粤电力Ａ(000539)粤电力Ｂ2004年年度报告（英文版）

GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. ANNUAL REPORT 2004 Important Notice The Board of Directors of the Company assures that there is no untrue presentation, nor seriously misleading statements, nor omission of material facts contained in the information hereinto. We also take individual and joint responsibility for the authenticity, veracity and integrality of the report. Director Lao Qiongjuan and Cao Techao didn’t attend the meeting of the Board. Both Tianjian Certified Public Accountants Ltd. Co., and PricewaterhouseCoopers Zhong Tian CPAs Ltd. Co., (“PricewaterhouseCoopers”) have issued the standard unqualified audit report for the Company. Chairman of the Board of Directors, Pan Li, General Manager, Liu Luoshou, Deputy General Manager Yuan Sujie, Finance Department Manager, Liu Xuemao severally and jointly accept responsibility for the correctness, accuracy and completeness of the information contained in this annual report. The reader is advised that this report has been prepared originally in Chinese. In the event of a conflict between this report and the original Chinese version or difference in interpretation between the versions of the report, the Chinese language report shall prevail. CONTENTS I. GENERAL INFORMATION OF THE COMPANY II. SUMMARY OF ACCOUNTING AND OPERATING DATA III. CHANGES IN SHARE CAPITAL AND DETAILS OF SHAREHOLDING STRUCTURE IV. INFORMATION OF DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES V. CORPORATION GOVERNANCE STRUCTURE VI. GENERAL SHAREHOLDERS’ MEETING VII. REPORT OF THE DIRECTORS VIII. REPORT OF THE SUPERVISORY COMMITTEE IX. SIGNIFICANT EVENTS X. FINANCIAL STATEMENTS Consolidated Financial Statements Together with International Auditors’ Report Issued by PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd.(“ PricewaterhouseCoopers”) XI. DOCUMENTS AVAILABLE FOR INSPECTION I. GENERAL INFORMATION OF THE COMPANY 1. Official Chinese name of the Company: 广东电力发展股份有限公司 Official English name of the Company: GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. (Abbreviation: GED) 2. Legal representative: Mr. Pan Li 3. General manager: Mr. Liu Luoshou 4. Secretary to the Board of Directors: Ms. Li Xiaoqing Telephone: (8620)87570276 Email: lxq@ged.com.cn Representatives on security issues: Mr. Liu Wei Telephone: (8620)87570251 Facsimile: (8620)85138084 Email: liuw@ged.com.cn Company’s correspondence address: 26/F., Yudean Plaza, 2 Tian He Dong Road, Guangzhou, Guangdong Province Postal code : 510630 5. Company’s registered address: 10/F., Boli Commercial Centre, Guang Fa Garden, 498 Huan Shi Dong Road, Guangzhou, Guangdong Province Company’s office address: 23-26/F., Yudean Plaza, 2 Tian He Dong Road, Guangzhou, Guangdong Province Postal code : 510630 Company’s E-mail address: ged@www.ged.com.cn Company’s Web site: http://www.ged.com.cn 6. Newspapers selected by Company China Securities, Securities Times, Shanghai Securities, Hong Kong Commercial (Chinese and English for overseas) Web site designated by CSRC to http://www.cninfo.com.cn publish Company’s annual report: Place where Company’s annual Office of Board Affairs report is kept: 7. Place of listing, Abbreviation and code of the Company’s shares: Place of listing of Company’s shares: Shenzhen Stock Exchange Code of Company’s shares: 000539 and 200539 Abbreviation of Company’s shares: Yue Dian Li A and Yue Dian Li B -1- I. GENERAL INFORMATION OF THE COMPANY (CONT’D) 8. Other information: 1) Company’s first registration date: 3 November 1992 Correspondence address: 10/F., Boli Commercial Centre, Guang Fa Garden, 498 Huan Shi Dong Road, Guangzhou, Guangdong Province 2) Business Registration No. “Qi He Yue Zong Zi” No.002753 3) Tax registration No. “Guo Shui Sui Wai Zi 440101617419493 “ Di Shui Sui Wai Zi 440100617419493 4) Names of the Company’s Auditors: (1) Pan-China Certified Public Accountants Office address: 17/F, Bldg. A, Investment Plaza,27 Financial Street, West District, Beijing (2) PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. Office address: 12th Floor, Shui On Plaza, 333 Huai Hai Zhong Lu, Shanghai, 200021, People’s Republic of China 6) Legal Consultant: Guangdong Xin Yang Lawyers Firm Office address: 11/F, 202 Hu Bin Road, PricewaterhouseCoopers Center, Shanghai II. SUMMARY OF ACCOUNTING AND OPERATING DATA Summary of major accounting and operating data of the Group prepared in accordance with International Financial Reporting Standards (“IFRS”) and audited by PricewaterhouseCoopers are as follows: Major accounting data for current year: RMB’000 Income from sales of electricity 7,115,657 Cost of sale of electricity 5,453,665 Operating profit 1,661,992 Other income, net 56,633 Profit before taxation 1,616,477 Net profit 936,730 Net cash flows from operating activities 1,610,808 Note: Explanations for differences between the Group’s profit for the year as reported by domestic and international auditors. -2- The adjustments made by PricewaterhouseCoopers in accordance with IFRS on the Group’s profit and net assets for the year are as follows: Consolidated profit attributable to Consolidated the Group net assets Rmb’000 Rmb’000 As per the statutory financial statements (audited by certified public accountants in the PRC) 948,467 8,105,332 Impact of IFRS adjustments: Amortization of deferred staff costs (10,219) 51,091 Difference in amortization of land use rights (3,171) 65,970 Deferred tax (3,801) 32,171 Provision for the early retirement obligation 12,772 (81,408) Difference in Appropriation for Staff and Workers’ Bonus and Welfare Fund (8,793) - Others 1,475 (7,181) As restated after IFRS adjustments 936,729 8,165,975 2 Three-year major accounting data and financial yardstick summary Unit：RMB’000 Year 2003 Year 2002 Year 2003 Before Year 2002 Before Yardstick item Year 2004 As restated restatement As restated restated Income from sales of electricity 7,115,567 5,996,285 5,996,285 5,586,730 5,586,730 Net profit 936,730 1,127,362 1,163,667 1,179,764 1,160,691 Earnings per share (RMB) Earnings per share (Basic) 0.35 0.42 0.44 0.44 0.44 Earnings per share (diluted) N/A N/A N/A N/A N/A Earnings per share after extraordinary item 0.35 0.42 0.44 0.44 0.44 Earnings on net asset (%) 11 14 15 16 16 Net cash flow per share from operating activities (RMB) 0.6 0.76 0.76 0.97 0.97 31 December 31 December 31 December 31 December 31 December 2003 2003 Before 2002 2002 Before Yardstick item 2004 As restated restatement As Restated Restated (1) Total Assets 13,543,508 12,547,943 12,590,293 11,872,866 11,853,793 (2) Shareholders’ Equity (excluding MI) 8,165,975 7,894,096 7,949,474 7,397,470 7,378,397 (3) Net assets per share (RMB) 3.07 2.97 3.01 2.77 2.77 (4) Adjusted net asset per share (RMB) 3.07 2.97 3.01 2.77 2.77 -3- 3 Consolidated statements of changes in shareholders’ equity for the year ended 31 December 2004 Reserves Statutory Statutory Public Discretionary Share Capital surplus welfare surplus Retained capital reserve reserve fund reserve earnings Total Balances at 1 January 2003，restated 2,659,404 1,383,187 731,462 286,404 1,164,557 1,153,383 7,378,397 Originally reported 2,659,404 1,383,187 731,462 286,404 1,164,557 1,172,456 7,397,470 Prior year adjustments - - - - - (19,073) (19,073) Dividends relating to 2002 - - - - - (611,663) (611,663) Net profit, restated - - - - - 1,127,362 1,127,362 Originally reported - - - - - 1,163,667 1,163,667 Prior year adjustments - - - - - (36,305) (36,305) Appropriation from retained earnings - - 125,525 62,762 297,496 (485,783) - Balances at 1 January 2004, restated 2,659,404 1,383,187 856,987 349,166 1,462,053 1,183,299 7,894,096 Originally reported 2,659,404 1,383,187 856,987 349,166 1,462,053 1,238,677 7,949,474 Prior year adjustments - - - - - (55,378) (55,378) Dividends relating to 2003 - - - - - (664,851) (664,851) Net profit - - - - - 936,730 936,730 Appropriation from retained earnings - - 93,967 46,984 313,812 (454,763) - Balances at 31 December 2004 2,659,404 1,383,187 950,954 396,150 1,775,865 1,000,415 8,165,975 Annual profit Annual profit Annual profit Annual profit Annual profit Reason of change appropriation appropriation appropriation appropriation appropriation -4- III. CHANGES IN SHARE CAPITAL AND DETAILS OF SHAREHOLDING STRUCTURE 1. Changes in share capital (1) Summary of changes in share capital Unit: shares Changes during year（+,-） Balance at Converted beginning of Rights from capital Additional Sub- Balance at end Type of Shares year issue Bonus issue reserve Issuance Others total of the year I. Non-listed shares 1. Promoters’ shares Including: 1,553,175,000 1,553,175,000 - State-owned shares 1,375,007,400 1,375,007,400 - Domestic legal person 178,167,600 shares 178,167,600 - Foreign legal person shares - Others 2.Subscriber legal 49,413,000 49,413,000 person shares 3.Employee shares 4.Preferred Shares or others: Total 1,602,588,000 1,602,588,000 II. Listed shares 1. Domestic listed RMB ordinary shares 391,476,000 391,476,000 2. Domestic listed foreign shares 665,340,000 665,340,000 3. Overseas listed foreign shares 4. Others Total 1,056,816,000 1,056,816,000 III. Total shares 2,659,404,000 2,659,404,000 -5- 2. Information about shareholders (1) As at 31December 2004, the Company has 125,744 shareholders, including 77,652 A shareholders, 48,092 B shareholders. (2) Top 10 major shareholders (as at 31December 2003) Proportion Number of Number of to total shares Nature of share Name of Changes shares held at share capital Nature of impawned or holders shareholders during year end of the year (%) shares held frozen Guangdong - 1,333,800,000 50.15 Non-listed - State-owned Electric Power enterprise Holding Co. China Cinda Asset - 87,750,000 3.3 Non-listed Unknown State-owned Management enterprise Corporation Guangdong - 85,082,400 3.2 Non-listed - Electric Power State-owned Development Co. enterprise Ltd Guangdong - 43,875,000 1.65 Non-listed Unknown Guangkong - Group CMBLSA RE FTIF 6,179,260 24,418,494 0.92 Listed Unknown Foreign TEMPLENTON - invested ASIAN GRW FD enterprise GTI 5496 Naito Securities 13,768,030 20,878,536 0.79 Listed Unknown Foreign Co., Ltd Invested enterprise Xiangcai Securities - 17,855,298 0.67 Listed Unknown - Co., Ltd Great Wall -10,436,253 16,843,697 0.63 Listed - Securities Co., - Ltd Toyo Securities 7,349,644 16,132,761 0.61 Foreign Asia Limited – Listed Unknown Invested A/C Client enterprise TEMPLETON - 16,090,315 0.61 Listed Unknown Foreign invested WORLD enterprise FUND,INC. The relationship and consistent Guangdong Electric Power Development Co. Ltd, the third of the top 10 of above shareholders shareholders, is a subsidiary of Yudean, which is the No.1 shareholder; it is unknown whether relationship exists between other shareholders. -6- (3) Information of holding company Yudean holds 50.15% shares of the Company and is the major shareholder of the Company. Pursuant to the Business License issued by the Guangdong Commercial Bureau, Yudean is a wholly state-owned limited company. Its registered capital is Rmb 12,000,000,000 and its registered address is 33-36/F., Yudean Plaza, 2 Tian He Dong Road, Its legal representative is Mr. Pan Li. It is mainly engaged in management of power plants and power generation assets; construction of power plants; sales of electricity; repair and maintenance of electricity equipments; technology service on electricity industry; electricity investment; investment planning and consulting; information consulting service; sales of production materials (except for gold, silver, vehicle and dangerous chemistry materials). The following chart is the shareholding relationship between the Company and its Related control parties, Guangdong Yudean Group Co., Ltd 100% 50.15% Guangdong electric power Development Co., Ltd. 3.20% The Company (4) No other legal person shareholders who hold more than 10% (inclusive) of the Company’s shares. (5) Top 10 shareholders of listed shares Number of shares Name of shareholders held at year-end Type CMBLSA RE FTIF TEMPLENTON ASIAN GRW 24,418,494 B share FD GTI 5496 Naito Securities Co., Ltd 20,878,536 B share Xiangcai Securities Co., Ltd 17,855,298 A share Great Wall Securities Co., Ltd 16,843,697 A share TOYO SECURITIES ASIA LIMITED-A/C CLIENT. 