深基地Ｂ(200053)2002年年度报告（英文）

SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO LTD 2002’S ANNUAL REPORT Important Note: The Board of Directors guarantees that there exist no omission, misstatement, or misleading information in this annual report. The Board of Directors is responsible, individually and jointly, for the authenticity, accuracy and integrity of the information herein. Dr. Fu Yuning, the Chairman of the Board of Directors, Mr. Cui Wei, the Financial Controller, and Ms. Yu Zhongxia, the Financial Manager, guarantees that there exist no omission, misstatement, or misleading information in the financial results of this annual report. (The Annual Report is written in both English and Chinese. In case of conflict between the two versions, Chinese version prevails.) 1 PART I. Company Profile Name of the Company Shenzhen Chiwan Petroleum Supply Base Co., Ltd (“SCPSB”) Legal Representative Dr. Fu Yuning Company Secretary Mr. Fu Jialin Securities Representative Mdm. Yu.Z.X Tel 26694211 Fax 26694227 Address Base Building, Chiwan, Shenzhen, PRC Place of Registration Chiwan, Shenzhen, PRC Office Base Building, Chiwan, Shenzhen, PRC Post Code 518068 E-mail Address szcpsb@public.szonline.net Annual Report available Administration Department, 3rd Floor, Base Building, Chiwan, Shenzhen, PRC Stock Exchange Shenzhen Stock Exchange Stock Series Shenzhen Base (B share) Stock Code 200053 Date of Initial Registration 24th July 1995 Initial Registration Address Industry and Commerce Administration Bureau of Shenzhen, Guangdong, PRC Registration Number for QGYSZZ No. 101031 Business License Number of Taxation 440301618833899 (N) Registration 440305618833899 (L) Domestic Certified Public Shenzhen Dahua Tiancheng Certified Public Accountants Accountants Office Address 1/F B Block, Unite Plaza, No. 5022, Bin He Ave., Futian Dis., Shenzhen, PRC International Certified PricewaterhouseCoopers Public Accountants Office Address 21st Floor Price’s Building Central Hong Kong 2 PART II. Financial and Business Highlights I. Profit Before Taxation and its Composition Items US$ RMB Total Profit 8,513,200.87 70,489,303.20 Net Profit 7,601,383.34 62,939,454.06 Net profit after deducting non-recurring gains and losses 7,622,442.69 63,113,825.47 Including: Profit from main business lines 6,214,772.02 51,458,312.33 Profit from other business lines 0 0 Operating profit 6,099,842.86 50,506,698.88 Investment income 2,434,417.36 20,156,975.74 Subsidy income 0 0 Net income / expenditure from non-operating (21,059.35) (174,371.42) Net cash flows arising from operating activities 8,800,117.84 72,864,975.72 Net increase / decrease in cash and cash equivalents (386,613.25) (3,201,157.71) Note: Items included in the non-recurring gains and losses and the amounts: US$ RMB 1. Income from non-operation 10,128.60 83,864.81 2. Expenditure of non-operation 31,187.95 258,236.23 Amount (21,059.35) (174,371.42) II. Difference in Profit after Taxation There is no difference in profit after taxation as audited by PricewaterhouseCoopers, in accordance with Auditing Standards promulgated by Hong Kong Society of Accountants, and that as audited by domestic Certified Public Accountants. III. Financial Highlights 2002 2002 2001 2001 2000 2000 Item US$’000 RMB’0,000 US$’000 RMB’0,000 US$’000 RMB’0,000 Turnover 11,531 9,547 12,415 10,280 11,676 9,668 Profit after taxation 7,601 6,294 7,268 6,018 5,417 4,485 Total assets 77,140 63,872 74,498 61,684 69,296 57,377 Shareholders’ equity 67,240 55,675 63,146 52,285 60,965 50,479 Earnings per share (Fully diluted) 0.033 0.273 0.0315 0.2610 0.0236 0.195 (US$/RMB per share) (Weighted average) 0.033 0.273 0.0315 0.2610 0.0236 0.195 Net assets per share 0.292 2.414 0.274 2.267 0.264 2.189 (US$/RMB per share) (Fully diluted) Net assets per share after adjustment 0.286 2.366 0.268 2.22 0.259 2.143 (US$/RMB per share) (Fully diluted) Net cash flows per share arising from 0.038 0.316 0.044 0.367 0.038 0.319 operating activities (Fully diluted) Return on equity (%) (Fully diluted) 11.305 11.305 11.51 11.51 8.9 8.9 3 V. Change of Shareholders’ Equity RMB Capital public Statutory Surplus Statutory Public Retained Item Share capital reserve public reserve Welfare fund earnings Equity Year-begin 230,600,000.00 218,558,237.08 35,060,064.36 17,530,032.02 8,451,670.32 525,280,104.53 Increase 6,293,945.41 3,146,972.73 62,939,454.06 31,469,727.03 Decrease 44,057,617.86 Year-end 230,600,000.00 218,558,237.08 41,354,009.77 20,677,004.72 27,333,506.52 556,749,831.56 Notes: The Company achieved a net profit of US$7,601,383.34 in 2001. Pending the final approval by the upcoming Annual General Meeting (hereinafter referred to as AGM), 50% of the net profit would be distributed to shareholders in terms of cash dividend. Also forwarded to the AGM for approval will be the proposed retention of statutory surplus public reserve (10%), statutory public welfare fund (5%) and discretionary surplus public reserve (5%). PART III. Change of Shareholder’s Fund and Substantial Shareholders 1. Changes in Shareholding Structure (as at 31st December, 2002) Unit: share Number of Change in number of shares Number shares bonus conversion of shares of reserves At year beginning rights shares to shares others subtotal at year end 1. Untradable shares a.Public promoter’s shares State owned share A shares 119,420,000 119,420,000 B shares 51,180,000 51,180,000 Others b.Shares raised from legal entity c. Employee’s shares d. Preferred shares Total 170,600,000 170,600,000 2. Tradable shares a. A shares b. B shares 60,000,000 60,000,000 c. Overseas listed shares d. Others Total 60,000,000 60,000,000 3. Total number of shares 230,600,000 230,600,000 4 Share performance In June 1995, the Company obtained approval from Shenzhen Securities and Exchange Commission to issue, at par value of RMB1.00 per share, a total of 230.6 million shares of common stock comprising 119.42 million A-shares for China Nanshan Development (Group) Incorporation (“CNDI”), 51.18 million B-shares for Offshore Joint Services Company of Singapore Private Limited (“OJSC”) and 60 million B-shares to foreign investors. The issue of 60 million B-shares were fully subscribed at HK$2.82 per share with fully diluted P/E ratio of 10.5 times. Trading of the shares in Shenzhen Stock Exchange began on 28 July 1995. Apart from the shares held by promoters and B shares in issue, the company did not issue any employees’ shares. For the year under review there was no purchase or cancellation of the Company’s shares by the Company. The paid-up capital remained unchanged. II. Particulars about Shareholders Shareholders The record from Shenzhen Stock Exchange (“SSE”) confirmed that there were altogether 13229 shareholders registered in SSE as at 31st December 2002, of which CNDI was the only A-share shareholder. All the directors of the Board and the members of the Supervisory Committee and senior management personnel of the Company did not hold any Company’s shares. Substantial shareholders The top ten shareholders as at 31st December 2002 are listed below: No Code Shareholder’s name Share Percentage % 1 00038657 CHINA NANSHAN DEVELOPMENT *119,420,000 51.79 (GROUP) INCORPORATION 2 00210963 OFFSHORE JOINT SERVICES (BASES) CO *51,180,000 22.19 OF SGP PTE LTD 3 00210854 SEMBAWANG MARINE & LOGISTICS LTD 2,087,093 0.91 （SEMBCORP LOGISTICS LTD） 4 00301640 WANG MEI LAN 752,170 0.33 5 91397816 LIU XIAO DONG 429,000 0.19 6 00276226 FENG HAN XING 368,393 0.16 7 91175993 BIN LIANG 306,737 0.13 8 91185421 ZHOU LI QING 264,391 0.11 9 00280449 SHENYE LIJING CO LTD 239,700 0.10 10 00267899 OR，TAK MING 230,000 0.10 Total 175,277,484 76.00 5 Profiles of Public Promoters 1. China Nanshan Development (Group) Incorporation Legal representative: Fu Yuning Date of incorporation: 28 September 1982 Paid-up capital: ¥500,000,000.00 Business scope: land development; shipping, land transportation and port operation; industrial, commercial, property and tourism; customs bonded warehouses; etc. 2. Offshore Joint Services (Bases) Company of Singapore Pte. Ltd. Legal representative: Mr. Koh Soo Keong Date of incorporation: 17 January 1983 Paid-up capital: S$10,000,000.00 Business scope: Investing in companies engaged in the supply of services and facilities to the offshore petroleum industry The above promoters did not mortgage their shares in whatsoever manners and for any purpose in 2001. PART IV. Information of