深基地Ｂ(200053)2001年年度报告（英文版）

SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO LTD 2001 ANNUAL REPORT Important Note: The Board of Directors of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. (hereinafter referred to as the Company) and all directors hereby guarantee that there exists no omission, misstatement, or misleading information in this annual report; individually and/or collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report. PART I COMPANY PROFILE ----------------------------------------------------------------------- 2 PART II FINANCIAL AND BUSINESS HIGHLIGHTS ----------------------------------------- 3 PART III CHANGES IN SHAREHOLDERS AND SHAREHOLDING STRUCTURE ------- 5 PART IV INFORMATION OF DIRECTORS，SUPERVISORS, SENIOR EXECUTIVES AND OTHER STAFF ----------------------------------------------------------------------------- 7 PART V ADMINISTRATIVE STRUCTURE ------------------------------------------------------------ 8 PART VI REVIEW OF ANNUAL GENERAL SHAREHOLDERS’MEETING ------------------- 9 PART VII DIRECTOR’S STATEMENTS -------------------------------------------------------------- 10 PART VIII REPORT OF THE SUPERVISORY COMMITTEE ------------------------------------- 13 PART IX SIGNIFICANT EVENTS -------------------------------------------------------------------- 14 PART X FINANCIAL STATEMENTS --------------------------------------------------------------- 15 PART XI DOCUMENTS AVAILABLE FOR VERIFICATION ----------------------------------- 40 The Annual Report is written in both English and Chinese. In case of conflict between the two versions, Chinese version prevails. 1 Part I. Company Profile Name of the Company Shenzhen Chiwan Petroleum Supply Base Co., Ltd (“SCPSB”) Legal Representative Dr Fu Yuning Company Secretary Mr Cui Wei Securities Representative Mr Liu Wei Securities Representative Mdm Yu.Z.X Tel 6694211 Fax 6694227 Address Base Building, Chiwan, Shenzhen, PRC Place of Registration Chiwan, Shenzhen, PRC Office Base Building, Chiwan, Shenzhen, PRC Post Code 518068 E-mail Address szcpsb@public.szonline.net Annual Report available Administration Department, 3rd Floor, Base Building, Chiwan, Shenzhen, PRC Stock Exchange Shenzhen Stock Exchange Stock Series Shenzhen Base (B share) Stock Code 200053 Date of Initial Registration 24 th July 1995 Initial Registration Address Industry and Commerce Administration Bureau of Shenzhen, Guangdong, PRC Registration Number for QGYSZZ No. 101031 Business License Number of Taxation 440301618833899 (N) Registration 440305618833899 (L) Domestic Certified Public Shenzhen Dahua Tiancheng Certified Public Accountants Accountants Office Address 1/F B Block, Unite Plaza, No. 5022, Bin He Ave., Futian Dis., Shenzhen, PRC International Certified PricewaterhouseCoopers Public Accountants Office Address 21st Floor Price’s Building Central Hong Kong 2 Part II. Financial and Business Highlights I. Profit Before Taxation and its Composition Items US$ RMB Total Profit ８，２３０，２６８．４１ ６８，１４６，６２２．４３ Net Profit ７，２６８，１８４．４７ ６０，１８０，５６７．４１ Net profit after deducting non-recurring gains and losses ７，２８６，０５３．３５ ６０，３２８，５２１．７４ Including: Profit from main business lines ６，９１５，２３２．８６ ５７，２５８，１２８．０８ Profit from other business lines ０ ０ Operating profit ６，４３１，７６１．８１ ５３，２５４，９８７．７９ Investment income １，８１６，３７５．４８ １５，０３９，５８８．９７ Subsidy income ０ ０ Net income / expenditure from non-operating （１７，８６８．８８） （１４７，９５４．３３） Net cash flows arising from operating activities １０，２３０，０２２．６２ ８４，７０４，５８７．２９ Net increase / decrease in cash and cash equivalents ６，０６４，０４２．０１ ５０，２１０，２６７．８４ Note: Items included in the non-recurring gains and losses and the amounts: US$ RMB 1. Income from non-operation ６，３９６．１６ ５２，９６０．２０ 2. Expenditure of non-operation －２４，２６５．０４ －２００，９１４．５３ Amount －１７，８６８．８８ －１４７，９５４．３３ II. Difference in Profit after Taxation There is no difference in profit after taxation as audited by PricewaterhouseCoopers, in accordance with Auditing Standards promulgated by Hong Kong Society of Accountants, and that as audited by domestic Certified Public Accountants. III. Financial Highlights ２００１ 2001 2000 2000 1999 1999 Item ＵＳ￥’ ０００ ＲＭＢ’ ０，０００ ＵＳ￥’ ０００ ＲＭＢ’ ０，０００ ＵＳ￥’ ０００ ＲＭＢ’ ０，０００ Turnover １２，４１５ １０，２８０ １１，６７６ ９，６６８ １０，７３３ ８，８８５ Profit before taxation ８，２３０ ６，８１５ ６，３０１ ５，２１８ ５，４０８ ４，４７７ Profit after taxation ７，２６８ ６，０１８ ５，４１７ ４，４８５ ４，６０１ ３，８０９ Total assets ７４，４９８ ６１，６８４ ６９，２９６ ５７，３７７ ６７，４７０ ５５，８６１ Shareholders’equity ６３，１４６ ５２，２８５ ６０，９６５ ５０，４７９ ５９，８８２ ４９，５７８ Earnings per share (Fully diluted) ０．０３１５ ０．２６１０ ０．０２３５ ０．１９４５ ０．０２ ０．１６５ (US$/RMB per share) (Weighted average) ０．０３１５ ０．２６１０ ０．０２３５ ０．１９４５ ０．０２ ０．１６５ Net assets per share ０．２７４ ２．２６７ ０．２６４ ２．１８９ ０．２６０ ２．１５０ (US$/RMB per share) (Fully diluted) Net assets per share after adjustment ０．２６８ ２．２２ ０．２５９ ２．１４３ ０．２５４ ２．１０６ (US$/RMB per share) (Fully diluted) Net cash flows per share arising from ０．０４４ ０．３６７ ０．０３８ ０．３１９ ０．０３２ ０．２６７ operating activities (Fully diluted) Return on equity (%) (Fully diluted) １１．５１ １１．５１ ８．９ ８．９ ７．７ ７．７ Earnings per share after deducting ０．０３１６ ０．２６１６ ０．０２３６ ０．１９５６ ０．０２ ０．１６５ non-recurring gains and losses (US$/RMB per share) 3 IV. Profit Statements Return on equity Earnings per share Profit as of the report period Fully Weighted Fully Weighted Fully Weighted diluted average diluted average diluted average Profit from main business lines １０．９５％ １０．７０％ ＵＳＤ０．０３ ＵＳＤ０．０３ ＲＭＢ０．２４８３ ＲＭＢ０．２４８３ Operating profit １０．１９％ ９．９６％ ＵＳＤ０．０２７９ ＵＳＤ０．０２７９ ＲＭＢ０．２３０９ ＲＭＢ０．２３０９ Net profit １１．５１％ １１．２５％ ＵＳＤ０．０３１５ ＵＳＤ０．０３１５ ＲＭＢ０．２６１０ ＲＭＢ０．２６１０ Net profit after deducting non- １１．５４％ １１．２８％ ＵＳＤ０．０３１６ ＵＳＤ０．０３１６ ＲＭＢ０．２６１６ ＲＭＢ０．２６１６ recurring gains and losses V. Change of Shareholders’Equity ＵＳ￥ Share Statutory Statutory Capital public Retained Item capital Surplus public Public Welfare Total reserve reserve fund earnings Year-begin 27,033,997.66 26,269,018.88 7,662,239.59 1,751,114.47 --- 60,965,256.13 figure Increase --- --- 1,453,636.89 363,409.22 7,268,184.47 8,721,821.36 Decrease --- --- --- --- 6,541,366.02 6,541,366.02 Year-end 27,033,997.66 26,269,018.88 9,115,876.48 2,114,523.69 726,818.45 63,145,711.47 figure Notes: The Company achieved a net profit of US$7,268,184.47 in 2001. Pending the final approval by the upcoming Annual General Meeting (hereinafter referred to as AGM), 70% of the net profit would be distributed to shareholders in terms of cash dividend. Also forwarded to the AGM for approval will be the proposed retention of statutory surplus public reserve (10%), statutory public welfare fund (5%) and discretionary surplus public reserve (5%). The surplus public reserve increased by US$1,453,636.89, of which US$363,409.22 was due to the increase in public welfare fund. VI. Business Analysis Years ended on 31 December Facilities utilization rates (%) 2001 2000 1999 General warehouse 94 ８８ ８５ Terrace warehouse 94 ８８ ８５ Yard 93 ９７ ９６ Office 50 ５０ ４４ Forklifts 78 ７１ ６０ Cranes 70 ６３ ５０ Trailers 59 ５３ ４０ Throughput volume (Tones) 646,000 ５３０，５１２ ５３８，５５２ Numbers of vessel movements 1,230 １，０３７ １，２７２ 4 Part III. Changes in Shareholders and Shareholding Structure I. Change of Shareholder’s Fund Change in Shareholding Structure (in 2001) unit: share Number of Change in number of shares Number conversion shares bonus of shares of reserves at year beginning rights shares to shares Others subtotal at year end 1. Non-tradable shares a. Public promoter’ s shares State owned share A shares 119,420,000 119,420,000 B shares 51,180,000 51,180,000 Others b. Shares raised from legal entity c. Employee’s shares d. Preferred shares Total 170,600,000 170,600,000 2. Tradable shares a. A shares b. B shares 60,000,000 60,000,000 c. Overseas listed shares d. Others Total 60,000,000 60,000,000 3. Total number of shares 230,600,000 230,600,000 Share performance In June 1995, the Company obtained approval from Shenzhen Securities and Exchange Commission to issue, at par value of RMB1.00 per share, a total of 230.6 million shares of common stock comprising 119.42 million ‘A’ shares for China Nanshan Development (Group) Incorporation (“CNDI”), 51.18 million ‘B’ shares for Offshore Joint Services Company of Singapore Private Limited (“OJSC”) and 60 million ‘B’shares to foreign investors. The issue of 60 million ‘B’shares were fully subscribed at HK$2.82 per share with fully diluted P/E ratio of 10.5 times. Trading of the shares in Shenzhen Stock Exchange began on 28 July, 1995. Apart from the shares held by promoters and B shares in issue, the company did not issue any employees’shares. For the year under review there was no purchase or cancellation of the Company’s shares by the Company. The paid-up capital remained unchanged. II. Particulars about Shareholders Shareholders The record from Shenzhen Stock Exchange (“SSE”) confirmed that there were altogether 13155 shareholders registered in SSE as at 31st December 2001, of which CNDI was the only ‘A’share shareholder. All the directors of the Board and the members of the Supervisory Committee and senior management personnel of the Company did not hold any Company’s shares. 