京粮控股(000505)珠江Ｂ2002年年度报告（英文版）

HAINAN PEARL RIVER HOLDINGS CO., LTD. 2002 Annual Report Important: The Board of Directors and all the directors of HaiNan Pearl River Holdings Co., Ltd. (hereinafter referred to as the Company) hereby confirm that there are no important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individually and/or jointly, for the reality, accuracy and completion of the whole contents herein. Mr. Zheng Qing, Chairman of the Board and General Manager, Mr. Chen Binglian, Chief Financial Officer and Mr. Su Wenzhi, Manager of the Financial Department hereby guarantee that the financial report enclosed in this 2002 Annual Report is true and complete. Hainan Pearl River Holding Company Limited I. Company Information 1. Legal Name of the Company in Chinese: 海南珠江控股股份有限公司 In English: HaiNan Pearl River Holdings Co., Ltd. 2. Legal Representative: Zheng Qing 3. Secretary of the Board: Feng Pai Security Affairs Representative: Gu Lirong Liaison Address: 29/F., Royal Empire Building, Pearl River Plaza, Binhai Avenue, Haikou Tel: 0898-68583723, 0898-68581888 ext. Fax: 0898-68581026 4. Registered Address: 29/F., Royal Empire Building, Pearl River Plaza, Binhai Avenue, Haikou Office Address: 29/F., Royal Empire Building, Pearl River Plaza, Binhai Avenue, Haikou Post Code: 570125 E-mail: hnpearl@public.hk.hi.cn 5. Newspapers Designated for Disclosing the Information: Securities Times, Ta Kung Pao Internet Website Designated by China Securities Regulatory Commission for Publishing the Annual Report: http://www.cninfo.com.cn Place Where the Annual Report is Prepared and Placed: Secretariat of the Board of Directors 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: Pearl River Holdings, Pear River B Stock Code: 000505, 200505 7. Date and Place of First Registration: January 11, 1992 in Haikou, Hainan Business License No.: 20128455-6 Taxation Registration No.: 460100800600377 Certified Public Accountant Engaged and Office Address: Hainan Cong Xin Certified Public Accountants Address: Room 1202 of CMEC Building, Guomao Av., Haikou 2 Hainan Pearl River Holding Company Limited II. Financial and Business Highlights 1. Financial Highlights In RMB Total profit -141,014,556 Net profit -138,051,149 Net profit, less the non-recurring gains and loss -133,070,909 Profit from principal businesses 14,289,597 Profit from other business lines 1,653,909 Operating profit -82,207,398 Investment income -55,168,915 Subsidy income 4,071,994 Net amount of non-operating income and expenses -7,710,237 Net cash flows arising from operating activities -28,296,825 Net increase of cash and cash equivalents -16,341,383 Note: Deducting non-recurring gain/loss items and the amount involved (in RMB) Income from equity transfer of Pearl River International Property 2,730,000 Co., Ltd. Net amount of non-operating income and expenses -7,710,237 Total -4,980,237 2. Financial highlights over the past three years by the end of the report period In RMB Indexes 2002 2001 2000 before adjustment after adjustment Income from principal businesses 91,008,754 91,705,847 37,217,630 37,217,630 Net profit -138,051,149 -39,149,574 62,724,718 60,471,973 Total assets 663,838,276 715,376,923 804,014,294 773,127,931 Shareholders’ equity 251,348,071 389,230,308 463,705,167 434,004,311 Earnings per share (diluted) -0.37 -0.10 0.17 0.16 Earnings per share (weighted) -0.37 -0.10 0.17 0.16 Earnings per share less the -0.35 -0.05 -0.05 -0.05 non-recurring gains and loss Net assets per share 0.67 1.03 1.23 1.15 Net assets per share after 0.61 0.95 1.17 1.09 adjustment Cash flow arising from business -0.075 -0.046 0.014 0.014 activities per share, net Net assets-income ratio (%) -54.92 -10.06 13.53 13.93 3. Net assets- income ratio and earnings per share in the report period calculated according to the Rules for Public Companies to Disclose Information and Prepare Regular Reports (No. 9) promulgated by China Securities Regulatory Commission (CSRC) Net assets-income ratio (%) Earnings per share (RMB) Items Fully diluted Weighted average Fully diluted Weighted average Profit from principal businesses 5.69 4.46 0.038 0.038 Operating profit 0.15 0.12 0.001 0.001 Net profit -54.92 -43.10 -0.366 -0.366 Net profit after deduction of non- recurring loss/gain -52.94 -41.55 -0.352 -0.352 4. Influence of adjustment according to IAS upon the net profit (in RMB’000) Net profit Net assets Jan. to Dec., 2002 Dec. 31, 2002 Calculation according to CAS -138,051 251,348 Adjustment according to IAS: - - 3 Hainan Pearl River Holding Company Limited (1) Capitalization of the interest of the loans raised for the construction-in-progress during the construction 5,268 -5,719 and the properties to be sold and adjustment of relevant depreciation (2) Unrecognized investment losses of the -626 consolidated subsidiaries (3) Adjustment of investment income in the associated -9,929 companies (4) Provision for bad debts -14,600 (5) Adjustment of the bank deposit interest receivable 795 from the related companies. (6) Losses necessary to be recognized in the accumulated losses due to the changes in long-term -1,253 investment in an associated company being adjusted as the equity losses of the associated company (7) Adjustment of treasury stock -1,410 (8) Others 80 -1,398 Calculated according to IAS -133,787 218,292 5. Changes in Shareholders’ Equity in the Report Period In RMB’000 Items Period beginning Increase in the Decrease in the Period end period period Share capital 377,650 377,650 Capital public reserve 283,854 795 284,649 Surplus public reserve 60,449 21 60,470 Statutory public welfare funds 49,406 31 49,437 Retained earning -370,669 138,103 -508,772 Unconfirmed investment losses -11,460 626 -12,086 Total shareholders’ equity 389,230 847 138,729 251,348 Reason for change: 1) Increase of the capital public reserve refers to the extra part of the interest collected from the associated parties for the funds they occupied; 2) Increase of surplus public reserve and public welfare fund was due to the provision based on the profit of the consolidated subsidiaries. 3) Decrease of the retained earnings was due to deficits made in the report year. 4) Increase of the unrecognized investment losses was due to the unconfirmed losses of the investme nt in the investees. III. Changes in Share Capital and Particulars about Shareholders (I) Changes in Share Capital 1. Statement of changes in share (Unit: share) 1. Non-circulating shares Period beginning Period end (1) Promoters’ shares Including: Domestic legal person shares 206,744,976 206,744,976 (2) Employees’ shares Total non-circulating shares 206,744,976 206,744,976 2. Circulating shares (1) Domestically listed RMB ordinary shares 113,405,824 113,405,824 (2) Domestically listed foreign shares 57,500,000 57,500,000 Total circulating listed shares 170,905,824 170,905,824 3. Total shares 377,650,800 377,650,800 2. Issuing and Listing At the time of reform for the joint stock system, the Company issued RMB 81.88 million of Renminbi based ordinary shares at the price of RMB 1.00 per share, of which the five promoters subscribed 60.7936 million shares, and the public subscribed 21.0864 million shares. The issuing duration was January 8 through March 7, 1992. On December 21, 1992, approved by the authority, 21.0864 shares were listed with Shenzhen Stock Exchange for trading. 4 Hainan Pearl River Holding Company Limited On May 18, 1993, the Company distributed bonus shares to the shareholders on 2-for-10 basis with totally 16.376 million bonus distributed; in addition, the Company placed 40.94 million new shares at the price of RMB 6.00 per share. On April 16, 1994, the Company distributed bonus shares to the shareholders on ten-for-ten basis with totally 139.196 million bonus shares distributed. The Company issued B shares on April 12, 1995 and 50 million B shares were listed at the price of HK$ 2.58 per share on June 29. On April 29, 1995, the Company distributed bonus shares to the shareholders on 1.5- for-10 basis with totally 49.2588 million bonus shares distributed. (II) Shareholders 1. By the end of 2002, the Company had totally 57,423 shareholders of A-shares and 13,139 shareholders of B-shares. 