Directors, Supervisors, Senior Executives and Other Staff I. Outline Brief of directors, supervisors and senior executives Share Name Post Sex Age Office Term held Fu Yuning Chairman male 46 May 2001—May 2004 Nil Koh Soo Keong Vice Chairman male 52 May 2001—May 2004 Nil Han Guimao Executive Director male 52 Nov. 2001—May 2004 Nil Fong Yue Kwong Director male 50 May 2001—May 2004 Nil Wang Fen Director female 48 May 2001—May 2004 Nil Lin Shao Dong Director male 57 May 2001—May 2004 Nil Lin Zhi Jun Independent Director male 48 May 2002—May 2004 Nil Bai You Zhong Independent Director male 62 May 2002—May 2004 Nil Zhong Jing Shen Convener of the male 51 Aug. 2001—May 2004 Nil Supervisor Committee Chan Sioh Noi Supervisor female 50 May 2001—May 2004 Nil Zhu Tian Sheng Supervisor male 58 May 2001—May 2004 Nil Fan Zhao Ping Supervisor male 49 Nov. 2001—May 2004 Nil Xiang Zhen Xian Supervisor male 46 May 2001—May 2004 Nil Zhang Xiang Supervisor male 38 May 2001—May 2004 Nil Ronnie Yoon General Manager male 53 Sept. 2000—May 2004 Nil Cui Wei Deputy GM & Financial male 46 May 2002—May 2004 Nil Controller Huang Dong Er Deputy GM male 51 May 2002—May 2004 Nil Fu Jia Lin Board Secretary male 41 May 2002—May 2004 Nil 6 Note: Seven of above directors and supervisors hold posts in CNDI, details as follows: Dr. Fu Yuning as the chairman from Dec. 1998; Mdm. Wang Fen as the general managerfrom March 2002; Mr. Lin Shao Dong as the vice chairman from July 2001; Mr. Han Gui Mao as the deputy general manager from March 2002; Mr. Zhong Jing Shen as the vice chairman from Aug. 2000; Mr. Zhu Tian Sheng as the director from June 2000; Mr. Fan Zhao Ping as the deputy general manager from Dec. 1998. Other staff As at Dec. 31, 2002, the Company has a staff of 121, including 94 engaging in production, 4 in accounting, 7 in administration and 16 in management; or composing 1 with doctor degree, 4 with master degree, 22 with bachelor degree, 7 with technical secondary school graduation and 87 with high school or lower graduation. Changes of directors, supervisors and senior executives 1) The 3rd session of the Board of Directors’ meeting was hold on May 22, 2002 and resolved: to appoint Mr. Han Guimao as Executive Director; to appoint Mr. Cui Wei as Deputy General Manager and Financial Controller; to appoint Mr. Huang Donger as Deputy General Manager; and to appoint Mr. Fu Jialin as Board Secretary to replace Mr. Cui Wei. 2) The first extraordinary Shareholders’ meeting for year 2002, held on January 7th 2002, had accepted the resignation of Mr. Cheng Da Ping as the member of Supervisory Committee due to his retirement and elected Mr. Zhu Tian Sheng as the member of Supervisory Committee. 3) The Annual General Shareholders’ Meeting for year 2002, held on May 28th 2002, had elected Mr. Bai You Zhong and Mr. Lin Zhi Jun as independent directors of the Third Board of Directors. II. Annual Salary of Directors, Supervisor and Senisor Executives Decision Procedure and Basis Salary standard of the Company was decided and approved by the Board of Directors. Of all directors, supervisors and senior executives, two independent directors, two employee supervisors and all senior executives draw their salary, bonus and other welfare from the Company, while others including Fu Yuning, Koh Soo Keong, Fong Yue Kwong, Wang Fen, Lin Shaodong, Han Guimao, Zhong Jingshen, Chan Sioh Noi, Zhu Tiansheng and Fan Zhaoping, draw the pay from their respective shareholder party rather than the Company. Amount Annual salary of the two supervisors and all senior executives totalled RMB 232.43 million. 7 Classification Three of present supervisors and senior executives enjoy an annual salary between RMB 95 thousands to RMB 200 thousands and three enjoy an annual salary over RMB 200 thousands. The allowance for the two independent directors in this year is RMB 35 thousands respectively. PART V. Administrative Structure The Company strictly implements the PRC Company Law, the Securities Law and other laws and regulations issued by the CSRC; continuously improves the legal person administration system and regulates its operation. The Company has built its administrative structure as follows: 1. In aspect of shareholders and shareholders’ general meeting: based on the principal of legality and efficiency, the Company makes every effort to attract more shareholders to attend the shareholders’ general meeting (SGM) and assures a thorough realization of shareholders’ rights. All SGM are attended and witnessed by professional lawyers. 2. In aspect of relations between the control shareholder and the Company: The Company is independent of its control shareholder in terms of assets, finance, organization and sales; and the Board of Directors, Supervisory Committee and internal organs of the Company operate independently. 3. In aspect of directors and Board of Directors: the Company elects directors strictly in line with the election procedure as regulated in the Articles of Association of the Company, which is subject to further improvement. Both the number of directors and composition of the Board comply with relevant laws and regulations. All directors not only attend the Board meetings and AGM diligently, but also take part in the training courses enthusiastically. Familiar with relevant laws and regulations, all directors understand the rights, duties and responsibilities of director. In order to further regulate the decision-making of Board of Directors, the Company has established the independent director system and three special committees in accordance with the requirements of the CSRC. 4. In aspect of supervisors and Supervisory Committee: Both the number of supervisors and composition of the Committee comply with relevant laws and regulations. Based on the spirit of being responsible for all shareholders, supervisors of the Company carefully exercise its duties to examine the performance of directors, managers as well as other senior executives, and express independent opinion. 5. In aspect of performance valuation, encouragement and binding mechanism: The Company has set up KPI evaluation system to its senior executives and is actively setting up a fair and open performance valuation criteria and encouragement and binding mechanism for all staff. 6. In aspect of information disclosure and transparency: The Company authorizes the secretary of the Board and the authorized representative in charge of securities affairs to take charge of disclosing information, receiving the visit and inquiry of the shareholders. The Company discloses the relevant information in a real, accurate, complete and timely way strictly according to the law, regulations and the Articles of Association, ensured all the shareholders to have equal opportunity to obtain the information. Moreover, the Company timely disclosed the detailed information of the largest shareholder or concrete controller and changes in shares held by them. 8 PART VI. Review of Annual General Shareholder’ Meeting I. The Company convened two shareholder’s general meetings in 2002. a) The Company announced resolutions of the first extraordinary shareholder’s general meeting on 8th Jan. 2002 both in Shenzhen Securities Times and South China Morning Post. The first extraordinary Shareholders’ General Meeting of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. was held at 3:00 pm, 7th Jan. 2002 in the Conference Room on 16/F of Chiwan Petroleum Building, Shenzhen. Shareholders and proxies representing 172,687,093 shares or 74.89% of the total number of shares, 230.6 million shares, attended the meeting. The Meeting reviewed and approved following resolutions by voting: Proposal on Changing Supervisors and Proposal on Establishing Shanghai Branch Company. b) The Company announced resolutions of the shareholder’s general meeting for the year 2002 on 29th May 2002 both in Shenzhen Securities Times and South China Morning Post. The Shareholders’ General Meeting for the year of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. was held at 3:00 pm, 28th May 2002 in the Conference Room on 16/F of Chiwan Petroleum Building, Shenzhen. Shareholders and proxies representing 172,687,093 shares or 74.89% of the total number of shares, 230.6 million shares, attended the meeting. The Meeting reviewed and approved following resolutions by voting: Work Report of the Board of Directors for the Year 2001; Work Report of