京粮控股(000505)ST珠江Ｂ2004年年度报告（英文版）

HAINAN PEARL RIVER HOLDINGS CO., LTD. ANNUAL REPORT 2004 §1. Important Notice 1.1 Board of Directors of Hainan Pearl River Holdings Co., Ltd. (hereinafter referred to as the Company) and its directors individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. 1.2 Mr. Zheng Qing, Chairman of the Board as well as General Manager, Mr. Chen Binglian, Deputy General Manager as well as Chief Financial Officer, hereby guarantee that the financial report enclosed in this Annual Report 2004 is true and complete. §2. Company Profile 2.1 Basic information Short form of the stock ST Pearl River, ST Pear River B Stock code 000505, 200505 Listed stock exchange Shenzhen Stock Exchange Registered address and office address 29/F, Royal Empire Building, Pearl River Plaza, Binhai Avenue, Haikou Post code 570125 Internet web site of the Company Naught E-mail of the Company hnpearl@public.hk.hi.cn 2.2 Contact person and method Secretary of the Board of Securities Affairs Directors Representative Name Feng Pai Gu Lirong Contact address 29/F, Royal Empire Building, Pearl 29/F, Royal Empire Building, River Plaza, Binhai Avenue, Pearl River Plaza, Binhai Avenue, Haikou Haikou Telephone (86)898-68581888 ext. (86)898-68581888 ext. Fax (86)898-68581026 (86)898-68581026 E-mail hnpearl@public.hk.hi.cn hnpearl@public.hk.hi.cn §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Increase/decrease 2004 2003 2002 over last year（％） Income from main operations 24,750,558 129,561,020 -80.90 91,008,755 Total profit -107,361,020 -1,482,336 -7,142.69 -140,462,535 Net profit -103,498,072 1,629,184 -6,452.76 -137,499,128 Net profit after deducting -110,359,070 -14,620,656 -654.82 -132,518,891 non-recurring gains and losses Increase/decrease At the end of At the end of from the end of At the end of 2004 2003 2002 previous year（％） Total assets 664,279,667 699,838,932 -5.08 663,838,276 Shareholder’s equity (excluding 157,388,310 250,895,785 -37.27 251,348,071 minority interests) Net cash flow arising from -79,676,938 -2,065,568 -3,757.39 -28,296,825 operating activities 1 3.2 Major financial indexes Unit: RMB Increase/decrease over 2004 2003 2002 last year（％） Earnings per share -0.274 0.004 -6,950.00 -0.364 Return on equity (%) -65.760 0.649 -66 -54.705 Return on equity calculated based on net -54.060 -5.822 -48 -41.375 profit after deducting non-recurring gains and losses (%) Net cash flow per share arising from -0.211 -0.005 -4,120.00 -0.075 operating activities Increase or decrease At the end At the end from the end of At the end of of 2003 of 2002 2001 previous year（％） Net assets per share 0.417 0.664 -37.20 0.666 Net assets per share after adjustment 0.369 0.601 -38.60 0.610 Items of non-recurring gains and losses √Applicable □Inapplicable Items of non-recurring gains and losses Amount Gains and losses occurred from disposal of long-term equity investment, fixed assets, construction -515,980.37 in progress, intangible assets and other long-term assets Tax refundable and reduction and exemption exceeding authority in approving or without formal approval document Various government subsidies Capital occupied received from non-financing enterprises reckoned into gains and losses of current 800,745.00 period Gains and losses from short-term investment Gains and losses from commission investment Other non-operating income/expenses after deducting daily reserve for impairment losses of assets 1,416,008.00 allotted by the Company based on regulations of Accounting System for Business Enterprise Various reserves for impairment losses of assets withdrew due to force majeure factors such as natural disaster Switching back various reserves for impairment losses allotted over the previous years 5,160,225.25 Gains and losses from debt reorganization Gains and losses from assets replacement Gains and losses occurred from transaction that trading price exceeds fair value Retroactively adjusting net profit in the previous period due to change of accounting policies in comparable financial statement Confirmed other non-recurring gains and losses items according with regulations of defining Total 6,860,997.88 3.3 Difference in net profit as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Impact of IFRS and Other Adjustments on Profit/(Loss) for the Year and Net Assets: IMPACT OF IFRS AND OTHER ADJUSTMENTS ON (LOSS)/PROFIT FOR THE YEAR AND NET ASSETS (Loss)/Profit for the Net assets as of year ended 31 December 31 December 2004 2003 2004 2003 RMB'000 RMB'000 RMB'000 RMB'000 As reported in statutory accounts (103,498) 1,629 157,388 250,895 Impact of IFRS and other adjustments - adjustment on capitalisation of interest charges arising from borrowings used to finance the properties under development during the construction period - - and corresponding depreciation 931 (4,788) - reversal of adjustment on capitalisation of interest charges arising from borrowings used to finance the properties under development during the construction period disposed of in last year - 4,788 - 4,788 - unrecognised losses of consolidated subsidiaries (2,747) (2,445) - - - wavier of payables recorded as movement of capital reserves in statutory accounts now recognised as income 10,482 - - - - reversal of capital reserve arising from transfer of construction in progress from the Company to a subsidiary as capital injection - - (2,072) (363) - goodwill on acquisition of an associate recorded as bad debts under IFRS and reversal of amortisation 306 (3,059) (2,753) (3,059) - gain on disposal of a subsidiary which was recorded as movement in capital reserve in statutory accounts 547 - - - - provision for bad and doubtful debts - - (14,600) (14,600) - adjustment on treasury stock - - (1,410) (1,410) - adjustment to income from an associate - - (9,929) (9,929) - others (568) 872 (1,094) (526) As restated for the Group (95,478) 2,716 125,530 221,008 §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in share (Unit: share) Amount at the Amount at the period-begin period-end I. Non-circulating shares 1. Sponsors’ shares Including: Domestic legal person’s shares 206,744,976 206,744,976 2. Inner employees’ shares Total non-circulating shares 206,744,976 206,744,976 II. Circulating shares 1. Domestically RMB ordinary shares 113,405,824 113,405,824 2. Domestically listed foreign shares 57,500,000 57,500,000 Total circulating shares 170,905,824 170,905,824 III. Total shares 377,650,800 377,650,800 4.2 Statement of shares held by the top ten shareholders 40250 shareholders of A-share and 10010 shareholders of Total number of shareholders at the end of report year B-share Particulars about shares held by the top ten shareholders Nature of Number of Increase / Shares held shareholders Type of shares share decrease in at the Proportion (state-owned Full name of Shareholders (Circulating/No pledged/ the report year-end (%) shareholder n-circulating) frozen year (share) (share) or foreign (share) shareholder) Beijing Wanfa Real Estate 0 112,628,976 29.82 Non-circulating 40,000,000 Other Development Co., Ltd. Guangzhou Lishengde Investment 0 17,000,000 4.50 Non-circulating 0 Other Co., Ltd. Henglong International Co., Ltd. 0 13,570,000 3.59 Non-circulating 13,570,000 Other Shanghai Central South Investment 0 11,000,000 2.91 Non-circulating 0 Other and Management Co., Ltd. Hainan Development Bank Haikou 0 7,820,000 2.07 Non-circulating 0 Other Branch Hebei Securities Co., Ltd. 0 5,750,000 1.52 Non-circulating 0 Other Guangzhou Pearl River Foreign 0 4,896,000 1.30 Non-circulating 0 Other Capital Contraction Design Institute, Hainan Branch Ping An Insurance Company Of 0 3,450,000 0.91 Non-circulating 0 Other China, Ltd. Hainan Yueyin Science and 0 2,660,000 0.70 Non-circulating 0 Other Technology Co. Ltd. Shenzhen Gintian Industrial Co., Ltd. 0 2,300,000 0.61 Non-circulating 2,300,000 Other Particulars about shares held by the top ten shareholders of circulation share Full name of shareholder Number of circulation shares held at Type (A-share, B-share, H-share or other) the year-end ZHANG XIAO XIA 1,725,000 B-share ZHAO SHU ZHEN 868,600 A-share ZHANG LI JUN 654,200 A-share HUANG PEI LING 602,413 B-share LI YAN 490,600 A-share QIU LAN ZHEN 460,000 A-share HUANG PEI LIN 431,200 B-share ZHANG HUI LONG 397,430 A-share LIN LI 397,378 B-share CHANG MIN 360,000 A-share Explanation on associated Among the above shareholders, there existed no associated relationship between relationship among the top ten the first largest shareholder and the other shareholders, and they didn’t belong to shareholders or consistent action the consistent actionist regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Companies. For the other shareholders, the Company is unknown whether there exists associated relationship, or whether the rest shareholders belong to the consistent actionist regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Companies. 