16,132,761 B share TEMPLETON WORLD FUND,INC. 16,090,315 B share AIZAWA SECTURITIES CO., LTD 11,350,959 B share TEMPLETON DRAGON FUND,INC. 11,135,658 B share TEMPLETON EMERGING MARKETS 10,714,365 B share INVESTMENT TRUST Northwest Securities Co., Ltd 9,606,841 A share Relationship between top 10 major Unknown shareholders of listing shares -7- IV. INFORMATION OF DIRECTORS, SUPERVISORS SENIOR MANAGEMENT AND EMPLOYEES 1. Information about the Company’s Directors, Supervisors and senior management: Name Gender Age Position Period of Shares held Shares Position in Period of Service at opening held at shareholder’s service of yea year-end company Pan Li Male 50 Chairman From - - Chairman of From 2001 13/05/2002 Yudean on on Deng An Male 55 Vice-Chairman From - - General From 2001 13/05/2002 Manager of on on Yudean Hong Rongkun Male 47 Director From - - Vice General From 2001 13/05/2002 Manager of on on Yudean Li Zhuoxian Male 42 Director From - - Vice General From 2001 18/08/2004 Manager of on on Yudean Liu Qian Male 50 Director - - Vice General From From Manager of 2003 13/05/2002 Yudean - on- on Liu Luoshou Male 53 Director, From - - - - General Manager 28/10/2003 on Cao Teychao Male 38 Director From - - 13/05/2002 Financial From 2001 on Minister of on Yudean Yao jiheng Male 40 Director From - - - - 18/08/2004 on Lao Qiongjuan Female 50 Director From - - Executor of 13/05/2002 China Cinda on Asset Management From 2001 Co., Guangzhou on representative office Zou Xiaoping Male 40 Director From - - Chairman of From 2001 13/05/2002 Guangdong on on Guangkong Group Wang Jun Male 46 Independent From - - - - Director 13/05/2002 on Zhang Zhiyue Male 38 Independent From - - - - Director 13/05/2002 on Song Xianzhong Male 41 Independent From 2,750 2,750 - - Director 13/05/2002 on Cheng Xinxin Female 51 Independent From - - - - Director 13/05/2002 on Zhu Baohe Male 42 Independent From - - - - Director 13/05/2002 on -8- Name Shares held Shares Position in Period of at opening held at shareholder’s Period of Gender Age Position Service of year year-end company service Yang Xuanxing Male 39 Chairman of From - - Audit and From 2001 Supervisory 13/05/2002 Inspection on Committee on Minister of Yudean Xu Runxiong Male 59 Supervisor From - - - - 13/05/2002 on Xin Huanping Male 41 Independent From - - - - Supervisor 13/05/2002 on Liang Ruyu Male 37 Independent From - - - - Supervisor 13/05/2002 on Lin Weifeng Male 36 Supervisor From 3,000 3,000 - - 13/05/2002 on Chen Chuyang Male 45 Supervisor From - - - - 15/05/2003 on Xu Peijin Male 49 Vice General From - - - - Manager 28/10/2003 on Yuan Sujie Male 44 Vice General From - - - - Manger 13/05/2002 on Luo Zhiheng Male 37 Vice General From 1,128 1,128 - - Manager 13/05/2002 on Li Xiaoqing Female 33 Secretary to the From - - - - board of directors 15/05/2003 on Liu Xuemao Female 49 Finance Manager From - - - - 13/05/2002 on 2. Information about working experience of the current directors, supervisors, senior management staff including part time for other companies other than their shareholding company.. Mr. Pan Li, started his career at 1972. During his employment, Mr. Pan has served as the technician staff, Vice-Section Chief of the technique and production section; Vice –director general of the Guangzhou Power Supply Bureau, Vice-General Manager of the Guangdong Yudean Group Co., Ltd, and currently taking the position as the Chairman in the Guangdong Yudean Group Co., Ltd and the Guang dong Electic Power Development Co., Ltd. Mr Deng An, started his career at 1968, Mr. Deng took the position as Vice-director of the Integrated-workshops, Vice-factory director of the Shaoguan Electric Power Co., Ltd. Mr. Deng also Served as the factory director for the Yun Fu Electric Power Co., Ltd and Huang Pu Electric Power Co., He is now taking the position of Vice-Chairman; General Manager in the Guangdong Yudean Group Co., Ltd, and he is one of the directors of the Guangdong Electric Power Development Co., Ltd. Mr Hong Rongkun, started to work at 1978. During his employment, Mr. Hong has served as The Party Branch Secretary for boiler department and Vice-factory director of the Maoming Thermal Power Co., Ltd, he also worked for the Power Industry Bureau of Guang dong Province -9- as the Deputy Director General of the technique and production department, Vice-General Engineer. Mr. Hong is currently taking the position as the director, Vice-General Manager in the Guangdong Yudean Group Co., Ltd and director of the Guangdong Electric Power Development Co., Ltd. Mr Li Zhuoxian, started to work at 1983. Mr. Li has took the position as the technician staff of the Chemical department, Vice-department director, department director, Vice-Section Chief of the Technique and production section, Vice-General Engineer, and Vice-factory director in the Shaogun Electric Power Co.. Mr. Li currently taking position of director, Vice-General Manager in the Guangdong Yudean Group Co., Ltd and is one of the directors of the Guangdong Electric Power Development Co., Ltd. Mr Liu Qian, he started to work at 1970. Mr. Liu has served as the Vice-Section Chief of the technique and production section, Manager Assistant of the transportation department in the Shaoguan Electric Power Co., and he also took the position of Vice-General Manager in the Guang Dong Huaneng Electric Power Co, General Manager of the Guang gong Development Co., Ltd. He is currently taking the position of director of the Guangdong YudeanGroup Co., Ltd and Vice-General Manager of the Guang dong Eclectic Power Development Co., Ltd. Mr Liu Luoshou, started to work at 1976. Mr. Liu took the position as director of the pneumatic machine department, Vice-director of the arrangement department factory director of the Zhanjiang Electric Power Co., General Manager of the Zhanjiang Electricity Co., General Manager of the Tan Shengqiao First Degree Water and Electricity Development Co., Ltd. He is now taking the position of the director and General Manager of the Guang dong Electic Power Development Co., Ltd. He is also taking the position as the Chairman of the Guangdong Shaoguan Yuejiang Electric Power Co., Ltd. Mr. Yao Jiheng , started to work at 1987, Mr. Yao was the person in charge being responsible for pneumatic machine of the constructive preparation department, he also took the position as Vice-director of the of the overhauling plant , director of the pneumatic machine plant ,Vice- factory director of the Yun Fu Electric Power Co., Assistant to factory director, Vice-factory director of the Huang Pu Electric Power Co., he is currently taking the position as the director of the Guang dong Eclectic Power Development Co., Ltd. and the factory director of the Shajiao Power Plant A. Mr. Cao Techao, started to work at 1988, Mr. Cao has served as the Section Chief of the financial department of the production section of Guang dong Power Industry Bureau; Deputy Director General of the Guang dong Power Group Co., He is currently taking the position of the Financial Minister of the Guangdong YudeanGroup Co., Ltd and he is also one of the directors of the Guang dong Electic Power Development Co., Ltd. Ms Lao Qiongjuan she started to work at 1970, Ms. Lao has took the position as the Vice- president of China Construction Bank - Lanzhou Electric Branch. the head of the credit department, Vice-president of China Construction Bank-Guang dong Branch she is currently taking the position as the Executor of China Cinda Asset Management Co., Guangzhou representative office and she is one of the directors of Guangdong Eclectic Power Development Co., Ltd. Mr. Zou Xiaoping, started to began to work at 1988, Mr. Zou was the lecturer of Wu Han Hua Zhong University of Science Technology, and he has also taken the position as Vice-General Manager of the Guang dong Guang Fa Industry Investment Group. He is currently taking position as Chairman of Guangdong Guangkong Group and he is one of the directors of Guangdong Eclectic Power Development Co., Ltd. Mr. Wang Jun, started to work at 1988, Mr. Wang was the assistant to the president, Vice- president, president of economic graduate school of Zhong Shan University, he is now the assistant to the president of Zhong Shan University, the president of management college of Zhong Shan University, he enjoys the special allowance granted by State Department of China, he is on of the independent directors of Guang dong Eclectic Power Development Co., Ltd. He is also member of the China Youth Scientist Association and Administrative Vice Chairman of the Guangdong Economics Association. - 10 - Mr. Zhang Zhiyue, started to work at 1980, Mr. Zhang was once worked at law office of Gan Su Jiuquan Iron and Steel Group Co., he also took a position in The State Economic and Trade Commission. He is now working as a lawyer in the Beijing Zedu Law Firm, and he is also the Vice president of the law school of Hu Nan University. Mr. Song Xianzhong, started to work at 1983, Mr. Song lectured at Industry economics department of Hu Nan Financial and Economics College, Accounting department of Politics Institute as well as Accounting department of Jinan University. He is currently taking position as Vice-president of management School of Jinan University, director of the Accounting department. He is one of the independent directors of Guang dong Eclectic Power Development Co., Ltd. He also takes the position as Administrative director cum Deputy Secretary-General of the Guang dong Accounting-Society and Vice-Chairman of Guang zhou Auditing-Society. Ms Cheng Xinxin, started to work at 1968, Ms. Cheng took the position at Budget department of the Guang dong Financial Bureau, she also served as Vice-General Manager of Hong Kong Fei Long Co., Ltd, Vice-General Manager of the Planning and Management department , Financial department , as well as Assets Management department Hong Kong Yue Hai Group.and Executor of Guang dong zhong nong xing Co., Guang dong representative office he is currently taking position as director and CEO of Wan Fang Xing Tai Consultancy Co., Ltd. she is also one of the independent directors of the Guang dong Electic Power Development Co., Ltd. Mr Zhu Baohe, started to work at 1983, Mr. Zhu has took the position in Research and Development of Shen Zhen Nan hai Industry Development Co., Ltd Guo Tai Securities- Shenzhen Branch, Jun An Securities Research Institute, he also has served as top analyst cum Vice-General Manager of Guo Xing Securities Research and Planning Centre. Assistant to CEO of Fang Zheng Securities Co., Ltd.. He is currently taking the position as assistant to CEO of Guo Hai Securities Co., Ltd. He is also one of the independent directors of Guang dong Electic Power Development Co., Ltd. Mr Yang Xuanxing, started to work at 1987, Mr. Yang has took the position as Vice-Chief auditor of auditing department, deputy director general of Guang dong Power Bureau. He is currently taking position as Audit and Inspection Minister of Guangdong YudeanGroup Co., Ltd, Chairman of the Supervisory Committee of Guang dong Electic Power Development Co., Ltd. Mr Xu Runxiong, Started to work at 1964, Mr. Xu has took the position as the Section Chief, Deputy director general,Director general of China Construction Bank- Guang dong Branch, he is currently taking the position as General-Manager of client service department of China Construction Bank- Guang dong Branch, he is also one of the Supervisors of the Guang dong Electic Power Development Co., Ltd. Mr Lin Weifeng, worked at Xin Fengjiang Water and Electricity Co., thereafter he served as the auditing director of Shajiao Power Plant, he is currently taking the position as employee supervisor of Guang dong Electic Power Development Co., Ltd. He also serves as Financial Minister of Shao jiao Power Plant. Mr Chen Chuyang, started to work at 1977, Mr. Chen has took the position as Manager of Monetary and Securities department, he is currently taking the position as Employee supervisor and the person in charge of General Affairs of Board of Directors of Guangdong Electric Power Development Co., Ltd. Mr Xin Huanping, started to work at 1988, Mr. Xin has the legal qualification for carrying business of Security Law Affairs, he has worked as a qualified lawyer for Shenzhen Commercial Law Firm, Guang dong Hua shang Law Firm, the chief director of the Guang dong Ji cheng Law Firm. He is currently taking the position as independent supervisor of Guang dong Electic Power Development Co., Ltd. Mr Liang Ruyu, started worked in Guangdong Midea Group Co., Ltd. Mr. Liang has also took the position as General Manager of Hua Yu Commercial Co., Ltd in city of Shun De. He is currently taking the position as General Manager of Shun de Operating department of Guang - 11 - dong Xing Ye Securities. He is also one of the independent supervisors of Guang dong Electic Power Development Co., Ltd. Mr