the Supervisor Committee for the Year 2001; Financial Settlement Report for the Year 2001, Dividend Distribution Plan for the Year of 2001; Proposal on Electing Independent Directors. Part VII. Director’s Statements I. Abstract of Business Statement The turnover and profit from main business of the Company was down by 7.1% and 5.2% respectively dure to the declined offshaore activties in the South China Sea in 2002 which was 25% less than prediction. The total profit of the Company reached 4.7% increase mainly because the investment income increased 34% to US$243 millioms. Business scope The Base provides logistic services to offshore oil exploration, development and production. Logistic services provided range from rental of office/customized warehouse/yard, berthing facilities and material handling etc. Besides, it also involves in offshore engineering services through its two associate companies. Operations review (i) Turnover breakdown 2001 2001 Change US$’000 US$’000 % Office rental 1,508 1,700 -11.3 Storage service 5,084 5,046 0.75 Operation 4,938 5,669 -12.9 Total 11,530 12,415 -7.1 9 (ii) Rental income For the period under review, the utilization rates of warehouse and yard reached 92% which was about same level with that of last year. Despite keen competition in office rental business, the office occupancy rate stayed at the level of 53% for the year of 2002. The main reason for the office rental decrease is because the Company did not have electrical surcharge business in 2002. (iii) Wharf Operations Revenue from wharf operations decreased by 12.9% as compared with that of last year because of the declined offshare operations. Apart from the company’s core business, the management, with the objective to maximizing the utilization of its operating facilities, continued to develop its container freight station business to reduce the unfavorable impact to the main business. II. Financial performance (extracted from audit reports prepared by Dahua Tiancheng Certified Public Accountant) 2002 2001 Change US$’000 US$’000 % Turnover 11,530 12,415 -7.1 Net profit 7,601 7,268 4.6 Earnings per share (US cent) 3.30 3.15 4.8 Total assets 77,140 74,498 3.5 Long term liability 1,159 1,309 -11.5 Shareholders’ fund 67,240 63,146 6.5 III. Application of the Proceeds The company had invested US$20.5 million raised from stock market in its 1995 floatation in the projects approved by AGM. All the projects had been completed by the end of 1996 and the results of which were disclosed accordingly. IV. Business prospects In virtue of turbulence of the Persian Gulf and increase of the international oil price, the desire of PRC government to increase offshore oil & gas production, we shall expect a consistent offshore oil drilling activities in the South China Sea which would result in sustained income from our core business. Chiwan Sembawang Engineering Company Limited (CSE), as the milestone of entering the offshare engineering services of the Company, is predicted to continuely increase in its businees and will take the role of new profit incresing source. 10 The Company is studying and implementing its business plan to expand its petroleum logistics business into asset-based logistics sector with an aim of providing value-added services and thus enhancing profitability of the company. As the Company’s logistics park in Shanghai is building up and put in use in next half year in 2003, the company will get a certain profit from this new business. In accordance with the strategic plan, the Company will continuely build up comprehansive logistics park in the leading cities in Chian to provide hardware facility for both domestic and international third party logistics companies. V. Report of the Board of Directors 1. Board Meetings and Resolutions The Board has held seven meetings in the reporting peroid: (1) The fourth tele-communication meeting of the third Board of Directors was held on 17th April 2002. The meeting reviewed and passed the following resolutions: “The Annual Report for the Year 2001 and its Abtract”; “The Board and Management Report”; “The Financial Report for the Year 2001”; “The Proposal on Dividend Distribution Plan of 2001”; “Estimated Dividend Distribution Policy for 2002”. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 19th April 2002. (2) The fifth tele-communication meeting of the third Board of Directors was held on 24th April 2002. The meeting reviewed and passed the following resolutions: “The First Quarter Report for the Year 2002”; “Proposal on Independent Director Candidates”; “Resolution on convening the 2002’s AGM”. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 26th April 2002. (3) The third meeting of the Third Board of Directors was held on 12th May 2002 and the meeting reviewed and passed following resolutions: “The Financial Buget for Year 2002”; “The General Manager’s Report”; “The Appointment of Legal Advisor”; “The Appointment of Executive Director”; and “The Appoinment of Senior Executives”. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 23rd May 2002. （4）The Sixth tele-communication meeting of the Third Board of Directors was held on 24th June 2002. The meeting reviewed and passed “The Self-Examining Report on Establishing Modern Business system”. （5）The seventh meeting of the third board of director was held by tele-communication on 19th August 2002. The meeting examined and approved the full text of interim report for period to June 2001 and its abstracts and the resolution that the Company would not distribute interim dividend and not convert statutory surplus reserves to share capitals. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 21st August 2002 respectively. （6）The eighth meeting of the third board of director was held by tele-communication on 24th October 2002. The meeting examined and approved the Third Quarter Report. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 25th October 2002 respectively. 11 （7）The fourth meeting of the Third Board of Directors was held on 2nd December 2002 and the meeting reviewed and passed following resolutions: “The Management Report”; “Proposal on Appointing Auditors”; “Proposal on Establishing Board Subsidary Committees”; “Proposal on the Working Rules of Independent Directors”; “Proposal on Amending the Articles of Association of the Company”; “Proposal on the Annual Payment of Independent Directors”; “Proposal on Establishing Shanghai Limited Liability Company”; and “The Resolution on Convening the First Extraordinary Shareholder’s Meeting of 2003”. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 4th December 2002 respectively. 2. Implementation of the dividend distribution plan The Company implemented its 2001 dividend distribution plan on 25th July 2002: US$0.2206 cash bonus for every 10 shares. Dividend for B share was converted into HK dollars for distribution. VI. Dividend Distribution Preplan Dividend distribution preplan as of the year is set out as follows: Retained Earning B/F --- Profits available for distribution 7,601,383.34 Less: Statutory surplus public reserve (10%) 760,138.33 Statutory public welfare fund (5%) 380,069.17 Discretionary public reserve (5%) 380,069.17 Dividends (tax included) (50%) 3,800,691.67 Retained profits (30%) 2,280,415 The cash dividend for the year 2002 of US$0.1648 for every ten shares (tax included) or US$3,800,691.67 in total would be paid by the Company and for this purpose the conversion will be based on the closing rate between US$ and HK$ announced by the People’s Bank of China on the first working day after the resolution is passed by the AGM. The above dividend distribution plan will be carried out after the final approval of the AGM 2002. The Company neither declared interim dividend nor converted any reserves into share capital in the year of 2002. VII. Estimated Dividend Distribution Policy for 2003 1. The Company will conduct dividend distribution once in 2003; 2. Approximately 50% of net profit realized in 2003 will be distributed as dividend; 3. The distribution will take the form of cash bonus. VIII. The Company did not plan to transfer capital public reserve into share capital for the year 2003. 12 PART VIII. Report of the Supervisory Committee I. Supervisory Committee Meetings Shenzhen Chiwan Petroleum Supply Base Co., Ltd. convened four supervisory committee meetings in 2002. 