20TH FEBRUARY，2002

1. PURPOSE & CONSTITUTION

The Association stands on a mutual basis and is to uphold prestige and safeguard the interests of its Members, for which the Association affords insurance cover and offers professional services. The liability of the Members is limited to the calls and supplementary calls set by the directors and in the event of its liquidation, any net assets of the Association are to be returned equitably to those Members.

2. ACCOUNTING PRINCIPLE

(1) The figures under items as incorporated in the Financial Statements are up to February 20th, 2002.

(2) The Association adopts accrual basis in accounting. The values of all assets are to be recorded at historical costs at the time of acquisition.

(3) The United States Dollar is the bookkeeping base currency of the Association .The Association adopts the principle of separate-accounting for similar accounts. All figures in these Financial Statements are in US Dollar. Balances of RMB accounts at the end of year shall be translated into the US Dollar at the official exchange rate prevailing on February 20th. The difference arising from the translation are stated as gains or losses in INCOME AND EXPENDITURE ACCOUNT other than stated in BALANCE SHEET.

(4) The Association carries out the principle of three-year settlement of income and expenditure. Calls and premiums, reinsurance premiums, claims and claim recoverable from reinsurers or third parties are allocated to the years to which they apply.

(5) Liabilities provisions of open policy years are drawn according to the balances allocated to years to which they relate and charged to the Income and Expenditure Account to prepare for the claims belong to the aforesaid policy years. Estimated liabilities provision of closed policy year is drawn on closure of a policy year.

(6) Calls and premiums less returns and reinsurance premiums are credited to the Income and Expenditure Account.

(7) The liabilities of the Association are reinsured above certain levels with other associations abroad. The reinsurance recoveries as the anti-item to the claims paid are credited in Income and Expenditure Account. The claims recoveries from the third party are the same as the reinsurance recoveries.

(8) Fixed assets refer to the assets whose useful life is over one year, unit value is above RMB 2000.00 and where original physical form remains during the process of utilization.

(9) Other Monetary Assets is listed separately after the Cash Balance among the current assets for its different keeping place and certain purpose.

3. NOTES TO ITEMS OF STATEMENTS

(1) OTHER MONETARY ASSETS

It refers to short-term deposits for US dollars which will mature in one year.

(2) SHORT-TERM INVESTMENTS

By the end of this accounting year, the Association sold all the bonds. The balance stated is the interest left in bond special account.

(3) GUARANTEE

The amount of Guarantee is cash balance which was held by Bank of China (Head Office) for several letters of guarantee issued by the Bank.

(4) CALLS AND PREMIUMS RECEIVABLE

It refers to the accumulated amount of calls and premiums receivable from members.

(5) REINSURANCE RECOVERIES RECEIVABLE

The figures of this item relate to recoveries receivable from other associations on claims incurred during the year.

(6) SUNDRY DEBITORS

It refers to all money receivable of the third party due to the Association.

(7) LONG-TERM INVESTMENTS

Please see the attached figure 1.

(8) SHORT TERM LOAN

Short-term loan in amount of RMB50million (USD6,040,982.02) was made from China Mingsheng Bank which matures on NOV.30.2002, RMB40milliom of which had been returned on 28.march.2002

(9) LIABILITIES PROVISION

Please see the attached figure 10.

(10) SUNDRY CREDITORS

It includes the unconfirmed accounts, the transactions from/ to MH Accounts and the transactions between the head office and the branches. The credit balance against HM Accounts is USD 688,762.44.

(11) CALLS AND PREMIUMS

Calls and premiums in the statements are from the three policy years of 1999、2000 and 2001 separately. See the attached figure 2,3 and 4.

(12) THE CLAIMS

Please see the attached charter 5 and 6.

(13) BROKERAGE

It refers to the amount which were paid to brokers. The balance is USD141,143.02.

(14) MANAGEMENT FEE

The management fee of 2001 has been drawn in accordance with the bond of director's instruction, which includes the costs of providing offices, salary of staff and administration cost.

(15) INVESTMENT INCOME

Please see the attached charter 7 and 8.

(16) TRANSFERS TO PROVISION SURPLUS

Please see the attached figure 9.

(17) RESERVES

The reserves of the Association are assorted to Reserve of Management which is USD1,697,055.06 and Reserve of claims which is USD51,405,389.96 in value.

4. The explanation of the cost method of investment

The Association invested USD15,058,168.62 in China Minsheng Bank CORP. by the end of 2001 and owned 6.36% interest of the Bank. The Association is the forth biggest shareholder and have significant influence on the operating of the invested bank. Thus, the equity method is used in this accounting year and the amount of investment of China MinSheng Bank CORP. had been adjusted to USD41,638,072.69.