深基地Ｂ(200053)2003年年度报告（英文版）

SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO LTD 2003’S ANNUAL REPORT Important Note: 1． 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. The Annual Report is written in both English and Chinese. In case of conflict between the two versions, Chinese version prevails. 2． There is no director who cannot guarantee the authenticity, accuracy and integrity of the content of this annual report or who has different opinion 3． There were seven directors attended the Board meeting. Madam Wang Fen and Mr. Lin Zhijun did not attend the meeting but authorized Mr. Han Guimao and Mr. Bai Youzhong to vote for them respectively. 4． Shenzhen Dahua Tiancheng Certified Public Accountants and PricewaterhouseCoopers both presented audit reports with standard and no-reserved audit opinion for our company. 5． Dr. Fu Yuning, the Chairman of the Board of Directors, Mr. Cui Wei, the Financial Controller, and Ms. Yu Zhongxia, the Financial Manager, guarantees the authenticity and integrity of the financial results of this annual report. 1 Catalogue PART I. Company Profile PART II. Accounting and Business Data Highlights PART III. Change of Share Capital and Shareholders PART IV. Information of Directors, Supervisors, Senior Executives and Other Staffs PART V. Administrative Structure PART VI. Review of Annual General Shareholder’ Meeting PART VII. Director’s Statements PART VIII. Report of the Supervisory Committee PART IX. Significant Events PART X. Financial Report PART XI. Documents Available for Verification: 2 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 Yu Zhongxia & Ren Qianli Tel 26694211 Fax 26694227 E-mail Address sa@cpsb-cn.com Office Address Base Building, Chiwan, Nanshan District, Shenzhen, PRC Post Code 518068 E-mail Address sa@cpsb-cn.com Website of the Company Newspapers Selected by the “Securities Times”. ”Ta Kung Pao” Company for Information Disclosure Website for Publishing the http://www.cninfo.com.cn Annual Report Place where the Annual Administration Department of SCPSB Report is available 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 International Certified PricewaterhouseCoopers Public Accountants PART II. Accounting and Business Data Highlights I. Company Accounting Data and Financial Index of This Year Items US$ RMB Total Profit 10,091,406.07 83,556,842.27 Net Profit 9,100,229.09 75,349,896.88 Net profit after deducting non-recurring gains and losses 9,109,081.54 75,423,195.17 Profit from main business lines 7,623,024.91 63,118,646.26 Profit from other business lines 0 0 3 Operating profit 6,470,136.07 53,572,726.67 Investment income 3,630,122.45 30,057,413.89 Subsidy income 0 0 Net income / expenditure from non-operating (8,852.45) (73,298.29) Net cash flows arising from operating activities 8,313,608.30 68,836,676.69 Net increase in cash and cash equivalents (7,706,373.95) (63,808,776.31) Note: Items included in the non-recurring gains and losses and the amounts: US$ RMB 1. Stock rights investment difference amortization 0.00 0.00 2. Income from non-operation 12,530.72 103,754.36 3. Expenditure of non-operation 21,383.17 177,052.65 4.Subsidy income 0.00 0.00 Amount (8,852.45) (73,298.29) II. Company Main Accounting Data and Financial Index 2003 2003 2002 2002 2001 2001 Item US$’00 RMB’0,0 US$’0 RMB’0,0 US$’00 RMB’0,00 0 00 00 00 0 0 Income from main business lines 13,239 10,962 11,531 9,547 12,415 10,280 Net Profit 9,100 7,535 7,601 6,294 7,268 6,018 Total assets 84,554 70,011 77,140 63,872 74,498 61,684 Shareholders’ equity 76,341 63,210 67,240 55,675 63,146 52,285 Earnings per (Fully diluted) 0.039 0.327 0.033 0.273 0.0315 0.261 share 0.039 0.327 0.033 0.273 0.0315 0.261 (US$/RMB per (Weighted share) average) 0.039 0.327 0.274 0.262 Earnings per (Fully diluted) share (US$/RMB per share) after deducting non-recurring gains and 0.039 0.327 0.274 0.262 losses (Weighted average) Net assets per share 0.331 2.741 0.292 2.414 0.274 2.267 (US$/RMB per share) Net assets per share after 0.325 2.693 0.286 2.366 0.268 2.22 adjustment (US$/RMB per share) Net cash flows per share arising 0.032 0.299 0.038 0.316 0.044 0.367 from operating activities Return on equity (%) (Fully 11.921 11.305 11.457 diluted) Return on equity (%)(Weighted 11.921 11.305 11.457 average) 4 Return on equity (%) after 11.932 11.336 11.485 deducting non-recurring gains and loses (Fully diluted) Return on equity (%) after 11.932 11.336 11.485 deducting non-recurring gains and loses (Weighted average) III. Accessory Form of Profit Form of This Year Rate of the return on equity and the return of per share calculated in accordance with the requirement of “Regulation (9th) of Compilation and Report of Information Disclosure for Company Distributing Securities to the Public “issued by China Securities Regulatory Commission. 2003 2002 Item Return on equity Earnings per share Return on equity Earnings per share (%) (RMB) (%) (RMB) Fully Weighted Fully Weighted Fully Weighted Fully Weighted diluted average diluted average diluted average diluted average Profit of 9.986 9.986 0.274 0.274 9.243 9.243 0.223 0.223 main business lines Operating 8.476 8.476 0.232 0.232 9.072 9.072 0.219 0.219 profit Net profit 11.921 11.921 0.327 0.327 11.305 11.305 0.273 0.273 Net profit 11.932 11.932 0.327 0.327 11.336 11.336 0.274 0.274 after deducting non-recurring gains and losses Note: Calculating Method for the Main Financial Index: Earnings per share (Fully diluted) = Profit of the report period / the total of ordinary shares at the end of the year Earnings per share (Weighted average) = P/(S0+S1+Si*Mi/M0-Sj*Mj/M0) Hereinto: P is the profit during the period under review; S0 is the total of ordinary shares at the beginning of the report period; S1 is the share number increased because of conversion of reserves to shares or the distribution of dividend in terms of share during the period under review; Si is the share number increased because of new shares issue or shares transferred from credit is; Sj is the share number decreased because of redemption or reduction of shares during the period under review; M0 is the number of the month during the period under review; Mi is the number of the month calculating from the next month of increasing shares to the end of the report period; Mj is the number of the month calculating from the next month of decreasing shares to the end of the report period. Net assets per share = Shareholder’s equity at the end of the year / the total of ordinary shares at the end of the year 5 Net assets per share after adjustment = (Shareholder’s equity at the end of the year – net amount of account receivable over 3 years – pending amortization charge – pending disposal of net assets(fixed and floating) losses– charge for launch – long-term pending amortization charge –negative balance of housing circulating fund)/ the total of ordinary shares at the end of the year Net cash flows per share arising from operating activities = Net cash flows arising from operating activities / the total of ordinary shares at the end of the year Return on equity (%) (Fully diluted) = Net profit / shareholder’s equity*100% Return on equity (%) (Weighted average) = P / (E0+NP / 2+Ei*Mi / M0 – Ej*Mj / M0) Hereinto: P is the profit during the period under review; EO is the net assets at the beginning of the report period; NP is the net profit during the period under review; Ei is the net assets increased because of new shares issue and conversion of credit to shares during the period under review; Ej is the net assets decreased because of redemption or distributing cash dividend during the period under review; M0 is the number of the month during the period under review; Mi is the number of the month calculating from the next month of increasing net assets to the end of the report period; Mj is the number of the month calculating from the next month of decreasing net assets to the end of the period. VI. Change of Shareholders’ Equity RMB Statutory Statutory Capital public Surplus public Public Welfare Retained Item Share capital reserve reserve fund earnings Equity Year-begin 230,600,000.00 218,558,237.08 41,354,009.77 20,677,004.72 27,333,504.63 556,749,831.56 Increase 7,534,989.66 3,767,494.86 75,349,896.88 75,349,896.84 Decrease 75,349,896.88 Year-end 230,600,000.00 218,558,237.08 48,888,999.43 24,444,499.58 27,333,504.63 632,099,728.40 Reasons of change: 1. The increased amount of statutory surplus public reserve and statutory public welfare fund was drawn in accordance with the company’s Article of Association. Statutory surplus public reserve is 10% of the net profit. statutory public welfare fund is 5% of the net assets. 2. The increased amount of retained earnings is the company’s net profit realized this year. PART III. Change of Share Capital and Shareholders I. Change of Share Capital: 1) Form for Change of Share Capital: Unit: share Before Change in number of shares After change rights bonus conversion others subtotal change shares of reserves to shares 1. Untradable shares 6 a. Public promoter’s shares State owned share Domestic legal entity owned share 119,420,000 119,420,000 Foreign investment legal entity owned share 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 of shares 230,600,000 230,600,000 2) Share Issue and List: 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 domestic promoter’s shares (A-shares), 51.18 million overseas promoter’s shares (B-shares) and 60 million to overseas public (B-shares). The issue of 60 million B-shares to overseas public was on June 23, 1995 and fully subscribed at HK$2.82 per share with fully diluted P/E ratio of 10.5 times. Trading of shares issued to overseas public in Shenzhen Stock Exchange began on 28 July 1995. Apart from the shares held by promoters and B shares issued, the company did not issue any employees’ shares. The company’s share capital of this year remained unchanged. II. Particulars about Shareholders 1) Total of Shareholders There were altogether 13229 shareholders registered as at 31st 2003, of which China Nanshan Development (Group) Incorporation (CNDI) was the only A-share shareholder. There were 13105 B-share shareholders. 2) Substantial Shareholders The top ten shareholders as of 31st December 2003 are listed below: 7 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 Note: * represents for untradable shares. 3) Profiles of Major Legal Entity Shareholders 3.1) China Nanshan Development (Group) Incorporation Legal representative: Fu Yuning Date of registration: October 1982 Business scope: land development; port transportation, industrial, commercial, real property and tourism; customs bonded warehouses business; etc. 3.2) Offshore Joint Services (Bases) Company of Singapore Pte. Ltd. Legal representative: Ms. Helen Tay Business scope: Investing in companies engaged in the supply of logistics services to the offshore petroleum industry The above promoters did not mortgage their shares in whatsoever manners and for any purpose in 2003. 3.3) Substantial Controller of Holding Shareholders: China Merchant Group Co., Ltd. Legal representative: Qin Xiao Date of registration: October 1986 Registered Capital: 800 million RMB Business Scope: passengers transport and freight by water and land; leasing and deputizing water-land conveyance and equipment; quay and storage business; salvage, refloatation, towage; building, fixing, inspecting and selling ship and offshore petroleum drilling equipment; fixing and inspecting artesian well flat-roof and container; contracting and constructing construction project and offshore petroleum exploitation and providing logistics services; stocking, supplying and selling water-land conveyance; developing traffic undertaking and industrial and commercial enterprise; organizing and managing finance, insurance operation and correlative service operation; developing and managing Shekou industry district. 8 4) Explanation for the Affiliated Relations of the Top Ten Shareholders or United Action Among the top ten shareholders, the domestic legal entity shareholder China Nanshan Development (Group) Incorporation has no affiliated relations with other shareholders and does not fall into the scope of united action person stipulated by “Regulation of Information Disclosure of the Change of Shareholding of listed company “. Foreign investment legal entity shareholder OFFSHORE JOINT SERVICES (BASES) CO OF SGP PTE LTD is the filiale held by the company’s third major shareholder SEMBAWANG MARINE & LOGISTICS LTD ( now changed its name to SEMBCORP LOGISTICS LTD). It is unknown that whether other tradable- share shareholders fall into the scope of united action person. PART IV. Information of Directors, Supervisors, Senior Executives and Other Staff I. Brief information Share Name Post Sex Age Office Term held Fu Yuning Chairman male 47 May 2001—May 2004 Nil Koh Soo Keong Vice Chairman male 53 May 2001—May 2004 Nil Han Guimao Executive Director male 53 Nov. 2001—May 2004 Nil Fong Yue Kwong Director male 51 May 2001—May 2004 Nil Wang Fen Director female 49 May 2001—May 2004 Nil Liu Fu Director male 58 Oct. 2003—May 2004 Nil Lin Zhi Jun Independent Director male 49 May 2002—May 2004 Nil Bai You Zhong Independent Director male 63 May 2002—May 2004 Nil Tian Rugeng Independent Director male 68 Oct. 2003—May 2004 Nil Zhong Jing Shen Convener of the male 52 Aug. 2001—May 2004 Nil Supervisor Committee Chan Sioh Noi Supervisor female 51 May 2001—May 2004 Nil Zhu Tian Sheng Supervisor male 59 May 2001—May 2004 Nil Fan Zhao Ping Supervisor male 50 Nov. 2001—May 2004 Nil Liu Bojiang Employee Supervisor male 57 Sep. 2003—May 2004 Nil Zhang Xiang Supervisor male 39 May 2001—May 2004 Nil Yuan Guocheng General Manager male 54 Sept. 2000—May 2004 Nil Cui Wei Deputy GM & Financial male 47 May 2002—May 2004 Nil Controller Huang Dong Er Deputy GM male 52 May 2002—May 2004 Nil Fu Jia Lin Board Secretary male 42 May 2002—May 2004 Nil 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 President from March 2002; Mr. Liu Fu as the Vice Chairman from July 2003; Mr. Han Gui Mao as the Senior Vice President from March 2002; 9 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 Senior Vice President from Dec. 1998. II. Annual Salary of Directors, Supervisor and Senisor Executives 1) Decision Procedure and Basis Salary standard of the Company was decided and approved by the Board of Directors. Three 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. 