Xu Peijin, started began to work at 1974, Mr. Xu has took the position as head of the electric plant ,Vice-department director, department director, Vice-factory director , Factory- director of Maoming Thermal Power Co., Ltd, and he is currently taking the position as Vice- General Manager of Guang dong Electic Power Development Co., Ltd. He is also the Vice- Chairman of Maoming Zhenneng Thermal Power Co., Ltd. Mr Yuan Sujie, started to work at 1977, Mr. Yuan has served as the Financial Section Chief of the production section , Deputy director general of financial department of Guang dong Power Industry Bureau , he is currently taking the position as Vice-General Manager of Guang dong Electic Power Development Co., Ltd. And he is also the Vice-Chairman of Yudean Holding Western Investment Co., Ltd. Mr Luo Zhiheng, started to work at 1988, Mr. Luo has served as the business operator of Guang hua Industry import and export Co., in charge manage of planning department of Guang dong Electic Power Development Co., Ltd. He is currently taking the position as Vice-General Manager of Guang dong Electic Power Development Co., Ltd. He is also one of the directors of the Zhanjiang Electric Power Co., Ltd. Ms Li Xiaoqing, started to work at 1996, Ms. Li has took the position as the office Secretary ,person in charge being responsible to the General Manager of Guangdong Electric Power Development Co., Ltd, she is currently taking the position as Secretary to the Board of Directors, and in charge manager for Board of Directors’ Affairs ,and she is also the director of Shenzhen Guang qian electricity Co., Ltd. Ms Liu Xuemao, started to work at 1972, Ms. Liu has worked in Shaoguan Electric Power Co, Huang Pu Electric Co, Guang dong Power Testing Institute,she is currently taking the position as the person in charge of financial affairs , in charge manage of financial department of Guangdong Electric Power Development Co., Ltd, she is also the supervisor of Zhanjiang Electric Power Co., Ltd. - 12 - 3. Remunerations of directors, supervisors and senior management of the Company The salary and welfare of directors, supervisors and senior management of the Company are determined by their position in the Company and are in accordance with the Company’s principle on staff payroll and welfare. No additional salary and welfare are paid. Allowance of independent directors, independent supervisors are paid according to the standard approved by the General Shareholders’ Meeting. Total remuneration paid to current directors, supervisors and senior management was RMB 2,840,000. Total amount paid to the top three directors was RMB 660,000, and total amount paid to the top three senior managers was RMB 910,000. Of them, one was paid over RMB 300,000, 10 were paid between RMB 100,000 and RMB 300,000, and 7 were paid below RMB 100,000. There are 10 directors and supervisors whose remunerations are not paid by the Company. They are: Pan Li, Deng An, Hong Rongkun, Li Zhuoxian, Liu Qian, Chao Techao, Lao Qiongjuan, Zou Xiaoping, Yang Xuanxin, and Xu Runxiong. They are paid by respective shareholders instead. During the year, allowance for independent directors was RMB 80,000 per annum per person (tax inclusive). They are: Wang Jun, Zhang Zhiyue, Song Xianzhong, Cheng Xinxin, and Zhu Baohe. Allowance for the independent supervisors was RMB 30,000 per annum per person (tax inclusive), they are Xin Huampin and Liang Ruyu. 4. Directors, Supervisors and Senior Management who resigned, appointed or elected in reporting period During the year, due to the redeployment of the position ,Yu Fumin, Li Xihua have no Longer took the responsibility of the directors of the company anymore due to the working reshuffle, Li Zhuoxian ,Yao Jiheng were appointed as the directors of the company in the Second Extraordinary General Shareholders’ Meeting which was held as at 18/08/2004. 5. Particulars of employees At the end of 2004, the Company had 1,515 employees, including 422 technicians, 1,091 production workers, 20 finance staffs, 85 administrative and management staffs and 274 retired staffs. Current employees consisted of 548 college graduates or above, 856 technical secondary school or high school graduates and 111 junior high school graduates or below. Except for few staff working in headquarters of the Company(accounts for 1.91%), most of the staff work in Shajiao A Power Plant. - 13 - V. CORPORATION GOVERNANCE STRUCTURE 1. General information about the Company’s corporation governance structure The Company continuously improves its corporate governance structure according to the requirement of Corporation Ordinance, the Securities Law, the Guideline of Listed Company Corporate Governance and other principles. The Company Reviewed and approved the during the fourteenth meeting of The Fourth Board of Directors of Guangdong Electric Power Development Co., Ltd. (the “Company”) on 08/04/2004 The Company Reviewed and approved the during the Second Extraordinary General Shareholders’ Meeting of 2004 on 08/18/2004. Based on the official guidance of issued by China Securities Regulatory Commission ( CSRC 2003 No. 56 ), the Company made the necessary amendments to relative terms of guarantee its Articles of Association. The current corporate governance structure of the Company runs effectively, all the shareholders’ meeting, board of directors’ meeting, supervisor committee’s meeting as well as the five expert subsidiary committees can be held regularly based on the Company’s Article of Associations, the Standing Orders of the Shareholders’ Convention, the Standing Orders of the Boards and the Standing Orders of the Supervisor Committee, all the above function can deliberate affairs according to their respective responsibilities, exerting decision-making and supervising function of independent directors and supervisors. 2. Information about independent directors and supervisors During the reporting period, five meetings were held by the Forth Board of Directors, all the five independent directors were able to attend those meetings and exert the voting rights in person or assigned other directors on behalf of them , there were no objection have been raised regarding to the board meeting proposals. The Forth supervisor committees of the Company hold three meetings during the reporting period, all the two independent supervisors were able to attend those meetings and exert the voting rights in person or assigned other directors on behalf of them , there were no objection have been raised regarding to the supervisory meeting proposals. According to the relevant rules and Articles of Association of the Company, the independent directors and supervisors carried out their responsibility and rights seriously and pay special concerns on the operation and production of the Company. They attended the board meetings, supervisory meetings and shareholders meetings actively, and expressed opinions on the Company’s operation and related party transactions to improve governance of the Company and to protect the interests of shareholders. - 14 - 3. Separation of operation with the holding company (a) Separation of human resource: the General Manager and all his subordinates, Secretary to the Board of Directors, Financial Manager are paid by the Company and take no position in the holding company. (b) Separation of assets: the Company has independent production system, supporting system and other facilities. The Company owns its intangible assets such as intellectual property rights, trademarks and non-patent technology, except that the procedures to apply land use right certificate of Shajiao A Power Plant are still in progress. (c) Financial independence: the Company has an independent financial department and has established independent accounting system and financial management system. It opened independent bank accounts for its own operation. (d) Separation of organization: the Company has established integrated operating institution of its own. (e) Separation of operation: the Company is principally engaged in the electricity generation and sales to Guangdong Electric Power Holding Co.(“GPHC”) directly. The Company has subcontracted the subsidiary of Yudean, the holding company, to purchase the fuels, which is solely for the purpose of better utilization of large-scale purchase and cost control. 4. The implementation of the Company’s evaluation and incentive system of senior management The Company is in the process of establishing a fair, visible performance evaluation scheme and incentive system for directors, supervisors and management. The management is appointed openly and fairly to be compliant with laws and regulations. - 15 - VI. GENERAL SHAREHOLDERS’ MEETINGS 1. 2003 Annual General Shareholders’ Meeting On 13 April 2004, notice on convening the meeting was published on China Securities, Shanghai Securities, Securities Times and Hong Kong Commercial. The Company convened its 2003 Annual General Shareholders’ Meeting in the morning of 18 May 2004 at the Conference Room on the 25TH Floor of Yudean Plaza, Tian He Dong Road, Guangzhou, Guangdong Province .21 shareholders (or proxy of shareholders) attended the meeting, representing 1,572,167,450 shares, which is equivalent to 59.12% of the total 2,659,404,000 shares. Among the shareholders, there were 9 A share shareholders, representing 1,564,197,507 shares and 12 B shareholders, representing 7,969,943 shares. Convening of the meeting complied with the Corporation Ordinance and Articles of Association of the Company. Following resolutions were voted and passed at the meeting: (1) Reviewed and approved the 2003 Report of the Board of directors; (2) Reviewed and approved the 2003 Report of the General Manager; (3) Reviewed and approved the 2003 Financial Statements; (4) Reviewed and approved the 2003 Proposal of Profit Appropriation and Dividend; (5) Reviewed and approved the 2003 Annual Report; (6) Reviewed and approved the 2003 Report of the Supervisory Committee; (7) Reviewed and approved the Proposal on the Increase of Investment in Yudean Holding Western Investment Co., Ltd; (8) Reviewed and approved the Review the Proposal on the Company’s Investment in the No. 6 Generator of Maoming Thermal Power Plant; (9) Reviewed and approved the Proposal on Amendments on the Company’s Article of Associations; (10) Reviewed and approved the Proposal on Fixed Assets Disposal of 2003; (11) Reviewed and approved the Proposal on Yuejia Electric’s Application of Credit Bank Loan Facility. (12) Reviewed and approved the Proposal on the Appointment of Statutory and International Auditors. - 16 - VI. GENERAL SHAREHOLDERS’ MEETINGS (CONT’D) 2. The First Extraordinary General Shareholders’ Meeting of 2004 The Company published the announcement for convening this meeting in the Securities Times, China Securities, Shanghai Securities and Hong Kong Commercial on 31 December 2003. The Company convened its first Extraordinary General Shareholders’ Meeting for 2004 in the morning of 10 Feburary 2004 at the Conference Room on the 25TH Floor of Yudean Plaza, Tian He Dong Road, Guangzhou, Guangdong Province . 12 shareholders (or proxy of shareholders) attended the meeting, representing 1,632,105,373 shares, which is equivalent to 61.37% of the total 2,659,404,000 shares. Among the shareholders, there were 5 A share shareholders, representing 1,550,512,600 shares and 7 B shareholders, representing 81,592,773 shares. Convening of the meeting comply with the Corporation Ordinance and Articles of Association of the Company. Following resolutions were passed at the meeting: (1) Reviewed and approved the Proposal on Increasing Share Equity of Zhanjiang Aoli Oil Generator Project. (2) Reviewed and approved the Proposal on Yuejiang Electric’s Application of Bank Loan Facility. (3) Reviewed and approved the Proposal on Consigning Maoming Thermal Power Plant for the Contract Management of 5# generation of Maomign Ruineng 3. The Second Extraordinary General Shareholders’ Meeting The Company published the announcement for convening this meeting in the Securities Times, China Securities, Shanghai Securities and Hong Kong Commercial on 7 July 2004. The Company convened its Second Extraordinary General Shareholders’ Meeting of 2004 in the morning of 18 August 2004 at the Conference Room25TH Floor of Yudean Plaza, Tian He Dong Road, Guangzhou, Guangdong Province. 