深南电A(000037)深南电Ｂ2003年年度报告摘要（英文版）

SHENZHEN NANSHAN POWER STATION CO., LTD. SUMMARY OF ANNUAL REPORT 2003 §1. Important Notes 1.1 The Board of Directors of Shenzhen Nanshan Power Station Co., Ltd. (hereinafter referred to as the Company) hereby confirms 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 completeness of the whole contents. The summary of annual report 2003 is abstracted from the annual report; the investors are suggested to read the full text of annual report to understand more details. 1.2 No director stated that they couldn’t ensure the correctness, accuracy and completeness of the contents of the Annual Report or had objection for this report. 1.3 Wang Jianbin, Vice Chairman of the Board, Yu Chunling, Director of the Company and Liu Zhanjun, Independent Director of the Company were absent from the Board meeting due to business. Of them, Vice Chairman of the Board Wang Jianbin and Director Yu Chunling respectively authorized Director Zhong Chengli and Chairman of the Board Liu Deyu to attend the Board meeting and voted on his/her behalf; Independent Director Liu Zhanjun authorized Independent Director Huang Sujian to attend the Board meeting and voted on his behalf. 1.4 PricewaterhouseCoopers Certified Public Accountants produced the standard unqualified Auditor’ s Report for the Company. 1.5 Mr. Liu Deyu, Chairman of the Board, Mr. Zhang Renyi, General Manager, Mr. Lu Xiaoping, CFO and Mr. Chen Xueshun, Director of Financing Dept. guarantee the accuracy and completeness of the financial report enclosed in this annual report. §2. Company Profile 2.1 Basic information Short form of the stock Shen Nan Dian A, Shen Nan Dian B Stock code 000037, 200037 Listed stock exchange Shenzhen Stock Exchange Registered address and Office address No.18, Yueliangwan Avenue, Nanshan District, Shenzhen Post code 518054 Internet web site of the Company Nil E-mail public@nspower.com.cn 2.2 Contact person and method Secretary of the Board of Representative in charge of Directors Securities Affairs Name Fu Bo Hu Qin Contact address No.18, Yueliangwan Avenue, No.18, Yueliangwan Avenue, Nanshan District, Shenzhen Nanshan District, Shenzhen Telephone 0755-26053918 0755-26053964 Fax 0755-26053918 0755-26053964 E-mail fubo@nspower.com.cn huqin@nspower.com.cn §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Increase/decrease 2001 2003 2002 over last year（％） Turnover 1,863,937 1,622,904 14.85 1,084,094 Other income 94,556 50,883 85.83 46,583 Profit before tax 546,587 511,014 6.96 271,301 Profit attributable to 475,995 365,642 60.18 205,587 shareholders Increase/decrease At the end of At the end of At the end of from the end of 2003 2002 2001 previous year（％） Shareholder’s equity 1,519,821 1,274,445 19.25 1,079,372 Net cash inflows arising 369,313 746,712 -50.54 366,753 from operating activities 3.2 Difference of net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Unit: RMB’0000 CAS IAS Net profit 47,111.04 51,608.30 In 2003, the reason of the difference amounting to RMB 4,884,600 between the foreign net profit and domestic consolidated net profit is as follows: 1. The method of accounting disposal for RMB 44,852,700 dividend given up by Jinbiwan Company is different. According to the resolution of the Shareholders’General Meeting of Jinbiwan Company held on Mar. 11, 2003, Proposal on Disposal of Non-distributed Profit of New Electric Power Company examined and approved by the 4th Extraordinary Shareholders’ General Meeting held on Apr. 17, 2003 and Resolution on Profit Distribution for 2001 and 2002 of the Shareholders’General Meeting of New Electric Power Company held on June 13, 2003, the shareholder of New Electric Power Company, Jinbiwan Company agreed not to share the bonus distribution of New Electric Power Company as the proportion of equity held by it but calculate and share the investment income in the former half of 2001 and 2002 of New Electric Power Company as income ratio of net assets of 2001 and 2002 of the Company and agreed not to share non-distributed profit in the later half of 2002 of New Electric Power Company, concerning exceeding distributed profit amounting to RMB 44,852,700 calculated as the above method, the Company and its wholly -owned subsidiary, Xingdesheng Company share it according to the corresponding proportion of equity of New Electric Power Company respectively held by them. In the account settled as accounting rule of HK, the Company took net amount amounting to RMB 42,951,100 after deducting enterprise income tax payable totally RMB 1,901,600 from RMB 44,852,700 dividend given up by Jinbiwan Company as Explanation on the difference Negative Goodwill dividing 15 years into income of each year according to generally accepted accounting principle of HK and the current income transferred-into in this year was RMB 2,863,400 according to generally accepted accounting principle of HK; but in the account settled as Chinese accounting rule, the Company carried forward net amount amounting to RMB 42,951,100 after deducting enterprise income tax payable totally RMB 1,901,600 from RMB 44,852,700 dividend given up by Jinbiwan Company into credit of Capital Public Reserve according to relevant regulation of accounting system. 2. The method of accounting disposal for the difference amounting to RMB 30,330,800 between the investment cost caused by the Company ’ s purchasing 49% equity of New Electric Power Company held by Jinbiwan Company under proportion of shareholder’ s equity of the invested company the Company should share is different. In the account settled as accounting rule of HK, the Company averagely amortized the credit balance difference of equity investment totally RMB 30,330,800 as Negative Goodwill dividing 15 years into income of each year according to generally accepted accounting principle of HK and the current income transferred-into in this year was RMB 2,022,100; but in the account settled as Chinese accounting rule, the Company transferred the credit difference totally RMB 30,330,800 of equity investment as provision for equity investment into the credit of Capital Public Reserve according to Implementation of Enterprise Accounting System and Answers (II) of Relevant Problems of Related Accounting Rule promulgated