锦州港年度报告全文.PDF

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84 ( ) KPMG-A(2003)AR No.0205 ( ) ( ) 1 28ii ,268, ,691,975 35,423, ,238, ,552, ,000,000 40,302,400 1

85 5 11,029,338 3,730,948 9,174,734 1,658,600 22,550,328 2,669,285 76,123,717 13,850, vi 10,000,000 2

86 ( ) ,367, ,480,863 5 (11,557,316) (9,684,568) 372,810, ,796,295 6 (225,344,819) (175,079,271) 147,465, ,717, ,262,487 8,932,515 8 (7,526,534) (4,961,401) (44,236,070) (38,751,727) 103,965,350 91,936, (80,959,303) (52,633,818) 23,006,047 39,302, (10,428,891) - 12,577,156 39,302, (14,184,312) (20,106,396) ( )/ (1,607,156) 19,196,197 (628,457) (489,917) ( )/ (2,235,613) 18,706,280 ========= ========== ( )/ 22 (0.002) ========= ==========

87 ( ) ( )/ (2,235,613) 18,706,280 ( )/ (266,970,755) 361,676,059 - (331,853,094) (266,970,755) 29,822,965 ( )/ (269,206,368) 48,529, (252,400,000) - (63,100,000) (269,206,368) (266,970,755) =========== ===========

88 ( ) ,505,212,725 1,476,053,941 27,442,789 53,823, ,861,880 4,000, ,642, ,529,864 1,743, ,227,736-1,594,917,615 1,535,620, ,581,156 4,471, ,238,289 62,308, ,036, ,378, ,325, ,519, ,181, ,678, ,020,098,909 2,465,298,704 =========== ===========

89 () ( ) ,500, ,500, ,866, ,866, ,940,703 37,940,703 (269,206,368) (266,970,755) 902,100, ,336, ,340,906 1,079, ,000, ,000, ,000, ,000, ,075, ,969,481 2,695,472 11,991, ,886, ,921, ,657, ,882, ,116,657,245 1,559,882, ,020,098,909 2,465,298,704 =========== ===========

90 ( ) / ( ) ,000, ,966, ,355, ,676,059 1,414,998, (134,414,923) (331,853,094) (466,268,017) ,000, ,966,423 37,940,703 29,822, ,730, ,130,238 54,130, (35,423,958) (35,423,958) ,706,280 18,706, ,500,000 (63,100,000) - (252,400,000) (63,100,000) (63,100,000) ,043,305 (12,043,305) (12,043,305) 12,043, ,500, ,866,423 37,940,703 (266,970,755) 904,336,371 =========== =========== =========== =========== =========== ,500, ,866, ,398,931 88,262,992 1,406,028, (146,458,228) (355,233,747) (501,691,975) ,500, ,866,423 37,940,703 (266,970,755) 904,336, (2,235,613) (2,235,613) ,500, ,866,423 37,940,703 (269,206,368) 902,100,758 =========== =========== =========== =========== ===========

91 ( ) ,387, ,122,348 9,815,077 8,618,608 (197,103,540) (161,631,434) (89,450,529) (67,468,481) (30,267,106) (22,344,501) (16,735,986) (11,333,110) 60,645,318 56,963, ,593,098 1,833,746-60,000,000 /( ) 250,000,000 (300,000,000) /( ) 47,730,000 (37,600,000) 2,159,024-4,757,427 11,708,442 (5,775,411) (4,000,000) (108,953,595) (209,576,424) 191,510,543 (477,634,236) ,000,000 1,136,320,000 (946,920,000) (517,811,700) (10,384,035) (10,658,648) (1,045,525) (54,398,217) (40,000,000) - ( )/ (4,001) 41,412,732 (510,353,561) 594,864, )/ (258,197,700) 174,193,361 ========== =========== ( 10 8

92 () ( ) ( )/ (258,197,700) 174,193, ,519, ,738,876 (49,758,820) (91,171,552) 374,760, ,567, ,325, ,519,505 (49,762,821) (49,758,820) 116,562, ,760,685 =========== =========== 17 22,678,292 - =========== =========== 16 29,342,621 - =========== ===========

93 1 ( ) 1 460,000,000 1,000,000 70%

94 ,130,238 1,406,028,346 1,414,998,108 : : - (117,482,249) (254,268,760) - (88,123,307) (117,178,970) - (285,057,637) (122,424,980) ,451,590 /() - 3,220,435 (2,000,035) - - (3,021,603) (i) - (487,442,758) (487,442,758) ,900,000 78,900,000-31,500,000 31,500,000 (ii) - 110,400, ,400, (iii) (26,557,236) (76,007,236) (49,450,000) (iv) 1,133,278 1,676, ,663 (iv) - (7,800,000) (7,800,000) (v) - (23,487,915) (23,487,915) - - (13,000,000) / - (9,031,007) 13,823, (9,854,520) (vi) (10,000,000) (10,000,000) - (35,423,958) (501,691,975) (466,268,017) ,706, ,336, ,730,091 ========= ========= ========== 11

