深赤湾Ａ(000022)深赤湾Ｂ2003年年度报告摘要（英文版）

Stock code: 000022 /200022 Short form: Shen Chiwan A/Shen Chiwan B Announcement Serial No. 2004-005 SHENZHEN CHIWAN WHARF HOLDINGS LIMITED 2003 ANNUAL REPORT SUMMARY 1. Important Notes: The Board of Directors of Shenzhen Chiwan Wharf Holdings Limited (“the Company”) individually and collectively accepts responsibility for the correctness, accuracy and completeness of the contents of this report and confirms that there are no material omissions nor errors which would render any statement misleading. The 2003 annual report summary is abstracted from the 2003 Annual Report, and thus it is suggested for investors to read the full text of 2003 Annual Report to understand more details. Chairman of the Board Ms. Wang Fen, as well as General Manager of the Company Dr. Liu Zhangjun and Chief Financial Officer Mr. Zhang Jianguo hereby confirm that the Financial Statements in the Annual Report is true and complete. This report was prepared in Chinese version and English version respectively. In the event of any difference in interpretation between the two versions, Chinese version shall prevail. 2. Company Profile 2.1 Basic information Short Form of the Stock Shen Chiwan A/Shen Chiwan B Stock Code 000022/200022 Stock Exchange Shenzhen Stock Exchange Registered Address Port of Chiwan, Shenzhen, PRC Office Address 11-12/F., Chiwan Petroleum Building, Port of Chiwan, Shenzhen, PRC Post Code 518068 E-mail of the Company cwh@cndi.com 2.2 For contact Company Secretary Authorized Representative Name Ms. Pei Jiangyuan Ms. Bu Dan and Ms. He Peng Address 11/F., Chiwan Petroleum Building, Port of Chiwan, Shenzhen, PRC Tel (86 755) 26694620 Fax (86 755) 26684117 E-mail cwh@cndi.com -1- 3. Financial Highlights 3.1 Major accounting data 2003 2002 +/- (%) 2001 Sales 1,012,014,118 714,755,787 41.59 478,756,052 Gross profit 651,082,889 393,035,908 65.65 193,984,617 Net profit 313,987,876 183,876,579 70.76 73,824,569 As at Dec. 31, 2003 As at Dec. 31, 2002 +/- (%) As at Dec. 31, 2001 Total assets 3,214,527,760 2,331,823,016 37.85 2,222,759,643 Shareholder’s equity 1,501,391,931 1,298,098,489 15.66 1,153,494,051 (minority interests excluded) Net cash flow from operating 575,695,920 290,261,808 98.34 189,923,346 activities 3.2 Financial Highlights 2003 2002 +/- (%) 2001 Earnings per share 0.823 0.482 70.76 0.194 Return on Equity 20.91% 14.17% 47.57 6.4% Net cash flow per share 1.509 0.761 98.34 0.498 from operating activities As at Dec. 31, 2003 As at Dec. 31, 2002 +/- (%) As at Dec. 31, 2001 Net assets per share 3.935 3.402 15.66 3.023 3.3 Difference in net profit calculated under Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable ? Non-applicable CAS IAS Net profit RMB313,987,876 RMB313,987,876 No discrepancy exists between the results calculated by CAS and Explanation on the difference IAS. -2- 4. Changes in Share Capital and Particulars about Shareholders 4.1 Changes in Share Capital Change in amount of shares (+,-) Before the Reserve After the Bonus s New change Rights Others Subtotal shares to issue change stocks I. Circulating Shares 1. Promoters’shares 224,470,000 224,470,000 Among which: Shares held by the State Shares held by domestic legal entity 224,470,000 224,470,000 shares held by overseas legal entity Others 2. shares raised from legal entity 3. Shares held by staff 127,700 -27,300 -27,300 100,400 4. Preference shares or others Sub-total 224,597,700 -27,300 -27,300 224,570,400 II. Non-circulating Shares 1. A shares 50,472,300 +27,300 +27,300 50,499,600 2. B shares 106,447,000 106,447,000 3. Overseas listed shares 4. Others Sub-total 156,919,300 +27,300 +27,300 156,946,600 III. Total shares 381,517,000 381,517,000 4.2 Shares held by top ten shareholders Total shareholders at the end of 2003 22,859 Particulars about shares held by top ten shareholders (as at the end of 2003) Number Changes of Type Amount of Percen-of shares Nature of Name of shareholders shares held of Shares tage pledged or shareholders in 2003 shares frozen CHINA NANSHAN DEVELOPMENT domestic 0 224,470,000 58.84% NC 0 (GROUP) INC. legal entity GUOTAI JUNAN SECURIES HONG 9,346,712 9,346,712 2.45% C N/A B shares KONG LIMITED GT PRC FUND 4,699,887 4,699,887 1.23% C N/A B shares BTFE-VALUE PARTNERS 643,748 2,950,608 0.77% C N/A B shares INTELLIGENT FD-CHINA B SHS FD WESTERN SECURITIES CO. LTD 1,217,862 