2. Shares held by the top ten shareholders Shareholders Shares held at year end Proportion in total shares Type of shares (shares) Beijing Wanfa Real Estate 112,628,976 29.82 Legal person Development Co., Ltd. shares Guangzhou Lishengde Investment 17,000,000 4.50 Legal person Co., Ltd. shares Henglong International Co., Ltd. 1 13,570,000 3.59 Legal person shares Shanghai Zhongnan Investment 11,000,000 2.91 Legal person and Management Co., Ltd. shares Hainan Development Bank 7,820,000 2.07 Legal person Haikou Branch shares Hebei Securities Co., Ltd. 5,750,000 1.52 Legal person shares Guangzhou Pearl River Foreign 4,896,000 1.30 Legal person Capital Contraction Design Institute, shares Hainan Branch China Ping An Insurance 3,450,000 0.91 Legal person shares Shenzhen Yueyin Science and 2,660,000 0.70 Legal person Technology Co. Ltd. shares Shenzhen Gintian Industrial Co., 2,300,000 0.61 Legal person Ltd. shares Notes In the report period, the Company’s controlling shareholder and the top ten shareholders remained unchanged and there existed no business relations among the top 10 shareholders. 13,570,000 shares held by Henglong International Co., Ltd. and 2,300,000 shares held by Shenzhen Gintian Industrial Co., Ltd. were frozen. None of the shares held by other top ten shares was pledged or frozen. 3. About Controlling Shareholder Beijing Wanfa Real Estate Development Co., Ltd. (“Wanfa Real Estate”), the Company’s number one principal shareholder, was established in November, 1995, with registered capital: RMB 280 million, legal representative: Meng Qiao, principal business: development and marketing of real estate. As a joint-stock company, it is principally engaged in the development and operation of real estate. Its major shareholders are Beijing Xinxing Real Estate Development General Company, Beijing Jiaheng Taishi Industrial Co., Ltd., Beijing Shengcai Science and Trade Co., Beijing Jiuzhu Property and Management Co., Ltd. and Beijing 5 Hainan Pearl River Holding Company Limited Yitai Co. The actual controller of the Company’s control shareholder, Beijing Xingxin Real Estate Development General Company, (“Xingxin Real Estate”) is one of the shareholders of Beijing Wanfa Real Estate Development Co., Ltd. established in 1992 with registration capital: of RMB 10,000,000 and legal representative: Zhengqing. The company is principally engaged in the development and operation of real estate as a collective enterprise. IV. Directors, Supervisors, Senior Executives and Staff 1. Particulars about the directors, supervisors and senior executives (1) Directors, Supervisors, Senior Executives in Current Office Name title Sex Age Office term Shares held at Shares Increase / Remarks year held at decrease of beginning year end shares Zheng Qing Chairamn of Male 36 Sep. 2003 to 5000 25000 +20000 Acting as director of the Board Sep. 2006 Beijing Wanfa Real and General Estate Development Co., Manager Ltd. since June 1999. Shares held increased is mainly due to the purchase of listed shares that have been frozen. Peng Director Male 45 Sep. 2003 to 0 0 0 Shugen Sep. 2006 Wu Director Male 51 Sep. 2003 to 0 0 0 Xiaojing Sep. 2006 Shi Yonghui Director Male 38 Sep. 2003 to 0 0 0 Acting as vice general Sep. 2006 manager of Beijing Wanfa Real Estate Development Co., Ltd. since July 1993. Zhang Jian Director Male 49 Sep. 2003 to Acting as director of Sep. 2006 Guangzhou Lishengde Investment Co., Ltd. since Aug. 2000. Tan Director Male 32 Sep. 2003 to Acting as general Shuguang Sep. 2006 manager of Shenzhen Yueyin Science and Technology Co. Ltd. since May 2001 Wang Independent Male 43 Sep. 2003 to 0 0 0 Zhigang Director Sep. 2006 Yang Kaijun Independent Male 46 Sep. 2003 to Director Sep. 2006 Zhang Independent Male 39 Sep. 2003 to Taowei Director Sep. 2006 Sun Xianli Convener of Male 56 Sep. 2003 to Supervisory Sep. 2006 Committee Yu Jianhui Supervisor Female 49 Sep. 2003 to 0 0 0 Sep. 2006 Xu Jingui Supervisor Male 33 Sep. 2003 to 0 0 0 Sep. 2006 Feng Pai Secretary of Male 39 June 2003 to 0 0 0 the Board Sep. 2006 and Chief Administrati ve Officer Chen Chief Male 43 April 2001 to 0 0 0 Binglian Financial Officer (2) Annual Remuneration Directors, supervisors and senior executives in current office received their pay from the Company according to the Company’s salary management system; the Company has not yet established the allowance system for independent directors. 1 director (concurrently General Manager), 1 staff representative supervisor and 2 senior executives received remuneration from the Company with total amount of RMB 490,000. including 1 receiving annual pay amounting to RMB 100,000 to RMB 250,000, 2 amounting to RMB 80,000 to RMB 100,000 and 1 amounting to RMB 50,000 to 80,000. The total amount paid to the three senior executives enjoying highest pay was RMB 430,000. 6 Hainan Pearl River Holding Company Limited Directors Peng Shuyin, Wu Xiaojing, Shi Yonghui, Zhang Jian and Tan Shuguang, Independent Directors Wang Zhigang, Yang Kaijun and Zhang Taowei and Supervisors Sun Xianli and She Jianhui did not receive pay from the Company. (3) In the report period, both the Board of Directors and the Supervisory Committee conducted election for the new Board and Supervisory Committee. The Shareholders’ General Meeting elected the fourth Board which consisted of Directors Zheng Qing, Peng Shuyin, Wu Xiaojing, Shi Yonghui, Zhang Jian, Tan Shuguang and Independent Directors Wang Zhigang, Yang Kaijun and Zhang Taowei, and at the same time, Li Jianhua, He Jie, Liu Changwei and Yang Hong left the office. The Shareholders’ General Meeting elected the fourth Supervisory Committee which consist of Sun Xianli, She Jianhui and Xu Jingui, and at the same time, Wen Chaolong left the office. (4) In the report period, the Company had not disengaged the General Manager or chief financial officer. The fourth Board of Directors renewed the engagement of Zheng Qing as General Manager and Feng Pai as the Secretary of the Board of Directors. 2. About Staff There were 34 staff members in the head office of the Company, including 25 holding college degrees or higher taking 73% of the total, 17 holding medium professional titles or higher, taking 50% of the total. The Company had no retired staff. V. Administrative Structure 1. About Administrative Structure Since listing, the Company has established modern enterprise system according to the PRC Company Law, the PRC Securities Law, the relevant provisions of China Securities Regulatory Commission (CSRC) and the Rules governing Stock Listing of Shenzhen Stock Exchange, unceasingly improved the legal person based administrative structure and the system and procedures of the Shareholders’ General Meeting, the Board of Directors and the Supervisory Committee, standardized the operation of the Company and reinforced the information disclosure work. The Company’s practical operation complied with the principle and requirements as specified in the Rules for administration of Listed Companies promulgated by CSRC and the State Economic and Trade Commission. 2. About Independent Directors The Company timely engaged independent directors according to the Guiding Opinions on the Establishment of Independent Director System in Listed Companies with the number of independent directors being one third of the total members of the Board. In addition, the Company specified the independent director system in the Articles of Association. The independent directors performed their power and duties with due diligence and played a good role as independent directors. Independent directors expressed their independent opinion on the related transaction in connection with the equity exchange. 3. Company and the Controlling Shareholders The Company is independent in personnel, assets, finance, organization and business from its controlling shareholder, Beijing Wanfa Real Estate Development Co., Ltd., carries out its business autonomously, and independently takes responsibility and risks. (1) Personnel: The Company has independent labor, personnel and salaries management system. Such senior executives as the General Manager receive their pay from the Company and take no important position in the Controlling shareholder. (2) Assets: The Company has independent production system, auxiliary production system and supporting facilities; the Company owns such invisible assets as industrial property right, trademark, non-patent technologies, etc. The Company has independent purchase and sales system. 