by the State Ministry of Finance. §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share capital (Unit: share) Before the Increase / decrease After the change in this time (+, -) change I. Unlisted shares 1. Sponsor’s shares 312,853,274 0 312,853,274 Including: State-owned share 85,538,864 0 85,538,864 Domestic legal person’s shares 113,783,159 0 113,783,159 Foreign legal person’s shares 113,531,251 0 113,531,251 Others 0 0 2. Raised legal person’s shares 61,700,661 0 61,700,661 3. Inner employees’shares 0 0 4. Preference shares or others 0 0 Total unlisted shares 374,553,935 0 374,553,935 II. Listed shares 1. RMB ordinary shares 64,846,135 0 64,846,135 2. Domestically listed foreign shares 108,565,928 0 108,565,928 3. Overseas listed foreign shares 0 0 4. Others 0 0 Total listed shares 173,412,063 0 173,412,063 III. Total shares 547,965,998 0 547,965,998 4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of circulating share Total number of shareholders at the end of report year 24,667 Particulars about shares held by the top ten shareholders Number of Nature of Increase / Holding shares Type of shares share shareholders decrease in Proportion Full name of Shareholders at the year-end (Circulating/No pledged/ (State -owned the report (%) (share) n-circulating) frozen shareholder/foreign year (share) (share) shareholder) Shenzhen Guangju Electronic 0 125,845,702 22.97 Non-circulating Unclear Investment Co., Ltd. Hong Kong Nam Hoi (International) 0 83,748,408 15.28 Non-circulating Unclear Foreign shareholder Limited Shenzhen Energy Group Co., Ltd. 0 62,697,297 11.44 Non-circulating Unclear Shenzhen State Power Science and 0 54,709,180 9.98 Non-circulating Unclear Technology Development Co., Ltd. Tengda Property Co., Ltd. 0 47,553,343 8.68 Non-circulating Unclear Foreign shareholder DEUTSCHE BANK AG LONDON 2,939,319 2,939,319 0.54 Circulating Unclear Western Securities Co., Ltd. 2,500,535 2,928,856 0.53 Circulating Unclear SKANDIA GLOBAL FUNDS PLC 2,555,371 2,555,371 0.47 Circulating Unclear Feng He Value Securities Investment 2,403,076 2,403,076 0.44 Circulating Unclear Funds National Combination of 101 Social 2,183,498 2,183,498 0.40 Circulating Unclear Insurance Funds Explanation on associated (1) Shenzhen Energy Group Co., Ltd. held 30,829,682 shares on behalf of the State. relationship among the top ten (2) Shenzhen Energy Group Co., Ltd., the Company’s No. 3 shareholder, indirectly held shareholders or consistent 100% equity of Hong Kong Nam Hoi (International) Limited, the Company’s No. 2 action shareholder as well as the Company’s foreign legal person shareholder. (3) Shareholders of No. 6 to No. 10 were social public shareholders. The Company is not aware of their associated relationships or whether belongs to the persons acting in concert regulated by the Management Regulation of Information Disclosure on Change of Shareholding for Listed Companies. Particulars about shares held by the top ten shareholders of circulating share Full name of Shareholders Holding circulating share at the Type (A-share, B-share, year-end (share) H-share or others) DEUTSCHE BANK AG LONDON 2,939,319 B WESTERN SECURITIES CO., LTD. 2,928,856 A SKANDIA GLOBAL FUNDS PLC 2,555,371 B FENG HE VALUE SECURITIES INVESTMENT 2,403,076 A FUNDS NATIONAL COMBINATION OF 101 SOCIAL 2,183,498 A INSURANCE FUNDS GF SECURITIES CO., LTD. 2,074,695 A BANK OF COMMUNICATIONS –HAIFUTONG 2,072,306 A CHOICENESS SECURITIES INVESTMENT FUNDS SHANGHAI (HK) WANGUO SECURITIES 1,759,988 B VALUE PARTNERS INTELLIGENT FUNDS – 1,691,842 B CHINESE MAINLAND FOCUS FUND BOHAI SECURITIES CO., LTD. 1,654,568 A Explanation on associated relationship By the end of the report period, the Company is not among the top ten shareholders of aware of their associated relationships among the top circulating share ten shareholders of circulating share. 4.3 Particulars about holding shareholders and actual controller of the Company 4.3.1 Particulars about change in holding shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation for holding shareholder and other actual controller The Company has no holding shareholder. §5. Particulars About Directors, Supervisors, Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Names Shares Held at Shares Held at Reason for Titles Sex Age Office Term the Year-begin the Year-End change Chairman of the Jun. 2003- Liu Deyu Male 57 0 0 Board Jun. 2006 Vice Chairman of Jun. 2003- Wang Jianbin Male 40 0 0 the Board Jun. 2006 Vice Chairman of Jun. 2003- Cui Jichun Male 47 0 0 the Board Jun. 2006 Jun. 2003- Zhang Renyi Director, GM Male 43 0 0 Jun. 2006 Jun. 2003- Yu Chunling Director Female 38 0 0 Jun. 2006 Jun. 2003- Li Li Director Male 60 0 0 Jun. 2006 Jun. 2003- Zhao Xiao Director Male 58 0 0 Jun. 2006 Jun. 2003- Zhong Chengli Director Male 56 0 0 Jun. 2006 Jun. 2003- Sun Yulin Director Male 52 0 0 Jun. 2006 Independent Jun. 2003- Liu Aiqun Male 49 0 0 Director Jun. 2006 Independent Jun. 2003- Huang Sujian Male 48 0 0 Director Jun. 2006 Independent Jun. 2003- Liu Zhanjun Male 45 0 0 Director Jun. 2006 Independent Jun. 2003- Zhou Chengxin Male 48 0 0 Director Jun. 2006 Chairman of the Jun. 2003- Zhu Tianfa Supervisory Male 54 0 0 Jun. 2006 Committee Jun. 2003- Ji Ming Supervisor Male 47 0 0 Jun. 2006 Jun. 2003- He Yingyi Supervisor Male 47 0 0 Jun. 2006 Jun. 2003- Li Yongsheng Supervisor Male 31 0 0 Jun. 2006 Jun. 2003- Zhou Qun Supervisor Male 39 0 0 Jun. 2006 Employee Jun. 2003- Wang Rendong Male 42 0 0 Supervisor Jun. 2006 Xu Shichun Employee Male 52 Jun. 2003- 0 0 Supervisor Jun. 2006 Deputy GM, Jun. 2003- Fu Bo Secretary of the Male 41 0 0 Jun. 2006 Board Aug. 2003- Zhu Wei Deputy GM M ale 46 0 0 Jun. 2006 Oct. 2003- Lin Qing Deputy GM Female 39 0 0 Jun. 2006 Aug. 2003- Lu Xiaoping CFO Male 41 0 0 Jun. 2006 Aug. 2003- Sun Shoulin Chief Engineer Male 57 0 0 Jun. 2006 5.2 Particulars about directors and supervisors holding the post in Shareholding Company √Applicable □Inapplicable Drawing the payment Title in Shareholding Name Name of Shareholding Company Office term or allotment from the Company Company (Yes / No) Liu Deyu Shenzhen Energy Group Co., Ltd. Deputy GM Since Nov. 1997 No Wang Jianbin Shenzhen Guangju Energy Co., Ltd. Chairman of the Board Since Feb.1999 No