest 10,059,219

Based on information available to the Company as at 29 February 2008, approximately 13% of the issued ordinary shares of the Company is held by the public, and therefore Rule 723 of the Listing Manual of Singapore Exchange Securities Trading Limited has been complied with.

148

manaGement team

SInGAPOrEGreatEasternHoldingsLtd

TheGreatEasternLifeAssuranceCoLtd

TanBengLeeDirector & Group CEO

HauwSooHoon(Mrs)Senior Managing Director, Established Markets

ChiangBoonKongManaging Director, Strategic Resource Management

LohSookMee(Mrs)Managing Director, Finance and Corporate Affairs

TanChingGueiManaging Director, Strategy & Investment Management

TanHakLehManaging Director, Singapore

TanHockLyeManaging Director, Operations

KhooKahSiangAppointed Actuary

ElizabethTeoh(Mrs)Group Company Secretary

NgKohWeeHead, Information Technology

Boon-GekMudeliar(Mrs)Head, Corporate Communications

RonnieTanHead, Group Risk Management

DrLeowYungKheeHead, Group Insurance

OngLeanWanHead, Regional Business Development (China)

FabianNgHead, Regional Business Development (Indonesia and Vietnam)

PatrickChenHead, Operations (Business)

BenTanHead, Customer Acquisition

JoachimTohHead, Investment Management

TheOverseasAssuranceCorporationLtd

TanHakLehManaging Director, Singapore

DrLeowYungKheeHead, General Insurance

HoLeeYen(Ms)Head, Life Bancassurance

AlphaFinancialAdvisersPteLtd

ArthurLimChief Executive Officer

LionCapitalManagementLtd

DanielChanChief Executive Officer & Chief Investment Officer

JanetLiem(Mrs)Head, Asian Equities

KonCheeKeatHead, Global Fixed Income & Structured Credits

JamesTanHead, Operations & Information Technology

JenniferWongPakshong(Ms)Head, Legal & Regulatory Affairs

TohLockLan(Mrs)Head, Business Development – Retail

PatriciaKhoo(Mrs)Acting Head, Business Development – Institutional


manaGement team

MAlAySIAGreatEasternCapital(Malaysia)SdnBhd

AlexFoongChief Executive Officer

GreatEasternLifeAssurance(Malaysia)Bhd

KohYawHuiChief Executive Officer

BruceLeeHead, Finance & Corporate Affairs

ChanChoongThoChief Investment Officer

LokeKahMengHead, Customer Management

CheongSooChing(Ms)Head, Risk Management & Strategic Planning

LeePooiHorHead, Information Technology

MargaretFong(Ms)Head, Operations

MichelleTan(Ms)Head, Group Audit

NancyLim(Mrs)Head, Human Capital

SophiaCh’ng(Ms)Appointed Actuary

YongCheeKeongHead, Customer Acquisition (Bancassurance)

LizaHanimZainalAbidin(Ms)Company Secretary

OverseasAssuranceCorporation(Malaysia)Bhd

NgKokKhengChief Executive Officer

LiewKimLoyExecutive Vice President, Operations

CheamTatHoiExecutive Vice President, Finance & Administration

ChInAGreatEasternLifeAssurance(China)CoLtd

ZhangXiaoDongChief Executive Officer

WangBoQingExecutive Vice President

WinsonSiuChief Financial Officer & Chief Actuary

LisaHuYing(Ms)General Manager, Finance

LiDingZhiGeneral Manager, Group Insurance

BeijingRepresentativeOffice

HuangTaoyuanChief Representative

IndOnESIAPTGreatEasternLifeIndonesia

TanJiakHiangPresident Director

VIETnAMFrancisTanChief RepresentativeHanoi&HoChiMinhCityRepresentativeOffices

DavidLohChief Agency OfficerGreatEasternLife(Vietnam)CoLtd

brunEIGreatEasternLifeAssuranceCoLtd

HelenYeo(Mrs)Vice President

150

Group netWorK

SInGAPOrEGreatEasternHoldingsLtd

TheGreatEasternLifeAssuranceCoLtd

TheOverseasAssuranceCorporationLtd1 Pickering Street #13-01Great Eastern CentreSingapore 048659Tel: (65) 6248 2000Fax: (65) 6532 2214Website: www.lifeisgreat.com.sgE-mail: [email protected]