2,843,880 0.75% C N/A A shares YUYANG SECURITIES INVESTMENT 2,668,335 2,726,242 0.71% C N/A A shares FD BERMUDA TRUST(FAR EAST)LTD- 2,465,038 2,465,038 0.65% C N/A B shares VALUE PARTNERS ‘A’FD NEWTON ORIENTAL FUND 1,225,303 2,405,628 0.63% C N/A B shares CA-IS BK LUX-A/C CARLSON FUND 2,373,000 2,373,000 0.62% C N/A B shares MGT CO. -3- BTFE-BOBL/MANULIFE GLOBAL 1,742,153 2,237,987 0.59% C N/A B shares FUND-CHINA VALUE Explanation on associated relationship No relationship exists between CND and the other nine among the top ten shareholders or shareholders. The Company is not aware of any relationship consistent action existing among the top nine shareholders of circulating shares. * N/A stands for non-available, while NC for non-circulating and C for circulating. Top ten shareholders of circulating shares are listed as follows. Amount of Shares held Type of Name of shareholders at the end of 2003 shares GUOTAI JUNAN SECURIES HONG KONG LIMITED 9,346,712 B shares GT PRC FUND 4,699,887 B shares BTFE-VALUE PARTNERS INTELLIGENT FD-CHINA B SHS FD 2,950,608 B shares WESTERN SECURITIES CO. LTD 2,843,880 A shares YUYANG SECURITIES INVESTMENT FD 2,726,242 A shares BERMUDA TRUST(FAR EAST)LTD-VALUE PARTNERS ‘A’FD 2,465,038 B shares NEWTON ORIENTAL FUND 2,405,628 B shares CA-IS BK LUX-A/C CARLSON FUND MGT CO. 2,373,000 B shares BTFE-BOBL/MANULIFE GLOBAL FUND-CHINA VALUE 2,237,987 B shares HONGYANG SECURITIES INVESTMENT FD 2,171,877 A shares The Company is not aware of any Explanation on associated relationship among the top ten relationship existing among the above shareholders of circulating shares shareholders 4.3 Controlling shareholder and actual controller 4.3.1 Changes in controlling shareholder and actual controller ? Applicable √Non-applicable 4.3.2 Controlling shareholder and other actual controllers Information about the controlling shareholder of the Company Company name: China Nanshan Development (Group) Incorporation (CND) Legal representative: Dr. Fu Yuning Registration Date: September 28, 1982 Business scope: Land development, port services and transportation, as well as related bonded warehousing, industry, commerce, property and tourism. Registered Capital: RMB500,000,000 No. 1 shareholder of the controlling shareholder of the Company Being No. 1 shareholder of CND, China Merchants (Nanshan) Holdings Limited, holds 36.518% equity interests in CND, with its direct and indirect shareholder being China Merchants Holdings (International) Co., Ltd. (CMHI), which was listed on Hong Kong Exchange. Basic information about CMHI is listed as follows. -4- Date of registration: May 28, 1991 Legal Representative: Fu Yuning Registered capital: HKD300,000,000 Place of registration: Hong Kong Business scope: port and port-related business, infrastructure and industrial production 5. Directors, Supervisory Committee Members, and Senior Executives 5.1 Changes in shares held by Directors , supervisory committee members and senior executives Shares held Reason Office Shares held at the Name Position at the end of term beginning of 2003 of 2003 change Chairman of May,2002- Wang Fen 34,100 34,100 - the Board May,2005 May,2002- Fan Zhaoping Director 28,600 28,600 - May,2005 May,2002- Yuan Yuhui Director 0 0 - May,2005 May,2002- Han Guimao Director 0 0 - May,2005 Director May,2002- Liu Zhangjun General 0 0 - May,2005 Manager Director May,2002- Zheng Shaoping Deputy General 0 700 Buy May,2005 Manager Independent May,2002- Zhang Limin 0 0 - Director May,2005 Independent May,2002- Liu Ruiqi 0 0 - Director May,2005 Independent May,2003- Ng. Pock Too 0 0 - Director May,2005 Chairman of May,2002- Huang Chuanqi Supervisory 0 0 - May,2005 Committee Vice Chairman May,2002- Yu Liming of Supervisory 0 0 - May,2005 Committee May,2002- Mary-Jean Wong Supervisor 0 0 - May,2005 May,2002- Zhang Ning Supervisor 0 0 - May,2005 May,2002- Nie Qi Supervisor 6,200 6,200 - May,2005 Deputy General May,2002- Lu Baodi 30,800 30,800 - Manager May,2005 Chief Financial May,2002- Zhang Jianguo 0 0 - Officer May,2005 Company May,2002- Pei Jiangyuan 0 0 - Secretary May,2005 -5- 5.2 Directors and supervisors holding positions in shareholding company (SC) √Applicable ? Non-applicable Receiving Name Name of SC Positions in SC Office term payment from SC Wang Fen CND President Oct.2002 till present Yes Fan Zhaoping CND Senior vice president