7 Hainan Pearl River Holding Company Limited (3) Finance: The Company has set up independent financial department, accounting system and financial management system and independently opened accounts at banks. (4) Organization: The Company has established its own organization independent from the controlling shareholder. The Board, the Supervisory Committee and internal departments and offices work independently. There exist no subordinate relations between the controlling shareholder/its functional departments and the Company/its functional departments. (5) Business: The Company has independent and complete business and autonomous operation capacity. 4. The Company checks the performances of the senior executives and the medium level management every year and shall further work out encouragement and binding mechanism. VI. Shareholders’ General Meeting (I) The Company published the public notice on holding 2001 Shareholders’ General Meeting on Securities Times. The meeting was held at Baohua Sea-view Hotel, Haikou on May 28, 2002, and adopted the following resolutions: 1. Approval of 2001 Work Report of the Board of Directors; 2. Approval of 2001 Annual Report; 3. Approval of 2001 Work Report of the Supervisory Committee; 4. Approval of 20021 Financial Settlement Report and the Profit Distribution Proposal; 5. Approval of Proposal on Amendment of the Articles of Association; 6. Approval of Rules of Procedures for Shareholders’ General Meeting; 7. Approval of Proposal on Change of Directors; 8. Approval of Proposal on Electing Independent Directors; 9. Approval of Proposal on Change of Supervisors; 10. Approval of Proposal of Renewing Engagement of the Certified Public Accountants. The resolutions of the meeting were published on Securities Times dated May 29, 2002. (II) The Company published the public notice on holding 2002 Extraordinary Shareholders’ Meeting on Securities Times dated August 22, 2002. The meeting was held at Baohua Sea- view Hotel, Haikou on September 26, 2002, and adopted the following resolutions: 1. Proposal on Election for New Board of Directors: Zheng Qing, Peng Shuyin, Shi Yonghui, Wu Xiaojing, Zhang Jian and Tan Shuguang were elected directors of the Fourth Board of Directors; Wang Zhigang, Yang Kaijun and Zhang Taowei were elected independent directors of the Fourth Board of Directors. 2. Proposal on Election for New Supervisory Committee: Sun Xianli and She Jianhui were elected supervisors of the Fourth Supervisory Committee; Xu Jingui, a staff representative supervisor, was elected through election by the Trade Union of the Company. 8 Hainan Pearl River Holding Company Limited The resolutions of the meeting were published on Securities Times dated September 27, 2002. VII. Report of the Board of Directors (I) Business Review 1. Sanya Wanjia Junhua Holiday Inn was carried out smoothly. In the report period, the principal building and villas were all completed with roof and now are in process of installation. The project is elected top quality and safety engineering works by Sanya Municipal Construction Bureau. 2. The land transfer of Wuhan project has achieved big progress. The Company has assisted textile machinery plant in arrangement for the existing workers and staff which has made good preparation for further development. 3. Pearl River Tubular Pile Co., Ltd. (Tubular Pile Co.) achieved growing sales of tubular pile building materials and the products have been widely applied in national and provincial key projects, such as Guangdong-Hainan Railway and Bo’ao Asia Forum. Tubular Pile Co. realized revenue from the principal business amounting to RMB 76.69 million, profit from the principal business amounting to RMB 12.71 million and net profit amounting to RMB 10.49 million. 4. Pearl River Property and Hotel Management Co., Ltd. was the first company in China granted national Class-A property management certificate and its trans-regional competitiveness and brand value have been significantly upgraded. 5. The Company conducted survey, demonstration and general planning conceptual design of Jianfengling Project and was actively making overall development of Hainan Jianfengling Tourism Resort. 6. In the report period, the Company made loss due to provision for devaluation of the assets, loss in external investment and shareholding and no operative result produced from the real estate business. (II) Analysis of operation results and financial position (in RMB) Items Jan. to Dec. 2002 Jan. to Dec. 2001 Increase / Decrease (%) Income of principal business 91,008,755 91,705,847 -0.76 Profit of principal business 14,289,597 19,312,923 -26.01 Net profit -138,051,149 -39,149,574 Net increase of cash and cash -16,341,383 -35,318,206 equivalents Investment income -55,168,915 -17,195,912 Main reasons: Decrease in the revenue and profit from the principal business was due to the substantial decrease of the sales of real estate products, substantial increase of losses was due to provision for the devaluation of assets and decrease in investment income was due to loss arising from investment to external enterprises. Items Dec. 31, 2002 Dec. 31, 2001 Increase / Decrease (%) Total assets 663,838,276 715,376,924 -7.20 Shareholders’ equity 251,348,071 389,230,308 -35.42 Main reason of change: Decrease in the total assets and shareholder’s equity was due to the loss in the report period. (III) Operation based on products and regions 1. Operation of the leading products taking 10% of the income from the principal businesses (in RMB) 9 Hainan Pearl River Holding Company Limited Based on sectors Income from Cost of Gross Increase / decrease of Increase / decrease Increase / decrease and products principal principal profit rate income from principal of cost of principal of gross profit rate business business (%) business over that of business over that over that of the previous year of the previous year previous year Building 76,687,182 63,888,854 16.69 94.94 102.18 -15.18 material processing and construction 2. The Company was engaged in its principal businesses in Hainan. (in RMB) Places Income from principal business Increase / decrease (%) of the income from principal business over the previous year Hainan 990,000,055 -2.94 Shanghai 1,008,700 (IV) Operation results of solely-owned subsidiaries and controlled companies Companies Registered capital Equity owned Total assets Net profit Business scope (in RMB’000) (%) (in RMB’000) (in RMB’000) Shanghai Real Estate 40,000 100 70,700 -630 Real estate Branch, Hainan Pearl development River Industrial Co., Ltd. Hainan Pearl River 5,000 100 12,960 350 Property and hotel Property & Hotel management Management Co., Ltd. Hainnan Pearl River 1,500 100 1,490 -20 Tourism services International Travel Agency Hainan Pearl River 1,000 100 2,680 -100 Engineering Industrial Construction construction and Supervision Co. supervision Hainan Pearl River 30,000 100 75,770 10,490 Manufacturing and Tubular Pipe Co., Ltd. sales of tubular piles Hubei Pearl River Real 37,500 92 49,990 -1,610 Real estate Estate Development Co., development Ltd. (V) Major Suppliers and Customers 1. The purchase from the top five suppliers was RMB 15.62 million, accounting for 38.1% of the Company’s total purchase amount. 2. The sales amount to the top five customers was RMB 28.66 million, accounting for 31.5% of the Company’s total sales amount.. (VI) Investment 1. Project Investment In the report period, the Company invested about RMB 27.35 million in the project of Sanya Wanjia Junhua Holiday Inn project and about RMB 38.20 million in Wuhan Real Estate Project. 2. Project Investment In the report period, the Company increased investment amounting to RMB 1.5 million on Beijing Wanzhi Environment Technology Co., Ltd. and additionally invested RMB 8.45 million on Beijing Feikai Biology Technology Co., Ltd. and additionally invested RMB 3 million on Beijing Baili Network Co., Ltd. 3. In the report period, the Company raised no proceeds through share offering or the proceeds raised previously and carried down to the report period. (VII) Business Plan in the New Year 1. Attach greater importance on engineering progress of Sanya hotel project, ensure the construction quality and try to bring it into trial operation as soon as possible. 2. Enhance the planning, proposal submission for construction and financing work and try to start the construction as early as possible. 