17 shareholders (or proxy of shareholders) attended the meeting, representing 1,641,669,365 shares, which was equivalent to 61.73 % of the total 2,659,404,000 shares. Among them, there were 6 A share shareholders, representing 1,561,576,741 shares and 11 B shareholders, representing 80,092,624 shares. Convening of the meeting complied with Corporation Ordinance of the People’s Republic of China and Articles of Association of the Company. The following resolution was voted and passed during the meeting: (1). Reviewed and approved the Proposal on Amendments on the Company’s Article of Associations; (2). Reviewed and approved the Proposal of Setting up Maoming zhenneng Thermal Power Co., Ltd (3). Reviewed and approved the Proposal on the Nomination of Mr. Li Zhuoxian as Director of the Fourth Board of Directors of the Company; (4). Reviewed and approved the Proposal on the Nomination of Mr. Yao Jiheng as Director of the Fourth Board of Directors of the Company; - 17 - 4. The Third Extraordinary General Shareholders’ Meeting The Company published the announcement for convening this meeting in the Securities Times, China Securities, Shanghai Securities and Hong Kong Commercial on 30 October, 2004. The Company convened its first Extraordinary General Shareholders’ Meeting for 2004 in the morning of 30 November 2004 at the Conference Room on the 25TH Floor of Yudean Plaza, Tian He Dong Road, Guangzhou, Guangdong Province13 shareholders (or proxy of shareholders) attended the meeting, representing 1,631,072,676 shares, which is equivalent to 61.33% of the total 2,659,404,000 shares. Among the shareholders, there were 4 A share shareholders, representing 1,550,507,400 shares and 9 B shareholders, representing 80,565,276 shares. Convening of the meeting comply with the Corporation Ordinance and Articles of Association of the Company. Following resolutions were passed at the meeting: 1) Reviewed and approved the Proposal of Setting up Guang Dong Yudean Jinghai Power Plant Co., Lted 2) Reviewed and approved the Proposal on Increasing Investment Percentage in Shenzhen Guang qian electricity Co., Ltd.. 3) Reviewed and approved the Proposal of “Agreement on Fuel Purchase” which is signed by the Company and Maoming Ruineng Thermal Power Co., Ltd. 4) Reviewed and approved the Proposal of “Agreement on Fuel Purchase” signed by the Company and Zhanjiang electric Power Co., Ltd. 5) Reviewed and approved the Proposal of Common Expenses Allocation of the Guangdong Shaoguan Electric Power Co., Ltd. 6) Reviewed and approved the Proposal of Rental Contract for Long Huang Chong Ash Ground of Guangdong Shaoguan Electric Power Co., Ltd 7) Reviewed and approved the Proposal of the Repayment for the Capital Occupancy Expenses paid by Yudean Group instead; 8) Reviewed and approved the Proposal of the changes of Company’s office address as well as the Amendments on the Company’s Article of Associations; - 18 - VII. REPORT OF DIRECTORS 1. The Company’s operation during reporting period In the year of 2004, the Company undergone the difficult times for shortage of coal supply, continuously rising of fuel transporting price and lack of high quality coal. The Company ensured its coal supply through professional management and reliable supply chain, and no suspending of electricity generation occurred; meanwhile, the Company was also aware of generator inspection and technology innovation, in order to maintain the stable operating and enhance the effectiveness of the generators. As a result, the Company satisfactorily accomplished its annual electricity generating tasks and even exceeded the budget. At the end of 2004, the total generation volume of the Company amounted to 21.887 billion KWH, and on- grid volume totalled 20.457 billion KWH, increased by 14.85% and 15.04% respectively as compared to those of last year. The continuously increasing price of fuel and transporting has imposed large pressure on the Company’s achievement and exaltation, especially for those companies locate in remote regions, which lack of coal resources. In 2004 the average unit price of coal increased by 40% as compared with the same period in last year, and which was resulted in turn affected the Company’s profit margin. To overcome those problems, the Company focuses on secure manufacturing management, increasing electric power generating, enhancing control over budget and cost, exploring its internal potential, accelerating its construction in process and enlarge its profitability through manufacturing scale expansion. With the efforts the Company has made, its financial condition, total assets and operating income maintain at a stable level. Besides, its decrease of profit was less than increase of cost. At the end of 2004, the Company’s total assets amounted to RMB 13.54 billion, and net assets amounted to RMB 8.166 billion, with 6.54% and 3.44% increase respectively, as compared to last year’s figure. The operating revenue amounted to RMB 7.116 billion. The net profit was RMB 0.937 billion. As calculated on basis of 2,659,404,000 shares issued by the Company, the earnings per share was RMB 0.35, with decrease of 16.67% in comparison to last year’s figure. With the reformation of electric power system, the Company has clarified its position and development strategy within the new industry. After more than 1 year’s solid work, the Company has formed a continuable development status that mainly bases on electric power generation. Recently, the Company has 5 electric power generation projects in production and the installed generation capacity is 3,285 MWH; 9 projects in progress and the installed generation capacity is 2,250 MWH; 3 projects in exploration, and the installed generation capacity is 7,000 MWH. The total generation capacity of projects in progress and exploration is 2.8 times of projects in production. From that we can infer that the Company has great continuable development ability. Beyond those mentioned above, the Company achieved splendid performance in expanding business into backward and forward industries. Furthermore, the Company also succeeded in exploring business in resourceful provinces. Although it is estimated that the shortage of electric power and coal supply, difficulty in security production and persistent high price of coal-transporting will continuously exist, the company still face opportunities together with challenges. The Company will consistently exert efforts on maximizing corporation’s value and shareholders’ benefit through increasing its competitiveness on core business and enhancing integrated continuable development ability. 1) The scope and review of the Company’s operations The Company is a large power generation company principally engaged in operation and construction of power plants and electric power transmission project. At the end of reporting period, the Group’s installed generation capacity was 3,285 MW, and installed generation capacity attributable to the Company was 2,632.3 MW. The total generation volume of the Group amounted to 21.887 billion KWH, and on-grid volume - 19 - totaled 20.457 billion KWH, increased by 14.85% and 15.04% respectively as compared to those of last year. The total generation volume of the Group accounted for 9.17% of that in Guangdong Province; while its market share slightly decreased as compared to last year. Following is the operating abstract of first half year of 2004: Unit: RMB’ 000 Industry Region Operating Operating Gross Profit Increase rate of Increase rate Increase Income Cost Ratio Operating of Operating rate of Income (%) Cost (%) Gross Profit Ratio (%) Electric Guangdong 7,115,657 5,453,665 23.36 18.67 36.92 -10.21 Power Province Amount of 0.00 0.00 -- 0.00 0.00 0.00 Related Parties Transaction During reporting period no significant change occurred on the Group’s operating activities and construction. However, the Group’s profitability of operating activities decreased in result of the rising price of fuel and freight charge. 2) The Company's wholly-owned plant and subsidiaries In 2004, Shajiao A Power Plant, the Company's wholly-owned plant, achieved electricity generation volume of 8,856 million KWH and on-grid electricity generation volume of 8,281 million KWH, increased by 8.37% and 8.50% respectively as compared to those of last year. Zhanjiang Electric Power Co., Ltd. (“Zhanjiang Electric”), a 76% held subsidiary with a registered capital of RMB 2.875 billion, is mainly engaged in power generation and construction of power plant and it has contributed a net profit of RMB 450 million. The Zhanjiang Power Plant owned by Zhanjiang Electric has achieved power generation of 7,940 million KWH and on-grid electricity of 7,526 million KWH, increased by 15.42% and 15.82% respectively compared to those of last year. Guangdong Yuejia Electric Power Co., Ltd. (“Yuejia Electric”), a 58% held subsidiary, with a registered capital of RMB 1.2 billion, is mainly engaged in power generation and contributed a net profit of RMB 179 million. The Meixian B Power Plant owned by Yuejia Electric has achieved power generation of 2,052 million KWH and on-grid electricity volume of 1,867 million KWH, increased by 23.10% and 22.43% respectively compared to those of last year. Shaoguan Yuejiang Electric Power Co., Ltd. (“Yuejiang Electric”), a 65% held subsidiary with a registered capital of RMB 450 million, was mainly engaged in power generation. It contributed a net profit of RMB 72 million. The Shaoguan No.10 generator managed by Yuejiang Electric has achieved electricity generation volume of 1,800 million KWH and on- grid electricity volume of 1,641 million KWH, increased by 5.70% and 6.21% respectively as compared with those of last year. Guangdong Maoming Ruineng Thermal Power Co., Ltd. (“Maoming Ruineng”), a 51% held subsidiary with a registered capital of RMB 217 million, was mainly engaged in power generation. It contributed a net profit of RMB 17 million. The No.5 generator managed by Maoming Thermal Power Plant achieved electricity generation volume of - 20 - 1,238 million KWH and on-grid electricity volume of 1,142 million KWH, increased by 94.65% and 94.22% respectively as compared with those of last year. 3) Major suppliers and customer In 2004, all the electricity of the Group was sold to GPHC and 90.78% fuels were purchased from top five suppliers. 4) Difficulties in operation and Settlement During reporting period, the subsidiaries of the Company were burdened with heavy tasks and the average utility of generators reached 6,900 hours. Moreover, the tight supply of coal and the shortage of coal with high-quality brought severe challenges to manufacturing security of the Company. In despite of the above difficulties, the Company ensured its coal supply through professional management and reliable supply chain; meanwhile, the Company was also aware of generator inspection and technology innovation, in order to maintain the stable operating and enhance the effectiveness of the generators. As a result, the Company satisfactorily accomplished its annual electricity generating tasks and even exceeded the budget. The continuously increasing price of fuel and freight cheage has imposed large pressure on the Company’s achievement and exaltation. To overcome those problems, the Company focuses on secure manufacturing management, increasing production ablity of the generators, enhancing control over budget and cost, exploring its internal potential, accelerating its construction in process and enlarge its profitability through manufacturing scale expansion. 2. Investments The investment made during the reporting period was RMB 1,413.22 million, which increased by 899.32 million at 175% compared with that of 2003. 