1. The third meeting of the third supervisory committee was held by tele-communication on 7th April 2002. The meeting examined and approved the resolutions on Report of the Supervisory Committee; the financial report of the Company for the year 2001; the dividend distribution plan for the year 2001; the estimated dividend distribution policy for the year2002. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 19th April 2002 respectively. 2. The 2nd meeting of the third Supervisory Committee was held on 22nd May 2002. The meeting resolved the follows: the annual report of the supervisory committee for the year 2001 and the audited financial report for the year 2001. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 23rd May 2002 respectively. 3. The fourth meeting of the third supervisory committee was held by tele-communication on 19th August 2002. The meeting examined and approved the resolutions on the full text of interim report for period to June 2001 and its abstracts and the resolution that the Company would not distribute interim dividend and not convert statutory surplus reserves to share capitals. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 21st August 2002 respectively. 4. The third meeting of the third supervisory committee was held on 2nd December 2002 and the meeting examined and approved the General Manager’s Report and the Financial Report for the period ended Spet 30 2002. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 4th December 2002 respectively. II. The Supervisory Committee formed following opinion for the Company’s operation in the report period. 1. The committee confirmed that the Company’s decision procedures were both healthy and lawful. The Company’s management systems and internal control procedures were in place. The meeting also confirmed that neither any of the eight directors nor senior managers had acted in contravention of the laws, regulations, Articles of Company or resolutions passed by the Shareholder’s meeting. 2.The meeting reviewed and confirmed that the audited report prepared by the independent auditors gave a true and fair presentation of the Company’s financial performance. 4. In 2002 the Company did not engage in any acquisition and disposal of the Company’s assets. 4. All the inter-party transactions in 2002 were conducted in arm-length principle and the Company’s interests were safeguarded. PART IX. Significant Events 1. The Company did not experience any significant lawsuit or arbitration in the report year. 2. In 2002, neither the directors nor the senior managers was fined or penalized by Securities Supervisory and Administration Authorities of PRC. 13 3. The Company announced resolutions of the first extraordinary shareholder’s general meeting on 8th Jan. 2002 both in Shenzhen Securities Times and South China Morning Post. The first extraordinary Shareholders’ General Meeting of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. was held at 3:00 pm, 7th Jan. 2002. The Meeting reviewed and approved following resolutions: Proposal on Changing Supervisors and Proposal on Establishing Shanghai Branch Company. 4. The third meeting of the Third Board of Directors was held on 12th May 2002 and the meeting reviewed and passed following resolutions: “The Financial Buget for Year 2002”; “The General Manager’s Report”; “The Appointment of Legal Advisor”; “The Appointment of Executive Director”; and “The Appoinment of Senior Executives”. The resolutions were announced in both Shenzhen Securities Times and Hong Kong South China Morning Post on 23rd May 2002. 5. The Company announced resolutions of the shareholder’s general meeting for the year 2002 on 29th May 2002 both in Shenzhen Securities Times and South China Morning Post. The Shareholders’ General Meeting for the year of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. was held at 3:00 pm, 28th May 2002. The Meeting reviewed and approved following resolutions by voting: Work Report of the Board of Directors for the Year 2001; Work Report of the Supervisor Committee for the Year 2001; Financial Settlement Report for the Year 2001, Dividend Distribution Plan for the Year of 2001; Proposal on Electing Independent Directors. 6. There was neither procurement nor sales of assets nor consolidation by merger in 2002. 7. There were no significant related transactions in 2002. 8. The Company maintained its autonomy in personnel and financial management and possesses integrated assets. 9. The Company did not entrust, contract or lease other company’s assets or was entrusted, contracted or leased with its own assets. 10. On 5th December 2000, the Company entrusted China Nanshan Development (Group) Incorperation to sign agreement for entrustment of total RMB 30 millions for the period 12 monthes of which RMB10 millions capital was contributed by the Company. This enstrusted capital plus RMB300 thousands had been returned to the Company’s account on 28th May 2002. 11. The Company signed agreement of land purchase with the People’s Government of Yanghang, Baoshan District of Shanghai City to sell 250 mu land area for the Company’s need to developing its first phase logistics park. The total investment of the first phase logistics park will be RMB160 millions. This issue had been announced both in Shenzhen Securities Times and South China Morning Post on 20th April 2002. 12. The Company signed a construction contract with China Metallurgy Construction Company for the first phase of Shanghai Logistics Park. The construction work of the Park, which will build up wharehouse and office with 83000 square meters, has been started and shall be completed in June 2003. 13. There was neither other significant contract signed nor significant guarantee event happened in the report year. 14. There were no change in the Company’s name and stock’s short form in 2002. 15. In 2002, the Company made all necessary disclosures. No significant events that should be disclosed were missing. 14 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2002 15 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2002 Contents Pages Report of the international auditors 1 Income statement 2 Balance sheet 3 Statement of changes in shareholders’ equity 4 Cash flow statement 5 Notes to the financial statements 6 - 27 Supplementary information 28 16 PricewaterhouseCoopers 22nd Floor Prince’s Building Central Hong Kong Telephone (852) 2289 8888 Facsimile (852) 2810 9888 REPORT OF THE INTERNATIONAL AUDITORS TO THE MEMBERS OF SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. (Incorporated as a joint stock limited company in the People’s Republic of China) We have audited the accompanying balance sheet of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. (the “Company”) as of 31st December 2002 and the related income and cash flow statements for the year then ended. These financial statements set out on pages 2 to 27 are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements present fairly in all material respects the financial position of the Company as of 31st December 2002 and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 15th April 2003 - 17 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2002 Note 2002 2001 US$ US$ Revenue 3 11,530,634 12,415,170 Operating costs (5,315,862) (5,499,937) Gross profit 6,214,772 6,915,233 Administrative expenses (960,565) (953,045) Other operating expenses (21,059) (17,869) Profit from operations 4 5,233,148 5,944,319 Finance income - net 6 845,636 469,574 Share of results of associates before tax 2,441,490 1,824,480 Profit before tax 8,520,274 8,238,373 Income tax expense 7 (918,891) (970,189) Net profit 7,601,383 7,268,184 Earnings per share 8 3.30 cents 3.15 cents The notes on pages 6 to 27 form an integral part of these financial statements. - 18 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. BALANCE SHEET AS AT 31ST DECEMBER 2002 Note 2002 2001 ASSETS US$ US$ Non-current assets Property, plant and equipment 9 7,935,158 8,654,760 Investment property 10 15,629,208 16,030,581 Land use rights 11 13,599,350 15,320,598 Construction in progress 12 1,172,385 - Investments in associates 13 13,932,244 11,497,827 Due from an associate 13 1,600,000 1,600,000 53,868,345 53,103,766 Current assets Inventories 14 129,394 144,936 Due from related companies 22 66,517 157,861 Due from associates 22 27,347 30,006 Due from holding company 22 23,594 1,241,327 Other receivables, prepayments and deposits 3,995,400 