5 Substantial shareholders The top ten shareholders as at 31st December 2001 are listed below: Series Code Name of shareholders Shares Percent- No in stock age 1 00038657 China Nanshan Development (Group) Incorporation *119,420,000 51.79 2 00210963 Offshore Joint Service (Bases) Co. of Sgp. Pte Ltd *51,180,000 22.19 3 00210854 Sembawang Marine & Logistics Ltd 2,087,093 0.91 4 00305251 WEI HUI PING 815,100 0.35 5 00301640 WANG MEI LAN 664,670 0.29 6 00309137 LIN YONG QING 459,302 0.20 7 00276226 FENG HAN XING 368,393 0.16 8 91370643 MA ZHENG 320,200 0.14 9 91175993 BIN LIANG 306,737 0.14 10 91185421 ZHOU LI QING 260,289 0.11 Total 175,881,784 76.28 Note: Shares held by the third largest shareholder of the Company, SEMBAWANG MARINE & LOGISTICS LTD, was decreased to 2,087,093 shares, a fall from 5.64% to 0.91% of the total. The symbol ‘*’stands for unlisted shares. Profiles of Public Promoters 1. China Nanshan Development (Group) Incorporation Legal representative: Fu Yuning Date of incorporation: 28 September 1982 Paid-up capital: ¥500,000,000.00 Business scope: land development; shipping, land transportation and port operation; industrial, commercial, property and tourism; customs bonded warehouses; etc. 2. Offshore Joint Services (Bases) Company of Singapore Pte. Ltd. Legal representative: Mr. Koh Soo Keong Date of incorporation: 17 January 1983 Paid-up capital: S$10,000,000.00 Business scope: Investing in companies engaged in the supply of services and facilities to the offshore petroleum industry The above promoters did not mortgage their shares in whatsoever manners and for any purpose in 2001. 6 PART IV. Information of Directors, Supervisors, Senior Executives and Other Staff I. Outline Brief of directors, supervisors and senior executives Name Title Gender Age Office term Share held Fu Yuning Chairman of the Board Male 45 May 2001 – May 2004 Zero Koh Soo Keong Vice Chairman Male 51 May 2001 – May 2004 Zero Fong Yue Director Male 49 May 2001 – May 2004 Zero Kwong Wang Fen Director Female 47 May 2001 – May 2004 Zero Lin Shaodong Director Male 56 Nov. 2001 – May 2004 Zero Han Guimao Director Male 51 Nov. 2001 – May 2004 Zero Zhong Jingshen Convener of the Male 50 Aug. 2001 – May 2004 Zero Supervisory Committee Chan Sioh Noi Supervisor Female 49 May 2001 – May 2004 Zero Cheng Daping Supervisor Male 60 May. 2001 – Jan. 2002 Zero Fan Zhaoping Supervisor Male 48 Nov. 2001 – May 2004 Zero Xiang Zhenxian Supervisor Male 45 May 2001 – May 2004 Zero Zhang Xiang Supervisor Male 37 May 2001 – May 2004 Zero Yuan guocheng General Manager Male 52 Sep. 2000 – May 2004 Zero Cui Wei Financial Supervisor and Male 45 May 1998 – May 2004 Zero Secretary of the Board Note: Seven of above directors and supervisors hold posts in CNDI, details as follows: Fu Yuning has been holding the post of chairman of the Board from Dec. 1998 till now; Wang Fen has been holding the post of standing deputy general manager from Dec. 1998 till now; Lin Shaodong has been holding the post of vice chairman of the Board from July 2001 till now; Han Guimao has been holding the post of assistant-general-manager from Dec. 1994 till now; Zhong Jingshen has been holding the post of vice chairman of the Board from Aug. 2000 till now; Cheng Daping has been holding the post of director from June 2000 till Nov. 2001; Fan Zhaoping has been holding the post of deputy general manager from Dec. 1998 till now. Resignation of directors, supervisors and senior executives Mr. Fan Zhaoping and Mr. Qian Fuhao, former directors of the Company, resigned from their posts due to work adjustment and retirement respectively. Mr. Yuan Yuhui, former supervisor of the Company, resigned from his post due to work adjustment. Mr. Chen Tongtai and Mr. Li Mingzheng, former independent directors of the Company, no longer held the post due to the expiration of office term. II. Annual Salary of Directors, Supervisors and Senior Executives Decision Procedure and Basis Salary standard of the Company was decided and approved by the Board of Directors. Of all directors, supervisors and senior executives, two employee supervisors and all senior executives draw their salary, bonus and other welfare from the Company, while others including Fu Yuning, Koh Soo Keong, Fong Yue Kwong, Wang Fen, Lin Shaodong, Han Guimao, Zhong Jingshen, Chan Sioh Noi, Cheng Daping and Fan Zhaoping, draw the pay from their respective shareholder party rather than the Company. Amount Annual salary of the two supervisors and all senior executives totalled RMB 1.562 million. Classification Three of present supervisors and senior executives enjoy an annual salary between RMB 100 thousand to RMB 7 200 thousand and one enjoys an annual salary over RMB 200 thousand. III. Information of Staff As at Dec. 31, 2001, the Company has a staff of 111, including 92 engaging in production, 4 in accounting, 6 in administration and 14 in management; or composing 1 with doctor degree, 3 with master degree, 22 with bachelor degree, 2 with technical secondary school graduation and 88 with high school or lower graduation. PART V. Administrative Structure The Company strictly implements the PRC Company Law, the Securities Law and other laws and regulations issued by the CSRC; continuously improves the legal person administration system and regulates its operation. Also, it has established the Articles of Association, which has being amended closely in accordance with relevant rules. Moreover, the Rules of Procedures of Shareholders’General Meeting, the Rules of Procedures of the Board of Directors as well as the Rules of Procedures of the Supervisory Committee are under active preparing. Pursuant to regulations in Administrative Rules for Listed Company released by the CSRC and State Economic and Trade Commission on 7th Jan. 2002, the Company has built its administrative structure as follows: 1. In aspect of shareholders and shareholders’general meeting: based on the principal of legality and efficiency, the Company makes every effort to attract more shareholders to attend the shareholders’ general meeting (SGM) and assures a thorough realization of shareholders’rights. All SGM are attended and witnessed by professional lawyers. 2. In aspect of “Three Separation”: The Company is independent of its control shareholder in terms of assets, finance, organization and sales; and the Board of Directors, Supervisory Committee and internal organs of the Company operate independently, except for that Dr Fu Yuning, Chairman of the Company, holds the post of Chairman of the control shareholder concurrently. Explanation has been made to the CSRC concerning the double engagement of Dr Fu. 3. In aspect of directors and Board of Directors: the Company elects directors strictly in line with the election procedure as regulated in the Articles of Association of the Company, which is subject to further improvement. Both the number of directors and composition of the Board comply with relevant laws and regulations. All directors not only attend the Board meetings and SGM diligently, but also take part in the training courses enthusiastically. Familiar with relevant laws and regulations, all directors understand the rights, duties and responsibilities of director. In order to further regulate the decision-making of Board of Directors, the CSRC required the listed company to establish the independent director system. Accordingly, the Company is searching for the right candidate and will make appropriate amendment on its Articles of Association. 4. In aspect of supervisors and Supervisory Committee: Both the number of supervisors and composition of the Committee comply with relevant laws and regulations. Based on the spirit of being responsible for all shareholders, supervisors of the Company carefully exercise its duties to examine the performance of directors, managers as well as other senior executives, and express independent opinion. 5. In aspect of performance valuation, encouragement and binding mechanism: The Company is actively setting up a fair and open performance valuation criteria and encouragement and binding mechanism for directors, supervisors and executives. 6. In aspect of information disclosure and transparency: The Company authorizes the secretary of the Board and the authorized representative in charge of securities affairs to take charge of disclosing information, receiving the visit and inquiry of the shareholders. The Company discloses the relevant information in a real, accurate, complete and timely way strictly according to the law, regulations and the Articles of Association, ensured all the shareholders to have equal opportunity to obtain the 8 information. Moreover, the Company timely disclosed the detailed information of the largest shareholder or concrete controller and changes in shares held by them. PART VI. Review of Annual General Shareholder’Meeting The Company convened two shareholder’s general meetings in 2001. 