*ST石化Ａ(000013)*ST石化Ｂ2003年年度报告摘要（英文版）

SHENZHEN PETROCHEMICAL INDUSTRY (GROUP) CO., LTD. 2003 ANNUL REPORT SUMMARY §1. Important Notes 1.1 The Board of Directors of Shenzhen Petrochemical Industry (Group) Co., Ltd. (hereinafter referred to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. 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 have objection for this report. 1.3 All directors attended the Board meeting. 1.4 Huazheng Certified Public Accountants issued an Auditors’Report with unable to express opinion for the Company, to which and the Board of Directors and the Supervisory Committee made detailed explanations, the investors are suggested to read the content. 1.5 Chairman of the Board of the Company Mr. Li Nujiang and Person in Charge of Accounting Organ Mr. Wu Xianbiao hereby confirm that the Financial Report enclosed the Annual Report is true and complete. 1.6 The report is compiled in Chinese and English languages should there be difference in interpretation of the two languages, the Chinese version shall prevail. §2. Company Profile 2.1 Basic information Short form of the stock *ST SPEC-A, *ST SPEC-B Stock code 000013, 200013 Listed stock exchange Shenzhen Stock Exchange Registered address and Registered address: SPEC Bldg., Hongli West Road, Futian District, office address Shenzhen Office address: 45, Wuhe Rd. S., Bantian, Buji, Longgang District, Shenzhen Post code 518112 E-mail of the Company spec0013@vip.sina.com 2.2 Contact person and method Secretary of the Board of Directors Name Cai Jianping Contact address 45, Wuhe Rd. S., Bantian, Buji, Longgang District, Shenzhen Telephone (86)755-84190844 Fax (86)755-84190844 E-mail spec0013@vip.sina.com §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data (Calculated according to the IAS) Unit: RMB’000 Increase/decrease over last 2003 2002 2001 year（％） Turnover 0 614,678 -100 727,826 Profit (Loss) before taxes (309,773) (482,056) --- (2,216,603) Profit (Loss) attributable (309,773) (485,947) --- (2,212,642) to shareholders At the end of At the end of Increase/decrease from the At the end of 2003 2002 end of previous year（％） 2001 Total assets 212,084 740,646 -71.4 1,006,653 Shareholder’s equity (2,406,774) (2,097,001) --- (1,645,311) Net cash inflows from 504,821 26,989 --- 4,634 operating activities 3.2 Major financial indexes (Calculated according to the IAS) (Unit: RMB) Increase/decrease over 2003 2002 2001 last year（％） Earnings per share (1.02) (1.49) --- (7.29) Return on equity --- --- --- --- Net cash flows per share arising from 1.66 0.09 --- 0.02 operating activities Increase or decrease At the end At the end At the end from the end of of 2003 of 2002 of 2001 previous year（％） Net assets per share (7.93) (6.93) - (5.42) Net assets per share after adjustment (7.93) (6.96) - (5.52) 3.3 Difference of net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Unit: RMB’000 Loss attributable to Net liabilities shareholders RMB’000 RMB’000 As reported in the “A”shares consolidated (327,934) (2,406,260) audited statutory financial statements under the PRC accounting standards IFRS adjustments Adjustment to capital reserve 454 __ Adjustment to provision for guarantees given to banks 23,423 __ and customers/bank loans Effect of non-consolidation of subsidiaries (5,147) __ Others (569) (514) __________ __________ As reported after IFRS adjustments (309,773) (2,406,774) in the “B”shares financial statements ========= ========= §4. Change in Share Capital and Particulars about Shareholders 4.1 Statement of change in share Before the Increase / decrease in this After the change year (+ / -) change Other Subtotal I. Unlisted shares 1. Sponsors’shares 164,546,553 0 0 164,546,553 Including: State-owned shares 164,546,553 -164,546,553 -164,546,553 0 Domestic legal person’s shares 164,546,553 164,546,553 164,546,553 Foreign legal person’s shares 0 0 Others 0 0 2. Raised legal person’s shares 54,724,424 0 0 54,724,424 3. Inner employees’shares 0 0 4. Preference shares or others 0 0 Total unlisted shares 219,270,977 0 0 219,270,977 II. Listed shares 1. RMB ordinary shares 51,324,002 0 0 51,324,002 2. Domestically listed foreign shares 32,760,000 0 0 32,760,000 3. Overseas listed foreign shares 0 0 4. Others 0 0 Total listed shares 84,084,002 0 0 84,084,002 III. Total shares 303,354,979 0 0 303,354,979 4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of circulation share Total number of shareholders at the end of report year 34,075 Particulars about shares held by the top ten shareholders Number of Nature of Increase / Shares held Type of shares share shareholders