333,662 Trade receivables 15 2,043,231 2,113,929 Cash and bank balances 17,057,709 17,444,322 23,343,192 21,466,043 Total assets 77,211,537 74,569,809 SHAREHOLDERS’ EQUITY Share capital 19 27,033,998 27,033,998 Reserves 20 44,017,116 41,503,462 Total shareholders’ equity 71,051,114 68,537,460 LIABILITIES Non-current liabilities Deferred taxation 16 1,159,433 1,309,480 Rentals received in advance 17 2,838,860 2,900,236 3,998,293 4,209,716 Current liabilities Trade payables and accruals 1,130,565 1,005,855 Tax liabilities 574,360 360,333 Dividends payable - 61,573 Rentals received in advance 17 457,205 394,872 2,162,130 1,822,633 Total liabilities 6,160,423 6,032,349 Total equity and liabilities 77,211,537 74,569,809 Director Director The notes on pages 6 to 27 form an integral part of these financial statements. - 19 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31ST DECEMBER 2002 Share Capital Other Retained capital reserve reserves earnings Total US$ US$ US$ US$ US$ Year ended 31st December 2001 Balance at 1st January 2001 27,033,998 26,269,019 7,662,240 304,019 61,269,276 Net profit for 2001 - - - 7,268,184 7,268,184 Appropriations - - 1,453,637 (1,453,637) - Balance at 31st December 2001 27,033,998 26,269,019 9,115,877 6,118,566 68,537,460 Year ended 31st December 2002 Balance at 1st January 2002 27,033,998 26,269,019 9,115,877 6,118,566 68,537,460 Dividend in respect of 2001 - - - (5,087,729) (5,087,729) Net profit for 2002 - - - 7,601,383 7,601,383 Appropriations - - 1,520,277 (1,520,277) - Balance at 31st December 2002 27,033,998 26,269,019 10,636,154 7,111,943 71,051,114 An analysis of the movement in each category within reserves is presented in note 20. The notes on pages 6 to 27 form an integral part of these financial statements. - 20 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2002 Note 2002 2001 US$ US$ Cash flows from operating activities Cash generated from operations 21 9,911,470 11,522,110 Tax paid (847,838) (1,329,773) Net cash from operating activities 9,063,632 10,192,337 Cash flows from investing activities Purchase of property, plant and equipment and investment property (561,222) (295,450) Payment for construction in progress (4,789,569) - Dividends received from an associate - 48,133 Proceeds from sale of property, plant and equipment 134,551 - Interest received 853,724 449,768 Net cash (used in)/from investing activities (4,253,820) 202,451 Cash flows from financing activities Dividends paid to shareholders (5,087,729) (4,330,747) Net cash used in financing activities (5,087,729) (4,330,747) Net (decrease) / increase in cash and cash equivalents (386,613) 6,064,041 Movement in cash and cash equivalents At start of year 17,444,322 11,380,281 (Decrease) / Increase (386,613) 6,064,041 At end of year 17,057,709 17,444,322 The notes on pages 6 to 27 form an integral part of these financial statements. - 21 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 1 Corporate information The Company was incorporated as a Sino-foreign equity joint venture company in Shenzhen, the People’s Republic of China (“PRC”) in February 1984. On 11th May, 1995, the Company obtained approval from the Shenzhen Municipal Government for the reorganisation of it into a joint stock limited company. The Company is engaged in leasing of office, provision of management services, storage and marine logistics services in PRC. 2 Accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below: (a) Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). They have been prepared under the historical cost convention. The preparation of the financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current event and actions, actual results ultimately may differ from those estimates. The Company adopted IAS 40 Investment Property in 2001. The financial effects of adopting the standard were reported in the previous year’s financial statements. (b) Group accounting Associates Investments in associates are accounted for by the equity method of accounting. Under this method the Company’s share of the post-acquisition profits or losses of associates is recognised in the income statement and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment. Associates are entities over which the Company generally has between 20% and 50% of the voting rights, or over which the Company has significant influence, but which it does not control. Unrealised gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Company’s investment in associates includes goodwill (net of accumulated amortisation) on acquisition. When the Company’s share of losses in an associate equals or exceeds its interest in the associate, the Company will not recognise further losses, unless the Company has incurred obligations or made payments on behalf of the associates. A listing of the Company’s principal associates is shown in note 13. - 22 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 2 Accounting policies (continued) (c) Foreign currency translation (1) Measurement currency Items included in the financial statements of the Company are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to the Company (the “measurement currency”). The financial statements are presented in United States dollar, which is the measurement currency of the Company. (2) Transactions and balances Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges. Translation differences on debt securities and other monetary financial assets measured at fair value are included in foreign exchange gains and losses. Translation differences on non-monetary items such as equities held for trading are reported as part of the fair value gain or loss. Translation differences on available-for-sale equities are included in the revaluation reserve in equity. (d) Property, plant and equipment Property, plant and equipment (except for investment property – see note 2 (e)) comprise office buildings, wharf, motor vehicles and other equipments and are stated at historical cost less depreciation and impairment loss. Depreciation is calculated on the straight-line method to write off the cost of each asset to their residual values over their estimated useful lives as follows: Buildings and wharfs 30 - 50 years Machinery 12 - 20 years Motor vehicles and cranes 10 years Leasehold improvements 10 years Office equipment and furniture 5 years Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains or losses on disposals are determined by comparing proceeds with carrying amount and are included in determining operating profit. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised, during the period of time that is required to complete and prepare the property for its intended use, as part of the cost of the asset. Other borrowing costs are expensed. - 23 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 2 Accounting policies (continued) (d) Property, plant and equipment (continued) Repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset 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 Company. Major renovations are depreciated over the remaining useful life of the related asset. (e) Investment property Investment property is held for long term rental yields and is not occupied by the Company. Investment property is treated as a long-term investment and is carried at cost less accumulated depreciation and impairment loss. Depreciation is calculated on the straight-line method to write off the cost of each asset to their residual values over 30 to 45 years. Where the carrying amount of investment property is greater than its fair value, it is written down to its recoverable amount. The fair value of investment property is determined by the discounted cash flow method based on the reasonable anticipative investment return rate. (f) Impairment of long lived assets Property, plant and equipment and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’s net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows. (g) Land use rights Land use rights are up-front payments to acquire long-term interests in land. These are stated at cost and amortised over the remaining period of the lease on a straight-line basis. In previous years, land use rights were included in property, plant and equipment and were stated at cost less accumulated amortisation. The changes in classification of land use rights did not have a significant effect on the financial statements. - 24 