95 (i) (ii) (iii) (iv) (v) (vi) 487,442, ,400,000 23,487,915 4 (a) 30 12

96 (b) (c) (d) (i) ( ) ( (i)) (ii) 13

97 14 (iii) (e) (f) ( (i)) (g) (h) (i) ( (g)) ( (o))

98 (i) (ii) (j) (k) (l) (i) (ii) (i) 15

99 (m) (n) (i) (ii) (o) 5 3%5% 7%3% 16

100 ,056,404 48,671,024 39,487,762 34,297,155 29,335,918 17,023,921 24,845,846 24,053,060 49,042,285 27,196,126 27,576,604 23,837, ,344, ,079,271 ========== ========== ,644,870 2,363,200-1,957,180 3,866,134 3,288,500 1,751,483 1,323,635 8,262,487 8,932,515 ========== ========== ,723,037-2,299,758 2,184,100 2,503,739 2,777,301 7,526,534 4,961,401 ========== ========== ,989,162 24,708,772 8,185,272 4,511,249 45,174,434 29,220,021 ========== ========== 17

101 1,007 (2001 1,019) 10 ( ) [1999]1 ( [2001]11) 10% ,480,215 67,454,131 (3,763,485) (3,111,871) 85,716,730 64,342,260 (4,757,427) (11,708,442) 80,959,303 52,633,818 ========== ========== ( 17) 4,967,065-5,461,826-10,428,891 - ========== ========== 13 (i) 18

102 33% ( [2000]2) 33% 18%( 15%) 33% 15% ,209,312 21,849,396 ======== ======== (1,933,400) (1,743,000) (2,091,600) - (4,025,000) (1,743,000) ======== ======== 14,184,312 20,106,396 ======== ======== (ii) ,577,156 39,302,593 ========= ========= 33.0% 4,150, % 5,895, % 12,125, % 4,211,007 (16.6%) (2,091,600) % 10,000,000 ( 3(vi)) 112.8% 14,184, % 20,106,396 ======== ======== ======== ======== (iii) ,743,000-4,025,000 1,743,000 2,761,864-8,529,864 1,743,000 ========== ========== 17,478,788(2001: 11,620,000)

103 ,898, ,295, ,850, ,355, ,811,136 1,686,211,161-2,480,224 11,588 10,873, ,591, ,956, ,300,651 21,453,178 34,423,783 11,418,510 (214,596,122) - (81,453) (10,592,484) (2,981,682) (26,417,035) - (40,072,654) - (22,143,649) (23,795,587) (2,614,016) - (48,553,252) ,117, ,492, ,508, ,616, ,806,442 1,742,542, ,604,362 63,449,213 15,394,223 45,709, ,157,220 17,945,828 24,175,033 1,880,195 13,624,996-57,626,052 (2,370) (6,109,615) (662,208) (21,815,180) - (28,589,373) - (1,193,486) (148,944) (521,961) - (1,864,391) ,547,820 80,321,145 16,463,266 36,997, ,329, ,569, ,171, ,045,698 79,619, ,806,442 1,505,212,725 ========== ========== ========== ========== ========== ========== ,293, ,846, ,456,639 77,646, ,811,136 1,476,053,941 ========== ========== ========== ========== ========== ========== ( ), 1,351,975,618 1,152,236,065 ( ,114,996,495 37,239,570, 242,773, ,355,570 ( ,697, ,923,619 3,763,485(20013,111,871) 6.97% ( %) 20

104 ,679,451 11,277,734 27,721, ,678,763 ========== ========== ======== ========= ,138,629-1,482,098 6,620,727 ========== ========== ======== ========= ( ) ,604, % 705,754-40% 8,026,640 4,000,000 49% 488,184-41% 1,641,302-10,861,880 4,000,000 ========= ======= 16 29,342,621 20% ,142, ,571, ,623,201-20,337,701 - ========= ========= 21

105 ( 19) 2,142,900 - ========= ========= 18,194,801 - (4,967,065) - 13,227,736 - ========= ========= 20,337,701 - (4,967,065) - 15,370,636 - ========= ========= 22,678, (12) ,487,915 65,452,882 21,042,683 22

106 ,265,702 53,320,600 (i) 90,000, ,000,000 (ii) 40,302,400-5,870,000 7,100,000 18,765,244 28,634,550 ( 17) 2,142,900-2,504,824 3,789,222 3,184,973 5,534, ,036, ,378,526 =========== ========== (i) [2001]1 628,400, ,200, ,000,000 [2002] ,000,000 90,000,000 50,000,000 40,000,000 (ii) i 40,302, ,975 11,894 88,198, ,430,753 56,421,975 55,234,337 21,694,183 19,842, ,325, ,519,505 (49,762,821) (49,758,820) 116,562, ,760,685 ========= ========= 6,816,471 (2001 6,673,554 ) 6,011,963 (20016,011,988 ) ( 23) 23