Shenzhen State Power Science and Cui Jichun Chairman of the Board Since Jul. 2003 No Technology Development Co., Ltd. Director of Plan & Yu Chunling Shenzhen Energy Group Co., Ltd. Since Apr. 2003 No Development Dept. Li Li Tengda Property Co., Ltd. Chairman of the Board Since 1992 No Zhao Xiao Shenzhen Energy Group Co., Ltd. Chief Engineer Since Nov. 2001 No Shenzhen Guangju Electronic Zhong Chengli Chairman of the Board Since Sep. 2000 No Investment Co., Ltd. Shenzhen State Power Science and Sun Yulin Deputy GM Since Dec. 1999 No Technology Development Co., Ltd. Zhu Tianfa Shenzhen Energy Group Co., Ltd. Chief Economist Since Nov. 2001 No Shenzhen Guangju Electronic Ji Ming GM Since Sep. 2000 No Investment Co., Ltd. Assistant GM and Zhou Qun Shenzhen Energy Group Co., Ltd. concurrently Director of Since Mar. 2003 No Office Shenzhen State Power Science and Manager of Market He Yingyi Since Apr. 2000 No Technology Development Co., Ltd. Dept. Li Yongsheng Tengda Property Co., Ltd. Manager Since 1994 No 5.3 Particulars about the annual remuneration of directors, supervisors and senior executives Total annual remuneration RMB 5,400,000 Total annual remuneration of the top three RMB 1,150,000 directors drawing the highest payment Total annual remuneration of the top three senior RMB 2,750,000 executives drawing the highest payment Allowance of independent director RMB 100,000 per person/ year Other treatment of independent directors The Company paid the relevant expenses such as traffic, accommodation, investigation and research, investigation and meeting occurred due to work. Name of directors and supervisors receiving no Liu Deyu, Wang Jianbin, Cui Jichun, Yu Chunling, Li Li, payment or allowance from the Company Zhong Chengli, Zhao Xiao, Sun Yulin, Zhu Tianfa, Ji Ming, He Yingyi, Zhou Qun and Li Yongsheng Payment Number of persons RMB 950,000 ～ RMB 1,000,000 1 RMB 850,000 ～ RMB 900,000 3 RMB 700,000 ～ RMB 750,000 1 RMB 400,000 ～ RMB 450,000 2 RMB 150,000 1 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period In the report period, the rapid development of the economy in Shenzhen also drove the city’s electricity load and comsumption to increase dramatically. The city’ s consumption amount and the highest load of electricy reached 30,771 million KWH and 5.8 million KW respectively, an increase of 20.83% and 24.73% over the previous year respectively; the network electricity of Shenzhen’ s fuel power plant reached 9,135 million KWH, with an increase of 30.79% over the same period in the previous year. The electricity demand was in bloom, while in Shenzhen even in Guangdong province, the power supply construction lagged and the power network was very weak, resulting in the very tense power supply in Shenzhen in 2003. The objective market environment created favorable opportunity for the operation and development of the Company’ s main operations. 2003 was the year for the Company to consolidate basic business, develop outwards and create SHENNANDIAN brand. The Company grasped tightly the favorable tendency of power demand ’ s increase in a rapid and sustainable way and acquired good achievements in production and operation of main operations and external investment. In this year the Company actually completed electricity generation amounting to 3,145,251,500 KWH, an increase of 470,902,800 KWH and 17.61% than the corresponding period of last year, an excess of 20.97% than the generation task of 2,600,000,000 KWH prescribed by the Board of Directors in the early period of the year and created the best record since the Company was established. The Company realized income from main operations amounting to RMB 1,863,937,200, an increase of 14.85% than last year, and for the reason of the dramatic rise in fuel price and drop in the electricity price, the profit from main operations was RMB 499,239,900, a decrease of 6.65% than last year; acquired allowance RMB 72,905,700 and realized net profit amounting to RMB 475.9950 million, an increase of 30.18% than last year. While finishing the indexes of power generation and profit, the technical renovation project of “substituting the big for the small” for the combustion engine invested and constructed by the New Power Company was put into production at the end of September, making the Company’ s total installed capacity reach 180,000 KW, and the total installed capacity reach to 880,000KW, put across the general contract project of “substituting the big for the small”for the combustion engine of Shenzhen Baochang Power Plant, indicated the start of the Company’ s business of accepting general contract projects of external combustion engine stations and technical consulting service; Successfully exploitd the investment and operation in Zhongshan power market, strengthened the development of main operations and expanded the operation scale, realized the Company’ s strategic object of cross-regional development 6.2 Statement of main operations classified according to industries or products Unit: RMB’0000 Classified according to Income from Cost of Gross Increase/decrease Increase/decreas Increase/decrease industries or products main main profit ratio in income from e in cost of main in gross profit ratio operations operations (%) main operations operations over over the last year over the last year the last year (%) (%) (%) Production and supply of power, steam and hot 186,393.72 136,343.51 26.85 14.85 25.48 -6.20 water Including: related 0.00 0.00 - 0.00 0.00 0.00 transactions Electric power 186,393.72 136,343.51 26.85 14.85 25.48 -6.20 Including: related 0.00 0.00 - 0.00 0.00 0.00 transactions Pricing rules for related Naught transactions Necessity and durative Naught of related transactions 6.3 Particulars about main operations classified according to areas Unit: RMB’0000 Areas Income from main operations Increase/decrease in income from main operations over the last year (%) Shenzhen, Guangdong 186,393.72 14.85 6.4 Particulars about the customers of purchase and sales Unit: RMB’0000 Total amount of purchase 100,267.53 Proportion in the total 89.00% of the top five suppliers amount of purchase Total amount of sales of the 213,706.97 Proportion in the total 100.00% top five sales customers amount of sales 6.5 