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3 1 TIANJIN MARINE SHIPPING CO. LTD. TMSC [email protected] http// [email protected] 5 http// 6 A ST B ST B Clarendon House,2 Church Street,Hamilton,Bermuda 3

4 % , , (557,074) (72,583) 4,206 1,007 (2,818) (1,352) (9,544) 2,657 (245) (562,573) (73,173) 500, , ,625 1,067,243 (13,142) (17,348) 17,381 20,200 (239) (2,897) 4

5 504,625 1,067, ,621, ,140, ,396, ,644, ,644, ,074,008-72,583, ,583,245 24,774, ,774, ,503,339,757 2,098,092, ,098,092,089 2,001,101, ,001,101, ,625,267 1,067,243, ,067,243,487 1,141,178, ,141,178, % % % 9% 5

6 [2001] ,000,000 10:3 2,720,520 23,928,300 26,648, ,648, A B

7 B B B B A B B B B A B NATA SECURITIES CO. LTD B TOYO SECURITIES ASIA LTD. A/C CLIENT B B HKIT S/A B 1 5% %

8 ( ) ,

9

10 % ,583, % 258, % 232, ,330,

11 ,270,423 8,754, ,671,816-40,380,011 27,252,900-1,359,118 33,667,498 3,420,334 10,153,100 5,701,517 4,760,708 4,496, ,389,419 39%

12 % 1,503,339,757 2,098,092, ,454, ,884, ,625,267 1,067,243, ,416,232 24,487, ,074,008-72,583,

13

14 ,983,227 10% 637,514 9% 572, ,953, [2003] : : ,076 (19,259) 25,108 1,098 (13,373) 17,462 (32,632) 45,744 2,692 (2,451) 6,283 (2,451) 8,975 14

15 [2003]56 50%

16

17 % %

18

19

20 (2004) 1600 ( ) ) (6)(a)

21 B B A 188 (1) (2) (3) (4) 21

22 (5) (6) (7) (a) 5% 10% 20% 40% 100% 22

23 (b) (8) 50% ( 50 ) (9) % 23

24 / (10) (11) (12) / 24

25 (13) (14) (a) (i) (ii) (b) (15) (16) (17) (1995)11 25

26 (1) 15% 33% (2) : 3% 5% 5% 3%-10% ( ) ( ) 7,000 8, % 0% 4,200 3, % 0% 3,570 3, % 2.1% 1, % 1,500 1,350 90% 0% 1, % 0% % 29.25% % 53.61% % % 55% % 7% 26

27 % 30% % 0% % % 0% % % 33.33% 5,327 5, % 13, % % % % % % ( (4)(a)) 40,347.6 (1) ,208, ,633, , , ,430, ,951, , ,399 5, ,430, ,951,393 27

28 ( (6)) (84,138,350) - 201,292, ,951,393 (473,951,393) (528,729,428) (272,659,351) (54,778,035) (2) (a) ,026,119,890 1,003,650,924 (426,751,242) (92,901,116) 599,368, ,749,808 (i) 212,829,546 1,003,650,924 (101,993,893) (92,901,116) 110,835, ,749,808 ( (6)(a)) 813,290,344 - (324,757,349) - 488,532,995 - (i) % % 109, (7,661) 582, (53,909) 4,662 2 (3,245) 61,169 6 (5,662) 2,761 1 (1,338) 185, (17,207) 95, (89,750) 174, (16,123) 212, (101,994) 1,003, (92,901) 28

29 % (b) ,763, ,565,827 (86,718,945) (45,603,567) 45,044, ,962, % % 46, (7,391) 23, (5,098) 33, (29,000) 125, (27,457) 8,457 6 (7,338) 40, (8,758) 43, (42,990) 19, (4,291) 131, (86,719) 208, (45,604) 5%( 5%) , ,261 ( (6)(a)) (62,834) - 26, , % (3) % % 29

