深基地Ｂ(200053)2004年年度报告（英文版）

SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO LTD 2004’S ANNUAL REPORT Important Note: 1． The Board of Directors guarantees that there exist no omission, misstatement, or misleading information in this annual report. The Board of Directors is responsible, individually and jointly, for the authenticity, accuracy and integrity of the information herein. The Annual Report is written in both English and Chinese. In case of conflict between the two versions, Chinese version prevails. 2． There is no director who cannot guarantee the authenticity, accuracy and integrity of the content of this annual report or who has different opinion. 3． There were eight directors attended the Board meeting. Mr. Fong Yue Kwong did not attend the meeting but authorized Mr. Han Guimao to vote for him. 4． Shenzhen Dahua Tiancheng Certified Public Accountants and PricewaterhouseCoopers both presented audit reports with standard and no-reserved audit opinion for our company. 5． Dr. Fu Yuning, the Chairman of the Board of Directors, Mr. Cui Wei, the Financial Controller, and Ms. Yu Zhongxia, the Financial Manager, guarantees the authenticity and integrity of the financial results of this annual report. 1 Catalogue PART I. Company Profile 3 PART II. Accounting and Business Data Highlights 4 PART III. Change of Share Capital and Shareholders 7 PART IV. Information of Directors, Supervisors, Senior Executives and Other Staffs 10 PART V. Administrative Structure 11 PART VI. Review of Annual General Shareholder’Meeting 13 PART VII. Director’ s Statements 15 PART VIII. Report of the Supervisory Committee 21 PART IX. Significant Events 22 PART X. Financial Report 23 PART XI. Documents Available for Verification 58 2 PART I. Company Profile: Name of the Company Shenzhen Chiwan Petroleum Supply Base Co., Ltd (“SCPSB”) Legal Representative Dr. Fu Yuning Company Secretary Mr. Fu Jialin Securities Representative Yu Zhongxia Tel 26694211 Fax 26694227 E-mail Address sa@cpsb-cn.com Office Address Base Building, Chiwan, Nanshan District, Shenzhen, PRC Post Code 518068 E-mail Address sa@cpsb-cn.com Website of the Company Newspapers Selected by the “Securities Times”. ”Ta Kung Pao” Company for Information Disclosure Website for Publishing the http://www.cninfo.com.cn Annual Report Place where the Annual Administration Department of SCPSB Report is available Stock Exchange Shenzhen Stock Exchange Stock Series Shenzhen Base (B share) Stock Code 200053 Date of Initial Registration 24th July 1995 Initial Registration Address Industry and Commerce Administration Bureau of Shenzhen, Guangdong, PRC Registration Number for QGYSZZ No. 101031 Business License Number of Taxation 440301618833899 (N) Registration 440305618833899 (L) Domestic Certified Public Shenzhen Dahua Tiancheng Certified Public Accountants Accountants International Certified PricewaterhouseCoopers Public Accountants 3 PART II. Accounting and Business Data Highlights I. Company Accounting Data and Financial Index of This Year Items RMB Total Profit １１０，３６１，３３２．１０ Ｎｅｔ Ｐｒｏｆｉｔ １００，４１２，０３４．５０ Ｎｅｔ ｐｒｏｆｉｔ ａｆｔｅｒ ｄｅｄｕｃｔｉｎｇ ｎｏｎ－ｒｅｃｕｒｒｉｎｇ ｇａｉｎｓ ａｎｄ ｌｏｓｓｅｓ １００，６５３，４３７．４０ Ｐｒｏｆｉｔ ｆｒｏｍ ｍａｉｎ ｂｕｓｉｎｅｓｓ ｌｉｎｅｓ ８７，９０８，５０５．４２ Profit from other business lines ８３，６４３．５６ Operating profit ６９，０５７，０２５．０８ Investment income ４１，５４５，７０９．９２ Subsidy income ０．００ Net income / expenditure from non-operating －２４１，４０２．９０ Net cash flows arising from operating activities ９９，３９２，７５９．４１ Net increase in cash and cash equivalents ８，２６５，６０９．４５ Note: Items included in the non-recurring gains and losses and the amounts: RMB 1. Stock rights investment difference amortization 0.00 2. Income from non-operation １０６，２９６．０６ ３． Ｅｘｐｅｎｄｉｔｕｒｅ ｏｆ ｎｏｎ－ｏｐｅｒａｔｉｏｎ ３４７，６９８．９６ 4.Subsidy income ０．００ Amount －２４１，４０２．９０ II. Company Main Accounting Data and Financial Index 2004 2003 2002 Item RMB’0,000 RMB’0,000 RMB’0,000 Income from main business lines 15,655 10,962 9,547 Net Profit 10,041 7,535 6,294 Total assets 84,303 70,011 63,872 Shareholders’equity 67,224 63,210 55,675 (Fully diluted) 0.435 0.273 0.261 Earnings per share (Weighted average) 0.435 0.273 0.261 Earnings per share (Fully diluted) 0.436 0.274 0.262 after deducting non-recurring gains (Weighted average) 0.436 0.274 0.262 and losses Net assets per share 2.915 2.741 2.414 Net assets per share after adjustment 2.857 2.693 2.366 Net cash flows per share arising from 0.431 0.299 0.316 operating activities Return on equity (%) (Fully diluted) 14.937 11.921 11.305 Return on equity (%)(Weighted average) 15.279 11.921 11.305 Return on equity (%) after deducting 14.973 11.932 11.336 non-recurring gains and loses (Fully diluted) Return on equity (%) after deducting non-recurring gains and loses (Weighted 15.316 11.932 11.336 average) 4 III. Accessory Form of Profit Statement of This Year Rate of the return on equity and the return of per share calculated in accordance with the requirement of “Regulation (9th) of Compilation and Report of Information Disclosure for Company Distributing Securities to the Public “issued by China Securities Regulatory Commission. 2004 2003 Item Return on equity Earnings per share Return on equity Earnings per share (%) (RMB) (%) (RMB) Fully Weighted Fully Weighted Fully Weighted Fully Weighted diluted average diluted average diluted average diluted average Profit of main １３．０７７ １３．３７６ ０．３８１ ０．３８１ ９．９８６ ９．９８６ ０．２７４ ０．２７４ business lines Operating １０．２７３ １０．５０８ ０．２９９ ０．２９９ ８．４７６ ８．４７６ ０．２３２ ０．２３２ profit Net profit １４．９３７ １５．２７９ ０．４３５ ０．４３５ １１．９２１ １１．９２１ ０．３２７ ０．３２７ Net profit after deducting １４．９７３ １５．３１６ ０．４３６ ０．４３６ １１．９３２ １１．９３２ ０．３２７ ０．３２７ non-recurring gains and losses Note: Calculating Method for the Main Financial Index: Earnings per share (Fully diluted) = Profit of the report period / the total of ordinary shares at the end of the year Earnings per share (Weighted average) = P/(S0+S1+Si*Mi/M0-Sj*Mj/M0) Hereinto: P is the profit during the period under review; S0 is the total of ordinary shares at the beginning of the report period; S1 is the share number increased because of conversion of reserves to shares or the distribution of dividend in terms of share during the period under review; Si is the share number increased because of new shares issue or shares transferred from credit is; Sj is the share number decreased because of redemption or reduction of shares during the period under review; M0 is the number of the month during the period under review; Mi is the number of the month calculating from the next month of increasing shares to the end of the report period; Mj is the number of the month calculating from the next month of decreasing shares to the end of the report period. Net assets per share = Shareholder’ s equity at the end of the year / the total of ordinary shares at the end of the year 5 Net assets per share after adjustment = (Shareholder’ s equity at the end of the year –net amount of account receivable over 3 years – pending amortization charge – pending disposal of net assets(fixed and floating) losses– charge for launch – long-term pending amortization charge –negative balance of housing circulating fund)/ the total of ordinary shares at the end of the year Net cash flows per share arising from operating activities = Net cash flows arising from operating activities / the total of ordinary shares at the end of the year Return on equity (%) (Fully diluted) = Net profit / shareholder’ s equity*100% Return on equity (%) (Weighted average) = P / (E0+NP / 2+Ei*Mi / M0 –Ej*Mj / M0) Hereinto: P is the profit during the period under review; EO is the net assets at the beginning of the report period; NP is the net profit during the period under review; Ei is the net assets increased because of new shares issue and conversion of credit to shares during the period under review; Ej is the net assets decreased because of redemption or distributing cash dividend during the period under review; M0 is the number of the month during the period under review; Mi is the number of the month calculating from the next month of increasing net assets to the end of the report period; Mj is the number of the month calculating from the next month of decreasing net assets to the end of the period. VI. Change of Shareholders’Equity RMB Statutory Discretional Capital public Retained Item Share capital Statutory Surplus Public Surplus public Equity reserve earnings public reserve Welfare fund reserve Year-begin 230,600,000.00 218,558,237.08 48,888,999.43 24,444,499.61 29,902,903.59 27,333,504.63 632,099,728.40 Increase 6,206.85 10,041,203.44 5,020,601.70 5,020,601.70 100,412,034.50 100,418,241.24 Decrease 70,288,424.10 60,279,917.48 Year-end 230,600,000.00 218,564,443.93 58,930,202.81 29,465,101.31 34,923,505.29 57,457,115.03 672,238,052.29 Reasons of change: 1. The increased amount of statutory surplus public reserve and statutory public welfare fund was drawn in accordance with the company’s Article of Association. Statutory surplus public reserve is 10% of the net profit. statutory public welfare fund is 5% of the net assets. 2. The increased amount of retained earnings is the company’s net profit realized this year. 6 PART III. Change of Share Capital and Shareholders I. Change of Share Capital: 1) Form for Change of Share Capital: Unit: share Change in number of shares Before conversion After change bonus rights of reserves others subtotal change shares to shares 1. Untradable shares a. Public promoter’s shares State owned share 119,420,000 Domestic legal entity owned share 51,180,000 -51,180,000 -51,180,000 119,420,000 Foreign investment legal entity owned share Others b. Shares raised from legal entity c. Employee’s shares 170,6000,000 d. Preferred shares 119,420,000 Total 2. Tradable shares 60,000,000 51,180,000 51,180,000 a. A shares b. B shares 60,000,000 c. Overseas listed shares 111,180,000 d. Others Total 3. Total of shares 230,600,000 230,600,000 2) Share Issue and List: In June 1995, the Company obtained approval from Shenzhen Securities and Exchange Commission to issue, at par value of RMB1.00 per share, a total of 230.6 million shares of common stock comprising 119.42 million domestic promoter’ s shares (A-shares), 51.18 million overseas promoter’ s shares (B-shares) and 60 million to overseas public (B-shares). The issue of 60 million B-shares to overseas public was on June 23, 1995 and fully subscribed at HK$2.82 per share with fully diluted P/E ratio of 10.5 times. Trading of shares issued to overseas public in Shenzhen Stock Exchange began on 28 July 1995. Apart from the shares held by promoters and B shares issued, the company did not issue any employees’shares. The number of company’ s shares remained unchanged this year, but according to the approval from China Securities Regulatory Commission, the 51.18 million overseas promoter’ s shares were transferred into tradable B shares in Shenzhen Stock Exchange from 28th July 2004.The 7 overseas promoter is Offshore Joint Services (Base) Company of Singapore Pte. Ltd. We have disclosed this information on 22th July 2004. II. Particulars about Shareholders 1) Total of Shareholders There were altogether 11994 shareholders registered as at 31st 2004, of which China Nanshan Development (Group) Incorporation (CNDI) was the only A-share shareholder. There were 11993 B-share shareholders. 2) Substantial Shareholders The top ten shareholders as of 31st December 2004 are listed below: No Code Shareholder’s name Share Percentage % 1 00038657 CHINA NANSHAN DEVELOPMENT *119,420,000 51.79 (GROUP) INCORPORATION 2 00210963 OFFSHORE JOINT SERVICES (BASES) 51,180,000 22.19 CO OF SGP PTE LTD 3 2000003686 SUN HUNG KAI INVESTMENT 873,904 0.38 SERVICES LTD-CUSTOMERS A/C 4 2000309137 LIN YONG QING 320,935 0.14 5 2091010919 ZHANG YAN QIANG 306,000 0.13 6 2000261437 ZHANG TAO 266,800 0.12 7 TOYO SECURITIES ASIA LIMITED-A/C 262,200 0.11 2000205841 CLIENT 8 2091419112 LIU YANG JUN 257,951 0.11 9 2091185421 ZHOU LI QING 255,200 0.11 10 2000301654 NAITO SECURITIES CO.,LTD 250,200 0.11 173,393,190 75.19 Total Note: * represents for untradable shares. 