Operation of share- holding companies (applicable to the situation where investment equity takes over 10% of its net profit) □Applicable √Inapplicable 6.6 Explanation on reasons of material changes in main operations and its structure □Applicable √Inapplicable 6.7 Explanation on reasons of material changes in profitability capability of main operations (gross profit ratio) than that in the last year □Applicable √Inapplicable 6.8 Analysis to reasons of material changes in operating results and profit structure compared with the previous year □Applicable √Inapplicable Analysis to reasons of material changes in the whole financial position than that in the last year √Applicable □Inapplicable Unit: RMB’000 In 2003(the year) In 2002(the last year) Increase/decrease in amount of the year over the last year (%) Shareholders’equity 1,519,821 1,274,445 19.25 Profits attributable to 475,995 365,642 30.18 shareholders Net increase in cash (76,838) 277,108 -127.73 and cash equivalents Reasons of increase/decrease: 1.The increase of total assets is mainly because of the increase of profits attributable to shareholders and the capital public reserve. 2.Profits attributable to shareholders mainly are allowance income, increase of minority shareholders’abandonment of dividends and the decrease of the minority shareholders’equity. 3.Net decrease in cash and cash equivalents is mainly because of the rise in international fuel price and drop in power price, resulting into the decrease in the net cash flow. 6.9 Explanation on the past, current and future important effects of the material changes in production and operation environment, macro-policies and regulations on the Company’ s financial position and operating results √Applicable □Inapplicable √Applicable □Inapplicable 1. Rising demand for power In 2004, the demand for power in the whole country will keep rising rapidly and the general power supply situation will be more austere than last year. In Guangdong province, the shortage of power supply will be changed from seasonal to all- year, the gap of the power supply in the whole province will exceed 2 million KW. As the district with the most austere power supply in Guangdong, Shenzhen’ s highest power load is forecasted to reach to 6.8 million KW, net increase of 1 million KW compared to last year. Ended the end of Jan. of 2004, the highest power load of Shenzhen power network has reached to 4.681 million, an increase of 26.82% than the corresponding period of last year. 2. Drop in the price of power According to the Notice on Adjusting the Network Power Price of the Gas Turbine Power Generation Enterprise of Guangdong Price Bureau, from Jul.1, 2003, the Company’ s network power price will be adjusted form RMB 0.75/KWH to RMB 0.72/KWH, and thus decrease the income from main operations amounting to RMB 44.175 million. 3. Rise in the price of fuel In 2003, due to the persistent high price in the international oil market, the cost of the fuel needed for power generation increased 17% than the corresponding period of the last year, and added to the Company’ s power production cost. 6.10 Completion of the profit estimation □Applicable √Inapplicable 6.11 Completion of the business plan □Applicable √Inapplicable 6.12 Application of the raised proceeds □Applicable √Inapplicable Particulars about the changed projects □Applicable √Inapplicable 6.13 Application of the proceeds not raised through shares offering (For details, please refer to 7.1 in this report) √Applicable □Inapplicable Unit: RMB’0000 Name of projects Amount of Progress of projects Earnings of projects projects SHENNANDIAN 120,000.00 18.17% Naught (Zhongshan) Power Co., Ltd. Total 120,000.00 - - 6.14 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants □Applicable √Inapplicable 6.15 Business plan as of the next year of the Board of Directors (If it has) √Applicable □Inapplicable 1.At the beginning of the year, the Company invested over RMB 60 million to overhaul the main power generating sets and accessorial sets, ensure the completion rate and contribution rate, actively strive for generation amount, fuithest satisfy the requirment of power attemper during the summer power consuming peak, try to complete the annual power generation plan amountting to 3400 million KWH and the profit index excessly and ahead of time. 2.Nearly track the price trend of international fuel price, rationally arrange the fuel purchase plan in the whole year, hunter for the new purchase channel of oil variety and spare parts. Elevate the management of planned purchase and stored material, on the premise of guaranteeing production and supply, try hard to cut down purchase cost. 3.Pay more emphasis on the progress of the project construction of the technical renovation project of “substituting the big for the small” for the combustion engine invested by SHENNANDIAN (Zhongshan) Company, try to put the first combustion engine single circulation sets into production for power generation in June of 2004, and the rest sets will all be constructed and put into production in te 4th quarter of 2004. Make the successful exploitation of Zhongshan power market as the breakthrough, grasp the opportunity of the serious power shortage in Zhongshan, actively apply to invest gas-steam combined circulation power generation sets (2*180,000KW) and quicken the pace of the cross-region development of the Company’ s main operations. 4.Organized to hold the Seminar on Strategy of the Adaptation of the Combustion Engine Sets to the Power Market Development and Nationalization Experience of 9E type Combustion Engine Combined Circulation System, through cooperating with the international suppliers of combustion engine and national supplier of combined circulation suited instruments, actively expliot the method of cooperating with the national research academies and institutions and well known enterprises in this industry, synthetize the resourses of all fields of combustion engine and combined circulation suited instruments as design, production and maintenance, try to sythetize the advantagies and transfer to actual ability for profits and strengthen the Company’ s competition status in the industry. 