深物业A(000011)ST物业Ｂ2001年年度报告（英文版）

SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD. 2001 ANNUAL REPORT April 27, 2002 Important: Board of Directors of Shenzhen Properties & Resources Development (Group) Ltd. (hereinafter referred to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. Independent director Li Fenglan was unable to assume the liabilities due to health problem and applied resignation to the Company, so Ms. Li was absent from the recent Board meeting. Shenzhen Peng Cheng Certified Public Accountants issued an Auditors’ Report with explanatory notes to which the Board of Directors and the Supervisory Committee made remarks in details. Investors are reminded to notice the part. This report has been prepared in Chinese version and English version respectively. In the event of difference in interpretation between the two versions, the Chinese report shall prevail. Contents Ⅰ. Company Profile----------------------------------------------------------------------------- Ⅱ. Financial Highlight and Business Highlight-------------------------------------------- Ⅲ. Particulars about the Changes in Capital Shares and Shareholders-------------- Ⅳ. Particulars about Director, Supervisor, Senior Executive and staff -------------- Ⅴ. Administrative Structure------------------------------------------------------------------- Ⅵ. Brief Introduction to the Shareholders’ General Meeting -------------------------- Ⅶ. Report of the Board of Directors ----------------------------------- --------------------- Ⅷ. Report of the Supervisory Committee--------------------------------------------------- Ⅸ. Important Events---------------------------------------------------------------------------- Ⅹ. Financial Report----------------------------------------------------------------------------- . Documents for Reference------------------------------------------------------------------ I. COMPANY PROFILE 1. Name of the Company In Chinese: 深圳市物业 发展 集团股份有限公司 Abbreviation in Chinese: 物业集团 In English: Shenzhen Properties & Resources Development (Group) Ltd. (PRD) 2. Legal Representative: Tian Chenggang 3. Secretary of Board of Directors: Guo Yumei Authorized Representative in Charge of Securities Affairs: Dong Wei Tel: (86) 755-2211020 Fax: (86) 755- 2212043, 2212997 Liaison address: 42/F and 39/F, International Trade Center, Renmin Rd. S., Shenzhen, PRC E-mail: szwygf@public.szptt.net.cn 4. Registered Address and Office Address of the Company: 39/F and 42/F, International Trade Center, Renmin Rd. S., Shenzhen, PRC Post Code: 518014 5. Media Designated for Disclosing Information of the Company: A-Share: Securities Times B-Share: Ta Kung Pao Internet Web Site Designated by CSRC for Publishing the Annual Report: http://www.cninfo.com.cn Place Where the Annual Report is Prepared and Placed: Office of Board of Directors, 42/F, International Trade Center, Renmin Rd. S., Shenzhen, PRC 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of Stock and Stock Code: Shen Wuye A (0011), Shen Wuye B (2011) 7. Registration Number forbusiness license of Enterprise juristic person: 19217413-5 Registration Number for Taxation: 440301192174135 Domestic Certified Public Accountants: Shenzhne Pengcheng Certified Public Accounts Office Address: 7/F, Block A, Zhongshen Garden, Caitian Rd., Shenzhen Overseas Certified Public Accountants: 12/F China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road, Central, Hong Kong II. SUMMARY OF FINANCIAL HIGHLIGHTS AND BUSINESS HIGHLIGHTS (I) Accounting Data as of the Report Year (Unit: In RMB) Total profit 105,768,566.85 Net profit 86,385,900.61 Net profit after deducting non-recurring gains and losses 82,601,869.77 Profit from main business lines 287,957,154.56 Profit from other business lines 3,831,514.14 Operating profit 113,026,105.17 Investment income -11,041,569.1 Subsidy income 0 2 Net incomes/expenditures from non-operation 3,784,030.84 Net cash flows arising from operating activities 133,563,365.47 Net increase in cash and cash equivalents 6,744,712.31 Note: items included in the non-recurring gains and losses and the amounts Income from non-operation 7,965,102.13 Expenditure of non-operation 4,181,071.29 Total 3,784,030.84 Differences in net profit prepared under PRC GAAP and IAS: Profit after tax Net assets as at as of 2001 Dec. 31, 2001 RMB’000 RMB’000 86,386 309,442 As reported under PRC GAAP Adjustments to confirm with IAS: 118 118 Unrealized profit from short-term investment 4 000 Adjustment on amount at year-begin 263 4,493 Adjustment on rent, cost and amortization of cost 4,142 1,375 Fixed assets 646 - Prior year’s adjustment on accounting for B share 6 227 626 Adjustment on accounting for A share as at the year-begin 19,145 Others 88 7,520 As reported under International Accounting Standards 78,199 292,798 (II) Major Accounting Date and Financial Indexes over the Past Three Years ended the Report Year (Unit: RMB) Items 2001 2000 1999 After Before adjustments After Before adjustments adjustments adjustments Income from main business lines 1,021,639,372.64 526,791,452.85 658,120,332.85 542,238,262.97 549,238,262.97 Net profit 86,385,900.61 5,392,916.15 53,712,789.16 41,798,372.29 42,954,267.75 Total assets 2,448,633,703.29 2,719,831,834.77 2,667,288,668.25 2,387,206,412.98 2,397,362,024.53 Shareholders’ equity (excluding minority 285,880,553.67 198,144,112.71 264,249,800.28 171,484,721.45 189,270,536.01 shareholders’ equity) Earnings per share (fully diluted) 0.159 0.010 0.100 0.077 0.079 Earnings per share (weighted average) 0.159 0.010 0.100 0.077 0.079 Net assets per share 0.528 0.366 0.488 0.317 0.349 Net assets per share after adjustment* 0.129 -0.077 0.040 0.021 0.074 Net cash flows per share arising from 0.247 0.591 0.591 0.080 0.080 operating activities Weighted average return on equity 35.79% 3.10% 24.10% 25.46% 26.07% Fully diluted return on equity 30.22% 2.72% 20.33% 24.37% 22.69% Return on equity after deducting 28.89% 1.64% 19.48% 24.33% 22.61% non-recurring gains and losses In accordant with Regulations on the Information Disclosure of Companies Publicly Issuing Shares (No. 9) released by China Securities Regulatory Commission, in the year 2001, the Company’s return on net assets and earnings per share as calculated based on calculating method of fully diluted and weighted average: Supplementary statement of profit statement for the year ended 2001 Items Return on equity Earnings per share 3 Fully diluted Weighted average Fully diluted Weighted average (%) (%) (RMB) (RMB) Profit from main business lines 100.73 119.32 0.5315 0.5315 Operating profit 39.54 46.83 0.2086 0.2086 Net profit 30.22 35.79 0.1594 0.1594 Net profit deducting the 28.89 34.23 0.1525 0.1525 non-recurring gains and losses Notes: *During the year, provisions have been made for part of receivable accounts, which have been overdue for more than three years and the net assets, have been reduced accordingly. On this basis, receivables overdue for more than three years, which have been provided for, are not deducted in calculating the adjusted net assets per share for the year. (III) Particulars about Change in shareholders’ equity Unit: In RMB Statutory Exchange Capital public Surplus Items Share capital welfare Retained profit translaction Total reserve public reserve public funds reserve At the beginning of the year 541,799,175.00 306,007,801.60 62,919,127.11 62,919,127.11 -716,640,606.73 4,058,615.73 198,144,112.71 Increased during the year 86,385,900.61 1,350,540.35 97,736,440.96 Decreased during the year At the end of the year 541,799,175.00 306,007,801.60 62,919,127.11 62,919,127.11 -630,254,706.12 5,409,156.08 285,880,553.67 Net profit as of Difference Reason of change the year in exchange translation III. PARTICULARS ABOUT CHANGES IN SHARE CAPITAL AND ABOUT THE SHAREHOLDERS (I) Changes in Share Capital 1. Particulars about changes in shares as of the year 2001 (Unit: Share) Increase/decrease of this period (+ , - ) Before the Others After the Share Bonus Capitalization of change Subtotal change Allotment shares public reserve I. Unlisted shares Nil Nil Nil Nil Nil 1. Promoters’ shares (State-owned shares) 323,747,713 323,747,713 2. Domestic juristic person’s shares 65,200,850 65,200,850 Overseas juristic person’s share Others 3. Raised juristic person’s shares 4. Employees’ shares 5. Preference shares or others Total unlisted shares 388,948,563 388,948,563 . Listed Shares Nil Nil Nil Nil Nil 1. Domestically listed RMB ordinary 91,355,000 91,355,000 shares 4 2. Domestically listed foreign 61,456,312 61,456,312 investment shares 3. Overseas listed foreign investment shares 4. Frozen senior executives shares 36,300 36,300 Total of listed shares 152,850,612 152,850,612 . Total of shares 541,799,175 Nil Nil Nil Nil Nil 541,799,175 2. Issuance and listing of shares Over the previous three years at the end of the report year, the Company issued neither new shares nor derived securities; and there were changes in neither total number nor the structure of the shares due to bonus shares and shares allotment. The existent employee’s shares of the Company are subscribed by senior executives when the Company initially issued the shares; the issuance date is Oct. 31, 1991; the issuance price is RMB 3.6 per share; the issuance quantity is 6.5 million shares. (II) About shareholders 1. Ended Dec. 31, 2001, the Company had totally 47000 shareholders, including 38252 shareholders of A-share, 8748 shareholders of B-share. 2. About the top ten shareholders are as follows: Holding Percentage of the Name of shareholders shares (share) total shares (%) Shenzhen Construction Investment Holdings 323,747,713 59.75 China Ping An Insurance Company 56,628,000 10.45 Tongqian Securities Investment Fund 3,146,610 0.58 Shenzhen Guoli Industrial Company 2,516,800 0.46 Duty-free Company 1,573,000 0.29 XU QIAN 1,100,000 0.20 Shanghai Zhaoda Investment Consultation Co., Ltd. 1,010,000 0.19 LIM PENG BOON 1,000,000 0.18 China Shenzhen International Co-operation Shares Co., Ltd. 887,172 0.16 Renjun Development Co., Ltd. 801,580 0.15 Among the top ten shareholders as listed above, Shenzhen Construction Investment Holdings is the shareholder of state-owned shares; Xu Qian, LIN PENG BOON and Renjun Development Co., Ltd. are the foreign shareholders. The top two shareholders hold the state-owned juristic person’s shares, and shares held by them was neither pledging or freezing in the report year. There exists no association relationship among the top ten shareholders. 3. The holding shareholder of the Company is Shenzhen Construction Investment Holdings (“the Holdings”), who was established in July 1986, registered capital is RMB 1.5 billion.; legal representative: Mr. Zhang Bao. The Holdings is an assets management company owned by the whole people, and involve in industry, general undertaking of construction material for civil use, development of real estate and property management, etc. As one of three largest state assets management companies, Shenzhen Construction Investment Holdings Company conducted the investors’ rights for state assets of the Company within the limits authorized by the municipal government and was entrusted by Shenzhne municipal government. The permanent organization of Sheznhen Municipality State Assets Management Committee is Shenzhen Municipality State Assets 5 Management Office (“Municipality State Assets Office”), who implemented management for three largest state assets management companies of Shenzhen on behalf of Shenzhen municipal government. Thus, the actual controller of Shenzhen Construction Investment Holdings Company is Municipality State Assets Office, whose office address is Investment Bldg., Shennan Av., Futian District, Shenzhen; post code: 518026. 