3) Profiles of Major Legal Entity Shareholders 3.1) China Nanshan Development (Group) Incorporation Legal representative: Fu Yuning Date of registration: October 1982 Business scope: land development; port transportation, industrial, commercial, real estat4 and tourism; customs bonded warehouses business; etc. 3.2) Substantial Controller of Holding Shareholders Being No. 1 shareholder of CND, China Merchants (NanShan) Holdings Ltd holds 36.518% equity interests in CND, With its direct and indirect shareholder being China Merchants Holdings (International) Co, Ltd.(CMHI), witch was listed on Hong Kong exchange .Basic information about CMHI is listed as follows: Legal representative: Fu Yuning 8 Date of registration: May 28, 1991 Registered Capital: HKD300,000,000 Business Scope: Port and port-related business. infrastructure and industrial production. 3.3) Controlling graph China Merchants (NanShan) Holdings Ltd 36.518% China Nanshan Development (Group) Incorporation 51.79% Shenzhen Chiwan Petroleum Supply Base Co., Ltd 4.1)The top ten tradable shareholders as of 31st December 2004 are listed below: No Shareholder’s name Share Percentage % ＯＦＦＳＨＯＲＥ ＪＯＩＮＴ ＳＥＲＶＩＣＥＳ （ＢＡＳＥＳ） ＣＯ ＯＦ ５１，１８０，０００ 1 B ＳＧＰ ＰＴＥ ＬＴＤ 2 ＳＵＮ ＨＵＮＧ ＫＡＩ ＩＮＶＥＳＴＭＥＮＴ ＳＥＲＶＩＣＥＳ ＬＴＤ ８７３，９０４ B －ＣＵＳＴＯＭＥＲＳ Ａ／Ｃ 3 ＬＩＮ ＹＯＨＮＧ ＱＩＮＧ ３２０，９３５ B 4 ＺＨＡＮＧ ＹＡＮ ＱＩＡＮＧ ３０６，０００ B 5 ＺＨＡＮＧ ＴＡＯ ２６６，８００ B 6 ＴＯＹＯ ＳＥＣＵＲＩＴＩＥＳ ＡＳＩＡ ＬＩＭＩＴＥＤ－Ａ／Ｃ ２６２，２００ B ＣＬＩＥＮＴ 7 ＬＩＵ ＹＡＮＧ ＪＵＮ ２５７，９５１ B 8 ＺＨＯＵ ＬＩ ＱＩＮＧ ２５５，２００ B 9 NAITO SECURITIES CO.,LTD ２５０，２００ B 10 ＳＨＵ ＪＩＡＮ ＰＩＮＧ ２４０，０００ B 4.2) Explanation for the Affiliated Relations of the Top Ten Shareholders or United Action Among the top ten shareholders, the domestic legal entity shareholder China Nanshan Development (Group) Incorporation has no affiliated relations with other shareholders and does not fall into the scope of united action person stipulated by “Regulation of Information Disclosure of the Change of Shareholding of listed company “. Foreign investment legal entity shareholder OFFSHORE JOINT SERVICES (BASES) CO OF SGP PTE LTD is the filiale held by the company’ s third major shareholder SEMBAWANG MARINE & LOGISTICS LTD ( now changed its name to SEMBCORP LOGISTICS LTD). It is unknown that whether other tradable - share shareholders fall into the scope of united action person. 9 PART IV. Information of Directors, Supervisors, Senior Executives and Other Staff I. Brief information Share Name Post Sex Age Office Term held Fu Yuning Chairman male ４８ May 2004— May 2007 Nil Koh Soo Keong Vice Chairman male ５４ May 2004— May 2007 Nil Han Guimao Executive Director male ５４ May 2004— May 2007 Nil Fong Yue Kwong Director male ５２ May 2004— May 2007 Nil Wang Fen Director female ５０ May 2004— May 2007 Nil Liu Fu Director male ５９ May 2004— May 2007 Nil Lin Zhi Jun Independent Director male ５０ May 2004— May 2007 Nil Bai You Zhong Independent Director male ６４ May 2004— May 2007 Nil Tian Rugeng Independent Director male ６９ May 2004— May 2007 Nil Zhong Jing Shen Convener of the male ５３ May 2004— May 2007 Nil Supervisor Committee Ong Lee Keang Supervisor female ５０ May 2004— May 2007 Nil Xiang Qing Sheng Supervisor male ６０ May 2004— May 2007 Nil Fan Zhao Ping Supervisor male ５１ May 2004— May 2007 Nil Zhang Xiang Employee Supervisor male ４０ May 2004— May 2007 Nil Liu Bojiang Employee Supervisor male ５８ May 2004— May 2007 Nil Yuan Guocheng General Manager male ５５ Sept. 2000— May 2007 Nil Cui Wei Deputy GM & Financial male ４８ May 2002— May 2007 Nil Controller Huang Dong Er Deputy GM male ５３ May 2002— May 2007 Nil Ren Yong Ping Deputy GM male ５１ April 2004— May 2007 10000 Fu Jia Lin Board Secretary male ４３ May 2002— May 2007 Nil Note: Seven of above directors and supervisors hold posts in CNDI, details as follows: Dr. Fu Yuning as the Chairman from Dec. 1998; Mdm. Wang Fen as the President from March 2002; Mr. Liu Fu as the Vice Chairman from July 2003; Mr. Han Gui Mao as the Senior Vice President from March 2002; Mr. Zhong Jing Shen as the Vice Chairman from Aug. 2000; Mr. Zhu Tian Sheng as the Director from June 2000; Mr. Fan Zhao Ping as the Senior Vice President from Dec. 1998. 10 II. Annual Salary of Directors, Supervisor and Senisor Executives 1) Decision Procedure and Basis Salary standard of the Company was decided and approved by the Board of Directors. Three independent directors, two employee supervisors and all senior executives draw their salary, bonus and other welfare from the Company, while others including Fu Yuning, Koh Soo Keong, Fong Yue Kwong, Wang Fen, Han Guimao, Liu Fu ,Xiang Qingsheng , Zhong Jingshen, Ong Lee Keang, and Fan Zhaoping, draw the pay from their respective shareholder party rather than the Company. 2) Amount Annual salary of the two employee supervisors and all senior executives totalled RMB 2.75 million. The total annual salary of the first three senior executives is RMB 2.08 million. 3) Classification Two of the present supervisors and senior executives enjoy an annual salary between RMB 10 0 thousand to RMB 200 thousand and five enjoy an annual salary over RMB 200 thousand. The allowance for the three independent directors in this year is RMB 60 thousand respectively. 4) Changes of directors, supervisors and senior executives The first session of the Extraordinary General Meeting held on January 1st 2005 had approved application of Mr. Zhu Tiansheng to quit the position of supervisor because of the reason of job change and elected Mr. Xiang Qing Sheng as the supervisor. III. Information of Other Employees: As at Dec. 31, 2004, the Company has a staff of 156, including 113 employees engaging in production (17 engineering technique employees), 10 in accounting, 9 in administration and 24 in management; or composing 1 with doctor degree, 10 with master degree, 31 with bachelor degree, 7 with technical secondary school graduation and 107 with high school or lower graduation. PART V. Aadministrative Structure The Company strictly implements the PRC Company Law, the Securities Law and other laws and regulations issued by the CSRC; continuously improves the legal person administration system, makes every effort to build modern enterprise system and regulates its operation. According to “Administration Guide Line for listed Company”, the Board of Directors explained the practice situation of the legal person administration of the company as follows: 1) In aspect of shareholders and general meeting: the company’ s administration structure can ensure the equal status of all the shareholders especially the minority shareholders and can ensure shareholders fully exercised their legal rights. The convening procedure, the qualification of the person attending the meeting and the voting procedure of the meeting are in accordance with the stipulation of “Company Law”, “Regulatory Opinion for General Meeting of Listed Company”, “Article of Association”. 2) In aspect of relations between the control shareholder and the Company: the Company’ s control shareholders attached importance to the listed company, gave energetic support, exercised shareholder’ s rights and undertook shareholder’ s obligation legally. The Company is independent of its control shareholder in terms of business, assets, organization, employees and finance. The company is accounting and undertaking responsibilities and risks independently. 11 3) In aspect of directors and Board of Directors: the Company elects directors strictly in line with the election procedure as regulated in the Articles of Association of the Company. The AOA stipulates that accumulative total voting system should be used in the Board election. All the directors exercised their duties loyally, bona fide and diligently. Both the number of directors and composition of the Board comply with relevant laws and regulations. The Company has established the independent director system, employed three independent directors taking charge of the special committee of the Board in accordance with the requirements of the CSRC and the Shenzhen Securities Regulatory Office. 4) In aspect of supervisors and Supervisory Committee: Both the election of the company’ s shareholder supervisors and employee supervisors complied with relevant laws and regulations. The member and the composition of the Board of Supervision can ensure the Board of Supervision supervise and inspect directors, senior executives and the finance of the Company independently and efficiently. The Board of Supervision stipulated rules of procedure of the Board of Supervision. The meeting of the Board of Supervision complied with the stipulated procedure. 5) In aspect of person having correlative benefit: the company respects the legal rights of banks and other creditors, employees, consumers, supply merchants, societies and other persons having correlative benefit and cooperates actively to make the company developed continuously and healthily. 6) In aspect of information disclosure and transparency: The Company stipulates the regulation of information disclosure and authorizes the secretary of the Board and the author ized representative in charge of securities affairs to take charge of disclosing information, receiving the visit and inquiry of the shareholders. The Company discloses the relevant information in a real, accurate, complete and timely way strictly according to the law, regulations and the Articles of Association, ensures all the shareholders to have equal opportunity to obtain the information. Moreover, the Company timely disclosed the detailed information of the largest shareholder or concrete controller and changes in shares held by them. According to “Administration Guide Line for listed Company”, the Board of Directors took the opinion that the practice situation of the company’s administration is basically in accordance with the requirement of “Administration Guide Line for listed Company” after improving each systems of the company according to the requirement of the CSRC’ s Shenzhen Regional Office. II. Information of Independent Directors’Performance According to the requirement of the CSRC and Shenzhen Securities Regulatory Office, the company employed three specialists as independent directors, major in law, accounting and professional area of the company. The company established three special committees of the Board of Directors and made and improved “Detailed Work Rules of Nomination and Salary Committee of the Board of Directors”, “Detailed Work Rules of Strategy and Development Committee the Board of Directors”and “Detailed Work Rules of Audit Committee of the Board of Directors”. During the period under review, in accordance with the requirement of CSRC’ s “Guidance Opinion for Listed Company to Establish of Independent Directors System”，”Article of Association” and “Work System of Independent Director”the company’ s independent directors exercised their duties, took part in the decision-making of the company’ s importance affairs, presented independent director’ s opinion and fully exerted the function of independent director. The information of independent directors to attend the directors’meetings is as follows: 12 The number Name of the The of directors’ The number independent number of The number of reference meetings to of absence director presence authorizing be present Bai Youzhong 8 8 Lin Zhijun 8 8 Tian Rugeng 8 8 There is no independent director who has different opinion. III. The Company is independent of its control shareholder in terms of business, assets, organization, employees and finance and has independent and integrated ability of operation and management. 1) In the aspect of operation, the business of the company is entirely independent of its control shareholder. The control shareholder and its subordinate units did not engage in the business same or similar to the business of the listed company. 2) In the aspect of employees, the employees of the company is independent of the control shareholder and the executives, the leading official of the finance and the secretary of the Board do not occupy any position in the company of the control shareholder. 3) In the aspect of assets, the assets invested by the control shareholder is independent, integrated and has clear ownership. 4) In the aspect of organization, the company’ s Board of Directors, Board of Supervision and other intern organizations operate independently. There is no affiliated relation between the control shareholder and its functional departments and the company and company’ s functional departments. The control shareholder and its subordinate organization did not give any plan and instruction as to the operation to the company and its subordinate organization or intervene the independence of the company’ s management by other means. 