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 2 Accounting policies (continued) (h) Construction in progress Construction in progress comprises infrastructure projects and prepayments of land use rights which are stated at cost to the Company. This includes all expenditure and other direct costs, prepayments and deposits attributable to the construction and interest charges arising from borrowings used to finance the construction during the construction period. Depreciation is not provided on construction in progress until the related asset is completed and transferred for intended use. (i) Leases (1) When the Company is the lessee Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. (2) When the Company is the lessor Assets leased out under operating leases are included in investment property and property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term. (j) Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of selling expenses. (k) Trade receivables Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is an objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowers. (l) Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the balance sheet. - 25 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 2 Accounting policies (continued) (m) Deferred income taxes Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. (n) Pension obligations The Company’s contributions to a defined pension scheme operated by the government authority are charged to the income statement in the year to which they relate. (o) Revenue recognition Revenue comprises the invoiced value for the sale of services net of rebates and discounts. Revenue from services is recognised upon performance of the service. Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Company. Dividends are recognised when the right to receive payment is established. Rental income is recognised on an accrual basis. (p) Dividends Dividends are recorded in the Company’s financial statements in the period in which they are approved by the Company’s shareholders. (q) Segment reporting Business segments provide products or services that are subject to risks and returns that are different from those of other business segments. Geographical segments provide products or services within a particular economic environment that is subject to risks and returns that are different from those of components operating in other economic environments. (r) Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. - 26 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 3 Segment information (a) Primary reporting format - business segments Office Wharf, leasing handling and and marine Year ended management Storage logistics Unallocated 31st December 2002 services services services items Total US$ US$ US$ US$ US$ Revenue 1,508,293 5,083,799 4,938,542 - 11,530,634 Segment costs (987,704) (2,147,835) (2,180,323) (981,624) (6,297,486) Profit from operations 520,589 2,935,964 2,758,219 (981,624) 5,233,148 Finance income - net 845,636 Share of results before tax of associates 2,441,490 Profit before tax 8,520,274 Income tax expense (918,891) Net profit 7,601,383 Segment assets 9,140,202 8,831,642 4,482,675 39,224,774 61,679,293 Associates 15,532,244 Total assets 77,211,537 Segment liabilities 1,150,067 2,430,937 31,598 2,547,821 6,160,423 Total liabilities 6,160,423 Other segment items Capital expenditure 363,608 71,008 98,551 28,055 561,222 Depreciation 486,126 126,897 803,575 117,239 1,533,837 Amortisation - - - 1,721,248 1,721,248 - 27 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 3 Segment information (continued) (a) Primary reporting format - business segments (continued) Office Wharf, leasing and handling and Year ended management Storage marine logistics Unallocated 31st December 2001 services services services items Total US$ US$ US$ US$ US$ Revenue 1,700,408 5,045,965 5,668,797 - 12,415,170 Segment costs (1,067,623) (2,178,311) (2,254,003) (970,914) (6,470,851) Profit from operations 632,785 2,867,654 3,414,794 (970,914) 5,944,319 Finance income - net 469,574 Share of results before tax of associates 1,824,480 Profit before tax 8,238,373 Income tax expense (970,189) Net profit 7,268,184 Segment assets 10,053,562 6,904,143 6,935,554 37,578,723 61,471,982 Associates 13,097,827 Total assets 74,569,809 Segment liabilities 989,491 2,752,230 28,831 2,261,797 6,032,349 Total liabilities 6,032,349 Other segment items Capital expenditure 244,941 15,593 8,337 26,579 295,450 Depreciation 597,849 102,800 807,437 117,375 1,625,461 Amortisation - - - 1,721,248 1,721,248 There are no significant sales or other transactions between the business segments. Unallocated segment costs mainly represent corporate expenses. Segment assets consist primarily of property, plant and equipment, land use rights, investment property, inventory of raw materials, receivables and operating cash. Segment liabilities comprise operating liabilities. Capital expenditure comprises additions to property, plant and equipment. (b) Secondary reporting format - geographical segments The Company provides the above services in the PRC, its country of incorporation. No geographical segment information is presented. - 28 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 3 Segment information (continued) (c) Analysis of revenues 2002 2001 US$ US$ Revenue from services 5,618,293 6,384,806 Rental income 5,912,341 6,030,364 11,530,634 12,415,170 4 Profit from operations The following items have been included in arriving at profit from operations: 2002 2001 US$ US$ Depreciation on property, plant and equipment (note 9) 1,063,802 1,165,942 Depreciation on investment property (note 10) 470,035 459,519 Amortisation of land use rights (note 11) 1,721,248 1,721,248 Loss on disposal of property, plant and equipment and investment property 13,809 51,719 Staff costs (note 5) 1,458,841 1,512,722 Cost of inventories recognised as expenses (included in operating costs) 109,109 177,004 Repairs and maintenance expenditure on property, plant and equipment 91,638 108,015 Repairs and maintenance expenditure on investment property 66,739 64,521 Trade receivables - provision for doubtful debts (included in administrative expenses) - 130,710 5 Staff costs 2002 2001 US$ US$ Wages and salaries 1,434,528 1,480,978 Pension costs – defined contribution scheme (note 24) 24,313 31,744 1,458,841 1,512,722 The average number of employees in 2002 was 119 (2001: 116). - 29 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 6 Finance income - net 2002 2001 US$ US$ Interest income 855,872 476,862 Net exchange (loss)/gain (8,141) 336 Others (2,095) (7,624) 845,636 469,574 7 Income tax expense 2002 2001 US$ US$ Current tax 1,061,865 1,112,131 Deferred tax (note 16) (150,047) (150,047) Share of tax of associates 7,073 8,105 918,891 970,189 (a) In accordance with the relevant income tax laws applicable in the Shenzhen Special Economic Zone of the PRC, the profits of the Company are subject to an income tax at the rate of 15%. (b) The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the basic tax rate of the Company as follows: 2002 2001 US$ US$ Profit before tax 8,520,274 8,238,373 Tax calculated at a tax rate of 15% (2001: 15%) 1,278,041 1,235,756 Income not subject to tax (359,150) (265,567) Tax charge 918,891 970,189 - 30 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 8 Earnings per share Basic earnings per share are calculated by dividing the net profit attributable to shareholders by the number of ordinary shares in issue during the year. 2002 2001 Net profit attributable to shareholders US$ 7,601,383 US$ 7,268,184 Number of ordinary shares in issue 230,600,000 230,600,000 Earnings per share US$ US$ Diluted earnings per share for both years were not disclosed as there were no dilutive potential ordinary shares. - 31 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 9 Property, plant and equipment Motor vehicles Lea Buildings Wharfs Machinery and cranes improv US$ US$ US$ US$ Year ended 31st December 2002 Opening net book amount 450,586 3,057,855 2,087,442 802,605 1,2 Additions - 18,647 - 120,501 2 Disposals (441) (6,258) - (15,150) Depreciation (16,091) (126,897) (388,970) (133,200) (1 Closing net book amount 434,054 2,943,347 1,698,472 774,756 1,2 At 31st December 2002 Cost 893,758 5,812,527 6,034,356 1,556,572 1,9 Accumulated depreciation (459,704) (2,869,180) (4,335,884) (781,816) (6 At 31st December 2002 434,054 2,943,347 1,698,472 774,756 1,2 At 31st December 2001 Cost 898,207 5,829,640 6,034,356 1,739,071 1,6 Accumulated depreciation (447,621) (2,771,785) (3,946,914) (936,466) (4 At 31st December 2001 450,586 3,057,855 2,087,442 802,605 1,2 - 32 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 10 Investment property 2002 2001 US$ US$ Cost At 1st January 20,896,558 - Reclassification from property, plant and equipment - 20,896,558 Additions 70,422 - Disposals (1,760) - At 31st December 20,965,220 20,896,558 Accumulated depreciation At 1st January 4,865,977 - Reclassification from property, plant and equipment - 4,406,458 Charge for the year 470,035 459,519 At 31st December 5,336,012 4,865,977 Net book value At 31st December 15,629,208 16,030,581 Independent valuer has not been employed to determine the fair value of the investment property. The fair value of the investment property as at 31st December 2002 was determined by management of the Company to be US$22,936,000 (2001: US$30,486,000) using discounted cash flow method. 