decrease in at the Proportio Full name of Shareholders (Circulating/N pledged/ (State -owned the report year-end n (%) on-circulating) frozen shareholder/foreig year (share) (share) (share) n shareholder) Guangzhou Puliqi 164,546,553 164,546,553 54.24 Non-circulating 0 Communication Investment Co., Ltd. Shenzhen Investment Holding 0 23,400,000 7.71 Non-circulating 0 State-owned Corporation shareholder China Merchants Securities 0 19,380,532 6.39 Non-circulating 0 Co., Ltd. Shenzhen Jingye Plastics Co., 0 2,208,772 0.73 Non-circulating 0 Ltd. Quanzhou Fukang Investment 0 1,560,000 0.51 Non-circulating 0 Consultation Co., Ltd. Shenzhen Orient Fortune 0 1,560,000 0.51 Non-circulating 1,560,000 Investment Co., Ltd. China Everbright Securities 0 1,484,936 0.49 Non-circulating 1,484,936 Co., Ltd. China Prime Investment 0 936,000 0.31 Non-circulating 0 Management Co., Ltd. Chongqin Xinhua Trust 0 780,000 0.26 Non-circulating 0 Investment Co., Ltd. NanHai Eastern Petrochemical 0 780,000 0.26 Non-circulating 0 Economic and Technology Development Corp. Explanation on associated relationship Among the above top ten shareholders, the Company is unknown among the top ten shareholders or whether there exists associated relationship or consistent action. consistent action Particulars about shares held by the top ten shareholders of circulation share Name of shareholders (full name) Number of circulation Type (A-share, B-share, shares at the year-end H-share or others) YU JIN XI 615,153 B ZHENG RUI HONG 300,500 B DING XIAO FENG 254,580 A SIU MAN 243,500 B CHENG SI YI 229,430 B YANG QUAN KAI 210,000 B QU KANG 199,200 B SHI MIN QIANG 168,600 B CHAN CHI KONG 158,950 B GONG FENG MING 150,000 A Explanation on associated relationship Among the top ten shareholders of circulation share, the among the top ten shareholders of Company is unknown whether there exists associated circulation share relationship. 4.3 Particulars about controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in controlling shareholders and actual controller of the Company √Applicable □Inapplicable Name of new controlling shareholder Guangzhou Puliqi Communication Investment Co., Ltd. Name of new actual controller Guangzhou Puliqi Communication Investment Co., Ltd. Date of change Dec. 15, 2003 Publication date and newspaper Securities Times and Ta Kung Pao dated Dec. 16, 2003 4.3.2 Introduction of especial situation for controlling shareholder and other actual controller Particulars about the controlling shareholder 1. Name: Guangzhou Puliqi Communication Investment Co., Ltd. 2. Registration address: Room F on 5/F, No. 36-38, Taojin Road, Dongshan District, Guangzhou 3. Registered capital: RMB 100 million 4. Registration number: 4401012040901 5. Type of enterprise: Limited Company 6. Business scope: computer, network, communication equipment, integrated terminal communication electron technology, sales of electron products; communication consultation and investment project using self-owned funds. 7. Date of foundation: Dec. 30, 1998 8. Name of shareholders: Wang Guofeng, Huang Wenqi §5. Particulars About Director, Supervisor and Senior Executives 5.1 Directors, supervisors and senior executives Name Title Gender Age Office term Shares Shares Reason for held at the held at the change held at the held at the change year-begin year-end Xin Yu Chairman of the Board, Male 40 Nov. 2001 - 2004 0 0 General Manager Ding Fuyi Director Male 49 Nov. 2001 - 2004 0 0 Liu Cong Director, Male 43 Nov. 2001 - 2004 0 0 Li Linsen Director Male 57 Nov. 2001 - 2004 6,240 6,240 Liu Qingmin Director Male 41 Nov. 2001 - 2004 0 0 Zhou Zhen Director, Deputy General Male 40 Nov. 2001 - 2004 0 0 Manager Cai Jianping Director, Secretary of the Male 40 Nov. 2001 - 2004 0 0 Board Li Qinwen Chairman of the Supervisor Male 56 Nov. 2001 - 2004 0 0 Committee Liu Yayan Supervisor Female 32 Jun.. 2003 - 2004 0 0 Wu Sheng Supervisor Male 38 Nov. 2001 - 2004 0 0 Ruan Kejian General Manager Male 37 Dec. 2003 - 2006 0 0 5.2 Particulars about directors and supervisors holding the post in Shareholding Company □Applicable √Inapplicable 5.3 Particulars about the annual payment of directors, supervisors and senior executives Unit: RMB Total annual remuneration RMB 862,000 Total annual remuneration of the top three RMB 669,400 directors drawing the highest payment Total annual payment of the top three senior RMB 669,400 executives drawing the highest payment Name of directors and supervisors receiving no Director: Ding Fuyi and Liu Cong payment or allowance from the Company Supervisor: Li Qinwen Range of remuneration