4.3 Particulars about the controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in the controlling shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation on the controlling shareholder and other actual controller Beijing Wanfa Real Estate Development Co., Ltd. (“Wanfa Real Estate”), the first largest shareholder of the Company, was established in Nov. 1995 with registered capital amounting to RMB 280 million, whose legal representative is Meng Qiao. Its main business includes the development and operation of real estate. As a joint-stock company, its major shareholders are Beijing Xinxing Real Estate Development General Company, Beijing Jiahengtai Industrial Co., Ltd., Beijing Shengcai Science and Trade Co., Beijing Jiuzhu Property and Management Co., Ltd. and Beijing Yitai Co.. The actual controller of the Company’s controlling shareholder, Beijing Xinxing Real Estate Development General Company (“Xinxing Real Estate”) is one of the shareholders of Beijing Wanfa Real Estate Development Co., Ltd., who was established in 1992 with registered capital of RMB 10 million and legal representative Zheng Qing. The said company is principally engaged in the development and operation of real estate as a collective enterprise. 4.3.3 Property right and controlling relationship between the actual controller of the Company and the Company is as follows: State-owned Assets Supervision and Administration Commission of Beijing Municipal Government Beijing Xinxing Real Estate Development General Company 18.065% Jiahengtai Industrial Co., Ltd. 19.253% Jiuzhu Property Management Co., Ltd. 14.968% Shengcai Science & Trading Corporation 17.955% Tianzheng Construction Supervision Co., Ltd. 14.809% Yitai Corporation 14.950% Beijing Wanfa Real Estate Development Co., Ltd. 29.82% Hainan Pearl River Holdings Co., Ltd. §5. Particulars About Directors, Supervisors and Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives Name Title Sex Age Office Shares held Shares held Reason for term at the at the change year-begin year-end Zheng Qing Chairman of the Board / Male Sep. 2002- 25000 25000 Naught 38 General Manager Sep. 2005 Peng Shuyin Director Male Sep. 2002- 0 0 Naught 47 Sep. 2005 Wu Xiaojing Director Male Sep. 2002- 0 0 Naught 53 Sep. 2005 Shi Yonghui Director Male Sep. 2002- 0 0 Naught 40 Sep. 2005 Zhang Jian Director Male Sep. 2002- 0 0 Naught 51 Sep. 2005 Tan Shuguang Director Male Sep. 2002- 0 0 Naught 34 Sep. 2005 Wang Zhigang Independent Director Male Sep. 2002- 0 0 Naught 45 Sep. 2005 Yang Kaijun Independent Director Male Sep. 2002- 0 0 Naught 48 Sep. 2005 Zhang Taowei Independent Director Male Sep. 2002- 0 0 Naught 41 Sep. 2005 Sun Xianli Convener of Male Sep. 2002- 0 0 Naught 58 Supervisory Committee Sep. 2005 She Jianhui Supervisor Female Sep. 2002- 0 0 Naught 51 Sep. 2005 Xu Jingui Supervisor Male Sep. 2002- 0 0 Naught 35 Sep. 2005 Feng Pai Deputy General Male Apr. 2003- 0 0 Naught 41 Manager Apr. 2006 Chen Binglian Deputy General Male Apr. 2003- 0 0 Naught 45 Manager Apr. 2006 5.2 Particulars about directors and supervisors holding the post in Shareholding Company √Applicable □Inapplicable Drawing the payment Name of Shareholding Title in Shareholding Name Office term from the Company Company Company (Yes / No) Beijing Wanfa Real Estate Zheng Qing Director Jun. 1999 to now Yes Development Co., Ltd. Beijing Wanfa Real Estate Shi Yonghui Deputy General Manager Jul. 1993 to now No Development Co., Ltd. Guangzhou Lishengde Zhang Jian Chairman of the Board Aug. 2000 to now No Investment Co., Ltd. Hainan Yueyin Science and Tan Shuguang General Manager May 2001 to now No Technology Co. Ltd. 5.3 Particulars about the annual payment of directors, supervisors and senior executives Total annual payment RMB 520,000 Total annual payment of the top three directors Naught (one director drew the remuneration from the drawing the highest payment Company because he concurrently took the post of General Manager of the Company.) Total annual payment of the top three senior RMB 450,000 executives drawing the highest payment Allowance of independent director Naught Other treatment of independent directors Naught Name of directors and supervisors receiving no Director: Peng Shuyin, Wu Xiaojing, Shi Yonghui, Zhang payment or allowance from the Company Jian and Tan Shuguang Independent Director: Wang Zhigang, Yang Kaijun and Zhang Taowei Supervisor: Sun Xianli, She Jianhui Range of payment Number of persons RMB 150,000 ～ RMB 250,000 1 RMB 100,000 ～ RMB 150,000 2 RMB 50,000 ～ RMB 100,000 1 §6. Report of the Board of Directors 6.1 Discussion and analysis to the whole operation in the report period 1. Four certificates (Land Certificate, Land Use License, Planning License and Construction License) of Wuhan Real Estate Project has been handled over, the Company strived for the partial development funds and completed project bidding; and all preparation work for development has been completed all-sidedly. The 1st phase project started foundations construction in the 4th quarter of 2004. 2. Project of Sanya Wanjia Holiday Inn entered into the phase of exquisite decoration and started to conduct the business-opening preparation work. 3. To liquidize remnant assets, the Company programmed the 3rd phase project of Longzhu New City. 4. Pearl River Property developed the comprehensive business such as real estate and etc. by relying on brand advantage. 6.2 Statement of main operations classified according to industries or products Unit: RMB Classified according to Income Cost of Gross Increase/ Increase/ Increase/ industries or products from main main profit decrease of decrease of cost decrease of operations operations ratio income from of main gross profit (%) main operations operations ratio compared compared with compared with with the the previous the previous previous year year (%) year (%) (%) Income from sales of 1,145,259 1,345,495 -17.48 -90.29 -86.30 Down 34% real estate Income from property 14,532,747 11,788,749 18.88 39.03 46.15 Down 4% management Income from tour 5,607,564 5,245,947 6.45 29.66 30.24 No change service Income from 3,445,470 2,015,712 41.50 105.27 100.56 Up 1% engineering supervision Including: total amount of related transactions that the listed company sold products or provided labor service to the controlling shareholder and its subsidiaries was RMB 0.00 in the report period. 