4. The second shareholder of the Company is China Ping An Insurance Company, who was established in March 1988; legal representative: Mr. Ma Mingzhe; business scope: insurance; registration capital: RMB 15 billion. IV. PARTICULARS ABOUT DIRECTOR, SUPERVISOR, SENIOR EXECUTIVES AND STAFF (I) About director, supervisor and senior executives 1. Basis condition Title Name Gender Age Number of holding Office term shares (share) Director: Tian Chenggang Male 48 0 0 June 2001 to June 2004 Wu Gongcheng Male 47 0 0 Ditto Shao Xianghua Male 52 0 0 Ditto Zha Shengming Male 53 18150 18150 Ditto Zhao Ning Male 48 0 0 Ditto He Wenhua Male 57 18150 18150 Ditto Li Zhen Male 38 0 0 Ditto Zhang Tianliang Male 38 0 0 Ditto Li Fenglan Female 62 0 0 Ditto (independent director) Supervisor: Cao Zeyang Male 51 0 0 Ditto Tong Qinghuo Male 38 0 0 Ditto Liu Jiake Male 52 0 0 Ditto Jin Chenggui Male 54 0 0 Ditto Ma Deqin Female 48 0 0 Ditto Deputy General Manager Yang Shuncheng Male 53 0 0 Ditto Deputy General Manager Fang Yibing Male 40 0 0 Ditto Secretary of the Xiu Xuguang Male 46 0 0 Ditto Discipline Committee Secretary of the Board Guo Yumei Female 42 0 0 Ditto Dir. Mr. Shao Xianghua took the position of the deputy general manager of Shenzhen Construction Investment Holdings (the holding shareholders of the Company); Dir. Mr. Zhang Tianliang took the position of the director of the Office of the Holdings; Dir. Mr. Li Zhen took the position of the manager of Comprehensive Dept. of the Holdings. 2. Particulars about the annual salary In the report year, the annual salary and welfare of management personnel are determined based on Provisional Measure on Annual Salary of Management Personnel of Shenzhen Properties & Resources Development (Group) Ltd.; and the annual salary received by director and supervisor are determined based on their actual administrative and management titles in the Company. The total amount of the annual salary (including welfare and subsidy) received by directors, supervisors and senior executives from the Company is RMB 2,864,500. Among them, the total amount of the annual salary of the top three directors is RMB 772, 100; the total amount of the annual salary of the top three senior executives is RMB 627,000. There are 14 persons (including directors, supervisors 6 and senior executives) draw their annual salary from the Company. Of them, 3 persons enjoy their salary over RMB 250,000 per year respectively; 6 persons enjoy their salary over RMB 200,000 per year respectively; 3 persons enjoy their salary over RMB 170,000 per year respectively; 2 persons enjoy their salary over RMB 140,000 per year respectively. Director Shao Xianghua, Li Zhen and Zhang Tianliang draw their salary from their own companies. In the report year, the independent directors draw no pay from the Company. 3. In the report year, the Company reengaged the Board of Director and the Supervisory Committee, and new Board of Director and Supervisory Committee were elected in Annual Shareholders’ General Meeting. 4. The new Board of Directors of the Company held the 1st meeting, Tian Chenggang was elected as Chairman of the Board; Wu Gongcheng was engaged as General Manager; Zha Mingsheng, Zhao Ning, Yang Shuncheng and Fang Yibing were engaged as Deputy General Manager; Guo Yumei was engaged as Secretary of the Board. (II) About employee The Company has totally 2757 employees in office at present, including production personnel: 1747 persons; salesperson: 163 persons; technician: 626 persons; financial personnel: 83 persons; administrative personnel: 139 persons. 1323 persons graduated from 3-year regular collage or technical secondary school. Presently, the Company need to bear the cost of 82 retirees. 1. V. ADMINISTRATIVE STRUCTURE The Company keeps on establishing and improving various internal management system, and has established a series of internal control and management systems including Rules of Procedures of the Shareholders’ General Meeting, Rules of Procedures of the Board of Directors, Rules of Procedures of the Supervisory Committee, Detailed Implementation Rules of Information Disclosure as well as internal auditing and financial management etc. The systems are on the whole in line with requirements of Administration Rules for Listed Company. In the report, according to requirements of Suggestion of Supervision and Management for Establishing Independent Directors, the Company revised the Article of Association and added relevant contents regarding independent directors. After official releasing of Administration Rules for Listed Company, the Company made serious and careful improvement on the above administration systems against corresponding concrete requirements, and established Temporary Work Measures for Independent Directors. The Company keeps on raising standardized operating level through improving its legal person administrative structure in the following terms: 1. Shareholders and the Shareholders’ General Meeting The Company’s current management systems ensured shareholders could fully implemente their rights. The Company strictly implements its obligation of information disclosure towards significant management decision-making, and ensures all shareholders enjoy right of knowing facts and right of participation. Relying on economic web page, telephone and fax, the Company communicates with shareholders smoothly and efficiently. The Company has standardized the holding and voting procedures of the Shareholders’ General Meeting through Rules of Procedures of the Shareholders’ General Meeting, and safeguarded the legal rights and interests of all shareholders. 2. Controlling Shareholder and the Company 7 The Company’s controlling shareholder Shenzhen State Assets Management Company made supervision and management on state property right, and didn’t directly interfere in the Company’s daily production and management work. The Company has established decision-making and management system taking the Shareholders’ General Meeting, the Board of Directors, the Supervisory Committee, and management as the core, and safeguarded orderly operation of production and management. In the report year, the Company’s wholly owned subsidiary Shenzhen Huang Cheng Real Estate Development Co., Ltd. developed No.12~15 Building in B Quarter of Huang Cheng Yuan with total construction area of 94652 M2. According to the regulation of No.89 document released by State Ministry of Construction on Management Measures for Construction Bidding of Housing Construction and Municipal Infrastructure Engineering, the bidding was carried out by the Construction and Engineering Trading Center of Shenzhen Construction Bureau, and finally Shenzhen Jian Ye Construction and Engineering Company won the bidding at the price of RMB 193,980,000 and signed contract. The Company’s controlling shareholder Shenzhen Construction and Investment Holding Company’ subsidiary Shenzhen Zheng Ye Holding held 61.02% of shares in Shenzhen Jian Ye Construction and Engineering Company, and the Company thus had correlative transaction with the controlling shareholder because of Shenzhen Jian Ye Construction and Engineering Company’s winning the bidding. The bidding was fully in line with regulation of State Construction Ministry, presided and approved by the special institution of Shenzhen Construction Bureau and didn’t damaged the interests of medium and small shareholders. The Company had independent and complete business and self-management capabilities, and is absolutely separated from its controlling shareholder Shenzhen Construction and Investment Holding in respect of business, assets, finance, personnel and organization. The Company hadn’t provided any guarantee to shareholder in the report year. 3. Directors and the Board of Directors In the report year, the Company reelected the Board of Directors, and let shareholders have an understanding of candidates of directors by disclosing detailed information about them before holding the Shareholders’ General Meeting. The Company held Board meetings strictly according to Rules of Procedures of the Board of Directors. Directors worked diligently and conscientiously, attended Board meeting with a serious attitude, and expressed explicit opinions on each discussion topic. According to regulation of CSRC, the Company selected Ms. Li Fenglan to be independent director in the Shareholders’ General Meeting in June of 2001. Director Li Fenglan expressed independent opinions according to requirements of Shenzhen Securities Administration Office. The Company will augment independent directors in the 2003 Annual Shareholders’ General Meeting so that independent directors will make up one third of total directors. Pursuant to the concrete requirements of Administration Rules for Listed Companies, the Company will establish four special committees of the Board of Directors one by one when conditions are ripe. 4. Supervisors and the Supervisory Committee The major duty of the Supervisory Committee is to carry out superintendence on the Company’s finance, production and management as well as performance of directors, general manager and other senior executives in terms of compliance with laws and legislations, constantly have an understanding and grip on the Company’s management status and express independent opinions of superintendence. 5. Performance Evaluation, Encourage and Binding Mechanism 8 In order to establish an encourage and binding mechanism that are suited to rights, liabilities and interests, to efficiently mobilize enthusiasm and creativity of management staffs and to promote increase of production and operating benefits, the Company has established Temporary Measures of Annual Salary. Annual salary is linked up with the Company’s large-scale and long-term benefits, which is aimed to avoid short-term behaviors of management staffs and promote long-term and stable development. Detailed measures is: the Company, at the beginning of the year, makes overall assessment on accomplishment of last year’s management plan, and according to profit realized and overall factor of scores as well as the principle of Temporary Measures of Annual Salary, the Board of Director decides on the annual salary of management staff and the rewarding or punishment mode. In view of requirements of Administrative Rules for Listed Companies, the Temporary Measures of Annual Salary in effect are only for overall performance evaluation and assessment towards management staffs, and there are no performance evaluation and assessment measures for individuals, especially for individuals of directors and supervisors. The Company is setting about establishment of new Detailed Work Rules for General Manager and relevant work systems, and standardizing and binding work of management staffs. When conditions are ripe, the Company will establish performance evaluation and assessment system for individuals of directors, supervisors and senior executives in succession and will improve the current performance evaluation, encouragement and binding mechanism. 