AgentServiceCentresGreat Eastern @ Changi200 Changi Road #01-03Singapore 419734

Great Eastern House49 Beach Road #01-01Singapore 189685

brunEIGreatEasternLifeAssuranceCoLtdSuite 1, 2nd Floor Badiah ComplexJalan TutongBandar Seri Begawan, BA 2111Negara Brunei DarussalamTel: (673) (2) 24 3792Fax: (673) (2) 22 5724E-mail: [email protected]

ChInAGreatEasternLifeAssurance(China)CoLtd50th Floor Chongqing World Trade Centre 131 Zourong RoadYuzhong District Chongqing 400010People’s Republic of ChinaTel: (86) (23) 6381 6666Fax: (86) (23) 6388 5566Website: www.lifeisgreat.com.cn E-mail: [email protected]

BeijingRepresentativeOfficeNo. 26 North Yue Tan Street,Heng Hua International Business Centre 710A,Beijing Xi Cheng District, Beijing 100045People’s Republic of China Tel: (86) (10) 5856 5501Fax: (86) (10) 5856 5502

VIETnAMGreatEasternLifeAssuranceCoLtd–HanoiRepresentativeOfficeUnit 1, Level 4 International Centre17 Ngo Quyen StreetHoan Kiem DistrictHanoi, VietnamTel: (84) (4) 9 363 900Fax: (84) (4) 9 363 902Website: www.lifeisgreat.com.vnE-mail: [email protected]

GreatEasternLifeAssuranceCoLtd–HoChiMinhCityRepresentativeOfficeMelinh Point Tower02 Ngo Duc Ke Street, Level 6, Suite 612, District 1Ho Chi Minh City, VietnamTel: (84) (8) 5 202 762Fax: (84) (8) 5 202 800Website: www.lifeisgreat.com.vnE-mail: [email protected]


MAlAySIAGreatEasternLifeAssurance(Malaysia)BhdMenara Great Eastern303 Jalan Ampang50450 Kuala LumpurMalaysiaTel: (60) (3) 4259 8888Fax: (60) (3) 4259 8000Website: www.lifeisgreat.com.myE-mail: [email protected]

BranchOfficesAlor Star66 & 68 Jalan Teluk Wan Jah05200 Alor Star, KedahMalaysiaTel: (60) (4) 731 9877Fax: (60) (4) 731 9878

Batu Pahat109, Jalan Rahmat83000 Batu Pahat, JohorMalaysiaTel: (60) (7) 432 5562Fax: (60) (7) 432 5560

Bintulu No. 313, Lot 3956, Phase 4,Bintulu Parkcity Commerce Square,Jalan Tun Ahmad Zaidi/Jalan Tanjung Batu,97000 Bintulu, SarawakMalaysiaTel: (60) (86) 336 676Fax: (60) (86) 332 601

Ipoh23 & 25 Persiaran Greentown 5Pusat Perdagangan Greentown30450 Ipoh, PerakMalaysiaTel: (60) (5) 254 2027Fax: (60) (5) 255 5578

Johor Bahru10th Floor, Menara Pelangi,Jalan Kuning, Taman Pelangi80400 Johor Bahru, JohorMalaysiaTel: (60) (7) 334 1022Fax: (60) (7) 334 9122

KlangNo. 8 & 10 Jalan Tiara 2ABandar Baru Klang41150 Klang, SelangorMalaysiaTel: (60) (3) 3343 6688Fax: (60) (3) 3341 3398

KluangNo. 22 & 24Jalan Md Lazim Saim86000 Kluang, JohorMalaysiaTel: (60) (7) 772 3529Fax: (60) (7) 772 3449