2) Amount Annual salary of the two employee supervisors and all senior executives totalled RMB 2.30 million. The total annual salary of the first three senior executives is RMB 1.91 million. 3) Classification Three of the present supervisors and senior executives enjoy an annual salary between RMB 10 thousand to RMB 20 thousand and three enjoy an annual salary over RMB 200 thousand. The allowance for the three independent directors in this year is RMB 60 thousand respectively 4) Changes of directors, supervisors and senior executives A. On August 20, 2003 the Supervisory Committee had declared that because ex-employee- supervisor Ms Yu Zhongxia was not suitable to be employee supervisor as she is the leading official of the Finance Department, the Committee of the company’s Labor Union had approved unanimously to reelect Mr. Liu Bojiang as Employee Supervisor. B. The 2nd session of the Extraordinary General Meeting held on October 23, 2003 had approved application of Mr. Lin Shaodong to quit the position of director because of the reason of job change and elected Mr. Liu Fu as the director of the Third Board of Director. C. The 2nd session of the Extraordinary General Meeting held on October 23, 2003 had approved to elect Mr. Tian Rugeng as the independent director of the Third Board of Directors. III. Information of Other Employees: As at Dec. 31, 2003, the Company has a staff of 141, including 107 employees engaging in production (13 engineering technique employees), 4 in accounting, 9 in administration and 19 in management; or composing 1 with doctor degree, 8 with master degree, 26 with bachelor degree, 5 with technical secondary school graduation and 103 with high school or lower graduation. 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, makes every effort to build modern enterprise system and regulates its operation. During the period under review, according to the requirement of patrol, inspection, neatening 10 and revolution of the CSRC’s Shenzhen Regional Office, the Article of Association was revised mainly in the aspect of administrative structure and the company stipulate rules for procedure of the General Meeting, Board of Directors and Board of Supervisors. In the meantime, the detailed rules for work of the special committee of the Board of Directors were revised as to the Clauses inconsistent with the regulations. According to “Administration Guide Line for listed Company”, the Board of Directors explained the practice situation of the legal person administration of the company as follows: 1) In aspect of shareholders and general meeting: the company’s administration structure can ensure the equal status of all the shareholders especially the minority shareholders and can ensure shareholders fully exercised their legal rights. New clause was added to the AOA, which stipulates that shareholders can collect voting rights on the General Meeting. During the period under review, the company convened three shareholder’s general meetings, the convening procedure, the qualification of the person attending the meeting and the voting procedure of all these three meeting are in accordance with the stipulation of “Company Law”, “Regulatory Opinion for General Meeting of Listed Company”, “Article of Association”. 2) In aspect of relations between the control shareholder and the Company: the Company’s control shareholders attached importance to the listed company, gave energetic support, exercised shareholder’s rights and undertook shareholder’s obligation legally. The Company is independent of its control shareholder in terms of business, assets, organization, employees and finance. The company is accounting and undertaking responsibilities and risks 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. The AOA stipulates that accumulative total voting system should be used in the Board election. All the directors exercised their duties loyally, bona fide and diligently. Both the number of directors and composition of the Board comply with relevant laws and regulations. The Company has established the independent director system, employed three independent directors taking charge of the special committee of the Board in accordance with the requirements of the CSRC and the Shenzhen Securities Regulatory Office. 4) In aspect of supervisors and Supervisory Committee: Both the election of the company’s shareholder supervisors and employee supervisors complied with relevant laws and regulations. The member and the composition of the Board of Supervision can ensure the Board of Supervision supervise and inspect directors, senior executives and the finance of the Company independently and efficiently. The Board of Supervision stipulated rules of procedure of the Board of Supervision. The meeting of the Board of Supervision complied with the stipulated procedure. 5) In aspect of person having correlative benefit: the company respects the legal rights of banks and other creditors, employees, consumers, supply merchants, societies and other persons having correlative benefit and cooperates actively to make the company developed continuously and healthily. 6) In aspect of information disclosure and transparency: The Company stipulates the regulation of information disclosure and 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, ensures 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 11 held by them. According to “Administration Guide Line for listed Company”, the Board of Directors took the opinion that the practice situation of the company’s administration is basically in accordance with the requirement of “Administration Guide Line for listed Company” after improving each systems of the company according to the requirement of patrol, inspection, neatening and revolution of the CSRC’s Shenzhen Regional Office. II. Information of Independent Directors’ Performance According to the requirement of the CSRC and Shenzhen Securities Regulatory Office, the company employed three specialists as independent directors, major in law, accounting and professional area of the company. The company established three special committees of the Board of Directors and made and improved “Detailed Work Rules of Nomination and Salary Committee of the Board of Directors”, “Detailed Work Rules of Strategy and Development Committee the Board of Directors” and “Detailed Work Rules of Audit Committee of the Board of Directors”. During the period under review, in accordance with the requirement of CSRC’s “Guidance Opinion for Listed Company to Establish of Independent Directors System”，”Article of Association” and “Work System of Independent Director” the company’s independent directors exercised their duties, took part in the decision-making of the company’s importance affairs, presented independent director’s opinion and fully exerted the function of independent director. III. The Company is independent of its control shareholder in terms of business, assets, organization, employees and finance and has independent and integrated ability of operation and management. 1) In the aspect of operation, the business of the company is entirely independent of its control shareholder. The control shareholder and its subordinate units did not engage in the business same or similar to the business of the listed company. 2) In the aspect of employees, the employees of the company is independent of the control shareholder and the executives, the leading official of the finance and the secretary of the Board do not occupy any position in the company of the control shareholder. 3) In the aspect of assets, the assets invested by the control shareholder is independent, integrated and has clear ownership. 4) In the aspect of organization, the company’s Board of Directors, Board of Supervision and other intern organizations operate independently. There is no affiliated relation between the control shareholder and its functional departments and the company and company’s functional departments. The control shareholder and its subordinate organization did not give any plan and instruction as to the operation to the company and its subordinate organization or intervene the independence of the company’s management by other means. 5) In the aspect of finance, the company established the regulatory system of finance and accounting and made it integrity in accordance with correlative laws and regulations. The control shareholder did not intervene the company’s finance and accounting affairs. PART VI. Review of Annual General Shareholder’ Meeting The Company Convened Three Shareholder’s General Meetings during the period under review, the details of which as follows: 12 I. The 1st Extraordinary General Meeting of 2003 was held on January 6, 2003. The meeting reviewed and approved “Proposal on the Revision of Article of Association of the Company” and other seven Proposals by voting. The resolution of the meeting was published in the Shenzhen ”Securities Times” and Hong Kong ”Ta Kung Pao” on January 8, 2003. Three shareholders and the proxies, representing 172,687,093 shares or 74.89% of the company’s total number of tradable shares, attended the meeting. Executive Director Mr. Han Guimao presided the meeting. Mr. Zhou Weiping, lawyer of Beijing Haiwen Law Firm, attended this meeting and provided Legal Opinion. The general meeting reviewed and approved each proposal by named voting, the results of voting as follows: 1) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, attending the meeting, Proposal on Revision of Article of Association was approved. 2) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, “Proposal on Establishment of Special Committee of Board of Directors and Detailed Work Rules” was approved and established Strategy and Development Committee the Board of Directors, Nomination and Salary Committee of the Board of Directors and Audit Committee of the Board of Directors. 3) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, “Proposal on Work System of Independent Director” was approved. 4) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, “Proposal on Annual Allowance of Independent Director” was approved and the annual allowance of independent director is 60 thousand per person. 5) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, “Proposal on Appointment of Accountants” was approved and Shenzhen Dahua Tiancheng Accountants and PricewaterhouseCoopers were invited to take the work of finance audit of 2002 year. 6) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, “Proposal on Financial Budget for the year 2002” was approved. 7) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, “Proposal on Establishment of Independent Legal Person Company in Shanghai” . The company’s registered capital is 50 million RMB and regarded as substantial entity for management and operation of Shanghai logistics area. 8) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, “Proposal on Application of Conversion of Untradable Foreign Investment Shares to B shares”. The meeting approved the 2nd large shareholder of the company, OFFSHORE JIONT SERVICES (BASES) CO,. OF SINGAPORE PTE. LTD. to apply 51,180,000 legal entity B shares held by it to come in the market. II. The General Meeting of 2002 was held on May 19, 2003. The meeting reviewed and approved “Report of Board of Directors of 2002”and other five Proposals. The resolution of the meeting was published in the Shenzhen ”Securities Times” and Hong Kong ”Ta Kung Pao” on May 20, 2003. Three shareholders and the proxies, representing 172,687,093 shares or 74.89% of the company’s total number of tradable shares, attended the meeting. Executive Director Mr. Han Guimao presided the meeting. Mr. Zhou Weiping, lawyer of Beijing Haiwen Law Firm, attended this meeting and provided Legal Opinion. 13 The general meeting reviewed and approved each proposal by named voting, the results of voting as follows: 1) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, Report of Board of Director and Financial Final Account of 2002 were approved. 2) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, Report of Board of Supervision of 2002 was approved. 3) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, Report of Financial Budget of 2003 was approved. 4) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, Scheme for Profit Distribution of 2002, US$0.1648 cash bonus for each 10-share . 