10 Hainan Pearl River Holding Company Limited 3. Make overall planning for comprehensive development of Hainan Jianfengling Tourism Resort and lay a solid foundation for long term development of the Company. 4. Continue to reinforce the management of the secondary companies and external investment, trying to improve the operation results of the controlled subsidiaries and associates. (VIII) Routine Work of the Board of Directors 1. Board meetings and resolutions in the report period (1) The 11 th meeting of the third Board of Directors was held on April 16, 2002 in Sanya. The meeting examined and adopted the following resolutions: 2001 Work Report of the Board of Directors; 2001 Annual Report and Summary 2001 Financial Settlement Report and the Profit Distribution Proposal; Proposal for Revising the Company’s Articles of Association; Rules of Procedures for Shareholders’ General Meeting. Rules of Procedures for the Board of Directors; Proposal for Nominating Candidates for Independent Directors; Proposal for Replacing Some of the Senior Executives; Proposal for Renewing Engagement of the Certified Public Accountants; Special Report on Provision for Devaluation of Assets; The aforesaid resolutions were published on Securities Times dated April 19, 2002. (2) 2002 1st Extraordinary Shareholders’ Meeting convened by the Board of Directors was he ld on April 25, 2002 by means of communication. The meeting examined and adopted 2002 1st Quarter Report. The aforesaid resolution was published on Securities Times dated April 27, 2002. (3) The 12th meeting of the third Board of Directors was held on June 27, 2002 by means of communication. The meeting examined and adopted the following resolutions: Approval of Proposal on the Related Transaction of Equity Exchange; Self-inspection Report on Establishing the Modern Enterprise System. The resolutions of the meeting were published on Securities Times dated June 28, 2002. (4) The 13th meeting of the third Board of Directors was held on August 19, 2002 in Shekou. The meeting formed the following resolutions: Review and approval of 2002 Semi-annual Report and Summary; Review and approval of the Proposal for Election for the New Board of Directors; Review and approval of Proposal for Establishing USA Primary Depositary Certificate Plan; Review and approval of Information Disclosure Management System; Review and approval of the Proposal on Entrusting Singapore Meritus International Hotels & Resorts 11 Hainan Pearl River Holding Company Limited Pte. Ltd. to Manage Sanya Hotel. Decision on Holding Extraordinary Shareholders’ Meeting. The aforesaid resolutions were published on Securities Times dated August 22, 2002. (4) The 1st meeting of the fourth Board of Directors was held on October 25, 2002 in Beijing. The meeting formed the following resolutions: Electing Zheng Qing Chairman of the Board of the 4th Board of Directors; Zheng Qing was engaged as General Manager and Feng Pai as Secretary of the Board; Approval of 2002 3rd Quarter Report. The aforesaid resolutions were published on Securities Times dated October 26, 2002. 2. Implementation of the Resolutions of the Shareholders’ General Meeting by the Board of Directors In the report period, the Company had no plan for profit distribution, converting public reserve into share capital, share allotment, or additional issuing of new shares. (IX) Profit Distribution Proposal and Proposal for Converting the Capital Reserve into Shares In the report period, the Company would conduct neither profit distribution nor converting capital reserve into shares due to deficit making. VIII. Report of the Supervisory Committee (I) Meetings 1. The 6th meeting of the third Board of Directors was held on April 16, 2002 in Sanya. The meeting formed the following resolutions: (1) Review and approval of 2001 Work Report of the Supervisory Committee; (2) Review and approval of 2001 Annual Report and Summary; (3) Review and approval of 2001 Financial Settlement Report and the Profit Distribution Proposal; (4) Review and approval of Rules of Procedures for the Supervisory Committee; (5) Review and approval of the Special Report on Provision for Devaluation of Assets. The aforesaid resolutions were published on Securities Times dated April 19, 2002. 2. The 7th meeting of the third Board of Directors was held on August 19, 2002 in Haikou. The meeting formed the following resolutions: (1) Review and approval of 2002 Semi-annual Report; (2) Review and approval of Proposal for Election for the New Supervisory Committee. 12 Hainan Pearl River Holding Company Limited The aforesaid resolutions were published on Securities Times dated August 22, 2002. 3. The 1st meeting of the fourth Board of Directors was held on October 25, 2002 in Beijing. The meeting formed the following resolutions: (1) Electing Sun Xianli the convener of the Fourth Supervisory Committee; (2) Approval of 2002 3rd Quarter Report. The aforesaid resolutions were published on Securities Times dated October 26, 2002. (II) The Supervisory Committee conducted supervision over the Company’s operation according to the law based on the relevant laws and regulation of the state. In the opinion of the Supervisory Committee, Company was legal in decision-making procedures. None the directors and senior executives vio lated the laws, regulations and the Articles of Association of the Company or harmed the interests of the Company while performing their duties. Company’s financial statements have truly reflected the Company’s real financial position and operation results. The Company acquired and sold assets based on fair prices; neither insider transaction nor other transaction which was harmful to the shareholders’ equity or caused loss of the Company’s assets has been found. The related transactions were carried out in a fair and reasonable way without any harm to the Company’s interest. The Company has established quite perfect internal control system; provision and offset after verification of the reserves for devaluation of the assets were carried out through legal procedures and on sufficient basis. IX. Significant Events 1. Material Lawsuits and Arbitrations: (1) In the report period, the Company brought a case to court against Hainan Zhongkexin Industrial Development Co., Ltd. and Hainan Overseas Chinese Commerce Co., Ltd. asking the court to judge the two defendants to pay the arrears for purchase of houses and overdue default fine totaling RMB Eighteen million and Eight Hundred Thousand only. Haikou Municipal Intermediate People’s Court is hearing this case. The aforesaid event was disclosed in 2002 3rd Quarter Report (which was published on Securities Times dated October 26, 2002). (2) In 1994, five corporations and natural persons, including Haikou Industrial Import & Export Co., borrowed RMB 11.858 million of mortgage loan from Bank of Communications Hainan Provincial Branch for purchasing commodity houses from the Company and the Company offered the guarantee for them. In December, 2002, the said bank brought a case to court against the Company as the second defendant. This case is still in process of hearing. 2. Assets Acquisition and Sales: For the detail, refer to the Related Transaction (1). 