6.3 Particulars about main operations classified according to areas Unit: RMB Areas Income from Increase/decrease of income from Proportion of income from main operations main operations compared with main operations for 2004 the previous year (%) in the total revenue Hainan 24,725,541 -78.82 99.90% 6.4 Particulars about the customers of purchase and sales Total amount of purchase of 9,530,000 Proportion in the total 45.20% the top five suppliers amount of purchase Total amount of sales of the 2,120,000 Proportion in the total 12.60% top five sales customers amount of sales 6.5 Operation of share-holding companies (applicable to the situation where investment equity takes over 10% of its net profit) √Applicable □Inapplicable Name of share-holding company Southwest Securities Co., Ltd. Investment earnings contributed in -53,657,486 Proportion in net profit 51.84% the period of listed company Business scope Comprehensive securities Share-holding company Net profit -161,750,992 (in addition, adjusted retroactively RMB -440,289,643) 6.6 Explanation on reasons of material changes in main operations and its structure □Applicable √Inapplicable 6.7 Explanation on reasons of material changes in profitability capability of main operations (gross profit ratio) compared with the previous year □Applicable √Inapplicable 6.8 Analysis to reasons of material changes in operating results and profit structure compared with the previous year □Applicable √Inapplicable Analysis to reasons of material changes in the whole financial position than that in the last year □Applicable √Inapplicable 6.9 Explanation on the past, current and future important effects of the material changes in production and operation environment, macro-policies and regulations on the Company’s financial position and operating results □Applicable √Inapplicable 6.10 Completion of the profit estimation □Applicable √Inapplicable 6.11 Completion of the business plan □Applicable √Inapplicable 6.12 Application of the raised proceeds □Applicable √Inapplicable Particulars about the changed projects □Applicable √Inapplicable 6.13 Application of the proceeds non-raised through shares offering √Applicable □Inapplicable Name of project Amount of project Progress of project Earning of project Sanya Wanjia Junhua Holiday Inn RMB 39.14 million Exquisite decoration Naught engineering Wuhan Real Estate Project RMB 68.17 million The 1st phase Naught foundations engineering 6.14 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants □Applicable √Inapplicable 6.15 Business plan as of the next year of the Board of Directors √Applicable □Inapplicable In 2005, the Company will grasp core business tightly, and ready the following tasks: 1. To start the 1st phase engineering of Wuhan Real Estate project roundly, and realize commence sales. 2. To complete the ending engineering of Sanya Wanjia Hotel, and try to bring it into trial operation as soon as possible. 3. To liquidize the remanent land in Haikou, and start the 3rd phase project of Longzhu New City. Profit estimation of the new report year □Applicable √Inapplicable 6.16 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors In the report period, the Company would conduct neither profit distribution nor converting capital reserve into share capital due to deficit. The Company did not appropriate share distribution preplan though the Company achieved the profit in the report period □Applicable √Inapplicable §7. Significant Events 7.1 Purchase of assets □Applicable √Inapplicable 7.2 Sales of assets □Applicable √Inapplicable 7.3 Significant guarantees □Applicable √Inapplicable 7.4 Significant related transactions 7.4.1 Related sale and purchase □Applicable √Inapplicable 7.4.2 Related credits and liabilities current √Applicable □Inapplicable Unit: RMB’0000 To supply funds to related parties Related parties supplies Related parties funds to Listed Company Occurred amount Balance Occurred amount Balance Beijing Xinxing Real Estate Development -641 5226 General Company (the actual controller of the controlling shareholder) Beijing Wanfa Real Estate Development Co., 1200 1200 Ltd. (the controlling shareholder) Hainan Longzhu Shunda Entertainment Co., 0 549 Ltd. (affiliated enterprise) Guangzhou Lishengde Investment Co., Ltd. 0 440 (the second largest shareholder) Shanghai Sea Pearl Property Corporation -22 107 (affiliated enterprise) Total -22 1096 559 6426 Including: Occurred amount and balance that the Company supplied funds to the controlling shareholder and its subsidiaries was RMB 0.00 and RMB 0.00 respectively in the report period. 7.5 Entrust financing □Applicable √Inapplicable 7.6 Implementation of commitment items □Applicable √Inapplicable 7.7 Significant lawsuit and arbitrations √ Applicable □ Inapplicable The case on the Company prosecuted Hainan Zhongkexin Industrial Development Co., Ltd. and Hainan Overseas Chinese Commerce Co., Ltd. to pay the arrears for purchase of houses and overdue default fine, Haikou Municipal Intermediate People’s Court issued the judgment in July 2003, which judged Hainan Zhongkexin Industrial Development Co., Ltd. to pay the rest arrears for purchased of houses amounting to RMB 9.4 million and overdue default fine amounting to RMB 1.15 million. The Company received all arrears on Mar. 2, 2004 and Mar. 30, 2004, and the said case has been finished. The said event was published on Securities Times dated Apr. 23, 2004. 7.8 Particulars about the performance of obligations of Independent Directors 1. Particulars about the independent directors attending the Board meeting Name of Times that should Times of Times of Times of Remark Independent be attend the personal commission absence Directors Board meeting presence presence Wang Zhigang To go abroad 5 4 / 1 due to business Yang Kaijun 5 5 / / Zhang Taowei 5 5 / / 2. Particulars about the independent directors proposed different opinions about the relevant matters of the Company □Applicable √Inapplicable §8. Report of the Supervisory Committee □Applicable √Inapplicable §9. Financial Report 9.1 Auditors’ Opinion To the members of Hainan Pearl River Holding Company Limited (incorporated in the People's Republic of China with limited liability) We have audited accompanying consolidated balance sheet of Hainan Pearl River Holding Company Limited (the "Company") and its subsidiaries (the "Group") as of 31 December 2004, and the related consolidated statements of income and cash flows for the year then ended. The financial statements as set out on pages 2 to 29 are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing issued by the International Federation of 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 give a true and fair view of the state of the Group's affairs as of 31 December 2004 and of the Group's loss and cash flows for the year then ended in accordance with International Financial Reporting Standards. Grant Thornton Certified Public Accountants Hong Kong [Date] 9.2 Notes to accounting statement 1. Compared with the latest annual report, there was no change in accounting policy, accounting estimate and calculation method. 2. Compared with the latest annual report, the Company no longer consolidated balance sheet of Beijing Baili Network Technology Co., Ltd. and Hainan Pearl River Supervision Co., Ltd. and accounting statement of Hainan Pearl River Tubular Pile Co., Ltd.. 9.3 Accounting statement (Attached hereafter) Board of Directors of Hainan Pearl River Holdings Co., Ltd. April 12, 2005 11 Consolidated statement of income for the year ended 31 December 2004 Notes 2004 2003 RMB'000 RMB'000 Turnover 6 24,751 129,561 Cost of sales (21,482) (97,180) Gross profit 3,269 32,381 Other revenue 7 12,448 1,856 Gain on disposal of subsidiaries 106 18,158 Selling, general and administrative expenses (22,810) (26,471) Amortisation of intangible assets 15 (1,716) (1,674) Write back of impairment of properties held for sale 199 2,276 Provision for doubtful debts (7,960) (2,126) Provision for impairment of long term investments (62,496) (332) (Loss)/Profit from operations 8 (78,960) 24,068 Net finance costs 9 (17,564) (18,748) Loss from associates (351) (3,310) (Loss)/Profit before taxation (96,875) 2,010 Taxation 10 - - (Loss)/Profit before minority interests (96,875) 2,010 Minority interests 1,397 706 (Loss)/Profit for the year (95,478) 2,716 (Loss)/Profit per share (RMB Fen) 11 (25.28) 0.72 Consolidated balance sheet as of 31 December 2004 Notes 2004 2003 RMB'000 RMB'000 ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 12 87,559 89,772 Land use rights 13 27,131 - Long term investments 14 92,835 154,509 Intangible assets 15 10,017 13,825 217,542 258,106 Current assets Properties held for sale 16 326,096 264,474 Inventories 17 591 636 Trade and other receivables 18 70,825 81,627 Amounts due from associates 19 528 3,914 Amounts due from investee companies 20 220 - Amounts due from unconsolidated subsidiaries 21 130 - Amount due from a related company 3,960 4,180 Cash at banks and in hand 16,758 58,692 419,108 413,523 Current liabilities Secured bank loans – current portion 22 81,220 93,570 Other loans – current portion 23 15,000 167,000 Trade and other payables 24 162,092 119,338 Amounts due to associates 19 1,616 2,352 Amounts due to investee companies 20 446 226 Amount due to an unconsolidated subsidiary 21 178 - Loans from related companies 25 63,196 58,670 Dividends payable 3,213 3,213 326,961 444,369 Net current assets/(liabilities) 92,147 (30,846) Non-current liabilities Secured bank loans – non-current portion 22 25,000 - Other loans – non-current portion 23 152,000 - 177,000 - Minority interests 7,159 6,252 Net assets 125,530 221,008 CAPITAL AND RESERVES Share capital 26 377,651 377,651 Reserves 27 (252,121) (156,643) Shareholders’ funds 125,530 221,008 __________________________ __________________________ Director Director Consolidated statement of changes in equity for the year ended 31 December 2004 Share Capital Revenue Accumulated capital reserve reserve losses Total RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 Balance at 1 January 2003 377,651 288,912 109,908 (558,179) 218,292 Profit for the year - - - 2,716 2,716 Balance at 31 December 2003 and as at 1 January 2004 377,651 288,912 109,908 (555,463) 221,008 Loss for the year - - - (95,478) (95,478) Balance at 31 December 2004 377,651 288,912 109,908 (650,941) 125,530 Consolidated cash flow statement for the year ended 31 December 2004 2004 2003 Notes RMB'000 RMB'000 Cash flows from operating activities (Loss)/Profit before taxation (96,875) 2,010 Adjustments for : Depreciation 3,923 7,960 Provision for doubtful debts 7,960 2,126 Provision for impairment of long term investments 62,496 332 Write back of impairment of properties held for sale (199) (2,276) Loss from associates 351 3,310 Gain on disposal of subsidiaries 30 (106) (18,158) Loss/(Gain) on disposal of property, plant and equipment 2,239 (335) Amortisation of intangible assets 1,716 1,674 Interest income (1,074) (763) Interest expense 18,638 19,511 Operating (loss)/profit before working capital changes (931) 15,391 Increase in trade and other receivables (10,221) (3,806) Increase in properties held for sale (61,423) (20,101) Decrease/(Increase) in inventories 35 (6,279) Increase in amounts due from unconsolidated subsidiaries (130) - Decrease in amounts due from associates 3,386 2,780 Increase in amounts due from investee companies (220) - Increase in trade and other payables 45,205 35,630 (Decrease)/Increase in amounts due to associates (736) 1,500 Increase in amounts due to investee companies 220 226 Increase in amount due to an unconsolidated subsidiary 178 - Cash (used in)/generated from operations (24,637) 25,341 Interest paid (15,200) (7,159) (39,837) 18,182 Cash flows from investing activities Proceeds from disposal of property, plant and equipment 1,297 2,246 Acquisition of a subsidiary net of cash acquired 29 - (6,335) Disposal of subsidiaries net of cash disposed of 30 414 13,679 Increase in long term investments (1,725) (225) Purchases of property, plant and equipment (35,907) (22,896) Interest received 1,074 763 Net cash used in investing activities (34,847) (12,768) Cash flows from financing activities Bank loans repayment (12,350) (4,465) New bank loans raised 25,000 3,000 Increase in loan from related companies 22,000 39,500 Repayment of loan from related companies (6,700) - Capital contribution by minority interests 4,800 - Net cash generated from financing activities 32,750 38,035 (Decrease)/Increase in cash (41,934) 43,449 Cash at beginning of year 58,692 15,243 Cash at end of year 16,758 58,692 Notes to the financial statements for the year ended 31 December 2004 1. ORGANISATION AND OPERATIONS Hainan Pearl River Holding Company Limited (the "Company") was incorporated in the People's Republic of China (the "PRC") in November 1987. On 3 January 1992, the Hainan Provincial People's Government approved the reorganisation of the Company into a joint stock limited company. The principal activities of the Company and its subsidiaries (the "Group") are properties development and management and travel related services. Last year, the Group also engaged in manufacture of PHC-pipe. The registered office of the Company is located at 29/F., Dihao Building, Pearl River Plaza, Binhai Avenue, Haikou, Hainan, PRC. The average number of employees of the Group during the year was 1,156 (2003 : 960). 2. BASIS OF PRESENTATION The consolidated financial statements of the Group incorporate the financial statements of the Company and its major subsidiaries made up to 31 December 2004. All material inter-company transactions and balances are eliminated on consolidation. As of 31 December 2004, the Company had the following subsidiaries, which were all incorporated in the PRC : Date of Attributable Registered Company name establishment equity interest capital Principal activities Consolidated subsidiaries Hainan Pearl River Properties and 22 August 1991 98% RMB5,000,000 Property Hotels Management Co., Ltd. management ("海南珠江物业酒店管理 有限公司") Hainan Pearl River Enterprises 29 June 1993 100% RMB40,000,000 Property Holding Co., Ltd. Shanghai Real development Estate Co. ("海南珠江实业股份有限 公司上海房地产公司") Hainan Pearl River Tourism Co. 5 April 1994 95% RMB1,500,000 Travel services Ltd ("海南珠江国际旅行社有限公 司") 2. BASIS OF PRESENTATION (Continued) Date of Attributable Registered Company name establishment equity interest capital Principal activities Consolidated subsidiaries Hubei Pearl River Real Estate 12 April 2001 88% RMB37,500,000 Property Development Co., Ltd. development ("湖北珠江房地产开发 有限公司") Sanya Wanjia Hotel Management 19 March 2003 100% RMB40,000,000 Hotel management Co., Ltd. ("三亚万嘉酒店管理 有限公司") A subsidiary is a company controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefit from its activities. Acquired subsidiaries are subject to application of the purchase method. This involves the revaluation at fair value of all identification assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their revalued amounts, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of income from the effective date of acquisition or up to the effective date of disposal, as appropriate. The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group's share of its net assets together with any unamortised goodwill or negative goodwill. 