Dec.1998 till present Yes Yuan Yuhui CND Senior vice president Oct.2002 till present Yes Han Guimao CND Senior vice president Oct.2002 till present Yes Vice Chairman of the Huang Chuanqi CND Feb.2002 till present No Board Mary-Jean Wong CND Director April 1995 till present No 5.3 Annual salaries of Directors , supervisory committee members and senior executive Total annual salaries RMB1,890,000 Total annual salaries of the two Directors who RMB850,000 receive salaries from the Company * 1 Total annual salaries of the top three senior RMB1,060,000 executives Allowance of Independent Directors RMB60,000/year per person (pre-tax) The fee of the traffic , hotel and engaging Other treatments agency for attending the Board and Annual General Meeting is paid by the Company. Directors: Wang Fen, Fan Zhaoping, Han Name of Directors and Supervisors who don’t Guimao, Yuan Yuhui 2 receive payment or allowance from the Company * Supervisors: Huang Chuanqi, Yu Liming, Mary-Jean Wong Annual salaries Number of persons RMB100,000 –RMB200,000 3 RMB210,000 –RMB450,000 4 *1. Except for the three Independent Directors, the other Directors and Supervisors did not get any emolument, social benefits, or any other preferential treatment from the Company in taking their positions as the Company’s Directors and Supervisory Committee Members in 2003. Director Mr. Liu Zhangjun and Mr. Zheng Shaoping got their annual salaries totaling RMB850,000 from the Company according to their positions as the General Manager and the Deputy General Manager of the Company. *2. Supervisor Mr. Zhang Ning and Supervisor Mr. Nie Qi got their salaries for their positions as Deputy General Manager of Chiwan Container Terminal Co., Ltd (“CCT”) and Deputy General Manager of Harbor Division. -6- 6. Report of Board of Directors 6.1 Discussion and analysis on the performance of 2003 The company is engaged mainly in the handling, warehousing and transportation of containers as well as bulk and general cargoes at the terminals of Shenzhen Port , and also in other related services. Rapid economic development and surging foreign trade volume in South China, especially in the Pear River Delta in 2003 provided sufficient cargoes for Shenzhen port. By making full use of the market opportunity, the Company improved management, optimized operation structure and increased operation efficiency and service level, accelerated the tempo of investment in related equipment and facilities and upgraded the overall handling capacity on one hand, while on the other hand further explored on the market and optimized the business structure. The company achieved impressive increase in cargoes handling business, especially in container handling business, and in cargoes transportation, tugboat service and agency business consequently. The company achieved a throughput of 24,520,000 tons in 2003, 23% up compared with 2002 and accounting for 21.8% of the total throughput of Shenzhen during the year. Container throughput at the Port of Chiwan rose 44.8% up to 2,236,000 TEU in 2003, enjoying a 20.9% share in the container handling market in Shenzhen. International container shipping lines calling at Port of Chiwan dramatically increased in 2003, and the market position of Port of Chiwan in terms of container handling business was largely enhanced. Throughput of bulk and general cargo of the Company in 2003 increased by 17.4% to 8,540,000 tons, which shared one-third market in business of bulk and general cargo handling in Shenzhen. Business performance of the Company for the past three years is set out as follows. Business Data 2003 2002 2001 Total throughput (’000 ton) 24,520 19,940 13,500 Throughput of bulk and general cargo (’000 ton) 8,540 7,270 5,590 Container throughput (’000 TEU) 2,236 1,544 901 Trucking (’000 teu•km) 4,690 4,230 3,760 Hours charged for tow trucks 718,000 532,000 Hours charged for tugboat 16,999 13,847 9,151 6.2 Core businesses Sales to Cost to Margin Sales Cost Margin 2002 2002 to 2002 Handling RMB921,148,307 RMB332,595,679 63.89% 46.18% 17.56% 15.02% Including related- parties transaction 0 RMB25,065,600 - 0 17.25% 0 (RPR) The principle for Transactions with related parties were carried out on base of local building prices, the RPR on terms and conditions mutually agreed by the parties. Necessity and The transaction of the land-lease from CND is necessary