30 3, , , , %( 5%) (4) (27,587,243) (19,900,584) - 2,758,724 (17,141,860) 2,629,000 2,465,868 1,000,000-3,465,868 (24,958,243) (17,434,716) 1,000,000 2,758,724 (13,675,992) (a) (1,655,868) - - (1,655,868) (19,090,584) 1,000,000 2,758,724 (15,331,860) (a) (b) 598, (359,243) 299,369 (59,874) 239,495 (17,381,355 (28,185,981) 10 10,804,626 (20,199,953) 2,818,598 ) (27,587,243) 10,445,383 (19,900,584) 2,758,724 (17,141,860 ) 30

31 30 500,000 5% ,000 10% 510, % ,000 6% 10 1,655,868 50% 3,465,868 (1,655,868) 1,810,000 (5) ,574, ,586,961 20,249,290 19,016, ,427,389 70,835,002 32,273,845 3,796,221 2,502, ,407, (272,450) (272,450) ,409, ,860,806 24,045,511 21,246, ,562, (238,525,408) (20,691,436) (16,908,715) (8,739,407) (284,864,966) (34,182,315) (6,975,902) (3,078,924) (3,220,298) (47,457,439) , , (272,707,723) (27,667,338) (19,987,639) (11,728,458) (332,091,158) ,701, ,193,468 4,057,872 9,518, ,471, ,048, ,895,525 3,340,575 10,277, ,562,423 (a) (b) ( 324 ) ( (6)) ( (10)) , ,321 (209,223) (183,544) 260, ,777 31

32 (c) (6) ,000,000 20,693, ,859, ,777, ,303, ,033, ,163, ,504,040 (a) (b) %-6.9% ( %-7.8%) ( (5)) 8,414 (2002 8,414 ) ( (1)) (7) % (8) ,970,131 10,487,628 36,425,116 29,646,978 3,874,380 3,983,447 52,269,627 44,118,053 (9) ,000,000-12,135,298 10,492,695 15,621,627 21,294,351 7,291,248 3,524,213 32

33 55,048,173 35,311,259 (10) ,485, ,602, ,884, ,602, ,370,081 (69,148,026) (15,485,275) 58,454, ,884, %-6.0% ( %-6.0%) (11) ( ) ( ) 1 A 103, , , ,689 B 180, , , , , , , ,089 24,871 24,871 24,871 24, , , , ,649 (12) (13) 33

34 ,779,036 55,512, ,291,999 ( (14)) 637, ,327 1,209, ,416,550 56,085, ,501,840 10% 50% % 637,514 ( % 258,489 ) 5% 10% % 572,327 (2002 9% 232,640 ) (14) ( )/ ,330, ,405,002 (557,074,008) (72,583,245) ( (13)) (637,514) (258,489) ( (13)) (572,327) (232,640) ( )/ (381,953,221) 176,330,628 (15) ( (5)(b)) 251, , , ,598 23,586 12,409 3,694 14, , , % 34

35 (16) ,991,413 15,857,002 2,027,202 1,684,242 22,018,615 17,541,244 (17) ,466,947 (79,552,652) 914,295 78,145,664 (67,354,398) 10,791,266 1,691,876-1,691,876 12,387,624-12,387,624 6,558,650 (4,182,700) 2,375,950 12,240,465 (2,365,769) 9,874,696 88,717,473 (83,735,352) 4,982, ,773,753 (69,720,167) 33,053,586 (18) 325 ( (6)(a)) (19) ,822,456 34,995,501 (4,683,650) (3,241,484) 1,083,999 2,315,800 (4,785,487) (4,225,684) 634, ,968 30,072,118 30,304,101 (20) ,000 27,500 2,760,110 2,758,724 35

36 2,790,110 2,786,224 (21) 20 ( ) (1) (a) ,117, ,813,635 (380,359,281) (63,162,282) 403,758, ,651,353 (i) 135,816, ,813,635 (65,601,932) (63,162,282) 70,214, ,651,353 ( (6)(a)) 648,301,177 - (314,757,349) - 333,543,828 - (i) (%) (%) 38, (313) 385, (31,256) ,108 7 (4,626) 2,158 2 (4,514) 181, (14,705) 95, (60,775) 155, (12,575) 135, (65,602) 779, (63,162) (b)