5) In the aspect of finance, the company established the regulatory system of finance and accounting and made it integrity in accordance with correlative laws and regulations. The control shareholder did not intervene the company’ s finance and accounting affairs. PART VI. Review of Annual General Shareholder’Meeting The Company Convened One Shareholder’ s General Meeting during the period under review, the details of which as follows: The company published the notification on holding 2003 Annual General Shareholder’Meeting in both Shenzhen Securities and Hong Kong Ta Kung Pao on April 22,2004.The meeting was held on the 16th floor of Petroleum Mansion, Chiwan, Shenzhen at 10:00 am on May 25,2004. Three shareholders and the proxies, representing 172,687,093 shares or 74.89% of the company’ s 230.6 million tradable shares with voting rights, attended the General Shareholder’ Meeting, including, legal entity of A-share, representing 119.42 million shares with voting rights, which took 51.79% of the total shares with voting rights; B-share, representing 53,267,093 shares with voting rights, which took 23.1% of the total shares with voting rights. The meeting complied with the PRC Company Law and the Company’ s Article of Association, Executive Director Mr. Han Guimao presided the meetin g. The meeting reviewed and approved each proposal by named voting, and reviewed and approved the following proposals: 1) The Work Report of the Board of Directors for the Year 2003; 2) The Work Report of the Supervisory Committee for the Year 2003; 3) The Financial Report for the Year 2003; 13 4) The Dividend Distribution Plan for the Year 2003: Audited by Shenzhen Dahua Tiancheng Certified Public Accountants, the company realized net profit amounting to RMB 100,412,034.50,according to the Company’ s Article of Association, appropriating 10% of the net profit as statutory surplus public reserve amounting to RMB10, 041,203.44, appropriating 5% of the net profit as statutory public welfare fund amounting to RMB5, 020,601.70, appropriating 5% of the net profit as discretionary public reserve amounting to RMB5, 020,601.70,and total dividends (tax included) (50%)amounts to RMB 50,206,017.26. The cash dividend for the year 2004 of RMB 2.177 ( tax included ) for every ten shares (tax included) or RMB 50,206,017.26 in total would be paid by the Company and for this purpose the conversion will be based on the closing rate between RMB and HKD announced by the People’ s Bank of China on the first working day after the resolution is approved by the AGM. 5) The Financial Budget for the Year 2004; 6) Appointment of Accounting Firms for the year 2004: Approve of reengaging Shenzhen Dahua Tiancheng Certified Public Accountants and PricewaterhouseCoopers undertake the auditor of the company for the auditing of the company’ s 2004 accounting report. 7) Election of New Numbers for the Fourth Board of Directors; Approve of electing Mr. Fu Yuning, Mr.Koh Soo Keong, Mr.Han Guimao, Mr.Fang Guangyu, Ms.Wangfen, Mr.Liufu as directors of the Fourth Board of Directors; Approve of electing Mr.Bai Youzhong, Mr.Lin Zhijun, Mr.Tian Rugeng as independent directors of the Fourth Board of Directors. 8) Election of New Numbers for the Fourth Supervisory Committee; 9) Approve of electing Mr.Zhong Jingshen,Ms Wang Lijuan,Mr.Fan Zhaoping as supervisors of the Fourth Supervisory Committee. 9) Feasibility Study Report and Investment Budget of the Second Phase Project of Shanghai Baowan International Logistics Center; 10) Feasibility Study Report and Investment Budget for the Project of Beijing Logistics Park. Mr. Yao Wenping, lawyer of Beijing Junhe Law Firm attended this meeting and provided Legal Opinion, Confirming that the procedure of this General Shareholder’ s meeting comply with the regulations of the PRC Company Law, Guidelines for Shareholders' Meetings of Listed Companies and the Company’ s Article of Association, the qualified of all the attendee is lawful and effective, the procedure of voting is lawful and effective. 14 PART VII. Director’ s Statements I. Information of Company Business 1) Company Business Review Year 2004 was an excellent year for the Company. Not only did we record strong growth in turnover and profits, creating substantial value for our shareholders, but also more significantly achieved a symbolic mile -stone and strategically oriented performance. We recorded a highest-ever turnover of 156 million and net profit of 100 million, representing an increase of 42.8% and 33.3% respectively as compared to the last financial year. Return on equity reached 15% and earning per share grew 33.3% from last year RMB 0.33 to reach RMB 0.44 in 2004. The remarkable growth was contributed by the overall good performance of all segments of our business, logistics service and offshore engineering in particular, accounting for 55% of the total profit attributed the shareholders. Turnover of the supply base business reported a moderate 4.7% growth for the Year to reach 114 million as compared to 109 million in Year 2003. Despite higher operating expenditure and interest costs, net profit gained 4% to reach 46.8 million as compared to 45.3 million last year. Turnover of the logistic services business (Shanghai 1st phase) generated a first full year of revenue of 24.8 million on a full year average warehouse occupying rate of 89%. Net profit 10 million was recorded, representing a 41% net profit margin. Turnover of Chiwan Logistics and Distribution Co Ltd in which the Company acquired 90% equity in December 2003 rose from 13.6 million in year 2003 to 17 million this year, representing an increase of 24.6%. Net profit grew 79% from 1.14 million in year 2003 to 1.83 million this year on improvement in occupancy rate from 70% to 81%. Turnover of the Chiwan Sembawang Engineering in which the Company owns 32% equity recorded strong growth albeit a very active offshore structure market environment. Turnover increased 20% to reach 538 million and net profit rose 43% to reach 132 million. An investment income of 41.55 million was realized. For the year 2004, the Company total operating expenses amounted to 80 million, up 40% as compared to 52 million last year. The increase in total costs was the result of increase in operating expenses in tandem with the increase in operational activity, increase in depreciation cost due to adjustment made to the depreciation period, interest expenses and the integration of costs from Shanghai Baowan International Logistics Park and Chiwan Logistics and Distribution Co. 2) Business scope The main business of the company is to provide logistics services to offshore oil exploration, development and production in North China Sea and provide production and fixation services for the structure of offshore engineering through its investor. Logistics services provided range from rental of office/customized warehouse/yard, wharf loading and un-loading, aclinic transportation etc. 15 3) Segment Business Review A. Turnover breakdown 2004 2003 Change RMB10’000 RMB10’000 % Office rental 1,617 1,304 24 Storage service 7,907 4,579 73 Operation 5,566 4,559 22 Others (CFS) 565 520 9 Total 15,655 10,962 43 B. Chiwan Petroleum Supply Base Driven by consistent high oil price throughout the year and the national need to search for more energy resources, offshore activities continued to record stable increase, various offshore drilling activities rose 15% as compared to last year. The year also saw the offshore activities in the eastern part of the South China Sea entered into a new scenario where deep-water exploration and gas field development were added. High oil price also led to the extended life span of a few of the marginal oil field in the area. Non-oil business contributed a vital 10% of the revenue in the year under review. C. Logistics Services The first phase of Shanghai Baowan International Logistics Park which was completed in Oct 2003 completed its first full year of operation. Not only the 74,000 m2 of warehouse area reached 100％ occupancy by Oct 2004, but also we saw rental rates rose gradually. This gives a strong bearing on our middle and lo ng term investment return prospect. 16 D. Chiwan Logistics and Distribution Co Though performed well in year 2004, the ROE of 4.7% of the Company was considered on a low side. We are now in the process of making adjustment to the company business direction, the organization and asset reallocation with a view to improve profitability of the Company. E. Offshore Engineering CSE operated near its full capacity in the year under review on strong demand in offshore structure in PRC. The company turned in a historical high turnover and net profit of 538 million and 132 million respectively. In the light of long-term prospective market condition, both domestic and international, CSE, in a joint venture arrangement, is establishing another yard of 460,000 m2 in Penglai, Shangdong Province. The yard is scheduled to be commissioned in July, 2005. II. Financial performance (Extracted from audit reports prepared by Dahua Tiancheng Certified Public Accountant) 2004 2003 Growth Rate RMB10’000 RMB10’000 % Income 15,655 10,962 43 Net profit 10,041 7,535 33 Earnings per share (US cent) 0.435 0.327 33 Total assets 84,303 70,011 20 Long term liability 712 836 17 Shareholders’equity 67,224 63,210 6 III. Application of the Proceeds The company had invested US$20.5 million raised from stock market in its 1995 floatation in the projects approved by AGM. All the projects had been completed by the end of 1996 and the results of which were disclosed accordingly. IV. Business prospects The remarkable result in year 2004 was a symbolic achievement which saw our revenue, net profit, and ROE climbed to a historical new high. The achievement also represented a strategy-driven performance in the sense that we had successfully embarked on the 17 development of a new core business in providing logistics services to the logistics industry. This lays a strong foundation for the continuous implementation of our 5-year business plan. Driven by the robust economy growth, China will remain a strong oil consumer and the development of domestic reserves is a priority. With strong oil price, new explorations and new developments in the South China Sea, we expect demand for Base’ s services to grow by a stable 10% for the next 3-5 years. Logistics services, modelled to provide logistics functions to the logistics industry sector including 3rd party logistics, retailers, importer and exporter etc will play an important role in our effort to accomplish our target in our strategic business plan. Construction works of 2nd phase of Shanghai Baowan and Guangzhou project will start at the end of March 2005 and we will see part of the facilities being commissioned for use by the 4th quarter of 2005 and thus a possible contribution to our revenue. The tightening of land supply especially in the major cities resulted from China macroeconomic measures has severely hampered the progress of our expansion in logistic park construction. The adverse impact of the macroeconomic measure on our logistics sector would be the scarcity of land supply and escalating land price which would certainly erode its profitability. Rapid introduction of functional services within and outside our logistics parks to enhance earnings is therefore very crucial to the investment viability of our future projects. The outlook of offshore engineering services remains very prospective on a very strong demand for offshore structures brought about by the strong demand for energy resources in PRC. However, we expect only a marginal growth in revenue from CSE owing to the fact that the remarkable performance was achieved with a near-full capacity production output. We look forwards to a better growth in year 2007 after Penglai yard in Shandong is commissioned in July 2005. V. Report on the Routine of Board of Directors 1) Board Meetings and Resolutions The Board has held eight meetings in the reporting period. A. The 13th tele-communication meeting of the third Board of Directors was held on January 13, 