Kota BharuNo. S25 / 5252 - T&UJalan Sultan Yahya Petra15200 Kota Bharu, KelantanMalaysiaTel: (60) (9) 748 2332Fax: (60) (9) 744 9701

Kota KinabaluWisma Great Eastern Level 4 & 5No. 65 Jalan GayaP.O. Box 1088888809 Kota Kinabalu, SabahMalaysiaTel: (60) (88) 252 033Fax: (60) (88) 210 437

Kuala Terengganu 2nd Floor, 6FBangunan Persatuan Hin AnnJalan Air Jernih20300 Kuala TerengganuMalaysiaTel: (60) (9) 622 4959Fax: (60) (9) 626 5195

KuantanA25 Jalan Dato Lim Hoe Lek25000 Kuantan, PahangMalaysiaTel: (60) (9) 515 7666Fax: (60) (9) 515 8477

KuchingHouse No. 51, Lot 435, Section 54,KTLD, Travilion Commercial Centre,Jalan Padungan 93100 Kuching, SarawakMalaysiaTel: (60) (82) 412 736Fax: (60) (82) 426 684

Labuan U0370, 1st FloorJalan Anggerik87007 Wilayah Persekutuan LabuanMalaysiaTel: (60) (87) 410 089Fax: (60) (87) 410 097

Lahad Datu Ground & 1st FloorMDLD 0819, Jalan Teratai91100 Lahad Datu, SabahMalaysiaTel: (60) (89) 884 136Fax: (60) (89) 884 226

Group netWorK

152

Group netWorK

Limbang Lot 1406, 1st FloorJalan Buangsiol98700 Limbang, SarawakMalaysiaTel: (60) (85) 214 058Fax: (60) (85) 214 057

MelakaNo.23 Jalan PM 15Plaza Mahkota75000 MelakaMalaysiaTel: (60) (6) 282 4577Fax: (60) (6) 283 4579

Miri Lots 1260 & 1261Block 10, M.C.L.D, Jalan Melayu98000 Miri, SarawakMalaysiaTel: (60) (85) 413 299Fax: (60) (85) 417 518

Penang25, Light Street10200 PenangMalaysiaTel: (60) (4) 262 2141Fax: (60) (4) 262 2140

Sandakan 1st Floor, Standard Chartered Bank Building,Jalan Pelabuhan, Mail Bag Service 38,90009 Sandakan, SabahMalaysiaTel: (60) (89) 213 484Fax: (60) (89) 271 343

Sarikei Lot 1438, Block 361st Floor, Jalan Masjid96100 Sarikei, SarawakMalaysiaTel: (60) (84) 653 885Fax: (60) (84) 653 884

Seremban101 & 103 Jalan Yam Tuan70000 SerembanNegeri SembilanMalaysiaTel: (60) (6) 763 6120Fax: (60) (6) 763 1480

SibuNo. 10 A-F, Wisma Great EasternPersiaran Brooke96000 Sibu, SarawakTel: (60) (84) 312 829Fax: (60) (84) 333 925

Taiping60 Jalan Barrack34000 TaipingPerakMalaysiaTel: (60) (5) 805 1021Fax: (60) (5) 805 1023

TawauGround Floor Wisma Great EasternJalan Billian, P.O. Box 77391008 Tawau, SabahMalaysiaTel: (60) (89) 771 322Fax: (60) (89) 762 341

OverseasAssuranceCorporation(Malaysia)BhdLevel 18, Menara Great Eastern303 Jalan Ampang50450 Kuala LumpurMalaysiaTel: (60) (3) 4259 7888Fax: (60) (3) 4813 2737Website: www.oac.com.myE-mail: [email protected]

BranchOfficesAlor Setar 1301 Ground FloorJalan Teluk Wanjah05200 Alor SetarMalaysiaTel: (60) (4) 734 6515Fax: (60) (4) 734 6516

Ipoh 26A, 26B & 26CPersiaran Greentown 6Greentown Business Centre30450 IpohMalaysiaTel: (60) (5) 253 6649Fax: (60) (5) 255 3066