37 154,382, ,603,103 (51,115,029) (36,188,264) 103,267, ,414, (%) (%) 44, (5,852) 72, (9,447) 9,064 6 (3,186) 167, (21,980) 7,886 5 (6,780) 36, (4,761) 93, (35,297) , (51,115) 276, (36,188) (2) , ,344,911 71,612,580 (63,604,428) 521,353,063 2,629 1,655,868 1,000,000-2,655,868 (22,659) (19,900,584) - 2,758,724 (17,141,860) 383, ,100,195 72,612,580 (60,845,704) 506,867,071 (1,655,868) - - (1,655,868) 493,444,327 72,612,580 (60,845,704) 505,211,203 (3) ,881,786 (461,968,863) 422,472,243 (419,523,874) (4)

38 (63,604,428) (2,010,720) 2,758,724 2,758,724 (60,845,704) 748,004 (1) ( ) 207 (2) ,000, ,000,000 (3) : % % 184,088, % 184,088, % (4) ( ) ( ) ( ) ( ) ( ) 38

39 ( ) ( ) ( ) (5) (a) (b) , ,777-17, , , ,162 3,694 3,610 (10,418) (4,333) (49,164) (54,432) (c) (6) / (a) /

40 89, , , , , , , ,017 (324,757) - 547, ,017 98, ,184 (86,407) (78,365) 12,402 27, , , , ,836 71, , ,836 (6) / ( ) (a) / ( )

41 (b) / ,832-3,626 8,368 2, ,983 23,923 17,068-17,068-73,120 23, (557,074,008) / ( ) - 20,116,609 - (25,828) (536,983,227) 41

42

43 ( ) (1) 285,430, ,951, ,318, ,252,379 (2)(a) (1)(a) 110,835, ,749,808 70,214, ,651,353 (2)(b) (1)(b) 45,044, ,962, ,267, ,414,839 (3) 3,703,078 30,361,059 (700,585) 2,637, ,013,348 1,578,024, ,100,251 1,356,955,664 (4) (2) (15,331,860) (19,090,584) 505,211, ,444,327 (15,331,860) (19,090,584) 505,211, ,444,327 (4) (17,141,860) (19,900,584) ,562, ,427, ,063, ,442,098 (332,091,158) (284,864,966) (62,777,815) (59,579,179) - (5) 582,471, ,562, ,285, ,862,919-16,948,788-2,719, ,471, ,511, ,285, ,581,957 39, , ,971 2,614,927 1,189, ,848 (6)(a) 488,532, ,543, ,187,000 1,646, ,543, ,819 1,503,339,757 2,098,092,089 1,423,140,723 1,996,455,767 43

44 ( ) ( ) (6) 564,163, ,504, ,403, ,726,740 (7) 99,688, ,708, ,191, ,212,647 (7) 24,959,098 14,896,372 2,979, , , ,930,122 1,165, , , , (8) 52,269,627 44,118,053 16,873,325 12,344,975 (7) 74,135,861 40,345,786 43,715,094 14,789,967 (9) 55,048,173 35,311,259 38,676,636 27,322,099 (10) 69,148,025 15,485,275 49,663, ,606, ,136, ,748, ,254,923 (10) 58,454, ,884,806-49,663,800 1,001,060,613 1,017,020, ,748, ,918,723 1,653,877 13,827, (11) 492,648, ,648, ,648, ,648,820 (12) 280,265, ,265, ,687, ,265,597 (13) 121,501, ,291, ,291, ,291,540 56,085,290 55,512,963 51,249,588 51,249,588 ( )/ (14) (381,953,221) 176,330,628 (372,234,928) 185,331,087 (11,837,769) (2,293,557) ,625,267 1,067,243, ,392,625 1,069,537,044 1,503,339,757 2,098,092,089 1,423,140,723 1,996,455,767 44