1) There is no usage of the proceeds raised during the reporting period. There are no proceeds raised but not used up by the Company, either; 2) The progress of investment projects funded by self-owned capital other than proceeds of previous fund: During reporting period, the capital injection of RMB 39 million to Yuejiang Electric, a 65% held subsidiary has been completed. The construction and installation of No.11 generator managed by Yuejiang Electric are ongoing under control. The task accomplishing rate at milestone node was 68.42% and it is expected to start trial production in the first half year of 2005. The Company injected RMB 100.51 million to Maoming Zhenneng Thermoelectricity Ltd. (‘Maoming Zhenneng’), which is a 51% held subsidiary. The 6# generator(300MW) constructed by Maoming Zhenneng has signed project contracts and part of donkey engine contract, and has started land acquisition and piling in the major plant area. The constructions of No. 5 generator (135 MW) and No. 6 generator (150 MW) which were self-raised by Yuejia Electric have been carried on smoothly. The No. 5 generator has been put into production in October 2004, and achieved power generation of 140 million KWH in 2004; the plant construction of No. 6 generator has - 21 - been almost completed, and is expected to start trial production within the year of 2005. The Shanwei Electric Power Plant Phrase I (2 X 600MW), with 25% equity interest held by the Company has been carried out extensively. In 2004, the Company injected 330.89 million RMB and which made up a percentage of 90.35 of the whole project. The feasibility study report of Qianwan LNG Electric Power Plant project (3 X 350MW), with 19% equity interest held by the Company, has been approved by the state government. The projected generator has been enlarged to 3 X 390MW and the Company has increased its equity interest to 40%. The company invested RMB 120.9 million in 2004 and achieved 84.27% of the annual investment plan. The feasibility study report of the (3 X 350MW) project of Huizhou LNG Electric Power Plant with 32% equity interests held by the company has been approved by the state government. The projected generator has been enlarged to 3 X 390MW and the company invested RMB 210.53 million in 2004 and achieved 101.72% of the annual investment plan. The feasibility study report of the (2 X 60MW) project of Zhanjiang Aoli Oil electricity generation has been submitted to the State Department for approval. The company invested 183.37 million RMB on this project and achieved 62.57% of the annual investment plan. The Company invested 32.42 million RMB as paid-in capital to Guangdong Yudean Holding Western Investment Co., Ltd. in 2004. And the No. 1 generator of the project of Guizhou Pannan Electric Power Plant (2 X 600 MW) with 55% investment proportion held by the Company, is expected to be put into production at the end of 2005. The construction of Shibeishan Wind Power Plant project, with 30 % equity interests held by the Company has been carried on smoothly. The Company has invested 69.51 million RMB by 2004, and achieved 100% of the annual investment plan. In 2004, the Company invested 108.12 million RMB to its 51% equity held company, Guangdong Yudean Jinghai Electric Ltd., and is preparing for Huilai Electric’s prophase construction. The Company injected RMB 2.03 million as prophase expenses to the expansion project of its 70% equity held company, Meixian Electric Power Plant. The Company invested RMB 1.3 million as prophase expenses to the project of its 51% equity held company, Maoming Bohe Electric Power Plant. The Company invested 189.95 million RMB on the Desulfuration Project of the No. 5 Generator of Shajiao A Power in 2004. This project has been satisfactorily completed and put into production in March 2004. The Company also invested 24.69 million RMB on Desulfuration Project of the No. 1-No. 4 Generator of Shajiao A Power in 2004. The construction projects of all subsidiary desulfuration company held by the Company are ongoing favorably. 3. Financial highlights and analysis on operation result (1) Financial highlights and operation result Unit: RMB'000 - 22 - Items 31 December 2004 31 December 2003 Increase / decrease +/(-) As restated Total Asset 13,543,508 12,547,943 995,565 Long-term Liabilities 1,569,860 1,550,811 19,049 Shareholder Equity 8,165,975 7,894,096 271,879 Items Jan-Dec 2004 Jan-Dec 2003 Increase/decrease +/(-) As restated Profit from selling electricity 1,661,992 2,013,170 (342,385) Net profit 936,730 1,127,362 (190,632) Net (decrease)/ increase in (1,387,009) (61,892) (1,325,117) cash and cash equivalents Explanations of the movements of the above and other outstanding items: i The increase of total asset was mainly because that no appropriation of current year’s profit is made yet and the liability increased in 2004 too. ii The increase of long-term liability mainly dues to the incremental loans borrowed by subsidiaries of the Company. iii The decrease of operating profit and net profit because that the increase of operating cost exceeded the increase of operating profit. iv The increase of outflow of cash and cash equivalents mainly dues to the Company’s increased investment in 2004. (2) Accounting policies, accounting estimated changes and related impacts Being approved by the board, the Company and its subsidiaries performed assets tabulation and verification in 2004. VAT and other tax receivables amounting to RMB 19,073,417.88 paid by Shajiao Power Plant A of the Company in 1994 was identified as uncollectible and should to be written off. Besides, the material loss amounted to 4,504,263.54 RMB and fixed assets amounted to 12,654,997.53 RMB. The materials loss and fixed assets loss of Zhanjiang Electric Ltd amounted to 10,955,305.59 RMB and 14,235,997.68 RMB respectively. Decrease of Shareholder Equity was identified by assets tabulation and verification. The Company restated the prior year and opening balance of the relevant accounts, according to the assets tabulation and verification. Thereinto, the Retained Earning of 2003 led to a decrease of 55,378,069.44RMB, Minority Interest decreased 6,045,912.78RMB; the Inventory Provision of 2003 led to an increase of 15,459,569.13, General Administration Expenses increased 15,459,569.13RMB; Fixed Assets Provision of 2003 led to an increase of 26,890,995.21RMB, Non- operating Expenses increased 26,890,995.21RMB; The opening balance of Retained Earning in 2003 increased by 19,073,417.88, Tax Payable increased by 18,934,752.85 RMB, and Other Payable increased by 138,665.03 RMB. - 23 - (3) Effect of the significant changes in external environment, government policies and regulations On 15th December 2004, the State Renovation and Development Committee issued a notice (‘Notify on the opinion of Establish the Linkage Scheme between coal and electricity) [Fa Gai Price (2004) No. 2909]. It suggests building up price linkage system between coal and electricity. The first price linkage is supposed to base on the vehicular price of electric used coal at the end of May 2004. According to the average markup of electric coal from June to November, and the calculation formula of price linkage, the electric power supplying enterprises should bear 30% of the markup price. This regulation will help relieve cost pressure and allow the Company to maintain comparative stable profitability. 4. Work plan for year 2005 (1) Subsidiaries’ electricity generation plan. The planned generation volume of the Company's subsidiaries for year 2005 is 24,527 million KWH, showing an increase of 13.99% as compared to the plan of prior year (21,517 million KWH) and 12.06% as compared to the actual generation volume of prior year (21,887 million KWH). The total generation plan included: Shajiao A Plant: 8,556 million KWH, Zhanjiang Electric: 8,039 million KWH, Meixian B Power Plant: 3,167 million KWH, Shaoguan #10 and #11 generators: 3,339 million KWH, Maoming Thermoelectric: 1,426 million KWH; (2) To strengthen the management on the subsidiaries’ operation and safety production; to improve the load factor and equivalent availability factor of generators, and try to decrease the scheduled shut down factor and unscheduled shut down factor, to ensure the generators to produce continuously, safely and stably; and to perform budget and cost control to increase the operating profit. (3) Investment plan. The planned investment projects in 2005 are RMB 1,616.35 million, of which the investment on projects equity held by the Company is RMB 1,095.33 million and on projects share held by the Company is RMB 521.02 million. (4) To actively carry on the constructions of the investment projects, especially emphasize on the final accounts of Meixian Electric No. 5 generator, boost the construction process of Maoming Zhenneng Electric No. 6 generator, and accelerate the capital construction projects of Meixian Electric No. 6 generator and Shaoguan Electric No. 11 generator. (5) To actively involve in preparation and process of projects that are share held by the Company; to develop the Maoming Bohe Harbor and Meixian Electric Power Plant expansion projects; to prepare for the Maoming Youyeyan projects etc. (6) To actively expand the Company’s business scope, involve in developing clean energy such as water electricity and wind electricity, achieve expansion of forward and backward industry chain. For example, exploring the utility of Maoming Oil Shale, and intervening coal transportation industry through share-holding Yudean Shipping Co Ltd. (7) Consistently reinforcing the Company’s standardization and systemizing project, building up reputation as a high quality listed company, and generally enhance the Company’s investment value. - 24 - 5. Work performed by the Board of Directors (1) Meetings of the Board of Directors and major resolutions passed by the Board of Directors Five board meetings were held on 8 April, 29 April, 16 July, 18 August, and 29 October 2004 respectively. They were the 14th to 18th meetings of the Fourth Board of Directors. The Fourth Board of Directors of Guangdong Electric Power Development Co., Ltd. (the “Company”) held its fourteenth meeting on 8 April 2004 in Shenzhen. The Chairman of the Board, Mr. Pan Li presided the meeting. 15 directors should attend the meeting, including 5 independent directors.14 directors attended the meeting, including 4 independent directors. The 1 director who did not attend the meeting consigned other directors to attend and vote. The secretary to the Board of Directors attended the meeting. The supervisors and other senior managements of the Company presented at the meeting. The following resolutions were reviewed and passed during the meeting: (1) Reviewed and approved the Work Report of the General Manager for 2003 and Operation Report of the General Manager for 2003; (2) Reviewed and approved the Financial Reports for the Year ended 31 December 2003; (3) Reviewed and approved the Proposal on Profit Appropriation and Dividends Distribution for 2003. (4) Reviewed and approved the Work Report of the Board of Directors for 2003; (5) Reviewed and approved the Annual Report of 2003 and Extract of Annual Report of 2003. (6) Reviewed and approved the Proposal on the Increase of Investment in Guangdong Yudean Holding Western Investment Co., Ltd. (“Yudean Western”); (7) Reviewed and approved the Proposal on the Company’s Investment in the No. 6 Generator of Maoming Thermal Power Plant; (8) Reviewed and approved the Proposal on Yuejia Electric’s Application for Bank Loan Facility; (9) Reviewed and approved the Proposal on Fixed Assets Disposal of 2003; (10) Reviewed and approved the Proposal on Use of the Statutory Public Welfare Fund for Improvement of Shajiao A Power Plant’s Living Area; (11) Reviewed and approved the Proposal on Alignment of the Amortization Period of Land Use Rights in the Statutory Accounts and the International Accounts to 50 Years; (12) Reviewed and approved the Proposal on the Appointment of Statutory and International Auditors; (13) Reviewed and approved the Proposal on Amendments of the Company’s Article of Associations; (14) Reviewed and approved the Guidance Policy on the Management of Investor Relationship; (15) Reviewed and approved the Proposal on the Appointment of the Company’s Legal Counsellor; (16) Reviewed and approved the Proposal on Staff Incentive raised by the Employee Remunerations Assessment Committee; (17) Reviewed and approved the Proposal on Convening the Annual General Shareholders’ Meeting of 2003. The Fourth Board of Directors of Guangdong Electric Power Development Co., Ltd. (the “Company”) held its fifteenth meeting on 29 April 2004 in Guangzhou. The Vice Chairman of the Board, Mr. Deng An presided the meeting. 15 directors should attend the meeting, including 5 independent directors.12 directors attended the meeting, including 4 independent directors. The 3 directors who did not attend the meeting consigned other directors to attend and vote. The secretary to the Board of Directors attended the meeting. The supervisors and other senior managements of the Company presented at the meeting. The following resolutions were reviewed and passed during the meeting: (1) Reviewed and approved the Work Report of the General Manager for the first quarter of 2004; (2) Reviewed and approved the Financial Reports for the first quarter of 2004; (3) Reviewed and approved the First Quarter Report for 2004. - 25 - The Fourth Board of Directors of Guangdong Electric Power Development Co., Ltd. (the “Company”) held its sixteenth meeting on 16 July 2004 in Guangzhou. The Board Director, Mr. Liu Qian presided the meeting. 