Johor Bahru Suite 13A-1, Level 13AMenara PelangiJalan Kuning, Taman Pelangi80400 Johor BahruMalaysiaTel: (60) (7) 3348 988Fax: (60) (7) 3348 977


Group netWorK

Kuala LumpurLevel 18, Menara Great Eastern303 Jalan Ampang50450 Kuala LumpurMalaysiaTel: (60) (3) 4259 7888Fax: (60) (3) 4813 0088

Klang3rd Floor No. 10 Jalan Tiara 2ABandar Baru Klang41150 KlangMalaysiaTel: (60) (3) 3345 1027Fax: (60) (3) 3345 1029

Kota BharuNo. S25/5252-S Tingkat 1Jalan Sultan Yahya Petra15200 Kota BharuMalaysiaTel: (60) (9) 748 2698Fax: (60) (9) 744 8533

Kota KinabaluSuite 6.3, Level 6Wisma Great Eastern LifeNo. 65 Jalan Gaya88000 Kota KinabaluMalaysiaTel: (60) (88) 235 636Fax: (60) (88)248 879

KuantanNo. 25, Jalan Dato’ Lim Hoe Lek25000 KuantanMalaysiaTel: (60) (9) 516 2849Fax: (60) (9) 516 2848

Kuching Level 3 No. 51Travilion Commercial CentreJalan Padungan93100 KuchingMalaysiaTel: (60) (82) 420 197Fax: (60) (82) 248 072

MelakaNo. 2.23, Jalan PM 15Plaza Mahkota 75000 MelakaMalaysiaTel: (60) (6) 284 3297Fax: (60) (6) 283 5478

Penang Suite 2-3 Level 2Wisma Great Eastern25 Lebuh Light 10200 PenangMalaysiaTel: (60) (4) 261 9361Fax: (60) (4) 261 9058

Seremban 103-2 Jalan Yam Tuan70000 SerembanMalaysiaTel: (60) (6) 764 9082Fax: (60) (6) 761 6178

IndOnESIAPTGreatEasternLifeIndonesiaMenara Karya 5th FlJl. H.R. Rasuna Said Blok X-5 Kav. 1-2South Jakarta 12950 IndonesiaTel: (62) (21) 2554 3888Fax: (62) (21) 5794 4717Website: www.lifeisgreat.co.idEmail: [email protected]

ShariaBranchMenara Karya 5th FlJl. H.R. Rasuna Said Blok X-5 Kav. 1-2South Jakarta 12950IndonesiaTel: (62) (21) 2554 3888Fax: (62) (21) 5794 4719E-mail: [email protected]

SalesOfficesBandungJl. Cikawao No. 51 D Kelurahan PaledangBandung 40261IndonesiaTel: (62) (22) 421 1028Fax: (62) (22) 421 8441E-mail: [email protected]

BatamKomplek Regency Park Blok II No. 17, Pelita Batam 29443IndonesiaTel: (62) (778) 453 774 (62) (778) 455 391Fax: (62) (778) 455 390E-mail: [email protected]

154

Group netWorK

Denpasar Hotel Santhi - Business Centre Lt. 4Jl. Patih Jelantik No.1Denpasar 80113IndonesiaTel: (62) (361) 224 183Fax: (62) (361) 264 324E-mail: [email protected]

JakartaPlaza Centris 12A FlJl. H.R. Rasuna Said Kav. B-5South Jakarta 12910 IndonesiaTel: (62) (21) 526 9133Fax: (62) (21) 526 9128E-mail: [email protected]

Komp. Mangga Dua Square Blok B/28,Jl. Gunung Sahari Raya No.1North Jakarta 14430IndonesiaTel: (62) (21) 6231 3378, (62) (21) 6231 3081Fax: (62) (21) 6231 3238E-mail: [email protected]