Number of persons Over RMB 200,000 2 RMB 100,000 to RMB 200,000 2 Under RMB 100,000 5 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period In the report period, share equity of several industrial enterprises held by the Company, were sealed up by the court due to lawsuit. The main productive enterprise Donggang Company, which belonged to Chemical Company, was sold in August 2003 to cancel the debt; the main production equipment and production and office cites of Shenzhen Plastic Company and its main affiliated company, Chemical Construction Material Company was executed by the court in the beginning of 2003 to cancel relevant debts, which led to Shenzhen Plastic Company lack of production and operating ability; Another production enterprise Chemical Material Company produced chemical material amounting to 18,810,000 code, increasing compared with the same period of last year, but the share equity of the company held by the Company was going to be auctioned. 6.2 Statement of main operations classified according to industries or products □Applicable √Inapplicable 6.3 Particulars about main operations classified according to areas □Applicable √Inapplicable 6.4 Particulars about the customers of purchase and sale □Applicable √Inapplicable 6.5 Operation of share-holding companies (applicable to the situation where investment earnings 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 Shenzhen Petrochemical Plastic Group Co., Ltd., Shenzhen Petrochemical Donghong Chemical Material Co., Ltd. and Shenzhen Petrochemical Fiber Co., Ltd., affiliated subsidiaries of the Company, was listed into the consolidated scope in 2002. Since Shenzhen Petrochemical Plastic Group Co., Ltd., Shenzhen Petrochemical Donghong Chemical Material Co., Ltd. and Shenzhen Petrochemical Fiber Co., Ltd. have been or would be auctioned by the court after the balance-sheet-date, the Company had no actual right over the said companies and the said companies were not listed in the consolidated scope in the year. Therefore, the Company had no main operations in the report period. 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 In the report period, the Company had no main operations. 6.8 Analysis to reasons of material changes in operating results and profit structure compared with the previous year √Applicable □Inapplicable In the report period, the decrease in losses of the Company over the last year was mainly due to great decrease in management expense and decrease in predicted liabilities caused by lawsuits involved. Changes in profit structure were because that the consolidated scope took changes in the report period and the Company had no main operations. Analysis to reasons of material changes in the whole financial position than that in the last year √Applicable □Inapplicable Material changes in the whole financial position of the Company in the report period over the last year was mainly because that there were material changes in the consolidated scope of the Company over the last year. Due to the changes in consolidated scope, the Company had no main operations. 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 In the report period, since the several unfavorable factors that affected the sustainable operation of the Company still existed, the Company did not gain substantial progress in the large amount of payments receivable from Shenzhen Petrochemical Corporation, the controlling shareholders, and the Company needed to take joint recovery responsibility because the Company provided guarantee for the bank loans of other enterprises and these enterprises were unable to repay the loans, the equity of main production enterprises held by the Company all has been sealed up by the court and it was possible to be forced for implementation by the court. In 2003, the equity of Shenzhen Petrochemical Donggang Chemical Fiber Co., Ltd. held by Shenzhen Petrochemical Fiber Co., Ltd., the main industrial enterprise of the Company, was sold by the court to cancel out the relevant liabilities and the main productive equipments and the productive and office location of Shenzhen Petrochemical Plastic Co., Ltd. (Hereinafter referred to as Shenzhen Plastic Company) and its subsidiaries were also implemented forcibly so as to cancel out relevant liabilities. The aforesaid problems seriously affected on the normal operating activities of the Group. The Board of Directors thought, it was impossible for the Company to improve the bad production and operation environment facing at present only depending on the its self force of the Group. 