107 ,000, ,000, ,000, ,000, ,000,000 B 166,500, ,500,000 A 228,000,000 90,000, ,500, ,500,000 ========== ========== A B ,365,513 8,682,757 11,892,433 37,940,703 ========== ========== ========= ========= % 5%~10% 50% ( )/ ( )/ 2,235,613 ( ,706,280) 946,500,000( ,500,000) 24

108 ,827, , ,075, ,717, , ,969,481 29,000,000-29,000, ,000, ,000, ,000, ,000, ,000, ,000,000 ( ) ,000,000-55,000, ,827, , ,075,161 1,347,717, ,560 1,347,969, ,827, , ,075, ,717, , ,969, ,000, ,000, ,000, ,000,000 =========== ========= =========== ========== ========= ========== % 20,000,000 20,000, % 90,000,000 90,000, % 27,000, ,000, % 60,000, ,000, % 85,000,000 85,000, % 20,000,000 20,000, % 16,000,000 4,000,000 4,000,000 8,000, % 125,000,000 25,000,000 25,000,000 75,000, % 195,000, ,000, % 50,000, ,000, % 30,000, ,000, % 20,000,000 20,000, % 40,000,000 40,000, % 100,000, ,000, ,000, ,000,000 29,000, ,000,000 ========= ========= ========= ========= - 247, , ,827,607 10,827, ,075, ,075,161 29,000, ,000,000 =========== ========== ========== ========== 25

109 268,000, ,000,000-40,000,000-6,011, ,573,722 29,848, ,897,501 70,340,775 4,002,642 4,676,724 13,712,955 6,433,725 ( 29) 43,552,290 43,249,890 11,729,609 16,086,385 24,417,893 29,285, ,886, ,921,564 =========== =========== 43,552,290 19(ii) 25 (i) 26

110 (ii) 23 (iii) 6,816,471 (iv) / ,000, ,709, ,000, ,315,000 ========== ========== ========== ========== 27

111 ,000 ========== ========= ,000,000 8,150,000 14,260,000 23,410,000 ========= , ,000 2,320,000 2,320,000 8,940,000 9,520,000 11,840,000 12,420,000 ========= ========= 28

112 27 ( ) ,670, ,935, ,014,770-62,684, ,935, ,724,000 47,632, ,408, ,567,000 ========== ========== 28 (i) A B 95,467 (ii) ,768,758 29

113 (iii) i) ( ) 27.13% ( ) ( ) ( ) ii) 15.85% iii) ( ) 6.34% iv) ( ) 1.58% v) 40% ( ) vi) ( ) 20% , ,700 2,112, ,100 ======== ======== 30

114 (i) 2,928, ,187 (ii) 1,448, ,000 (iii) 15,254,613 10,782,270 (iv) - 305,800,000 (v) 8,370,000 7,100,000 ( 23) 730,000, ,000, ,000,000 (i) (ii) (iii) (iv) 100,000, ,800,000 40,000,000 (v) 2,500,000 5,870,000 (vi) 17 31

115 / - 1,512, ( 18) ,238, ,694, ( 24) (43,552,290) ,500, ,337, ,870, ,694,183 1,512,000 58,608,289 (43,552,290) 20,337,701 ======== ======== ======== ========== ========= ( )/ (1,742,587) 12,749, ,708, ,336,371 -A - 5,957, (735,861) - (735,861) , , (5,114,392) - (2,235,613) 18,706, ,100, ,336,371 ========= ========= ========== =========

116 JINZHOU PORT COMPANY LIMITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002

117 Report of the auditors to the shareholders of Jinzhou Port Company Limited (Established in the People s Republic of China with limited liability) KPMG-A(2003)AR No.0205 We have audited the accompanying consolidated balance sheet of Jinzhou Port Company Limited (the Company ) and its subsidiary (hereinafter collectively referred to as the Group ) as of 31 December 2002 and the related consolidated income statement and statement of profit appropriation, consolidated statement of equity and consolidated statement of cash flows for the year then ended. These consolidated financial statements are the responsibility of the directors. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as promulgated by the International Federation of Accountants, except that the scope of our work was limited as explained below. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. 1. As disclosed in note 28 (ii) to the financial statements, during our audit, it was revealed that almost all transactions in a bank account in name of the Company and an agreement entered into by the Company were not recorded in the Company s books and records. The management cannot ensure the non-existence of similar unrecorded transactions. We are therefore unable to satisfy ourselves that all transactions undertaken by the Company have been appropriately recorded and reflected in the Company s books and records. 2. As indicated in note 3 to the financial statements, retrospective adjustments to correct prior year fundamental accounting errors have been made against equity as of 31 December 2000 and 31 December 2001, and net profit of 2001 aggregating RMB 466,268,017, RMB 501,691,975 and RMB 35,423,958 respectively. As stated in note 2 to the financial statements, due to the state of the Company s books and records, the management cannot ensure with confidence the completeness and accuracy of such adjustments. We have not been able to obtain enough evidence to give us comfort that adjustments are complete and accurate. 1