5) By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, Proposal on Employment of Accountants of 2003 was approved, Shenzhen Dahua Tiancheng Accountants and PricewaterhouseCoopers were invited to take the work of finance audit of 2003 year. III. The 2nd Extraordinary General Meeting of 2003 was held October 23, 2003. The meeting reviewed and approved “Proposal on the Revision of Article of Association of the Company” and other seven Proposals by voting. The resolution of the meeting was published in the Shenzhen ”Securities Times” and Hong Kong ”Ta Kung Pao” on October 24, 2003. Three shareholders and the proxies, representing 172,687,093 shares or 74.89% of the company’s total number of tradable shares, attended the meeting. Executive Director Mr. Han Guimao presided the meeting. Mr. Zhou Weiping, lawyer of Beijing Haiwen Law Firm attended this meeting and provided Legal Opinion. The general meeting reviewed and approved each proposal by named voting, the results of voting as follows: By 172,687,093 approval votes, 0 waiver vote and 0 against vote, the approval votes representing 100% of the total number of the shares with voting rights appeared at the meeting, Proposal on the Revision of Article of Association of the Company, Proposal on Rules of Procedure of General Meeting, Proposal on Rules of Procedure of Board of Directors, Proposal on Rules of Procedure of Board of Supervisors, Proposal on Revision of Work Detailed Rules of Special Committee of Board of Directors, Proposal on Approval for Mr. Lin Shaodong’s Application to Quit the Position of Director because of the Reason of Job Change and Electing Mr. Liu Fu as the director, Proposal on Electing Mr. Tian Rugeng as the Independent Director and Proposal on Purchasing 90% of shares of Shenzhen Chiwan Godown Co., Ltd. were all approved. PART VII. Director’s Statements I. Information of Company Business 1) Company Business Review 14 As the new upsurge of the development of China economy continued, the demand of energy increased. Offshore oil exploration activities in the east part of South China Sea, the company’s main service area, increased steadily. The profit from main business of the Company was up by 14.8%, among that, profit from businesses correlative to the oil business were up by 25.9%. Other business was increased steadily as well. The profit from main business of the Company reached 5.9%, notwithstanding that the interest income was heavily reduced because of investment activities. The investment income of the company was up by 49%, reached US$3.6 million, and increased mainly because of the excellent performance of the company’s investor, Shenzhen Chiwan Sembawang Engineering Co., Ltd.. During the report year, the total profit after tax of the company is US$9.1 million and up by 19.7%. The rate of return on equity was 11.92% and up by 5.4%. 2) Business scope The main business of the company is to provide logistics services to offshore oil exploration, development and production in North China Sea and provide production and fixation services for the structure of offshore engineering through its investor. Logistics services provided range from rental of office/customized warehouse/yard, wharf loading and un-loading, aclinic transportation etc. The company also invested and operate logistics Park in Shanghai. 3) Operations review A. Turnover breakdown 2003 2002 Change US$’000 US$’000 % Office rental 1,574 1,508 4.4 Storage service 5,531 5,084 8.79 Operation 5,506 4,375 25.9 Others (CFS) 629 563 11.7 Total 13,239 11,530 14.82 B. Rental Income For the year of 2003, the utilization rates of warehouse and yard reached 96% which was up by 6.6% compared with that of last year. The income was up by 8.8%. Despite keen competition in warehouse service, the company benefited from the demand brought by offshore operation activities and also exploit new customers actively. Therefore, the income rate of storage service increased steadily. Though occupancy rate improved to 70% from 52%, realised income moved marginally higher than the previous year. This was due mainly to a 22 year lease of Chiwan Building to CSE, of which rental was paid in advance for the duration of the lease. C. Wharf Operations 15 Income from Petroleum logistics services increased in large scale because of the increase of the offshore oil exploration business in South China Sea. As to the service of consolidating and packaging containers, there was an increase in the performance as well which made the company’s resources utilized efficiently. For the year of 2003, company’s petroleum services and non-oil services are up by 25.9% and 11.7% respectively. II. Financial performance (Extracted from audit reports prepared by Dahua Tiancheng Certified Public Accountant) 2003 2002 Growth Rate US$’000 US$’000 % Income 13,239 11,530 14.82 Net profit 9,100 7,601 19.72 Earnings per share (US cent) 3.95 3.30 19.70 Total assets 84,554 77,140 9.6 Long term liability 1,009 1,159 -12.94 Shareholders’ equity 76,340 67,240 13.53 By virtue of domestic macro environment of desirable overall economic operation and the increasing requirement of energy, import and export trade, the company has obtained a steady increase in every business area, especially a remarkable increase in the investment income which resulted in the highest level ever of the net profit of US$9.1 million and was up by 19.7% compared with that of the last year. The company has implemented its new investment plan in the year 2003 and taken a good step out by accomplishing the operation of the first stage of Shanghai Baowan International Logistics Center and the equity acquisition of Shenzhen Chiwan Godown Co., Ltd. (Renamed later for Shenzhen Chiwan Logistics Co., Ltd.), which became a solid foundation of the new business development of the company. 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 By virtue of the rapid increase of domestic economy, we shall expect a continuous increase in oil & gas production and petroleum logistics services in the coming ten years, which would result in a sustained increase in the petroleum service business of the company. Non-petroleum business, which accounted for 20% of the annual revenue, had played an 16 important role in maintaining the operating earnings of the company. Import and export trade will be largely promoted by a new round of economic development. We shall be able to make more efficient utilization of the resources and facilities of the company, and to raise the income of non-petroleum business by taking full advantage of increasingly infrequent coastline and land resources. The offshore engineering sector will be a continual increase. We shall expect a good return rate of Shenzhen Chiwan Sembawang Engineering Co., Ltd., which is the pioneer of offshore engineering sector. Chiwan Sembawang Company will continue to enhance its productivity to provide a firm foundation for rapid increase of the company business. The contribution from the logistics sector will be an important source of growth of the company’s revenue and profit. The commission of Shanghai first phase logistics park in Oct 2003 has laid a strong foundation for economic returns: We expect this to contribute over 15% to our total turnover and net profit respectively. The newly acquired Shenzhen Chiwan Logistics Company is undergoing strategic restructuring process, to promote utilization of customs bonded and supervision function; to promote total city and regional distribution chain to importers and manufacturers; and to utilize the company’s vintage location to promote port related logistics. Barring any unforeseen circumstances, the forecast state of our various segmental businesses is indicative of yet another good year and beyond for the company. The company will expand its logistics investment. The investment to the second stage of Shanghai Baowan Logistics Park and Beijing Logistics Park projects will be examined by the Board and the AGM and be implemented within the year 2004. The board of directors will try to seize the trend of the logistics industry in accordance with the developing plan of the company, to perfect the function of every logistics service and to provide excellent and complete logistics services to logistics service providers and industrial manufacturers to enlarge the contribution of logistics business to the revenue and profit of the company. V. Report on the Routine of Board of Directors 1) Board Meetings and Resolutions The Board has held five meetings in the reporting period. A. The 5th meeting of the third Board of Directors was held in Shenzhen on April 15, 2003. The meeting reviewed and approved the following resolutions: “The Annual Report for the Year 2002 and its Abstract”; “The General Manager’s Report of for the Year 2002”; “The Financial Report for the Year 2002”; “The Proposal on Dividend distribution Plan of 2002”; “Financial Budget for the year 2003”; “Appointment of Accounting Firms for the year 2003”; “Appointment of Legal Advisor for the year 2003”; “Resolution on Convening the first AGM of the year 2003”; and “Public Announcement on Associated Transactions”. The resolutions were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on April 17, 2003. B. The ninth tele-communication meeting of the third Board of Directors was held on April 25, 2003. The meeting reviewed and approved the following resolutions: “The First Quarter Report for the Year 2003”. The resolution was published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on April 29, 2003. C. The eleventh tele-communication meeting of the Third Board of Directors was held on August 28, 2003 and the meeting reviewed and approved the resolution of “Interim Report for the year 2003”, The resolution was published in both Shenzhen Securities Times and 17 Hongkong Ta Kung Pao on August 30, 2003. D. The Sixth meeting of the Third Board of Directors was held in Shenzhen on September 18, 2003. The meeting reviewed and approved the following resolutions: “Rectify and Reform Report to problem detected by circuit inspection by Shenzhen Securities Supervisory Office”; “Proposal on Revision of Articles of Association”; “Proposal on the Rules of Procedure for AGM”; “Proposal on the Rules of Procedure for the Board of Directors”; “Proposal on Administration of Information Disclosure”; “Proposal on Revision of Detailed Rules of Special Committee of Board of Directors”; “Proposal on Alteration of Directors”; “Proposal of Appointing Mr. Tian Rugeng as Candidate of Independent Director”; “Proposal on purchasing 90% equity of Shenzhen Chiwan Godown Co., Ltd. and Public Announcement on Associated Transactions” and “Resolution on Convening AGM”. The resolutions were published in both Shenzhen Securities Times and Hongkong Ta Kung Pao on September 20, 2003. E. The twelfth tele-communication meeting of the third board of director was held on October 29, 2003. The meeting reviewed and approved the “Third Quarter Report for the year 2003”, the resolution was published in both Shenzhen Securities Times and Hongkong Ta Kung Pao on October 31, 2003. 2) Implementation of the Dividend Distribution Plan During the year under review, the Company implemented its 2002 dividend distribution plan on July 12, 2003: US$0.1648 cash bonus for each 10-share. Dividend for B shares was converted into HK dollars for distribution. VI. Dividend distribution Preplan for Year 2003 Profit distribution preplan as of the year is set out as follows: USD Retained Earning B/F 3,301,148.13 Profits available for distribution 9,100,229.09 Less: Statutory surplus public reserve (10%) 910,022.91 Statutory public welfare fund (5%) 455,011.45 Discretionary public reserve (5%) 455,011.46 Dividends (tax included) (80%) 7,280,183.27 Retained profits (0%) 3,301,148.13 The cash dividend for the year 2003 of US$0.3157 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 approved by the AGM. The above profit distribution plan will be carried out after the final approval of the AGM 2003. The Company neither declared interim dividend nor converted any reserves into share capital or rights issue in the report period. VII. Estimated Profit distribution Policy for 2004 The estimated profit distribution policy for the year 2004 is as follows: 18 1) The Company will conduct profit distribution once in 2004; 2) Approximately over 50% of net profit realized in 2004 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 2004. PART VIII. Report of the Supervisory Committee I. Supervisory Committee Meetings Corporation Supervisory Committee convened three meetings in the report period. 1) The fourth meeting of the third supervisory committee was held in Shenzhen on April 15, 2003. The meeting reviewed and approved the following resolutions: “General Manager’s Report for the year 2002”; “Report of the Supervisory Committee for the year 2002”; “Annual Report for the year 2002 and its Abstract”; “Financial Report for the year 2002”; “Proposal of the profit distribution plan for the year 2003” and “Financial Budget for the year 2003”. The resolutions were published in both Shenzhen Securities Times and Hongkong Ta Kung Pao on April 17, 2003. 2) The fifth tele-communication meeting of the third Supervisory Committee was held on August 28, 2003. The meeting reviewed and approved “Interim Report for the year 2003 and its Abstract” and the resolution on the interim dividend distribution plan (no allocating or granting) for the year 2003. The resolutions were published in both Shenzhen Securities Times and Hongkong Ta Kung Pao on August 30, 2003. 3) The fifth meeting of the third supervisory committee was held in Shenzhen on September 18, 2003. The meeting reviewed and approved the resolutions on “Rectify and Reform Report to the problem detected by the circuit inspection by Shenzhen Securities Supervisory Office” and “Rules of procedure of the Supervisory Committee”. The resolutions were published in both Shenzhen Securities Times and Hongkong Ta Kung Pao on September 20, 2003. II. Opinions Formed by the Board of Supervision as to the Company’s operation in the Report Period as follows: 1) 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 the directors nor senior managers had acted in contravention of the laws, regulations, Articles of Association or detrimental to the interest of the company. 