11 Land use rights 2002 2001 US$ US$ Net book value at 1st January 15,320,598 17,041,846 Amortisation (1,721,248) (1,721,248) Net book value at 31st December 13,599,350 15,320,598 - 33 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 11 Land use rights (continued) The Company entered into agreements on 10th February 1984 and 18th July 1997 with China Nanshan Development (Group) Incorporation ("Nanshan Development") in respect of the right to use the coastal land in Nanshan, the PRC of approximately 390,000 square metres in area, which includes the water front on which the land and wharf of the Company are situated, for a period of 25 years. However, at that time, the prevailing PRC laws did not provide for a mechanism for issuing official land use rights documentation. Therefore, as at the date of the approval of these financial statements, the Nanshan Development has not obtained formal land use rights documentation, except for an outline "red line sketch" planning document, in respect of the abovementioned land and wharf areas. Nanshan Development entered into deeds with the Company on 3rd July 2000 and 18th July 1997 in which Nanshan Development agreed to indemnify the Company until the end of the 25 years period referred to above in respect of all losses, costs, expenses and any other liabilities that may be incurred or suffered by the Company arising out of or in connection with the use and occupation of the above-mentioned land and wharf areas by the Company. 12 Construction in progress 2002 2001 US$ US$ At beginning of year - - Additions 1,172,385 - At end of year 1,172,385 - Construction in progress comprises mainly costs of infrastructure projects and prepayments of certain land use rights for a project in Shanghai. 13 Investments in associates 2002 2001 US$ US$ At beginning of year 11,497,827 9,729,585 Share of results before tax 2,441,490 1,824,480 Share of tax (Note 7) (7,073) (8,105) Dividend received - (48,133) At end of year 13,932,244 11,497,827 Due from an associate 1,600,000 1,600,000 The amount due from an associate is unsecured, interest-free and not repayable within one year from the balance sheet date. - 34 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 13 Investments in associates (continued) The Company has the following unlisted associates: Interest held Nature of business Shenzhen Chiwan Offshore Petroleum 20% Provision of testing, repair and Equipment Repair/Manufacture Co., Ltd. maintenance services for oil (note a) drilling activities Shenzhen Chiwan Sembawang Engineering 32% Provision of marine construction Co., Ltd. (note b) and fabrication services (a) This is a Sino-foreign equity joint venture company established in Shenzhen, the PRC on 12th August 1992 for an operating period of 15 years. (b) This is a Sino-foreign equity joint venture company established in Shenzhen, the PRC on 2nd July 1994 for an operating period of 30 years. There were no changes in the percentage of ownership interests in the associates during the two years ended 31st December 2002. 14 Inventories 2002 2001 US$ US$ Spare parts (at cost) 129,394 144,936 15 Trade receivables 2002 2001 US$ US$ Total receivables 2,173,941 2,244,639 Less: Provision for doubtful debts (130,710) (130,710) 2,043,231 2,113,929 The credit risk of the trade receivables is disclosed in note 18. - 35 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 16 Deferred taxation Deferred income tax represents long-term tax liabilities arising from accelerated depreciation allowances under the liability method using a principal tax rate of 15% (2001: 15%). The movement on deferred tax account is as follows: 2002 2001 US$ US$ At 1st January 1,309,480 1,459,527 Transferred to current year tax (note 7) (150,047) (150,047) At 31st December 1,159,433 1,309,480 17 Rentals received in advance 2002 2001 US$ US$ Rentals received in advance (note (a)) 3,296,065* 3,295,108 Less: Amount falls due within one year classified under current liabilities (457,205) (394,872) 2,838,860 2,900,236 Note(a): The balance includes a rental of US$2,146,000 (2001: US$2,494,000) received in advance from an associate, of which US$348,000 (2001: US$348,000) falls due within one year. - 36 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 18 Financial risk management (a) Financial risk factors The Company’s activities expose it to financial risks including the effects of changes in foreign currency exchange rates and interest rates. The Company’s overall risk management seeks to minimise potential adverse effects on the financial performance of the Company. (i) Foreign exchange risk The Company operates in PRC and is exposed to foreign exchange risk arising from currency exposures primarily with respect to US dollars. Certain expenses of the Company are denominated in currencies other than US dollars. Although the Company generates foreign currency revenues from services rendered, the Company may generate a deficit or surplus of revenues in foreign currencies over payments in such currencies from time to time. The Company is not able to hedge its foreign currency exposure effectively other than by retaining its foreign exchange denominated earnings and receipts to the extent permitted by the State Administration of Foreign Exchange. The Company’s results of operations may also be affected by changes in the value of currencies other than the US dollars, depending on the currencies of its foreign currency denominated receipts and obligations. (ii) Interest rate risk The Company’s income and operating cash flows are substantially independent of changes in market interest rates. The Company has no significant interest-bearing assets except bank deposits. Other financial assets and liabilities do not have material interest rate risk. (iii) Credit risk The Comapny has no significant concentrations of credit risk. The Company has policies in place to ensure that sales of services are made to customers with an appropriate credit history. Cash transactions are limited to high credit quality financial institutions. The Company has policies that limit the amount of credit exposure to any one financial institution. (iv) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Company maintains a high level of liquid cash fund. - 37 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 18 Financial risk management (continued) (b) Fair values Financial assets of the Company include cash and bank balances, trade receivables, other receivables, prepayments and deposits, amount due from holding company, amounts due from associates and amounts due from related companies. Their fair values are not materially different from their carrying amounts. Financial liabilities of the Company include trade payables and accruals, tax liabilities and rentals received in advance. Their fair values are not materially different from their carrying amounts. 