118 3. We have not been able to obtain confirmation for the amount due from a shareholder, Jinzhou Harbour Bureau, of RMB 50,238,289. Further, we have not been able to verify the appropriateness of the entries recorded in such account as detailed in note 18 to the financial statements. Consequently we have not been able to obtain enough evidence to give us comfort on the nature, accuracy and recoverability of the balance. 4. We have not been able to ascertain the appropriateness of the amount due to Orient Group Industry Company Limited of RMB 43,552,290 included in trade and other payables as set out in note 24 to the financial statements and the recoverability of the amount due from IRICO Group Corporation of RMB 40,000,000 and Jitong Communication Company Limited of RMB 40,302,400 included in trade and other receivables as set out in note 19 to the financial statements. 5. We have requested direct confirmations for certain balances but have not been able to perform effective alternative procedures for those unreturned confirmations and confirmations with unreconciled differences as set out below. Consequently, we have not been able to obtain enough evidence to give us comfort on the existence, accuracy and completeness of these balances. Book value of Book value of balances for balances for which which confirmations were confirmations not received or confirmed were sent with unreconciled differences RMB RMB Accounts receivable (included in trade and other receivables) 11,029,338 3,730,948 Advanced payments from customers (included in trade and other payables) 9,174,734 1,658,600 Prepayments for construction in progress (included in property, harbour works and equipment) 22,550,328 2,669,285 Payables for construction in progress (included in trade and other payables) 76,123,717 13,850, We have not been able to ascertain the nature of the income tax charge of RMB 10,000,000 in the year 2001 as set out in note 3 (vi) to the financial statements and the correct period in which such charge is related to. Because of the significance of the matters discussed in the preceding paragraphs, we do not express an opinion on the financial statements. KPMG Huazhen Certified Public Accountants Beijing, 19 April

119 JINZHOU PORT COMPANY LIMITED CONSOLIDATED INCOME STATEMENT AND STATEMENT OF PROFIT APPROPRIATION FOR THE YEAR ENDED 31 DECEMBER 2002 (Expressed in Renminbi Yuan) Note Revenue 5 384,367, ,480,863 Sales tax and surcharges 5 (11,557,316) (9,684,568) Net revenue 372,810, ,796,295 Operating expenses 6 (225,344,819) (175,079,271) Gross profit 147,465, ,717,024 Other operating income 7 8,262,487 8,932,515 Other operating expenses 8 (7,526,534) (4,961,401) Administrative expenses (44,236,070) (38,751,727) Profit from operations 103,965,350 91,936,411 Net financing costs 11 (80,959,303) (52,633,818) Profit before exceptional items 23,006,047 39,302,593 Exceptional items 12 (10,428,891) - Profit before tax 12,577,156 39,302,593 Income tax expense 13 (14,184,312) (20,106,396) Profit after tax (1,607,156) 19,196,197 Minority interest (628,457) (489,917) Net (loss) / profit for the year (2,235,613) 18,706,280 ========= ========= Basic and diluted (loss) / earnings per share 22 (0.002) ========= ========= The notes on pages 10 to 34 form part of these financial statements. 3

120 JINZHOU PORT COMPANY LIMITED CONSOLIDATED INCOME STATEMENT AND STATEMENT OF PROFIT APPROPRIATION (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2002 (Expressed in Renminbi Yuan) Note Net (loss)/profit for the year (2,235,613) 18,706,280 Add: (Accumulated losses)/retained earnings as previously stated (266,970,755) 361,676,059 Prior year adjustments - (331,853,094) Adjusted (266,970,755) 29,822,965 (Accumulated losses)/ retained earnings (269,206,368) 48,529, Less: Issue of bonus shares - (252,400,000) Payment of cash dividend - (63,100,000) Accumulated losses as of 31 December (269,206,368) (266,970,755) =========== =========== No separate statement of recognized gains and losses is disclosed, as the only component of the statement is the net loss for the year, which is directly reflected in the consolidated income statement above. The notes on pages 10 to 34 form part of these financial statements. 4

121 JINZHOU PORT COMPANY LIMITED CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2002 (Expressed in Renminbi Yuan) Note ASSETS Property, harbour works and equipment 14 1,505,212,725 1,476,053,941 Land use rights 27,442,789 53,823,100 Investments in associates 15 10,861,880 4,000,000 Other investments 16 29,642,621 - Deferred tax assets 13 8,529,864 1,743,000 Finance lease receivable 17 13,227,736 - Total non-current assets 1,594,917,615 1,535,620, Inventories 2,581,156 4,471,995 Amount due from a shareholder 18 50,238,289 62,308,637 Trade and other receivables ,036, ,378,526 Cash and cash equivalents ,325, ,519,505 Total current assets 425,181, ,678, Total assets 2,020,098,909 2,465,298,704 =========== =========== The notes on pages 10 to 34 form part of these financial statements. 5