2) The Board of Supervision carefully reviewed the financial report of the company and confirmed that the company was in good financial situation. The meeting further confirmed that the audit report prepared by the independent auditors Shenzhen Dahua Tiancheng and Price Waterhouse Coopers gave a true and fair presentation of the Company’s financial performance by offering clear opinion in the audit report for the year 2003. 3) In 2002 the Company did not raise capital or engage in any acquisition and disposal of the Company’s assets. 4) All the affiliated transactions in 2003 were conducted in arm-length principle and the Company’s interests were safeguarded. PART IX. Significant Events 19 1) The Company did not experience any significant lawsuit or arbitration in the report year. 2) During the report period, neither the directors nor the senior managers was fined or penalized by Securities Supervisory and Administration Authorities of PRC. 3) The first extraordinary shareholder’s general meeting of the year 2003 was held in Shenzhen on January 6, 2003, the meeting reviewed and approved eight proposals including “Proposal on the Amending of Articles of Association”, the resolutions were published in Shenzhen Securities Times and Hong Kong Takungpao on January 8, 2003. 4) The fifth meeting of the third Board of Directors was held in Shenzhen on April 15, 2003. The meeting reviewed and approved the following resolutions: “The Annual Report for the Year 2002 and its Abstract”; “The General Manager’s Report for the year 2002”; “The Financial Report for the Year 2002”; “The Proposal on Profit distribution Plan of 2002”; “Financial Budget for the year 2003”; “Appointment of Accounting Firms for the year 2003”; “Appointment of Legal Advisor for the year 2003”; “Resolution on Convening the first AGM of the year 2003”; and “Public Announcement on Affiliated Transactions”. The resolutions were published in both Shenzhen Securities Times and Hong Kong Takongpao on April 17, 2003. 5) The fourth meeting of the third supervisory committee was held in Shenzhen on April 15, 2003. The meeting reviewed and approved the following resolutions: “General Manager’s Report for the year 2002”; “Report of the Supervisory Committee for the year 2002”; “Annual Report for the year 2002 and its Abstract”; “Financial Report for the year 2002”; “Proposal of the profit distribution plan for the year 2003” and “Financial Budget for the year 2003”. The resolutions were published in both Shenzhen Securities Times and Hongkong Ta Kung Pao on April 17, 2003. 6) The ninth tele-communication meeting of the third Board of Directors was held on April 25, 2003. The meeting reviewed and approved the following resolutions: “The First Quarter Report for the Year 2003”. The resolution was published in both Shenzhen Securities Times and Hong Kong Takongpao on April 29, 2003. 7) Annual General Meeting of the year 2002 was held on May 19, 2003, the meeting reviewed and approved (by voting) five resolutions including “Report of Board of Directors for the year 2002”, the resolutions were published in both Shenzhen Securities Times and Hong Kong Takungpao on May 20, 2003. 8) The Company signed agreement of land purchase with the People’s Government of Yanghang, Baoshan District of Shanghai City to sell 350 mu land area for the Company’s need to developing its second stage of Shanghai Baowan Logistics Park project. Partial purchase fund of 27 million RMB Yuan has been paid by August 17, 2003 9) Profit distribution plan has been implemented on July 12, 2003 by way of cash bonus of US$0.1648 for each 10-share. 10) The board of directors published a public announcement of “Circulation of Untradable Foreign Investment Shares” on July 25, 2003, by virtue of the “Notice on Approval of Circulation of Untradable Foreign Investment Shares of Shenzhen Chiwan Petroleum Supply Base Co.Ltd.” (China Securities Regulatory Commission, Zheng Jian Gong Si Zi [2003] No. 27), the 51,180,000 shares of non-floating foreign stock (occupied 22.19% of the whole capital stock), held by OFFSHORE JOINT SERVICES (BASES) CO OF SGP PTE LTD who’s the foreign legal share holder of Shenzhen Chiwan Petroleum Supply Base Co.Ltd, would circulate in Shenzhen Stock Exchange one year after the approval date of China Securities Regulatory Commission, ie. one year after July 11, 2003. 20 11) The eleventh tele-communication meeting of the Third Board of Directors and the fifth tele-communication meeting of the third Supervisory Committee were held on August 28, 2003. The meeting reviewed and approved the resolution on the “Interim Report for the year 2003”, Interim dividend distribution plan (no allocating or granting) for the year 2003. The resolution was published in both Shenzhen Securities Times and Hongkong Ta Kung Pao on August 30, 2003. 12) The Sixth meeting of the Third Board of Directors was held in Shenzhen on September 18, 2003. The meeting reviewed and approved the following resolutions: “Rectify and Reform Report to the problem detected by the circuit inspection by Shenzhen Securities Supervisory Office”; “Proposal on Amending the Articles of Association”; “Proposal on the Rules of Procedure for the AGM”; “Proposal on the Rules of Procedure for the Board of Directors”; “Proposal on Administration of Information Disclosure”; “Proposal on Amending the Detailed Rules of the Special Committee of the Board of Directors”; “Proposal on Alteration of Directors”; “Proposal of Appointing Mr. Tian Rugeng as Candidate of Independent Director”; “Proposal on acquiring 90% equity of Shenzhen Chiwan Godown Co., Ltd. and Public Announcement on Associated Transactions” and “Resolution on Convening AGM”. The resolutions were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on September 20, 2003. 13) The fifth meeting of the third supervisory committee was held in Shenzhen on September 18, 2003. The meeting reviewed and approved the resolutions on “Rectify and Reform Report to the problem detected by the circuit inspection by Shenzhen Securities Supervisory Office” and “Rules of procedure of the Supervisory Committee”. The resolutions were published in both Shenzhen Securities Times and Hongkong Ta Kung Pao on September 20, 2003. 14) The company announced “Independent Financial Counsel Report Regarding Associated Transactions” and “Assets Assessment Report of Shenzhen Chiwan Godown Co., Ltd.”. 15) The second extraordinary shareholders general meeting was held on October 23, 2003, the meeting reviewed and approved (by voting) eight proposals including ; the resolutions were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on October 24, 2003. 16) The twelfth tele-communication meeting of the third board of director was held on October 29, 2003. The meeting reviewed and approved the “Third Quarter Report for the year 2003”, the resolution was published in both Shenzhen Securities Times and Hongkong Ta Kung Pao on October 31, 2003. 17) The company made public announcement on , Shenzhen Chiwan Godown Co., Ltd was renamed as Shenzhen Logistics Co., Ltd., and approved by and obtained business license from Shenzhen Administration of Industry and Commerce. 18) The company has acquired short-term (6 month) loan of 18 million RMB Yuan for capital investment project, from China Merchants Bank Chiwan Branch on December 24, 2003. 19) The Company maintained its autonomy in personnel and financial management and possesses integrated assets. 20) The Company did not entrust, contract or lease other company’s assets or was entrusted, contracted or leased with its own assets. 21) There was neither other significant contract signed nor significant guarantee event happened in the report year. 21 22) There were no change in the Company’s name or stock’s short form in the report period 23) During the report period, the Company made all necessary disclosures. No significant events that should be disclosed were missing. PART X. AUDIT REPORT ShenHua(2004)GuShenZi No.015 TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. In accordance with the authorization, we have audited the accompanying consolidated balance sheet of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. (the “Company”) as of 31st December 2003 and the profit and profit distribution statements and cash flow statements for the year then ended. These financial statements set out 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 Independent Audit Standards of China Certified Accountants. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements comply with the provisions of Enterprise Accounting Standard and Enterprise Accounting System promulgated by the state and present fairly in all material respects the financial position of the Group as of 31st December 2003 and of the results of its operations and its cash flows for the year then ended. Shenzhen Dahua Tiancheng Certified Public Accountants CPA : Li Bing, Wu Jianhui Shenzhen, PR China 2004-2-26 22 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2003 Units: US$ Assets Note 2003-12-31 2002-12-31 Current assets： Currency capital 1 9,351,335.04 17,057,708.99 Short-term investments - - Dividends receivable - - Interest receivable - - Accounts receivable 2 2,460,148.54 2,160,689.67 Other receivables 3 2,206,213.66 1,708,329.47 Prepayments 7,694,484.46 3,812,783.03 Inventories 4 149,254.21 129,394.25 Pending amortization expenses 5 14,892.76 8,562.10 Mature long-term creditor investment in one year - - Other current assets - - Total current assets 21,876,328.67 24,877,467.51 Long-term investment： Long-term equity investments 6 16,411,769.81 13,860,593.08 Long-term creditor investments - - Total long-term assets 16,411,769.81 13,860,593.08 Property, plant and equipment： Original cost of property, plant and equipment 7 38,377,104.07 37,834,848.92 Minus: accumulated depreciation 7 16,650,926.86 15,532,251.35 Net value of fixed assets 7 21,726,177.21 22,302,597.57 Minus: depreciation reserve of fixed assets - - Net worth of fixed assets 21,726,177.21 22,302,597.57 Project material - - Construction in progress 8 11,345,168.22 1,172,385.03 Fixed assets liquidation - - Total fixed assets 33,071,345.43 23,474,982.60 Intangible assets and others Intangible assets 9 11,878,101.93 13,599,349.81 Long-term pending amortization expenses 10 1,316,520.33 1,327,491.30 Other long-term assets - - Total intangible and deferred assets 13,194,622.26 14,926,841.11 Deferred taxation： Deferred taxation debit item - - Total assets 84,554,066.17 77,139,884.30 ＿ Legal representative: Director: Chief Accountant Agency: SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2003 Units: US$ 23 Indebtedness and shareholders’ equity Note 2003-12-31 2002-12-31 Current liability： Short-term loan 11 2,173,913.04 - Accounts payable 12 104,084.54 38,408.10 Prepayments 13 3,466,595.75 3,296,065.43 Wage payable 15 350,086.48 285,146.19 Welfare payable 28,718.57 12,133.83 Dividend payable - 3,800,691.67 Accrued taxes payable 17 486,018.54 619,320.18 Other accounts should be handed in - - Other accounts payable 14 542,217.40 632,015.33 Pre-withdrew expenses 18 52,498.86 56,352.70 Estimated liability - - Long-term liabilities - current portion - - Other current liabilities - - Total current liability 7,204,133.18 8,740,133.43 Long-term liability： Long-term loan - - Bond payable - - Long-term accounts payable 19 1,009,386.08 1,159,433.05 Special-purpose accounts payable - - Other long-term liability - - Total long-term liability 1,009,386.08 1,159,433.05 Deferred taxations： Deferred taxation debit item - - Total liability 8,213,519.26 9,899,566.48 Minority interests： Minority interests - - Rights and interests of shareholders： Capital stock 20 27,033,997.66 27,033,997.66 Additional paid-in capital 21 26,269,018.88 26,269,018.88 Capital surplus reserve 22 12,456,198.97 10,636,153.15 Unappropriated profits 23 3,301,148.13 3,301,148.13 Declared cash dividend 16 7,280,183.27 Total shareholders’ equity 76,340,546.91 67,240,317.82 Total liability and shareholders’ equity 84,554,066.17 77,139,884.30 Legal representative:： Director： Chief of accountant agency： SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD Profits and profits distribution statement Year 2003 Units: US$ Accumulative total of this Accumulative total of last Item Note year year 1. Earnings of main operation 24 13,239,045.77 11,530,633.97 Minus: cost of main operation 24 5,046,574.93 4,818,664.81 Taxation and surtax of main operation 25 569,445.93 497,197.14 2. Profits of main operation 7,623,024.91 6,214,772.02 24 plus：profits of other operation - - minus： Operating expenses - - Overhead expenses 1,370,963.60 960,564.97 Financial affairs fee 26 (218,074.76) (845,635.81) 3. Profits of operation 6,470,136.07 6,099,842.86 plus：Yield 27 3,630,122.45 2,434,417.36 Earnings of allowance - - Non-operating revenue 28 12,530.72 10,128.60 Minus: Non-operating expenses 28 21,383.17 31,187.95 4. Total profits 10,091,406.07 8,513,200.87 minus：income tax 991,176.98 911,817.53 Profits and loss of minority shareholders - - deficit of subsidiary company - - 5. Net profits 9,100,229.09 7,601,383.34 plus：unappropriated profits of the beginning of the year 3,301,148.13 1,020,733.13 Other roll-in - - 6. Distributable profits 12,401,377.22 8,622,116.47 minus：Withdraw legal capital surplus reserve 910,022.91 760,138.33 Withdraw legal public welfare 455,011.45 380,069.17 Withdraw welfare and encouragement fund - - 7. Distributable profits for shareholders 11,036,342.86 7,481,908.97 minus:payable preference stock dividend - - Withdraw arbitrary capital surplus reserve 455,011.46 380,069.17 Payable common stock dividend 7,280,183.27 3,800,691.67 Common stock dividend switched to capital stock - - 8. Unappropriated profits 3,301,148.13 3,301,148.13 Complementary data： Accumulative total of Accumulative total Item this year of last year Sales and disposal the equity of departments or investment-receive