2. BASIS OF PRESENTATION (Continued) During the year, the Group disposed of the following subsidiaries. These subsidiaries did not constitute any major line of business which was not disclosed as discontinuing operations in the financial statements. Attributable Company name equity interest Principal activities Hainan Pearl River Enterprises Project Construction Supervision 100% Construction supervision Co., Ltd. and management ("海南珠江实业工程建设监理公司") Beijing Baili-net Technology Co., Ltd. 75% Information technology ("北京百利网科技有限公司") consulting services As of 31 December 2004, the following subsidiaries are not consolidated where in the directors' opinion, the Group cannot exercise control over these companies and the operations are not in the same line with the Group. Attributable Company name equity interest Principal activities Hainan Pearl River Haikou Environmental Projects Company 100% Environmental construction ("海南珠江海口绿化工程公司") Hainan Pearl River Environmental Projects Co., Ltd. 100% Environmental construction ("海南珠江绿化工程有限公司") Hainan Pearl River Estate Cleaning Company 100% Buildings cleaning ("海南珠江物业清洁公司") Pearl River Estate Machine Engineering Company 100% Selling machinery ("珠江物业机电工程公司") Hainan Pearl River Estate Marketing Co., Ltd. 100% Properties selling agent ("海南珠江不动产营销策划有限公司") 2. BASIS OF PRESENTATION (Continued) As of 31 December 2004, the Company had the following major associates, which were all incorporated in the PRC : Date of Attributable Registered Principal activities Company name establishment equity interest capital Beijing Dirui Computer & 12 August 1999 27.27% RMB41,250,000 Hotel video Technology Co., Ltd. communication ("北京市迪瑞计算技术有 system 限公司") Beijing Wanwangyuan 25 September 2000 30% RMB30,000,000 Communication Communication & technique and Technology Co. system ("北京万网元通讯技术公 司") Beijing Feikai Biological 21 February 2001 40% RMB15,000,000 Biological technique Technology Co. research ("北京飞凯生物技术公司") Beijing Xin Li Ji Vacuum Glass 27 March 2001 34.89% RMB25,000,000 Investment holding Technique Co., Ltd ("北京新立基真空玻璃技 术有限公司") Zhongjinwang Database Co., 20 June 1996 18.397% RMB80,000,000 Interest services Ltd ("中经网数据有限公司") An associate is a company, other than a subsidiary, in which the Group has a long term equity interest and over which the Group is in a position to exercise significant influence on its financial and operating policy decisions. The results of the above associates are accounted for by using the equity method of accounting and the Group's interests are stated at the share of net assets value in these associates. 3. PRINCIPAL ACCOUNTING POLICIES The non-statutory consolidated financial statements are prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS"). The statutory financial statements are prepared in accordance with the PRC Accounting Standards for Business Enterprises and the Accounting System for Business Enterprises ("Statutory Accounts"), which differ in certain respects from IFRS. These consolidated financial statements have incorporated adjustments made to the Statutory Accounts in order to conform to IFRS. The impact on IFRS and other adjustments between the Statutory Accounts and these financial statements are summarised in note 33. The Group's operations are principally conducted in the PRC. Accordingly, the consolidated financial statements of the Group have been prepared in Renminbi ("RMB"), being the functional currency of the Group. The following principal accounting policies were adopted in preparation of the consolidated financial statements of the Group to conform to IFRS : (a) Property, plant and equipment (i) Depreciation Depreciation is provided to write off the cost of property, plant and equipment over their estimated useful lives using the straight line method. The estimated useful lives of property, plant and equipment are as follows : Land and buildings 25 years Machinery and equipment 10 years Furniture and fixtures 5 years Motor vehicles 5 years (ii) Measurement bases Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to the working condition and location for its intended use. When assets are sold or retired, any gain or loss resulting from their disposal, being the difference between the net disposal proceeds and the carrying amount of the assets, is included in the consolidated statement of income. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (b) Construction in progress Construction in progress represents machineries and properties under construction and is stated at cost. Cost includes construction cost plus interest charges arising from borrowings used to finance these projects during the construction period. Construction in progress is transferred to property, plant and equipment when it is capable of producing saleable output on a commercial basis. (c) Goodwill Goodwill represents the premium of purchase consideration over the fair values ascribed to the net assets of subsidiaries or associates acquired and is amortised, using the straight line method, over a period of 10 years. (d) Long term investments All investments are initially recognised at cost being the fair value of the consideration given and including transaction costs. They are subsequently carried at fair value based on quoted market prices, when available. For unquoted investments, management considers all available factors in determining fair value, which may include cost, the type of investment, subsequent purchases of the same or similar investments, and the current financial position and operating results of the company invested in. Any investment that does not have a quoted market price in an active market and where fair value cannot be reliably measured is stated at cost and is subject to review for impairment. Investments intended to be held on a continuing basis are classified as available-for-sale investments. Changes in fair value in these investments are recognised in a revaluation reserve when these changes arise. In the case of impairment the deficit is recognised in the consolidated statement of income. When these investment are disposed of, the related revaluation surplus or deficit is recognised as income or an expense. Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as trading investment and included in current assets. Changes in fair value in these investments are recognised in the consolidated statement of income as they arise. (e) Land use right Land use right are up-front payments to acquire long-term interests in the usage of land and stated at cost less provision for impairment where necessary and is charged to consolidated statement of income over the term of right remaining period of the land on the straight line method. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (f) Impairment The carrying amounts of the Group's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. All impairment losses are recognised in the consolidated statement of income. Calculation of recoverable amount The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversal of impairment An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (g) Properties held for sale Properties held for sale are stated at the lower of cost and net realisable value. Cost of properties held for sale includes cost of construction, development expenditures and interest charges capitalised. Net realisable value is determined on the basis of the estimated selling price less further costs of construction and estimated costs necessary to make the sale. (h) Related parties Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (i) Borrowing costs Costs incurred on borrowings that are directly attributable to the construction of the hotel in Sanya and properties held for sale in Wuhan are capitalised as part of the cost of the hotel and the properties held for sale up to the completion of their construction. Any other borrowing costs are charged to the consolidated statement of income in the period in which they are incurred. (j) Foreign currencies Transactions in foreign currencies are translated into Renminbi Yuan at the rates of exchange ruling at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Renminbi Yuan at the rates of exchange ruling at that date. Exchange differences are dealt with in the consolidated statement of income. (k) Recognition of revenue Revenue from the sale of developed properties is recognised when title of the property is transferred and the buyer takes legal possession of the property. Revenue from property management is recognised when the management service is provided. Revenue from travel-related services is recognised when the related services are performed. (l) Provision A provision is recognised in the consolidated balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (m) Segmental reporting In accordance with the Group's internal financial reporting, the Group has determined that business segments be represented as the primary reporting format and geographical segment as the secondary