122 JINZHOU PORT COMPANY LIMITED CONSOLIDATED BALANCE SHEET (CONTINUED) AT 31 DECEMBER 2002 (Expressed in Renminbi Yuan) Note EQUITY Issued capital ,500, ,500,000 Share premium 186,866, ,866,423 Reserves 21 37,940,703 37,940,703 Accumulated losses (269,206,368) (266,970,755) Total equity 902,100, ,336, Minority interest 1,340,906 1,079, Liabilities Interest-bearing loans and borrowings ,000, ,000,000 Total non-current liabilities 279,000, ,000, Interest-bearing loans and borrowings ,075, ,969,481 Income tax payable 2,695,472 11,991,402 Trade and other payables ,886, ,921,564 Total current liabilities 837,657, ,882, Total liabilities 1,116,657,245 1,559,882, Total equity, minority interest and liabilities 2,020,098,909 2,465,298,704 =========== =========== The notes on pages 10 to 34 form part of these financial statements. 6

123 JINZHOU PORT COMPANY LIMITED CONSOLIDATED STATEMENT OF EQUITY FOR THE PERIOD FROM 1 JANUARY 2001 TO 31 DECEMBER 2002 (Expressed in Renminbi Yuan) Share Retained earnings/ Note capital Premium Reserves (accumulated losses) Total Balance at 1 January 2001 As previously stated 631,000, ,966, ,355, ,676,059 1,414,998,108 Prior year adjustments (134,414,923) (331,853,094) (466,268,017) Adjusted balance at 1 January ,000, ,966,423 37,940,703 29,822, ,730, Total recognized gains and losses As previously stated ,130,238 54,130,238 Prior year adjustments (35,423,958) (35,423,958) Adjusted ,706,280 18,706, Issue of bonus shares 315,500,000 (63,100,000) - (252,400,000) Payment of cash dividends (63,100,000) (63,100,000) Transfer to reserves As previously stated ,043,305 (12,043,305) - Prior year adjustments - - (12,043,305) 12,043,305 - Adjusted Adjusted balance at 31 December ,500, ,866,423 37,940,703 (266,970,755) 904,336,371 =========== =========== =========== =========== =========== Balance at 1 January 2002 As previously stated 946,500, ,866, ,398,931 88,262,992 1,406,028,346 Prior year adjustments (146,458,228) (355,233,747) (501,691,975) Adjusted balance at 1 January ,500, ,866,423 37,940,703 (266,970,755) 904,336, Total recognized loss (2,235,613) (2,235,613) Balance at 31 December ,500, ,866,423 37,940,703 (269,206,368) 902,100,758 =========== =========== =========== =========== =========== The notes on pages 10 to 34 form part of these financial statements. 7

124 JINZHOU PORT COMPANY LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2002 (Expressed in Renminbi Yuan) Note OPERATING ACTIVITIES Cash receipts from customers 384,387, ,122,348 Cash received from other operating activities 9,815,077 8,618,608 Cash paid to suppliers and employees (197,103,540) (161,631,434) Interest paid (89,450,529) (67,468,481) Income tax paid (30,267,106) (22,344,501) Other taxes paid (16,735,986) (11,333,110) Cash flows from operating activities 60,645, ,963, INVESTING ACTIVITIES Proceeds from sale of property and equipment 1,593,098 1,833,746 Refund from securities investment consultants - 60,000,000 Refund /(payment) for equity investment in Jitong Communication Company Limited 250,000,000 (300,000,000) Refund from/(prepayment to) third parties relating to investment activities 47,730,000 (37,600,000) Proceeds from finance lease 2,159,024 - Interest received 4,757,427 11,708,442 Acquisition of associates (5,775,411) (4,000,000) Acquisition of property, harbour works and equipment (108,953,595) (209,576,424) Cash flows from investing activities 191,510, (477,634,236) FINANCING ACTIVITIES Proceeds from borrowings 488,000,000 1,136,320,000 Repayment of borrowings (946,920,000) (517,811,700) Repayment of unrecorded government loan (10,384,035) (10,658,648) Dividends paid (1,045,525) (54,398,217) Cash repayments related to equity investment in Jitong Communication Company Limited (40,000,000) - (Payments)/ refund for other financing activities (4,001) 41,412,732 Cash flows from financing activities (510,353,561) 594,864, Net (decrease)/increase in cash and cash equivalents, carried forward (258,197,700) 174,193,361 =========== =========== The notes on pages 10 to 34 form part of these financial statements. 8

125 Jinzhou PORT Company Limited CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED 31 DECEMBER 2002 (Expressed in Renminbi Yuan) Note Net (decrease)/increase in cash (258,197,700) 174,193,361 and cash equivalents, brought forward Cash and cash equivalents at 1 January 424,519, ,738,876 Less: cash pledged as security for bank loan (49,758,820) (91,171,552) Net cash and cash equivalent 374,760, ,567,324 Cash and cash equivalents at 31 December ,325, ,519,505 Less: cash pledged as security for bank loan (49,762,821) (49,758,820) Net cash and cash equivalents 116,562, ,760,685 =========== =========== Investing and financing activities not involving cash Finance leases out of property, harbour works 17 22,678,292 - and equipment =========== =========== Non-cash transactions: Acquisition of investment by contributing 16 29,342,621 - a land use right at net book value ============= ============= The notes on pages 10 to 34 form part of these financial statements. 9