Jambi Jl. Gatot Subroto No. 8Kel. Sungai Asam Kec. Pasar JambiJambi 36134IndonesiaTel: (62) (741) 24231Fax: (62) (741) 24231E-mail: [email protected]

MakasarKomplek Pelita Marga Mas Blok C No. 8, Jl. G. LatimojongMakassar 90153IndonesiaTel: (62) (411) 319 658Fax: (62) (411) 319 836E-mail: [email protected]

MedanJl. Brigjend. Katamso No. 37 CAur, Medan 20151IndonesiaTel: (62) (61) 452 3233Fax: (62) (61) 452 0988E-mail: [email protected]

PalembangKomplek Ruko BalayudhaJl. Jend. Sudirman No. 6Palembang 30128IndonesiaTel: (62) (711) 411 098, (62) (711) 411 435Fax: (62) (711) 413 595E-mail: [email protected]

SemarangJl. Sriwijaya No. 128Semarang 50242IndonesiaTel: (62) (24) 841 4628Fax: (62) (24) 841 4628, (62) (24) 841 4998E-mail: [email protected]

SurabayaWisma Property 21 4th FlJl. Dharmahusada No.115Surabaya 60285 Indonesia Tel: (62) (31) 599 7526, (62) (31) 599 3019Fax: (62) (31) 599 7527E-mail: [email protected]

AlphaFinancialAdvisersPteLtd1 Pickering Street #06-03Singapore 048659Tel: (65) 6725 9600Fax: (65) 6725 9616Website: www.alphafinancialadvisers.comE-mail: [email protected]

LionCapitalManagementLtdOne George Street #08-01 Singapore 049145Tel: (65) 6417 6800Fax: (65) 6417 6801Website: www.lioncapital.com.sgE-mail: [email protected]


notice of annual General meetinGGreat eastern HoldinGs limited(IncorporatedintheRepublicofSingapore)(CompanyRegistrationNo.:199903008M)

NOTICE IS HEREBY GIVEN that the Ninth Annual General Meeting of Great Eastern Holdings Limited will be held at 1 Pickering Street #02-02, Great Eastern Centre, Singapore 048659 on Tuesday, 15 April 2008 at 4.00 pm for the following purposes:

as ordinary business1 To receive and adopt the Directors’ Report and the audited Financial Statements for the financial year ended 31 December 2007.

2 To approve a final tax exempt (one-tier) dividend of 16 cents and a special final tax exempt (one-tier) dividend of 26 cents per ordinary share, in respect of the financial year ended 31 December 2007 as recommended by the Directors.

3 (a) To re-appoint pursuant to Section 153(6) of the Companies Act, Chapter 50, Mr Lee Seng Wee who will be retiring under Section 153 of the said Act, to hold office from the date of this Annual General Meeting until the next Annual General Meeting.

(b) To re-elect the following Directors retiring by rotation under Article 91 of the Company’s Articles of Association and who being eligible, offer themselves for re-election:

(i) Mr Tan Beng Lee

(ii) Tan Sri Dato’ Dr Lin See-Yan

(iii) Professor Neo Boon Siong

Note: Tan Sri Dato’ Dr Lin See-Yan and Professor Neo Boon Siong, upon their re-election as Directors, will remain as members of the Audit Committee and are considered independent members of the Audit Committee.

(c) To re-elect Mr Koh Beng Seng who is retiring under Article 97 of the Company’s Articles of Association and who being eligible, offers himself for re-election.

4 To approve Directors’ fees of S$1,101,100 for the financial year ended 31 December 2007 (2006: S$922,750).

5 To re-appoint Messrs Ernst & Young as Auditors and authorise the Directors to fix their remuneration.

156

as special business6 To consider and, if thought fit, to pass the following Ordinary Resolution to empower the Directors to grant options under the Great

Eastern Holdings Executives’ Share Option Scheme and to allot and issue ordinary shares pursuant to the exercise of the options thereunder, provided that the aggregate number of ordinary shares to be issued does not exceed 10% of the total number of issued ordinary shares in the capital of the Company:

mandate to Grant sHare options and to issue ordinary sHares arisinG That the Directors of the Company be and are hereby authorised to offer and grant options in accordance with the provisions of the