3. Related transactions: (1) The Company exchanged its partial equity in Beijing Xinliji Vacuum Glass Technology Co., Ltd. for 13 Hainan Pearl River Holding Company Limited partial equity of Shenzhen Wanwangyuan Communication Technology Co., Ltd. respectively with Beijing Xinxing Real Estate Development Corporation and Guangzhou Lichengde Investment Co., Ltd.The equity exchange was conducted on the basis of the net asset value ended December 31, 2001. The equity value involved in the said transaction was only RMB 2.1 million and RMB 1.05 million respectively. After the equity exchange, the equity in Beijing Xinliji Vacuum Glass Technology Co., Ltd. held by the Company was reduced by 34.89% while the proportion of the equity in Shenzhen Wanwangyuan held by the Company increased to 30%. The detailed related transaction and the resolutions of the board meeting were published on Securities Times dated June 28, 2002. In November of 1999, Beijing Xinxing Real Estate Development Corporation entrusted CITIC Trust & Investment Co., Ltd. (the former CITIC Industrial Trust & Investment to offer RMB 50 million and RMB 40 million of trust loans to the Company, which was approved by a Board meeting and an Extraordinary Shareholders’ Meeting. The loans were renewed for one year in 2000 and renewed again for another year in 2001. The two roans were turned into the loans of two-year-term respectively on October 29, and November 8, 2002 with annual interest rate of 5.49%. (3) In January, 2001, Beijing Xinxing Real Estate Development Corporation turned the amount of RMB 37.00 million owed by the Company into a one-year trust loan and entrusted CITIC Trust & Investment Co., Ltd. to offer. On December 20, 2002, the loan was turned into a two-year-term loan with annual interest rate of 5.49%. (4) In May, 2002, Beijing Xinxing Real Estate Development Corporation provided a loan amounting to RMB 25.00 million to the Company with a term of one year. On November 26, 2002, the loan was turned into a two-year-term trust loan with annual interest rate of 5.49%. The aforesaid 2 , 3 and 4 were all disclosed in the regular reports since 1999 Annual Report; and (2) was disclosed as resolution of the Board meeting and resolution of the Extraordinary Shareholders’ Meeting on Securities Times in November and December, 1999. (5) On November 7, 2002, the Company borrowed a loan amounting to RMB 7.17 million from Beijing Xinxing Real Estate Development Corporation with annual interest rate of 5.31% and a term of one year. (6) On November 26, 2002, the Company entrusted CITIC Trust & Investment Co., Ltd. to lend a loan amounting to RMB 15.00 million to the Company with annual interest rate of 5.31% and a term of one year. 4. In the report period, the Company had never entered into any contract concerning keeping as custodian, contracting, leasing, guarantee, management on commission of any other companies’ assets and vice versa. 5. In the report period, there were no commitments made by the Company or the shareholders holding over 5% of the Company’s share capital. 6. In the report year, the Company did not change the engagement of the certified public accountants. The Company renewed the engagement of Hainan Cong Xin Certified Public Accountants as the Company’s A-stock auditor with remuneration of RMB 300,000 (with business travel expenses exclusive). The certified public accountants had offered services to the Company successively since the Company’s 1993 Semi-annual Report. The Company renewed the engagement of Grant Thornton Certified Public Accountants as the Company’s A-stock auditor with remuneration of HK$ 460,000 (with business travel expenses inclusive). The certified public accountants had offered services to the Company successively since the Company’s 1999 Annual Report. 7. In the report year, the Company, the Board of Directors, its directors and senior executives had never been investigated, underwent administrative punishment or had been criticized through public notice by China 14 Hainan Pearl River Holding Company Limited Securities Regulatory Commission; and had never been condemned by Shenzhen Stock Exchange in public either. X. Financial Statements (attached hereafter) XI. Documents Available for Inspection 1. Financial Statements signed by and under the seal of the legal representative, chief financial officer and accounting supervisors; 2. Original copy of the Auditors’ Report under the seal of the accounting firm and signed by and under the seal of certified accountants. 3. Originals of all documents and manuscripts of Public Notices of the Company disclosed in public in Securities Times. 15 Hainan Pearl River Holding Company Limited Hainan Pearl River Holding Company Limited Report and Financial Statements For the year ended 31 December 2002 16 Hainan Pearl River Holding Company Limited Contents Auditors' Report 1 Consolidated Statement of Income 2 Consolidated Balance Sheet 3 Consolidated Cash Flow Statement 4 Consolidated Statement of Changes in Equity 5 Notes to the Financial Statements 6 Expressed in Renminbi Yuan ("RMB") Auditors' report To the members of Hainan Pearl River Holding Company Limited (incorporated in the People's Republic of China with limited liability) We have audited the financial statements of Hainan Pearl River Holding Company Limited (the "Company") and its subsidiaries (the "Group") for the year ended 31 December 2002 on pages 2 to 24 which have been prepared in accordance with International Accounting Standards as promulgated by the International Accounting Standards Committee. The financial statements 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 issued by the International Federation of Accountants. 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 give a true and fair view of the state of the Group's affairs as at 31 December 2002 and of the Group's loss and cash flows for the year then ended. Grant Thornton Certified Public Accountants Hong Kong ２３ Ａｐｒｉｌ ２００３ 1 Hainan Pearl River Holding Company Limited Consolidated statement of income for the year ended 31 December 2002 Notes 2002 2001 RMB'000 RMB'000 Turnover 5 91,009 91,706 Cost of sales (76,776) (72,393) Gross profit 14,233 19,313 Other income 6 8,957 4,345 Selling, general and administrative expenses (36,502) (26,779) Impairment loss on properties, plant and equipment - (18,603) Provision for diminution in value of properties held for sale (29,994) - Provision for doubtful debts (20,353) (11,612) Provision for diminution in value of long term investments (49,323) (17,713) Loss from operations (112,982) (51,049) Net finance costs 7 (14,904) (13,003) Loss from associates (8,295) (2,334) Loss before taxation 8 (136,181) (66,386) Taxation 9 - - Loss before minority interests (136,181) (66,386) Minority interests 2,394 5,876 Loss for the year 27 (133,787) (60,510) Loss per share (RMB) 10 (0.35) (0.16) 2 Hainan Pearl River Holding Company Limited Consolidated balance sheet as at 31 December 2002 Notes 2002 2001 RMB'000 RMB'000 ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 11 84,621 55,055 Long term investments 12 156,523 203,273 Intangible assets 13 12,938 18,493 254,082 276,821 Current assets Properties held for sale 14 230,892 261,958 Inventories 15 3,038 7,615 Trade and other receivables 16 107,135 72,096 Amount due from an unconsolidated subsidiary - 92 Amounts due from associates 6,694 8,485 Amounts due from investee companies 11,443 21,634 Amount due from a related company 4,180 - Cash at banks and in hand 15,243 31,584 378,625 403,464 Current liabilities Bank loans 17 125,035 112,135 Short term loans 18 15,000 127,000 Trade and other payables 19 108,332 75,291 Amounts due to associates 852 1,021 Loan from a related company 20 7,170 500 Dividends payable 3,213 3,213 259,602 319,160 Net current assets 119,023 84,304 Non-current liabilities Long term loans 21 152,000 - Minority interests 2,813 9,046 Net assets 218,292 352,079 CAPITAL AND RESERVES Share capital 22 377,651 377,651 Reserves 23 (159,359) (25,572) Shareholders’ funds 218,292 352,079 __________________________ __________________________ Director Director 3 Hainan Pearl River Holding Company Limited Consolidated cash flow statement for the year ended 31 December 2002 2002 2001 RMB'000 RMB'000 Cash flows from/(used in) operating activities Loss before taxation (136,181) (66,386) Adjustments for : Depreciation 8,506 6,999 Provision for doubtful receivables 20,353 11,612 Permanent diminution in value of long term investments 49,323 17,713 Provision for properties held for sale 29,994 313 Loss from an associate 8,295 2,334 Gain on disposal of investment in a long term investment/an associate (2,730) (827) Loss on disposal of property, plant and equipment 610 647 Provision for diminution in value of property, plant and equipment - 18,603 Written off of inventories 746 - Amortisation of intangible assets 1,854 1,372 Interest income (1,581) (1,894) Interest expense 16,485 14,897 Operating (loss)/profit before working capital changes (4,326) 5,383 (Increase)/Decrease in trade and other receivables (63,038) 10,332 Decrease in properties held for sale 1,072 24,692 Decrease in inventories 3,709 1,161 Decrease in amount due from an unconsolidated subsidiary 92 93 Decrease in amounts due from associates 1,791 1,093 Decrease/(Increase) in amounts due from investee companies 10,191 (20,475) Increase in amount due from a related company (4,180) - Increase in trade and other payables 44,256 219 Decrease in amount due to an unconsolidated subsidiary - (990) Decrease