units - - Losses resulted from natural disaster - - Increase (or decrease) of overall profit due to changes in accounting policy - - Increase (or decrease) of overall profit due to changes in accounting estimates - - ＿ Legal representative:：： Director： Chief accountant agency： 25 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD Cash flow statement for the year of 2003 Items Note Year 2003 (in US$) 1 Cash flows from operating activities 13,120,69.72 Cash generated from sales of products and supply of - services Rent received Cash generated from other operating activities 29 425,625.83 Cash inflow subtotal 13,546,305.55 Cash paid for purchase of products and receiving 1,105,055.20 services Value-added tax paid 17,056.50 Cash paid to the employees or for the employees 1,097,879.56 Income tax paid 1,326,142.85 Other tax paid (besides value-added tax & income tax) 770,975.07 Cash paid in relation to other operating activities 29 915,588.07 Cash outflow subtotal 5,232,697.25 Net cash from operating activities 8,313,608.30 2 Cash flows from investing activities - Cash received from return on investment - Cash gained from investment profit 2,243,953.00 Proceeds from disposal of property, plant and 731.89 equipment, intangible assets and other long-term assets Cash received from other investing activities 30 1,599,516.91 Cash inflow subtotal 3,884,201.80 Cash paid for purchase of property, plant and 994,735.19 equipment, intangible assets and other long-term assets Cash paid for investment 15,099,764.69 Include: cash paid for acquisition of a subsidiary 1,165,820.61 Cash paid for other investing activities 30 2,138,618.14 Cash outflow subtotal 18,233,181.02 Net cash from investing activities (14,388,979.22) 3 Cash flows from financing activities - Cash gained from receiving investment - Cash received from borrowings 2,173,913.04 Cash received from other financing activities - Cash inflow subtotal 2,173,913.04 Cash paid for repayment - Dividends paid to shareholders or repayment of 3,804,916.07 interests Cash paid for reduction of registered capital - Cash paid for other financing activities - Cash outflow subtotal 3,804,916.07 Net cash from financial activities (1,631,003.03) 4 Effect of exchange rate floating on cash flow - 5 Net increase in cash and cash equivalents (7,706,373.95) 26 Annotation: Items Year 2003 1 Non cash-related investing and financing activities - Converting liabilities into capital - Convertible bond due within a year - Financial lease of property, plant and equipment - 2 Cash flow for adjusting net interest to operating activities Net interest 9,100,229.09 Plus: Accrued assets depreciation reserve - Depreciation of property, plant and equipments 1,191,710.44 Intangible assets and amortization of long-term prepaid 1,925,095.60 expenses Decrease in prepaid expenses (643.65) Increase in pre-taken expenses 3,853.84 Loss in disposal of property, plant and equipment, intangible 7,912.27 assets and other long-term assets Loss in retirement of property, plant and equipment 5,794.97 Financial expenses (2,341.28) Investment loss (3,630,122.45) Deferred tax debit (150,046.97) Decrease of inventories (4,815.84) Decrease of receivable operating items (250,446.27) Increase of payable operating items 117,428.55 Others - Net cash flow generated from operating activities 8,313,608.30 3 Increase of cash or cash equivalents - Year-begin cash balance 9,351,335.04 Loss: Year-end cash balance 17,057,708.99 Plus: Year-begin balance of cash equivalents - Loss: Year-end balance of cash equivalents - Increase of cash or cash equivalents (7,706,373.95) 27 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD Depreciation reserve list 2003 Unit: US$ Item Balance at Number of Number of Balance at the the this year this year end of year beginning of increases reversals year Total of bad loans 130,612.80 149,274.78 5,984.15 273,903.43 Including: accounts 130,612.80 149,274.78 5,984.15 273,903.43 receivable Other receivables -- -- -- -- Total of reserve for reduction of -- -- -- -- short-term investments Including: stock investments -- -- -- -- Bond investments -- -- -- -- Total of reserve for reduction of -- -- -- -- inventory Including: commodity -- -- -- -- inventories Raw and processed -- -- -- -- materials Total of reserve for reduction of -- -- -- -- long-term investments Including: long-term equity -- -- -- -- investments long-term creditor -- -- -- -- investments Total of capital assets -- -- -- -- depreciation reserve Including ： houses and -- -- -- -- buildings Machine -- -- -- -- equipments Intangible assets depreciation -- -- -- -- reserve Including：Patent rights -- -- -- -- Trademark rights -- -- -- -- Depreciation reserve for -- -- -- -- construction in progress Depreciation reserve for loans -- -- -- -- by mandate 28 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2003 Units: RMB yuan Assets Note 2003-12-31 2002-12-31 Current assets： Currency capital 1 77,429,054.13 141,237,830.44 Short-term investments - - Dividends receivable - - Interest receivable - - Accounts receivable 2 20,370,029.91 17,890,510.47 Other receivables 3 18,267,449.11 14,144,968.01 Prepayments 63,710,331.33 31,569,843.49 Inventories 4 1,235,824.86 1,071,384.39 Pending amortization expenses 5 123,312.05 70,894.19 Mature long-term creditor investment in one year - - Other current assets - - Total current assets 181,136,001.39 205,985,430.99 Long-term investment： Long-term equity investments 6 135,889,454.03 114,765,710.70 Long-term creditor investments - - Total long-term assets 135,889,454.03 114,765,710.70 thereinto：price difference consolidated - - thereinto：balance of equity investments - - Property, plant and equipment： Original cost of property, plant and equipment 7 317,762,421.70 313,272,549.06 Minus: accumulated depreciation 7 137,869,674.40 128,607,041.18 Net value of fixed assets 7 179,892,747.30 184,665,507.88 Minus: depreciation reserve of fixed assets - - Net worth of fixed assets 179,892,747.30 184,665,507.88 Project material - - Construction in progress 8 93,937,992.86 9,707,348.05 Fixed assets liquidation - - Total fixed assets 273,830,740.16 194,372,855.93 Intangible assets and others Intangible assets 9 98,350,683.98 112,602,616.43 Long-term pending amortization expenses 10 10,900,788.33 10,991,627.96 Other long-term assets - - Total intangible and deferred assets 109,251,472.31 123,594,244.39 Deferred taxation： Deferred taxation debit item - - Total assets 700,107,667.89 638,718,242.01 29 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD CONSOLIDATED INCOME STATEMENT (continuous) FOR THE YEAR ENDED 31ST DECEMBER 2003 Units: RMB yuan Indebtedness and shareholders’ equity Note 2003-12-31 2002-12-31 Current liability： Short-term loan 11 18,000,000.00 - Accounts payable 12 861,819.99 318,019.07 Prepayments 13 28,703,412.81 27,291,421.76 Wage payable 15 2,898,716.05 2,361,010.45 Welfare payable 237,789.76 100,468.11 Dividend payable - 31,469,727.03 Accrued taxes payable 17 4,024,233.51 5,127,971.09 Other accounts should be handed in - - Other accounts payable 14 4,489,560.07 5,233,086.93 Pre-withdrew expenses 18 434,690.56 466,600.36 Estimated liability - - Long-term liabilities - current portion - - Other current liabilities - - Total current liability 59,650,222.75 72,368,304.80 Long-term liability： Long-term loan - - Bond payable - - Long-term accounts payable 19 8,357,716.74 9,600,105.65 Special-purpose accounts payable - - Other long-term liability - - Total long-term liability 8,357,716.74 9,600,105.65 Deferred taxations： Deferred taxation debit item - - Total liability 68,007,939.49 81,968,410.45 Minority interests： Minority interests 20 230,600,000.00 230,600,000.00 Rights and interests of shareholders： 21 218,558,237.08 218,558,237.08 Capital stock 22 103,236,402.57 88,166,423.19 Additional paid-in capital 23 27,333,504.63 27,333,504.63 Capital surplus reserve (7,908,333.36) (7,908,333.34) Unappropriated profits 16 60,279,917.48 Declared cash dividend 632,099,728.40 556,749,831.56 Total shareholders’ equity 700,107,667.89 638,718,242.01 Chief accountant agency： 30 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD Profits and profits distribution statement Year 2003 Units: RMB yuan Accumulative total of Accumulative total of Item Note this year last year 1. Earnings of main operation 24 109,619,298.98 95,473,649.27 Minus: cost of main operation 24 41,785,640.42 39,898,544.63 Taxation and surtax of main operation 25 4,715,012.30 4,116,792.32 2. Profits of main operation 63,118,646.26 51,458,312.32 plus：profits of other operation - - minus： Operating expenses - - Overhead expenses 11,351,578.60 7,953,477.95 Financial affairs fee 26 (1,805,659.01) (7,001,864.51) 3. Profits of operation 53,572,726.67 50,506,698.88 plus：Yield 27 30,057,413.89 20,156,975.74 Earnings of allowance - - Non-operating revenue 28 103,754.36 83,864.81 Minus: Non-operating expenses 28 177,052.65 258,236.23 4. Total profits 83,556,842.27 70,489,303.20 minus：income tax 8,206,945.39 7,549,849.15 Profits and loss of minority shareholders - - deficit of subsidiary company 75,349,896.88 62,939,454.05 5. Net profits 27,333,504.63 8,451,668.42 plus：unappropriated profits of the beginning of the year - - Other roll-in 102,683,401.51 71,391,122.47 6. Distributable profits 7,534,989.66 6,293,945.41 minus：Withdraw legal capital surplus reserve 3,767,494.86 3,146,972.70 Withdraw legal public welfare - - Withdraw welfare and encouragement fund 91,380,916.99 61,950,204.36 7. Distributable profits for shareholders - - minus:payable preference stock dividend 3,767,494.86 3,146,972.70 Withdraw arbitrary capital surplus reserve 60,279,917.50 31,469,727.03 Payable common stock dividend - - Common stock dividend switched to capital stock 27,333,504.63 27,333,504.63 8. Unappropriated profits 31 Complementary data： Accumulative total of Accumulative total of Item this year last year Sales and disposal the equity of departments or investment-receive units - - Losses resulted from natural disaster - - Increase (or decrease) of overall profit due to changes in accounting policy - - Increase (or decrease) of overall profit due to changes in accounting estimates - ： 32 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31ST DECEMBER 2003 Cash flows statement for the year of 2003 Item Note 2003 RMB(￥) Cash flows from operating activities Cash received from merchandise distribution and labor services offering 108,639,228.08 Rentals received - Other cash received from operating activities 3,524,181.85 Cash in-flow subtotal 112,163,409.93 Cash paid for merchandise purchase and labor services 9,149,857.06 Value-added tax paid 141,227.82 Cash paid to and paid for employees 9,090,42.76 Income tax and cost paid 10,980,462.80 Payments for taxes and costs except value-added tax and income tax 6,383,673.58 Other payments for operating activities 7,581,069.22 Cash outflow subtotal 43,326,733.24 Net cash from operating activities 68,836,676.69 Cash flows from investing activities Disinvestment received - Income from investments received 18,579,930.84 Net cash received from disposal of capital asserts, intangible assets and other long-term assets 6,060.05 Cash received from other investing activities 13,244,000.01 Cash in-flow subtotal 31,829,990.90 Purchase of capital asserts, intangible assets and other long-term assets 8,236,407.37 Cash paid for investment 125,026,051.63 Including acquisition of subsidiaries 9,652,994.65 Cash outflow subtotal 150,970,738.84 Net cash used in investing activities (119,140,747.94) Cash flows from financing activities Cash from absorbing investments 18,000,000.00 Cash from borrowings - Cash received from other financing activities - Cash in-flow subtotal 18,000,000.00 Cash for debts repayment - Cash for dividend payments or interest repayments 31,504,705.06 Cash paid for registered capital reduction - Cash paid for other financing activities - Cash outflow subtotal 31,504,705.06 RMB(￥) Net cash used in financing activities (13,504,705.06) Movement in cash influenced by changes of exchange rate - Net increase in cash and cash equivalents (63,808,776.31) 33 Annotations: Item Note 2003 Investing and financing activities not involved in cash income and expenses Transformations from debts to capital - Corporate translateible bonds due within one year - Financing and lease of capital assets - Translating net profits into cash flows from operating activities - Net profits 75,349,896.88 Plus: Accrual reserve - Depreciation of capital assets 9,867,362.44 Amortization of intangible assets and long-term pending amortization charge 15,939,791.57 Decrease of amortization charge (5,329.42) Increase of withholding expense 31,909.80 Losses from disposal of capital assets, intangible assets and other long-term assets 65,513.60 Losses of disusing capital assets 47,982.35 Financial expense (19,385.80) Losses from investment (30,057,413.89) Deferred taxation (1,242,388.91) Decrease of inventories (39,875.16) Decrease of operating receivable items (2,073,695.12) Increase of payable items 972,308.35 Others - Net cash from operating activities 68,836,676.69 Situation of net increase in cash and cash equivalents Cash balance at the end of year 77,429,054.13 Decrease: cash balance at the beginning of year 141,237,830.44 Increase: cash equivalents at the end of year - Decrease: cash equivalents at the beginning of year - Net increase in cash and cash equivalents (63,808,776.31) 34 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. Depreciation Reserve List 2003 Unit: RMB(￥) Item Balance at Number of Number of Balance at the the this year this year end of year beginning of increases reversals year Total of bad loans 1,081,473.98 1,237,995.18 49,548.76 2,267,920.40 Including: accounts 1,081,473.98 1,237,995.18 49,548.76 2,267,920.40 receivable Other receivables -- -- -- -- Total of reserve for reduction of -- -- -- -- short-term investments Including: stock investments -- -- -- -- Bond investments -- -- -- -- Total of reserve for reduction of -- -- -- -- inventory Including: commodity -- -- -- -- inventories Raw and processed -- -- -- -- materials Total of reserve for reduction of -- -- -- -- long-term investments Including: long-term equity -- -- -- -- investments long-term creditor -- -- -- -- investments Total of capital assets -- -- -- -- depreciation reserve Including ： houses and -- -- -- -- buildings Machine -- -- -- -- equipments Intangible assets depreciation -- -- -- -- reserve Including：Patent rights -- -- -- -- Trademark rights -- -- -- -- Depreciation reserve for -- -- -- -- construction in progress Depreciation reserve for loans -- -- -- -- by mandate 35 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. ANNOTATIONS TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 Corporate information The Company was incorporated as a Sino-foreign equity joint venture company in Shenzhen, by the name of Chiwan Petroleum Supply Base Co., limited. On 11th May 1995, the Company obtained approval from the Shenzhen Municipal Government for its reorganisation into a joint stock limited company in the PRC. The company is listed in Shenzhen Security Exchange and its public shares were listed for transactions. The company has been granted business corporation license with a registered capital of RMB 2,306, 000,000. The Company is engaged in dock and dock services; leasing heaps, warehouses and office buildings; offering labor services; transdocking, loading and unloading goods; leasing equipments; supplying water, electricity and petroleum; deputizing logistic services for petroleum on the sea; operating customs bonded warehouses and heaps. 