and reasonable for the continuity for the sustaining business operation. RPR -7- 6.3 Core busine sses of different areas Area Sales To 2002 Shenzhen RMB1,047,836,100 41.85% 6.4 Customers Sales of the top five customers RMB508,487,400 To gross sales 49% 6.5 Operation of joint-venture companies ? Applicable √Non-applicable 6.6 Reasons of changes in business structure ? Applicable √Non-applicable 6.7 Reasons of significant changes in profit margin of core business ? Applicable √Non-applicable 6.8 Reason of significant changes of operating results and profits √Applicable ? Non-applicable (1) Gross profit was increased due to the growth of sales for container business and decline of cost (2) Rising of net profit resulted from increase of gross profit and sound control of administrative and finance expenses. Reason of significant changes of the whole financial status compared with 2002 √Applicable ? Non-applicable (1) Increase of receivables resulted from the growth of sales. (2) Long-term investment in associates was increased due to the shareholders’loans provided to associates. (3) Increase of the fixed assets resulted from the construction of Berth 12 and Phase-III grain silos, as well as purchase of related handling equipment. (4) Increase of bank loans for investment and purchase of equipment led to the increase of long-term loans (5) Increase of profit realized by subsidiary companies led to the growth of minority interests. (6) Increase of net profit resulted in the increase of shareholders’equity. (7) Growth of business led to the increase of sales, which in turn led to the increase of tax. (8) Gross profit was increased due to growth of sales and sound control on cost. (9) Growth of business led to the increase of daily expenses, which caused the administrative expenses go up. (10) Tax grew since that profit was increased and that fully exempted tax enjoyed by some companies and berths are changed to half exempted. (11) Net profit was increased as a result of growth of gross profit while sound control on expenses. (12) Net increase of cash and cash equivalents grew since the balance of bank deposits was controlled under a sound level after a great fall in 2002. 6.9 Influence of Significant Changes in Business Environment and policy -8- √Applicable ? Non-applicable 6.9.1 container terminal business In order to support the development of container business of the ports located in the western part of Shenzhen and solve the problem of limited road overpass capacity, Shenzhen municipal government started widening and clearing of the main roads leading to the ports in western part of Shenzhen in the later half of 2003 and the operation will last for one year. The company coordinated with other companies located in the same area and co-operated with the communication departments of the government to channel off vehicles and guarantee the smooth transportation. After the completion of the project in the later half of 2004, transportation condition will be greatly improved and thus will benefit the further development of the ports in western part of Shenzhen. Despite the fall of export tax refund rates and the increasing dumping sues against Chinese exported products in 2004, it is expected the exports of the Pearl River Delta will remain over 10% growth during the year and imports will increase rapidly. The international container handling business will maintain a high-speed increase in Shenzhen ports, and the container terminal business of the Company will increase as well. 6.9.2 bulk and general cargo terminal business With the enlarging of total scales of edible oil processing factories, demand for imported soybeans will increase. China will further enlarge the purchasing amount of American soybeans. The Company’s throughput of the grains, in which imported soybeans accounts for the major part will keep on growing. Wheat is expected to be handled at Chiwan Port. Fertilizer business will remain steady. It is expected the bulk and general cargo terminal business will remain at a high level in 2004. 