in amount due to an associate (169) (3,612) Increase in amount due to a related company 6,670 500 Cash (used in)/generated from operations (3,932) 18,396 Interest paid (16,485) (14,897) Net cash (used in)/generated from operating activities (20,417) 3,499 Cash flows from investing activities Proceeds from disposal of property, plant and equipment 501 182 Proceeds from disposal of a long term investment/an associate - 827 Acquisition of a subsidiary net of cash acquired (see note 25) - (18,248) Disposal of a subsidiary net of cash disposed of (see note 26) (18) - Increase in long term investments (12,950) (20,000) Purchases of property, plant and equipment (42,020) (14,373) Interest received 1,581 1,894 Dividend received from an associate - 20,850 Net cash used in investing activities (52,906) (28,868) Cash flows from financing activities Bank loans repayment - (18,500) New bank loans taken out 17,100 37,000 New long term loans taken out 40,000 - Decrease in loan from a shareholder company - (5,000) Decrease in loan from a related company - (37,000) (Decrease)/Increase in minority interests (118) 13,551 Net cash generated/(used in) financing activities 56,982 (9,949) Decrease in cash (16,341) (35,318) Cash at beginning of year 31,584 66,902 Cash at end of year 15,243 31,584 4 Hainan Pearl River Holding Company Limited Consolidated statement of changes in equity for the year ended 31 December 2002 Share Capital Revenue Accumulated capital reserve reserve losses Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 Balance at 1 January 2001 377,651 288,912 109,488 (363,462) 412,589 Transfer - - 367 (367) - Loss for the year - - - (60,510) (60,510) Balance at 31 December 2001 377,651 288,912 109,855 (424,339) 352,079 and as at 1 January 2002 Transfer - - 53 (53) - Loss for the year - - - (133,787) (133,787) Balance at 31 December 2002 377,651 288,912 109,908 (558,179) 218,292 5 Hainan Pearl River Holding Company Limited Notes to the financial statements for the year ended 31 December 2002 1. ORGANISATION AND OPERATIONS Hainan Pearl River Holding Company Limited (the "Company") (formerly known as Hainan Pearl River Enterprises Holdings Company Limited) was incorporated in the People's Republic of China (the "PRC") in November 1987. On 3 January 1992, the Hainan Provincial People's Government approved the reorganisation of the Company into a joint stock limited company. The principal activities of the Company and its subsidiaries (the "Group") are property development and construction related products and services. The registered office of the Company is located at 29/F., Dihao Building, Pearl River Plaza, Binhai Avenue, Haikou, Hainan, PRC. The average number of employees of the Group during the year was 588 (2001: 526). 2. BASIS OF PRESENTATION The consolidated financial statements of the Group incorporate the financial statements of the Company and its major subsidiaries made up to 31 December 2002. All material inter-company transactions and balances are eliminated on consolidation. 6 Hainan Pearl River Holding Company Limited 2. BASIS OF PRESENTATION (Continued) As at 31 December 2002, the Company had the following subsidiaries, which were all incorporated in the PRC : Date of Attributable Company name establishment equity interest Registered capital Principal activities Consolidated subsidiaries Hainan Pearl River 22 August 1991 100% RMB5,000,000 Property Properties and Hotels management Management Co., Ltd. Hainan Pearl River 29 June 1993 100% RMB40,000,000 Property Enterprises Holding Co., development Ltd. Shanghai Real Estate Co. Hainan Pearl River Pile Co., 8 July 1993 100% RMB30,000,000 Manufacture of PHC Ltd. - Pipe Hainan Pearl River 18 September 1993 100% RMB1,000,000 Construction Enterprises Project supervision and Construction Supervision management Co., Ltd. Hainan Pearl River Tourism 5 April 1994 100% RMB1,500,000 Travel services Co. Hubei Pearl River Real 12 April 2001 92% RMB37,500,000 Property Estate Development Co., development Ltd A subsidiary is a company controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefit from its activities. 7 Hainan Pearl River Holding Company Limited 2. BASIS OF PRESENTATION (Continued) As at 31 December 2002, the Company had the following major associates, which were all incorporated in the PRC : Date of Attributable Registered Principal activities Company name establishment equity interest capital Shenzhen Dirui Computer & 12 August 1999 27.27% RMB41,250,000 Hotel video Technology Co., Ltd. communication (" 深圳市迪瑞计算技术有 system 限公司") Shenzhen Wanwangyuan 25 September 2000 30% RMB30,000,000 Communication Communication & technique and Technology Co. system (" 深圳万网元通讯技术公 司") Beijing Feikai Biological 21 February 2001 40% RMB15,000,000 Biological technique Technology Co. research ("北京飞凯生物技术公司") Beijing Xin Li Ji Vacuum Glass 27 March 2001 34.89% RMB25,000,000 Investment holding Technique Co., Ltd (" 北京新立基真空玻璃技 术有限公司") An associate is a company, other than a subsidiary, in which the Group has a long term equity interest and over which the Group is in a position to exercise significant influence on its financial and operating policy decisions. The results of the above associates are accounted for by using the equity method of accounting and the Group's interests are stated at the share of net assets value in these associates. Other associates, except as stated above, are stated in the consolidated balance sheet at cost less provision for permanent diminution in value. The results of operations and net assets of these associates are not accounted for on the equity basis for the purpose of the restatement of the financial statements to conform to IAS, because, in the opinion of the directors, they are not material to the results of operations and financial position of the Group taken as a whole. The results of these companies are dealt with in the consolidated statement of income to the extent of dividend income received and receivable. 8 Hainan Pearl River Holding Company Limited 3. PRINCIPAL ACCOUNTING POLICIES The financial statements on page 2 to 24 are prepared in accordance with International Accounting Standards ("IAS") issued by the International Accounting Standards Committee ("IASC") and interpretations issued by the Standard Interpretation Committee of the IASC as if those standards had been applied consistently throughout the year. This basis of accounting differs from that used in the statutory accounts of the Group which were prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises in the PRC. The financial statements are prepared under the historical cost convention. The following principal accounting policies were adopted in restating the financial statements of the Group to conform to IAS : (a) Property, plant and equipment (i) Depreciation Depreciation is provided to write off the cost or carrying value of property, plant and equipment over their estimated useful lives, taking into account the estimated residual value, using the straight line method. The estimated useful lives of property, plant and equipment are as follows : Land and buildings 25 years Machinery and equipment 10 years Furniture and fixtures 5 years Motor vehicles 5 years (ii) Measurement bases Property, plant and equipment are stated at cost less provision for diminution in value and accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to the working condition and location for its intended use. Subsequent expenditure relating to property, plant and equipment is added to the carrying amount of the assets if it can be demonstrated that such expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the assets. When assets are sold, any gain or loss resulting from their disposal, being the difference between the net disposal proceeds and the carrying amount of the assets, is included in the consolidated statement of income. 