2 Imdockant accounting policies, accounting evaluation and preparation of statements The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below: (a) The company carries out “Accounting Standard for Business Enterprises” and “Accounting System for Business Enterprises” (b) Accounting year The company adopts the Gregorian calendar as the accounting year, which means that an accounting year is from 1st January to 31st December. (c) Standard currency in accounts The company takes US dollar as standard currency when keeping accounts. (d) Base of keeping accounts and principles of figuring The company takes the accrual system as the base of keeping accounts. The principle of assets figuring takes historical costs as the principles (short-term investments and inventories are determined by the lower between costs at the end of year and market value), and each property material is figured by its acquired cost. (e) Accounting of foreign currency business The company translates economic business involved in non-standard currency into standard currency to enter into the account book, with a fixed exchange rate. It will adjust the balance of non-standard currency in monetary items pursuant to the fiducial exchange rate at the end of year, and the translation difference thereof will be reckoned into the item of current “financial expense”. (f) Measurement of foreign currency translation In the balance sheet, the “US dollar” item is translated into RMB pursuant to the fiducial exchange rate at the end of year, and the “Share capital”, “Additional paid-in capital” and “Capital surplus 36 reserve” items are translated pursuant to the historical exchange rate. The above items and their differences of translations pursuant to the fiducial exchange rate at the end of year are listed in an additional item “Translation difference” besides the items about shareholder’ various equities in balance sheet. Each sum of US dollar in items of the profits statement is translated into RMB pursuant to the average fiducial exchange rate of year. The “Profits distribution” item included in distribution of profits statement is translated into RMB pursuant to the fiducial exchange rate at the end of year. The “Undistributed profits at the beginning of year” item is translated into RMB pursuant to the fiducial exchange rate at the end of last year. To indicate the sums of RMB in the above two items and their difference pursuant to the fiducial exchange rate at the end of year, an additional item named “Translation difference” is established before the “Profits distribution” item in distribution of profits statement. Each item in the cash flows statement is translated into RMB pursuant to the average fiducial exchange rate of year. The “Net increase of cash and cash equivalents” item therein is translated into RMB pursuant to the fiducial exchange rate at the end of year. The “Movement in cash influenced by changes of exchange rate” item included in distribution of profits statement reflects translation differences resulting from adoptions of different exchange rates. (g) Standard of cash equivalent determination Cash equivalent means holding investment of valid short term, strong valid, facility to be changed into cash with known sum, and low risk for value variation. It includes short-term bond investment which is circulating in stock exchange and due without 3 months from the purchase date. (h) Short-term investment Short-term investment is the investment purchased by the company and changing at any moment. It is investment intended to be held less than one year, including stock investment, bond investment, etc. Deduct the cash dividends and interests declared to be provided from the money actually paid, and the result is the figure of short-term investment. At the end of the year, short-term investment is equivalent to the lower one between cost and market price; and the reserve of investment reduction is determined by accruing investment per item. (i) Bad loans accounting The bad loans reserve should be withdrawn from the accounts receivable at the end of year at 1%. The criterions of determining bad loans are as follows: a) As a result of the debtor’s bankruptcy or death, it is still impossible to take the loan back after the discharge by his bankrupt assets or heritages; b) The debtor does not repay his debts with an obviously impress that the debt is unable to be recovered. (j) Inventories The primary inventories in the company include materials, low-cost dissipative products, maintenance fittings, and so on. (k) Loans by mandate The sum of loans by mandate is determined by the actual sum of loans by mandate, and the sum of interests is determined in installments by the provisions in the agreements of loans by mandate. If the interests are not receivable on interest payment date, interests’ accrual will be 37 terminated and set off the accrued interests. At the end of year, loans by mandate will be checked up term by term. If the receivable sum is lower than the capital sum, due to the operation of the company mandated to grant the loan or any other factors, the depreciation reserve will be accrued per item in accordance with the difference between the receivable sum and the capital sum. (l) Long-term investments Long-term equity investments are entered into the account book pursuant to the acquired original capital of investment. Long-term equity investments, which have more than 20% votes standing for the capital sum of the company invested, are calculated by equity method. Other long-term equity investments, which have no more than 20% votes standing for the capital sum of the company invested, are calculated by cost method. At the end of year, long-term investments will be checked up term by term. If the receivable sum is lower than the investment book value, due to the successive decrease of the market price of the company invested or its deterioration, etc, the depreciation reserve will be accrued per item in accordance with the difference between the receivable sum and the book value. (m) Depreciation of fixed assets ①The company materials assets, which have service lives over one year and unit values over RMB 2,000, are classified as fixed assets. ②The fixed assets are figured pursuant to actual costs. ③Fixed assets are calculated by straight-line method of depreciation calculation, and deducted scrap values in accordance with the original values and estimated age limit of various fixed assets（dwellings category does not have scrap, while the other categories have the scrap values of 5% of their original values）, to determine their depreciation rates as follows: Assets category Service Annual life (years) depreciation rate Houses and buildings Including: warehouse and 40 2．375% heaps Houses 45 2．100% Dwellings 30 3．330% Facility Houses 10 9．500% Assets category Service Annual life (years) depreciation rate Dock establishments 50 1．900% 38 Machine equipments Including: operation 14 6．790% machines Power distribution 20 4．750% facilities Other machines 12 7．920% Transdockation equipments 10 9．500% Electron and other 5 19．000% equipments At the end of year, if the fixed assets receivable sum is lower than the book sum, due to the successive decrease of market price, the depreciations, damages and long-term idleness of equipments, the receivable sum will be prefigured per item. The depreciation reserve is to be accrued pursuant to the difference between the prefigured receivable sum and book sum. (n) Construction in progress Construction in progress reflects cost according to the cost from directly building and fixing, the actual interest paid for the loan and exchange gains and loses. The fulfillment of the purchased and constructed assets to be in the state of estimated utility is the time point of translation into fixed assets. At the end of year, the receivable sum of ceased constructions which are not estimated to restart within three years to come, and out of date for the reason of either capability or technology, is figured per item. And the depreciation reserve is accrued pursuant to the difference between the receivable sum and the book sum. (o) Intangible assets are entered into the account book pursuant to the actual paid amount or determined value. In the light of straight-line method of depreciation calculation, the amortization term is determined in the following ways: ①Land use rights are amortized by the shorter term between the contract and the period of continued existence. ②Dock use rights are amortized in 25 years. At the end of the year, the company shall accrue depreciation reserve in accordance with the difference between the recoverable amount estimated per item and the book value, provided the technology had been replaced, which would be more disadvantageous to the profit-making of the company, or the intangible assets became non-recoverable result from the significant fall of the market price of such assets. (p) Long-term pending amortization expenses Long-term pending amortization expenses are calculated by straight-line method, and the amortization periods in detail are listed below: ①Golf membership cards are accounted pursuant to the actual cost of acquiring the cards, and are amortized in 10 years; ②Warehouse fitment fees are accounted pursuant to actual cost, and are amortize in 10 years. 39 (q) Earnings affirmation principle Sales of labor services: after the supply of labor services, the earnings is regarded to be realized at the receival of payment or the receipt of money paid. Earnings from others’ usage of the company assets: affirmed by the term of charge and calculation method stipulated in the agreement. (r) Estimated liability affirmation principle The company looks as the responsibility which meets the following requirements and related to contingence proceedings as liabilities: ①The responsibility is one the company currently bears; ②The performance of the responsibility likely leads to outflow of the company’s economic interest; ③The amount of the responsibility can be measured reliably. (s) Accounting disposal of income tax The company takes the method of tax payable in relation to income tax. (t) Changes of accounting policies and accounting appraisal There is no change in accounting policies and accounting appraisal this year. (u) Corrections of significant accounting errors No significant accounting errors were found in the company this year. 3 Taxation The company applies such main items of taxation: sales tax, added value tax, urban construction tax, housing property tax, income tax, etc. The ratings of circulation tax are as follows: added value: tax 4% (since 2002); the earnings of portage and dock-management of sales tax: 3%, the rental of storage office building: 5%; urban construction tax's rating is 1% of circulation tax. The rating of house tax: annual house tax is the 1.2% of 70% of taxation original price of house property. The rating of income tax: 15% of payable amount of income. 