1. The Company announced agenda of the seventh shareholder’s general meeting on 14th April 2001 both in Shenzhen Securities Times and South China Morning Post. The Seventh Shareholders’ General Meeting of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. was held at 3:00 pm, 15th May 2001 in the Conference Room on 16/F of Chiwan Petroleum Building, Shenzhen. Shareholders and proxies representing 183.89 million shares or 79.75% of the total number of shares, 230.6 million shares, attended the meeting. The Meeting reviewed and approved following resolutions by voting: (1) Work Report of the Board of Directors for the Year of 2000; (2) Work Report of the Supervisory Committee for the Year of 2000; (3) Financial Settlement Report for the Year 2000; (4) Dividend Distribution Plan for the Year of 2000; (5) Proposal on Changing Directors and Supervisors; (6) Election of Dr Fu Yuning, Mr. Koh Soo Keong, Mr. Fong Yue Kwong, Mdm Wang Fen, Mr. Fan Zhaoping and Mr. Qian Fuhao as directors of the Third Board of Directors, and election of Mr. Zhong Jingshen, Mdm Chan Sioh Noi, Mr. Yuan Yuhui, Mr. Cheng Daping, as member of the Third Supervisory Committee of the Company, and election of Mr. Zhang Xiang and Mr. Xiang Zhenxian as Employee supervisors; and, (7) Reappointment of PricewaterhouseCoopers and Zhong Tian Qin Certified Public Accountants as auditors for the year 2001. The resolution was announced on 16th May 2001 in Shenzhen Securities Times and Hong Kong South China Morning Post. 2. The Company announced agenda of the first extraordinary shareholder’s general meeting on 26th and 27 th Oct. 2001 in Shenzhen Securities Times and South China Morning Post. The First Extraordinary Shareholders’General Meeting of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. was held at 3:00 pm, 15th May 2001 in the Conference Room on 16/F of Chiwan Petroleum Building, Shenzhen. Shareholders and proxies representing 172.69 million shares or 74.89% of the total number of shares, 230.6 million shares, attended the meeting. The Meeting reviewed and approved following resolutions by voting: (1) Approval on resignation of Mr. Fan Zhaoping and Mr. Qian Fuhao from the post of director due to work adjustment and retirement respectively, election of Mr. Lin Shaodong and Mr. Han Guimao as director of the Company; (2) Approval on resignation of Mr. Yuan Yuhui from the post of supervisor due to work adjustment, election of Mr. Fan Zhaoping as supervisor of the Company; and, (3) Appointment of the Shenzhen Dahua Tiancheng Certified Public Accountants as the Company’s domestic auditors and the international auditors remained unchanged. The resolution was announced on 29th Nov. 2001 in Shenzhen Securities Times and Hong Kong South China Morning Post. Beijing Hai Wen Law Firm issued the Legal Opinion for the shareholders’general meeting, which was published on 29th Nov. 2001 in Shenzhen Securities Times and Hong Kong South China Morning Post. 9 Part VII. Director’ s Statements I. Abstract of Business Statement 1. Industry Review In 2001, China National Offshore Oil Corporation achieved crude oil equivalent output of 23.13 million tons. Of which, the eastern sector of the South China Sea which the Base provided supporting logistic services accounted for 10.41 million tons or 45% of the total output. This indicated that the Base had about 45% of the market share in logistic services industry of offshore China. 2. Business Review Business scope The Base provides logistic services to offshore oil exploration, development and production. Logistic services provided range from rental of office/customized warehouse/yard, berthing facilities and material handling etc. Besides, it also involves in offshore engineering services through its two associate companies. Operations review (i) Turnover breakdown 2001 2000 Change US$’000 US$’000 % Office rental 1,700 1,636 3.9 Storage service 5,046 4,607 9.5 Operation 5,669 5,433 4.3 Total 12,415 11,676 6.3 (ii) Rental income For the period under review, the utilization rates of warehouse and yard increased by 6 percentage point to 94% though the occupancy rate of yard space sustained a marginal decrease as compared with that of 2000. As a result of 13% increase of weighted average rental rates for both warehouses and yards, the overall rental income increased by 9.5%. Despite keen competition in office rental business, the office occupancy rate stayed at the level of 50% for the year of 2000. Furthermore, the adjustment of property management fees into the office rental income based on the matching principle of accounting practices resulted in a 4% increase in office rental revenue over that of last year. (iii) Wharf Operations It substantially improved the operating environment of offshore oil industry that the international oil prices maintained in a reasonable level throughout the year of 2001. Apart from the company’s core business, the management, with the objective to maximizing the utilization of its operating facilities, continued to develop its container freight station business and achieved a 4% year-on-year increase. 10 II. Financial performance 1. Financial data (extracted from audit reports prepared by Dahua Tiancheng Certified Public Accountant) 2001 2000 Change US$’000 US$’000 % Turnover 12,415 11,676 6.3 Net profit 7,268 5,417 34.2 Earnings per share (US cent) 3.15 2.35 34.0 Total assets 74,498 69,296 7.5 Long term liability 1,309 1,460 -10.30 Shareholders’fund 63,146 60,965 3.6 2. Financial analysis Gross turnover in 2001 increased by 6.3% to US$12.42 million as opposed to US$11.68 million of 2000. This was mainly attributed to the across-the-board increase in all sectors of the company’s business. The management had, irrespective of the improved business environments, continued to take concerted actions to control costs and raise productivity. These efforts had paid off in terms of strengthening our competitiveness and creating economic value. Coupled with the substantial investment return of US$1.82 million from the two associate companies, namely Chiwan Sembawang Engineering Co Ltd and Chiwan Offshore Petroleum Equipment Repair & manufacture Co., Ltd which involve in offshore engineerings, the Company’s net profit increased by 34.2% to US$7.27 million. CSE recorded a net profit of US$5.55 million for the year of 2001, a 5 times increase on a year- on-year basis. As a result of the management’s efforts to enhance the internal control and reorient its marketing strategy in the intensified industry competition, CPEC continued to be profitable for the year of 2001. III. Application of the Proceeds The company had invested US$20.5 million raised from stock market in its1995 floatation in the projects approved by AGM. All the projects had been completed by the end of 1996 and the results of which were disclosed accordingly. IV. Business prospects In view of the stable international oil price and the desire of PRC government to increase offshore oil & gas production, we shall expect a consistent offshore oil drilling activities in the South China Sea which would result in sustained income from our core business. This, together with PRC accession into WTO, provides a solid platform for the base to expand its petroleum logistics business into asset-based logistics sector with an aim of providing value-added services and thus enhancing profitability of the company. For this purpose, the Company had set up a branch company in Shanghai to build a distribution park and provide hardware facility for both domestic and international third party logistics companies. CSE, through which the company participates in offshore engineering industry, would be a new growth point of the company’s bottom line in the next three years. Its return on shareholders’ investment is expected to exceed 10% in 2002. The Company expects a healthy growth in net profit for the year 2002. 11 V. Report of the Board of Directors 1. Board Meetings and Resolutions Shenzhen Chiwan Petroleum Supply Base Co., Ltd. convened eight board meetings in 2001. (1) The 12th meeting of the second board of director was held by tele-communication on 22nd March 2001. The meeting examined and approved: Annual Report and its abstracts for the year of 2000; Work Report of the Board of Directors and the General Manager’s Report for the year of 2000; Financial Report for the year ended 31st December 2000; Dividend Distribution Plan of 2000; and, Estimated Dividend Distribution Policy for 2001. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 24th and 26th March 2001 respectively. (2) The 13th meeting of the second board of director was held by tele-communication on 13th April 2001. The meeting examined and approved the election of members for the next Board of Directors and the nomination of candidates for the election; and the determination of the time and agenda of seventh Annual General Meeting. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 14th April 2001 respectively. (3) The 14th meeting of the second board of director was held on 9th May 2001 in the Conference Room on 16/F of Chiwan Petroleum Building, Shenzhen. The meeting examined and approved 2001 Budget and Resolution on Appointment of Legal Advisor and Auditors for the Year 2001. (4) The first meeting of the third board of director was held in the morning of 15th May 2001 in the Conference Room on 16/F of Chiwan Petroleum Building, Shenzhen. The meeting examined and approved: the election of Dr Fu Yuning as Chairman and Mr. Koh Soo Keong as Deputy Chairman of the Company; the appointment of Mr. Yoon Kok Seng as General Manager and Mr. Cui Wei as Financial Controller as nominated by Dr Fu Yuning; the appointment of Mr. Cui Wei as Company Secretary as nominated by Dr Fu Yuning; the appointment of Mr. Liu Wei and Mdm Yu Zhongxia as Security Representative as nominated by Dr Fu Yuning. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 16th May 2001 respectively. (5) The first meeting of the third board of director was held by tele-communication on 9th August 2001. The meeting examined and approved the full text of interim report for period to June 2001 and its abstracts and the resolution that the Company would not distribute interim dividend and not convert statutory surplus reserves to share capitals. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 13th August 2001 respectively. (6) The second meeting of the third board of director was held by tele-communication on 25th Oct. 2001. The meeting examined and approved Proposal on Changing Directors, Proposal on Changing Certified Public Accountants and the determination of the time and agenda of first Extraordinary Annual Shareholders’General Meeting. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 26th Oct. 2001 respectively. (7) The third meeting of the third board of director was held by tele-communication on 12th Nov. 2001. The meeting examined and approved Proposal on Changing Certified Public Accountants. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post 13th Nov. 2001 respectively. (8) The second meeting of the third board of director was held on 28th Nov. 2001 in the Conference Room on 16/F of Chiwan Petroleum Building, Shenzhen. The meeting examined and approved Proposal on Setting up a branch of the company in Shanghai and the Proposal on Holding the first Extraordinary Annual General Meeting in 2002. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 29th Nov. 2001 respectively. 2. Implementation of the dividend distribution plan The Company implemented its 2000 dividend distribution plan on 12th July 2001: US$0.1879 cash bonus for every 10 shares. Dividend for B share was converted into HK dollars for distribution. 12 VI. Dividend Distribution Preplan Dividend distribution preplan as of the year is set out as follows: Retained Earning B/F --- Profits available for distribution 7,268,184.47 Less: Statutory surplus public reserve (10%) 726,818.45 Statutory public welfare fund (5%) 363,409.22 Discretionary public reserve (5%) 363,409.22 Dividends (tax included) (70%) 5,087,729.13 Retained profits (10%) 726,818.45 The cash dividend for the year 2001 of US$0.2206 for every ten shares (tax included) or US$5,087,729.13 in total would be paid by the Company and for this purpose the conversion will be based on the closing rate between US$ and HK$ announced by the People’s Bank of China on the first working day after the resolution is passed by the AGM. The above dividend distribution plan will be carried out after the final approval of the AGM 2002. The Company neither declared interim dividend nor converted any reserves into share capital in the year of 2001. VII. Estimated Dividend Distribution Policy for 2002 1. The Company will conduct dividend distribution once in 2002; 2. Approximately 70% of net profit realized in 2002 will be distributed as dividend; 3. The distribution will take the form of cash bonus. VIII. The Company did not plan to transfer capital public reserve into share capital for the year 2002. PART VIII. Report of the Supervisory Committee I. Supervisory Committee Meetings Shenzhen Chiwan Petroleum Supply Base Co., Ltd. convened five supervisory committee meetings in 2001. 1. The seventh meeting of the second supervisory committee was held by tele-communication on 13th April 2001. The meeting examined and approved the resolutions on the election of members for the next Supervisory Committee and nomination of candidates for the election. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 14th April 2001 respectively. 2. The eighth meeting of the second supervisory committee was held on 9th May 2001 in the Conference Room on 16/F of Chiwan Petroleum Building, Shenzhen. The convener, Mr. Liu Jianxin, chaired the meeting. Four committee members attended the meeting, which conform to the legal quantum stipulated both in the Company Law and the Articles of the Company. The meeting approved the Report of Supervisory Committee for the year of 2000 and resolved to table the auditors’financial report of 2000 to the AGM. 3. The first meeting of the third supervisory committee was held by tele-communication on 9th August 2001. The meeting examined and approved the election of Mr. Zhong Jingshen as the convener of the company; the full text of interim report for period to June, 2001 and its abstracts; and the resolution on neither interim dividend distribution nor capital public reserve transferring into share capital. The 13 resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 13th August 2001 respectively. 4. The second meeting of the third supervisory committee was held by tele-communication on 25th August 2001. The meeting examined and approved the following resolution: Due to re-assignment of Mr. Yuan Yuhui, the Supervisory Committee accepted his resignation as member of the Committee and approved the proposal for Mr. Fan Zhaoping as replacement. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on and 26th Oct. 2001 respectively. 5. The first meeting of the third supervisory committee was held on 28th Nov. 2001 in the Conference Room on 16/F of Chiwan Petroleum Building, Shenzhen. The convener, Mr. Zhong Jingshen, chaired the meeting. Six supervisors were expected to attend the meeting while four of them were actually present, which conformed to the legal quantum stipulated both in the Company Law and the Articles of the Company. The meeting examined and approved the following resolution: Due to re-assignment of Mr. Cheng Daping, the Supervisory Committee accepted his resignation as member of the Committee and approved the proposal for Mr. Zhu Tiansheng as replacement. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 29th Nov. 2001 respectively. II. The Supervisory Committee formed following opinion for the Company’s operation in the report period. 1.The committee confirmed that the Company’s decision procedures were both healthy and lawful. The Company’s management systems and internal control procedures were in place. The meeting also confirmed that neither any of the eight directors nor senior managers had acted in contravention of the laws, regulations, Articles of Company or resolutions passed by the Shareholder’s meeting. 2.The meeting reviewed and confirmed that the audited report prepared by the independent auditors gave a true and fair presentation of the Company’s financial performance. 3. In 2001 the Company did not engage in any acquisition and disposal of the Company’s assets. 4. All the inter-party transactions in 2001 were conducted in arm-length principle and the Company’s interests were safeguarded. PART IX. Significant Events 1. The Company did not experience any significant lawsuit or arbitration in the report year. 2. In 2001, neither the directors nor the senior managers was fined or penalized by Securities Supervisory and Administration Authorities of PRC. 3. The 7th Shareholders’General Meeting of Shenzhen Chiwan Petroleum Supply Base Co Ltd was held on 15th May 2001, in which following documents were reviewed and approved: Work Report of the Board of Directors for 2000, Work Report of the Supervisory Committee for 2000, Financial Report of Actual Budget for the year of 2000, Profit Distribution Plan of 2000. Mr. Fu Yuning, Mr. Xu Siqiang, Mr. Fang Yuguang, Ms. Wang Fen, Mr. Fan Zhaoping and Mr. Qian Fuhao were elected as directors of the 3rd Board of Directors. Mr. Zhong Jingshen, Ms. Zeng Xilian, Mr. Yuan Yuhui, and Mr. Cheng Daping were elected as supervisors of the 3rd Supervisory Committee, and employee representatives Mr. Zhang Xiang and Mr. Xiang Zhenxian were confirmed as employee 14 supervisors. 4. The 1st Extraordinary Shareholders’General Meeting of 2001 held on November 28, 2001 examined and approved the resignation of Mr. Fan Zhaoping and Mr. Qian Fuhao as directors for the reason of work and retirement respectively. Mr. Lin Shaodong and Mr. Han Guimao were elected as directors of the Company. The meeting approved Mr. Yuan Yuhui’s resignation as supervisor for the reason of work and then elected Mr. Fan Zhaoping as supervisor of the Company. 5. The 2nd Meeting of the 3rd Board of Directors held on November 28, 2001 reviewed and approved the Proposal on Establishing Shanghai Branch of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. 6. There was neither procurement and sales of assets nor consolidation by merger in 2001. 7. There were no significant related transactions in 2001. 8. The Company maintained its autonomy in personnel and financial management and possesses integrated assets except that Dr. Fu Yuning, chairman of the Company, is also the chairman of the controlling shareholders due to requirement of work. For this matter, the Company had already furnished a written explanation to the China Securities Regulatory Commission. 9. The Company did not trust, contract or lease other company’s assets or was trusted, contracted or leased with its own assets. 