reporting format. Unallocated costs represented corporate expenses. Segment assets consist primarily of intangible assets, property, plant and equipment, inventories, receivables and operating cash. Unallocated assets include long term investments and intangible which cannot be allocated to any segment. Segment liabilities comprise operating liabilities and exclude items such as taxation and certain corporate borrowings. Capital expenditure comprises additions to land use rights, intangible assets and property, plant and equipment, including additions resulting from acquisitions of subsidiaries. In respect of geographical segment reporting, sales are based on the country in which the customer is located and total assets and capital expenditure are where the assets are located. (n) Retirement benefits Pursuant to the relevant regulations of the PRC government, the Group participates in a local municipal government retirement benefits scheme (the "Scheme"), whereby the Group is required to contribute a certain percentage of the basic salaries of its employees to the Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees of the Group. The only obligation of the Group with respect to the Scheme is to pay the ongoing required contributions under the Scheme mentioned above. Contributions under the Scheme are charged to the consolidated statement of income as incurred. There are no provisions under the Scheme whereby forfeited contributions may be used to reduce future contributions. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (p) Discontinuing operation A discontinuing operation is a clearly distinguishable component of the Group's business, both operationally and for financial reporting purposes, that is disposed of or abandoned pursuant to a single plan, and which represents a separate major line of business or geographical area of operation. (q) Cash and cash equivalent Cash comprises cash on hand and demand deposits repayable on demand with any bank or other financial institution. Cash includes deposits denominated in foreign currencies. Cash equivalents represent short-term, highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are also included as a component of cash and cash equivalents for the purpose of the cash flow statement. 4. SEGMENT INFORMATION Segmental information of the Group by business segment (primary segment) and geographical segment (secondary segment) are as follows : (a) Business segment Discontinuing operations Continuing operations (see note 5) Properties development and Travel-related Manufacture management services of PHC-pipe Total 2004 2003 2004 2003 2004 2003 2004 2003 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 Turnover 19,143 25,766 5,608 4,325 - 99,470 24,751 129,561 Segment results (7,314) 1,259 24 11 - 23,625 (7,290) 24,895 Unallocated expenses (71,670) (827) Loss from associates (351) (3,310) Net finance costs (17,564) (18,748) Minority interests 1,397 706 (Loss)/Profit for the year (95,478) 2,716 Segment assets 409,776 453,060 124,022 50,233 - - 533,798 503,293 Unallocated assets 102,852 168,336 Total assets 636,650 671,629 Segment liabilities 448,618 434,785 55,342 9,584 - - 503,960 444,369 Unallocated liabilities - - Total liabilities 503,960 444,369 Capital expenditure 4,573 13,826 31,334 1,850 - 7,219 35,907 22,895 Depreciation 3,899 3,214 24 22 - 4,724 3,923 7,960 Non-cash expenses other than depreciation 7,740 2,126 - - - - 7,740 2,126 Unallocated non-cash expenses 62,496 332 70,236 2,458 4. SEGMENT INFORMATION (Continued) (b) Geographical segment The sales and the capital expenditure of the Group during the years ended 31 December 2003 and 2004 were made in the PRC. All of the Group's assets as of 31 December 2004 were located in the PRC. 5. DISCONTINUING OPERATIONS The Group entered into a sale and purchase agreement with an independent third party on 22 October 2003 under which the Group agreed to dispose of 98.67% equity interest in its wholly-owned subsidiary, Hainan Pearl River Pile Co., Ltd., which was engaged in manufacture of PHC-pipe for a consideration of RMB50 million. The disposal was to raise funding for the Group's property and hotel development in Wuhan and Sanya respectively. The disposal was completed in December 2003. As of 31 December 2003, the Group received from the independent third party cash consideration of RMB25,548,000 and the remaining portion was included under other receivables under current assets. As a result, manufacture of PHC-pipe is reported in the financial statements for the year ended 31 December 2003 as a discontinuing operation. The sales, results, cash flows and net assets of this discontinued segment were as follows: 2004 2003 RMB'000 RMB'000 Sales and results: Sales - 99,470 Operating expenses - (78,455) Profit for the year - 21,015 Assets and liabilities: Total assets - 97,028 Total liabilities - (64,635) Net assets - 32,393 Cash flows: Operating cash flows - 20,245 Investing cash flows - (10,890) Financing cash flows - (1,015) Total cash flows - 8,340 6. TURNOVER 2004 2003 RMB'000 RMB'000 Properties development 1,145 11,790 Properties management income 17,978 12,132 Travel-related services 5,608 4,325 Sales of PHC-pipe - 99,470 Others 20 1,844 24,751 129,561 7. OTHER REVENUE 2004 2003 RMB'000 RMB'000 Rental income 944 1,618 Waiver of other payables 10,482 - Others 1,062 238 12,448 1,856 8. (LOSS)/PROFIT FROM OPERATIONS 2004 2003 RMB'000 RMB'000 (Loss)/Profit from operations is arrived at after charging/(crediting) : Amortisation of intangible assets 1,716 1,674 Depreciation of property, plant and equipment 3,923 7,960 Loss/(Gain) on disposal of property, plant and equipment 2,239 (335) Staff cost 4,461 8,126 9. NET FINANCE COSTS 2004 2003 RMB'000 RMB'000 Interest charges on bank loans 7,124 8,065 Interest charges on other loans 9,249 9,249 Interest charges on loans from related companies 2,938 2,268 Interest charges on other interest-bearing payables 1,395 293 Less : interest capitalised included in properties held for sale and construction in progress (2,068) (364) 18,638 19,511 Interest income (1,074) (763) 17,564 18,748 The borrowing costs have been capitalised at a rate of 10% per annum (2003 : 2%). 10. TAXATION The Group provides for taxation on the basis of its income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes. The tax expense can be reconciled to the (loss)/profit per the consolidated statement of income as follows : 2004 2003 RMB'000 RMB'000 (Loss)/Profit before taxation (95,478) 2,716 Tax on (loss)/profit before taxation, calculated at the rates applicable to the tax jurisdiction (31,508) 896 Tax effect on expenses that are not deductible in determining taxable profit 22,339 - Tax effect on income that are not assessable in determining taxable profit (35) (2,388) Tax loss utilisation (2,544) (363) Tax loss carried forward 11,748 1,855 Actual tax expenses - - 10. TAXATION (Continued) At 31 December 2004, the amount of unrecognised deferred tax asset in respect of unused tax losses is as follows : 2004 2003 RMB'000 RMB'000 At 1 January 18,527 17,915 Tax loss expired during the year (403) (880) Tax loss incurred during the year (2,544) (363) Tax loss utilisation 11,748 1,855 At 31 December 27,328 18,527 Deferred tax asset in respect of tax losses has not been recognised in the financial statements due to the unpredictability of future profit streams. The tax losses will expire in five years under current tax legislation. 