6.10 Completion of profit forecase ? Applicable √Non-applicable 6.11 Completion of business plan ? Applicable √Non-applicable 6.12 Utilization of raised proceeds ? Applicable √Non-applicable Particulars about projects changed ? Applicable √Non-applicable 6.13 Utilization of other funds √Applicable ? Non-applicable Item Amount Progress Earning Investment in fixed assets RMB615.15million smooth N/A Investment in Mawan Port RMB280.00million smooth N/A Total RMB895.15million - - -9- 6.14 Explanation on “Non-standardized Opinion”of Certified Public Accountants by the Board ? Applicable √Non-applicable 6.15 Business plan for 2004 √Applicable ? Non-applicable In 2004, the company will focus on 1. further exploring its container terminal business. Construction of Berth 13 will be focused on and related equipment will be purchased simultaneously. Re-construction of the back stacking yard for Berth 8 will be accelerated so as to enhance the gate overpass capacity. In order to keep up with the growth rate of Shenzhen Port and manage for a bigger market share in Shenzhen, the Company will search for a more close cooperation pattern with the world famous shipping companies, perfect the shuttle network in the Pearl River Delta, resolve the problems existing on roads and stacking area, upgrade the operation efficiency and services, and further explore the potentiality of resources. 2. handling of imported fertilizer and grains. Through extending the service-chain and providing integrated logistic services, the Company will further sharpen its competitive edges and enhance its market share. 3. developing the port tow-truck business by investing in more trucks as required. A new 3000hp tugboat will be put into use in 2004. Excellent related service will support the further growth of handling business. Profit forecast for 2004 ? Applicable √Non-applicable 6.16 Profit distribution plan for the year of 2003 Audited by PricewaterhouseCoopers Zhong Tian Public Accountants in accordance with Chinese Accounting Standard, the Company achieved a net profit of RMB313,987,876 (“domestic audited profit”) in 2003. Retained profit at year beginning amounted to RMB123,342,793, among which RMB109,876,896 was distributed as dividends for 2002. Profit distributable to shareholders for 2003 amounts to RMB327,453,773. Audited by PricewaterhouseCoopers in accordance with International Accounting Standard, the Company achieved a net profit of RMB313,987,876 (“overseas audited profit”) in 2003. Retained profit at year beginning amounted to RMB111,013,454, among which RMB109,876,896 was distributed as dividends for 2002. Profit distributable to shareholders for 2003 amounts to RMB315,124,434. According to relevant rules and regulation of the State as well as the Company’s Articles of Association, following profit distribution plan was approved by the Board of Directors, which is to be submitted for approval to the 2003 Annual General Meeting. 1. RMB31,398,788, i.e.10% of the domestic audited profit for 2003 is to be drawn for Statutory Surplus Reserve; 2. 5% of the domestic audited profit for 2003 totaling RMB15,699,394 is to be drawn for Statutory Welfare Fund; - 10 - 3. 25% of the domestic audited profit for 2003 totaling RMB78,496,969 is to be drawn for Discretionary Surplus Reserve; 4. After the above drawing of Statutory Surplus Reserve, Statutory Welfare Fund and Discretionary Surplus Reserve from domestic and overseas audited profit respectively, profit distributable to shareholders amounts respectively to RMB201,858,622 and RMB189,529,283. The principle of taking the lower amount as the base for distribution is taken. A cash dividend of RMB0.496 per share (pre-tax) totaling RMB189,232,432 will be paid for the total 381,517,000 shares as at the end of 2003, with the balance of domestic audited profit being RMB12,626,190 and the balance of overseas audited profit RMB296,851. 5. Capital reserve is to be converted into share capital at the rate of 3 shares for every 10 shares for the total 381,517,000 shares of the Company. After the conversion, total share capital of the Company is increased from 381,517,000 shares to 495,972,100 shares. 