9 Hainan Pearl River Holding Company Limited 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (b) Construction in progress Construction in progress represents machineries and properties under construction and is stated at cost. Cost includes construction cost plus interest charges arising from borrowings used to finance these projects during the construction period. Construction in progress is transferred to property, plant and equipment when it is capable of producing saleable output on a commercial basis. (c) Goodwill Goodwill represents the premium of purchase consideration over the fair values ascribed to the net assets of subsidiaries or associates acquired and is amortised, using the straight line method, over a period of 10 years. (d) Impairment The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. All impairment losses are recognised in the consolidated statement of income. Calculation of recoverable amount The recoverable amount of the Group's receivables is calculated as the present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset. Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of their net selling price and value in use. In accessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market situations. (e) Production technique Production technique represents a technique acquired by the Group and is stated at cost. Amortisation is charged to the consolidated statement of income on a straight-line basis over a period of 10 years starting from the date on which the technique is available for use. 10 Hainan Pearl River Holding Company Limited 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (f) Properties held for sale Properties held for sale are stated at the lower of cost and net realisable value. Cost of properties held for sale includes cost of construction, development expenditures and interest charges capitalised. Net realisable value is determined on the basis of the estimated selling price less further costs of constructions and estimated costs necessary to make the sale. (g) Long term investments Long term investments are stated at cost less provision for permanent diminution in value where necessary. (h) Related parties Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. (i) Financial instruments Financial instruments of the Group include other investments, loans and receivables, cash and bank balances, creditors and other payables. The accounting policies for various types of investments of the Group are set out in the individual accounting policies associated with these investments. Other financial instruments are stated at cost. (j) Foreign currencies Transactions in foreign currencies are translated into Renminbi Yuan at the rates of exchange ruling at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Renminbi Yuan at the rates of exchange ruling at that date. Profits and losses arising on exchange are dealt with in the consolidated statement of income. 11 Hainan Pearl River Holding Company Limited 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (k) Recognition of revenue Revenue from the sale of developed properties is recognised when title of the property is transferred and the buyer takes legal possession of the property. Revenue from the sale of goods is recognised when the goods are delivered to customers. Revenue from property management is recognised when the management fee is due and receivable. (l) Provision A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (m) Segmental reporting A segment is a distinguishable component of the Group that is engaged either in a particular business (business segment), or conducting business in a particular geographical area (geographical segment), which is subject to risks and rewards that are different from those of other segments. (n) Cash and cash equivalent For the purpose of the cash flow statement, cash and cash equivalents comprise cash in hand and amounts repayable on demand with banks and short-term highly liquid investments which are readily convertible into known amounts of cash without notice and which were within three months of maturity when acquired, less advances from banks repayable within three months from the date of the advance. 12 Hainan Pearl River Holding Company Limited 4. SEGMENT INFORMATION Segmental information of the Group by business segment (primary segment) and geographical segment (secondary segment) are as follows : (a) Business segment Properties development and Construction related properties management products and services Travel-related services Total 2002 2001 2002 2001 2002 2001 2002 2001 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 Turnover 9,038 47,959 77,693 40,036 4,278 3,711 91,009 91,706 Segment results (55,080) (32,333) 10,752 (582) (27) 13 (44,355) (32,902) Unallocated expenses (76,922) (20,481) Finance cost (14,904) (13,003) Minority interests 2,394 5,876 Loss for the year (133,787) (60,510) Segment assets 338,549 345,125 72,227 46,976 1,492 1,318 412,268 393,419 Unallocated assets 220,439 286,866 Total assets 632,707 680,285 Segment liabilities 332,915 259,031 61,674 47,883 259 1,062 394,848 307,976 Unallocated liabilities 16,754 11,184 Total liabilities 411,602 319,160 Capital expenditure 27,908 6,731 14,089 10,760 22 10 42,019 17,501 Depreciation 3,359 3,312 5,122 3,661 25 26 8,506 6,999 13 Hainan Pearl River Holding Company Limited 4. SEGMENT INFORMATION (Continued) (b) Geographical segment The sales of the Group during the years ended 31 December 2001 and 2002 were made in the PRC. 5. TURNOVER Turnover comprises income from sales of developed properties, sales of goods and property management and sales of construction related products. 6. OTHER INCOME 2002 2001 RMB'000 RMB'000 Gain on disposal of investment in a long term investment / an associate 2,730 827 Rental income 1,654 1,816 Others 4,573 1,702 8,957 4,345 7. NET FINANCE COSTS 2002 2001 RMB'000 RMB'000 Interest expenses 16,485 14,897 Interest income (1,581) (1,894) 14,904 13,003 14 Hainan Pearl River Holding Company Limited 8. LOSS BEFORE TAXATION 2002 2001 RMB'000 RMB'000 Loss before taxation is arrived at after charging : Amortisation of intangible assets 1,854 1,372 Depreciation of property, plant and equipment 8,506 6,999 Staff cost 6,196 4,995 9. TAXATION The Group provides for taxation on the basis of its income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes. 10. LOSS PER SHARE Loss per share was calculated based on the loss for the year of RMB133,787,000 (2001 : RMB60,510,000) and on the weighted average number of 377,650,800 (2001 : 377,650,800) shares. 15 Hainan Pearl River Holding Company Limited 11. PROPERTY, PLANT AND EQUIPMENT Land and Machinery and Furniture Construction buildings equipment Motor vehicles and fixture in progress Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 At cost less impairments At 1 January 2002 30,593 44,920 8,024 5,780 642 89,959 Additions 2,098 10,425 833 187 28,477 42,020 Disposals (1,368) (471) (439) (166) - (2,444) Disposal of a subsidiary - (3,966) - - (255) (4,221) At 31 December 2002 31,323 50,908 8,418 5,801 28,864 125,314 Accumulated depreciation At 1 January 2002 4,239 20,234 5,623 4,808 - 34,904 Charge for the year 1,486 6,489 378 153 - 8,506 Written back on disposal (463) (342) (398) (130) - (1,333) Disposal of a subsidiary - (1,384) - - - (1,384) At 31 December 2002 5,262 24,997 5,603 4,831 - 40,693 Net book value At 31 December 2002 26,061 25,911 2,815 970 28,864 84,621 At 31 December 2001 26,354 24,686 2,401 972 642 55,055 16 Hainan Pearl River Holding Company Limited 12. LONG TERM INVESTMENTS 2002 2001 RMB'000 RMB'000 Investments in unconsolidated subsidiaries - unlisted, at cost 770 727 Investments in associates - unlisted, at cost 5,133 5,258 Interest in associates - unlisted, share of net assets value 16,394 158,516 Investments in unlisted shares of public companies, at cost 1,680 1,680 Other investments, at cost 205,329 63,290 229,306 229,471 Provisions (72,783) (26,198) 156,523 203,273 13. INTANGIBLE ASSETS 17 Hainan Pearl River Holding Company Limited Product production technique Goodwill Total RMB'000 RMB'000 RMB'000 At 1 January 2001 - - - Addition 3,000 - 3,000 Goodwill arising on investment in an associate - 7,425 7,425 Goodwill arising on acquisition of subsidiaries (see note 25) - 9,440 9,440 Amortisation - (1,372) (1,372) At 31 December 2001 and 1 January 2002 3,000 15,493 18,493 Goodwill arising on investment in an associate - 7,177 7,177 Amortisation (225) (1,629) (1,854) Disposal of a subsidiary (see note 26) (2,775) (8,103) (10,878) At 31 December 2002 - 12,938 12,938 18 Hainan Pearl River Holding Company Limited 14. PROPERTIES HELD FOR SALE 2002 2001 RMB'000 RMB'000 Completed properties 145,796 147,089 Properties under development 134,383 134,403 Less : Provisions (49,287) (19,534) 230,892 261,958 Particulars of properties under