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 □Applicable √Inapplicable 6.14 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants √Applicable □Inapplicable The explanation on issues involved in the Auditors’ Report with objection of expressing opinion provided by Moore Stephens Nanfang Minhe Certified Public Accountants of the Board of Directors were as follows： A. About sustainable operation Concerning the following significant problems existing in the financ ial status of the Company at present: A. Dated the statement date，the former principal shareholder Shenzhen Petrochemical Corp. still owed RMB 1020 million to the Company and had no further repayment plan；B. The status that the assets can not cancel out the liabilities was serious and the loss was large; C. It was hard to recover the principal and interests of expiring liabilities; D. There existed lawsuit and guarantee issues with large amount; E. The held equity and majority fixed assets was frozen or pledged and partial entered into the procedure of auctioned or being auctioned compulsively. The existence of the aforesaid problems has resulted in the very austere of operating environment of the Company. The Board of Directors thought, it is the premise of reorganization plan and liabilities reorganization of the Company to settle of payments with large amount receivable to controlling shareholders and release joint recovery responsibility undertaken by the Company in several external guarantee issues. In Dec. 2003, Shenzhen Investment Holding Corporation transferred 100% equity of Petrochemical Group held by it as RMB 10 to the persons in charge of Petrochemical Group and its affiliated companies. Shenzhen Investment Holding Corporation and Petrochemical Group made no essential arrangement for the huge debts of petrochemical Group owed to the Company. There was no essential development about repayment of external loan and release of joint recovery responsibility undertaken by the Company in guarantee issues. Thus, it was necessary for the Company to seek suitable way of reorganization and measures of liabilities reorganization and gain the energetic support and cooperation of relevant departments and creditors to continue to maintain the sustainable operation of the Company and get rid of the corner facing at present. B. About the responsibility problem undertaken by the Company about the arrearage of Shenzhen Petrochemical Corp. amounting to RMB 270 million The Board believed: after the Shenzhen Petrochemical Corp. signed “Debt converted into Investment”agreement with the Company, Agriculture Bank of China and China Great Wall Assets Corporation in 2000, due to this reason, in fact Shenzhen Petrochemical Corp. undertook the loan of the Company amounting to RMB 270 million in Agriculture Bank of China. Thus, the direct debtor of the loan was Shenzhen Petrochemical Corp. and the Company should not undertake the direct debts amounting to RMB 270 million in Agricultural Bank of China; In addition, in spite of listed explanation in relevant agreement, the company should undertake certain law responsibility for Shenzhen Petrochemical Corp. didn’t fulfilled the relevant agreements. However, there was no undefined limit in what way and what kind of responsibility the Company should take, so it ’ s not considered as guarantee responsibility that the Company bore and it’ s not considered as the Company should fulfilled the obligation provided that Shenzhen Petrochemical Corp. couldn’t fulfilled the obligation. Due to the uncertainty of law essence, scope, and degree of the responsibility, the Company could not determine the probable responsibility and losses incurred probably. 6.15 Business plan as of the next year of the Board of Directors (If it has) √Applicable □Inapplicable Since there was material change in the Company’ s operating environment and the Company faced very much difficulties in the sustainable operation, thus, the main tasks in 2004 for the Company were as follows: 1. Continue to conduct clearing to the accounts in great amount receivable from Shenzhen Petrochemical Group, the original controlling shareholder of the Company. 2. Solve the management problems of the existing two industrial enterprises and try hard to maintain the daily operation of the Company. 3. Do the work of the Company after listing suspension. 