15 directors should attend the meeting, including 5 independent directors.10 directors attended the meeting, including 4 independent directors. The 5 directors who did not attend the meeting consigned other directors to attend and vote. The secretary to the Board of Directors attended the meeting. The supervisors and other senior managements of the Company presented at the meeting. The following resolutions were reviewed and passed during the meeting: (1) Reviewed and approved the proposal on authorizing the Company to develop prophase preparation for the project of Guangdong Huilai Electric Power Plant; (2) Reviewed and approved the proposal on authorizing the Company to develop prophase preparation for the project of Guangdong Maoming Bohe Harbor Electric Power Plant; (3) Reviewed and approved the proposal on authorizing the Company to develop prophase preparation for the expansion project of Guangdong Meixian Electric Power Plant; (4) Reviewed and approved the Proposal on Amendments of the Company’s Article of Associations; (5) Reviewed and approved the proposal on establishing Maoming Zhenneng Thermal Power Ltd.; (6) Reviewed and approved the application on current borrowings; (7) Reviewed and approved the proposal on office renting in Yudean Park; (8) Reviewed and approved the resignation application of Ex-board director, Mr. Yu Fumin; (9) Reviewed and approved the resignation application of Ex-board director, Mr. Li Xihua; (10) Reviewed and approved the recommendation for Mr. Yao Jiheng as candidate for the board director; (11) Reviewed and approved the Proposal on Convening the second Extraordinary General Shareholders’ Meeting of 2004. The Fourth Board of Directors of Guangdong Electric Power Development Co., Ltd. (the “Company”) held its seventeenth meeting on 18 August 2004 in Guangzhou. The Chairman of the Board, Mr. Pan Li presided the meeting. 15 directors should attend the meeting, including 5 independent directors.13 directors attended the meeting, including 3 independent directors. One of the 2 directors who did not attend the meeting consigned other directors to attend and vote. The secretary to the Board of Directors attended the meeting. The supervisors and other senior managements of the Company presented at the meeting. The following resolutions were reviewed and passed during the meeting: (1) Reviewed and approved the Work Report of the General Manager for the first half year of 2004; (2) Reviewed and approved the Financial Reports for the first half year of 2004; (3) Reviewed and approved the First half year Report and Extract of First half year Report of 2004; (4) Reviewed and approved the Proposal on Amendment of the Special committee of Board of Directors. The Fourth Board of Directors of Guangdong Electric Power Development Co., Ltd. (the “Company”) held its eighteenth meeting on 29 October 2004 in Guangzhou. The Chairman of the Board, Mr. Pan Li presided the meeting. 15 directors should attend the meeting, including 5 independent directors.9 directors attended the meeting, including 3 independent directors. The 6 directors who did not attend the meeting consigned other directors to attend and vote. The secretary to the Board of Directors attended the meeting. The supervisors and other senior managements of the Company presented at the meeting. The following resolutions were reviewed and passed during the meeting: (1) Reviewed and approved the Work Report of the General Manager for the third quarter of 2004; (2) Reviewed and approved the Financial Reports for the third quarter of 2004; (3) Reviewed and approved the Third quarter Report of 2004; (4) Reviewed and approved the proposal on establishing Guangdong Yudean Jinghai Electric Power Plant; (5) Reviewed and approved the proposal on increasing the equity proportion of the Company in Shenzhen Guangqian Ltd; (6) Reviewed and approved the proposal of Ruineng Ltd on purchasing fuel; (7) Reviewed and approved the proposal of Zhanjiang Ltd on purchasing fuel; (8) Reviewed and approved the proposal of Shaoguan Electric Power Plant on common production expenses apportionment; (9) Reviewed and approved the proposal of Shaoguan Electric Power Plant on renting Long Huang Chong Ash Ground; (10) Reviewed and approved the proposal on repayment of capital occupancy fees to Yudean Group; (11) Reviewed and approved the Proposal - 26 - on Amendments of the Company’s address and Article of Associations; (12) Reviewed and approved the proposal on Assets Tabulation and Verification of the Company and its subsidiaries; (13) Reviewed and approved the Proposal on Convening the third Extraordinary General Shareholders’ Meeting of 2004. (2) Implement of resolutions passed in general shareholders’ meetings Profit Appropriation and Dividends Appropriation Plan of 2003 was reviewed and approved in General Shareholders’ Meeting of 2003 on 18 May 2004. The resolution on dividends appropriation plan is: RMB 0.25 per share (tax exclusive; for public common A share and investment fund, the actual dividend is RMB 0.2 per share), and RMB0.25 per share for B shares. The dividends appropriation was accomplished in June 2004. The dividends were paid to shareholders whose names appear on the register of members of the Company as at the close of business on 23 June 2004 for both A shares and B shares. The Ex-dividend date is 24 June 2004. The implement of resolutions on investment that passed in General Shareholders’ Meetings please refer to “Note 2 Investment”. 6. Proposed Profit Appropriation and Dividend Distribution Plan of 2004 According to the operating result of 2004, the Board of Directors proposed following Profit Appropriation and Dividend Distribution Plan of 2004: The Company will set aside 10% of the net profit amounting to approximately RMB 939,674,100 to statutory surplus reserve totaling approximately RMB 93,944,710; 25% totaling approximately RMB 234,918,500 to discretionary surplus reserve and 5% totaling approximately RMB 46,983,700 million to statutory public welfare fund. The distributable reserve for 2004 is approximately RMB 563,804,500. Plus retained earning of 230,419,400 carried forward from last year, the total distributable reserve for 2004 is RMB 794,223,900. Board of Directors proposed the following plan for dividends: RMB 0.18(tax inclusive) per share for A shares and RMB 0.18 per share for B shares. - 27 - Explanations on Usage of Funds by the Holding Company and Other Related Parties The reader is advised that these explanations have been prepared originally in Chinese. In the event of a conflict between these explanations and the original Chinese version or difference in interpretation between the versions of the explanations, the Chinese language explanations shall prevail. Tianjian (2005) Te Shen No. 019 To the shareholders of Guangdong Electric Power Development Co., Ltd.: We have performed specific review on the usage of funds of Guangdong Electric Power Development Co., Ltd (the “Company”) by the Company’s holding company and other related parties as of 31 December 2004. The Company is responsible to provide true, lawful and complete information in connection with the usage of funds by the Company’s holding company and other related parties, including original contracts or agreements, accounting records, ledgers, financial statements and other related information we considered necessary. Our responsibility is to review the usage of funds by the holding company and other related parties and issue the explanations on the specific review. Our review was conducted in accordance with China Certified Public Accountants’ Independent Auditing Standards and consequently included such review procedures as were considered necessary and appropriate to the Company’s circumstances, including examination, on a test basis, of the Company’s transactions and accounting records. Pursuant to the requirement of the Notification on Regulating the Fund Intercourse of Listed Company and Related Parties as Zheng Jian Fa [2003] No.56 issued jointly by China Securities Regulatory Commission and the State-owned Assets Supervision and Administration Commission, our findings during the specific review on the usage of funds by the Company’s holding company and other related parties are explained as follows: 1. RELATED PARTIES RELATIONSHIPS (a) Related parties that has control relationship with the Company Relationship Name of related Registered Type of Legal with the parties address Principal business enterprise representative Company Guangdong Yudean Guangzhou Management of power Limited Pan Li Parent Group Co., generation enterprises, company company Ltd.(“Yudean”) operation of electricity assets and capitals, construction of electric power plants and sales of electric power. - 28 - 1. RELATED PARTIES RELATIONSHIPS (CONT’D) (a) Related parties that has control relationship with the Company (Cont’d) Relationsh Registered Type of Legal ip with the Name of related parties address Principal business enterprise representative Company Zhanjiang Electric Zhanjiang Electric generation and Limited Liu Qian Subsidiary Power Co., power plant construction company Ltd.(“Zhanjiang Electric”) Guangdong Yuejia Meizhou Electric generation Limited Liu Luoshou Subsidiary Electric Power Co., company Ltd.(“Yuejia Electric”) Guangdong Shaoguan Qujiang Electric generation Limited Liu Luoshou Subsidiary Yuejiang Electric company Power Co., Ltd. (“Yuejiang Electric”) Maoming Reineng Maoming Electric generation and Limited Tian Yanyun Subsidiary Thermal Power Co., power plant construction company Ltd(“Maoming Reineng”) Maoming Zhenneng Maoming Electric generation and Limited Tian Yanyun Subsidiary Thermal Power Co., power plant construction company Ltd (“Maoming Zhenneng”) (b) Related parties that does not have control relationships with the Company: Name of related party Relationships with the Company Guangdong Electric Materials Supply Co., Ltd Both were controlled by Yudean Maoming Thermal Power Plant Both were controlled by Yudean Shaoguan Electric Power Plant Both were controlled by Yudean Meixian A Power Plant Both were controlled by Yudean Shaoguan Power Plant D Both were controlled by Yudean Shajiao C Power Plant Both were controlled by Yudean Shaoguan No. 9 Generator Co., Ltd Both were controlled by Yudean Guangdong Yudean Holding Western Investment Both were controlled by Yudean Co., Ltd Shenzhen Guangqian Electricity Co Ltd Both were controlled by Yudean Guangdong Yudean Real Estate Investment Co Ltd Both were controlled by Yudean Yudean Investment Co Ltd Both were controlled by Yudean - 29 - 2. RELATED PARTY TRANSACTIONS (1) Purchase from related parties The Company and its subsidiaries purchased fuels from Guangdong Electric Materials Supply Co., Ltd. according to agreements. Details were as follows: Entity names Item 2004 2003 The Company (Shajiao A Power Plant) Coal 1,478,118,367.22 938,345,428.76 The Company (Shajiao A Power Plant) Oil - 1,230,130.00 Zhanjiang Electric Coal 1,461,042,369.54 802,401,517.62 Maoming Ruineng Coal 248,646,158.10 88,411,482.66 Maoming Ruineng Oil 8,449,016.43 - Total 3,196,255,911.29 1,830,388,559.04 Yuejiang Electric purchased fuels and materials from Shaoguan Electric Power Plant. Details were as follows: Entity name tems 2004 2003 Shaoguan Electric Power Plant Coal 260,937,026.13 190,051,690.22 Shaoguan Electric Power Plant Oil 23,610,375.53 10,580,357.18 Shaoguan Electric Power Plant Materials 12,726,682.80 29,317,596.98 Total Total 297,274,084.46 229,949,644.38 (2) Common expense allocation (i) According to a mutual agreement, Shaoguan Electric Power Plant allocates certain administrative expenses to Yuejiang Electric based on the proportion of their respective generators’ capacity. For the year ended 31 December 2004, the common administrative expenses allocated to Yuejiang Electric amounted to approximately RMB 15,339,080.60, overheads allocated to Yuejiang Electric amounted to RMB 13,133,645.18 (2003: RMB 12,727,643.90 and RMB 15,994,136.31 respectively); (ii) The Company (Shajiao A Power Plant) and Shajiao C Power Plant allocated common expenses based on the actual amount or a proportion of 50%. For the year ended 31 December 2004, the allocated common expenses were RMB 2,414,614.95 (2003: RMB 2,192,373.87). (iii) According to a mutual agreement, Yuejia Electric and Meixian A Power Plant share the administrative expense and overheads according to the proportion