10. Since China Finance Ministry revoked the business license of Zhong Tian Qin Accountants’Firm, on November 12, 2001 when the 3rd Meeting of the 3rd Board of Directors was held, the Company approved to engage Shenzhen Dahua Tiancheng Accountants’Firm as its domestic audit firm for 2001 instead of Zhong Tian Qin while its international accountants’firm remained unchanged. The resolution of this engagement was reviewed and passed in the 1st Extraordinary Shareholders’ Meeting of 2001 on November 28, 2001, and then was announced on Shenzhen Securities Times and Hongkong Nanhua Morning Post dated November 29, 2001. Audit fees paid to Shenzhen Dahua Tiancheng Accountants’Firm and PricewaterhouseCoopers for 2001 are RMB100000 and HK$135000 respectively. 11. On December 5, 2000, Shenzhen Chiwan Petroleum Supply Base Co., Ltd entrusted its first large shareholder China Nanshan Development (Group) Co., Ltd to sign an assets consignment and management agreement with Nanfang Securities Co., Ltd. The Company provided funds of RMB10 million which are equity funds. The commission term is 12 months. According to the signed agreement, Nanfang Securities Co., Ltd promised to postpone the reimbursement date to May 28,2002, and Nanshan Development (Group) Co., Ltd promised to reimburse a total of RMB10.3 million, namely RMB 10 million of principal fund and RMB300000 of occupancy expense, to Shenzhen Chiwan Petroleum Supply Base Co., Ltd in 3 working days right after May 28, 2002. Events about money management entrustment were announced on Shenzhen Securities Times dated January 22, 2002. 12. There was neither significant contract signed nor significant guarantee event happened in the report year. 13. There were no change in the Company’s name and stock’s short form in 2001. 14. In 2001, the Company made all necessary disclosures. No significant events that should be disclosed were missing. PART X. Financial Statements 15 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2001 16 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2001 Contents Pages Report of the international auditors 18 Income statement 19 Balance sheet 20 Statement of changes in shareholders’equity 21 Cash flow statement 22 Notes to the financial statements 23 to 38 Supplementary information 39 17 PricewaterhouseCoopers 22nd Floor Prince’s Building Central Hong Kong Telephone (852) 2289 8888 Facsimile (852) 2810 9888 REPORT OF THE INTERNATIONAL AUDITORS TO THE MEMBERS OF SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. (Incorporated as a joint stock limited company in the People’ s Republic of China) We have audited the accompanying balance sheet of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. as of 31st December 2001 and the related income and cash flow statements for the year then ended. These financial statements set out on pages 2 to 21 are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements present fairly in all material respects the financial position of the company as of 31st December 2001 and of the results of its operations and its cash flows for the year then ended in accordance with International Accounting Standards. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 18 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2001 Notes 2001 2000 US$ US$ Revenue 3 12,415,170 11,676,016 Operating costs (5,499,937) (5,261,755) -------- -------- 6,915,233 6,414,261 Administrative expenses (953,045) (793,267) Other operating expenses (17,869) (30,810) -------- -------- Operating profit 4 5,944,319 5,590,184 Finance income - net 6 469,574 305,577 Share of results before tax of associates 1,824,480 412,476 -------- -------- Profit before tax 8,238,373 6,308,237 Tax 7 (970,189) (891,187) -------- -------- Net profit 7,268,184 5,417,050 -------- -------- Earnings per share 8 3.15 cents 2.35 cents -------- -------- The notes on pages 23 to 38 form an integral part of these financial statements. 19 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. BALANCE SHEET AS AT 31ST DECEMBER 2001 Notes 2001 2000 US$ US$ ASSETS Non-current assets Property, plant and equipment 9 23,975,358 26,618,817 Investment property 10 16,030,581 16,490,100 Investments in associates 11 13,097,827 11,329,585 ------- ------- 53,103,766 54,438,502 --------------- --------------- Current assets Inventories 12 144,936 141,947 Due from related companies 21 157,861 166,214 Due from associates 21 30,006 37,237 Other receivables, prepayments and deposits 333,662 304,578 Due from holding company 21 1,241,327 3,051 Trade receivables 13 2,113,929 1,688,431 Investment fund 14 - 1,207,729 Cash and bank balances 17,444,322 11,380,281 ------- ------- 21,466,043 14,929,468 --------------- --------------- Total assets 74,569,809 69,367,970 ------- ------- EQUITY AND LIABILITIES Capital and reserves Share capital 18 27,033,998 27,033,998 Reserves 19 41,503,462 34,235,278 -------- -------- 68,537,460 61,269,276 --------------- --------------- Non-current liabilities Deferred tax liabilities 15 1,309,480 1,459,527 Rentals received in advance 16 2,900,236 591,742 -------- -------- 4,209,716 2,051,269 --------------- --------------- Current liabilities Trade payables and accruals 1,005,855 907,483 Taxation 360,333 577,975 Dividends payable 61,573 4,392,320 Rentals received in advance 16 394,872 169,647 ------- ------- 1,822,633 6,047,425 --------------- --------------- Total liabilities 6,032,349 8,098,694 --------------- --------------- Total equity and liabilities 74,569,809 69,367,970 ------- ------- Dr. Fu Yuning Mdm.Wang Fen Director Director The notes on pages 23 to 38 form an integral part of these financial statements. 20 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. STATEMENT OF CHANGES IN SHAREHOLDERS’EQUITY FOR THE YEAR ENDED 31ST DECEMBER 2001 Share Capital Other Retained capital reserve reserves earnings Total US$ US$ US$ US$ US$ Year ended 31st December 2000 Balance at 1st January 2000 27,033,998 26,269,019 6,578,830 304,019 60,185,866 Net profit for 2000 - - - 5,417,050 5,417,050 Appropriations - - 1,083,410 (1,083,410) - Dividends - - - (4,333,640) (4,333,640) ------- ------- ------- ------- ------- Balance at 31st December 2000 27,033,998 26,269,019 7,662,240 304,019 61,269,276 ------- ------- ------- ------- ------- Year ended 31st December 2001 Balance at 1st January 2001 27,033,998 26,269,019 7,662,240 304,019 61,269,276 Net profit for 2001 - - - 7,268,184 7,268,184 Appropriations - - 1,453,637 (1,453,637) - ------- ------- ------- ------- ------- Balance at 31st December 2001 27,033,998 26,269,019 9,115,877 6,118,566 68,537,460 ------- ------- ------- ------- ------- An analysis of the movements in each category within reserves is presented in note 19. The notes on pages 23 to 38 form an integral part of these financial statements. 21 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2001 Note 2001 2000 US$ US$ Cash flows from operating activities Cash generated from operations 20 11,522,110 8,045,807 Income tax paid (1,329,773) (827,609) -------- -------- Net cash from operating activities 10,192,337 7,218,198 -------------- -------------- Cash flows from investing activities Purchase of property, plant and equipment (295,450) (336,282) Dividend received from an associate 48,133 48,309 Decrease/(increase) in bank deposits with maturity over 3 months 5,815,395 (274,693) Interest received 449,768 410,732 -------- -------- Net cash from/(used in) investing activities 6,017,846 (151,934) -------------- -------------- Cash flows from financing activities Dividend paid (4,330,747) (3,680,942) -------- -------- Net cash used in financing activities (4,330,747) (3,680,942) -------------- -------------- Increase in cash and cash equivalents 11,879,436 3,385,322 -------- -------- Movement in cash and cash equivalents At start of year 5,456,190 2,070,868 Increase 11,879,436 3,385,322 -------- -------- At end of year 17,335,626 5,456,190 -------- -------- Analysis of the balances of cash and cash equivalents Cash and bank balances 17,444,322 11,380,281 Bank deposits with maturity over 3 months (108,696) (5,924,091) -------- -------- 17,335,626 5,456,190 -------- -------- The notes on pages 23 to 38 form an integral part of these financial statements. 22 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 1 General and basis of preparation of financial statements Shenzhen Chiwan Petroleum Supply Base Co., Ltd. (“the company”) is engaged in leasing of office, provision of management services, storage and marine logistics services. The financial statements have been prepared in accordance with International Accounting Standards (“IAS”) issued by the International Accounting Standards Committee. This basis of accounting differs from that used in the preparation of the statutory financial statements in the People’ s Republic of China (the “PRC”). The PRC financial statements of the company have been prepared in accordance with the accounting principles and regulations as applicable in the PRC. The financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. In 2001, the company adopted IAS 40 – Investment property. The effect of adopting the standard is disclosed in notes 9 and 10. 