2004. The meeting reviewed and approved the following resolutions: “Resolution on the Joint Venture of ‘Shanghai Baowan Logistics Co.,Ltd’( named temporarily, administration of industry and commerce’ s register will as the standard) Set by the Company and Shenzhen Chiwan Logistics Co.,Ltd”; “Resolution on Sanction the Senior Managers Apply for one-year Credit Line Amounting to 250 million from the Bank Managing in China, and Authorizing Executive Director Mr.Han Guimao Sign Loan Files”; “Appointment of Beijing Junhe Law Firm as Legal Advisor for the Year 2004”. The resolutions were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on January 15,2004. B. The seventh meeting of the Third Board of Directors was held in Shenzhen on April 20,2004. The meeting reviewed and approved the following resolutions: “The General Manager’ s Report for the Year 2003”; “The Financial Report for the Year 2003”; “The 18 Annual Report for the Year 2003 and its Abstract”; “The Proposal on Dividend Distribution Plan of 2003”;“Financial Budget for the year 2004”; “Appointment of Accounting Firms for the year 2004”; “Proposal on Election of New Members for the Fourth Board of Directors”; “Resolution on Investment Act and Budget of the Second Phase Project of Shanghai Baowan International Logistics Center”; “Proposal on Feasibility Study Report and Investment Budget for the Project of Beijing Logistics Park ”; “Proposal on Appointing Mr.Ren Yongping as Vice Manager of Shenzhen Chiwan Petroleum Supply Base Co.,Ltd”; “Proposal on Session and Agenda of Annual General Shareholder’Meeting for the Year 2003”. The resolutions were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on April 23, 2004. C. The fourteenth tele -communication meeting of the third Board of Directors was held on April 27, 2004, and the meeting reviewed and approved the resolution of: “The First Quarter Report for the Year 2004”. The resolution was published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on April 29, 2004. D. The first meeting of the fourth Board of Directors was held in Shenzhen on May 25, 2004. The meeting reviewed and approved the following resolutions: “Proposal on Electing Mr.Fu Yuning as Chairman of the Fourth Board of Directors ”; “Proposal on Electing Mr.Koh Soo Keong as Vice chairman of the Fourth Board of Directors ”; “Proposal on Electing Mr.Han Guimao as Executive Director of the Fourth Board of Directors ”; “Proposal on Electing Mr.Koh Soo Keong, Mr.Han Guimao, Mr.Liufu, Mr.Tian Rugeng,and Mr.Lin Zhijun as Commissioners of Strategy and Development Committee of the Fourth Board of Directors, and Mr.Han Guimao, Elected by Committee,as Director of Committee”; “Proposal on Electing Mr.Han Guimao, Mr.Fang Yuguang, Mr.Tian Rugeng, Mr.Bai Youzhong and Mr.Lin Zhijun as Commissioners of Nomination and Salary Committee of the Fourth Board of Directors, and Mr.Tian Rugeng,, Elected by Committee,as Director of Committee ”; “Proposal on Electing Ms.Wangfen, Mr.Han Guimao, Mr.Tian Rugeng, Mr.Bai Youzhong and Mr.Lin Zhijun as Commissioners of Audit Committee of the Fourth Board of Directors,and Mr.Lin Zhijun ,Elected by Committee, as Director of Committee ”; The resolution were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on May 26,2004. E. The first tele -communication meeting of the fourth Board of Directors was held on July 26, 2004. The meeting reviewed and approved the following resolutions: “Proposal on Increasing Capitalization to Shenzhen Chiwan Logistics Co.,Ltd ”; “Proposal on Adjusting the Registered Capital of Shanghai Baowan Logistics Co.,Ltd to RMB 160 Millio n, and Changing Register in Shanghai Administration Bureau of Industry and Commerce”. The resolutions were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on July 27, 2004. F. The second tele -communication meeting of the fourth Board of Directors was held on August 18, 2004. The meeting reviewed and approved the following resolutions: “The Interim Report for the Year 2004 and its Abstract”; “Proposal on the Interim Dividend Distribution Plan (no allocating, no granting) for the Year 2004 ”; “Proposal on Purchasing Liability Insurance for All the Company’ s Directors (the compensation limit is US$3 million)”; The resolutions were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on August 21, 2004. G. The third tele -communication meeting of the fourth Board of Directors was held on October 27, 2004. The meeting reviewed and approved the resolution of: “Third Quarter Report for the Year 2004”. H. The second meeting of the fourth Board of Directors was held in Shenzhen on December 4, 2004. The meeting reviewed and approved the following resolutions: “Resolution on 19 Guangzhou Baowan Logistics Park Project”; “Proposal on the Joint Venture of Guangzhou Baowan Logistics Co.,Ltd Set by the Company and Shanghai Baowan International Logistics Co.,Ltd.”; “Proposal on Administration of Investors’Relation of the Company”; “Proposal on Change Standard Currency in Accounts”; “Proposal on Session and Agenda of the First Annual General Shareholder’Meeting for the Year 2005”. The resolutions were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on December 8, 2004. I. The twelfth tele -communication meeting of the third board of directors was held on October 29, 2003. The meeting reviewed and approved the “Third Quarter Report for the Year 2003”, the resolution was published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on October 31, 2003. 2) Implementation of the Dividend Distribution Plan During the year under review, the Company implemented its 2003 dividend distribution plan on July 16, 2004: US$0.3157 cash bonus for each 10-share (tax included). Dividend for B shares was converted into HK dollars for distribution. VI. Dividend distribution Preplan for Year 2004 Profit distribution preplan as of the year is set out as follows: RMB Yuan Retained Earning B/F 27,333,504.63 Profits available for distribution 127,745,539.13 Less: Statutory surplus public reserve (10%) 10,041,203.44 Statutory public welfare fund (5%) 5,020,601.7 Discretionary public reserve (5%) 5,020,601.7 Dividends (tax included) (50%) 50,206,017.26 Retained profits 57,457,115.03 The cash dividend for the year 2004 of RMB 2.177 ( tax included ) for every ten shares (tax included) or RMB 50,206,017.26 in total would be paid by the Company and for this purpose the conversion will be based on the closing rate between US$ and HK$ announced by the People’s Bank of China on the first working day after the resolution is approved by the AGM. The above profit distribution plan will be carried out after the final approval of the AGM 2004. The Company neither declared interim dividend nor converted any reserves into share capital or rights issue in the report period. VII. Estimated Profit distribution Policy for 2005 The estimated profit distribution policy for the year 2005 is as follows: 1) The Company will conduct profit distribution once in 2005; 2) Approximately over 50% of net profit realized in 2005 will be distributed as div idend; 3) The distribution will take the form of cash bonus. 20 VIII. The Company did not plan to transfer capital public reserve into share capital for the year 2005. PART VIII. Report of the Supervisory Committee I. Supervisory Committee Meetings Corporation Supervisory Committee convened four meetings in the report period. 1) The sixth meeting of the third supervisory committee was held in Shenzhen on April 20, 2004. The meeting reviewed and approved the following resolutions: “General Manager’s Report for the Year 2003”; “Annual Report for the Year 2003 and its Abstract”; “Financial Report for the Year 2003”; “Proposal of the Profit Distribution Plan for the Year 2003”; “Financial Budget for the Year 2003”; “Proposal on Changing Member for the Fourth Supervisory Committee”. The resolutions were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on April 23, 2004. 2) The first meeting of the fourth Supervisory Committee was held on May 25, 2004. The meeting reviewed and approved the revolution of “Proposal on Electing Mr.Zhong Jingshen as Convener of the Fourth Supervisory Committee”. The resolution was published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on May 26, 2004. 3) The first tele-communication meeting of the fourth supervisory committee was held on August 18, 2004. The meeting reviewed and approved the following resolutions: “Interim Report for the Year 2004 and its Abstract”and “Proposal on the Interim Dividend Distribution Plan (no allocating, no granting) for the Year 2004 ” . The resolutions were published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on August 21, 2004. 4) The second tele-communication meeting of the fourth supervisory committee was held on September 23, 2004. The meeting reviewed and approved the resolution of replacing supervisor. The resolution was published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on September 24, 2004. II. Opinions Formed by the Board of Supervision as to the Company’ s operation in the Report Period as follows: 1) The Company’s decision procedures were both healthy and lawful. The Company’s management systems and internal control procedures were in place. The meeting also confirmed that neither the directors nor senior managers had acted in contravention of the laws, regulations, Articles of Association or detrimental to the interest of the company. 2) The Board of Supervision carefully reviewed the financial report of the company and confirmed that the company was in good financial situation. The meeting further confirmed that the audit report prepared by the independent auditors Shenzhen Dahua Tiancheng and Price Waterhouse Coopers gave a true and fair presentation of the Company’s financial performance by offering clear opinion in the audit report for the year 2004. 3) In 2004 the Company did not raise capital or engage in any acquisition and disposal of the Company’ s assets. 4) All the affiliated transactions in 2004 were conducted in arm-length principle and the Company’s interests were safeguarded. 21 PART IX. Significant Events 1) The Company did not experience any significant lawsuit or arbitration in the report year. 2) During the report period, neither the directors nor the senior managers was fined or penalized by Securities Supervisory and Administration Authorities of PRC. 3) The 13th tele-communication meeting of the third Board of Directors was held on January 13, 2004. The meeting reviewed and approved the resolutions of: “Resolution on joint venture of ‘Shanghai Baowan Logistics Co.,Ltd’Set by the Company and Shenzhen Chiwan Logistics Co.,Ltd”,the registered capital of joint venture was RMB 50 million, the company invested RMB 45 million, contributing 90% of the registered capital. The resolution was published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on January 15,2004. 4) Shanghai Baowan International Logistics Center that the company invested RMB 160 million had completed and come into operation formally in January 2004. The center covered the land of about 260 mu, had built kinds of warehouses and working facilities more than 80 square meters for modern logistics industry. The public notice on progress of the investment of Shanghai Logistics Center was published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on January 15,2004. 5) The company signed three years’contract of leasing warehouse and working facilities with Shanghai ST-Anda Logistics Co.,Ltd(“ST-Anda”).ST-Anda would lease part of warehouses, packing workshops and working facilities of Shanghai Baowan International Logistics Co.,Ltd from January 1,2004. Amount of the contract was RMB 67.38 million, the average of total rent would be paid monthly. The public notice on the important operation contract was punished in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on January 15,2004. 6) The company and China Nanshan Development (group) Incorporation,Chiwan Wahrf Holding (Hong Kong) Limited signed “Agreement on transfering shares”in Shenzhen on September 18,2003. By about RMB 37.38 million, Shenzhen Chiwan Petroleum Supply Base acquired 90% of the stock share and relative liabilities of Shenzhen Chiwan Godown Co.,Ltd owned by the above two companies.