45 (92,901) (63,162) (9,093) (2,440) (101,994) (65,602) (45,604) (36,188) (41,115) (14,927) (86,719) (51,115) (1,656) (1,656) - - (1,656) (1,656) (1,656) (1,656) - - (1,656) (1,656) - - (324,757) (314,757) (324,757) (314,757) (140,161) (101,006) (374,965) (332,124) (515,126) (433,130) 45

46 2003 ( ) (15) (3) 716,621, ,396, ,881, ,472,243 (3) (785,019,113) (698,367,561) (461,968,863) (419,523,874) (16) (22,018,615) (17,541,244) (10,904,360) (9,270,093) ( ) / (90,416,232) 24,487,430 (92,991,437) (6,321,724) / ( ) (17) 4,982,121 33,053,586 (6,345,785) 16,106,662 (26,705) (86,369) - - (18) (440,465,657) (101,010,928) (351,381,476) (58,024,679) - (19) (30,072,118) (30,304,101) (25,966,810) (24,991,148) (555,998,591) (73,860,382) (476,685,508) (73,230,889) /( ) (20) (4) 2,790,110 2,786,224 (60,845,704) 748,004 25, ,803-1,200 (21) (20,116,609) (209,743) (20,034,803) (101,560) (573,299,262) (70,356,098) (557,566,015) (72,583,245) (1) (4,081,958) (3,695,442) ,763, , ,544,212 1,351, (14) (557,074,008) (72,583,245) (557,566,015) (72,583,245) 46

47 2003 ( ) (14) (557,074,008) (72,583,245) (557,566,015) (72,583,245) (14) 176,330, ,405, ,331, ,914,332 (380,743,380) 176,821,757 (372,234,928) 185,331,087 (13) (637,514) (258,489) - - (13) (572,327) (232,640) - - (381,953,221) 176,330,628 (372,234,928) 185,331,087 ( )/ (14) (381,953,221) 176,330,628 (372,234,928) 185,331,087 47

48 2003 ( ) 840,215, ,749,704 4,208,727 6,368, ,424, ,118,235 (742,094,674) (463,294,282) (31,737,533) (7,103,752) (20,594,199) (8,960,718) (80,163,880) (11,487,089) (874,590,286) (490,845,841) (30,166,075) 23,272,394 30, ,000, ,000, ,030, ,000,000 (93,884,040) (69,407,409) (2,409,485) (1,000,000) - (30,249,485) (100,000,000) (100,000,000) (196,293,525) (200,656,894) (96,263,525) (100,656,894) ,737, ,096, ,737, ,096,660 (1,000,846,223) (895,419,990) (37,822,456) (32,691,797) (50,000,000) (50,000,000) (1,088,668,679) (978,111,787) (149,931,239) (166,015,127) 3,701,488 3,327,822 ( (1)) (272,659,351) (240,071,805) 48

49 2003 ( ) ( ) 1. (557,074,008) (557,566,015) (10,763,000) - 374,965, ,123,764 47,457,439 8,212, , , ,848 20,074-19,736,914 11,354,537 41,203-34,255,017 29,363,975 ( ) (496,553) 60,845,704 (11,837,769) - (71,371) - 62,093, ,855,051 11,088,544 36,609, (30,166,075) 23,272, ,292, ,180,574 (473,951,393) (397,252,379) (272,659,351) (240,071,805) 49

50 TIANJIN MARINE SHIPPING CO., LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF THE AUDITORS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2003

51 TIANJIN MARINE SHIPPING CO., LTD. CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF THE AUDITORS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2003 Contents Page Report of the auditors 1 Consolidated income statement 2 Consolidated balance sheet 3 Consolidated statement of changes in equity 4 Consolidated cash flow statement 5 Notes to the consolidated financial statements 6-27