19 Share capital Registered, issued and fully paid ordinary shares of RMB1 each: Unlisted Unlisted A shares B shares held by Nanshan held by legal B shares, Development persons listed Total Year ended 31st December 2001 At 1st January and 31st December 2001 14,100,000 6,000,000 7,033,998 27,033,998 Year ended 31st December 2002 At 1st January and 31st December 2002 14,100,000 6,000,000 7,033,998 27,033,998 Pursuant to the Company’s articles of association, both A and B shares are registered ordinary shares and shall carry equal rights. - 38 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 20 Reserves Capital Statutory Discretionary Statutory pub reserve surplus reserve surplus reserve welfare fu US$ US$ US$ U At 1st January 2001 26,269,019 3,502,228 2,408,896 1,751,1 Net profit for the year - - - Appropriations - 726,819 363,409 363,4 At 31st December 2001 26,269,019 4,229,047 2,772,305 2,114,5 At 1st January 2002 26,269,019 4,229,047 2,772,305 2,114,5 Dividend in respect of 2001 - - - Net profit for the year - - - Appropriations - 760,139 380,069 380,0 At 31st December 2002 26,269,019 4,989,186 3,152,374 2,494,5 - 39 - 20 Reserves (continued) (a) In accordance with the Company’s articles of association, profit after tax shall be appropriated in the following sequence: (i) make up accumulated losses; (ii) provide for statutory surplus reserve (note b); (iii) provide for statutory public welfare fund (note c); (iv) provide discretionary surplus reserve (note d); and (v) pay dividends. (b) Statutory surplus reserve In accordance with the relevant PRC laws and financial regulations, the Company is required to transfer 10% of the profit after tax to the statutory surplus reserve until the balance reaches 50% of the paid up share capital. For the year ended 31st December 2002, the directors propose to make a transfer of 10% (2001: 10%) of the Company’s profit after tax prepared in accordance with the PRC accounting standards. Such reserve can be used to reduce any losses incurred and to increase share capital. Except for the reduction of losses incurred, any other usage should not result in this reserve balance falling below 25% of the registered capital. (c) Statutory public welfare fund In accordance with the relevant PRC laws and financial regulations, the Company is required to transfer 5% to 10% of profit after tax to the statutory public welfare fund. For the year ended 31st December 2002, the directors propose to make a transfer of 5% (2001: 5%) of the Company’s profit after tax prepared in accordance with the PRC accounting standards. The use of this fund is restricted to capital expenditure for employees’ collective welfare facilities, ownership of which belongs to the Company. The statutory public welfare fund is not available for distribution to shareholders except in liquidation. (d) Discretionary surplus reserve In accordance with the relevant PRC laws and financial regulations, discretionary surplus reserve can be used to reduce any losses incurred and to increase share capital. However, the use of such reserve is subject to approval by shareholders in general meetings. For the year ended 31st December 2002, the directors propose to make a transfer of 5% (2001: 5%) of the Company’s profit after tax prepared in accordance with PRC accounting standards. (e) Capital reserve This mainly represents premium on issue of shares net of issuing expenses. According to relevant PRC laws and financial regulations, capital reserve can be used to increase share capital. 40 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 20 Reserves (continued) (f) Dividends Pursuant to the Company’s articles of association, where the financial statements prepared in accordance with the PRC accounting standards differ from those prepared under IFRS, for the purpose of approving the profit distribution, profit available for appropriation shall be deemed to be the lesser of the amounts in the two different financial statements. 21 Cash generated from operations Reconciliation of profit before tax to cash generated from operations: 2002 2001 US$ US$ Profit before tax 8,520,274 8,238,373 Depreciation (note 9, 10) 1,533,837 1,625,461 Amortisation (note 11) 1,721,248 1,721,248 Loss on disposal of property, plant and equipment and investment property (note 4) 13,809 51,719 Provision for doubtful debts (note 4) - 130,710 Interest income (note 6) (855,872) (476,862) Share of result before tax of associates (2,441,490) (1,824,480) Changes in working capital: Decrease/(increase) in inventories 15,542 (2,989) Decrease in amounts due from related companies 91,344 8,353 Decrease in amounts due from associates 2,659 7,231 Decrease/(increase) in amount due from holding company 1,217,733 (1,238,276) Decrease/(increase) in trade receivables 70,698 (556,208) Increase in other receivables, prepayments and deposits (42,406) (1,990) Decrease in investment fund - 1,207,729 Increase in rentals received in advance 957 2,533,719 Increase in trade payables and accruals 63,137 98,372 Cash generated from operations 9,911,470 11,522,110 41 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 22 Related party transactions The Company is controlled by China Nanshan Development (Group) Incorporation (incorporated in the PRC) which owns 52% of the Company’s shares. (a) The following transactions were carried out with related parties: 2002 2001 US$ US$ Service income from related companies 710,901 1,672,207 Land utilisation income from a related company 348,000 116,000 Related companies are companies in which the holding company has beneficial interests. Service provided to and rental charge on related companies were carried out on commercial terms and conditions and at market prices. (b) Amounts due from associates, related and holding companies The balances are unsecured, interest-free and repayable within one year. (c) Directors’ remuneration In 2002, the total remuneration of the directors was US$7,246 (2001: Nil). 23 Commitments (a) Capital commitments Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements is as follows: 2002 2001 US$ US$ Investment in Shanghai branch 6,160,427 - 42 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS 23 Commitments (continued) (b) Operating lease commitments The future minimum lease payments receivable under non-cancellable operating leases are as follows: 2002 2001 US$ US$ Not later than 1 year 652,427 209,366 Later than 1 year and not later than 5 years 1,866,691 523,415 2,519,118 732,781 24 Pension obligations The Company has participated in a pension scheme administered by the Shenzhen Municipal Government. The contributions made by the Company to the scheme are based on 7% to 12% of the basic salaries of the Company’s PRC employees. The Company has no other obligations other than the above-mentioned contributions. 25 Subsequent events (a) A proposal on changing the Shanghai branch company into a limited liability company with registered capital of RMB50,000,000 (US$ equivalent 6,038,647) was approved in an extraordinary shareholders’ meeting on 6th January 2003. (b) In an extraordinary shareholders’ meeting held on 6th January 2003 the board agreed that Offshore Joint Services (Bases) Co. of Singapore Pte Ltd, one of the shareholders of the Company, which holds 51,180,000 B shares of the Company, to apply to relevant authorities to have these B shares traded in the public market. (c) On 15th April 2003, the board of directors proposed a dividend of US$0.016 per share amounting to a total dividend of US$3,800,692 in respect of the profit for 2002. This proposed dividend is subject to approval by the shareholders in the annual general meeting. 26 Approval of the financial statements The financial statements were approved by the board of directors on 15th April 2003. 43 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE FINANCIAL STATEMENTS The impact of IFRS and other adjustments on the PRC statutory financial statements are as follows: Net profit for the year ended Net assets as at 31st December 31st December 2002 2002 US$ US$ As per the PRC statutory financial statements 7,601,383 67,240,318 Impact of IFRS and other adjustments: Proposed dividend in respect of 2002 to be taken up in 2003 - 3,800,692 Others - 10,104 As restated after IFRS adjustments 7,601,383 71,051,114 PART XI. Documents Available for Verification: 1. 2001 Financial Statements carrying the signatures of the Company’s legal representative and Financial Controller; 2. Original copy of Auditor’s Statements sealed by CPA and signed by registered accountants; 3. Original copy and press release of all the documents disclosed in 2001 in the newspapers specified by the China Securities Regulatory Commission; and, 4. Original copy of Annual Report carrying the signature of the Chairman. Chairman of the Board: Dr Fu Yuning Shenzhen Chiwan Petroleum Supply Base Co., Ltd. 15th April 2002 44