2. VI. BRIEFINGS ON THE SHAREHOLDERS’ GENERAL MEETING The notification on holding Annual Shareholders’ General Meeting was published in the designated intermediaries, Securities Times and Hong Kong Ta Kung Pao, dated May 29, 2001, and the notification on revising part of proposals was released on June 13, 2001. The Annual Shareholders’ General Meeting was held on the 35/F of Shenzhen International Trade Commercial Building on schedule dated June 29, 2001. There were six shareholders and shareholders’ proxies attending the meeting who represented 383,558,013 shares, taking 70.79% of total shares. Directors, supervisors and senior executives attended the meeting, and the professional lawyer Han Xiaojing from Beijing Tong Shang Lawyers’ Firm witnessed the meeting and issued legal position paper. In the meeting, the participators listened to 2001 Report of Management Plan, and the meeting unanimously approved, with 383,558,013 shares of affirmative votes that took 100% of shares with voting rights, 2000 Work Report of the Board of Directors, 2000 Work Report of the Supervisory Committee, 2000 Profit Distribution Plan, Proposal on Revising Articles of Association, and Proposal on Authorizing the Board of Directors to Engage Financial Auditors for 2001; Elected members of the 4th Board of Directors and the Supervisory Committee; Authorized the Board of Directors to handle investment projects and assets disposal with the limit of RMB 200,000,000 (including RMB 200,000,000). 3. VII. REPORT OF THE BOARD OF DIRECTORS (I) Business Highlights 1. As one of the listed companies engaging in professional property development with longest history and largest operation scale in Shenzhen, the Company boasts the systematic and professional ability undertaking development of real estates, construction supervision marketing and management of property. 9 The Company realized revenue and profit of respectively RMB 1021 million and RMB 288 million from its main business lines, breakdown as follows: (1) Classified according to product and industry: Real estate development: RMB787 million revenue and RMB 101 million profit; Property management and letting: RMB 98 million revenue and RMB 28 million profit. (2) Classified according to district: Shenzhen: RMB 965 million revenue and RMB 281million profit; Huadong: RMB 18 million, revenue and RMB 0.53 million profit; Hainan: RMB 44,259,600 revenue and RMB 328,300 profit. 2. Particulars about main product generating over 10% of the total revenue or profit from main business lines Item Industry Sales revenue Sales cost Gross profit rate Real estate development Real estate industry 727,359,455.97 491 728 824 32.30% Property management Real estate industry 52,502,944.93 39,705,217.69 24.4% Retail Commercial industry 98,777,923.69 62,738,409.26 36.5% Automobile transportation Transportation industry 47,834,742.48 26,063,017.06 45.5% Note: Both the main business lines and the structure remained unchanged in the report period over the previous year. 3. Operation and Achievement of main Wholly Owned and Holding Subsidiaries of the Company 4. Name of the Registered Principal activities Percent of Assets Net profit Company capital shares in hold 1.Shenzhen Huangcheng Development, construction, operation Real Estate Company 25,000,000 and management of commercial 697,410,000 90,650,000 697,410,000 Limited (“Huangcheng Co.”) supporting facilities of Huangang Port 2. Shenzhen ITC Vehicles Transportation and vehicles rental 29,850,000 163,860,000 34,510,000 163,860,000 Services Company service 3.Shenzhen International 12,830,000 Retailing of general merchandise 38,150,000 35,20,000 38,150,000 Trade Plaza 4.Shenzhen ITC Estate 20,000,000 Property letting and development 1228380,000 2,100,000 1,228,380,000 Management Company Note: Income from the investment in Hungcheng Company accounted for over 10% of the profit of the Company as of 2001. Huangcheng Company was mainly engaged in the development and sales of Huang Yu Yuan A zone in the year 2001 and realized a net profit of RMB 90 647 776.83, sales revenue from property of RMB 277 714 111.47, sales cost of RMB 136 948 687.55, and gross profit rate of 50.7%. (III) Major suppliers and clients Engaged in the real estate development, the Company generally contracts its property project as a whole to certain construction company winning in the bid. Such construction company is responsible for all the architecture materials. Most clients of the Company are individual, and the Company normally had no client purchasing batches of houses. Accumulated sales amounts to the top five clients accounts for 2.5% of the Company’s total sales revenue. (IV) Problems Occurred in the Operation and the countermeasures After years of internal restructure, the Company made great breakthrough in terms of striping bad assets and optimizing industrial structure, which supported its future development. However, the Company still has difficulties in following aspects: operation fund was in serious shortage and the historical problems still imposed heaven burden on the 10 Company; cost management and control systems were no fully implemented; the organization structure and staff need to be simplified and the staff lacked the crisis consciousness. To solve these problems, the Board of Directors adopted solutions as stated in Operation Plan and Main Operation Measures for 2002 (V) Investment 1. The Company neither raised proceeds nor used the previously raised proceeds in the report year. 2. Particulars about investment projects funded with non-raised proceeds Unit: RMB’000 Profit No Name Investment Progress Sales before tax 1 Fu Min Building 107,070 Completed 150,000 24,000 2 Fenghe Rili Garden 131,710 Zone C completed 158,610 31,000 3 Huang Yu Yuan 199,840 Zone A completed, underneath 277,720 122,410 construction for Zone B completed 4 Pastoral City 5,930 4 Phase started 18,510 530 5 Hainan Xin Da Building 62,850 Completed 44,260 330 Total 507,400 649,100 178,270 (VI) Analysis on Financial Status of the Board of Directors Changes on major financial indexes Unit: RMB Changes Item 2001 2000 Changes rate Main cause Recognition of payment of properties Total assets 2,448,630,000 2,719,830,000 -271,200,000 -9.97% developed in the year Inventory 1,339,640,000 1,539,290,000 -199,650,000 -12.97% Sales of developed products Cancellation of provision for impairment Long-term investment 149,990,000 171,550,000 -21,560,000 -12.57% losses of long-term investment Recognition of payment of properties Accounts received in advance 335,390,000 562,290,000 -226,900,000 -40.35% collected in advance Long-term liabilities 109,610,000 99,530,000 10,080,000 10.13% Refer to note (20, 21) Shareholders’ equity 285,880,000 198,140,000 87,740,000 44.28% Increase in profit as of the report period Profit from main business lines 287,960,000 127,870,000 160,090,000 125.20% Increase in real estate business Net profit 86,390,000 5,390,000 81,000,000 15.03% Increase in real estate business (VII) Impact from Changes of Macro Environment, Policy and Pursuant to relevant regulations in CK [2000] No. 25 Document, Circular on Printing and Distributing Enterprise Accounting Standards (“EAS”), [2001] No. 17 Document, Circular on Policy Cohesion in Implementing EAS issued by the Ministry of Finance and Reply to Questions concerning EAS and relevant regulations released on July 7, 2001, the Company started to implement the EAS from Jan. 1, 2001, according to which the Company withdrew provisions for devaluation of fixed assets, intangible assets, construction-in-progress (including construction materials) and entrusted loan; conducted the liabilities reorganization and non-monetary trade; made retroactive adjustment on accounting. Since no such provisions need to be withdrawn for the Company, the above changes in accounting policy imposed no impact on the Company’s profit, profit distribution or retained profit as at the beginning of the prior years. 11 (VIII) Shenzhen Peng Cheng Certified Public Accountants issued an Auditors’ Report with explanatory notes. The Company considers that: 1. The Company’s revenue from the sales of real estate was recognized upon the settlement bill reception and consent of the buyer in the previous years in accordance with Accounting Regulations for Joint Stock Limited Company while it is recognized upon the completion and the transfer of the property to the buyer, upon the settlement bill reception and consent of the buyer, the full payment (for installation purchase, upon the first installation and the advance from the bank) and qualification for the property certificate in the report year in accordance with Enterprise Accounting Standard – Income and Enterprise Accounting Regulation. In the opinion of the Certified Public Accountants, the reorganization of income in the report period is in compliance with Enterprise Accounting Regulation and the accounting principal of prudence, but is in contradiction with the accounting principal of cohesion. In the opinion of the Company’s Board and management group, such reorganization is not only in compliance with Enterprise Accounting Regulation and the accounting principal of prudence, but also in line with the Company’s actual situation. Though such change reduced the Company’s profit as of 2000 by RMB 48,319,873.01, it increases the Company’s anti-risk ability and is helpful for the Company’s consistent and healthy development. 2. The “Haiyi” case has been disclosed in 2000 Annual Report and 2001 Interim report. The company considered the former trial failed to identify the fact and adopted the wrong law, so applied to Guangdong Provincial Superior People’s Court for further trial, which was accepted by the Court. Now, the case is still under ruling. 