(the affiliated transaction was punished in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on September 20,2003). The affiliated transaction had been reviewed and approved by Board of Directors and AGM of the company. Register of Shanghai Administration of Industry and Commerce and approve of relevant Government Department of the transaction completed on December 5,2003,and the total amount had been paid off on January 29,2004 also. Detail of the transaction was punished in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on January 31,2004. 7) By virtue of the “Notice on Approval of Circulation of Untradable Foreign Investment Shares of Shenzhen Chiwan Petroleum Supply Base Co.Ltd.”(China Securities Regulatory Commission, Zheng Jian Gong Si Zi [2003] No. 27), the 51,180,000 shares of non-floating foreign stock (occupied 22.19% of the whole capital stock), held by Offshore Joint Services (bases ) Co. of SGP Pte Ltd who’ s the foreign legal share holder of Shenzhen Chiwan Petroleum Supply Base Co.Ltd, would circulate in Shenzhen B Stock Exchange on July 28,2004. the matters concerned of non-floating foreign stock conversed to circulating B stock was punished in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on July 22,2004. 8) By virtue of resolution of the 13th tele-communication meeting of the Third Board of Directors, Chiwan Petroleum Supply Base Co.Ltd (public announce on January 13,2004) 22 has acquired loan of RMB110 million from the bank managing in China on respective August 10 and 11,2004 for the project of Shanghai. The public announcement on the loan was published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on August 17,2004. 9) The public announcement of the balance of loan was RMB 87 million was published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on December 30,2004. 10) The second meeting of the Fourth Board of Directors was held on the 16th floor of Petroleum Mansion, Chiwan on December 4,2004, the meeting reviewed and approved the revolutions: “Resolution on the project of Guangzhou Baowan Logistics Center” and “Resolution on joint venture of Guangzhou Baowan Logistics Co.Ltd set by the company and Shanghai Baowan International Logistics Co.,Ltd”,the above resolution would table to the AGM for approval and was published in both Shenzhen Securities Times and Hong Kong Ta Kung Pao on December 8,2004. 11) The company paid HK175, 800 to PricewaterhouseCoopers, the accounting firm has provided auditing services for ten years continually since the company listed; and paid RMB 10 thousand to Dahua Tiancheng Certificated Accountants, the accounting firm has provided auditing services for the company for four years. 12) The Company maintained its autonomy in personnel and financial management and possesses integrated assets. 13) The Company did not entrust, contract or lease other company’ s assets or was entrusted, contracted or leased with its own assets. 14) There was neither other significant contract signed nor significant guarantee event happened in the report year. 15) There were no change in the Company’ s name or stock’ s short form in the report period 16) During the report period, the Company made all necessary disclosures. No significant events that should be disclosed were missing. PART X. Financial statements SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. REPORT OF THE INTERNATIONAL AUDITORS AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004 23 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. REPORT OF THE INTERNATIONAL AUDITORS AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004 Contents Pages Report of the international auditors 25 Consolidated income statement 26 Consolidated balance sheet 27 - 28 Consolidated statement of changes in shareholders’equity 29 Consolidated cash flow statement 30 Notes to the consolidated financial statements 31 - 58 24 PricewaterhouseCoopers Zhong Tian CPAs Limited Company 11/F PricewaterhouseCoopers Center 202 Hu Bin Road Shanghai 200021 People's Republic of China Telephone +86 (21) 6123 8888 Facsimile +86 (21) 6123 8800 www.pwccn.com INDEPENDENT AUDITORS’REPORT 2005/SH-076/WCWY/JZYL TO THE SHAREHOLDERS OF SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. (Incorporated as a joint stock limited company in the People’s Republic of China) We have audited the accompanying consolidated balance sheet of Shenzhen Chiwan Petroleum Supply Base Co., Ltd. (the “Company”) and its subsidiaries (collectively the “Group”) as of 31 December 2004 and the related consolidated income and cash flow statements for the year then ended. These financial statements 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. 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 present fairly in all material respects the financial position of the Group as of 31 December 2004 and of the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards. PricewaterhouseCoopers Zhong Tian CPAs Limited Company 28 March 2005 25 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 Notes 2004 2003 RMB RMB Revenue 3 156,545,214 109,619,293 Operating costs (68,636,709) (46,500,646) Gross profit 87,908,505 63,118,647 Administrative expenses (18,166,165) (11,351,582) Other operating expenses (289,307) (73,295) Profit from operations 4 69,453,033 51,693,770 Finance (costs)/income - net 6 (768,959) 1,805,653 Share of results of associates before tax 15 45,095,324 32,540,996 Profit before tax 113,779,398 86,040,419 Income tax expense 7 (13,121,351) (10,690,523) Group profit before minority interests 100,658,047 75,349,896 Minority interests (246,013) - Net profit 100,412,034 75,349,896 Earnings per share 8 0.44 0.33 The accompanying notes on pages 26 to 58 form an integral part of these consolidated financial statements. - 26 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2004 Notes 2004 2003 ASSETS RMB RMB Non-current assets Property, plant and equipment 9 120,928,881 96,831,520 Investment property 10 217,318,904 125,009,776 Land use rights 11 127,109,716 141,050,682 Progress payment for land use rights 12 91,725,320 27,000,000 Construction in progress 13 26,636 93,937,991 Intangible assets 14 582,907 560,929 Investments in associates 15 165,194,989 126,829,732 722,887,353 611,220,630 Current assets Inventories 1,179,135 1,341,559 Due from related companies 26(b) 359,625 217,300 Due from associates 26(b) 316,702 144,660 Due from holding company 26(b) 16,121 261,987 Trade receivables 16 26,290,395 22,213,173 Other receivables, prepayments and deposits 6,879,890 8,772,925 Cash and cash equivalents 85,694,667 84,183,778 120,736,535 117,135,382 Total assets 843,623,888 728,356,012 - 27 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. CONSOLIDATED BALANCE SHEET (CONTINUED) AS AT 31 DECEMBER 2004 Notes 2004 2003 SHAREHOLDERS’EQUITY RMB RMB Share capital 22 223,841,503 223,841,503 Reserves 23 448,480,198 408,341,887 Total shareholders’equity 672,321,701 632,183,390 Minority interests 17 4,337,677 2,130,974 LIABILITIES Non-current liabilities Deferred tax liabilities 18 7,115,327 8,357,716 Rentals received in advance 19 27,217,736 24,713,332 Other long-term liabilities - 1,960,000 34,333,063 35,031,048 Current liabilities Borrowings 20 83,000,000 18,000,000 Trade payables, other payables and accruals 38,525,742 23,603,766 Due to a fellow subsidiary 26,206 10,086,709 Current tax liabilities 6,847,708 3,330,044 Rentals received in advance, current portion 19 4,231,791 3,990,081 132,631,447 59,010,600 Total liabilities 166,964,510 94,041,648 Total equity and liabilities 843,623,888 728,356,012 The accompanying notes on pages 26 to 58 form an integral part of these consolidated financial statements. - 28 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’EQUITY FOR THE YEAR ENDED 31 DECEMBER 2004 Retained Share capital Reserves earnings (Note 22) (Note 23) (Note 23) Total RMB RMB RMB RMB Year ended 31 December 2003 Balance at 1 January 2003 223,841,503 305,574,832 58,886,889 588,303,224 Dividend in respect of 2002 - - (31,469,730) (31,469,730) Net profit for 2003 - - 75,349,896 75,349,896 Appropriations - 15,069,981 (15,069,981) - Balance at 31 December 2003 223,841,503 320,644,813 87,697,074 632,183,390 Year ended 31 December 2004 Balance at 1 January 2004 223,841,503 320,644,813 87,697,074 632,183,390 Dividend in respect of 2003 - - (60,279,917) (60,279,917) Other additions - 6,194 - 6,194 Net profit for 2004 - - 100,412,034 100,412,034 Appropriations - 15,003,972 (15,003,972) - Balance at 31 December 2004 223,841,503 335,654,979 112,825,219 672,321,701 The accompanying notes on pages 26 to 58 form an integral part of these consolidated financial statements. - 29 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 Notes 2004 2003 RMB RMB Cash flows from operating activities Cash generated from operations 24 108,876,783 90,205,400 Interests paid (1,428,901) - Tax paid (7,428,009) (10,980,464) Net cash from operating activities 100,019,873 79,224,936 Cash flows from investing activities Acquisition of a subsidiary, net of cash acquired - (2,898,266) Payment for remaining consideration of acquisition of a subsidiary (10,060,503) - Purchase of property, plant and equipment and investment property (4,424,796) (8,236,407) Payment for construction in progres s (24,439,260) (87,939,332) Payment for land use rights (65,268,902) (27,000,000) Payment for intangible assets (178,200) Dividends received from an associate - 18,586,654 Proceeds from disposals of property, plant and equipment 350,900 440,040 Interests received 791,694 1,878,045 Net cash used in investing activities (103,229,067) (105,169,266) Cash flows from financing activities Proceeds from bank borrowings 261,000,000 18,000,000 Repayments of bank borrowings (196,000,000) - Capital contribution from a minority shareholder 1,960,000 - Repayment of amount due to a minority shareholder (1,960,000) (8,819,997) Repayment of amounts due to a fellow subsidiary - (8,819,996) Dividends paid to shareholders (60,279,917) (31,469,730) Net cash from/(used in) financing activities 4,720,083 (31,109,723) Net increase/(decrease) in cash and cash equivalents 1,510,889 (57,054,053) Cash and cash equivalents at beginning of year 84,183,778 141,237,831 Cash and cash equivalents at end of year 85,694,667 84,183,778 The accompanying notes on pages 26 to 58 form an integral part of these consolidated financial statements. - 30 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 Corporate information The Company was incorporated as a Sino-foreign equity joint venture company in Shenzhen, the People’s Republic of China (the “PRC”) in February 1984. On 11 May 1995, the Company obtained the approval from the Shenzhen Municipal Government for its reorganisation into a joint stock limited company. The Company and its subsidiaries (collectively the “Group”) are principally engaged in leasing of office space and warehouses, provision of management, storage and marine logistics services in the PRC. 2 Accounting policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. (a) Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The basis of accounting differs from that used in the statutory financial statements of the Group which are prepared in accordance with the Accounting Standards for Business Enterprises and the Accounting System for Business Enterprises promulgated by the State of the PRC. Adjustments incorporated to restate the financial statements for conformity with IFRS have not been taken up in the Group’s books. The consolidated financial statements have been prepared under the historical cost convention. (b) Group accounting (1) Subsidiaries Subsidiaries, which are those entities in which the Group has an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies, are consolidated. The existence and effect of potential voting rights that are presently exercisable or presently convertible are considered when assessing whether the Group controls another entity. - 31 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2 Accounting policies (continued) (b) Group accounting (continued) Subsidiaries are consolidated from the date on which control is transferred to the Group to the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the fair value of the net assets of the subsidiary acquired is recorded as goodwill. See Note 2(g) for the accounting policy on goodwill. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group. Details of the Group’ s subsidiaries are described in Note 25. (2) Associates Investments in associates are accounted for by the equity method of accounting. Under this method the Group’ s share of the post-acquisition profits or losses of associates is recognised in the income statement and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment. Associates are entities over which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group’s investment in associates includes goodwill (net of accumulated amortisation) on acquisition. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless the Group has incurred obligations or made payments on behalf of the associates. A listing of the Group’ s principal associates is shown in Note 15. (c) Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. - 32 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2 Accounting policies (continued) (d) Foreign currency translation (1) Measurement and reporting currency Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (the “measurement currency”). Prior to 1 April 2004, the consolidated financial statements were presented in United States dollar (“USD”) , which was the measurement currency of the Company. The Board of directors performed an assessment of the changes in the underlying events and circumstances relevant to the Company early this year and concluded that Renminbi (“RMB”) could better reflect the economic substance of the operations of the Company and therefore the measurement currency of the Company and the reporting currency of the Group were changed to RMB from 1 April 2004 onwards. The change in the measurement currency has been accounted for prospectively from 1 April 2004 and all items of financial statements of the Company were translated into RMB using the exchange rate on 1 April 2004. (2) Translations and balances Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. (3) Group companies Income and cash flows statements of entities denominated in other currencies other than the Group’ s reporting currenc y are translated into the Group’s reporting currency at average exchange rates for the year and their balance sheets are translated at the exchange rates ruling on 31 December. Exchange differences arising from the translation of the net investment in these entities and of borrowings and other currency instruments designated as hedges of such investments are taken to shareholders’ equity. When an entity in other currency is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale. (e) Property, plant and equipment Property (except for investment property – see Note 2 (f)), plant and equipment comprise office buildings, wharfs, motor vehicles and other equipment are stated at historical cost less depreciation and impairment loss. - 33 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2 Accounting policies (continued) (e) Property, plant and equipment (continued) Depreciation is calculated on the straight-line method to write off the cost of each asset to their residual values over their estimated useful lives as follows: Buildings and wharfs 30 - 50 years Machinery 12 - 20 years Motor vehicles and cranes 10 years Fixture 5 - 10 years Office equipment and furniture 5 years Others 5 - 50 years Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains or losses on disposals are determined by comparing proceeds with carrying amount and are included in determining operating profit. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised, during the period of time that is required to complete and prepare the property for its intended use, as part of the cost of the asset. Other borrowing costs are expensed. Repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset. (f) Investment property Investment property, principally comprising office buildings and warehouses, is held for long-term rental yields and is not occupied by the Group. Investment property is treated as a long-term investment and is carried at cost less accumulated depreciation and impairment loss. Depreciation is calculated on the straight-line method to write off the cost of each asset to their residual values over 30 to 45 years. Where the carrying amount of investment property is greater than its fair value, it is written down to its recoverable amount. The fair value of investment property is determined by the discounted cash flow method based on the reasonable anticipative investment return rate. - 34 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2 Accounting policies (continued) (g) Intangible assets (1) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired subsidiary at the date of acquisition. In respect of business combination for which the agreement date is before 31 March 2004, goodwill is stated at cost less accumulated amortisation, which is based on a straight-line basis over the estimated useful life, and impairment losses. In respect of business combination for which the agreement date is on or after 31 March 2004, goodwill is stated at cost less any accumulated impairment losses. As from 1 January 2005, goodwill is no longer amortised but is tested annually for impairment. (2) Computer software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives. (h) Impairment of long lived assets Property, plant and equipment and other non-current assets, including goodwill, are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount which is the higher of an asset’ s net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows. (i) Land use rights Land use rights are up-front payments to acquire long-term interests in the usage of land. They are stated at cost and charged to the income statement over the remaining period of the lease on a straight-line basis, net off any impairment losses. (j) Construction in progress Construction in progress comprises infrastructure projects under construction, which are stated at cost. This includes all expenditure and other direct costs, prepayments and deposits attributable to the construction and interest charges arising from borrowings used to finance the construction during the construction period. Depreciation is not provided on construction in progress until the related asset is completed and transferred for intended use. - 35 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2 Accounting policies (continued) (k) Leases (1) A Group company is the lessee Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. (2) A Group company is the lessor Assets leased out under operating leases are included in investment property and property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term. (l) Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses. (m) Trade receivables Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is an objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowers. (n) Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. (o) Borrowings Borrowings are recognised in itially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings. - 36 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2 Accounting policies (continued) (p) Deferred income taxes Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Currently enacted tax rates are used in the determination of deferred income tax. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investment in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary differ ence can be controlled and it is probable that the difference will not reverse in the foreseeable future. (q) Pension obligations The Group’ s contributions to a defined pension scheme operated by the government authority are charged to the income statement in the year to which they relate. (r) Provisions Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. (s) Revenue recognition Revenue comprises the invoiced value of services rendered. Revenue from services is recognised upon provision of the related services. Revenue from operating leases is recognised on a straight-line method over the period of the leases. Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. Dividends are recognised when the right to receive payment is established. (t) Dividends Dividends are recorded in the Group’s financial statements in the period in which they are approved by the Group’s shareholders. - 37 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2 Accounting policies (continued) (u) Comparatives Where necessary, comparative figures have been restated to conform to the current year’ s presentation. As explained in Note 2 (d), the Company and the Group changed its measurement and reporting currency from USD to RMB in 2004. For comparison purposes, the 2003 comparative figures have been retranslated as follows: - income and cash flow statements of the Group for the year ended 31 December 2003 and related notes denominated in USD were translated at average exchange rate for the year ended 31 December 2003; - all balance sheet items (including share capital) were translated at the exchange rate on 31 December 2003; and - exchange differences arsing from the retranslation were taken to equity. - 38 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. Segment information (a) Primary reporting format - business segments Office leasing and Marine Year ended management Storage logistics Unallocated 31 December 2004 services services services items Total RMB RMB RMB RMB RMB Revenue 12,843,642 90,510,542 53,191,030 - 156,545,214 Segment costs (8,316,187) (45,037,680) (21,249,122) (12,489,192) (87,092,181) Profit from operations 4,527,455 45,472,862 31,941,908 (12,489,192) 69,453,033 Finance costs - net (768,959) Share of results of associates before tax 45,095,324 Profit before tax 113,779,398 Income tax expense (13,121,351) Minority interests (246,013) Net profit 100,412,034 Segment assets 90,737,426 504,822,393 64,658,825 18,210,255 678,428,899 Associates 165,194,989 Total assets 843,623,888 Segment liabilities 19,443,559 125,955,866 1,130,008 20,435,077 166,964,510 Total liabilities 166,964,510 Other segment items Capital expenditure 4,448,107 38,889,478 29,945 1,278,584 44,646,114 Expenditure on land use rights - 66,428,903 - - 66,428,903 Depreciation 5,997,077 8,881,307 4,947,764 1,327,726 21,153,874 Amortisation 1,140,155 14,361,875 142,519 - 15,644,549 - 39 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3 Segment information (continued) (a) Primary reporting format - business segments (continued) Office leasing and Marine Year ended management Storage logistics Unallocated 31 December 2003 services services services items Total RMB RMB RMB RMB RMB Revenue 13,035,502 45,793,816 50,789,975 - 109,619,293 Segment costs (8,429,603) (18,431,280) (19,639,763) (11,424,877) (57,925,523) Profit from operations 4,605,899 27,362,536 31,150,212 (11,424,877) 51,693,770 Finance income - net 1,805,653 Share of results of associates before tax 32,540,996 Profit before tax 86,040,419 Income tax expense (10,690,523) Net profit 75,349,896 Segment assets 98,998,137 396,113,360 90,087,806 16,326,977 601,526,280 Associates 126,829,732 Total assets 728,356,012 Segment liabilities 13,815,975 59,697,571 - 20,528,102 94,041,648 Total liabilities 94,041,648 Other segment items Capital expenditure 1,460,931 87,500,114 - 5,104,169 94,065,214 Expenditure on land use rights - 69,700,000 - - 69,700,000 Depreciation 4,114,647 1,050,997 5,368,470 865,723 11,399,837 Amortisation 1,140,155 12,969,261 142,519 - 14,251,935 There are no significant sales or other transactions between the business segments. Unallocated items mainly represent corporate expenses, assets and liabilities. Segment assets consist primarily of property, plant and equipment, land use rights, investment property, receivables and operating cash. Segment liabilities comprise operating liabilities and borrow ings. Capital expenditure comprises additions to property, plant and equipment, construction in progress, intangible assets and investment property, including additions resulting from acquisition through business combinations. - 40 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3 Segment information (continued) (b) Secondary reporting format - geographical segments The Group provides the above services within the PRC. All assets are located in the PRC. (c) Analysis of revenue 2004 2003 RMB RMB Revenue from services rendered 67,752,008 56,210,676 Revenue from operating leases 88,793,206 53,408,617 156,545,214 109,619,293 4. Profit from operations The following items have been included in arriving at profit from operations: 2004 2003 RMB RMB Depreciation on property, plant and equipment (Note 9) 13,685,213 7,486,048 Depreciation on investment property (Note 10) 7,468,661 3,913,790 Amortisation of land use rights (Note 11) 15,644,549 14,251,935 Amortisation of goodwill (included in other operating expenses) 131,554 - Loss on disposals of property, plant and equipment and investment property (included in other operating expenses) 156,963 455,408 Staff costs (Note 5) 23,213,253 15,001,224 Cost of inventories recognised as expenses (included in operating costs) 2,058,134 893,611 Repairs and maintenance expenditure on property, plant and equipment (included in operating costs) 1,490,841 769,601 Repairs and maintenance expenditure on investment property (included in operating costs) 1,425,450 984,467 Trade receivables (included in administrative expenses) - provision for doubtful debts 24,833 1,231,700 - reversal of provision for doubtful debts (2,041,542) - - 41 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. Staff costs 2004 2003 RMB RMB Wages and salaries 22,149,756 14,429,548 Pension costs –defined contribution scheme (Note 28) 1,063,497 571,676 23,213,253 15,001,224 The average number of full-time employees in 2004 was 241 (2003: 125). 