7. Significant Events 7.1 Acquisition of assets √Applicable ? Non-applicable Contribution to net profit of the assets Related-parties transaction or Transaction parties and the Date of Price purchased from the not (if yes, explain principle of assets purchased Purchase date of purchase to pricing) the year-end CSGCF; (CCT’s 1% equity interest and all the related rights 4 Dec. 2003 RMB16,709,500 RMB428,400 No and obligations which CSGCF held in CCT HDL; 4% equity interests and RMB56,180,00 4 Dec. 2003 RMB1,713,400 No related creditor’s rights 0 which HDL held in CCT Yes. CND; This transaction was carried out RMB10,824,00 The new seaside apartment 30 Oct. 2003 0 on base of local building prices, 3 building built by CND on terms and conditions mutually agreed by the parties. CSGCF stands for China State Grains, Cereals & Foods Import & Export (Group) Inc., while CCT for Chiwan Container Terminal Co., Ltd. and HDL for Hidoney Developments Limited 7.2 Sale of assets √Applicable ? Non-applicable Contribution to net profit of the assets Transaction parties Date of Profit or loss Related transaction or not (if yes, Sale price sold from 1 and the assets sold sale from sale explain principle of pricing) Jan 2003 to the date of sale - 11 - Yes. CND; 30 This transaction was carried out Oct. RMB2,830,000 0 0 on base of local building prices, CCT’s 30 used sets 2003 on terms and conditions mutually of apartment agreed by the parties. MTL; 16.67% equity 26 interests which Feb. RMB56,180,000 0 0 No Grossalan holds in 2003 Hidoney The transfer price RMB10.97million for SCGC’s 50% equity is based on SCPSB; the medium price between the price RMB10.73 million estimated by Beijing Guozhonglian Assets 50% equity interests Appraisal Co., Ltd appointed by and all the related 5 Dec. RMB20,766,500 RMB567,600 RMB5,360,500 SCPSB and the price RMB11.2 rights and 2003 million estimated by Shenzhen obligations which Zhongqingxin Assets Appraisal CWHK held in Co., Ltd appointed by the Company. SCGC The transfer price RMB9.8 million for SCGC’s shareholders’loans was based on its book value. MTL stands for MTL Chiwan Holdings Limited, while SCPSB for Shenzhen Chiwan Petroleum Supply Base Co., Ltd., CWHK for Chiwan Wharf (Hong Kong) Ltd., and SCGC for Shenzhen Chiwan Godown Co., Ltd. Impact to the Company’s business continuity and the management stability caused by the above purchase or sales The above issue didn’t bring any negative impact to the Company’s business continuity and the management stability. 7.3 Significant guarantee √Applicable ? Non-applicable Guarantee Date of Guaranteed Amount of Type of Term of Completion for related (agreement objects guarantee guarantee guarantee or not party or signing date) not Joint 30 April 2002- CCT 30 April 2002 RMB36,040,000 responsibility Yes Yes 30 April 2003 guarantee Shekou Sub-branch Joint 9 June 2003 - of China 9 June 2003 RMB188,680,000 responsibility No No 8 June 2005 Agriculture guarantee Bank Total amount of guarantee RMB152,640,000 Total balance of guarantee RMB188,680,000 - 12 - Including: amount for relate-party 0 Total guarantee provided by the Company for -RMB36,040,000 subsidiaries Amount against relavant rules 0 Proportion of total guarantees to net assets 12.57% 7.4 Related credits and liabilities transaction √Applicable ? Non-applicable Unit: RMB’000 To related parties From related parties Related parties Amount Balance Amount Balance CND -111.9 0 191,004.7 203,249.6 SCPSB 11,020.6 11,033.4 0 0 Total 10,908.7 11,033.4 191,004.7 203,249.6 7.5 Entrusted financing ? Applicable √Non-applicable 7.6 Commitment √Applicable ? Non-applicable Board of the Company promised to appoint a third Independent Director before June 30, 2003 and establish the Rules for the Independent Director in its 2002 Annual Report. The Third Independent Director was elected at the Company’s 2002 Annual General Meeting held on May 30, 2003 and the Rules for the Independent Director was approved as well on the meeting. 7.7 Significant arbitration and lawsuits ? Applicable √Non-applicable 7.8 Performance of Independent Directors √Applicable ? Non-applicable The third independent director was elected at the 2002 Annual General Meeting held on May 30, 2003 according to the “Guiding Lines on Setting up Independent Director System in Listed Companies”(GLSIDS) issued by CSRC. Thus, numbers of the Company’s Independent Directors complied with the stipulations of GLSIDS, which says “independent directors should at least take one third among all the members of the Board of Directors in Listed Companies.” Working Rules for Independent Directors was approved by the above meeting. During the reporting period, three Independent Directors seriously performed their duties, monitoring the Company’s business and operation consistently, attending the Board meetings actively, issued independent