126 JINZHOU PORT COMPANY LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002 (Expressed in Renminbi Yuan) 1 BACKGROUND INFORMATION Jinzhou Port Company Limited (hereinafter referred to as the Company ) was established as a joint stock limited company in the People s Republic of China (the PRC ) by way of subscription of 460,000,000 shares, with a par value of RMB The Company obtained its business licence issued by the Jinzhou Municipal Administration for Industry & Commerce of the PRC on 9 February Particulars of the Company s subsidiary, an entity established and operating in the PRC, as at 31 December 2002 are set out below: Registered and paid-up Ownership Date of Name capital interest establishment Principal activities Jinzhou Harbour RMB1,000,000 70% 22 April 1997 Provision of agency Freight and services to owners Shipping Agency of ships and goods, Company Limited and trading The Company and its subsidiary (hereinafter referred to as the Group ) are principally engaged in the operation and development of the Jinzhou Port. 2 BASIS OF PREPARATION The consolidated financial statements are presented in Renminbi Yuan ( RMB ) and are prepared on the historical cost basis. The accounting policies have been consistently applied by the Group and are consistent with those used in the previous year. During the period from September to December in 2001, the Ministry of Finance ( MOF ) inspected the Company for the implementation of Accounting Law for the year 2000 and before. The MOF notice dated 10 July 2002 addressed to the Company identified various fundamental errors, mainly overstatements of revenue, trade receivables and property, harbour works and equipment and charged the Company a fine of RMB100,000. Following the receipt of the notice, the Company changed certain members of the Board of Directors and the management team and set up a task force for rectification and improvements on accounting. A comprehensive examination has been conducted over the accounting books and related records and direct inquiries were made of all major counter-parties with which the Company conducts business transactions. Based on the Company s investigation and findings during the current year s audit, the relevant financial statements have been adjusted for identified fundamental errors. Please refer to note 3 for the effect of the adjustments on the Company s equity as at 31 December 2000 and 2001, and the net profit in However, due to the state of the Company s books and records, the management encountered difficulties in ensuring completeness and obtaining details of certain transactions for the purpose of preparing the financial statements for The Company has made its best effort to make adjustments in the Company s books and 10

127 records to properly reflect known transactions based on current information available, but is unable to ensure with confidence the completeness and accuracy of such adjustments. 3 FUNDAMENTAL ERRORS As stated in note 2, the adjustments of the Group s equity and net profit as recorded in the Group s consolidated financial statements are set out below: 31 December 31 December Net profit Equity Equity Amounts as previously reported 54,130,238 1,406,028,346 1,414,998,108 Prior year adjustments: Overstatement of revenue caused: Overstated cash in bank - (117,482,249) (254,268,760) Overstated trade receivables - (88,123,307) (117,178,970) Overstated property, harbour works and equipment - (285,057,637) (122,424,980) Overstated construction payables ,451,590 Understated/(overstated) other receivables - 3,220,435 (2,000,035) Understated advanced payments from customers - - (3,021,603) Subtotal (i) - (487,442,758) (487,442,758) Unpaid dividends Understated cash in bank - 78,900,000 78,900,000 Understated amount due from Jinzhou Harbour Bureau - 31,500,000 31,500,000 Subtotal (ii) - 110,400, ,400, Overcapitalized interests into property, harbour works and equipment (iii) (26,557,236) (76,007,236) (49,450,000) Overcharged depreciation due to overstated property, harbour works and equipment (iv) 1,133,278 1,676, ,663 Undercharged depreciation caused by incorrect (iv) - (7,800,000) (7,800,000) date of commencement of operation of property, harbour works and equipment Write off other receivables (v) - (23,487,915) (23,487,915) Effect of overstating costs of a piece of land Overstated cash in bank - - (13,000,000) (Overstated)/understated land use right - (9,031,007) 13,823,513 Overstated other receivables - - (9,854,520) Understated income tax expenses (vi) (10,000,000) (10,000,000) - Total adjustments (35,423,958) (501,691,975) (466,268,017) Adjusted amounts 18,706, ,336, ,730,091 ========= ========== ========== 11

128 (i) (ii) (iii) (iv) (v) (vi) The Company overstated revenue in prior years by RMB 487,442,758 resulting in the overstatement and understatement of various assets and liabilities. Dividends to legal persons shareholders (including state-owned shareholders) were not actually paid for the 1997 profit appropriation, which was implemented in 1998 of RMB 110,400,000. The Company has obtained its legal counsel s opinion on 18 March 2003 that the Company is not obliged to pay the above dividends because the profit appropriation based on falsified revenue and profit is invalid. Accordingly, the unpaid dividends were reversed to retained earnings brought forward. The Company capitalized certain amount of interest expenses, which should be charged to the income statement, in property, harbour works and equipment in prior years. The Company has reversed such capitalized interest to the income statement as requested by the MOF. The Company under accrued in prior years depreciation of property, harbour works and equipment due to the incorrect commencement dates of operation of certain assets. After the MOF s inspection, the Company has recalculated and adjusted the depreciation of property, harbour works and equipment. At the same time, overstated depreciation arising from overstated property harbour works and equipment was also adjusted. The Company wrote off an amount of RMB 23,487,915, which was previously included in amount due from Jinzhou Harbour Bureau, relating to expenses or losses incurred in 1997 and before, in the absence of appropriate supporting documents. Payment of income tax was made in 2002 for 2001 under the request of Jinzhou State Tax Bureau Development Zone Branch after a tax inspection. As the Company has not yet received the inspection result in writing, the tax paid is currently included as income tax expense for SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements of the Group for the year ended 31 December 2002 comprise the financial statements of the Company and its subsidiary. The consolidated financial statements were authorized for issue by the directors on 19 April (a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) promulgated by the International Accounting Standards Board. IFRS includes International Accounting Standards ( IAS ) and related interpretations. The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts 12