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 Since the Company incurred a loss in the year and the profit available for distribution to shareholders was in negative, thus, the Company would not distribute profits nor capitalize the capital reserve into share capital in 2003. The said profit distribution preplan for year 2003 should be submitted to Shareholders’General Meeting of the Company for consideration and approval. §7. Significant Events 7.1 Purchase of assets □ Applicable √ Inapplicable 7.2 Sales of assets √ Applicable □ Inapplicable Unit: (RMB) ’000 Related Contribution to net transaction profit of the Company Profit or Date of or not (if Transaction parties and the assets sold Sale price of the assets sold from loss from sale yes, explain the year-beginning to sale principle of the date of sale pricing) Auction of 54.51% equity of Shenzhen SPEC Donggang Chemical Sep. 2004 30,000 0.00 0.00 No Fiber Co., Ltd. held by Shenzhen SPEC Chemical Fiber Co., Ltd. Transfer 90.57% equity of Shenzhen No, Spike Biology Pharmaceutics Co., Mar. 2003 21,591.1 0.00 49.47 offsetting Ltd. held by the Company to China liabilities Real Estate (Holdings) Co., Ltd. 5% equity of Shenzhen ELCO No, Air-condition Co., Ltd. held by the Mar. 2003 12,096.9 0.00 14.56 offsetting Company to China Real Estate liabilities (Holdings) Co., Ltd. No, 70% equity of Shanghai Meixing Apr. 2004 2,100 0.00 115.44 offsetting Plastic Co., Ltd. held by the Company liabilities Influence on consistence of business and stability of managers caused by the issues interfered in purchase and sale In the report period, because the enterprises’equity and valid assets held by the Company at present were sealed up by the court, the assets sold by the Company was disposed by means of auction, realization or agreement transfer under the presiding of the court and all the proceeds were used to offset relevant liabilities. So, the sale of assets had serious influence on the Company and finally caused that the Company could not carry out normal production and operation activities. 7.3 Important guarantee √ Applicable □ Inapplicable Unit: (RMB) ’000 Complete Guarantee Name of the Company Date of Amount of Guarantee Guarantee type Implementation for related guaranteed happening guarantee term or not party or not Shenzhen NEPTUNUS Joint liabilities June 5, 2002- June 5, 2002 163,000 No No Group Co., Ltd. guarantee Aug. 7, 2003 Gintian Industrial Group Joint liabilities Sep. 22, 1998- Sep. 22, 1998 117,067.6 No No Co., Ltd. guarantee Jan. 30, 2001 China Aidi Group Co., Joint liabilities Dec. 31, 001- Dec. 31, 2001 33,500 No No Ltd. guarantee June 16, 2003 Shenzhen SZ-HK Joint liabilities July 29, 999- Industry Trade Import & July 29, 1999 24,090 No No guarantee June 30, 2001 Export Company China Banan Group Co., Joint liabilities Dec. 9, 1998- Dec. 9, 1998 95,760.8 No No Ltd. guarantee Dec.18, 2005 Shenzhen New Dawn Joint liabilities Nov. 25, 1996- Nov.25, 1996 43,953 No No Industrial Co., Ltd. guarantee Nov. 15, 2001 Guangdong Sunrise Joint liabilities Dec. 25, 1997- Dec.25, 1997 290,975.8 No No Holdings Co., Ltd. guarantee May 6, 2002 Shenzhen Zhonghao Joint liabilities Feb. 4, 1993- Feb.4, 1993 41,600 No Yes (Group) Co., Ltd. guarantee Apr. 30, 1996 Shenzhen Petrochemical Joint liabilities Sep. 5, 1997- Jinxin Chemical Sep. 5, 1997 234,328.20 No Yes guarantee July 13, 2001 Electronic Limited Shenzhen Petrochemical Aug. 18, 2000 Joint liabilities Aug. 18, 2000- 44,765.2 No Yes Oil Warehouse Limited guarantee Aug. 29, 2001 Shenzhen Petrochemical Joint liabilities Sep. 27, 1996- Sep. 27, 1996 82,539.3 No Yes Chemical Limited guarantee Mar. 27, 2002 Shenzhen Jinliyu Joint liabilities Apr. 13, 1998- Apr. 13, 1998 37,537.6 No Yes Petroleum Limited guarantee June 10, 2000 Shenzhen Petrochemical Joint liabilities Dec. 10, 1999- Dec. 10, 1999 34,715.2 No Yes Group Limited guarantee Apr. 1, 2002 Total amount of guarantee 1,596,729.4 Total balance of guarantee 1,596,729.4 Including: total balance of related guarantee 532,853.9 Total amount of guarantee the listed company provided for its share-controlling subsidiaries 163,650.7 Total amount of guarantee breaking regulations 34,715.2 7.4 Related credits and liabilities current □ Applicable √ Inapplicable 7.5 Entrusted assets □ Applicable √ Inapplicable 7.6 Implementation of commitment items □ Applicable √ Inapplicable 7.7 Significant lawsuit and arbitration √ Applicable □ Inapplicable 1.The progress of the unresolved lawsuits events disclosed in the 1st half of 2003 and before: (1) The objects involved in the lawsuits, which the Company as the debtor was indicted by the creditor and judged to lose lawsuit by the court, amounting to RMB 15 million and related interest. (2) The objects involved in the lawsuits events, which the Company as the guarantor for other companies’ loan from bank was indicted by the creditor and judged to take joint repayment liability by the court, amounting to RMB 0.9 million and related interest. 