5.Activly explore the method of capital operation and assets operation, actively participate in the oversea promotion acivity of B share, expand the influence of the Company on national and international capital market. Make full use of the resources of the listed company and exert its financing advantage, raise money for the Company’ s development. 6.In the first part of the year, the Company has finished the purchase of 75% of Zhongshan Power Plant to which Power Development Company blonged and Zhongshan Zhongfa Power Co., Ltd. and their power generation assets, wholly took over the company’ s production, operation and management. The Company invested RMB 50 million to implement the technique innovation project of residual heat utilization, newly added four residual heat power generation(4*3000KW), elevate the contribution of sets and cut down power generation cost. 7.Quicken the establishment of SHENNANDIAN Combustion Engine Engineering and Technique Co.,Ltd., actively exploit contracting combustion engine station project, technical service business, roundly exporting the Company’ s advanced management and technique, elevating the brand of SHENNANDIAN and make it a new profit growth point. 8.According to the construction progress of Shenzhen LNG project, strengthen the communication with Shenzhen government, bring the project of Nanshan Power Plant ’ s change to burn natural gas into the whole layout of of Shenzhen LNG project, try to be the first group of users of Shenzhen LNG project and create conditions for the Company’ s sustained developmetn. 9.Continue to seek effective method of activating the # 21, # 22, # 23 gas wheel power generation assets of Nanshan Power Plant, try to complete the transfer and removal of the three sets. Actively apply to invest and establish a gas-steam combined circulation power generation sets with 180000KW on the original location, and form sets of Combined Supply of Heat and Power with the gas-steam combined circulation power generation sets which has been established by New Power Company, to satisfy the demands for heat supply n the area of Shenzhen Nanyou district. 10.Press on with the drawback procedure of value added tax on national instruments of technique innovation of “substituting the big for the small”and favourable tax procedure on the project of sythetically utilizing resources. 11.In the principle of conforming to the law and regulation, actively explore and implement standardized, scientific and effective long-term incentive mechanism for business managers and key talents. Profit estimation of the next year (If it has) □Applicable √Inapplicable 6.16 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors Audited by Guangzhou Yangcheng CPAs Co., Ltd. according to the Independent Auditing Standards for Chinese Certified Public Accountants, the net profit realized by the parent company in 2003 was RMB 482,619,712.84. After the statutory public reserve was provided based on 10% of the net profit amounting to RMB 48,261,971.29, and the public welfare fund was provided based on 5% of the net profit amounting to RMB 24,130,985.64 in accordance with the relevant provisions of the Articles of Association, the balance was RMB 410,226,755.91. Plus the undistributed profit carried down from 2002 amounting to RMB 322,506,828.13, subtract the cash dividends distributed last year amounting to RMB 230,145,719.16, the total profit available for distribution to the shareholders in 2003 was RMB 502,587,864.88. After the consolidation, the net profit of the Company in 2003 was RMB 471,110,360.33. After provision of the statutory pub lic reserve amounting to RMB 48,261,971.29 and public welfare fund amounting to RMB 24,130,985.64, and deduction of statutory public reserve and public welfare fund provided by the consolidated subsidiaries in 2003 amounting to RMB 14,614,328.98, the balance was RMB 384,103,074.42. Plus the undistributed profit carried down from 2002 amounting to RMB 296,799,472.19, subtract the cash dividends distributed last year amounting to RMB 230,145,719.16, the profit available for distribution to the shareholders after consolidation in 2003 was RMB 450,756,827.45. Audited by PricewaterhouseCoopers Certified Public Accountants, the net profit realized in 2003 based on the calculation according to Hong Kong Accounting Standards was RMB 475,995,000. Less the statutory public reserve provided based on 10% of the net profit amounting to RMB 48,262,000 and public reserve provided based on 5% of the net profit amounting to RMB 24,131,000 according to the regulations of the People’ s Republic of China, plus the undistributed profit carried down from the previous year amounting to RMB 296,800,000 and less the difference arising from the consolidation of the subsidiaries amounting to RMB 14,614,000 and the conversion into capital public reserve amounting to RMB 4,885,000, subtract the cash dividends distributed last year amounting to RMB 230,146,000, the profit available for distribution to the shareholders in 2003 was RMB 450,757,000. Based on the above calculation result, the profit available for distribution to the shareholders after the domestic consolidation in 2003 was RMB 450,756,827.45, and the domestic parent company’ s profit available for distribution to the shareholders was RMB 502,587,864.88; the profit available distribution to the shareholders outside the People’s Republic of China was RMB 450,757,000. According to the relevant provisions of the State Ministry of Finance (Financial- Accounting Zi (1995) No. 31 and China Securities Regulatory Commission (CSRC Letter (1994) No. 1), based on the principle of soundness and the lower of the two, the profit available for distribution to shareholders was worked out according to the domestic consolidation in 2003, namely RMB 450,756,827.45. The preplan on profit distribution in 2003 is: allotting cash to all shareholders (total share capital is 547,965,998 shares) at the rate of RMB 4.68 (tax included) for every 10 shares and the balance is carried forward to the next year. The Company shall not convert capital reserve into share capital in the year. The above proposal is subject to Shareholders’General Meeting 2003 for review and approval before implementation. §7. Significant Events 7.1 Purchase of assets □Applicable √Inapplicable 7.2 Sales of assets □Applicable √Inapplicable 7.3 Significant guarantees √Applicable □Inapplicable Unit: RMB’0000 Date of happening Complete Guarantee for Name of guaranteed Amount of Term of (date of Type of guarantees Implementation related parties or objects guarantees guarantees agreement or not not (yes or no) signing) Shenzhen New Power 2,550.00 Ordinary Oct. 30, 2002 – Oct. 30, 2002 No Yes Industrial Co., Ltd. guarantee Oct. 30, 2004 SHENNANDIAN 20,000.00 Ordinary Dec. 30, 2003 – (Zhongshan) Power guarantee Dec. 31, 2006 Dec. 31, 2003 No Yes Co., Ltd. Total amount of guarantee 15,550.00 Total balance of guarantee 15,550.00 Including: total balance of related guarantees 15,550.00 Total guarantees provided by the listed company for 15,550.00 controlling subsidiaries Total illegal guarantees 0.00 Proportion of total guarantees in net assets of the 9.79 Company 7.4 Current related credits and liabilities √Applicable □Inapplicable Unit: RMB’0000 Related parties Providing capital to related parties Providing capital to the listed company by related parties Amount Balance Amount Balance Shenzhen Xiefu Power Supply -13.03 0.97 -81.02 3,070.53 Co., Ltd. Shenzhen Moon Bay Renhe 0.00 0.00 -97.77 17.01 Industrial Co., Ltd. Shenzhen Energy 0.00 0.00 0.00 55.33 Group Co., Ltd. Total -13.03 0.97 -178.79 3,142.87 7.5 Entrusted assets management □Applicable √Inapplicable 7.6 Implementation of commitments √Applicable □Inapplicable 1. The Company has released profit distribution policy in Annual Report 2002 and has implemented the said commitment. For details in profit distribution preplan 2003, please see “Preplan on profit distribution and converting capital reserve into share capital in the year”. 2. In the report period, the Company’ s shareholders holding over 5% shares and related parties did not owe payments of the Company and there was also no other commitment. 7.7 Significant lawsuits and arbitrations □Applicable √Inapplicable 7.8 Particulars about duties performance of Independent Directors In the report period, after elected and passed by the 6th Provisional Shareholders’ General Meeting 2003, the Company has engaged four independent directors, which made the Company’ s number of independent directors reach the requirements of CSRC. The new independent directors actively participated into the training of independent directors, studied such relevant regulations as Company Law and the Articles of Association, deeply learned about the duty standard and responsibility of independent directors, actively took part in the Board meetings and seriously considered all proposals. Besides, making use of their professional knowledge and work experience, they took part in the significant decision-making of the Company, expressed opinions independently on the related transactions of the Company in compliance with relevant provisions and exerted the functions as independent directors. §8. Report of the Supervisory Committee (I) Meetings in the Report Year In the report period, the Supervisory Committee held 12 meetings and attended all board meetings as non-voting delegates. The meetings are summarized as follows: 1.The 15th meeting of the 3rd Supervisory Committee was held on Jan.7, 2003 that examined and approved Proposal on Making General Contract with New Power Company on the Construction of its Technique Innovation Project of “substituting the big for the small”, Proposal on Submitting for Examination and Approval the Mandatory Operation Contract of the assets of the Gas-Steam Combined Circulation Residual Heat Power Generation, and the procedure arragement of the 2nd Provisional Shareholders’General Meeting of 2003. 2.The 16th meeting of the 3rd Supervisory Committee was held on Feb.18, 2003. In order to regulate the Company’ s operation and protect all shareholder’s interest of the Company, the meeting examined and approved Proposal on Assigning 49% Equity of Shenzhen New Power Co., Ltd. and the procedure arragement of the 3rd Provisional Shareholders’General Meeting of 2003. 3.The 17th meeting of the 3rd Supervisory Committee was held on Mar.13, 2003 which examined and approved Disposal Plan on the Undistributed Profit of New Power Company, Proposal on Generally Contracting with Baochang Power Plant on the Construction of Technique Innovation Project of “substituting the big for the small”,and Proposal on holding the 4th Provisional Shareholders’General Meeting of 2003. 4.The 18th meeting of the 3rd Supervisory Committee was held on Apr.18, 2003 which examined and approved Business and Work Report of the General Manager 2002, Financial Settlement Report 2002, Report on Providing Reserve for Devaluation of Various Assets and Canceling the Assets through Verification 2002, Profit Distribution and Converting the Capital Public Reserve into Share Capital 2002, Annual Report and the Summary 2002; Auditors’Report 2002 (both Oversea and Domestic Versions); Work Report of the Supervisory Committee 2002; Report on Plan for Production, Operation and Management Work in 2003. 5.The 19th meeting of the 3rd Supervisory Committee was held on Apr. 25, 2003 that examined and approved the 1st Quarterly Production, Business and Management Report 2003, the 1st Quarterly Report 2003, Report on Investing and Constructing the Technique Innovation Project of “substituting the big for the small” Gas-Steam Combined Circulation Residual Heat Engineering of New Power Company, Explanation on the Use Status of the Proceeds Previously Raised and Proposal on Holding the 5th Provisional Shareholders’General Meeting of 2003. 6.The 20th meeting of the 3rd Supervisory Committee was held on May 13, 2003 that examined and approved Proposal on Changing Office of Supervisory Committee, Proposal on Consigning Special Auditing of Shenzhen Energy Group Co., Ltd. and Proposal on holding the 6th Provisional Shareholders’General Meeting of 2003. 7.The 1st meeting of the 4th Supervisory Committee was held on Jun. 17, 2003 that conformably elected Mr. Zhu Tia nfa as the Chairman of the Supervisory Committee of the Company, and seven members as Zhu Tianfa, Ji Ming, He Yingyi, Zhou Qun, Li Yongsheng, Wang Rendong and Xu Shichun etc. formed the 4th Supervisory Committee. 