2 Principal accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below: (a) Investments in associates Investments in associated undertakings are accounted for by the equity method of accounting. These are undertakings over which the company has between 20% and 50% of the voting rights, and over which the company exercises significant influences, but which it does not control. Provisions are recorded for long-term impairment in value. Equity accounting involves recognising in the income statement the company’s share of the associates’ profit or loss for the year. The company’ s interest in the associates is carried in the balance sheet at an amount that reflects its share of the net assets of the associates. A list of the company’ s associates is shown in note 11. (b) Foreign currencies The reporting currency being adopted by the company is United States dollar in which most of the company’ s transactions are denominated. Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the transactions: gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. Such balances are translated at year end exchange rates. (c) Property, plant and equipment All property, plant and equipment is recorded at cost less accumulated depreciation and impairment loss. Depreciation is calculated on the straight-line method to write off the cost of each asset to their residual values over their estimated useful life as follows: Land use rights 14-25 years Buildings and wharfs 30-50 years Machinery 12-20 years Motor vehicles and cranes 10 years Leasehold improvements 10 years Office equipment and furniture 5 years 23 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 2 Principal accounting policies (continued) (c) Property, plant and equipment (continued) The company took over assets and liabilities from a Sino-foreign joint venture company at valuation (as approved by the PRC State-Owned Assets Administration Bureau) when the company was incorporated as a joint stock limited company in 1995. The valuation was a one-off exercise on formation to determine the value of assets and liabilities taken over by the company. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in determining operating profit. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised, during the period of time that is required to complete and prepare the property for its intended use, as part of the cost of the asset. (d) Investment property Investment property is held for long term rental yields and is not occupied by the company. Investment property is treated as a long term investment and is carried at cost less accumulated depreciation and impairment loss. Depreciation is calculated on the straight-line method. Impairment loss is recognised when the carrying value of the investment property is lower than the fair value. The fair value of investment property is determined by the discounted cash flow method based on the reasonable anticipative investment return rate. (e) Financial assets and liabilities Financial assets and liabilities carried on the balance sheet include cash and bank balances, receivables, investment fund, amount due from related companies, rental received in advance, trade payables and accruals and dividend payable. The particular recognition methods adopted are disclosed in the individual policy statement associated with each item. (f) Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises suppliers’invoiced value, freight and insurance charges and is assigned to individual items on the weighted average basis. Net realisable value is the estimate of the selling price in the ordinary course of business less selling expenses. (g) Trade receivables Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts at the year end. Bad debts are written off during the year in which they are identified. 24 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 2 Principal accounting policies (continued) (h) Investment fund Investment fund is carried at fair value. Fair value is based on quoted market prices of investments included in the fund at the balance sheet date. Realised and unrealised gains and losses arising from changes in the fair value of the investment fund is included in the income statement in the period in which they arise. (i) Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and deposits held at call with banks. (j) Pension obligations The company’s contributions to a defined contribution pension scheme are charged to the income statement in the year to which they relate. (k) Deferred income taxes Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. (l) Revenue recognition Revenue from the provision of services is recognised upon performance of services. Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable. Rental income is recognised in accordance with the terms of the rental agreement. 25 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 3 Segment information (a) Primary reporting format - business segments Office Wharf, leasing handling and and marine Year ended management Storage logistics Unallocated 31st December 2001 services services services items Total US$ US$ US$ US$ US$ Revenue 1,700,408 5,045,965 5,668,797 - 12,415,170 Segment costs (1,067,623) (2,178,311) (2,254,003) (970,914) (6,470,851) -------- -------- -------- -------- -------- Operating profit 632,785 2,867,654 3,414,794 (970,914) 5,944,319 Finance income - net 469,574 Share of results before tax of associates 1,824,480 -------- Profit before tax 8,238,373 Tax (970,189) -------- Net profit 7,268,184 -------- Segment assets 10,053,562 22,224,741 6,935,554 22,258,125 61,471,982 Associates 13,097,827 -------- Total assets 74,569,809 -------- Segment liabilities 989,491 2,752,230 28,831 2,261,797 6,032,349 -------- Total liabilities 6,032,349 -------- Capital expenditure 244,941 15,593 8,337 26,579 295,450 Depreciation 597,849 1,824,048 807,437 117,375 3,346,709 -------- 26 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 3 Segment information (continued) (a) Primary reporting format - business segments (continued) Office Wharf, leasing handling and and marine Year ended management Storage logistics Unallocated 31st December 2000 services services services items Total US$ US$ US$ US$ US$ Revenue 1,635,588 4,607,360 5,433,068 - 11,676,016 Segment costs (925,627) (2,159,990) (2,176,138) (824,077) (6,085,832) -------- -------- -------- -------- -------- Operating profit 709,961 2,447,370 3,256,930 (824,077) 5,590,184 Finance income - net 305,577 Share of results before tax of associates 412,476 -------- Profit before tax 6,308,237 Tax (891,187) -------- Net profit 5,417,050 -------- Segment assets 10,570,038 23,432,431 7,691,720 16,344,196 58,038,385 Associates 11,329,585 -------- Total assets 69,367,970 -------- Segment liabilities 818,445 325,848 81,003 6,873,398 8,098,694 -------- Total liabilities 8,098,694 -------- Capital expenditure 32,429 237,455 72,627 132,207 474,718 Depreciation 496,858 1,839,070 790,948 126,833 3,253,709 -------- There are no significant sales or other transactions between the business segments. Unallocated segment costs mainly represent corporate expenses. Segment assets consist primarily of property, plant and equipment, investment property, inventory of raw materials, receivables and operating cash. Segment liabilities comprise operating liabilities. Capital expenditure comprises additions to property, plant and equipment. (b) Secondary reporting format - geographical segments The company provides the above services in the PRC, its country of incorporation. (c) Analysis of revenues 2001 2000 US$ US$ Revenue from services 12,415,170 11,676,016 -------- -------- Revenue arising from interest income is disclosed in note 6. 27 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 4 Operating profit The following items have been included in arriving at operating profit: 2001 2000 US$ US$ Depreciation - owned assets 2,887,190 2,794,190 - investment property 459,519 459,519 Loss on disposal of property, plant and equipment 51,719 2,553 Staff costs (note 5) 1,512,722 1,357,926 Costs of inventories recognised as expenses (included in operating costs) 177,004 118,254 Repairs and maintenance expenditure on property, plant and equipment - owned assets 108,015 109,977 Repairs and maintenance expenditure on investment property 64,521 48,836 Provision for doubtful debts (included in administrative expenses) 130,710 - ------- ------- 5 Staff costs 2001 2000 US$ US$ Wages and salaries 1,480,978 1,328,764 Pension costs - defined contribution scheme (note 23) 31,744 29,162 ------- ------- 1,512,722 1,357,926 ------- ------- The average number of employees in 2001 was 116 (2000: 115). 