2.The lawsuits occurred in the 2nd half of 2003: (1) the objects involved in the lawsuits, which the Company as the debtor was indicted by the creditor, amounting to RMB 104,710,000 and related interest including the objects involved in the lawsuit the Company was judged to lose amounting to RMB 18.39 million and relevant interest. (2) The objects involved in the lawsuits, which the Company as the guarantor for other companies’loan from bank was indicted by the creditor, converting into RMB 237.15 million and related interest including the object, which the Company was judged to take joint repayment liability for, converting into RMB 20.15 million and related interest. Concerning the aforesaid lawsuits involved in 1 and 2 and their progress, please refer to the public notice of the Board of Directors disclosed on Securities Times and Ta Kung Pao dated July 10, 2003, Nov. 6, 2003, Dec. 26, 2003 and Dec. 31, 2003. 3. Because of the dissension of loan guarantee contract among the affiliated company of the Company, Shenzhen SPEC Chemical Fiber Co., Ltd., Shenzhen SPEC Donggang Chemical Fiber Co., Ltd. and Belgium United Bank Shenzhen Branch (the object was USD 2.1 million and related interest), Shenzhen Intermediate People ’ s Court had a compulsive auction of 54.51% equity of Shenzhen SPEC Donggang Chemical Fiber Co., Ltd. held by Shenzhen SPEC Chemical Fiber Co., Ltd. in Aug. 2003 to commute the above debts. For its detail, please refer to the public notice on Securities Times and Ta Kung Pao dated Aug. 8, 2003. 4. Because the Company’ s subsidiary, Shenzhen Plastic Company, and its subsidiary, Shenzhen Plastic Chemical Construction Material Co., Ltd. could not repay the principal and interest of loan from Shenzhen Commercial Bank, the court put teeth in the land, architecture, real estate, equipment, vehicle and electrical equipment of Shenzhen Plastic Company to offset the debt of Shenzhen Plastic Company and it caused Shenzhen Plastic Company could not carry out normal production and operation activities. Please refer to the public notice on Securities Times and Ta Kung Pao dated Mar. 29, 2003. 7.8 Other significant events 1. Because of the dissension of loan contract of the original controlling shareholder of the Company, Shenzhen Petrochemical Corp., the state-owned legal person shares amounting to 164,546,553 shares of the Company held by it (taking by 54.24% of the total share capital of the Company) were given public auction in Hangzhou on Oct. 16, 2003 and Guangzhou Puliqi Communications Investment Co., Ltd. obtained the aforesaid shares as RMB 0.131 per share through competitive auction. The procedure of owner change in register of the aforesaid shares has been finished in China Securities Depository and Clearing Corporation Limited Shenzhen Branch on Dec. 15, 2003. The procedures of the application of exempting offer purchase liabilities of Guangzhou Puliqi Communications Investment Co., Ltd. for CSRC is in process. Please refer to the public notices on Securities Times and Ta Kung Pao dated Sep. 11, 2003, Sep. 25, 2003, Oct. 17, 2003, Nov. 6, 2003, Nov. 25, 2003 and Dec. 17, 2003 for the details. 2. By the end of report year, the account receivables of the Company from the original control shareholder, Petrochemical Group is RMB 1.02 billion. Concerning the reason of this account receivable and the difficulty in the process of resolving, please refer to Significant Correlative Transactions in 2001 Annual Report. Furthermore, in Dec. 2003, Shenzhen Investment Holding Corporation transferred 100% equity of Petrochemical Group held by it as RMB 10 to the persons in charge of Petrochemical Group and its affiliated companies. Shenzhen Investment Holding Corporation and Petrochemical Group made no essential arrangement for the huge debts of Petrochemical Group owed to the Company, so the possibility of callback of the accounts receivables is very small. 