6. Finance (costs)/income - net 2004 2003 RMB RMB Interest income 791,694 1,878,045 Interest expenses (1,428,901) - Net exchange loss (24,059) (12,511) Others (107,693) (59,881) (768,959) 1,805,653 7. Income tax expense 2004 2003 RMB RMB Current tax 9,703,284 8,206,937 Share of tax of associates (Note 15) 3,418,067 2,483,586 13,121,351 10,690,523 - 42 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 7 Income tax expense (continued) The tax on the Group’ s profit before tax differs from the theoretical amount that would arise using the preferential income tax rate of Shenzhen Special Economic Zone of the PRC, the location in which the Company operates, as follows: 2004 2003 RMB RMB Profit before tax 113,779,398 86,040,419 Tax calculated at a tax rate of 15% (2003: 15%) 17,066,910 12,906,063 Effect of preferential tax rate available to an associate (3,617,264) (2,215,540) Others (328,295) - Tax charge 13,121,351 10,690,523 8. Earnings per share Basic earnings per share is calculated by dividing the net profit attributable to shareholders by the number of ordinary shares in issue during the year. 2004 2003 Net profit attributable to shareholders (RMB) 100,412,034 75,349,896 Number of ordinary shares in issue 230,600,000 230,600,000 Earnings per share (RMB) 0.44 0.33 - 43 - SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 9. Property, plant and equipment Motor Office vehicles equipment Buildings Wharfs Machinery and cranes and furniture Fixture Others Total RMB RMB RMB RMB RMB RMB RMB RMB Year ended 31 December 2004 Opening net book amount 32,055,200 23,319,917 17,906,228 6,670,045 6,362,824 10,517,306 - 96,831,520 Additions 6,086,203 55,343 1,645,610 3,149,016 288,291 3,921,281 7,487,342 22,633,086 Transfer from construction in progress (Note 13) 685,246 860,913 4,005,351 - 15,947 - 36,690,524 42,257,981 Transfer to investment property (Note 10) (26,771,788) - - - - - - (26,771,788) Disposals - (48,181) (93,532) (125,635) (69,357) - - (336,705) Depreciation charge (2,489,256) (1,007,304) (2,727,186) (1,615,433) (663,811) (2,145,265) (3,036,958) (13,685,213) Closing net book amount 9,565,605 23,180,688 20,736,471 8,077,993 5,933,894 12,293,322 41,140,908 120,928,881 At 31 December 2004 Cost 16,226,685 48,650,662 67,950,242 18,526,157 21,634,545 21,262,764 44,177,866 238,428,921 Accumulated depreciation (6,661,080) (25,469,974) (47,213,771) (10,448,164) (15,700,651) (8,969,442) (3,036,958) (117,500,040) Net book amount 9,565,605 23,180,688 20,736,471 8,077,993 5,933,894 12,293,322 41,140,908 120,928,881 At 31 December 2003 Cost 52,359,027 48,127,724 63,058,625 15,932,757 22,352,020 17,341,483 - 219,171,636 Accumulated depreciation (20,303,827) (24,807,807) (45,152,397) (9,262,712) (15,989,196) (6,824,177) - (122,340,116) Net book amount 32,055,200 23,319,917 17,906,228 6,670,045 6,362,824 10,517,306 - 96,831,520 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10. Investment property 2004 2003 RMB RMB Cost At 1 January 172,940,824 173,592,022 Transfer from property, plant and equipment (Note 9) 42,903,791 - Transfer from construction in progress (Note 13) 73,488,202 - Disposals (636,686) (651,198) At 31 December 288,696,131 172,940,824 Accumulated depreciation At 1 January 47,931,048 44,182,179 Charge for the year 7,468,661 3,913,790 Transfer from property, plant and equipment (Note 9) 16,132,003 - Disposals (154,485) (164,921) At 31 December 71,377,227 47,931,048 Net book amount At 31 December 217,318,904 125,009,776 Independent valuer has not been employed to determine the fair value of the investment property. The fair value of the investment property as at 31 December 2004 was determined by directors of the Company to be approximately RMB 386 million (2003: RMB 224 million) using the discounted cash flow method. SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. Land use rights 2004 2003 RMB RMB Opening net book amount 141,050,682 112,602,617 Additions 1,703,583 42,700,000 Amortisation charge (15,644,549) (14,251,935) Closing net book amount 127,109,716 141,050,682 The Company entered into two agreements with China Nanshan Development (Group) Incorporation (“Nanshan Development”), a shareholder, on 10 February 1984 and 18 July 1997 in respect of the acquisitions of the right to use a piece of land in Nanshan, the PRC for a period of 25 years. The land is where the wharf of the Company is located. At that time, the then prevailing PRC laws did not allow for the issuance of official documents for land use rights transfer. Therefore, Nanshan Development has not obtained the formal land use rights documentation associated with the land and the assignment of such rights to the Company has not been completed up to the date of the approval of these consolidated financial statements. Nanshan Development entered into two deeds with the Company on 3 July 2000 and 18 July 1997, under which Nanshan Development undertakes to indemnify the Company all losses, costs, expenses and any other liabilities that may incur or be suffered by the Company arising from the use and occupation of the above-mentioned land and wharf areas throughout the terms of the grant of such rights. 12. Progress payment for land use rights 2004 2003 RMB RMB Progress payment for land use rights 91,725,320 27,000,000 The amount mainly included progress payments of RMB 56,040,000 (2003: RMB 27,000,000) and RMB 35,685,320 (2003:Nil) for land use rights of two pieces of land acquired by two subsidiaries, Shanghai Baowan Logistic s Company Limited (“Shanghai Baowan”) and Guangzhou Baowan Logistic s Company Limited (“Guangzhou Baowan”), respectively. As at December 2004, the formal approval of the grant of the related land use rights certificates was still in progress. SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 13. Construction in progress 2004 2003 RMB RMB At beginning of year 93,937,991 9,707,348 Additions 21,834,828 85,693,910 Transfer to property, plant and equipment (Note 9) (42,257,981) (1,463,267) Transfer to investment property (Note 10) (73,488,202) - At end of year 26,636 93,937,991 14. Intangible assets Goodwill Software Total Year ended 31 December 2003 Current year additions and closing net book amount 560,929 - 560,929 Year ended 31 December 2004 Opening net book amount 560,929 - 560,929 Additions - 178,200 178,200 Amortisation charge (131,554) (24,668) (156,222) Closing net book amount 429,375 153,532 582,907 At 31 December 2004 Cost 560,929 178,200 739,129 Accumulated amortisation (131,554) (24,668) (156,222) Net book amount 429,375 153,532 582,907 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15. Investments in associates 2004 2003 RMB RMB At beginning of year 126,829,732 115,358,976 Share of results before tax 45,095,324 32,540,996 Share of taxation (Note 7) (3,418,067) (2,483,586) Dividends declared or received (3,312,000) (18,586,654) At end of year 165,194,989 126,829,732 The principal associates, which are all unlisted, are: Interest held Nature of business Shenzhen Chiwan Offshore Petroleum Equipment 20% Provision of testing, repair and Repair/Manufacture Co., Ltd. (“Chiwan maintenance services for oil Offshore”) (Note (a)) drilling activities Shenzhen Chiwan Sembawang Engineering Co., 32% Provision of marine construction Ltd. (“Chiwan SBW”) (Note (b)) and fabrication services (a) It is a Sino-foreign equity joint venture company established in Shenzhen, the PRC on 12th August 1992 with an operating period of 15 years. (b) It is a Sino-foreign equity joint venture company established in Shenzhen, the PRC on 2nd July 1994 with an operating period of 30 years. There were no changes in the interests held in the associates during the two years ended 31 December 2004. During the year, Chiwan SBW acquired 70% equity interests in Penglai Jutal Offshore Engineering Heavy Industry Co., Ltd (“Penglai Jutal”). In connection with the acquisition, Chiwan SBW entered into an agreement with Prospering Investments Limited (“Prospering”), another owner of Penglai Jutal, pursuant to which, Chiwan SBW undertakes to pay on behalf of Penglai Jutal an amount of RMB 67,506,600 to Prospering in case that Penglai Jutal is unable to honour the payment by the end of the two years from 29 December 2004. 16. Trade receivables 2004 2003 RMB RMB Total receivables 26,565,577 24,527,151 Less: Provision for doubtful debts (275,182) (2,313,978) 26,290,395 22,213,173 The credit risk of the trade receivables is disclosed in Note 21. SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17. Minority interests 2004 2003 RMB RMB At 1 January 2,130,974 - Acquisition of a subsidiary - 2,130,974 Capital contributions 1,960,000 - Share of capital reserve of a subsidiary 690 - Share of net profit of subsidiaries 246,013 - At 31 December 4,337,677 2,130,974 18. Deferred tax liabilities Deferred taxation was recognised according to certain PRC regulations at the time of reorganisation of the Company into a joint stock company. The temporary differences are reversed to current taxation over a period of 14 years. The movement in deferred tax liabilities account is as follows: 2004 2003 RMB RMB At 1 January 8,357,716 9,600,105 Transfer to current taxation (1,242,389) (1,242,389) At 31 December 7,115,327 8,357,716 19. Rentals received in advance 2004 2003 RMB RMB Rentals received in advance (Note (a)) 31,449,527 28,703,413 Less: portion classified under current liabilities (4,231,791) (3,990,081) 27,217,736 24,713,332 (a) The balance includes rental of RMB16,951,610 (2003: RMB16,863,528) received in advance from an associate, of which RMB3,668,313 (2003: RMB3,426,570) will be due in the coming year. SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20. Borrowings 2004 2003 RMB RMB Current - Unsecured bank borrowings 83,000,000 18,000,000 These borrowings bear interest at a fixed rate ranging from 4.536% to 4.698% (2003: 4.779%) per annum. As of 31 December 2004, the Group had unutilised banking facilities of RMB325,000,000, which was sufficient to finance the obligations arising from the net current liabilities of RMB 11,894,912 as at 31 December 2004. Consequently, directors are of the opinion that the Group has sufficient working capital for the foreseeable future. 