of the headcount quota or their respective generators’ capacity. For the year ended 31 December 2004, the expenses collected from Meixian A Power Plant were RMB 2,526,665.89. Those expenses did not occur in 2003. - 30 - (3) Rental income According to a mutual agreement between Yuejiang Electric and relevant parties, a rental arrangement was made for Long Huang Chong Ash Ground from 1 January 2003. Rentals were paid annually by relevant parties detailed as follows: Entity names Item 2004 2003 Shaoguan Electric Power Plant Rental 9,429,700.00 10,474,700.00 Shaoguan Power Plant D Rental 1,137,200.00 1,351,200.00 Shaoguan No. 9 Generator Co., Ltd Rental 5,640,100.00 5,588,700.00 Total 16,207,000.00 17,414,600.00 According to the lease contract signed by the Company and Guangdong Yudean Real Estate Investment Co Ltd, the Company will rent the offices held by Guangdong Yudean Real Estate Investment Co Ltd for two years, and the annual rental fees are RMB 4,173,120. In the year of 2004, the Company settled the payment at the exact amount. (4) Entrusted Management According to the agreement signed by Maoming Ruineng Thermal Power Ltd and Maoming Ruineng Thermal Power Plant in February 2004, the generators of Maoming Ruineng Thermal Power Ltd are entrusted managed by Maoming Thermal Power Plant. The annual general expense on management and expenses on inspection and maintenance are RMB 20,360,000.00. The General Administration Expenses (staff cost exclusive) are calculated at a rate of 5 Yuan/KWH. In 2004, Maoming Ruineng Thermal Power Ltd totally paid an amount of RMB 26,068,675.83 to Maoming Ruineng Thermal Power Plant for entrusted management fees and inspection fees etc. (5) Funding In February 2004, Guangdong Power Group, jointly with Shajiao Electric Power (headquarter) signed contracts on Shajiao A Power Plant No. 5 generator Desulfurization Project. According to the contracts, Shajiao Electric Power (headquarter) was the ultimate user and owner of Desulfurization Project, and the project capitals were paid by Guangdong Yudean Group in behalf of Shajiao Electric. Since Shajiao Electric Power (headquarter) became a subsidiary of the Company, it succeeded to the rights and responsibilities of those project contracts. Per audit report of Guangdong Tianhua Huayue CAP firm, from May 2003 to July 2004, Guangdong Yudean Group totally paid RMB 164,964,359.01 on the Shajiao A Electric Power Plant No. 5 generator Desulfurization Project. In the year ended at 31 December 2004, the Company has paid off the capital loans mentioned above, and also paid capital occupancy fees amounting to RMB 13,453,549.47 to Guangdong Yudean Group Co Ltd, according to the Agreement on Capital Occupancy fees. According to the Agreement on Joint Investment in Guangdong Yudean Holding Western Investment Co., Ltd, expect for capital injection, the investors should provide additional fundings to Guangdong Yudean Holding Western Investment Co., Ltd by instalment. For the year ended 31 December 2003, the Company provided entrusted loan amounting to 68,479,000.00 to Guangdong Yudean Holding Western Investment Co Ltd. For the year ended 31 December 2004, the Company provided entrusted loan amounting to 73,506,700.00, collected the principal of entrusted loan amounting to 37,446,800.00 and interest amounting to 3,321,581.44. - 31 - 3. BALANCES WITH RELATED PARTIES Please refer to the attachment. Pan-China Certified Public Accountants Beijing PRC March 25, 2004 - 32 - Balances With Related Parties Prepared by: Guangdong Electric Power Development Co.,Ltd. Unit: RMB 31 December 31 December Entity name Account Name of related Party 2003 Dr Cr 2004 Guangdong Electric Power Development Guangdong Yudean 180,000,000.00 - - 180,000,000.00 Co., Ltd. Prepayment Group Co., Ltd. Guangdong Electric Account Materials Supply 104,395,737.75 1,589,914,237.08 1,632,987,849.76 147,469,350.43 payable Co.,Ltd Guangdong Yudean Loan to Holding Western 68,479,000.00 37,446,800.00 73,506,700.00 32,419,100.00 associate Investment Co., Ltd Guangdong Yudean Interest rece Holding Western 2,135,770.31 - 2,135,770.31 ivable Investment Co., Ltd The Company (Shajiao Other 4,617,976.99 7,321,031.96 9,117,884.76 2,821,124.19 A Plant) receivable Shajiao C Powe Plant Guangdong Electric Account Materials Supply 112,455,870.00 - 31,901,190.00 144,357,060.00 payable Co.,Ltd Guangdong Yudean 30,480,000.00 30,480,000.00 - - Other payable Group Co., Ltd. Subtotal(Net payables) -5,765,369.24 74,450,415.93 Zhanjiang Electric Guangdong Yudean 50,000,000.00 1,578,885,223.65 1,463,885,223.65 165,000,000.00 Power Co., Ltd. Prepayment Group Co., Ltd. Guangdong Electric Account Materials Supply 96,508,569.68 1,463,885,223.65 1,643,020,850.70 275,644,191.73 payable Co.,Ltd Subtotal(Net payables) 46,508,569.68 110,644,191.73 Guangdong Shaoguan Other 10,474,700.00 9,429,700.00 - 19,904,400.00 Yuejiang Electric Power receivable Shaoguan Power Plant D Other Shaoguan Electric Power 1,351,200.00 1,137,200.00 1,351,200.00 1,137,200.00 receivable Plant Other Shaoguan No. 9 5,588,700.00 5,640,100.00 5,588,700.00 5,640,100.00 receivable Generator Co., Ltd Other Shaoguan Electric Power 22,388,272.31 360,079,450.75 379,216,216.18 41,525,037.74 payable Plant Other 65,072,000.00 80,072,000.00 15,000,000.00 - payable Shaoguan Power Plant D Subtotal(Net payables) 70,045,672.31 14,843,337.74 Maoming Ruineng Thermal Power Co., Other Maoming Thermal Power 507,865.00 - - 507,865.00 Ltd. receivable Plant Other Maoming Zhenneng - 2,130,851.03 - 2,130,851.03 receivable Thermal Power Plant Guangdong Electric Account Materials Supply 22,200,756.95 283,633,278.34 292,889,772.07 31,457,250.68 payable Co.,Ltd Account Maoming Thermal Power 93,143.21 21,243,006.41 25,099,743.05 3,949,879.85 payable Plant Subtotal(Net payables) 21,786,035.16 32,768,414.50 Guangdong Yuejia Electric Power Co., - - 25,000,000.00 25,000,000.00 Dividend pay Guangdong Yudean Ltd.(“Yuejia Electric”) able Investment Co., Ltd Subtotal(Net payables) 132,574,907.91 257,706,359.90 Person in charge Person in charge of of accouting Legal representative： Pan Li accounting function： Yuan Sujie department:： Liu Xuemao - 33 - Independent directors’ special explanation and opinion on current and accumulative guarantee offering of the Company. Pursuant to the Notice on Standardization of Listed Companies in Capital Transaction with Related Parties and Guaranty Offering, a document issued by CSRC and referred to Zheng Jian Fa [2003] No. 56, independent directors carried out inspection on the guarantee offered by the Company, and believed that: up to the end of the reporting period, the Company hasn’t offered guarantee to the holding companies, shareholders with 50% or below of the Company’s shares, illegal person and personnel and no illegal guaranty was offered by the Company. VIII. VIII REPORT OF THE SUPERVISORY COMMITTEE 1. Summary of the Supervisory Committee’s work done in 2004 In 2004, the Supervisors attended five meetings of the Board of Directors, the 2003 annual General Shareholders’ Meetings, and three extraordinary General Shareholders’ Meetings of 2004. Details are as follows: The Supervisory Committee convened its first meeting of year 2004 on 8 April 2004 in Shenzhen. The meeting has passed The Supervisory Committee’s Annual Working Report, The Company’s Annual Report and Extracts of Annual Report of 2003, the Proposal on Amendments of the Company’s Article of Associations, the Proposal on the Increase of Investment in Guangdong Yudean Holding Western Investment Co., Ltd. (“Yudean Western”). The Supervisory Committee convened its second meeting of year 2004 on 16 July 2004 in Guangzhou, and reviewed and approved the proposal on establishing Maoming Zhenneng Thermal Power Ltd., Reviewed and approved the proposal on office renting in Yudean Park. The Supervisory Committee held its third meeting of year 2004 on 29 October 2004 in Guangzhou, and reviewed and approved the proposal on establishing Guangdong Yudean Jinghai Electric Power Plant; reviewed and approved the proposal on increasing the equity proportion of the Company in Shenzhen Guangqian Ltd; Reviewed and approved the proposal of Ruineng Ltd on purchasing fuel; Reviewed and approved the proposal of Zhanjiang Ltd on purchasing fuel; Reviewed and approved the proposal of Shaoguan Electric Power Plant on common production expenses apportionment; Reviewed and approved the proposal of Shaoguan Electric Power Plant on renting Long Huang Chong Ash Ground; Reviewed and approved the proposal on repayment of capital occupancy fees to Yudean Group. The Supervisors have assessed and monitored the operation of the Company during all the above meetings and considered the control system of the Company was efficient and the operation of the Company was prudent and compliant with relevant laws and regulations. In addition, the supervisors have enhanced the control on the daily operation by the monitoring control and the internal audit. They have enhanced the monitoring and supervision on the power of the senior management by attending the general meeting of the management and performing the audit procedures when there was resignation of the senior management. 2. Independent Opinion from the Supervisory Committee i. In accordance with relevant laws and regulations, as well as the Articles of - 34 - Association, the Supervisory Committee exerted supervisions on the convening procedures and resolutions of Board of Directors’ meetings and shareholders’ meetings, the Board of Director’s execution for the resolutions passed by shareholders’ meetings, the performance of the Company’s senior management, and the management system of the Company. The Supervisory Committee is of the opinion that during the reporting period, the operation of the Company and its decision-making procedures were noted legally, the system of internal controls was improved, and no illegal or improper activities in violation of the Company’s Articles of Association and the interests of the Company and the shareholders by the Directors or General Manager were noted. ii In the Supervisory Committee’s opinion, the auditor’s reports with unqualified opinion issued by Pan-China Certified Public Accountants and PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. are true and fair, while the financial statements are a true reflection of the Company’s financial status and operating results iii For last 3 years, the Company did not have any other capital proceeding events. iv The Company had no significant acquisition or sale of assets in the reporting period. v The Supervisory Committee is of the opinion that related party transactions were conducted fairly and reasonably in the reporting period, the decision- making and information disclosure procedures was standardized, therefore, no activities that impair the interest of the listed company were incurred. 3. Assessment on the Company’s operation and financial position In 2004, the Group’s total electricity generation volume amounted to 21,887 million KWH, achieving 101.72% of the planned annual power generation of 21,517 million KWH, and an increase of 14.85% as compared to 19,057 million KWH in 2003. According to the audit report issued by Pan-China Certified Public Accountants Co Ltd., the Group’s total assets amounted to RMB13.304 billion in 2004, the total sales amounted to RMB 7.151 billion. The net profit was RMB 0.948 billion. Earnings per share was RMB 0.357. The Company has got a satisfactory operating result in current year. The chairman of supervisor committee: Yang Xuanxing IX. SIGNIFICANT EVENTS 1. The Company has no significant lawsuits or arbitrations during the reporting period. 2. The Group has no significant acquisition or sales of assets in the reporting period. 