3. The Company owned short-term loans totaling RMB 464 million by the end of Dec. 31, 2001.The Board and the management group of the Company took active countermeasures to solve this problem and planned to take effective ways in order to solve the problems step by step. At present, the company has come to an intention with the creditors as to actively find out ways to reached a solution. The said overdue loan will not affect the normal operation of the Company. (IX) 2002 Management Plan and Main Measures Based on the analysis towards macro-economic situation, the Company, in order to further expedite its enterprise reform and development pace, decided that 2002 was its “Reforming Year”. Focusing on the two major lines, namely production management and capital operation, and undertaking the three tasks of standardization of management, organization of personnel reform and construction of spiritual civilization, the Company grasped opportunities, expedited development, set the general work target of establishing a new type of enterprise that could deal with internationalized competition. The target of operating income for 2002 is RMB 600,000,000, and total investment arranged for 2002 is RMB 420,000,000. The Company shall practically carry out the following work: 1. With real estate development as the leading business, the Company will strengthen its main business lines, cultivate the enterprise’s core competitiveness, and enhance its production and management benefits by a wide range. (1) To seriously carry out new and renewed real estate projects in 2002, namely, 2nd phase of Huang Yu Yuan, Group D of Fenghe Rili, Dushi Jinbao, 2nd phase of Fuchang Building and 4th phase of Shanghai Tianyuan Dushi, which have started with total area of 500,000 M2 . (2) To reinforce sales and leasing work of current real estate. For those projects that have 12 already been completed, such as the 1st phase of Huang Yu Yuan, Group C of Fenghe Rili, as well as projects in Dalian, Hainan, Shenzhen and Huizhou, the Company shall strive to sell all of them in the year through diversified means. For those inventory projects, such as International Trade Commercial Building, 2nd Phase of International Trade Plaza, Huang Cheng Plaza, and Fu Min Building’s skirt buildings etc., the Company shall strive to make a breakthrough by means of promotion, exchange of assets, offset of debts with assets, sales reward etc. to either lease or sell the estates. (3) To set about planning work for increasing land reserve. (4) To further raise estate management level. 2. To reinforce dynamics in relaxing secondary enterprises, and build the Company into an enterprise with good assets structure. (1) To continually reinforce dynamics in relaxing secondary enterprises. (2) To keep on clear off historical problems, center on resolving the seven problems left over, and shall on the whole finish clearing up these problems in the year. 3. To center on cost management, and keep on doing a strict and good job of various fundamental management. (1) In respect of cost management, implement strict target control for all income and expenditure, establish standard system, and split out each expense and expenditure. (2) In respect of capital management, do a good job of additional loans, withdrawal of funds, inspection of application of funds, and dunning debts etc. 4. Based on reforming of personnel systems, optimize organizational structure, and build an able and efficient enterprise. (X) Daily Work of the Board of Directors 1. Meetings of the Board of Directors held in the report year: Date of meeting Main contents March 23, 2001 Reviewed 2000 annual report and summary, financial report, and profit distribution plan May 22, 2001 Reviewed the proposals of annual Shareholders’ General Meeting June 11, 2001 Studied candidates of members of the 4th Board of Directors June 29, 2001 Held the 1st Meeting of the 4th Board of Directors, elected Board chairman, general manager, vice general manager, and Board secretary August 9, 2001 Reviewed 2001 interim report, financial report, and profit distribution plan 2. Implementation of resolutions of the Shareholders’ General Meeting: Authorized by the Shareholders’ General Meeting, the Board of Directors had elected domestic and overseas Certified Public Accountants. 3. According to the resolution of the Shareholders’ General Meeting, RMB 53,710,000 of profit in 2001 had been used for making up losses of previous years. 4. As discussed and decided in the Board meeting, the Company shall neither distribute profit of 2001 nor transfer capital public reserve into share capital. The profit earnings will continually be used for making up losses of previous years. This proposal is subject to discussion in the annual Shareholders’ General Meeting. 5. VIII. REPORT OF THE SUPERVISORY COMMITTEE The Company elected the next Supervisory Committee on June 29, 2001. The Shareholders’ General Meeting passed the members of the 4th Supervisory Committee, and the 1st Meeting of the Supervisory Committee was held on the same day, in which Cao Ziyang was elected to be chairman of the Supervisory Committee. Among the other four supervisors, one was replaced for he was to retire, and other three supervisors were all 13 members of last Supervisory Committee. The Company held altogether six meetings of the Supervisory Committee in 2001: The 8th Meeting of the 3rd Supervisory Committee was held on March 20, 2001, which reviewed and passed 2000 Work Report of the Supervisory Committee, and arranged the work of 2001; The 9th Meeting of the 3rd Supervisory Committee was held on March 26, 2001, which reviewed and passed the annual report of 2000, summary and profit distribution plan; The 10th Meeting of the 3rd Supervisory Committee was held on June 8, 2001, which reviewed and passed the proposal on engaging independent directors in the Board of Directors, and the public notice was released in designated newspaper; The 1st Meeting of the 4th Supervisory Committee was held on June 29, 2001, which elected chairman of the new Supervisory Committee; The 2nd Meeting of the 4th Supervisory Committee was held on August 9, 2001, which reviewed and passed 2001 Interim Report and Summary, 2001 Interim Profit Distribution Plan, and the public notice on resolutions of the meeting were published in designated newspaper in time; The 3rd Meeting of the 4th Supervisory Committee was held on November 30, 2001, which reviewed and passed Rules of Procedures of the Supervisory Committee of Shenzhen Properties & Resources Development (Group) Ltd., and listened to the introduction of financial and capital status presented by the head of finance department. In the meeting, the Committee also took counsel on the dealings of significant funds, carried out discussion on how to implement obligations of the Supervisory Committee and how to reinforce functions of supervision, finalized concrete issues of year-end inspection and consultation. The members of the Supervisory Committee attended each Board meeting as non-voting delegates, in which the Supervisory Committee, according to the PRC Company Law, Administration Rules for Listed Company and the Articles of Association, implemented supervision on the operation of the Board of Directors and the management team in terms of compliance with law, reviewed relevant information of the Company’s significant economic activities as well as the 2000 summary of auditing work of internal auditing institution and various auditors’ report in the report year, and strictly implemented obligations of superintendence. The Supervisory Committee expressed independent opinions towards relevant issues in the following respects: 1. Operation according to law: The Board of Directors operates in accordance with the PRC Company Law, Articles of Association and relevant laws and legislations. The Company has established perfect internal control system in management of assets, production and operation, significant investment, human affairs, and finance etc. The Board of Directors and the management team could strictly comply with relevant national laws and legislations, and could implement resolutions of the Shareholders’ General Meeting seriously. In 2001, the Company had done a good job of production and management, ensured healthy development of its whole economy through strategies of focusing on key projects, inviting internal bidding for small project, and transforming management mechanism. The Company not only solved the problem of how to continually raise economic benefits when there’s shortage in funds, but also accumulated rather valuable experience for deepening of reform of management mechanism in the future and implementing long term and med-term development plans. In 2001, the Company realized RMB 86.39 million of net profit, and achieved the expected target. Through consulting documents of the Company’s significant economic activities, the Supervisory Committee hadn’t found directors and senior executives violating laws, legislations, Articles of Association and damaging the Company’s interests. 2. Financial inspection: Through inspecting the Company’s financial accounting documents and relevant rules and systems, the Supervisory Committee believed that the system of 14 financial work was sound and administration was improved, and the Company’s profit accounting and allocation of provision for various assets devaluation were all in line with regulations of financial system of listed company and internal control system. As audited by the Certified Public Accountants, the Company’s financial report truly, objectively and accurately reflected the financial status and business results. 3. The Company hadn’t raised funds publicly in the report year. 4. The Supervisory Committee haven’t found unreasonable transaction, inside trading, damaging of rights and interests of part of shareholders or runoff of the Company’s assets. 5. The Company’s wholly owned subsidiary Shenzhen Huang Cheng Real Estate Development Co., Ltd. developed No.12~15 Building in B Quarter of Huang Cheng Yuan with total construction area of 94652 M2. According to the regulation of No.89 document released by State Ministry of Construction on Management Measures for Construction Bidding of Housing Construction and Municipal Infrastructure Engineering, the bidding was carried out by the Construction and Engineering Trading Center of Shenzhen Construction Bureau, and finally Shenzhen Jian Ye Construction and Engineering Company won the bidding at the price of RMB 193,980,000 and signed construction contract. The Company’s controlling shareholder Shenzhen Construction and Investment Holding Company’ subisidiary Shenzhen Zheng Ye Holding held 61.02% of shares in Shenzhen Jian Ye Construction and Engineering Company, and thus the Company had correlative transaction with the controlling shareholder because of Shenzhen Jian Ye Construction and Engineering Company’s winning the bidding. The bidding was fully in line with regulation of State Construction Ministry, presided and approved by the special institution of Shenzhen Construction Bureau and didn’t damaged the interests of medium and small shareholders. 6. The Company is separated from its controlling shareholder in respect of business, personnel, organization, finance and assets. The Company has independent and complete business and self-management capabilities. 7. The Supervisory Committee believed the remarks made by the Board concerning the Auditors’ Report with explanatory notes issued by Shenzhen Peng Cheng Certified Public Accountants was genuine and in compliance with the actual situation of the Company. IX. SIGNIFICANT EVENTS (I) Significant lawsuits or arbitration 1. The “Haiyi Company” lawsuit as disclosed in 2000 annual report and 2001 interim report was still under ruling. 