3. The Company signed Three Parties Agreement on Transferring Loan to Investment and Share Equity with China Agricultural Bank of China Shenzhen Branc h (“Agricultural Bank”) and China Great Wall Assets Management Corporation Shenzhen Office (“Great Wall Corporation”) in Dec.2000. Agricultural Bank agreed to transfer the loan of the Company converting into RMB 270,000,000(including RMB 3,000,000 nominal loan of one related company) to Great Wall Corporation. Since the transfer date, Agricultural Bank of China has not executed the right of the creditor again and actually relieved the loan of the Company. Meanwhile, RMB 270,000,000 credit of the Company aga inst Petrochemical Group amounting to RMB 270,000,000 was transferred to investment income with equal amount against Petrochemical Group and the Company correspondingly offset the account receivable against Petrochemical Group amounting to RMB 267,000,000 but should take corresponding responsibility in the process of establishing the objective company relating with loan-to- investment by Petrochemical Group and Great Wall Corporation. By the end of the report period, because the objective company is not established, the agreement of loan-to- investment has not been finished execution and Great Wall Corporation has not obtained the investment stated in the aforesaid agreement. Agricultural Bank and Great Wall Corporation has put forward to release the agreement to Petrochemical Group and the Company and required to recover the credit and liabilities relationship of loan between Agricultural Bank and the Company. But according to the regulations of the above agreement and contract, Petrochemical Group is the direct debtor of the above loan totaling RMB 270 million and the nature and scope of the corresponding responsibilities that the Company should take in process of establishment of the objective company is not clear, so the corresponding responsibilities that the Company should take for the direct debtor is hard to estimate and record in account. 7.9 Items after period 1. According to the suggestion of the principal shareholder of the Company, Guangzhou Puliqi Communications Investment Co., Ltd., the Board of Directors agreed to engage Huazheng Certified Public Accountant Co., Ltd. as the audit organization of the financial report 2003 (A-share) of the Company in Mar. 2004 and submit it to the next Shareholders’General Meeting for examination. 2. On Feb. 27, 2004, CSRC Shenzhen Check Bureau issued Notification of Register and Investigation (2004SJLTZ NO. 002) to the Company that decided to put on record and investigate the Company because the Company was suspected of breaking securities laws and regulations. 3. Concerning the lawsuit that Commercial Bank indicted the Company not to repay the mature loan, Shenzhen Intermediate People ’ s Court made the civil judgement with (2001) SZFJYCZ NO. 269 and sealed up the house property in No. 401, Shangbu Industrial Zone, Futian District, Shenzhen. On Mar. 17, 2003, Shenzhen Intermediate People’ s Court judged that the house property was entrusted Shenzhen Land Property Exchange Center for auction and was obtained by Shenzhen Success Digit Technology Co., Ltd. as RMB 52 million through competitive auction. 4. According to the suggestion of the control shareholder of the Company, Guangzhou Puliqi Communications Investment Co., Ltd., the Company held the provisional Shareholders’ General Meeting on Feb. 7, 2004 and the Shareholders’ General Meeting reelected the Board of Directors and the Supervisory Committee of the Company of the Company. After reelection, the Board of Directors of the Company is composed of five people including Li Nujiang, Ruan Keshu, Du Baijun, Zhou Zhen and Cai Jianping. Li Nujiang is Chairman of the Board of the Company (legal representative); the Supervisory Committee is composed of three people including Zhuang Yuexun, Yu Huming and Liu Yayan. Zhuang Yuexun is Chairman of the Supervisory Committee. 5. About management control of two industrial enterprises of the Company A. According to relevant laws, regulations and Articles of Association of the Company, the Company held the provisional Shareholers’General Meeting of the affiliated company, Shenzhen Petrochemical Plastic Group Co., Ltd. on Mar. 24, 2004 and elected the new Board of Directors of Shenzhen Plastic Company and the Board of Directors appointed new management team. So far, the original operation team of Shenzhen Plastic Company refused to transfer work and the Company could not make effective management for Shenzhen Plastic Company. B. According to relevant laws, regulations and Articles of Association of the Company, the Company changed three directors expedited to Shenzhen Petrochemical Dongho ng Chemical Fiber Material Co., Ltd. and changed the legal representative. So far, the original legal representative of Shenzhen Petrochemical Donghong Chemical Fiber Material Co., Ltd. did not transfer the business license, seal and so on to the appointed legal representative and the Company could not make effective management for Shenzhen Petrochemical Donghong Chemical Fiber Material