3. Significant related party transactions (1) The Company, jointly with Yudean Group Co Ltd, Guangzhou Fazhan Electric Power Investment Co Ltd, Guangdong Tianneng Investment Co Ltd (“Tianneng”), increased investment on Guangdong Yudean Holding Western Investment Co., Ltd. In order to meet the construction demand of Guizhou Pannan Electric Power Plant, the three companies increased the registered capital from RMB 10,000,000 to RMB 273,400,000. According to the equity proportion, the Company injected capital amounting to RMB 32,421,100. The related parties, namely Yudean Group Co Ltd - 35 - and Tianneng Co Ltd, injected capital amounting to RMB 92,190,000 and RMB 23,706,000 respectively. (2) The Company and Guangdong Tianneng investment company (“Tianneng”), Maoming Jiarun electric power development co. Ltd, Maoming electric power development company and Guangzhou Changhe development co. Ltd signed a “Contract on the Establish of Maoming Zhunneng Thermo-electric Co. Ltd” (the “Contract”). The five companies above co-launched the Maoming Zhunneng thermo- electric co. Ltd (“Zhunneng”) which register capital is 0.2 billion RMB according to the proportion of 51:23:10:10:6 . The company and the related party Tianneng Co Ltd injected capitals amounting to RMB 102,000,000 and RMB 46,000,000 respectively. (3) In order to meet the demand of operating activity, the Company and Guangdong Yudean Real Estate Investment Co Ltd signed a ‘Contract on Office Rental in Yudean Park’. The rental offices located in 23th,25th and 26th floor, South-wing of Yudean Park, No. 2, Tianhe East Road, Tianhe District, Guangzhou, with total area of 3,220 m2 . The rental period is 2 years, and annual rental expensese is RMB 4,173,120. Guangdong Yudean Real Estate Investment Co Ltd is a subsidiary of Yudean Group Co Ltd., the equity interest is 45%. (4) The Company and Yudean Group signed a contract on “Investment to Guangdong Yudean Jinghai Power Co., Ltd” (“the Contract”) to set up Jinghai Company for the purpose of speed up the construction progress of Guangdong Huilai Power Plant. The total designed generation volume of the plant are 4*600MW+4*900MW beyond critical coal fuel generators. The 4*600MW generators will be constructed for phase I project. Two of the 4*600MW generators be constructed at first. The estimated investment on those two 4*600MW generators will be RMB 6.2 billion (The final total investment amount will base on required funds to complete the power plant’s final construction scale, each phase’s investment amounts will be determined by formally approved preliminary design estimation). The registered capital of Jinghai Company is initially agreed to be RMB 1.55 billion, the proportion of the investment of the Company will share 51% interest and will inject of capital amounted to RMB 790.5 million. The proportion of the investment of the Group will be 49% and the injection of capital will be RMB 759.5 million. (5) Guangqian Company, invested by both the Company and the Group, is the project company which is responsible for the construction of Shenzhen Qianwan LNG power plant. Pursuant to “Approval on the feasibility report related to Shenzhen Qianwan LNG power plant” issued by the State Development and Reform Committee, the capital of the project will be injected by the Company and the Group with pro-rata 40% and 60% respectively. Therefore, the Company’s interests on Guangqian Company will be increased from the current 27.15% to 40%.The construction scale of current period construction for the project is three 390,000 kilowatt Gas-Vapour Combine Cycle Generator with total costs of RMB 3.9 billion approximately. The project capital is about 25% of the total investment. Calculated based on the total project investment of RMB 3.9 billion, the required capital injection by the Company and Yudean Group will be RMB 400 million and RMB 590 million respectively. (6) The Company and Yudean Group’s holding companies, namely Shajiao A Electric Power Plant and Shajiao C Electric Power Plant, totally occurred RMB 2,414,614.95 of apportionment on common expenses. (7) The Company’s 51% equity interest holding company, Maoming Ruineng Co Ltd., signed an agreement with Yudean Group on ‘Fuel Purchasing and Selling’. In 2004, Ruineng Co Ltd totally purchased fuel amounting to RMB 257,095,174.53 from Yudean Group. - 36 - (8) The Company’s 76% equity interest holding company, Zhanjiang Electric Power, signed an agreement with Yudean Group on ‘Fuel Purchasing and Selling’. In 2004, Zhanjiang Co Ltd totally purchased fuel amounting to RMB 1,461,042,369.54 from Yudean Group. (9) The Company’s 65% equity interest holding company, Yudean Electric Power Plant and Yudean Group’s subsidiary company, Shaoguan Electric Power Plant and D Plant, signed an agreement on ‘Shaoguan Electric Power Plant on common production expenses apportionment’. In 2004, the total occurred expenses were RMB 325,746,810.24. Within that, the cost of fuel and materials were RMB 297,274,084.46. (10) The Company’s 65% equity interest holding company, Yudean Electric Power Plant and Yudean Group’s subsidiary company, Shaoguan Electric Power Plant, D Plant and No. 9 generator, signed a rental agreement on ‘Shaoguan Electric Power Plant Renting Long Huang Chong Ash Ground’. In 2004, Yujiang Co Ltd collected rental fees amounting to RMB 16,207,000 from the three parties mentioned above. (11) The Company and Yudean Group signed an agreement on ‘Capital Occupancy Expenses Payment’. The Company repaid the capital occupancy expenses amounting to RMB 13,453,549.47 to Yudean Group, for its subsidiary Shajiao A Electric Power Plant No. 5 generator’s Desulfuration Project. - 37 - 4. Significant contracts and implementation. (1) The Company is not involved in trustee, sub-contract or lease with other companies in the reporting period. (2) Significant guarantee. During the reporting period, no guarantee related to the “Notice on Standardization of Listed Companies in Capital Transaction with Related Parties and Guaranty Offering” issue by CSRC was provided by the Company The Company provided guarantee to its subsidiary, Zhanjiang Electric from 2002 to August 2006. It is due to the Company’s take-up of guarantee from Yudean in 2002. Yudean transferred the guarantee for bank loan of the Zhanjiang Electric, for its power plant’s construction, to the Company. As at December 31, 2004, the guaranteed borrowing balance was RMB 263 million. (3) The Company is not involved in financing consigning with other companies in the reporting period. For details of entrusted loan on investment projects, please refer to ‘Chapter 10, Financial Report, Notes to the Account, 8, Long-term Investment’. 5. Commitments of the Company or its shareholders holding 5% or above of the Company’s shares Maoming Ruineng, a subsidiary of the Company, entered into a long-term loan contract with Shanghai Pudong Development Bank Guangzhou Branch for an amount of RMB 650 million. The Company issued a supporting letter for the loan and committed as follows: (1) Unless written consent by the creditor, the Company shall maintain its 51% equity interest in Maoming Ruineng. Before the rescission day, the disposition of the relevant equity interests should obtain the written consent by the creditor. (2) The Company was forbidden from any mortgage, pledge, retain or other guarantee on the direct or indirect equity interests held in Maoming Ruineng. (3) Except for requirement by law or regulation, the Company was forbidden from modifying the Articles of Association of Maoming Ruineng without written consent by the creditor. The balance of borrowings is Rmb 483 million as at 31 December 2004. 6. Appointment of auditors During the reporting period, the Company appointed Beijing Pan-China Certified Public Accountants and PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. as its auditors. The Company paid RMB650, 000 and RMB1, 200,000 to Beijing Pan-China Certified Public Accountants and PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. respectively in 2004. Pan-China Certified Public Accountants has been the auditor of the Company for 4 sequential years and PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. has been its auditor for 4 sequential years. - 38 - X. Consolidated income statement ,consolidated balance sheet, and consolidated cash flow statement 1. Balance Sheet GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. AND SUSBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2004 (All amounts in thousands of Rmb) Notes 2004 2003 (As restated) ASSETS Non-current assets Property, plant and equipment 10 8,407,240 7,576,065 Land use rights 11 310,793 316,564 Intangible assets 12 303,053 347,594 Investments in associates 13 1,240,671 257,101 Loans to associates and available-for-sale investments 14 38,800 76,115 Available-for-sale investments 15 75,502 76,982 Prepayments for investment in subsidiary 16 108,120 - Deferred tax assets 17 32,171 35,972 Deferred staff costs 18 51,091 61,310 Long-term prepayments for coal purchase 25(b) 345,000 180,000 10,912,441 8,927,703 Current assets Materials and supplies 19 417,792 219,151 Trade receivables 1,064,398 835,331 Prepayments and other receivables 38,570 33,719 Due from related companies 25(h) 32,662 22,540 Short-term bank deposits 270,000 314,845 Cash and cash equivalents 24(b) 807,645 2,194,654 2,631,067 3,620,240 Total assets 13,543,508 12,547,943 EQUITY AND LIABILITIES Capital and reserves Share capital 22 2,659,404 2,659,404 Reserves 23 5,506,571 5,234,692 8,165,975 7,894,096 Minority interests 1,996,548 1,805,044 Non-current liabilities Borrowings 20 1,504,740 1,473,780 Early retirement obligation 21 65,120 77,031 1,569,860 1,550,811 Current liabilities Trade payables 55,079 45,698 Borrowings 20 539,040 283,360 Taxes payable 306,101 301,945 Other payables and accruals 241,171 275,218 Due to related companies 25(h) 669,734 391,771 - 39 - 1,811,125 1,297,992 Total equity and liabilities 13,543,508 12,547,943 - 40 - 2. Income statement GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT THE YEAR ENDED 31 DECEMBER 2004 (All amounts in thousands of Rmb, except for earnings per share data) Notes 2004 2003 (As restated) Operating revenue, net 3 7,115,657 5,996,285 Operating costs: Fuel (3,712,016) (2,269,656) Repair and maintenance (329,764) (332,659) Depreciation (717,610) (686,638) Staff costs 4 (369,316) (459,378) Administrative expenses (216,468) (194,402) Others (108,491) (40,382) Total operating costs (5,453,665) (3,983,115) Profit from operations 5 1,661,992 2,013,170 Other income, net 56,633 24,131 Finance costs, net 6 (102,486) (103,966) Share of results of associates before tax 338 1,492 Profit before tax 1,616,477 1,934,827 Income tax expense 7 (466,008) (594,028) Profit after tax 1,150,469 1,340,799 Minority interests (213,739) (213,437) Net profit 936,730 1,127,362 Earnings per share - Basic 8 Rmb0.35 Rmb0.42 - Diluted 8 N/A N/A - 41 - 3. Cash flow statement GUANGDONG ELECTRIC POWER DEVELOPMENT CO., LTD. AND SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 (All amounts in thousands of Rmb) Notes 2004 2003 (As restated) Cash flows from operating activities: Cash generated from operations 24(a) 2,195,007 2,749,255 Interest paid (108,400) (103,966) Income tax paid (481,713) (636,198) Net cash from operating activities 1,604,894 2,009,091 Cash flows from investing activities: Proceeds from disposal of property, plant and equipment 574 - Purchases of property, plant and equipment (1,504,170) (847,870) Purchases of intangible assets (5,488) - Purchases of land use rights (3,189) (14,990) Interest received 32,360 29,257 Investment in associates (985,650) (243,460) Prepayments for investment in subsidiary (108,120) - Dividends received from associates 2,215 2,095 Dividends received from available-for-sale investments 4,966 3,983 Loans to associates made (37,447) (68,479) Loan repayments received 74,762 1,686 Net cash used in investing activities (2,529,187) (1,137,778) Cash flows from financing activities: Proceeds from /(repayments of) borrowings 286,640 (346,360) Dividends paid to group shareholders (664,851) (611,663) Dividends paid to minority shareholders (200,505) (189,169) Contribution from minority shareholders 116,000 213,987 Net cash used in financing activities (462,716) (933,205) Net decrease in cash and cash equivalents (1,387,009) (61,892) Cash and cash equivalents at beginning of year 2,194,654 2,256,546 Cash and cash equivalents at end of year 24(b) 807,645 2,194,654 - 42 - XI. Appendix for References 1. Financial Statement with legal representative, person in charge of accounting function and person in charge of accounting department’s signatures and official stamps on that. 2. Audit Report and Financial Report with CPA firm’s official stamp and CPAs’ signatures on that. 3. All original copies of official documents and notices, which were disclosed in Securities Times, China Securities, Shanghai Securities and Hong Kong Commercial (both English and Chinese version). 4. Annual Reports in English and Chinese version. The documents mentioned above are kept in office, and are ready for reference at any time (except public holidays, Saturday and Sunday). Board of Directors of Guangdong Electric Power Development Co Ltd Chairman of Board of Directors’:Pan Li 29 March 2005 - 43 -