2. As for the “Jiyong Company” lawsuit as disclosed in 2000 annual report and 2001 interim report, Guangdong Provincial High People’s Court ruled in Aug. 2001 that the Equity Assignment Contract signed between the Company and Jiyong Company was valid and Jiyong Company should settle the balance assignment payment amounting to RMB 140 million. Aug. 8,2 001, the Company published such ruling. Presently, the Company has applied to Guangdong Provincial High People’s Court for force implementation. Aug. 2001, Guangdong Provincial High People’s Court ruled the Contract on Joint Construction of Jia Bin building to be valid and the Company owned no legal responsibility to 999 Zongli Industrial Company, who appealed again due to malcontent but was refused by Guangdong Provincial High People’s Court according to the law in Jan. 2002. 3. Gintian Case: in 1996, the Company signed Mutual Guarantee Contract with Gintian Industry (Group) Co., Ltd. (“Gintian Co.”). Oct. 30, 1998, the Company offered guarantee to Gintian Co. for the loan amounting to RMB 59 million borrowed from Changchun Branch, Communication Bank. Since Gintian Co. failed to repay the loan timely, Communication Bank brought litigation to Jilin 15 Provincial High People’s Court against Gintian Co. and the Company demanding Gintian Co. to repay the principal and interest of the loan and the Company to undertake the joint repayment liabilities. Aug. 3, 2001, Jilin Provincial High People’s Court ruled at the first trial that the Company was subject to the joint repayment liabilities. Feb. 2002, Supreme People’s Court refused the second litigation brought by Gintian Co. and sustained the first trial ruling. During the inquisition period, the Company discovered certain assets of Gintian and provided it to the creditor, Changchun Branch of Communication Bank and Jilin Provincial High People’s Court, who sealed the assets. Since the Company actively assisted the bank to realize its rights and the sealed assets was approved to be high quality, the bank reached agreement with the Company to prolong the implementation of the Company’s joint repayment liabilities. 4. Aug. 201, the Company brought litigation to Shenzhen Municipal Medium People’s Court against Shenzhen Luohu Hotel Co., Ltd. demanding the repayment of RMB 16.5 million and RMB 17 million according interest. Nov. 2001, the Court ruled in favor of the Company that the defendant should pay the Company RMB 16.5 million and the according interest. 5. June 2001, Hu Fuming brought litigation to Shenzhen Municipal Medium People’s Court against the Company claiming that he once advanced payment of HKD 11.3 million and RMB 20,000 for Shenzhen International Trade Building Trading Service Company (formal subsidiary of the Company, renamed as Shenzhen International Trade Development Company) in 1987, so demanding the Company to pay RMB 32 million for the principal and interest of the said advanced payment. Dec. 2001, Shenzhen Municipal Medium People’s Court ruled that the evidence provided by the plaintiff was not untenable and discontinued the case due to the bankruptcy of Shenzhen International Trade Development Company. 6. For the “Shenye Real Estate case” as disclosed in the 2001 Interim Report, by Hong Kong High Court arranged the court hearing on April 17, 2002. The case was undergoing the appeal procedure. The plaintiff has expressed its intend for imparlling to our party (Shenye Real Estate Company). So while the appeal procedure undergoing, the two parties will search for reconciliation. (II) Nov. 21, 2000, the Company published Contract on Canceling Joint Development and Operation of Shenzhen Huang Gang Port Service Zone in the designated media. The Contract has not been approved by relevant authorities of Shenzhen Municipal Government till now. (III) The Company had no significant related transaction in the report period except the Project of Construction Biding for B Zone of Hua Yu Yuan stated in V.2 in the report. (IV) Significant Guarantee 1. The Company and its subsidiaries provided pledge guarantee to the purchaser of its commercial building. By the end of Dec. 31, 2001, RMB 713.58 million was involved in the unsettled pledged amount. 2. Guarantee provided to Gintian Company was stated in IX (I) 3 in the report. (V) Neither the Company nor its shareholder holding over 5% of its shares made commitment in the report period. (VI) Engagement of Certified Public Accountants Approved in the provisional Board meeting, it was decided to engaged Shenzhen Peng Cheng Certified Public Accountants and GLASS RADCLIFFE CHAN Certified Public Accountants as domestic and overseas auditors for 2001 respectively, pending to the examination of the annual shareholders’ general meeting. 2000 2001 Note Shenzhen Hua Peng Certified Public Accountants RMB The Company bears no travel expenses MORISON HENG Certified Public Accountants 350,000 Shenzhen Peng Cheng Certified Public Accountants RMB The Company bears no travel expenses GLASS RADCLIFFE CHAN Certified Public Accountants 400,000 16 (VII) Neither the Company, the Board nor its members was inspected, penalized, criticized or publicly censured by the securities regulatory authorities in the report period. X. FINANCIAL REPORT (ATTACHMENT) 6. XI. DOCUMENTS FOR REFERENCE 1. Financial statements carried with signatures and sales of legal representative and chief accountant of the Company; 2. Original of Auditors’ Report carried with sale of Certified Public Accountants as well as signatures and sales of certified public accountants. 3. Originals of all documents as disclosed in public on the newspapers as designated by China Securities Regulatory Commission as well as the original manuscripts of the public notices published in the report period. Board of Directors of Shenzhen Properties & Resources Development (Group) Ltd. April 27, 2002 17 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Audited Financial Statements For the year ended December 31, 2001 18 AUDITORS’ REPORT TO THE SHAREHOLDERS OF SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD (Incorporated in the Peoples’ Republic of China with limited liability) We have audited the consolidated accounts on pages 3 to 24 of Shenzhen Properties Resources Development (Group) Ltd. (the “Company”) and its subsidiaries (together with the Company referred to as the “Group”) for the year ended December 31, 2001. These consolidated accounts are the responsibility of the Group’s directors. Our responsibility is to express an opinion on these consolidated accounts based on our audit. We conducted our audit in accordance with International Standards on Auditing as promulgated by the International Federation of Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and significant estimates made by directors, as well as evaluating the overall accounts presentation. We believe that our audit provides a reasonable basis for our opinion as follows : (1) No provision has been made against the cost of investment of RMB14,947,000 and the receivable amount of RMB16,422,000 due from an associated company which is now in liquidation. We are unable to obtain sufficient information to determine with reasonable certainty about the recoverable amount of these balances. (2) No provision has been made against a receivable amount of RMB21,059,000 which has been aged for more than 9 years. In our opinion, the Group will not receive full payment and the amount should be fully provided. (3) A provision of RMB10,000,000 has been made against the capitalised cost of the leasehold land amounting to RMB48,510,000, held in Hong Kong, which has not yet been developed since the acquisition made in 1992. No revaluation has been made and we consider there is an impairment in value. We are unable to confirm that the provision for the impairment in value of Rmb10,000,000 is adequate. Without qualifying our opinion on going concern basis, we draw attention to the disclosures made in the financial statements concerning the possible outcome of negotiations for continuing bank finance being made available in view of certain Group’s expired bank loans. The financial statements have been prepared on a going concern basis, the validity of which depends upon future funding being available. The financial statements do not include any adjustments that would result from a failure to obtain such funding. 1 AUDITORS’ REPORT TO THE SHAREHOLDERS OF SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD (Continued) (Incorporated in the Peoples’ Republic of China with limited liability) Subject to any adjustments that we might have found to be necessary had we been able to satisfy ourselves as to the matters referred to in the preceding paragraphs (1) and (3) above, and except for the absence of the provision referred to in the preceding paragraph (2), in our opinion, the consolidated accounts give a true and fair view of the state of affairs of the Group as at December 31, 2001, and of the profit and its cash flows of the Group for the year then ended in accordance with International Accounting Standards as promulgated by the International Accounting Standards Committee. GLASS RADCLIFFE CHAN Certified Public Accountants Hong Kong, 23 April 2002 2 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2001 Restated Notes 2001 2000 RMB’000 RMB’000 Turnover 5 1,015,727 548,278 Cost of sales (740,154 ) (423,576 ) Gross profit 275,573 124,702 Other net (expenses)/revenue (4,689) 5,295 Administrative expenses (104,052 ) (124,795 ) Distribution costs (12,770 ) (3,092 ) Waiver of bank loans - 21,266 Gain from exchange of land - 73,341 Profit from operations 7 154,062 96,717 Finance costs 8 (73,178 ) (86,221 ) Share of losses of associates (11,452 ) (5,156 ) Income from investments 9 27,503 33,403 Profit before taxation 96,935 38,743 Taxation 10 (17,371 ) (8,533 ) Profit after taxation 79,564 30,210 Minority interests (1,365 ) (744 ) Profit attributable to shareholders 78,199 29,466 Earnings per share Basic and diluted 11 RMB0.14 RMB0.05 3 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 2001 Restated Notes 2001 2000 RMB’000 RMB’000 ASSETS Non-current assets Fixed assets 12 297,987 240,070 Intangible assets 13 65,194 44,747 Interests in associates 15 159,542 233,650 Long-term investments 16 23,890 42,361 546,613 560,828 Current assets Inventories 17 1,303,201 1,286,989 Trade and other debtors 278,560 194,530 Trading securities 18 34,502 46,209 Cash and bank balances 294,094 286,093 1,910,357 1,813,821 Current liabilities Trade and other creditors 1,145,982 1,156,277 Taxes payable 30,518 27,500 Dividends payable 29,454 29,454 Short-term loans 19 953,600 962,320 Current portion of long-term liabilities 20 1,194 - 2,160,748 2,175,551 Net current liabilities (250,391 ) (361,730 ) Total assets less current liabilities 296,222 199,098 Non-current liabilities Long-term loans 20 1,400 5,995 Other long-term payables 2,024 1,836 3,424 7,831 292,798 191,267 CAPITAL AND RESERVES Share capital 21 541,799 541,799 Reserves 22 (271,918 ) (351,467 ) 269,881 190,332 Minority interests 22,917 935 292,798 191,267 Approved by the Board of Directors on DIRECTOR DIRECTOR 4 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2001 Restated Notes 2001 2000 RMB’000 RMB’000 Net cash inflow from operating activities 23 18,004 370,388 Investing activities Interest received 23,881 28,137 Dividends received - 2,322 Proceeds on disposal of other investments 10,117 11,779 Decrease/(Increase) in trading securities 15,329 (21,636 ) Proceeds on disposal of fixed assets 36,890 5,754 Purchases