129 of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. The Company also prepares its statutory consolidated financial statements that comply with the PRC accounting rules and regulations. Reconciliation of the Group s equity and net profit as recorded in the consolidated financial statements prepared under PRC accounting rules and regulations with those prepared under IFRS are set out in note 30. (b) Basis of consolidation The financial statements of its subsidiary are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. Intra-group balances and transactions, and any unrealized gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Subsidiaries are those enterprises controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. (c) Foreign currency transactions The Group maintains its books and records in RMB. Transactions in foreign currencies are translated to RMB at the foreign exchange rate quoted by the People s Bank of China ( PBOC rate ) ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to RMB at the applicable PBOC rate ruling at that date. Foreign exchange differences arising on translation are recognized in the income statement. (d) Property, harbour works and equipment (i) Owned assets Items of property, harbour works and equipment, are stated at cost less accumulated depreciation (see below) and impairment losses (refer to accounting policy (i)). The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads. Where an item of property, harbour works and equipment comprises major components having different useful lives, they are accounted for as separate items of property, harbour works and equipment. Borrowing costs should be recognized as an expense in the period in which they are incurred, except to the extent that they are capitalized as being directly attributable to the acquisition or construction of a qualifying asset 13

130 which necessarily takes a substantial period of time to get ready for its intended use. (ii) Subsequent expenditure Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the item of property, harbour works and equipment. All other expenditures are recognized in the income statement as expenses as incurred. (iii) Depreciation Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items of property, harbour works and equipment, and major components that are accounted for separately. The estimated useful lives are as follows: Harbour works Machinery and equipment Buildings, open yards and warehouses Other equipment Major components 50 years 14 to 18 years 10 to 40 years 5 to 22 years 2 to 5 years No depreciation is provided for construction in progress. (e) Investments Equity investments which the Company has the power to exercise significant influence over the financial and operating policies are accounted for under the equity method of accounting whereby an interest in an investee entity is initially recorded at cost and adjusted thereafter for any post acquisition change in the Company s share of net assets of the investee. Equity investments in investee entities in which the Company does not control, jointly control and does not exercise significant influence are accounted for under the cost method. Investment income is recognized when an investee enterprise declares a cash dividend or distributes profits. Upon disposal or transfer of equity investments, the difference between the proceeds received and the carrying value of the investments is recognized in the income statement. (f) Trade and other receivables Trade and other receivables are stated at their cost less impairment losses (refer to accounting policy (i)). 14

131 (g) Inventories Inventories that consist primarily of spare parts and fuel are initially recorded by the actual purchase cost. The inventories are carried at the lower of cost and net realizable value. (h) Cash and cash equivalents Cash and cash equivalents comprise cash in hand and balances with banks and authorized non-bank financial institutions. Cash pledged as security for bank loans is excluded as a component of cash and cash equivalents for the purpose of the statement of cash flows. (i) Impairment The carrying amount of the Group s assets, other than inventories (refer to accounting policy (g)) and deferred tax assets (refer to accounting policy (o)), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognized in the income statement. (i) Calculation of recoverable amount The recoverable amount of the Group s receivables is calculated as the present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset. Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of their selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. (ii) Reversals of impairment An impairment loss in respect of a receivable is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been 15

132 determined, net of depreciation or amortization, if no impairment loss had been recognized. (j) Interest-bearing borrowings Interest-bearing borrowings are recognized initially at cost, less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between cost and redemption value being recognized in the income statement over the period of the borrowing on an effective interest basis. (k) Provisions A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. (l) Finance lease A finance lease is a lease that transfers substantially all the risks and rewards incident to ownership of an asset. Title may or may not eventually be transferred. Lessors recognize assets held under finance lease in their balance sheets and present them as a receivable at an amount equal to the net investment in the lease. The finance income is the difference between: (i) The aggregate of the minimum lease payment under a finance lease from the standpoints of the lessor and any estimated unguaranteed residual value accruing to the lessor; and (ii) The present value of (i) above, at the interest rate implicit in the lease. (m) Revenue Revenue from services rendered is recognized in the income statement when services are rendered to customers. No revenue is recognized if there are significant uncertainties regarding recovery of the consideration due or the associated costs. (n) Expenses (i) Operating lease payment Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. (ii) Net financing costs 16