52 12th Floor, Shui On Plaza 333 Huai Hai Zhong Lu Shanghai People's Republic of China Telephone +86 (21) Facsimile +86 (21) REPORT OF THE AUDITORS TO THE SHAREHOLDERS OF TIANJIN MARINE SHIPPING CO., LTD. We were engaged to audit the accompanying consolidated balance sheet of Tianjin Marine Shipping Co., Ltd. (the Company ) and its subsidiaries ( the Group ) as at 31 December 2003 and the related consolidated income, changes in shareholders equity and cash flow statements for the year then ended. These consolidated financial statements set out on pages 2 to 27 are the responsibility of the Company s management. As disclosed in Note 21 (c) to the accompanying consolidated financial statements, as at 31 December 2003, the net amount due from Tian Hai Group Co., Ltd. ( Tian Hai ), the largest shareholder of the Company, and its two subsidiaries, guaranteed by Tian Hai, amounted to approximately RMB547 million, net of provision of approximately RMB325 million. Other than a written confirmation from Tian Hai indicating its intention to repay the Group, we have not been able to obtain the necessary audit evidence nor were we able to perform any alternative procedures regarding the recoverability of the net amount outstanding as at 31 December Because of the significance of the matter discussed in the preceding paragraph, we are not able to express an opinion on the accompanying consolidated financial statements. PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd. 28 April 2004 Business is undertaken in the registered name of.

53 TIANJIN MARINE SHIPPING CO., LTD. CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) Year ended 31 December Notes Revenue 3, 21(a) 694, ,310 Operating costs (780,813) (692,559) Gross (loss) / profit (86,210) 35,751 Other operating (loss)/income 4 (15,077) 26,291 Administrative and selling expenses (113,138) (102,363) Provision for restructured debt due from related parties. 21(c) (324,757) - Loss from operations 5 (539,182) (40,321) Finance costs net 6 (30,072) (30,273) Loss before tax (569,254) (70,594) Income tax 8 (4,082) (3,695) Loss before minority interests (573,336) (74,289) Minority interests 10,763 1,116 Net loss (562,573) (73,173) Dividends Loss per share Basic 10 RMB(1.142) RMB(0.149)

54 TIANJIN MARINE SHIPPING CO., LTD. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) ASSETS As at 31 December Notes Non-current assets Property, plant and equipment , ,685 Due from related companies 21(c) 488, ,836 Land use right 11(c) 11,973 13,053 Other non-current assets 4, ,062,326 1,444,384 Current assets Trade receivables, net 12 73, ,486 Due from related companies 21(c) 71,063 - Other receivables 13 15,167 53,409 Cash , , , ,013 Total assets 1,507,340 2,071,397 EQUITY AND LIABILITIES Shareholders equity Share capital , ,649 Reserves , ,843 (Accumulated losses)/retained earnings (412,077) 151, ,625 1,067,198 Minority interests 1,654 13,279 Non-current liabilities Bank loans 16 58, ,885 Current liabilities Trade payables 118, ,488 Accruals and other payables ,865 95,149 Current tax liabilities 11,970 16,409 Bank loans , , , ,035 Total equity and liabilities 1,507,340 2,071,397

55 TIANJIN MARINE SHIPPING CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) Reserves Share Capital Statutory Retained capital reserve reserves earnings Total Note (18) Note 19(a) Note 19(b) /(Accumulated losses) Balance at 1 January , , , ,370 1,140,371 Net loss for the year (73,173) (73,173) Appropriation from net profit (491) - Balance at 31 December , , , ,706 1,067,198 Net loss for the year (562,573) (562,573) Appropriation from net profit - - 1,210 (1,210) - Balance at 31 December , , ,108 (412,077) 504,625

56 TIANJIN MARINE SHIPPING CO., LTD. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) Cash flows from operating activities Years ended 31 December Notes Cash generated from operations 20 54,941 (100,944) Interest paid 6 (37,822) (36,623) Income tax paid (2,318) (6,994) Net cash generated from /(used in) operating activities 14,801 (144,561) Cash flows from investing activities Purchase of property, plant and equipment and land use right (93,884) (82,765) Proceeds on disposal of fixed assets - 21,982 Interest received 4,183 4,912 Decrease in other non-current assets (2,379) (300) Net cash used in investing activities (92,080) (56,171) Cash flows from financing activities Proceeds from bank loans 938, ,668 Repayment of bank loans (1,000,846) (800,135) Increase in minority interests - 1,319 Decrease in bank time deposits with maturity over three months (50,000) (65,330) Net cash (used in)/generated from financing activities (112,109) 75,522 Effects of exchange rate changes 6 3,701 1,899 Net decrease in cash (185,687) (123,311) Cash at beginning of year 386, ,290 Cash at end of year , ,979