of fixed assets (48,689 ) (41,835 ) Acquisition of intangible assets (24,888 ) - Advances/(Repayment) to associates 62,656 9,507- Net cash inflow/(outflow) from investing activities 75,296 (5,972 ) Financing activities Interest paid on bank loans and other loans (73,178 ) (88,210 ) New short-term bank loans raised 24 259,908 10,983 New long-term loans raised - 3,243 New short-term loans raised 24 46,100 - Repayments of short-term bank loans 24 (310,374 ) (158,316 ) Repayments of short-term loans - (247 ) Repayments of long-term bank loans 24 (7,755 ) (1,613 ) Net cash used in financing activities (85,299 ) (234,160 ) Increase in cash and cash equivalents 8,001 130,256 Decrease in bank balances pledged as securities to loans 1,200 589 Cash and cash equivalents at beginning of year 273,793 142,948 Cash and cash equivalents at end of year 282,994 273,793 5 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 CONSOLIDATED STATEMENTS OF RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED DECEMBER 31, 2001 Restated Notes 2001 2000 RMB’000 RMB’000 Exchange differences arising on translation of 22 subsidiary 1,350 762 Profit for the year 22 78,199 29,466 Total recognised gains 79,549 30,228 6 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2001 7. CORPORATE INFORMATION Shenzhen Properties Resources Development (Group) Ltd. (the “Company”) was incorporated as a joint stock company with limited liability in the People’s Republic of China pursuant to a reorganisation of state-owned enterprises. A and B shares were issued by the Company. The Company and its subsidiaries (the “Group”) are principally engaged in property development, investment and management, transportation and construction and property development consultancy. 8. GOING CONCERN The directors have carefully considered the financial position of the Group in the light of accumulated losses of RMB622,874,000 (2000: RMB701,073,000) and net current liabilities of RMB250,391,000 (2000: RMB361,730,000) as shown on the balance sheet as at December 31 2001. The Group is currently in negotiation with its bankers to renew certain banking facilities. The absence of such confirmed facilities raised significant uncertainties that the Group will be able to continue as going concern. Provided that the negotiations can be successfully completed and after taking into account the cash inflow expected to be received from the sales of properties in coming year, the directors arrived at the opinion that the Group will be able to meet in full its financial obligations as they fall due in the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis, and no adjustments have been made which would result from a failure to obtain such funding. 9. BASIS OF PREPARATION The financial statements of the Group companies have been prepared in accordance with International Accounting Standards (“IAS”) issued by the International Accounting Standard Committee. This basis of accounting differs from that used in the management accounts of the Group companies which were prepared in accordance with generally accepted accounting principles and relevant financial regulations in the PRC (“PRC GAAP”). Adjustments which might restate the results of operations and the net assets have been made in compliance with IAS but will not be recognised in the books of the companies within the Group. 7 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 10. PRINCIPAL ACCOUNTING POLICIES The following principal accounting policies are adopted by the Group in preparing the financial statements to comply with IAS: (a) Basis of consolidation The group accounts comprise the accounts of the Company and all its subsidiaries made up to December 31, 2001. All significant intercompany transactions and balances within the Group have been eliminated on consolidation. Minority interests represent the interests of outside shareholders in the operation results and net assets of subsidiaries. The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate. The group accounts also include the Group’s share of post acquisition profits less losses, and reserves, of its associated companies. (b) Subsidiaries A subsidiary is a company in which the Company, directly or indirectly, controls more than half of the voting power or issued share capital or controls the composition of the board of directors. (c) Interests in associates An associate is an enterprise, not being a subsidiary or a joint venture, in which the Group has a long-term equity interest and is in a position to exercise significant influence in its management. The consolidated profit and loss account includes the Group’s share of the post-acquisition results of its associates for the year. In the consolidated balance sheet, interests in associates are initially reflected at cost and are subsequently adjusted for post-acquisition changes in the Group’s share of the net assets of its associates, plus any goodwill not yet written off or amortised. The carrying amount of such interests is reduced to recognise any decline, other than a temporary decline, in the value of individual investments. Investment in associated companies are stated at cost less provision for permanent diminution in value and the results of the associated companies are accounted for by the Company on the basis or dividends received and receivable. Where the Group transacts with its associates, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case those unrealised losses are not eliminated. 8 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 4. PRINCIPAL ACCOUNTING POLICIES – (continued) (d) Fixed assets and depreciation Fixed assets are stated at cost less accumulated depreciation and any provisions for impairment losses required to reflect recoverable amounts. Costs represent the purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Subsequent expenditure is capitalized when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the enterprise. All other subsequent expenditure, such as repairs and maintenance and overhaul costs, is recognized as an expense in the period in which it is incurred. Depreciation is provided to write off the cost of fixed assets less their estimated residual values over their anticipated useful lives, on the straight-line method. Estimated useful lives are summarized as follows: - Land and buildings in the PRC 2% to 5% Buildings outside the PRC Term of lease or, if less, 20 years Motor vehicles 20% Fixtures and equipment 20% Leasehold improvements 20% When tangible fixed assets are sold or retired, their cost and accumulated depreciation are removed from the accounts and any gain or loss resulting from their disposal is included in the profit and loss account. Major costs incurred in restoring fixed assets to their normal working condition are charged to the profit and loss account. Improvements are capitalised and depreciated over their expected remaining useful lives to the Group. The carrying amounts of fixed assets are reviewed regularly to assess whether their recoverable amounts have declined below their carrying amounts. Expected future cash flows have not been discounted in determining the recoverable amount. (e) Intangible assets Intangible assets represent the cost of acquisition of taxi licences and are stated at cost less amortisation and provision, if necessary, for any permanent diminution in value. Amortisation is provided to write off the cost of taxi licences over the license period granted by relevant authorities, which is 20 years. (f) Investments in securities (i) Long term investments Long-term investments which are held for long term are stated at cost less provision for diminution in value other than temporary in nature. (ii) Trading securities Trading securities are carried at market value determined on an individual basis. Reductions to market value and reversals of such reductions are recognised in profit and loss account as they arise. 9 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 4. PRINCIPAL ACCOUNTING POLICIES – (continued) (g) Properties held for/under development and completed properties held for sales Properties held for/under development and completed properties held for sales are stated at cost less net realisable value. Cost includes land use rights, construction cost and development costs, and interest capitalised during the development period and other direct costs. Net realisable value is the estimated selling price less related expenses in the normal course of business. (h) Inventories Inventories are stated the lower of cost and net realisable value. Costs, which comprise all costs of purchase, are calculated using the weighted average method. Net realisable value represents the estimated selling prices less all estimated costs of completion and selling expenses. (i) Borrowing costs Borrowing costs are directly attributable to the acquisition, construction or production of qualifying assets which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted form borrowing costs capitalised. All other borrowing costs are recognised as an expense in the period in which they are incurred. (j) Revenue recognition Revenue from sale of property is recognised when sales agreements are signed between the Group and the customers, deposits are received from customers in full amount, and the relevant risks and rewards were transferred to the customers. During the year, the recognition of properties sales revenue was changed and therefore, revenue and gross profit of RMB131,329,000 and RMB46,961,000 recognised in 2000 is now recognised during the year. This has been accounted for are a prior year adjustment. (see note 25). Revenue from the sale of goods is recognised upon the transfer of risks and rewards of ownership. Rental income under operating leases is recognised on a straight line basis over the term of the relevant lease. Interest income is recognised on a time proportion basis taking into account the principal amounts outstanding and the interest rates applicable. Dividend income from investments is recognised when the right to receive payment have been established. 