133 Net financing costs comprise interest payable on borrowings calculated using the effective interest rate method, interest receivable on funds invested, bank charges, and foreign exchange gains and losses. Interest income is recognized in the income statement as it accrues, taking into account the effective yield on the asset. (o) Income tax Income tax on the taxable profit for the year comprises current and deferred tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the assets can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. 5 REVENUE Revenue represents income from the provision of port services, loading and unloading of oil and cargo, and warehousing for cargo, and is stated net of discounts. All the revenue is generated in the PRC. No segment reporting is presented. Pursuant to the relevant PRC tax rules and regulations, the Group is required to pay business tax ranging from 3 percent to 5 percent of the invoiced value of services provided. The Group is also subject to city construction tax and education surcharge at 7 percent and 3 percent of business tax, respectively. 6 OPERATING EXPENSES Loading, unloading and transportation 55,056,404 48,671,024 Depreciation 39,487,762 34,297,155 Personnel expenses 29,335,918 17,023,921 Repairs and maintenance 24,845,846 24,053,060 Railway and storage expense 49,042,285 27,196,126 Fuel, utilities, consumables and others 27,576,604 23,837, ,344, ,079,271 ========== ========== 17

134 7 OTHER OPERATING INCOME Rental income 2,644,870 2,363,200 Insurance compensation - 1,957,180 Income from resale of power 3,866,134 3,288,500 Others 1,751,483 1,323,635 8,262,487 8,932,515 ========== ========== 8 OTHER OPERATING EXPENSES Rental expenses 2,723,037 - Cost for resale of power 2,299,758 2,184,100 Others 2,503,739 2,777,301 7,526,534 4,961,401 ========== ========== 9 PERSONNEL EXPENSES Personnel expenses included under operating expenses and administrative expenses comprise: Wages, salaries and employees welfare 36,989,162 24,708,772 Compulsory social security contributions 8,185,272 4,511,249 45,174,434 29,220,021 ========== ========== The average number of employees of the Group during the year ended 31 December 2002 was 1,007. (2001: 1,019). 10 RETIREMENT AND OTHER EMPLOYEES BENEFITS Retirement benefits The Group participates in an employee pension scheme organized by the local government (the Scheme ). The Group is required to contribute to the Scheme at a percentage of the aggregate wages and salaries of all employees, as determined under the rules stipulated by the local Labour Bureau. The Group s contributions to the Scheme are recognized as an expense in the income statement as incurred. 18

135 Other staff benefits Pursuant to the relevant regulations prescribed by the Jinzhou Municipal Government and the Liaoning Provincial Government, the Group is required to make contributions to a housing fund administrated by Jinzhou Municipal Housing Fund Administrative Center for the benefits of the employees at 10% of the aggregated wages and salaries of all employees. 11 NET FINANCING COSTS Interest expenses on bank and other loans 89,480,215 67,454,131 Less: amount capitalized in construction in progress (3,763,485) (3,111,871) Net interest expenses 85,716,730 64,342,260 Interest income (4,757,427) (11,708,442) 80,959,303 52,633,818 ========== ========== 12 EXCEPTIONAL ITEMS Provision for finance lease receivable (note 17) 4,967,065 - Loss on property, harbour works and equipment 5,461,826-10,428,891 - ========== ========== 13 INCOME TAX EXPENSE (i) Recognized in the income statement The Company is subject to PRC income tax rules and regulations applicable to joint stock limited companies. The income tax rate normally applicable to the Group is 33 percent. According to a regulation of the State Council, the tax incentives implemented locally for listed companies to enjoy a fiscal subsidy equivalent to 18 percent of taxable income (making the effective income tax rate at 15 percent), could be retained until 31 December As of 1 January 2002, the income tax rate applicable to all companies is 33% except as stipulated otherwise by laws and regulations. Therefore, the Group has paid income tax at a rate of 15% up to 31 December

136 Current tax expense Current year 18,209,312 21,849, Deferred tax expense Origination and reversal of temporary differences (1,933,400) (1,743,000) Reversal of deferred tax due to change of income tax rate (2,091,600) - (4,025,000) (1,743,000) Total income tax expense in income statement 14,184,312 20,106,396 ======== ======== (ii) Reconciliation of effective tax rate Profit before tax 12,577,156 39,302,593 ======== ========= Income tax using the current applicable tax rate 33.0% 4,150, % 5,895,389 Non-deductible expenses 96.4% 12,125, % 4,211,007 Effect of change of tax rate (16.6%) (2,091,600) - - Unexplained charge from Jinzhou State Tax Bureau (see note 3 (vi)) % 10,000, % 14,184, % 20,106,396 ======= ======== ====== ======== (iii) Deferred tax assets At the beginning of the year 1,743,000 - Transferred from consolidated income statement 4,025,000 1,743,000 Unrecognized gain from investment 2,761,864 - At the end of the year 8,529,864 1,743,000 ======== ======== Deferred tax asset at 31 December 2002 is attributable to the provision on trade and other receivables of RMB 17,478,788 (2001: RMB 11,620,000) and unrecognized gain from investment. 20