development as at 31 December 2002 are as follows : Area in Average cost square per square Project meter meter Cost RMB RMB'000 Yanjiang First Road 76,780 797 61,172 19 Hainan Pearl River Holding Company Limited Sanya Bay 33,000 838 27,653 Longzhou New Town/ 龙珠国际大酒店 37,300 1,129 42,121 Others 3,437 134,383 As stated in Note 3 (f) above, properties held for sale are stated at the lower of cost and net realisable value. The estimation of net realisable value of properties held for sale requires the Company's directors to make assumptions on future market conditions with reference to currently available information and valuation made by professional valuer and bankers. As at 31 December 2002, the directors' valuation on properties for sale was performed after taking into consideration the latest sale transactions, if any, or the announcement of the minimum selling prices on the land located nearby the properties held for sale held by the Group. The minimum selling prices are set by the government from time to time based on the supply and demand of the property market in the PRC. 15. INVENTORIES As at 31 December 2002, all of the inventories held were stated at cost. 20 Hainan Pearl River Holding Company Limited 16. TRADE AND OTHER RECEIVABLES 2002 2001 RMB'000 RMB'000 Trade receivables 52,774 44,283 Other receivables and prepaid expenses 106,699 59,798 Less : Provisions (52,338) (31,985) 107,135 72,096 17. BANK LOANS Bank loans of approximately RMB36.5 millions (2001 : RMB50.0 millions) were secured by certain properties held for sale, property, plant and equipment and shares of unlisted investment. At 31 December 2002, all of the bank loans were in RMB. The bank loans bear interests ranging from 5.84% to 9.12% per annum (2001 : 6.44% to 9.21%). 18. SHORT TERM LOANS 21 Hainan Pearl River Holding Company Limited Short term loans represent one year trust lending loans bearing interest at 5.31% (2001 : 5.85%) per annum. The trust party of the loan is Beijing Xin Xing Property Development Company Limited. 19. TRADE AND OTHER PAYABLES 2002 2001 RMB'000 RMB'000 Trade payables 40,836 30,316 Other payables and accrued expenses 67,496 44,975 108,332 75,291 20. LOAN FROM A RELATED COMPANY Loan from a related company represents a loan from Beijing Xin Xing Property Development Company Limited. The loan is unsecured and bears interest at 5.31% per annum (2001 : non-interest bearing). 22 Hainan Pearl River Holding Company Limited 21. LONG TERM LOANS Long term loans represent two years trust lending loans bearing interest at 5.49% per annum and are repayable in the fourth quarter of 2004. The trust party of the loans is Beijing Xin Xing Property Development Company Limited. 22. SHARE CAPITAL 2002 2001 RMB'000 RMB'000 Registered and fully paid 206,744,976 legal entity shares of RMB 1 each 206,745 206,745 113,405,824 A shares of RMB 1 each 113,406 113,406 57,500,000 B shares of RMB 1 each 57,500 57,500 377,651 377,651 23. RESERVES 23 Hainan Pearl River Holding Company Limited Capital Revenue Accumulated reserve reserve losses Total RMB'000 RMB'000 RMB'000 RMB'000 Balance at 31 December 2002 288,912 109,908 (558,179) (159,359) Balance at 31 December 2001 288,912 109,855 (424,339) (25,572) According to the Company Law of the PRC and the Article of Association of the Company, when distributing net profit of each year, the Company shall set aside 10% of its net profits as reported in the statutory accounts for the statutory common reserve fund (except when the fund has reached 50% of the Company's registered share capital) and 5% to 10% for the statutory common welfare fund (collectively as "Revenue reserve"). These reserves cannot be used for purposes other than those for which they are created and are not distributable as cash dividends. The Company declares dividends based on the lower of retained earnings as reported in the statutory accounts and the financial statements prepared under IAS. As the statutory accounts have been prepared on an accounting basis other than IAS, the net profit/(loss) as reported in the statutory accounts is different from the amount reported in the accompanying consolidated statement of income (see Note 27). 24 Hainan Pearl River Holding Company Limited 24. RELATED PARTY TRANSACTIONS During the year the Group had the following transactions with its related parties : 2002 2001 RMB'000 RMB'000 Handling charges paid to a related company - 954 Interest paid for trust lending loans (see also notes 18 and 21) 7,654 7,376 Interest received from an investee company 1,108 1,174 25. ACQUISITION OF A SUBSIDIARY The fair value of assets acquired and liabilities assumed were as follows: 2002 2001 RMB'000 RMB'000 25 Hainan Pearl River Holding Company Limited Cash at banks and in hand - 192 Property, plant and equipment - 3,230 Intangible assets - 3,000 Inventories - 19 Trade and other receivables - 11,829 Bank loans - (6,000) Trade and other payables - (2,270) Minority interests - (1,000) Net assets acquired - 9,000 Goodwill arising on acquisition - 9,440 - 18,440 Satisfied by : Cash consideration - 18,440 Cash acquired - (192) Cash outflow on acquisition net of cash acquired - 18,248 26 Hainan Pearl River Holding Company Limited 26. DISPOSAL OF A SUBSIDIARY 2002 2001 RMB'000 RMB'000 Cash at banks and in hand 18 - Property, plant and equipment 2,837 - Product production technology 2,775 - Goodwill on consolidation 8,103 - Inventories 122 - Trade and other receivables 10,376 - Bank loans (4,200) - Trade and other payables (11,215) - Minority interests (3,721) - Net assets disposed of 5,095 - Satisfied by : Increase in interests in associate 5,095 - 27 Hainan Pearl River Holding Company Limited Net cash outflow arising on disposal Cash at banks and in hand disposed of (18) - (18) - 28 Hainan Pearl River Holding Company Limited 27. IMPACT OF IAS AND OTHER ADJUSTMENTS ON LOSS FOR THE YEAR AND NET ASSETS Loss for the Net assets as at year ended 31 December 31 December 2002 2001 2002 2001 RMB'000 RMB'000 RMB'000 RMB'000 As reported in statutory accounts As previously reported (138,051) (38,214) 251,348 390,483 Opening balances adjustment - Share of accumulated losses of an investee company classified as an associate in current year - (936) - (1,253) As restated (138,051) (39,150) 251,348 389,230 Impact of IAS and other adjustments - Opening balances adjustments - impairment loss of property, plant and equipment - (30,886) - - - previous years' unrecognised losses of a subsidiary - (6,042) - - - reversal of provision for staff quarter expense - 1,186 - - - reversal of opening balances adjustment - 936 - 1,253 - (34,806) - 1,253 29 Hainan Pearl River Holding Company Limited - write back of costs of property, plant and equipment and corresponding accumulated depreciation - 10,516 - - - adjustment on capitalisation of interest charges arising from borrowings used to finance the properties under development during the construction period and corresponding depreciation 5,268 7,684 (5,719) (10,987) - previous years' unrecognised losses of a subsidiary which has already been taken up in previous years under IAS - 6,042 - - - unrecognised losses of consolidated subsidiaries (626) (6,007) - - - provision for bad and doubtful debts - (5,600) (14,600) (14,600) - adjustment on treasury stock - - (1,410) (1,410) - excess interest income from a related company recognised as capital reserve in PRC statutory accounts now adjusted as income for the year 795 - - - - Share of accumulated losses of an investee company classified as an associate in current year now adjusted as share of loss from associates in current year (1,253) - - - - adjustment to income from an associate - - (9,929) (9,929) - adjustment to income from debt restructuring - 699 - - - others 78 112 (1,398) (1,478) As restated for the Group (133,787) (60,510) 218,292 352,079 30 Hainan Pearl River Holding Company Limited 28. FINANCIAL INSTRUMENTS (a) Fair value of financial instruments The directors consider that the carrying amount of cash, trade and other receivables, trade and other payables and banks loans approximates to their fair value. (b) Credit risks At balance sheet date, the Group has no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated balance sheet. 29. APPROVAL OF THE FINANCIAL STATEMENTS The financial statements on pages 2 to 24 were approved by the board of directors on 23 April 2003. 31