10 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 4. PRINCIPAL ACCOUNTING POLICIES – (continued) (k) Retirement benefit costs The Group participates in retirement schemes operated by local authorities and the annual cost of providing retirement benefits is charged to the consolidated profit and loss account according to the contribution determined by the relevant schemes. (l) Taxation The charge for taxation is based on the result for the year as adjusted for items, which are non-assessable or disallowable. Timing differences arise from the recognition for tax purposes of certain items of income and expense in a different accounting period from that in which they are recognised in the accounts. The tax effect of timing difference, computed using the liability method, is recognised in accounts to the extend in its probable a liabilities or an asset will crystallize in the foreseeable future. (m) Foreign currencies translation The Company and its subsidiaries maintain their books and records in Renminbi (‘Rmb’). Transactions in foreign currencies are translated at exchange rates quoted by the People’s Bank of China at the translation dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Rmb at the exchange rate quoted by the People’s Bank of China at the balance sheet date. All exchange differences are dealt with in the profit and loss account. The accounts of subsidiaries and associated companies expressed in foreign currencies are translated at rates of exchange ruling at the balance sheet date. Exchange differences arising in these cases are dealt with as a movement in reserves. (n) Operating leasing Leases where substantially all the rewards and risks of ownership of assets remain with the lessors are accounted for as operating leases. Rentals income and expenses under operating leases are credited and charged respectively to the consolidated profit and loss account on a straight-line basis over the term of the relevant lease. (o) Cash and cash equivalents Cash and cash equivalents comprise short term highly liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired, less advances from banks repayable within three months from the date of the advances (p) Deferred taxation Deferred taxation is accounted for at the current taxation rate in respect of timing differences between profit as computed for taxation purposes and profit as stated in the accounts to the extent that an asset or liability is expected to be payable or receivable in the foreseeable future. 11 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 11. TURNOVER An analysis of the Group’s turnover is as follows: Restated 2001 2000 RMB’000 RMB’000 Sale of properties 774,335 310,888 Sale of goods 94,979 - Property management services 48,755 59,830 Taxi service 37,838 31,021 Property rental income 33,394 99,481 Hotel and restaurant operations - 3,827 Others 26,426 43,231 Total revenue 1,015,727 548,278 12. BUSINESS AND GEOGRAPHICAL SEGMENTS For management purposes, the Group is organised into three major operating divisions – property, trading, and transportation and catering services. The divisions are the basis on which the Group reports its primary segment information. Principal activities are as follows: Property - construction, sales, leasing and management of properties Trading - sale of general merchandise Transportation and catering service - hotel and restaurant operation and provision of taxi services All the Group’s business are conducted in PRC. Segment information about these businesses for the year ended December 31, 2001 is presented below: Sales of properties, Taxi services, hotel management and restaurant services and operations 2001 rental income Trading and others Eliminations Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Revenue External sales 856,484 94,979 64,264 - 1,015,727 Inter-segment sales 24,456 - - (24,456 ) - Total revenue 880,940 94,979 64,264 (24,456 ) 1,015,727 Inter-segment sales are charged on terms as determined by the directors. 6. BUSINESS AND GEOGRAPHICAL SEGMENTS – (continued) 12 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Sales of properties, Taxi services, hotel management and restaurant services and operations rental income Trading and others Eliminations Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RESULTS Segment results 225,119 32,089 18,365 - 275,573 General administrative expenses and unallocated corporate expenses (121,511 ) Operating profit 154,062 Finance costs (73,178 ) Share of losses of associates (11,452 ) Income from investments 27,503 Profit before tax 96,935 Income taxes (17,371 ) Profit after tax 79,564 Minority interests (1,365 ) Net profit for the year 78,199 Segment information about these businesses for the year ended December 31, 2000 is presented below: Sales of properties Taxi services, hotel management and restaurant services and operations Restated rental income Trading and others Eliminations Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Revenue External sales 470,199 - 78,079 - 548,278 Inter-segment sales 5,176 - 727 (5,903 ) - Total revenue 475,375 - 78,806 (5,903 ) 548,278 6. BUSINESS AND GEOGRAPHICAL SEGMENTS – (continued) 13 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Inter-segment sales are charged on terms as determined by the directors. Sales of properties Taxi services, hotel management and restaurant services and operations Restated rental income Trading and others Eliminations Consolidated RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RESULTS Segment results 57,268 - 67,434 - 124,702 General administrative expenses and unallocated corporate expenses (27,985 ) Operating profit 96,717 Finance costs (86,221 ) Share of profits of associates (5,156 ) Income from investments 33,403 Profit before tax 38,743 Income taxes (8,533 ) Profit after tax 30,210 Minority interests (744 ) Net profit for the year 29,466 13. PROFIT FROM OPERATIONS Profit from operations has been arrived at after charging: Restated 2001 2000 RMB’000 RMB’000 After charging: Bad debts - 1,564 Depreciation of owned fixed assets (note 12) 39,352 23,181 Amortisation of intangible assets (note 13) 4,441 7,709 Net Provision for inventories 24,552 - Net foreign exchange loss 107 - Provision for doubtful debts 25,319 1,470 Staff costs - statutory pension 2,203 802 - other costs 27,828 43,761 Provision for diminution in value of investment 9,704 - And after crediting: Interest income 23,881 28,137 Provision for inventories written back - 9,462 Gain on disposal of fixed assets 4,059 2,526 14. FINANCE COSTS Restated 14 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 2001 2000 RMB’000 RMB’000 Interest expenses 75,685 92,415 Less: Interest capitalised (2,507 ) (6,194 ) 73,178 86,221 15. INCOME FROM INVESTMENTS Restated 2001 2000 RMB’000 RMB’000 Interest on bank deposits, government bonds and other loans 23,881 28,137 Dividends from equity investments - 47 Provision for diminution in value of investments written - back 6,306 Gain on dealing of listed investments 2,671 486 Provision for trading securities - (3,009 ) Reversal of the provision for trading securities 951 1,436 27,503 33,403 16. TAXATION Restated 2001 2000 RMB’000 RMB’000 The charge comprises: Profits tax for the year: PRC profits tax 17,371 8,533 Taxation attributable to the Company and its subsidiaries 17,321 8,533 Share of taxation attributable to associates 50 - 17,371 8,533 The Group provided for income tax on the estimated assessable profit for the year at a rate of 15% (2000:15%), the prevailing income tax for all PRC enterprise in Shenzhen. Taxation on overseas profits has been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the countries in which the subsidiary operate. 17. EARNINGS PER SHARE The calculation of earnings per share is based on the Group’s profit attributable to shareholders of 15 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 RMB78,199,000 (2000: RMB29,466,000) and the 541,799,000 (2000: 541,799,000) shares in issue during the year. 18. FIXED ASSETS Leasehold Fixture Investment land and Leasehold Motor and properties buildings improvements vehicles equipment Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 COST At January 1, 2001 13,184 218,934 20,200 68,379 53,210 373,907 Transferred from inventories - 81,411 - - - 81,411 Additions - 1,806 24,326 19,919 2,638 48,689 Disposals - (7,204 ) (10,782 ) (23,021 ) (23,541 ) (64,548 ) Reclassification (13,184 ) 13,184 - - - - At December 31, 2001 - 308,131 33,744 65,277 32,307 439,459 DEPRECIATION At January 1, 2001 - 65,329 2,710 36,476 29,322 133,837 Charge for the year - 14,422 5,617 14,127 5,186 39,352 Eliminated on disposals - (1,255 ) - (12,397 ) (18,065 ) (31,717 ) At December 31, 2001 - 78,496 8,327 38,206 16,443 141,472 NET BOOK VALUES At December 31, 2001 - 229,635 25,417 27,071 15,864 297,987 At December 31, 2000 (Restated) 13,184 153,605 17,490 31,903 23,888 240,070 As at December 31, 2001, land and buildings with net book values of RMB118,728,000 (2000: RMB119,107,000) have been pledged to the banks to secure general banking facilities for the Company and its subsidiary. (see note 26). 19. INTANGIBLE ASSETS 2001 2000 RMB’000 RMB’000 Original cost 88,812 63,924 Accumulated amortisation (23,618 ) (19,177 ) Net book value 65,194 44,747 As at December 31, 2001, taxi licences with a net book value of RMB31,680,000 (2000: RMB32,340,000) have been pledged to the banks to secure general banking facilities for the Company and its subsidiary. (see note 26). 20. PRINCIPAL SUBSIDIARIES Details of the principal subsidiaries at December 31, 2001 are as follows: 16 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Proportion of Ownership interest/ Proportion of Place of Names of subsidiary Voting power held Principal activities incorporation Direct Indirect % % Shenzhen ITC Vehicles Services 100 Transportation and vehicles The People’s Republic Company rental service of China Hainan Xinda Development 100 Property development and The People’s Republic Headquarter Company trading of China Shenzhen Property and Construction 100 Property development The People’s Republic Development Company of China Shenzhen ITC Estate Management 100 Property management The People’s Republic Company of China Shenzhen International Trade Plaza 100 Retailing of general The People’s Republic merchandise of China 重慶深國貿物業管理有限公司 100 Property management The People’s Republic of China 深圳市國管機電有限公司 100 Property consultancy The People’s Republic services of China 深圳市天闕物業機電服務公司 100 General trading The People’s Republic of China 上海深圳物業管理公司 100 Property management The People’s Republic of China Nanjing International Tongren 55 Property development The People’s Republic Development Ltd. of China Shenzhen Huangcheng Real Estate 100 Property development, The People’s Republic Company Limited construction and of China management Shum Yip Properties Development 100 Property development Hong Kong Limited Shanghai Shenzhen Properties 100 Property management and The People’s Republic Development Company Limited construction of China Nanjing Shenzhen Properties 40 60 Property investment The People’s Republic Development Company Limited of China Zhanjiang Shenzhen Estate 100 Property development and The People’s Republic Development Company Limited retailing of general of China merchandise 深圳市物業工程建設監理公司 100 Property development The People’s Republic consultancy services of China Shenzhen ITC Plaza & Development 70 Property investment and The People’s Republic Company Limited development of China 21. INTERESTS IN ASSOCIATES Restated 2001 2000 RMB’000 RMB’000 17 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Cost of investment 326,790 326,790 Share of post-acquisition loss, net of dividends received (118,787 ) (107,335 ) 208,003 219,455 Amounts due from associates 37,438 90,390 Provision for diminution in value (85,899 ) (76,195 ) 159,542 233,650 During the year, the equity interest in a associate was increased from 50% to 70% and the result was consolidated into the Group’s. Details of the principal associates at December 31, 2001 are as follows: Proportion of ownership interest/ Proportion of Place of Name of associates Voting power held Principal activities incorporation Direct % Shenzhen Luohu Hotel Company 50 Hotel operation