11. (LOSS)/PROFIT PER SHARE (Loss)/Profit per share was calculated based on the loss for the year of RMB95,478,000 (2003 : profit for the year of RMB2,716,000) and on the weighted average number of 377,650,800 (2003 : 377,650,800) shares during the year. 12. PROPERTY, PLANT AND EQUIPMENT Land and Machinery and Motor Furniture Construction buildings equipment vehicles and fixture in progress RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 Gross carrying amount 13,316 23,767 7,554 5,093 69,266 Accumulated depreciation (2,019) (16,474) (6,099) (4,632) Carrying amount at 1 January 2004 11,297 7,293 1,455 461 69,266 Gross carrying amount 9,686 20,462 7,524 4,807 73,457 Accumulated depreciation (2,318) (16,438) (5,739) (3,882) Carrying amount at 31 December 2004 7,368 4,024 1,785 925 73,457 The carrying amounts of property, plant and equipment for the year presented in the financial statements as of 31 December 2004 a Land and Machinery and Motor Furniture Construction buildings equipment vehicles and fixture in progress RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 Carrying amount at 1 January 2004 11,297 7,293 1,455 461 69,266 Additions – separately acquired - 2,785 799 1,001 31,322 Assets disposed (3,341) - (83) (112) Depreciation (588) (2,524) (386) (425) Disposal of subsidiaries (see note 27) - (3,530) - - Transfer to land use rights - - - - (27,131 Carrying amount at 31 December 2004 7,368 4,024 1,785 925 73,457 13. LAND USE RIGHT 2004 2003 RMB'000 RMB'000 Cost At 1 January - - Transfer from construction in progress 27,131 - At 31 December 27,131 - Accumulated amortisation Balance at 1 January and 31 December - - Net book value 27,131 - Land use right represents the right to use the land at Sanya City for a period for 41 years from 2004 to 2045. The land use right amounted to RMB27,131,000 (2003 : nil) is pledged to a bank to secure a bank loan amounted to RMB20,000,000 (2003 : nil). 14. LONG TERM INVESTMENTS 2004 2003 RMB'000 RMB'000 Investments in unconsolidated subsidiaries - unlisted, at cost 2,731 1,144 Interest in associates - unlisted, share of net assets value 28,207 28,420 Investments in unlisted shares of public companies, at cost 1,680 1,680 Other investments, at cost 195,828 196,380 228,446 227,624 Provisions (135,611) (73,115) 92,835 154,509 32 15. INTANGIBLE ASSETS 2004 2003 RMB'000 RMB'000 Goodwill Gross carrying amount 14,602 17,163 Accumulated amortisation (4,585) (3,338) Carrying amount 10,017 13,825 The carrying amount of the intangible assets of the year presented in the financial statements as of 31 December 2004 are reconciled as follows: 2004 RMB'000 Carrying amount at 1 January 13,825 Amortisation (1,716) Disposal – disposal of a subsidiary (see note 30) (2,092) Carrying amount at 31 December 10,017 16. PROPERTIES HELD FOR SALE 2004 2003 RMB'000 RMB'000 Completed properties 136,864 135,444 Properties under development 235,448 175,445 Less : Provisions for impairment (46,216) (46,415) 326,096 264,474 16. PROPERTIES HELD FOR SALE (Continued) Particulars of properties under development as of 31 December 2004 are as follows : Area in Average cost square per square Project meter meter Cost RMB RMB'000 Yanjiang First Road 76,780 797 61,172 Longzhou New Town/ 龙珠国际大酒店 37,300 1,128 42,064 Wuhan Mingzhu Garden/ 武汉明珠嘉园 Note 128,873 Others 3,339 235,448 The properties under development in Wuhan is divided into 2 phases. The cost included the land cost where the properties situated. The total saleable building area after completion will be approximately 410,000 square metre. The first phase construction was commenced in December 2004 and pre-sales are expected to be made in July 2005. As stated in note 3 (g) above, properties held for sale are stated at the lower of cost and net realisable value. The estimation of net realisable value of properties held for sale requires the Company's directors to make assumptions on future market conditions with reference to currently available information and valuation made by professional valuer and bankers. As of 31 December 2004, the directors' valuation on properties for sale was performed after taking into consideration the latest sale transactions, if any, or the announcement of the minimum selling prices on the land located nearby the properties held for sale held by the Group. The minimum selling prices are set by the government from time to time based on the supply and demand of the property market in the PRC. Completed properties in both Haikou and Shanghai are pledged to banks securing bank loans amounted to RMB81,220,000 (2003 : RMB90,570,000). The cost of properties pledged amounted to RMB107,343,000 (2003 : RMB105,430,000). Land use right in Wuhan included in the cost of properties under development is pledged to a bank to secure a bank loan of RMB120,000,000 of which RMB5,000,000 was drawn down by the Group as of 31 December 2004 (2003 : nil). 17. INVENTORIES As of 31 December 2004, all of the inventories held were stated at cost. 18. TRADE AND OTHER RECEIVABLES 2004 2003 RMB'000 RMB'000 Trade receivables 3,688 28,066 Other receivables and prepaid expenses 83,814 77,645 Less : Provisions (16,677) (24,084) 70,825 81,627 19. AMOUNTS DUE FROM/TO ASSOCIATES The amounts outstanding are interest free, unsecured and have no fixed term of repayments. 20. AMOUNTS DUE FROM/TO INVESTEE COMPANIES The amounts outstanding are interest free, unsecured and have no fixed term of repayments. 21. AMOUNTS DUE FROM/TO UNCONSOLIDATED SUBSIDIARIES The amounts outstanding are interest free, unsecured and have no fixed term of repayments. 22. SECURED BANK LOANS 2004 2003 RMB'000 RMB'000 Bank loans repayable within one year 81,220 93,570 Bank loans repayable within one to two years 20,000 - Bank loans repayable within two to five years - - Bank loans repayable over five years 5,000 - Less : Current portion due within one year included under current liabilities (81,220) (93,570) Non-current portion included under non-current liabilities 25,000 - 22. SECURED BANK LOANS As of 31 December 2004, all of the bank loans were in RMB. The bank loans bear interest at rate of from 5.31% to 9.12% per annum (2003 : 5.84% to 9.12%). Fair value of the above non-current secured bank loans approximately amounted to RMB25 millions. Fair values of non-current secured bank loans have been determined by calculating their present values at the balance sheet date, using fixed effective market interest rates available to the Group. 23. OTHER LOANS 2004 2003 RMB'000 RMB'000 Other loans repayable within one year 15,000 167,000 Other loans repayable within one to two years 152,000 - Less : Current portion due within one year included under current liabilities (15,000) (167,000) Non-current portion included under non-current liabilities 152,000 - Other loans represent trust lending loans bearing interest at a rate of from 5.022% to 5.184% (2003 : 5.31% to 5.49%) per annum. The trust party of the loan is Beijing Xin Xing Property Development Company Limited, a major shareholder of the Company's major shareholder, Beijing Wanfa Property Development Company Limited. Loans included in current portion in the financial statements are repayable in the fourth quarter of 2005. The remaining portion of loans represented two years trust loan, repayable in the fourth quarter of 2006. Fair value of the above non-current other loans approximately amounted to RMB152 millions. Fair values of non-current other loans have been determined by calculating their present values at the balance sheet date, using fixed effective market interest rates available to the Group. 24. TRADE AND OTHER PAYABLES 2004 2003 RMB'000 RMB'000 Trade payables 8,356 19,818 Other payables and accrued expenses 153,736 99,520 162,092 119,338 Included in other payables, there are interest bearing payables amounted to RMB39,200,000 (2003 : RMB20,700,000). The interest rates ranged from 5.04% to 7% per annum (2003 : 5.04% to 5.84% per annum). These payables are unsecured and have no fixed term of repayment. 25. LOANS FROM RELATED COMPANIES Loans from related companies represent loans from Beijing Xin Xing Property Development Company Limited and Beijing Wanfa Property Development Company Limited. The loans are unsecured and bears interest at rates of from 5.04% to 7% per annum (2003 : 5.04% to 7% per annum). 