21. Financial risk management (a) Financial risk factors The Group’ s activities expose it to financial risks including the effects of changes in foreign currency exchange rates and interest rates. The Group’ s overall risk management seeks to minimise potential adverse effects on the financial performance of the Group. (i) Foreign exchange risk RMB is not freely convertible into foreign currencies. Since most of the transactions of the Group were settled in RMB, in the opinion of directors, the Group would not have significant foreign currency risk exposure. (ii) Interest rate risk The Group has no significant interest-bearing assets but it has borrowed short-term loans from banks at fixed rates. The interest rates of short-term loans of the Group are disclosed in Note 20. Other financial assets and liabilities do not have material interest rate risk. (iii) Credit risk The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of services are made to customers with an appropriate credit history. Cash transactions are limited to high credit quality financial institutions. The Group has policies that limit the amount of credit exposure to any one financial institution. SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ２１ Ｆｉｎａｎｃｉａｌ ｒｉｓｋ ｍａｎａｇｅｍｅｎｔ （ｃｏｎｔｉｎｕｅｄ） （ａ） Ｆｉｎａｎｃｉａｌ ｒｉｓｋ ｆａｃｔｏｒｓ （ｃｏｎｔｉｎｕｅｄ） (iv) Liquidity risk Liquidity risk management implies funding through an adequate amount of committed bank facilities. The Group aims at maintaining flexibility in funding by keeping committed bank facilities available. (b) Fair values Financial assets of the Group include cash and bank balances, trade receivables, other receivables, prepayments and deposits, amounts due from holding company, amounts due from associates and related companies and rentals received in advance. Their fair values are not materially different from their respective carrying amounts. Financial liabilities of the Group include trade payables and accruals, tax liabilities, rentals received in advance, other liabilities and borrowings. Their fair values are not materially different from their respective carrying amounts. 22. Share capital Registered, issued and fully paid ordinary shares of RMB 1 each: Unlisted A shares Unlisted B shares Number of held by Nanshan held by a legal B shares, shares Development person listed Total RMB RMB RMB RMB Registered, issued and fully paid 230,600,000 119,420,000 51,180,000 60,000,000 230,600,000 Translation difference (note 22(d)) - (3,500,000) (1,500,000) (1,758,497) (6,758,497) At 31 December 2003 / 1 January 2004 230,600,000 115,920,000 49,680,000 58,241,503 223,841,503 Unlisted shares transfer to listed shares (note 22(b)) - - (49,680,000) 49,680,000 - At 31 December 2004 230,600,000 115,920,000 - 107,921,503 223,841,503 SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 22. Share capital (continued) (a) Pursuant to the Company’s articles of association, all shares are registered ordinary shares and shall carry equal rights. (b) Pursuant to an approval obtained from the China Securities Regulatory Commission, Zheng Jian Gong Si Zi [2003] No. 27, the unlisted B shares held by a legal person have been listed on the Stock Exchange of Shenzhen, the PRC, from 11th July 2004 onward. (c) Share premium arising from the issuance of shares, net of issuing expenses, is recorded in share premium and other reserves. (d) The total registered share capital of the Company is RMB 230,600,000 (“Registered Amount”) which has been fully paid up. Such contributions had been translated into the former measurement currency of the Company in USD using the exchange rate prevailing at the date of contribution. As explained in Note 2(u), the 2003 comparative figures have been restated to conform to the changes in presentation in this year and all balance sheet items including share capital were translated at the exchange rate on 31 December 2003. As a result, the amount of the retranslated share capital as of 31 December 2003 was RMB 6,758,497 lower than the original translated amount using the exchange rate prevailing at the date of contributions. SHENZHEN CHIWAN PETROLEUM SUPPLY BASE CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 23. Reserves Share premium Statutory Discretionary Statutory public Retained and other reserves surplus reserve surplus reserve welfare fund earnings Total RMB RMB RMB RMB RMB RMB Balance at 1 January 2003 217,507,477 41,310,460 26,101,657 20,655,238 58,886,889 364,461,721 Dividend in respect of 2002 - - - - (31,469,730) (31,469,730) Net profit for the year - - - - 75,349,896 75,349,896 Appropriations - 7,535,000 3,767,491 3,767,490 (15,069,981) - Balance at 31 December 2003/ 1 January 2004 217,507,477 48,845,460 29,869,148 24,422,728 87,697,074 408,341,887 Dividend in respect of 2003 - - - - (60,279,917) (60,279,917) Net profit for the year - - - - 100,412,034 100,412,034 Other additions 6,194 - - - - 6,194 Appropriations - 10,002,648 - 5,001,324 (15,003,972) - At 31 December 2004 217,513,671 58,848,108 29,869,148 29,424,052 112,825,219 448,480,198 ２３． Ｒｅｓｅｒｖｅｓ （ｃｏｎｔｉｎｕｅｄ） (a) Ｐｕｒｓｕａｎｔ ｔｏ ｔｈｅ ｒｅｌｅｖａｎｔ ＰＲＣ ｒｅｇｕｌａｔｉｏｎｓ ａｎｄ ａｒｔｉｃｌｅｓ ｏｆ ａｓｓｏｃｉａｔｉｏｎ ｏｆ ｔｈｅ Ｃｏｍｐａｎｙ， ｂｅｆｏｒｅ ｄｉｓｔｒｉｂｕｔｉｎｇ ｐｒｏｆｉｔ ｔｏ ｓｈａｒｅｈｏｌｄｅｒｓ， ｔｈｅ Ｃｏｍｐａｎｙ ｓｈｏｕｌｄ ｔｒａｎｓｆｅｒ １０％ ｏｆ ｔｈｅ ｉｔｓ ｐｒｏｆｉｔ ａｆｔｅｒ ｔａｘ ｔｏ ｓｔａｔｕｔｏｒｙ ｓｕｒｐｌｕｓ ｒｅｓｅｒｖｅ （ｅｘｃｅｐｔ ｗｈｅｒｅ ｔｈｅ ｒｅｓｅｒｖｅ ｂａｌａｎｃｅ ｈａｓ ｒｅａｃｈｅｄ ５０％ ｏｆ ｔｈｅ ｐａｉｄ ｕｐ ｓｈａｒｅ ｃａｐｉｔａｌ）， ａｎｄ ｆｏｒ ｔｈｅ ｓｔａｔｕｔｏｒｙ ｐｕｂｌｉｃ ｗｅｌｆａｒｅ ｆｕｎｄ ａｔ ａ ｐｅｒｃｅｎｔａｇｅ ｏｆ ５％ ｔｏ １０％． Ｔｈｅ Ｃｏｍｐａｎｙ ｍａｙ ｍａｋｅ ａｐｐｒｏｐｒｉａｔｉｏｎ ｆｒｏｍ ｉｔｓ ｐｒｏｆｉｔｓ ａｆｔｅｒ ｔａｘ ｔｏ ｄｉｓｃｒｅｔｉｏｎａｒｙ ｓｕｒｐｌｕｓ ｒｅｓｅｒｖｅ ｐｒｏｖｉｄｅｄ ｉｔ ｉｓ ａｐｐｒｏｖｅｄ ｂｙ ａ ｒｅｓｏｌｕｔｉｏｎ ｏｆ ａ ｓｈａｒｅｈｏｌｄｅｒｓ’ｇｅｎｅｒａｌ ｍｅｅｔｉｎｇ． The amounts of transfers to the statutory surplus reserve and statutory public welfare fund shall be made based on profit after tax reflected in the PRC statutory accounts prepared in accordance with PRC accounting standards. (b) Ｓｔａｔｕｔｏｒｙ ｓｕｒｐｌｕｓ ｒｅｓｅｒｖｅ ａｎｄ ｄｉｓｃｒｅｔｉｏｎａｒｙ ｓｕｒｐｌｕｓ ｒｅｓｅｒｖｅ According to the relevant PRC regulations, statutory surplus reserve and discretionary surplus reserve can be used to make up losses or to increase the share capital of a company. Except for the reduction of losses incurred, any other usage should not result in the reserve balance falling below 25% of the registered capital amount. (c) Ｓｔａｔｕｔｏｒｙ ｐｕｂｌｉｃ ｗｅｌｆａｒｅ ｆｕｎｄ According to the relevant PRC regulations, the use of statutory public welfare fund is restricted to fund capital expenditure to be incurred for employees’collective welfare facilities. The titles of these staff welfare facilities rest with the Group. The statutory public welfare fund is not normally available for distribution to shareholders except in liquidation. Once the capital expenditure on staff welfare facilities has been incurred, an equivalent amount must be transferred from the statutory public welfare fund to discretionary surplus reserve. (d) Ｐｒｏｆｉｔ ｄｉｓｔｒｉｂｕｔｉｏｎ Pursuant to the relevant PRC regulations and the articles of association of the Company, profit distributable to shareholders shall be the lower of the accumulated profit distributable to shareholders determined according to the PRC accounting standards as stated in the PRC statutory accounts and the accumulated profit distributable to shareholders adjusted according to IFRS. 57 24. Cash generated from operations Reconciliation of profit before tax to cash generated from operations: 2004 2003 RMB RMB Profit before tax 113,779,398 86,040,419 Depreciation 21,153,874 11,399,838 Amortisation of land use rights 15,644,549 14,251,935 Amortisation of intangible assets 156,222 - Loss on disposal of property, plant and equipment and investment property 156,963 455,408 (Reversal of)/provision for bad and doubtful debts (2,016,709) 1,231,700 Interest income (791,694) (1,878,045) Interest expenses 1,428,901 - Share of results before taxation of associates (45,095,324) (32,540,996) Changes in working capital (excluding the effects of acquisition of a subsidiary): (Increase)/decrease in inventories 162,424 (233,283) (Increase)/decrease in amounts due from related companies (142,325) 333,759 (Increase)/decrease in amounts due from associates (172,042) 13,329,773 (Increase)/decrease in amount due from holding company 245,866 (66,629) Increase in trade receivables (2,060,513) (4,060,131) (Increase)/decrease in other receivables, prepayments and deposits 932,022 (2,448,411) Increase in rentals received in advance 2,746,114 1,411,988 Increase in trade payables and accruals 2,749,057 2,978,075 Cash generated from operations 108,876,783 90,205,400 58 25. Principal subsidiaries As of 31 December 2004, the Company has interest in the following principal subsidiaries. All the subsidiaries are incorporated in the PRC and are mainly engaged in rendering of logistic and storage services. Percentage of equity interest held by the Company 2004 2003 Directly Indirectly Directly Indirectly Shenzhen Chiwan Logistics Co., Ltd. 90% - 90% - Shanghai Baowan 90% 9% - - Guangzhou Baowan 90% 9.9% - - 26. Related party transactions The Company is controlled by Nanshan Development, which owns 52% of the Company’s equity interests. Ｔｈｅ ｆｏｌｌｏｗｉｎｇ ｔｒａｎｓａｃｔｉｏｎｓ ｗｅｒｅ ｃａｒｒｉｅｄ ｏｕｔ ｗｉｔｈ ｒｅｌａｔｅｄ ｐａｒｔｉｅｓ ｄｕｒｉｎｇ ｔｈｅ ｙｅａｒ： 2004 2003 RMB RMB Sales of service Service income from holding company - Nanshan Development 3,151,168 3,169,592 Service income from associates - Chiwan Offshore 1,288,048 1,972,213 - Chiwan SBW 4,700,299 4,205,594 5,988,347 6,177,807 Service income from related companies - Shenzhen Chiwan Wharf Holdings Limited and its subsidiaries 538,740 762,466 Land usage income from an associate - Chiwan SBW 2,881,440 2,881,440 Purchases of services Construction services provided by a related company - Shenzhen Chixiao Compound Estate Inc. - 13,073,217 Rental for land leased from holding company - Nanshan Development 1,501,159 - 59 ２６． Ｒｅｌａｔｅｄ ｐａｒｔｙ ｔｒａｎｓａｃｔｉｏｎｓ （ｃｏｎｔｉｎｕｅｄ） （ａ） Ｔｈｅ ｆｏｌｌｏｗｉｎｇ ｔｒａｎｓａｃｔｉｏｎｓ ｗｅｒｅ ｃａｒｒｉｅｄ ｏｕｔ ｗｉｔｈ ｒｅｌａｔｅｄ ｐａｒｔｉｅｓ ｄｕｒｉｎｇ ｔｈｅ ｙｅａｒ （ｃｏｎｔｉｎｕｅｄ）： Related companies are companies in which the holding company has beneficial interest. Service provided to and rental charge on or paid to related companies and payment for the construction to a related company were carried out on commercial terms and conditions and at market pric es. （ｂ） Ａｍｏｕｎｔｓ ｄｕｅ ｆｒｏｍ ａｓｓｏｃｉａｔｅｓ， ｒｅｌａｔｅｄ ａｎｄ ｈｏｌｄｉｎｇ ｃｏｍｐａｎｉｅｓ The balances are unsecured, interest-free and repayable within one year. （ｃ） Ｄｉｒｅｃｔｏｒｓ’ ｒｅｍｕｎｅｒａｔｉｏｎ In 2004, the total remuneration of the directors was RMB180,000 (2003: RMB140,000). 27. Commitments (a) Capital commitments Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements are as follows: 2004 2003 RMB RMB Property, plant and equipment 15,882,541 28,028,893 (b) Operating lease commitments –where the Group is the lessee The future aggregate minimum lease payments under non-cancellable operating leases are as follows: 2004 2003 RMB RMB Not later than 1 year 25,852,556 19,335,199 Later than 1 year and not later than 5 years 34,124,904 9,667,604 Later than 5 years 11,337,977 - 71,315,437 29,002,803 60 ２７． Ｃｏｍｍｉｔｍｅｎｔｓ （ｃｏｎｔｉｎｕｅｄ） (c) Operating lease commitments –where the Group is the lesser The future minimum lease payments receivable under non-cancellable operating leases are as follows: 2004 2003 RMB RMB Not later than 1 year 31,218,150 25,723,948 Later than 1 year and not later than 5 years 35,161,074 50,697,811 66,379,224 76,421,759 28. Pension obligations The Group has participated in a pension scheme administered by the government authorities. The contributions made by the Group to the scheme are based on certain percentage of the basic salaries of the Group’s PRC employees. The Group has no other obligations other than the above-mentioned contributions. 29. Subsequent events On 28 March 2005, the board of directors proposed a dividend of RMB 0.2177 per share, amounting to an aggregate amount of RMB 50,206,017 for the year ended 31 December 2004. This proposed dividend is subject to approval by the shareholders in the annual general meeting. Such amounts will be reflected as an appropriation for the year ending 31 December 2005. 30. Comparative figures As mentioned in Note 2 (u), the comparative figures have been translated into RMB for comparison purposes due to the changes in the measurement and reporting currency in 2004. 31. Approval of the financial statements The consolidated financial statements were approved by the board of directors on 28 March 2005. PART XI Documents Available for Verification: 1. Original copy of Annual Report carrying the signature of the Chairman; 2. Original copy of Auditor’ s Statements sealed by CPA and signed by registered accountants; 3. Original copy and press release of all the documents disclosed in 2004 in the newspapers specified by the China Securities Regulatory Commission; 4. AOA,and; 5. Other related data. 61 Chairman of the Board: Dr Fu Yuning Shenzhen Chiwan Petroleum Supply Base Co., Ltd. Dated: 28 March 2005 62