The People’s Republic Limited of China Shenzhen Carrier Service Company 40 Air-conditioning The People’s Republic Limited of China ITC Tian An Company Limited 50 Property investment and The People’s Republic development of China Shenzhen Lingnan Jifa Warehouse 50 Warehousing The People’s Republic Company Limited of China Anhui Nan Peng Paper 30 Manufacturing and sales of The People’s Republic Manufacturing Company coated art paper of China Limited Suzhou Fuda Property Development 25 Property development The People’s Republic Company Limited of China Shenzhen Matform Ceramics 26 Ceramics craft The People’s Republic Industry Company Limited of China 22. LONG TERM INVESTMENTS Restated 2001 2000 RMB’000 RMB’000 Unlisted equity investments at cost 5,184 42,363 Provision for permanent diminution in value (5,070 ) (23,778 ) 114 18,585 Unlisted legal person shares 23,776 21,036 23,890 42,361 23. INVENTORIES Restated 2001 2000 RMB’000 RMB’000 18 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Properties held for sale/under development 437,087 777,404 Completed properties held for sale 862,405 445,400 Other inventories 3,709 64,185 1,303,201 1,286,989 Properties under development include a piece of land in Nanjing carried at RMB151,441,000 on which developments works terminated several years ago due to unfavorable market conditions. The directors will develop the land for property trading purposes when the property market improves in further coming year. As at December 31, 2001, completed properties held for sale with a carrying value of RMB135,800,000 (2000: RMB76,900,000) have been pledged to the banks to secure general banking facilities for the subsidiaries. (see note 26) 24. TRADING SECURITIES Restated 2001 2000 RMB’000 RMB’000 Listed securities, at market value 34,498 36,209 Government bonds, at cost 4 10,000 34,502 46,209 25. SHORT-TERM LOANS Restated 2001 2000 RMB’ 000 RMB’000 Mortgaged bank loans 418,000 502,329 Guaranteed bank loans 489,500 459,591 Other unsecured loans 46,100 400 953,600 962,320 Mortgaged bank loans are secured by the Group’s assets and bear interest at prevailing market rates ranging from 5% to 8% (2000 : 5% to 12%) per annum. Other unsecured loans carry interest at an annual fixed rate of approximately 7% (2000: 10%). Mortgaged bank loans of RMB90,000,000 (2000: RMB77,342,000) and guaranteed bank loans of RMB353,800,000 (2000: RMB318,591,000) have been overdue. Management of the Company is in the process of negotiating with the banks to extend the repayment due date. 26. LONG-TERM LOANS Restated 2001 2000 RMB’000 RMB’000 19 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Bank loans – secured Wholly repayable within five years 2,594 5,995 Not wholly repayable within five years - - 2,594 5,995 Less: Amount due within one year shown under current liabilities 1,194 - 1,400 5,995 Long-term bank loans are secured by the Group’s assets and bearing interest at prevailing market rates ranging from 4% to 5% (2000 : 5% to 6%) per annum. 27. SHARE CAPITAL Restated 2001 2000 RMB’000 RMB’000 Registered, issued and fully paid: 388,949,000 state shares and shares held by other promoters of RMB1 each 388,949 388,949 91,391,000 A share of RMB1 each 91,391 91,391 61,459,000 B share of RMB1 each 61,459 61,459 541,799 541,799 All the shares rank pari passu with each other in all respects. 28. RESERVES Statutory Capital Public Translation Accumulated reserve welfare fund reserve losses Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Balance at January 1,2001 256,806 79,511 13,289 (654,112 ) (304,506 ) Prior year adjustments (note 26) - - - (46,961 ) (46,961 ) As restated 256,806 79,511 13,289 (701,073 ) (351,467 ) Net profit for the year - - - 78,199 78,199 Translation of financial statements of overseas subsidiary - - 1,350 - 1,350 Balance at December 31, 2001 256,806 79,511 14,639 (622,874 ) (271,918 ) Statutory reserve and statutory public welfare fund are maintained in accordance with the relevant laws and regulations in the PRC and form part of shareholders’ equity. 29. RECONCILIATION OF PROFIT FROM ORDINARY ACTIVITIES BEFORE TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES Restated 2001 2000 RMB’ 000 RMB’000 20 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Profit from ordinary activities before taxation 96,935 38,743 Adjustment for: Share of results of associates 11,452 5,156 Minority interest 20,617 - Interest expense 75,685 86,221 Interest income (23,881 ) (28,137 ) Bad or doubtful debts written back (29,614 ) (457 ) Dividend income - (47 ) Provision for doubtful debts 54,933 1,927 Bad debts - 1,564 Provision for inventories 27,098 - Provision for inventories written back (2,546 ) (9,462 ) Provision for diminution in value of investments 9,704 - Provision for diminution in value of investments written back - (6,306 ) Provision on trading securities - 3,009 Reversal of provision on trading securities written back (951 ) (1,436 ) Depreciation of property, plant and equipment 39,352 23,181 Amortisation of intangible assets 4,441 7,709 Gain on disposal of fixed assets (4,059 ) (2,526 ) Gain on dealing of listed investments (2,671 ) (486 ) Operating cash flows before movements in working capital 276,495 118,653 Increase in inventories (124,682 ) (286,465 ) (Increase)/Decrease in receivables (109,349 ) 56,510 (Decrease)/Increase in payables (10,107 ) 494,983 Cash generated by operations 32,357 383,681 Taxes paid (14,353 ) (12,722 ) Exchange difference - (571 ) Net cash inflow from operating activities 18,004 370,388 30. ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR Other Short-term Long-term short-term Minority bank loans bank loans loans interests RMB’000 RMB’000 RMB’000 RMB’000 21 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Balance at January 1, 2001 962,320 5,995 - 935 Reclassified of short-term loans due within 2-5 years (4,354 ) 4,354 - - New loans raised 259,908 46,100 - Repayments of amounts borrowed (310,374 ) (7,755 ) - - Share of profit by minority shareholders - - - 1,366 Addition of subsidiary - - - 20,616 Balance at December 31, 2001 907,500 2,594 46,100 22,917 31. PRIOR YEAR ADJUSTMENTS RMB’000 Reversal of profit arising from the sales recognised in the previous year 46,961 The adjustment relates to a change in accounting policy of properties sales recognition such that certain sales and the related cost had been recognised in the previous year. In order to be consistent with the presentation of the statutory financial statements which are prepared under PRC GAAP, the directors consider that it is appropriate to reflect such adjustments as a prior year adjustment to the equity of the Group as of January 1, 2000. 32. PLEDGE OF ASSETS As at December 31, 2001, leasehold land and buildings with a net book value of RMB118,728,000 (2000: RMB119,107,000), completed properties held for sales of RMB135,800,000 (2000: RMB76,900,000) and certain taxi licences having a net book value of RMB31,680,000 (2000: RMB32,340,000) have been pledged to the banks for the general banking facilities granted to the Group. 33. CONTINGENT LIABILITIES (1) The Company provided guarantee to a third party for a bank loan of Rmb67,600,000. This party is unable to meet the repayment and the banks have taken legal action to receive certain assets of this party. The bank will take the shortfall from the Company when the legal action is completed. (2) A subsidiary provided secured guarantee to a third party for a bank loan of RMB2,500,000. (3) During the year, a subsidiary is requested by the liquidator to repay the investment principal and interest totaling to Rmb24,000,000 to a joint venture investor which is under liquidation. The Company is now negotiating with the liquidator to reassess the repayment amounts. 34. OPERATING LEASES The Group leases out certain properties under non-cancellable operating leases. Rental income to be received as follows: Restated 2001 2000 RMB’000 RMB’000 22 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Land and buildings - expiring in the first year 3,060 - - expiring in the second to fifth years inclusive 8,451 - - expiring after the fifth year 972 - 12,483 - 35. RELATED PARTY TRANSACTIONS During the year, group companies entered into the following transactions with related parties who are not members of the Group: Amounts due Amounts due Rental income to related parties from related parties 2001 2000 2001 2000 2001 2000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Associates 1,873 22 32,005 58,410 61,433 62,762 The above transactions were carried out at terms agreed between the Group and the associates. The amounts due to related parties are unsecured, interest free and have no fixed terms of repayment. 36. LEGAL LITIGATION In 1999, an appeal was lodged by the Group with the Guangdong High Civil Court in relation with a claim by certain customers under certain contracts related to the sale of properties made by the Group to its customers. It was alleged that the Company had breached the contracts by not providing the title documents by the dates as specified in the contacts. The total amount under dispute is approximately HK$79,000,000, representing compensation claimed by the customers. A court ruling is yet to be made on the case. The directors, after consultation with the Group’s legal advisers, are of the opinion that these claims were unfounded and are confident that the Group will not suffer any loss form these claims. Accordingly, no provision for loss has been made in the Company’s financial statements. 31. IMPACT OF IAS ADJUSTMENTS ON PROFIT/LOSS Profit for the year ended December 31, Restated 2001 2000 RMB’000 RMB’000 As reported in financial statements prepared in accordance with PRC GAAP 86,386 5,379 23 SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD 深圳市物業發展(集團)股份有限公司 Adjustment to conform with IAS: Unrealised profit on trading securities 118 - Understatement of rental income 2,973 - Deferred expenses written off (3,236) - Deferred tax written off - (4,120) Difference in accounting for a subsidiary - 31,018 Amortisation charges written back to fixed assets 10,467 463 Addition depreciation charges (4,408 ) - Addition amortisation charges (1,917 ) (1,673 ) Minority interest 646 - Reverse of “B shares” last year adjustments 6,227 - “A share” prior year adjustments (19,145 ) 1,359 Others 88 (2,974 ) 78,199 29,466 32. IAS IMPACT ON CONSOLIDATED NET ASSETS December 31 Consolidated net assets Restated 2001 2000 RMB’000 RMB’000 As reported in financial statements prepared in accordance with PRC GAAP 309,442 233,847 Adjustment to conform with IAS: Unrealised profit on trading securities 118 - Understatement of rental income 2,973 - “B share” prior years adjustments (4,000 ) - Deferred expenses written off (3,236 ) - Deferred tax written off - (4,120 ) Difference in accounting for a subsidiary - (13,512 ) Amortisation charges written back to fixed assets 11,605 (2,827 ) Addition depreciation charges (4,408 ) - Addition amortisation charges (8,572 ) (1,673 ) Unamortised expenses written off (4,230 ) - Reverse of “B shares” last year adjustments 626 - “A share” prior years adjustments - (15,623 ) Others (7,520 ) (4,825 ) 292,798 191,267 24