Co., Ltd.. 7.10 Particulars about the performance of obligations of Independent Directors In the report period, because two independent directors of the Company assigned the posts of director (Independent Directors) of the Company, the Company has not engaged Independent Directors again so far. §8.Report of the Supervisory Committee The Supervisory Committee gave attention to the auditors’report unable to form an opinion issued by Huazheng Certified Public Accountants and Moore Stephens Shenzhen Nanfang Minhe Certified Public Accountants. For the issues involved in the said auditors’report, the Supervisory Committee agreed with the explanation made by the Board of Directors on this. §9. Financial Report Attachment §10. Documents for Reference 1. Accounting Statements with the personal signatures and seals of legal representative, person in charge of the accounting affairs and person in charge of accounting institutions; 2. Original of Auditor’s Report with the seals of Moore Stephens Nanfang Minhe Certified Public Accountants and Huazheng Certified Public Accountants; 3. Originals of all documents and manuscripts of Public Notices of the Company disclosed in public on the newspapers designated by China Securities Regulatory Commission in the report period. Board of Directors of Shenzhen Petrochemical Industry (Group) Co., Ltd. April 28, 2004 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 2003 2002 RMB’000 RMB’000 Turnover ____ 614,678 Cost of sales ____ (526,422) ________ _______ Gross profit ____ 88,256 Other revenue 4,561 6,786 Distribution costs ____ (29,752) Administrative expenses (8,518) (76,461) Write-back of / (provision for) doubtful debts 10,777 (59,616) Provision for compensation payment for litigation ____ (42,866) Provision for payment for breach of contracts ____ (9,856) Provision for economic compensation for employees (1,714) (36,036) Other operating expenses (761) (2,161) Write-back of / (provision for) impairment loss on fixed assets 26,567 (91,110) Provision for impairment loss on construction in progress ____ (5,346) Provision for impairment loss on intangible assets ____ (360) _______ _______ Profit /(loss) from operating activities 30,912 (258,522) Finance costs (68,361) (102,359) Share of results of associates ____ (4,047) Provision for impairment loss on interests in non-consolidated (66,230) ____ subsidiaries Provision for impairment loss on long term investments ____ (14,091) Gain on disposal of long term investments and subsidiaries 496 13,974 Loss on disposal of other investments ____ (167) Provision for guarantees given to banks (206,590) (116,844) ________ _______ Loss before taxation (309,773) (482,056) Taxation ____ (4,891) ________ ________ Loss before minority interests (309,773) (486,947) Minority interests ____ 35,257 ________ ________ Loss attributable to shareholders (309,773) (451,690) ======= ======= Loss per share ---basic RMB(1.02) RMB (1.49) ---diluted N/A N/A CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2003 2003 2002 RMB’000 RMB’000 Non-current assets Fixed assets 88,004 330,487 Construction in progress ____ 14,736 Intangible assets ____ 10,366 Interests in non-consolidated subsidiar ies 108,394 30,762 Interests in associates (46) 2,977 Long term investments 12,172 29,766 ________ ________ 208,524 419,121 ________ ________ Current assets Inventories ____ 88,457 Accounts receivable, other receivables and prepayments 2,075 160,591 Short term investments ____ 200 Cash and bank balances 1,485 72,277 ________ ________ 3,560 321,525 ________ ________ Current liabilities Accounts payable and other payables 812,306 520,862 Bank and government loans due within one year 722,581 1,230,163 Tax payable 1,059 6,784 Staff bonus and welfare fund 441 1,518 Provision for guarantees given to banks 1,063,627 878,341 Provision for guarantees given to customers 18,844 18,850 Provision for compensation payment for litigation ____ 42,866 Provision for payment for breach of contracts ____ 9,856 Provision for economic compensation for staffs ____ 35,030 ________ ________ 2,618,858 2,744,270 ________ ________ Net current liabilities (2,615,298) (2,422,745) ________ ________ Total assets less current liabilities (2,406,774) (2,003,624) ________ ________ Non-current liabilities Long term bank loans ____ 3,106 Long term payables ____ 7,596 Minority interests ____ 82,675 ________ ________ Net liabilities (2,406,774) (2,097,001) ======= ======= Equity Share capital 303,355 303,355 Reserves (2,710,129) (2,400,356) ________ ________ Shareholders’deficiency (2,406,774) (2,097,001) ======= =======