8.The 2nd meeting of the 4th Supervisory Committee was held on Aug.6, 2003, which examined and approved Report on Purchasing Zhongshan Power Development Company’ s Subsidiary Fuel Power Plant and Report on Jointly Constructing Technical Renovation Project of “Substituting the big for the small” for the Combustion Engine with Xingdesheng Co., Ltd. and Zhongshan Power Development Company. 9.The 3rd meeting of the 4th Supervisory Committee was held on Aug.17, 2003. The meeting examined and approved Report on the Company’ s Production, Operation and Management on the First Half Year of 2003, Proposal on Interim Profit Settlement 2003, Interim Auditors’ Report of Guangzhou Yangcheng CPAs Co., Ltd. 2003, Interim Report 2003 (both Oversea and Domestic Versions). 10.The 4th meeting of the 4th Supervisory Committee was held on Sept. 29, 2003. The meeting examined and approved Proposal on Investing and Constructing Zhongshan Nanlang Combustion Engine Power Station, Proposal on Investing and establishing SHENNANDIAN (Zhongshan) Power Co., Ltd., Proposal on Report on Adjusting the Company’ s Organization Structure and Management Mode, Proposal on Operating Related Transactions between the Company and Shenzhen Xiefu Oil Supply Co., Ltd., Proposal on Amending the Articles of Association of the Company, Proposal on Holding the 7th Provisional Shareholders’ General Meeting 2003, and examined Report on Progress of Buying Fuel Power Plant, the subsidiary of Zhongshan Power Development Co., Ltd.. 11.The 5th meeting of the 4th Supervisory Committee was held on Oct.17, 2003. The meeting examined and approved Report on the Company’ s Production, Operation and rd rd Management in the 3 Quarter of 2003, the 3 Quarterly Profit Settlement Project 2003, the 3rd Quarterly Report 2003 (both Oversea and Domestic Versions). 12.The 6th meeting of the 4th Supervisory Committee was held on Dec.19, 2003. The meeting listened to the Company’s Power Generation Instruments Overhaul Report 2004 and considered and passed Proposal on Self- inspection and Rectification Report on the Company’s Normative Operation in 2003 and Proposal on the Contract of Assets Trusteeship of New Power Company’ s Power Generation Sets. At the same time the meeting discussed Report on Implementing the Smoke Sulfur-off Technique Innovation of 7# Set and the meeting also stud ied Shenzhen Securities Regulation Office’s report on Elevating Level of Administration Regulation, Promote the Development of Listed Companies. (II) The Supervisory Committee’ s independent opinions on the following events 1. The Company’s operation according to laws In 2003, the members in the Supervisory Committee attended all meetings of the Board of Directors as nonvoting delegates and supervised on all decisions, material operations and investments submitted to the Board of Directors for research. The Supervisory Committee considered that the Company could develop all productive and operative business according to the State and local laws and regulations and the Articles of Association in 2003, not disobeying any law and regulation, which should be fully affirmed. In the report period, there was still no final conclusion in the registered check from CSRC Shenzhen Inspection Bureau. The Company actively cooperated, seriously conduced self- examination and self-correction and fully checked the problems left in the history and in the aspects of normative operation. It put forward rectification measures and projects and formed rectification report, in which each item should be implemented in rectification within a limited period. The Company committed to stick to operation according to laws and normative operation based on the principle of safeguarding the interests of the Company and its shareholders in the future. 2. Inspecting the Company’ s finance In 2003, the Company further enlarged the capital management and cost control. Through rigorous and effective internal management measures, the Company’ s productive and operative cost was controlled in an effective way, which made the benefits increase and created good returns for the shareholders. The Supervisory Committee considered that the Company could strictly implement the relevant financial and tax policies of the State, attach importance to the financial management and exert the supervision and control function of finance. It agreed the unqualified auditors’report on the Company’ s accounting statements’complying with the provisions in Accounting Standards for Business Enterprises and Accounting System for Business Enterprises released by the State and on reflecting the Company’ s financial position ended Dec. 31, 2003 and its operating results and cash flows for the year then ended in all material aspects presented by Guangzhou Yangcheng CPAs Co., Ltd. and PricewaterhouseCoopers Certified Public Accountants respectively for the Company. 3. Use of the raised proceeds The actual projects and the committed projects invested with the Company’ s latest proceeds raised through pubic offer were accordant. 4. Acquisition and sales of assets The Company had no acquisition or sales of assets in the report period. 5. Related transactions The Supervisory Committee considered the principle of fair transaction in the market was taken into account in the Company’ s related transactions in the report period and their transaction prices were confirmed according to the market price of the products in the same type. After considered and passed by the Board of Directors and Shareholders’General Meeting of the Company, the transaction price was fair and reasonable. §9. Financial Report 9.1 Auditing opinions INTERNATIONAL AUDITORS’REPORT TO THE SHAREHOLDERS OF SHENZHEN NANSHAN POWER STATION CO., LTD. (incorporated as a joint stock limited company in the People ’ s Republic of China) We have audited the accounts on pages 2 to 24 which have been prepared in accordance with accounting principles generally accepted in Hong Kong. Respective responsibilities of directors and international auditors The Company’ s directors are responsible for the preparation of accounts which give a true and fair view. In preparing accounts which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those accounts and to report our opinion to you. Basis of opinion We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the Group ’ s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the accounts are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion the accounts give a true and fair view of the state of the Group’ s affairs as at 31 December 2003 and of its profit and cash flows for the year then ended. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 14 March 2004 9.2 Financial statement CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2003 Note 2003 2002 RMB’000 RMB’000 Turnover 3 1,863,937 1,622,904 Other revenues 3 94,556 50,883 1,958,493 1,673,787 Fuel costs (1,023,375) (753,020) Staff costs 4 (85,859) (143,031) Depreciation of fixed assets (137,831) (119,152) Impairment of fixed assets - (11,320) Amortisation of intangible assets (2,055) (8,190) Operating lease expenses - equipment (30,375) (26,198) Repairs and maintenance expenses (59,291) (34,642) Other operating expenses 5 (62,190) (52,873) Operating profit 557,517 525,361 Finance costs 6 (12,367) (14,347) Share of profit of associated companies 1,437 - Profit before taxation 546,587 511,014 Taxation 7 (70,592) (51,671) Profit after taxation 475,995 459,343 Minority interests - (93,701) Profit attributable to shareholders 475,995 365,642 Dividends 8 256,448 230,146 Earnings per share - basic 9 RMB0.87 RMB0.67 CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2003 Note 2003 2002 RMB’000 RMB’000 Intangible assets 11 (61,045) 14,292 Fixed assets 12 1,314,880 1,038,912 Construction in progress 13 231,976 54,864 Interest in associated companies 14 3,622 - Investment securities 15 71,885 74,285 Current assets Inventories 16 150,316 86,909 Trade receivable s 216,190 148,368 Amount due from a minority shareholder 19 23,530 - Amount due from a related company - 3,223 Other receivables, deposits and 37,212 prepayments 58,042 Bank balances and cash 17 494,178 570,956 942,256 846,668 Current liabilities Trade payable s 5,476 31,975 Amounts due to associated companies 18 3,238 2,367 Amount due to a related company 20 13,865 1,148 Other payables and accrued charges 140,348 197,883 Taxation payable 48,657 40,834 Bank loans, unsecured 21 622,329 335,000 833,913 609,207 Net current assets 108,343 237,461 Total assets less current liabilities 1,669,661 1,419,814 Financed by: Share capital 22 547,966 547,966 Reserves 23 521,098 429,679 Retained earnings 24 Proposed final dividend 256,448 230,146 Others 194,309 66,654 Shareholders’funds 1,519,821 1,274,445 Minority interests 19,840 145,369 Bank loans, unsecured 21 130,000 - 1,669,661 1,419,814 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003 2003 2002 Note RMB’000 RMB’000 Total equity as at 1 January 1,274,445 1,079,372 Declaration of dividend 24 (230,146) (169,869) Profit for the year 475,995 365,642 Exchange differences 23 60 1,432 Utilisation of public welfare fund 23 (533) (2,132) Total equity as at 31 December 1,519,821 1,274,445 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 Note 2003 2002 RMB’000 RMB’000 Operating activities Cash received from customers 2,137,328 1,882,878 Cash paid to suppliers (1,269,047) (845,594) Cash paid to and on behalf of employees (104,481) (103,256) Other cash received 15,750 11,200 Other cash payments (327,847) (150,342) Net cash inflow generated from operations 25(a) 451,703 794,886 Interest paid (17,934) (16,379) PRC income tax paid (64,456) (31,795) Net cash inflow from operating activities 369,313 746,712 Investing activities Purchase of fixed assets and payments for construction in progress (582,762) (360,124) Purchase of investment securities - (2,400) Purchase of interest in a subsidiary from minority shareholder (56,320) - Dividend received from investment securities 867 - Interest received 5,033 4,178 Loan to a minority shareholder (20,000) - Net cash outflow from investing activities (653,182) (358,346) Net cash (outflow)/inflow before financing (283,869) 388,366 Financing activities 25(b) New loans raised 752,329 335,000 Repayment of loans borrowed (335,000) (295,000) Decrease in pledged bank deposits - 18,611 Capital contribution from minority shareholder 19,840 - of a subsidiary Dividends paid (230,138) (169,869) Net cash inflow/(outflow) from financing 207,031 (111,258) (Decrease)/increase in cash and cash equivalents (76,838) 277,108 Cash and cash equivalents at 1 January 570,956 292,416 Effect of foreign exchange rate changes 60 1,432 Cash and cash equivalents at 31 December 17 494,178 570,956 9.3 Compared with the latest annual report, changes in accounting policy, accounting estimate and calculation method with reasons as follows: 1. There was no change in accounting policy. 2. There was no change in accounting estimate. 3. Detailed explanations on changes in calculation method The accounting disposal of the Company’ s income tax was adopted payable tax method originally. From Jan. 1, 2003, the accounting policy that the Company originally adopted payable tax method to calculate corporate income tax was changed into adopting tax influence accounting method to calculate corporate income tax. After checking, the accumulative amount arising from the said changes in accounting policy was RMB 0.00 and its influence on the current was RMB 0.00. 9.4 Compared with the latest annual report, the consolidated scope changes with reasons as follows: On Dec. 12, 2003, after approved by Zhongshan Foreign Trade and Economic Cooperation Bureau with ZWJMZZ [2003] No. 968 document, SHENNANDIAN jointly invested and established SHENNANDIAN (Zhongshan) Power Co., Ltd. (hereinafter referred to as SHENNANDIAN (Zhongshan) wit h Xingdesheng Company and Zhongshan Power Development Company. Its corporate business license registration number was: QHYZZZ No. 003422 and its registered capital was RMB 99.20 million, of which the Company held its 55% equity, Xingdesheng Company and Zho ngshan Power Development Company held 25% and 20% of its equity respectively. Since Xingdesheng Company’ s 100% equity was indirectly held by the Company, the Company totally held 80% equity of SHENNANDIAN (Zhongshan). Thus, the said subsidiary was listed into the consolidated scope in the report period. Board of Directors of Shenzhen Nanshan Power Station Co., Ltd. Mar. 17, 2004