Great Eastern Holdings Executives’ Share Option Scheme (the “Scheme”) and to allot and issue from time to time such number of ordinary shares in the capital of the Company as may be required to be issued pursuant to the exercise of the options under the Scheme, provided that the aggregate number of ordinary shares over which the Directors may grant options on any date, when added to the number of ordinary shares issued and issuable in respect of all options granted under the Scheme, shall not exceed 10% of the total number of issued ordinary shares in the capital of the Company on the day preceding that date.

7 To transact any other ordinary business.

By Order of the Board

elizabetH teoH Secretary

Singapore27 March 2008

Note: A member of the Company entitled to attend and vote at the above Meeting may appoint a proxy to attend and vote on his behalf. Such proxy need not be a member of the Company. The instrument appointing a proxy must be deposited at the Company’s registered office at 1 Pickering Street #16-01, Great Eastern Centre, Singapore 048659 not less than 48 hours before the time fixed for holding the Meeting.


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proxy formGreat eastern HoldinGs limited(IncorporatedintheRepublicofSingapore)(CompanyRegistrationNo.:199903008M)

I/We,

of

being a member/members of Great Eastern Holdings Limited, hereby appoint nric/passport proportion

name address number of shareholdings (%)

and/or (delete as appropriate)

as my/our proxy/proxies to attend and vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held at 1 Pickering Street #02-02, Great Eastern Centre, Singapore 048659 on Tuesday, 15 April 2008 at 4.00 pm and at any adjournment thereof.

I/We have indicated with an “X” in the appropriate box against such item how I/we wish my/our proxy/proxies to vote. If no specific direction as to voting is given, or in the event of any item arising not summarised below, my/our proxy/proxies may vote or abstain at the discretion of my/our proxy/proxies.

no. resolutions for against

as ordinary business1 Adoption of Directors’ Report and 2007 Audited Financial Statements 2 Approval of a final tax exempt (one-tier) dividend of 16 cents and a special final tax exempt (one-tier)

dividend of 26 cents per ordinary share3 (a) Re-appointment of Director under Section 153(6) of the Companies Act, Chapter 50: Mr Lee Seng Wee (b) Re-election of Directors retiring by rotation: (i) Mr Tan Beng Lee (ii) Tan Sri Dato’ Dr Lin See-Yan (iii) Professor Neo Boon Siong (c) Re-election of Director retiring under Article 97: Mr Koh Beng Seng4 Approval of Directors’ fees of S$1,101,100 in respect of financial year 20075 Appointment of Messrs Ernst & Young as Auditors and to authorise Directors to fix their remuneration as special business6 Authority for Directors to grant share options and to allot and issue ordinary shares pursuant to the

Great Eastern Holdings Executives’ Share Option Scheme

Dated this day of 2008

IMPORTANT:1. For investors who have used their CPF

monies to buy Great Eastern Holdings Limited shares, this Annual Report is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

Total Number of Shares Held

Signature(s) of Member(s) or Common Sealimportant: please read notes overleaf.

notes to proxy form:

1. (a) A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote on his behalf. Such proxy need not be a member of the Company.

(b) Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person.

2. The instrument appointing a proxy or proxies must be deposited at the Company’s registered office at 1 Pickering Street #16-01, Great Eastern Centre, Singapore 048659, not less than 48 hours before the time fixed for holding the Annual General Meeting.

3. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of a director or an officer or attorney duly authorised.

6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointor by an attorney, the letter of power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with Section 179 of the Companies Act, Chapter 50.

8. The Company shall be entitled to reject that instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.

desiGned and produced by epiGram

Great eastern Holdings limited1 Pickering Street #13-01

Great Eastern CentreSingapore 048659

Tel: (65) 6248 2000Fax: (65) 6532 2214

Website: www.lifeisgreat.com.sgE-mail: [email protected]

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