57 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 1. General information Tianjin Marine Shipping Co., Ltd. (the Company ), a state-owned enterprise established in the People s Republic of China (the PRC ) in 1980, was reorganized into a joint stock company in December In November 1995, in connection with the issuance of its domestically-listed foreign currency ordinary shares on the Shanghai Stock Exchange ( B shares), the Company underwent another reorganization whereby Tian Hai Group Co., Ltd. ( Tian Hai ), its largest shareholder, injected certain businesses, assets and related liabilities into the Company. The Company s B shares were listed on the Shanghai Stock Exchange in April 1996, following which on 7 October 1996, the Company was recognized as a foreign invested joint stock limited company. In September 1996 and September 1999, shares held by the Company s employees were listed on the Shanghai Stock Exchange as domestically-listed Rmb ordinary shares. ( A shares). The Company and its subsidiaries (the Group ) are principally engaged in international short-haul container shipping business, provision of international and domestic shipping and freight agency services and crew services. The registered office of the Company is located at No.188, Jing Men Avenue, Tianjin Port Free Trade Zone, PRC. 2. Principal accounting policies a Basis of preparation The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ). The consolidated financial statements have been prepared under the historical cost convention as modified by impairment of assets. This basis of accounting differs from that used in the preparation of the Group s statutory accounts which are prepared in accordance with accounting regulations of the People s Republic of China ( Statutory Accounts ). The adjustments made to conform the Statutory Accounts of the Group to IFRS are shown in Note 24. The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts 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 reporting period. Although these estimates are based on management s best knowledge of current event and actions, actual results ultimately may differ from those estimates.

58 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 2. Principal accounting policies (continued) a Basis of preparation (continued) As at 31 December 2003, the Company suffered a net loss of approximately Rmb563 million for the year then ended, (including a provision for restructured debt due from related parties of Rmb 325 million) while the current liabilities exceeded current assets by approximately Rmb498 million. The continuation of the business of the Company depends on continuing financial support from bankers. The Directors believe the Company is able to obtain the continuous financial support from the bankers to enable the Company to meet its financial liabilities as and when they fall due and to carry on its business without significant curtailment of operations for the foreseeable future. Consequently, the Directors have prepared these consolidated financial statements on the going concern basis. b Group accounting policies (1) Subsidiaries Subsidiaries are entities in which the Group has an interest of more than one half of the voting rights or otherwise has power to govern the financial and operating policies. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries. Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated; unrealized losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group. Details of the Group s subsidiaries are set out in Note 23. (2) Minority interests Minority interests are that part of the net results of operations and of the net assets of a subsidiary attributable to interests which are not owned by the parent company, either directly or indirectly through its subsidiaries. c Foreign currency translation (1) Measurement currency The companies within the Group maintain their books and records in RMB, the measurement currency. The subsidiaries incorporated in Republic of Liberia and Hong Kong also maintain their books and records in RMB as their business operations are in the PRC.

59 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 2. Principal accounting policies (continued) c Foreign currency translation (continued) (2) Transactions and balances Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing on the first day of the month in which the transactions took place. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. Non-monetary assets and liabilities in other currencies are translated at historical rates. d Property, plant and equipment Property, plant and equipment are initially measured at cost. Subsequent to initial recognition, property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss. Depreciation is calculated on the straight-line method to write off the cost of each asset to its estimated residual value of 3% of cost over its estimated useful life as follows: Vessels Buildings Machinery and motor vehicles years years 5 8 years Construction-in-progress represents property under construction and machinery pending installation and is stated at cost. This includes the costs of construction and equipment and other direct costs. Construction-in-progress is not depreciated until such time when the assets are completed and ready for use. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit. Interest costs on borrowings to finance the construction of property, plant and equipment are capitalized during the period that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed as incurred. Repairs and maintenance are charged to the income statement during the period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset.