opinions on significant issues such as the appointment of the senior executives, and significant related-party transactions, etc. maintaining the minority shareholder’s rights, thus played significant roles in the scientific decision-making by the Board of Directors. Articles had been amended for the Strategic - 13 - Committee, Audit Committee, Nomination Committee, Remuneration Committee and Evaluation Committee, and all the Committees will be set up in the proper time. 8. REPORT BY THE SUPERVISORY COMMITTEE 8.1 Within the reporting year, in accordance with the “Company Law” of PRC and the Company’s Articles of Association, the Supervisory Committee conducted examination and supervision, carried out its rights and obligations as well as delegated its representatives to attend the Board Meeting and gave its opinions upon the Company’s decision-making regarding some significant issues. The Supervisory Committee held two meetings in 2003. The Third meeting of the Fourth Supervisory Committee was held on 16 April 2003 to • review and approve the Chairman’s Working Report for 2002; • review and approve the Annual Report of the Company for 2002 and the Abstract; • review and approve the Company’s Financial Statements for 2002; and • review and approve the Working Report of the Supervisory Committee for the year of 2002; The Fourth meeting of the Fourth Supervisory Committee was held on 27 August 2003 to • Review and approve the Company’s Interim Report for 2003. • Review and approve the Abstract for the Company’s Interim Report . 8.2 The Committee expressed its independent opinions on the following issues: Ÿ By supervising the Company’s production and operation, as well as the decision-making and management, the Committee confirmed that during the year 2002 the Company did not, in the above activities, demonstrate any behavior which might have violated the laws and regulations of the country, and that the Company had set up perfect intra-control system. By supervising the behaviors of the Company’s Directors and senior management personnel as they were exercising their authorities, the Committee confirmed that, during the year 2003, the Company’s Directors and senior management personnel had not, in their daily business and management activities, demonstrated any behavior which might have violated the laws, regulations, the Company’s Articles of Association, or the resolutions passed at the Shareholders’Meetings. They had neither abused their authorities, nor infringed upon the interests of the shareholders, the Company or its employees. Ÿ With no reserved opinions contained therein, the Auditor's Statements for 2003 presented by the Company’s domestic and overseas accounting firms truly reflected the Company's financial status and business performance. Ÿ No funds were raised during the reporting year. The last proceeds (by issuing 40,000,000 B Shares in December 1995) had been used up by the end of 1996. Actual usage and amount of the proceeds were in conformity with the original plan. Ÿ The transaction prices for purchases or sales of the assets were fair and reasonable. Neither inside dealings, nor damage to the interests of certain shareholders, nor loss of the Company’s assets had been found. Ÿ Related party transactions in 2003 were conducted fairly in conformity with market prices, and have not impaired the interests of the Company. 9. Financial Statements - 14 - 9.1 Report of Auditors The accompanying consolidated balance sheet of the Company and its subsidiaries as of 31st December 2003 and the related consolidated income and cash flow statements for the year then ended were audited by PricewaterhouseCoopers Certified Public Accountants. In their opinion, the consolidated financial statements present fairly in all material respects the financial position of the Company as of 31st December 2003, and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards. - 15 - 9.2 SHENZHEN CHIWAN WHARF HOLDINGS LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2003 2003 2002 RMB RMB Revenue 1,012,014,118 714,755,787 Operating costs (360,931,229) (321,719,879) Gross profit 651,082,889 393,035,908 Administrative expenses (92,030,520) (70,752,437) Other operating (expenses)/income (6,807,176) 4,087,812 Profit from operations 552,245,193 326,371,283 Finance costs - net (25,653,843) (24,589,184) Gain/(loss) on