6 Finance income - net 2001 2000 US$ US$ Interest income 476,862 352,964 Net exchange gain/(loss) 336 (45,459) Others (7,624) (1,928) ------- ------- 469,574 305,577 ------- ------- 28 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 7 Tax 2001 2000 US$ US$ Current tax 1,112,131 1,034,412 Deferred tax (note 15) (150,047) (150,047) Share of tax of associates 8,105 6,822 ------- ------- 970,189 891,187 ------- ------- (a) In accordance with the relevant income tax laws applicable in the Shenzhen Special Economic Zone of the PRC, the profits of the company are subject to an income tax at the rate of 15%. (b) The tax on the company’s profit before tax differs from the theoretical amount that would arise using the basic tax rate of the company as follows: 2001 2000 US$ US$ Profit before taxation 8,238,373 6,308,237 ------- ------- Tax calculated at a tax rate of 15% (2000: 15%) 1,235,756 946,236 Income not subject to tax (265,567) (55,049) ------- ------- Tax charge 970,189 891,187 ------- ------- 8 Earnings per share Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the number of ordinary shares in issue during the year. 2001 2000 Net profit attributable to shareholders US$ 7,268,184 US$ 5,417,050 Number of ordinary shares in issue 230,600,000 230,600,000 Earnings per share US$ 3.15 cents US$ 2.35 cents --------- --------- Diluted earnings per share for both years were not disclosed as there were no dilutive potential ordinary shares. 29 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 9 Property, plant and equipment Office Motor Leasehold equipment Land use vehicles improve- and rights Buildings Wharfs Machinery and cranes ments furniture Total US$ US$ US$ US$ US$ US$ US$ US$ Cost At 1st January 2001 34,471,982 21,797,006 5,829,640 6,165,483 1,740,884 1,487,763 2,525,916 74,018,674 Reclassification to investment property (note 10) - (20,896,558) - - - - - (20,896,558) -------- -------- -------- ------- ------- ------- ------- -------- 34,471,982 900,448 5,829,640 6,165,483 1,740,884 1,487,763 2,525,916 53,122,116 Additions - - - - - 206,099 89,351 295,450 Disposals - (2,241) - (131,127) (1,813) - (39,487) (174,668) -------- -------- -------- ------- ------- ------- ------- -------- At 31st December 2001 34,471,982 898,207 5,829,640 6,034,356 1,739,071 1,693,862 2,575,780 53,242,898 -------------- -------------- -------------- ------------- --------------- ------------- ------------- -------------- Accumulated depreciation At 1st January 2001 17,430,136 4,829,468 2,644,743 3,644,471 803,488 316,493 1,240,958 30,909,757 Reclassification to investment property (note 10) - (4,406,458) - - - - - (4,406,458) -------- -------- -------- ------- ------- ------- ------- -------- 17,430,136 423,010 2,644,743 3,644,471 803,488 316,493 1,240,958 26,503,299 Charge for the year 1,721,248 26,221 127,042 391,828 133,539 154,689 332,623 2,887,190 Disposals - (1,610) - (89,385) (561) - (31,393) (122,949) -------- -------- -------- ------- -------- ------- ------- -------- At 31st December 2001 19,151,384 447,621 2,771,785 3,946,914 936,466 471,182 1,542,188 29,267,540 -------------- -------------- -------------- ------------- --------------- ------------- ------------- -------------- Net book value At 31st December 2001 15,320,598 450,586 3,057,855 2,087,442 802,605 1,222,680 1,033,592 23,975,358 -------- -------- -------- ------- -------- ------- ------- -------- At 31st December 2000 17,041,846 477,438 3,184,897 2,521,012 937,396 1,171,270 1,284,958 26,618,817 -------- -------- -------- ------- -------- ------- ------- -------- 30 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 9 Property, plant and equipment (continued) The company entered into agreements on 10th February 1984 and 18th July 1997 with China Nanshan Development (Group) Incorporation ("Nanshan Development ") in respect of the right to use the coastal land in Nanshan, the PRC of approximately 390,000 square metres in area, which includes the water front on which the land and wharf of the company are situated, for a period of 25 years. However, at that time, the prevailing PRC laws did not provide for a mechanism for issuing official land use right documentation. Therefore, as at the date of the approval of these financial statements, the company has not obtained formal land use right documentation, except for an outline "red line sketch" planning document, in respect of the above mentioned land and wharf areas. Nanshan Development entered into deeds with the company on 18th January 1995 and 18th July 1997 in which Nanshan Development agreed to indemnify the company until the end of the 25 years period referred to above in respect of all losses, costs, expenses and any other liabilities that may be incurred or suffered by the company arising out of or in connection with the use and occupation of the above-mentioned land and wharf areas by the company. 10 Investment property Cost US$ Reclassification from property, plant and equipment (note 9) and at 31st December 2001 20,896,558 -------------- Accumulated depreciation Reclassification from property, plant and equipment (note 9) 4,406,458 Charge for the year 459,519 -------- At 31st December 2001 4,865,977 -------------- Net book value At 31st December 2001 16,030,581 -------- At 31st December 2000 16,490,100 -------- The company adopted the new accounting standard, IAS 40 - Investment property, issued by the International Accounting Standards Committee, commencing from 1st January 2001. To conform with the treatment in IAS 40, the investment property which has previously been grouped under property, plant and equipment is now separately shown as investment property. As such, the comparative amounts of property, plant and equipment for the year ended 31 December 2000 have been restated accordingly. The fair value of the investment property as at 31 December 2001 as determined by management of the company was USD30,486,000. 31 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 11 Investments in associates 2001 2000 US$ US$ Share of net assets 11,497,827 9,729,585 Amount due from an associate 1,600,000 1,600,000 -------- -------- 13,097,827 11,329,585 -------- -------- The amount due from an associate is unsecured, interest-free and not repayable within one year from the balance sheet date. The company had the following unlisted associates: Interest held Nature of business Shenzhen Chiwan Offshore Petroleum 20% Provision of marine engineering Equipment Repair/Manufacture services Company Ltd. (note a) Shenzhen Chiwan Sembawang 32% Provision of marine engineering Engineering Co., Ltd. (note b) and fabrication services Notes: (a) This is a Sino-foreign equity joint venture company established in Shenzhen, the PRC on 12th August 1992 for an operating period of 15 years. (b) This is a Sino-foreign equity joint venture company established in Shenzhen, the PRC on 2nd July 1994 for an operating period of 30 years. There were no changes in the percentage of ownership interests in the associates during the two years ended 31st December 2001. 12 Inventories 2001 2000 US$ US$ Spare parts (at cost) 144,936 141,947 ------- ------- 13 Trade receivables 2001 2000 US$ US$ Total receivables 2,244,639 1,688,431 Less: doubtful debt provision (130,710) - ------- ------- 2,113,929 1,688,431 ------- ------- The credit risk of the trade receivable is disclosed in note 17. 32 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 14 Investment fund Prior year balance represented a designated amount contributed to an investment fund (the “Fund”) of which the company’s major shareholder was appointed as a trust manager of the Fund. During the year 2000, a total of RMB30 million was contributed by the company and its major shareholder to the Fund and a securities company in Shenzhen was appointed to manage the Fund which had been invested in shares and debentures listed in the PRC. Pursuant to an agreement signed between the company and its major shareholder, the amount as at 31 December 2001 was taken up by its major shareholder. 15 Deferred tax liabilities Deferred income tax represents long-term tax liabilities arising from accelerated depreciation allowances under the liability method using a principal tax rate of 15% (2000: 15%). The movement on deferred tax account is as follows: 2001 2000 US$ US$ At 1st January 1,459,527 1,609,574 Transferred to current year tax (note 7) (150,047) (150,047) ------- ------- At 31st December 1,309,480 1,459,527 ------- ------- 16 Rentals received in advance 2001 2000 US$ US$ Rentals received in advance 3,295,108* 761,389 Less: Amount falls due within one year classified under current liabilities (394,872) (169,647) ------- ------- 2,900,236 591,742 ------- ------ * The balance includes a rental of US$2,494,000 received in advance from an associate, of which US$348,000 falls due within one year. 33 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 17 Financial assets and liabilities (a) Interest rate risk Financial assets and liabilities do not have material interest rate risk. (b) Credit risk (i) Cash and bank balances Substantial amounts of the company’s cash and cash equivalents are deposited with reputable banks. The company does not have material credit risks. (ii) Trade receivables Trade receivables of the company are spread among a number of customers in the PRC. Other than that, the company has no significant concentration of risk. (c) Foreign exchange risk Certain expenses of the company are denominated in currencies other than United States dollars. Although the company generates foreign currency revenues from services rendered, the company may generate a deficit or surplus of revenues in foreign currencies over payments in such currencies from time to time. The company is not able to hedge its foreign currency exposure effectively other than by retaining its foreign exchange denominated earnings and receipts to the extent permitted by the State Administration of Foreign Exchange. The company’s results of operations may also be affected by changes in the value of currencies other than the United States dollars, depending on the currencies of its foreign currency denominated receipts and obligations. (d) Fair values Financial assets of the company include cash and bank balances, trade receivables, other receivables, prepayments and deposits, investment fund, amounts due from associates, amounts due from related companies and amount due from holding company. Their fair values are not materially different from their carrying amounts. Financial liabilities of the company include trade payables and accruals, rental received in advance and dividends payable. Their fair values are not materially different from their carrying amounts. 