60 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 2. Principal accounting policies (continued) e Land use right Acquired land use right is stated at cost less accumulated amortization and accumulated impairment losses. Amortization is calculated using the straight line method to write off the cost less accumulated impairment losses over the term of the land use right. f Leases (1) Group company as the lessee Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. (2) Group company as the lessor Assets leased out under operating leases are included in property, plant and equipment in the consolidated balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income is recognized on a straight-line basis over the lease term. g Trade receivables Trade receivables are carried at original invoiced amount less provision made for impairment of these receivables. A provision for impairment is established when there is an objective evidence that the Group may not be able to collect all amounts due according to the original terms of receivables. h Cash Cash is carried in the balance sheet at cost. For the purposes of the cash flow statement, cash comprises cash in hand and deposits held at call with banks with original maturities of three months or less. i Borrowings Borrowings are recognized initially at the proceeds received net of transaction costs incurred.

61 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 2. Principal accounting policies (continued) j Pension schemes All employees of the Group of PRC nationality participate in defined contribution employee pension plans organised by the governmental authorities in accordance with relevant regulations. Contributions to these plans are made to a governmental agency which is then responsible for the pension liabilities relating to the Group s existing and retired employees. The Group accounts for these contributions on an accrual basis. Contributions to the plans are charged to the income statement as incurred. k Provisions Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The Group recognizes a provision for onerous contracts when the expected benefits to be derived from a contract are less than the unavoidable costs of meeting the obligations under the contract. l Revenue recognition Provided it is probable that the economic benefits associated with a transaction will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized on the following bases: (i) Container shipping income from international short-haul container shipping is recognized upon completion of the voyage and unloading of cargoes. (ii) Commission income is recognized when agency and other services are rendered. (iii) Income from operating leases is recognized on a straight-line basis over the lease term.

62 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 2. Principal accounting policies (continued) m Cost of operations The major operating costs being bunker oil, ship stores, spare parts, dry-docking and survey expenses are charged to operating expenses as consumed or incurred. n Taxation The Company and its subsidiaries provide for current corporate income tax on the basis of their respective taxable profit in the Statutory Accounts. Deferred taxation is provided under the balance sheet liability method in respect of significant temporary differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary difference can be utilized. o Impairment of assets (1) Financial instruments Financial instruments are reviewed for impairment at each balance sheet date. For financial assets carried at amortized cost, whenever it is probable that the Group will not collect all amounts due according to the contractual terms of loans or receivables, an impairment or bad debt loss is recognized in the income statement. Reversal of impairment losses previously recognized is recorded when the decrease in impairment loss can be objectively related to an event occurring after the write-down. Such reversal is recorded as income. However, the increased carrying amount is only recognized to the extent it does not exceed what amortized cost would have been had the impairment not been recognized.

63 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 2. Principal accounting policies (continued) o Impairment of assets (continued) (2) Other assets Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognized in the consolidated income statement. The recoverable amount is the higher of an asset s net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset at an arm s length transaction less the costs of disposal while value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit. Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses recognized for the asset no longer exist or have decreased. The reversal is recorded in the consolidated income statement or as a revaluation increase. However, the increased carrying amount of an asset due to a reversal of an impairment loss is recognized to the extent it does not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for that asset in prior years. 3. Revenue Container shipping income Related parties (Note 21 (a)) 251, ,162 Third parties 419, ,046 Commission income 20,700 11,818 Others 3,118 22, , ,310 The Group operates in the East Asia region, and is involved in the international short-haul container shipping business which includes related shipping and freight agency services, leasing of vessels, provision of customs declaration services and provision of logistic services. No segment information is presented as the Group operates in one industry and one geographical segment.