4 Controlled subsidiary and affiliated company (a) Controlled subsidiary Name of Operation Registered Business Investment Shareholding controlled character capital Scope amount percentage subsidiary Shenzhen Manufacturin RMB Offering RMB 90% Chiwan Logistics g enterprises 14,810,000 warehouse 19,739,700 40 Distribution deposit Company Limited services *In accordance with stock equity transfer agreements with China Nanshan Development (Group) Incorporation (“Nanshan Development”) and Chiwan Ganghang (Hongkong) Incorporation (“Chiwan Ganghang”) respectively, the company purchased 40% stock equity of Shenzhen Chiwan Logistics Distribution Company limited (“Chiwan Logistics”, the previous “Shenzhen Chiwan Storage Company Limited”)at RMB 8,773,200 and 50% stock equity of Chiwan Logistics at RMB 10,966,500 correspondingly. As a result, the company holds 90% stock equity of Chiwan Logistics. The company made a payment of US$ 1,165,820.61 (equivalent to RMB 9.652.994.65), which is 48.90% of total amount equity fund. Taking into account of the facts of the company’s payment and the operation in Chiwan Logistics, the company’s consolidation in the year 2003 does not include Chiwan Logistics. Financial data list of the payment for purchasing subsidiary of the year (RMB) Name of the purchased subsidiary: Chiwan Logistics Date of purchase: 31st December 2003 Index Amount on Amount at From purchase Amount in purchase date the end of last date to the last year year end of year Current assets 9,596,039.00 6,074,143.00 9,596,039.00 6,074,143.00 Long-term --- --- --- --- investments Fixed assets 31,431,247.00 33,591,977.00 31,431,247.00 33,591,977.00 Intangible assets 90,000.00 --- 90,000.00 --- Index Amount on Amount at From purchase Amount in purchase date the end of last date to the last year year end of year Other assets 319,836.00 557,738.00 319,836.00 557,738.00 Current 1,307,375.00 425,752.00 1,307,375.00 425,752.00 liabilities Long-term 19,600,000.00 19,600,000.00 --- 19,600,000.00 liabilities Principal 13,586,385.00 13,895,160.00 --- 13,895,160.00 operating earnings Principal 4,777,054.00 4,459,582.00 --- 4,459,582.00 operating profits Total profits 1,355,472.00 1,011,874.00 --- 1,011,874.00 Income tax 220,373.00 163,925.00 --- 163,925.00 Net profits 1,135,099.00 847,949.00 --- 847,949.00 (b) Affiliated companies 41 Operation Registered Business scope Investment Shareholding Name of character capital (US$) amount (US$) percentage affiliated company Shenzhen Chiwan Manufacturin 30,000,000 Manufacturing 3,000,000 32% Sembawang and distributing g enterprises Engineering Co., Ltd. steel-structured engineering (“Chiwan products for Sembawang”) Offshore engineering Shenzhen Chiwan Manufacturin 2,000,000 Supplying 2,000,000 20% Offshore Petroleum services of g enterprises Equipment equipment Repair/Manufacture inspection to the Co., Ltd petroleum (“Chiwan industry Offshore”) The above affiliated companies are accounted by equity method and are excluded from the accounting statement consolidation. 5 Principal notes to accounting statement Note 1.Currency capital 2003-12-31 2002-12-31 Category Original (US$) Equivalent Original (US$) Equivalent RMB currency RMB Currency Cash RMB 483.09 4,000.00 RMB 483.09 4,000.00 4,000.00 4,000.00 HKD 9.69 80.22 HKD 9.69 80.22 75.70 75.70 Subtotal --- 492.78 4,080.22 --- 492.78 4,080.22 Bank RMB 2,280,536.62 18,882,843.21 1,152,125.94 9,539,602.77 savings 18,882,843.21 USD 6,990,754.01 57,883,443.20 USD 15,847,692.40 131,218,893.07 6,990,754.01 15,847,692.40 HKD 87,936.10 658,687.50 HKD 57,397.87 475,254.38 686,780.93 448,277.50 Subtotal 9,350,842.26 77,424,973,.91 17,057,216.21 141,233,750.22 Total 9,351,335.04 77,429,054.13 17,057,708.99 141,237,830.44 The company’s currency capital magnificent decrease on 31st December 2003 is primarily owing to the payment of Shanghai Logistics Area construction. Note 2.Accounts receivable 42 a) Listed in US$: 2003-12-31 2002-12-31 Account age Amount Amount Proportion Proportion in Bad loans Bad loans (US$) in total (US$) total amount reserve reserve amount (%) (%) Within one year 2,565,408.47 93.83 206,270.55 1,756,152.3 76.64 30,612.80 2 From one year to 168,643.50 6.17 67,632.88 535,150.15 23.36 100,000.00 two years From 2 years to 3 --- --- --- --- --- --- years Total 2,734,051.97 100 273,903.43 2,291,302.4 100 130,612.80 7 b) Listed in RMB: 2003-12-31 2002-12-31 Account age Amount Amount Proportion Proportion in Bad loans Bad loans (RMB) in total (RMB) total amount reserve reserve amount (%) (%) Within one year 21,241,582.13 93.83 1,707,920.15 14,540,941.21 76.64 253,473.98 From one year to 1,396,368.18 6.17 560,000.25 4,431,043.24 23.36 828,000.00 two years From 2 years to 3 --- --- --- --- --- --- years Total 22,637,950.31 100 2,267,920.40 18,971,984.45 100 1,081,473.98 *In consideration of the current financial difficulty of its customer NORMS, the company accrues 40% (US$ 245,923.20) from NORMS’s accounts receivable (US$614,807.99) as bad loans reserve. **Therein shareholders with over 5% shareholdings owe the company US$31,641.54. Detailed information is listed as follows: Name of indebted company Amounts (US$) Arrearage time Arrearage reason Nanshan Development 31,641.54 Within one year Business fund Total 31,641.54 43 ***The total amount of top five accounts receivable is US$ 1,736,973.66 美元，which is 63.53% of the total accounts receivable. Note 3.Other receivables 2003-12-31 2002-12-31 Proportion Proportion Account age Amount in total Amount in total amount amount (Equivalent (Equivalent (US$) % (US$) % RMB) RMB) Within one year 2,196,723.14 18,188,867.6 99.57 94,593.29 783,232.44 5.54 1 From one year to 3,367.71 27,884.63 0.03 13,736.18 113,735.57 0.80 two years From 2 years to 3 6,122.81 50,696.87 0.00 --- --- --- years Over 3 years --- --- --- 1,600,000.0 13,248,000.00 93.66 0 Total 2,206,213.66 18,267,449.1 100 1,708,329.4 14,144,968.01 100 1 7 *Details of the item which is no less than 10% of other receivables is listed below: Indebted company Amount (US$) Character Content Chiwan Logistics 2,130,434.78 Temporary Interest-free borrowing borrowing Total 2,130,434.78 **In accordance with stock equity transfer agreements with Nanshan Development and Chiwan Ganghang respectively, the company purchased 40% stock equity of Chiwan Logistics and 50% stock equity of Chiwan Logistics correspondingly. At the same time, the company repays a short-term liability of RMB 17,640,000 (equivalent US$ 2,130,434.78) for Chiwan Logistics. Note 4.Inventories and inventory depreciation reserve Category 2003-12-31 2002-12-31 (US$) (Equivalent RMB) (US$) (Equivalent RMB) Inventory materials 149,254.21 1,235,824,86 129,394.25 1,071,384,39 44 Total 149,254.21 1,235,824,86 129,394.25 1,071,384,39 *This is no inventory depreciation reserve should be accrued in the company at the end of 2003. Note 5.Pending amortization charge Category 2003-12-31 2002-12-31 (US$) (Equivalent RMB) (US$) (Equivalent RMB) Road toll and license 3,023.91 25,037.97 3,130.79 25,922.94 tax Newspapers and 1,505.42 12,464.88 1,297.77 10,745.53 periodicals fee Insurance premium 2,049.03 16,965.97 1,506.15 12,470.93 Others 8,314.40 68,843.23 2,627.39 21,754.79 Total 14,892.76 123,312.05 8,562.10 70,894.19 *The company annual balance includes road toll, license tax, newspapers and periodicals fee in the year of 2004. Note 6.Long-term investment a) Listed in US$: Item 2003-12-31 2002-12-31 Book balance Depreciation Book value Book balance Depreciation Book value balance balance Long-term equity investments --Investments on 15,245,949.20 --- 15,245,949.20 13,860,593.08 --- 13,860,593.08 affiliated companies --Investments on 1,165,820.61 1,165,820.61 subsidiaries Long-term --- --- --- --- --- --- creditor investments Total 16,411,769.81 --- 16,411,769.81 13,860,593.08 --- 13,860,593.08 Listed in RMB: 45 Item 2003-12-31 2002-12-31 Book balance Depreciation Book value Book balance Depreciation Book value balance balance Long-term equity investments --Investments on 126,236,459.38 --- 126,236,459.38 114,765,710.7 --- 114,765,710.7 affiliated 0 0 companies 9,652,994.65 --Investments on 9,652,994.65 subsidiaries Long-term --- --- --- --- --- --- creditor investments Total 135,889,454.03 --- 135,889,454.03 114,765,710.7 --- 114,765,710.7 0 0 b) Investments calculated by equity method among equity investments: Name of Inves Proporti Original Equity Monetary Accumulative 2003-12-31 company tmen investment adjustments dividends equity on in invested t costs (US$) of the year received of adjustments term registere (US$) the year (US$) d capital in the company invested (US$) (Equivalent RMB) Chiwan Offshore 15 20% 400,000.00 38,331.86 --- 445,947.42 845,947.42 7,004,444.64 years Chiwan 30 32% 9,600,000.00 3,591,790.59 2,244,766.33 4,800,001.78 14,400,001.7 119,232,014.7 Sembawang years 8 4 Chiwan Logistics 90% 1,165,820.61 --- --- --- 1,165,820.61 9,652,994.65 Total 11,165,820.61 3,630,122.45 2,244,766.33 5,245,949.20 16,411,769.81 135,889,454.0 3 c) Changes of depreciation reserve: Name of company invested Amount at Increase in Reversals in Amount at Note year-begin this year this year year-end Chiwan Offshore --- --- --- --- Chiwan Sembawang --- --- --- --- Total --- --- --- --- *This is no long-term investments depreciation reserve should be accrued in the company at the 46 end of 2003. **In accordance with stock equity transfer agreements with Nanshan Development and Chiwan Ganghang respectively, the company purchased 40% stock equity of Chiwan Logistics at RMB 8,773,200 and 50% stock equity of Chiwan Logistics at RMB 10,966,500 correspondingly. Note 7.Fixed assets and accumulated depreciation Fixed assets original cost Year-begin Increase Decrease 2003-12-31 (US$) (US$) (US $) (US$) (RMB) Building and structure 21,831,409.15 78,645.43 21,929,483.28 181,576,121.56 176,719.56 Port facility 5,902,697.24 1,251.21 5,901,929.12 48,867,973.11 483.09 Machine 6,025,559.94 --- 6,409,177.18 53,067,987.05 383,617.24 Haulage plant 1,556,571.99 --- 1,646,668.61 13,634,416.09 90,096.62 Elctro-equipment and 2,518,610.60 101,924.51 2,489,845.88 20,615,923.89 others 73,159.79 Total 37,834,848.92 181,821.15 38,377,104.07 317,762,421.70 724,076.30 Accumulated Increase Decrease 2003-12-31 depreciation Year-begin (US$) (US $) (US$) (US$) (RMB) Building and structure 5,814,387.74 496,938.02 19,922.9 6,291,402.86 52,092,815.68 0 Port facility 3,090,286.77 126,931.81 178.50 3,217,040.08 26,637,091.86 Machine 4,116,644.46 324,525.29 --- 4,441,169.75 36,772,885.53 Haulage plant 781,952.63 140,878.17 225.65 922,605.15 7,639,170.64 Elctro-equipment and 1,728,979.75 103,082.90 53,353.63 1,778,709.02 14,727,710.69 others Total 15,532,251.35 1,192,356.19 73,680.68 16,650,926.86 137,869,674.40 Equity 22,302,597.57 21,726,177.21 179,892,747.30 *All decrease of fixed assets of this year was retirement and liquidation. **There is no need to withdraw depreciation reserve in the end of 2003. Note 8.Construction in progress Project item Sources of Estimate Year-begin Increase Decreas Capital 2003-12-31 fund of cost e assets (US$) switched this (RMB) year Shanghai equity 10,016,204.5 11,072,973.0 Logistics Area capital 1,087,353.26 0 --- 30,584.71 5 91,684,216.86 F5warehouse equity 70,000.00 54,339.01 158,680.19 --- 1,650.97 211,368.23 1,750,128.9 capital 47 capital 4 Other equity 120,000.0 warehouse capital 0 30,692.76 120,823.19 --- 90,689.01 60,826.94 503,647.06 Total 10,293,292.3 11,345,168.2 1,172,385.03 0 --- 122,924.69 2 93,937,992.86 Note 9.Intangible assets Types Obtain Original Year-begin Increa Roll Residual manner amount(US (US$) se out Amortisatio Accumula 2003-12-3 2003-12-3 amortisatio $) n ted 1 1 n expenses(U amortisati (US$) (RMB) age limit S$) on expenses( US$) *Land Capital 26,615,536. 8,915,512.78 --- --- 1,354,255.2 19,054,27 7,561,257. 62,607,21 67months ues rights input 20 4 8.65 55 2.51 Land ues Lease 4,361,157.6 3,416,240.27 --- --- 174,446.28 1,119,363. 3,241,794. 26,842,05 223month rights 6 64 02 4.49 Dock use Lease 3,495,288.3 1,267,596.76 --- --- 192,546.36 2,420,238. 1,075,050. 8,901,416. 67months rights 8 02 36 98 Total 34,471,982. 13,599,349.8 --- --- 1,721,247.8 22,593,88 11,878,101 98,350,68 24 1 8 0.31 .93 3.98 * Thereinto includes evaluated increment 10,911,708.00US$ when organization, dock evaluated depreciation 187,883.00US$, above-mentioned evaluated net increment was averagely amortized in 14 years since the company listed in a stock exchange,(before 10th February, 2009). ** The company and China Nanshan Development (Group) Incorporation (hereinafter Nanshan Group) entered into agreements of land use rights at 10th February,1984 and 18th July, 1997, the period of use is 25 years. The above-mentioned land was invested by the nation into Nanshan Group, but Nanshan Group has not provided the certificate of land use rights. Up to the day of audit report，the company had not acquired any formal certificate of land use rights except for the programming chart of above-mentioned land and the area of dock. Nanshan Group entered into agreements with the company on 1st January, 1995 and 18th July, agreed on making compensation for any losses, expenses and other related debts in the 25 years for using above-mentioned land and docks. *** There were no states of intangible assets depreciation reserve in the end of 2003. Note 10.Long-term pending amortization expenses Types Original Year-begin Increase Amortisatio 2003-12-31 Residual amount(US$ (US$) (US$) n Accumulated (US$) amortisatio ) expenses(U amortisation (RMB) n S$) expenses age limit (US$) (month) Golf member fee 163,323.60 65,722.69 - 19,408.32 129,765.77 46,314.37 383,482.98 15 Warehouse 98,362.66 281,234.98 71 fi 48 fitment 898,046.25 679,531.99 28,005.45 609,174.78 5,043,967.1 8 Base building fitment 1,678,547.3 359,720.49 233,194.15 3,925.12 34,396.16 123,889.46 202,723.11 5 66 Integrative building fitment 101,048.74 43,038.89 30,121.08 8,836.10 29,560.87 64,323.87 532,601.64 61 Petroleum mansion 101,653.9 2,733,869.3 fitment 313,548.91 264,767.20 7 36,243.71 58,652.02 330,177.46 7 83 Dock fitment 67,408.58 41,236.38 29,171.13 6,600.77 15,318.71 63,806.74 528,319.81 69 Total 1,327,491.30 192,876.7 1,316,520.3 10,900,788. 