disposal of subsidiaries /associates 5,360,499 (66,526) Share of results of associates before tax 1,334,492 1,397,913 Profit before tax 533,286,341 303,113,486 Income tax expense (39,195,173) (14,006,958) Profit after tax 494,091,168 289,106,528 Minority interests (180,103,292) (105,229,949) Net profit 313,987,876 183,876,579 Earnings per share 0.823 0.482 - 16 - SHENZHEN CHIWAN WHARF HOLDINGS LIMITED CONSOLIDATED BALANCE SHEET AS AT 31ST DECEMBER 2003 2003 2002 RMB RMB ASSETS Non-current assets Property, plant and equipment 1,496,440,747 1,261,647,873 Construction-in-progress 267,046,303 49,823,701 Land use rights 864,947,364 617,305,856 Investment property 10,481,188 19,167,511 Intangible assets 13,790,514 (3,416,480) Investments in associates 288,221,180 3,122,194 Available-for-sale investments 4,647,500 59,979,500 2,945,574,796 2,007,630,155 Current assets Inventories 19,954,765 19,720,491 Amount due from a related company 11,033,436 12,785 Loans to a related company - 100,000,000 Other receivables and prepayments 17,048,870 22,761,088 Trade receivables 178,197,639 125,968,632 Cash and cash equivalents 42,718,254 55,729,865 268,952,964 324,192,861 Total assets 3,214,527,760 2,331,823,016 SHAREHOLDERS’EQUITY Share capital 381,517,000 381,517,000 Reserves 930,399,128 805,568,035 Retained earnings 189,475,803 111,013,454 1,501,391,931 1,298,098,489 Total shareholders’equity Minority interests 566,273,362 456,976,246 LIABILITIES Non-current liabilities Borrowings 382,130,000 41,800,000 Current liabilities Trade payables 149,183,222 40,430,630 Other payables and accrued expenses 178,610,089 32,623,855 Tax liabilities 14,349,568 5,020,750 Short-term borrowings 419,340,000 434,940,000 Amount due to holding company 3,249,588 21,933,046 764,732,467 534,948,281 1,146,862,467 576,748,281 Total liabilities Total equity and liabilities 3,214,527,760 2,331,823,016 - 17 - SHENZHEN CHIWAN WHARF HOLDINGS LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST DECEMBER 2003 2003 2002 RMB RMB Cash flows from operating activities Cash generated from operations 634,152,395 329,339,906 Interest received 483,925 1,018,003 Interest paid (26,947,202) (25,455,780) Income tax paid (31,993,198) (14,640,321) Net cash from operating activities 575,695,920 290,261,808 Cash flows from investing activities Purchase of property, plant and equipment (403,658,497) (28,707,771) Payments for construction-in-progress (211,494,277) (156,749,561) Investment in and loans made to associates (200,853,379) (1,875,000) Disposal of available-for-sale investments - 328,640 Disposal of a subsidiary 3,045,276 - Classification of an associate to a subsidiary - 3,222,198 Disposal of an associate - 1,457,484 Interest received from loans 5,922,125 - Disposal of property, plant and equipment 1,735,631 5,056,580 Dividend received 785,057 1,738,400 Net cash used in investing activities (804,518,064) (175,529,030) Cash flows from financing activities Proceeds from short-term borrowings 1,226,060,000 733,012,421 Proceeds from long-term borrowings 432,323,090 10,000,000 Repayments of short-term borrowings (1,241,660,000) (749,489,361) Repayments of long-term borrowings (91,993,090) (153,498,000) Dividends paid to minority investors of a subsidiary - (21,926,000) Dividends paid (109,876,896) (38,914,734) Net cash used in financing activities 214,853,104 (220,815,674) Decrease in cash and cash equivalents (13,969,040) (106,082,896) Movement in cash and cash equivalents: Cash and cash equivalents at 1st January 55,729,865 162,170,168 (Decrease)/increase (13,969,040) (106,082,896) Effect of exchange rate changes 957,429 (357,407) Cash and cash equivalents at 31st December 42,718,254 55,729,865 - 18 - 9.3 Accounting policies and accounting estimation remained unchanged during the reporting period compared with 2002. 9.4 Towards the end of 2003, the Group disposed 50% of the equity interests in Shenzhen Chiwan Godown Co. Ltd. to Shenzhen Chiwan Petroleum Supply Base Co., Ltd. (“SCPSB”). The disposed business contributed revenues of 13,586,386 and operating profit of 1,135,099 to the Company’s consolidated income statement in 2003, and its assets and liabilities at 31 December 2003 were respectively 41,437,122 and 20,127,375. For and on behalf of the Board Wang Fen Chairman Shenzhen Chiwan Wharf Holdings Limited Dated 31 March 2004 - 19 -