18 Share capital 2001 2000 US$ US$ Registered, issued and fully paid: A share: 119,420,000 shares of RMB 1 each 14,000,000 14,000,000 B share: 111,180,000 shares of RMB 1 each 13,033,998 13,033,998 -------- -------- 27,033,998 27,033,998 -------- -------- Pursuant to the company’s articles of association, both A and B shares are registered ordinary shares and shall carry equal rights. 34 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 19 Reserves Capital Statutory Discretionary Statutory public Retained reserve surplus reserve surplus reserve welfare fund earnings Total US$ US$ US$ US$ US$ US$ At 1st January 2000 26,269,019 2,960,523 2,138,044 1,480,263 304,019 33,151,868 Net profit for the year - - - - 5,417,050 5,417,050 Appropriations - 541,705 270,852 270,853 (1,083,410) - Dividends - - - - (4,333,640) (4,333,640) ------- ------- ------- ------- ------- ------- At 31st December 2000 26,269,019 3,502,228 2,408,896 1,751,116 304,019 34,235,278 ------- ------- ------- ------- ------- ------- At 1st January 2001 26,269,019 3,502,228 2,408,896 1,751,116 304,019 34,235,278 Net profit for the year - - - - 7,268,184 7,268,184 Appropriations - 726,819 363,409 363,409 (1,453,637) - ------- ------- ------- ------- ------- ------- At 31st December 2001 26,269,019 4,229,047 2,772,305 2,114,525 6,118,566 41,503,462 ------- ------- ------- ------- ------- ------- 35 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 19 Reserves (continued) (a) In accordance with the company’s articles of association, profit after tax shall be appropriated in the following sequence: (i) make up accumulated losses; (ii) provide for statutory surplus reserve (note b); (iii) provide for statutory public welfare fund (note c); (iv) provide discretionary surplus reserve (note d); and (v) pay dividends. (b) Statutory surplus reserve In accordance with the relevant PRC laws and financial regulations, the company is required to transfer 10% of the profit after tax to the statutory surplus reserve until the balance reaches 50% of the paid up share capital. For the year ended 31st December 2001, the directors propose to make a transfer of 10% (2000: 10%) of the company’s profit after tax prepared in accordance with the PRC accounting standards. Such reserve can be used to reduce any losses incurred and to increase share capital. Except for the reduction of losses incurred, any other usage should not result in this reserve balance falling below 25% of the registered capital. (c) Statutory public welfare fund In accordance with the relevant PRC laws and financial regulations, the company is required to transfer 5% to 10% of profit after tax to the statutory public welfare fund. For the year ended 31st December 2001, the directors propose to make a transfer of 5% (2000: 5%) of the company’s profit after tax prepared in accordance with the PRC accounting standards. The use of this fund is restricted to capital expenditure for employees’collective welfare facilities, ownership of which belong to the company. The statutory public welfare fund is not available for distribution to shareholders except in liquidation. (d) Discretionary surplus reserve In accordance with the relevant PRC laws and financial regulations, discretionary surplus reserve can be used to reduce any losses incurred and to increase share capital. However, the use of such reserve is subject to approval by shareholders in general meetings. For the year ended 31 December 2001, the directors propose to make a transfer of 5% (2000: 5%) of the company’s profit after tax prepared in accordance with PRC accounting standards. (e) Capital reserve This mainly represents premium on issue of shares net of issuing expenses. According to relevant PRC laws and financial regulations, capital reserve can be used to increase share capital. (f) Dividends Pursuant to the company’s articles of association, where the financial statements prepared in accordance with the PRC accounting standards differ from those prepared under IAS, for the purpose of approving the profit distribution, profit available for appropriation shall be deemed to be the lesser of the amounts in the two different financial statements. 36 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 20 Cash generated from operati ons Reconciliation of profit before tax to cash generated from operations: 2001 2000 US$ US$ Profit before tax 8,238,373 6,308,237 Depreciation (note 9, 10) 3,346,709 3,253,709 Loss on disposal of property, plant and equipment (note 4) 51,719 2,553 Provision for doubtful debts (note 4) 130,710 - Interest income (note 6) (476,862) (352,964) Share of result before tax of associates (1,824,480) (412,476) Changes in working capital: (Increase)/decrease in inventories (2,989) 71,290 Decrease in amounts due from related companies 8,353 97,905 Decrease/(increase) in amounts due from associates 7,231 (12,308) (Increase)/decrease in amount due from holding company (1,238,276) 29,519 (Increase)/decrease in trade receivables (556,208) 173,373 (Increase)/decrease in other receivables, prepayments and deposits (1,990) 56,040 Decrease/(increase) in investment fund 1,207,729 (1,207,729) Increase/(decrease) in rentals received in advance 2,533,719 (61,033) Increase in trade payables and accruals 98,372 99,691 ------- ------- Cash generated from operations 11,522,110 8,045,807 ------- ------- 21 Related party transactions The company is controlled by China Nanshan Development (Group) Incorporation (incorporated in the PRC) which owns 52% of the company’s shares. (a)The following transactions were carried out with related parties: 2001 2000 US$ US$ Service income from related companies 1,672,207 1,332,601 ------- ------- Rental income from a related company 116,000 - ------- ------- Related companies are companies in which the holding company has beneficial interests. Service provided to and rental charge on related companies were carried out on commercial terms and conditions and at market prices. 37 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 21 Related party transactions (continued) (b) Amounts due from associates, related and holding companies The balances are unsecured, interest-free and repayable within one year. (c) Directors’remuneration In 2001, no remuneration was paid to the directors (2000: US$6,194). 22 Capital commitments At 31 December 2001, capital expenditure approved by the board of directors but not contracted for amounted to RMB160 million (US$ equivalent 19,323,671) in relation to an investment to establish a branch in Shanghai. 23 Pension scheme The company has participated in a retirement scheme administered by the Shenzhen Municipal Government. The contributions made by the company to the scheme are based on 7% to 12% of the basic salaries of the company’s PRC employees. The company has no other obligations other than the above-mentioned contributions. 24 Subsequent event On 15th March 2002, the board of directors proposed a dividend of US$5,087,729 in respect of the profit for 2001. This proposed dividend is subject to approval by the shareholders in the annual general meeting. 25 Approval of financial statements The financial statements were approved by the board of directors on 17 April 2002. 38 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED 31ST DECEMBER 2001 The impact of IAS and other adjustments on the PRC statutory financial statements are as follows: Net profit for the year ended Net assets as at 31st December 31st December 2001 2001 US$ US$ As per the PRC statutory financial statements 7,268,184 63,145,711 Impact of IAS and other adjustments: Proposed dividend in respect of 2001 to be taken - 5,087,729 up in 2002 Others - 304,020 --------- --------- As restated after IAS and other adjustments 7,268,184 68,537,460 --------- --------- 39 PART XI. Documents Available for Verification: 1. 2001 Financial Statements carrying the signatures of the Company’s legal representative and Financial Controller; 2. Original copy of Auditor’s Statements sealed by CPA and signed by registered accountants; 3. Original copy and press release of all the documents disclosed in 2001 in the newspapers specified by the China Securities Regulatory Commission; and, 4. Original copy of Annual Report carrying the signature of the Chairman. Chairman of the Board: Dr Fu Yuning Shenzhen Chiwan Petroleum Supply Base Co., Ltd. 19th April 2002 40