1,903,096.57 5 203,847.72 638,421.81 3 33 Note 11.Short-term borrowings Sum of end of the period Type if borrowings Period-begin Original RMB US$ currency Fiduciary property --- 18,000,000.00 18,000,000.00 2,173,913.04 Total --- 18,000,000.00 Note: The principal of borrowings is 18,000,000RMB，term of borrowings is one year, namely from 24th December,2003 to 24th December 2004, with an annual interest rate 4.779%. Note 12.Accounts payable Balance at the end of year was 104,084.54US$( RMB 8 61,819.99Yuan)，the company owes shareholders holding 5%(including more than 5%) vote rights no money. Note 13.Advance receipts Balance at the end of year was 3,466,595.75US$(RMB28,703,412.81 Yuan)，the company owes shareholders holding 5%(including more than 5%) vote rights no money. In addition, 2,036,658.98US$(RMB16,863,536.35Yuan)of the balance at the end of year received in advance field and office building of the company from Shenzhen Chiwan Sembawang Engineering Co., Ltd. There are some advance receipts as to yard and office, owned by the company and used by Shenzhen Chiwan Shenbawang Engineering Co.,Ltd, which will be proportioned averagely and transferred to the income during the rental period. Note 14.Other accounts payable 49 Balance at the end of year was 542,217.40US$(RMB4,489,560.07 Yuan)，the company owes shareholders holding 5%(including more than 5%) vote rights no money. No other 10% of total amount (including more than 10%) of accounts payable There are no concrete items representing over 10% of other accounts payable (10% included). Note 15.Wage payable Balance at the end of year was 350,086.48US$(RMB2,898,716.05 Yuan)，mainly was premium for employees of 2003. Note 16.Declared cash dividend Name of investors 2003-12-31 Reason for arrearage （US$） （RMB） Internal legal entity Distribution scheme to be considered shareholders 3,770,162.57 31,216,946.06 by shareholders general meeting. External legal entity Distribution scheme to be considered shareholders 1,615,783.95 13,378,691.11 by shareholders general meeting. Public foreign shareholders Distribution scheme to be considered 1,894,236.75 15,684,280.31 by shareholders general meeting. Total 7,280,183.27 60,279,917.48 *The distribution of net profit scheme of 2003 refers to Note 22. Note 17.Unpaid taxation Items of taxation 2003-12-31 2003-12-31 (US$) (RMB) (US$) (RMB) Added value tax 9,673.89 80,099.81 9,107.04 75,406.29 Sales tax 48,652.68 402,844.19 36,404.45 301,428.84 Housing property tax 36,864.85 305,240.96 --- --- Enterprise income tax 390,764.03 3,235,526.17 575,166.90 4,762,381.93 Individual income tax 63.09 522.38 (1,358.21) (11,245.98) Total 486,018.54 619,320.18 5,127,971.09 4,024,233.51 Note 18.Pre-withdrew expense Items 2003-12-31 2002-12-31 Reason of credit (US$) (RMB) (US$) (RMB) balance Power rate Bill not 16,444.46 136,160.13 15,755.79 130,457.94 received Audit fee Still in audit 36,054.40 298,530.43 30,596.91 253,342.42 Others --- --- 10,000.00 82,800.00 Total 52,498.86 434,690.56 56,352.70 466,600.36 50 Note 19.Other long-term accounts payalbe Types Year-begin Increase Decrease 2002-12-31 (US$) (US$) (US $) (US$) (RMB) Evaluation --- increments for ratepaying reserve 1,159,433.05 150,046.97 1,009,386.08 8,357,716.74 Total --- 1,159,433.05 150,046.97 1,009,386.08 8,357,716.74 By virtue of the approval letter of Shenzhen Government Office (Shen Fu Ban Han (1995) No.112), the company shall deduct US$2,272,281.41 from the assets appraisal increment, during the joint stock reorganization, as the taxation reserve for the appraisal increment, which shall be paid by installment within 14 years (ie. before 10th, Feb. 2009) Note 20.Capital stock Items Year-begin Increase/ 2003-12-31 (US$) (RMB) Decreas (US$) (RMB) e 1. Untradable shares Public promoter’s shares Shares raised from 14,000,000.00 119,420,000.0 --- 14,000,000.00 119,420,000.00 internal legal entity 0 Shares raised from 6,000,000.00 51,180,000.00 --- 6,000,000.00 51,180,000.00 external legal entity Total 20,000,000.00 170,600,000.0 --- 20,000,000.00 170,600,000.00 0 2. Tradable shares Overseas listed 7,033,997.66 60,000,000.00 --- 7,033,997.66 60,000,000.00 shares Total 7,033,997.66 60,000,000.00 --- 7,033,997.66 60,000,000.00 3. Total number of 27,033,997.66 230,600,000.0 --- 27,033,997.66 230,600,000.00 shares 0 Note 21.Additional paid-in capital Types Year-begin Increase Decrease 2002-12-31 (US$) (US$) (US $) (US$) (RMB) Paid-in capital in 13,385,531.75 --- --- 13,385,531.75 111,367,624.16 excess of par Evaluation 12,876,261.32 --- --- 12,876,261.32 107,130,494.18 increment reserve Other additional 7,225.81 --- --- 7,225.81 60,118.74 paid-in capital roll in Total 26,269,018.88 --- --- 26,269,018.88 218,558,237.08 Note 22.Capital surplus reserve 51 Types Year-begin Increase Decrease 2002-12-31 (US$) (US$) (US $) (US$) (RMB) Legal capital --- 5,899,208.64 surplus reserve 4,989,185.74 910,022.91 48,888,999.37 Legal public --- 2,949,604.32 welfare 2,494,592.86 455,011.45 24,444,499.61 Arbitrary --- 3,607,386.01 capital surplus 3,152,374.55 455,011.46 29,902,903.59 Total --- 12,456,198.97 10,636,153.15 1,820,045.82 103,236,402.57 *The distribution of net profit scheme of 2003 refers to Note 22. Note 23.Undistributed profits Types Year-begin Increase Decrease 2002-12-31 (US$) (US$) (US $) (US$) (RMB) Undistributed 3,301,148.13 9,100,229.09 9,100,229.09 3,301,148.13 profits 27,333,504.63 Total 3,301,148.13 9,100,229.09 9,100,229.09 3,301,148.13 27,333,504.63 *The increase of this year was net profit roll in, the decrease of this year was resulted from the distribution of net profit scheme of 2003; according to the net profit 9,100,229.09US$ after audit, withdrew 10% of legal reserve, 5% of legal public welfare, 5% of arbitrary capital surplus and 80% of common stock dividends 2003 year profit. Note 24.Earnings and costs of main operation A. Listed in US$ 2003 (US$) 2002 (US$) Main operation Operating Operating Operating earnings Operating costs earnings costs Port and transport 5,883,696.97 2,527,559.58 services 7,079,883.28 2,658,615.61 Storage services 5,083,799.10 1,946,945.49 5,530,654.22 2,000,291.63 Transfer and 563,137.90 344,159.74 load/unload services 628,508.27 387,667.69 Total 11,530,633.97 4,818,664.81 13,239,045.77 5,046,574.93 B. Listed in RMB Yuan 2003 (RMB) 2002 (RMB) Main operation Operating Operating Operating earnings Operating costs earnings costs Port and transport 22,013,337.2 48,717,010.91 20,928,193.32 services 58,621,433.56 5 Storage services 16,562,414.7 42,093,856.55 16,120,708.66 45,793,816.94 0 Transfer and 4,662,781.81 2,849,642.65 load/unload services 5,204,048.48 3,209,888.47 Total 41,785,640.4 95,473,649.27 39,898,544.63 52 109,619,298.98 2 *The total amount of top 5 clients operating earnings was 5,768,888.95US$, which was 43.61% of total operating earnings in 2003. Note 25.Taxation and surtax of main operation Items 2003 2002 （US$） （RMB） （US$） （RMB） Sales tax 5% or 3% of earning 4,076,032.03 563,807.85 4,668,329.00 492,274.40 Urban 1% of circulation tax construction tax and 40,760.29 4,922.74 educational surtax 5,638.08 46,683.30 Total 4,116,792.32 569,445.93 4,715,012.30 497,197.14 Note 26.Financial affairs expenses Types 2003 2002 (US$) (RMB) (US$) (RMB) Interest expenses --- --- --- --- Minus: interest 855,872.18 7,086,621.65 revenue 226,870.11 1,878,484.51 Exchange expenses 1,814.37 15,022.98 1,564.91 12,957.45 Minus: exchange --- --- --- --- revenue Others 8,422.00 69,734.16 7,230.44 59,868.04 Total (7,001,864.51 (845,635.81) (218,074.76) (1,805,659.01) ) Note 27.Investment income Types 2003 2002 (US$) (RMB) (US$) (RMB) Net gain or loss of the 3,630,122.45 30,057,413.89 2,434,417.36 20,156,975.74 owner’s equity of investment-receive company adjusted at the end of the year Total 3,630,122.45 30,057,413.89 2,434,417.36 20,156,975.74 Note 28.Non-operating revenue and expenses A. Non-operating revenue Types 2003 2002 (US$) (RMB) (US$) (RMB) Capital ass 12,530.72 103,754.36 10,128.60 83,864.81 53 合计 12,530.72 103,754.36 10,128.60 83,864.81 B. Non-operating expenses Types 2003 2002 (US$) (RMB) (US$) (RMB) Capital assets disposal 187,333.76 loss 14,271.56 118,168.52 22,624.85 Donation expenses 60,902.55 2,500.00 20,700.00 7,355.38 Others 9,999.92 4,611.61 38,184.13 1,207.72 Total 258,236.23 21,383.17 177,052.65 31,187.95 Note 29.Other cash related to operation Cash afflux item Cash flows (US$) Advance rent,etc. 425,625.83 Total 425,625.83 Cash outflow item Cash flows (US$) Charges of water and 915,588.07 electricity, and wages for five Chinese Total 915,588.07 Note 30.Other cash related to investment Cash afflux item Cash flows (US$) Shenzhen Chiwan Sembawang 1,599,516.91 Engineering Co., Ltd. returned temporary borrowings. Total 1,599,516.91 Cash outflow item Cash flows (US$) Chiwan Logistics Co. Ltd. 2,138,681.14 temporary borrowings. Total 2,138,681.14 Annotation6 Related party transactions (1) Affiliated corporations without controlling relationship Name of affiliated corporations Relationship with principal company Shenzhen Chiwan Sembawang Affiliated corporation Engineering Co., Ltd. Shenzhen Chiwan Offshore Petroleum Affiliated corporation Equipment Repair/Manufacture Co., Ltd (2) Affiliated corporations with controlling relationship Name of Type of Legal Registered Business scope Share Relationship with affiliated compan Representati capital holding principal company 54 corporations y ve China Nanshan Joint- Fu Yuning 500,000,000 Development of 51.79% Majority Development stock RMB land、harbor shareholder of (Group) limited transportation principal company Incorporation company Chiwan Limited Han guimao 14,810,000 Warehouse 90% Subsidiary Logistics Co. company RMB storage service company of Ltd. principal company (3) Transaction of affiliated corporation Name of affiliated corporations Items 2003 2002 Sum（US$） In the proportion Sum（US$） In the proportion of revenue of this of revenue of year this year China Nanshan Development Leasing 296,796.00 2.57% (Group) Incorporation services ,etc. 319,993.00 2.42% Shenzhen Chiwan Sembawang Leasing 439,463.00 3.81% Engineering Co., Ltd. services ,etc. 855,922.00 6.47% Shenzhen Chiwan Offshore Leasing 169,500.00 1.47% Petroleum Equipment services ,etc. Repair/Manufacture Co., Ltd 238,190.00 1.80% Chiwan Container Terminal C Leasing --- --- o., Ltd. services ,etc --- --- Harbor affairs Leasing 580.00 0.00% services ,etc. 0 0.00% Storage Leasing 289.00 0.00% services ,etc. 279 0.00% Nanshan real estate Leasing 62,465.00 0.54% services ,etc. 62,808.00 0.47% Shenzhen Chiwan Wharf Leasing 55,303.00 0.48% Holdings Limited services ,etc 55,458.00 0.42% Bitran Leasing --- --- services ,etc. --- --- Haiqin Leasing --- --- services ,etc. --- --- Oriental Logistics Leasing 17,781.00 0.15% services ,etc. 8,119.00 0.06% International Freight Agency Leasing 16,724.00 0.14% Co., ltd services ,etc. 10,564.00 0.08% Total 1,551,333.00 11.72% 1,058,901.00 9.18% (4) Correspondence of affiliated corporations Name of affiliated corporations Contents Subject 2003-12-31 2002-12-31 (US$) (US$) China Nanshan Development (Group) Leasing Accounts Incorporation operation, etc. receivable 31,641.54 23,594.32 Shenzhen Chiwan Sembawang Leasing Accounts Engineering Co., Ltd. operation etc. receivable 1,632.25 1,627,347.00 Shenzhen Chiwan Offshore Petroleum Leasing Accounts Equipment Repair/Manufacture Co., Ltd operation etc. receivable 15,839.50 --- Nanshan real estate Leasing Accounts operation etc. receivable 797.1 --- 55 Shenzhen Chiwan Wharf Holdings Leasing Accounts Limited operation etc. receivable 4,226.62 5,561.00 Oriental Logistics Leasing Accounts operation etc. receivable 1,341.09 706 International Freight Agency Co., ltd Leasing Accounts operation etc. receivable 4,105.07 3,457.00 Chiwan Logistics Co. Ltd. Repaying debts Other on behalf of accounts others receivable 2,130,434.78 --- Shenzhen Chiwan Sembawang Leasing Advance Engineering Co., Ltd. operation etc. receipts 2,036,658.98 2,187,148.10 Total 4,226,676.93 3,847,813.42 Annotation 7.Contingent proceedings Up to 31st December, 2003, there were no proceedings of the company. Annotation 8.Undertakings Up to 31st December, 2003， there were no other external undertakings of the company. Annotation 9.balance sheet unadjustable items among the items Up to 31st December, 2003 there were no proceedings of the company. Annotation 10.Other important proceedings Up to 31st December, 2003, there were no other important proceedings of the company. Annotation 11.Adjustment of differences between accounting statements compiled according to accounting standards at home and abroad Because of the B-share issue, the company prepared Finance Report in accordance with “Accounting System for Enterprises”. In the meantime, the company prepared Finance Report in accordance with “International Accounting Standards” (IAS). The international certified public accountant is PricewaterhouseCoopers. Differences of net assets and net profits between accounting statements compiled according to accounting standards at home and abroad Net assets（US$） Net profits（US$） According to IAS 76,350,651.42 9,100,229.09 According to the Accounting 76,340,546.91 9,100,229.09 System for Enterprises Differences 10,104.51 --- Reason：caused by other means 10,104.51 --- of classify Annotation 12.Net assets earning rate and earnings per share(EPS) Net assets earning rate EPS 56 Profits of Fully Weighted Fully Weighted Fully diluted Weighted diluted average diluted average (RMB) average the period (US$) (US$) (RMB) of report Profits of 9.99% 9.99% 0.0331 0.0331 main operation 0.2741 0.2741 Profits of 8.48% 8.48% 0.0281 0.0281 business 0.2327 0.2327 Net profits 11.92% 11.92% 0.0395 0.0395 0.3271 0.3271 Net profits after the deduction of 11.93% 11.93% 0.0395 0.0395 extraordinary gain or loss 0.3271 0.3271 Annotation 13.Approval of accounting statement The accounting statement is approved by board of directors of he company on____(month)_____(day)_____(year) Director Director PART XI Documents Available for Verification: 1. Original copy of Annual Report carrying the signature of the Chairman. 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; 4. AOA,and; 5. Other related data. Chairman of the Board: Dr Fu Yuning Shenzhen Chiwan Petroleum Supply Base Co., Ltd. April 2004 57