26. SHARE CAPITAL 2004 2003 RMB'000 RMB'000 Registered and fully paid 206,744,976 legal entity shares of RMB 1 each 206,745 206,745 113,405,824 A shares of RMB 1 each 113,406 113,406 57,500,000 B shares of RMB 1 each 57,500 57,500 377,651 377,651 27. RESERVES Capital Revenue Accumulated reserve reserve losses Total RMB'000 RMB'000 RMB'000 RMB'000 Balance at 31 December 2004 288,912 109,908 (650,941) (252,121) Balance at 31 December 2003 288,912 109,908 (555,463) (156,643) According to the Company Law of the PRC and the Article of Association of the Company, when distributing net profit of each year, the Company shall set aside 10% of its net profits as reported in the statutory accounts for the statutory common reserve fund (except when the fund has reached 50% of the Company's registered share capital) and 5% to 10% for the statutory common welfare fund (collectively as "Revenue reserve"). These reserves cannot be used for purposes other than those for which they are created and are not distributable as cash dividends. The Company declares dividends based on the lower of retained earnings as reported in the statutory accounts and the financial statements prepared under IFRS. As the statutory accounts have been prepared on an accounting basis other than IFRS, the net (loss)/profit as reported in the statutory accounts is different from the amount reported in the accompanying consolidated statement of income (see note 30). 28. RELATED PARTY TRANSACTIONS During the year the Group had the following transactions with its related parties : 2004 2003 RMB'000 RMB'000 Interest paid for loans from related companies (see also note 25) 2,938 2,268 Interest paid for trust lending loans (see also note 23) 9,249 9,249 Consideration of disposal of a subsidiary 10,774 - During the year, the Company disposed of a subsidiary, Beijing Baili-net Technology Co., Ltd., to Beijing Xin Xing Property Development Company Limited. The gain arising from this disposal amounted to RMB547,000. 29. ACQUISITION OF A SUBSIDIARY On 12 March 2003, the Group injected additional RMB7,000,000 into Beijing Baili-net Technology Co., Ltd. resulting the equity held by the Group increased from 18% to 75%. The fair value of assets acquired and liabilities assumed were as follows: 2004 2003 RMB'000 RMB'000 Cash at banks and in hand - 665 Property, plant and equipment - 3,430 Trade and other receivables - 22,147 Trade and other payables - (9,658) Minority interests - (4,145) Net assets acquired - 12,439 Goodwill arising on acquisition - 2,561 Consideration - 15,000 Satisfied by : Cash consideration - 7,000 Decrease in other investments - 8,000 - 15,000 Net cash outflow arising on acquisition Cash consideration - (7,000) Cash at banks and in hand acquired - 665 - (6,335) 30. DISPOSAL OF SUBSIDIARIES On 15 December 2004, the Group entered into an agreement with Beijing Xin Xing Property Development Company Limited whereby the Group agreed to dispose of 75% of equity of Beijing Baili-net Technology Co., Ltd. held by the Group with a consideration of RMB10,774,000. The disposal was completed before the year end date. On 24 December 2004, the Group entered into agreements with the employees of Hainan Pearl River Enterprises Project Construction Supervision Co., Ltd. whereby the Group agreed to dispose of all equity of Hainan Pearl River Enterprises Project Construction Supervision Co., Ltd. held by the Group with a consideration of RMB944,000. The disposal was completed before the year end date. 2004 2003 RMB'000 RMB'000 Cash at banks and in hand 530 11,869 Property, plant and equipment 3,530 38,594 Long term investments 552 - Goodwill on consolidation 2,092 - Inventories 10 8,681 Trade and other receivables 13,284 37,884 Bank loans - (30,000) Trade and other payables (5,890) (34,634) Minority interests (2,496) - Net assets disposed of 11,612 32,394 Gain on disposal 106 18,158 Consideration 11,718 50,552 Satisfied by : Cash consideration 944 50,000 Increase in other investments - 552 Settlement of loan from related companies 10,774 - 11,718 50,552 Net cash inflow arising on disposal Cash consideration received 944 25,548 Cash at banks and in hand disposed of (530) (11,869) 414 13,679 31. MAJOR NON-CASH TRANSACTION The disposal of a subsidiary during the year ended 31 December 2004 was satisfied by the waiver of RMB10,774,000 included in loans from related companies. 32. CAPITAL COMMITMENT 2004 2003 RMB'000 RMB'000 Contracted but not provided for Properties, plant and equipment 38,627 10,694 33. IMPACT OF IFRS AND OTHER ADJUSTMENTS ON (LOSS)/PROFIT FOR THE YEAR AND NET ASSETS (Loss)/Profit for the Net assets as of year ended 31 December 31 December 2004 2003 2004 2003 RMB'000 RMB'000 RMB'000 RMB'000 As reported in statutory accounts (103,498) 1,629 157,388 250,895 Impact of IFRS and other adjustments - adjustment on capitalisation of interest charges arising from borrowings used to finance the properties under development during the construction period and corresponding depreciation - 931 - (4,788) - reversal of adjustment on capitalisation of interest charges arising from borrowings used to finance the properties under development during the construction period disposed of in last year - 4,788 - 4,788 - unrecognised losses of consolidated subsidiaries (2,747) (2,445) - - - wavier of payables recorded as movement of capital reserves in statutory accounts now recognised as income 10,482 - - - - reversal of capital reserve arising from transfer of construction in progress from the Company to a subsidiary as capital injection - - (2,072) (363) - goodwill on acquisition of an associate recorded as bad debts under IFRS and reversal of amortisation 306 (3,059) (2,753) (3,059) - gain on disposal of a subsidiary which was recorded as movement in capital reserve in statutory accounts 547 - - - - provision for bad and doubtful debts - - (14,600) (14,600) - adjustment on treasury stock - - (1,410) (1,410) - adjustment to income from an associate - - (9,929) (9,929) - others (568) 872 (1,094) (526) As restated for the Group (95,478) 2,716 125,530 221,008 34. FINANCIAL INSTRUMENTS As of 31 December 2004, the Group's financial instruments mainly consisted of cash at banks and in hand, trade and other receivables, trade and other payables, bank loans, other loans and loans from related companies. (i) Interest rate risk The Group has no significant interest rate risk as interest rate is stable in PRC currently. (ii) Foreign currency risk The Group has no significant foreign currency risk due to limited foreign currency trade related transactions. The Group does not use derivative financial instruments to hedge its foreign currency risk. (iii) Credit risks The Group performs ongoing credit evaluation of its customers' financial position and requires no collateral from its customers. The allowance for doubtful debts is based upon a review of the expected collectibility of all trade and other receivables. The Group's bank balances are maintained with state-owned banks in the PRC. The carrying amounts of the trade and other receivables, amounts due from associates, amounts due from investee companies, amounts due from unconsolidated subsidiaries and amount due from a related company included in the consolidated balance sheet represent the Group's maximum exposure to credit risk in relation to the Group's financial assets. No other financial assets carry a significant exposure to credit risk. The Group has no concentration of credit risk due to its large customer base. (iv) Fair value The directors consider that the carrying amount of cash, trade and other receivables, trade and other payables approximates to their fair value. No fair value changes have been included in consolidated statement of income for the year as non-current loans are carried at amortised cost in the consolidated balance sheet. 35. APPROVAL OF THE FINANCIAL STATEMENTS The financial statements on pages 2 to 32 were approved by the board of directors on [date].