64 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 4. Other operating (loss)/income Income from delayed return of containers by customers 1,692 12,173 Provision for expenses to overhaul a damaged vessel and other related costs (Note 25) (20,000) - Vessels lease income 80,467 75,802 Vessels lease expense (79,553) (67,354) Others 2,317 5,670 (15,077) 26, Loss from operations Loss from operations include: Provision for doubtful receivables from related parties 332,618 25,551 third parties 42,166 24, ,784 50,002 Major operating costs (other than depreciation and staff costs ) Domestic and overseas port charges 388, ,587 Bunker oil, ship stores and spare parts consumed 159, ,305 Operating lease rentals vessels 127, ,438 containers 53,526 39,859 Other container expenses 30,639 25,668 Depreciation on property, plant and equipment owned assets 20,973 10,832 owned assets (vessels) leased out 21,028 25,678 Staff costs (Note 7) 34,090 24,103 Directors remuneration Finance costs-net Interest expenses - bank loans (37,822) (36,623) Interest income 4,684 4,912 Net foreign exchange gains 3,701 1,899 Others (635) (461) (30,072) (30,273)

65 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 7. Staff costs Salaries 24,503 16,249 Provision for staff welfare benefits 5,911 4,369 Pensions costs - defined contribution pension scheme 3,676 3,485 34,090 24,103 The average number of full time employees in 2003 was 787. (2002: 771) 8. Income tax expense PRC corporate income tax - current year 4,082 3,695 The Company and all of its subsidiaries incorporated in China are subject to the statutory corporate tax rate of 33%, except for one which enjoys the preferential rate of 15% due to its location in a special economic zone. All of the subsidiaries incorporated outside of the PRC are exempt from corporate income tax of the respective countries in which they are incorporated.

66 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 8. Income tax expense (continued) The Group s tax expense principally refers to taxes paid by subsidiaries with individual taxable profits. The Group s statutory tax rate is reconciled to the effective tax rate as follows: % % Accounting loss (569,254) 100 (70,594) 100 Assumed tax assets at the statutory tax rate (187,854) 33 (23,296) 33 Unrecognized tax losses 98,870 (17) 10,769 (15) Tax effect of expenses that are not deductible in determining taxable profit 94,375 (17) 16,501 (23) Effect of tax holidays enjoyed by subsidiaries (1,309) - (279) - Income tax expense 4,082 (1) 3,695 (5) For the year ended 31 December 2003, the Group had temporary differences resulted from tax losses carried forward and provision for doubtful receivables, for which no deferred tax asset is recognized due to the uncertainty of the taxable profit of the Group in the future. Such unrecognized deferred tax asset amounted to approximately RMB 171 million as at 31 December 2003 (2002: RMB 56 million). 9. Dividends The Directors do not propose any dividend for the year (2002: Nil). 10. Loss per share Basic loss per share is calculated by dividing the net loss attributable to shareholders by the weighted average number of ordinary shares in issue during the year Net loss (RMB 000) (562,573) (73,173) Weighted average number of ordinary shares in issue (thousands) 492, ,649 Basic loss per share (RMB per share) (1.142) (0.149) No diluted loss per share was presented as there were no dilutive potential ordinary shares issued / outstanding during the year.

67 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 11. Property, plant and equipment Vessels Buildings Machinery Motor vehicles Construction -in-progress Total Year ended 31 December 2002 Opening net book amount 337, ,036 2, , ,465 Additions 49, ,869 11,893 5,911 69,712 Disposals (20,470) (1,466) - (42) (4) (21,982) Transfers - 9, (9,806) - Depreciation charge (28,162) (5,419) (1,575) (1,354) - (36,510) Closing net book value 337, ,899 2,870 10,611 9, ,685 At 31 December 2002 Cost 522, ,738 19,855 19,554 9, ,342 Accumulated depreciation (184,890) (21,839) (16,985) (8,943) - (232,657) Net book amount 337, ,899 2,870 10,611 9, ,685 Year ended 31 December 2003 Opening net book value 337, ,899 2,870 10,611 9, ,685 Additions - 3,274 4,267 2,168 85,175 94,884 Disposals (272) - (272) Transfers 70,835 23, (94,779) - Depreciation charge (29,977) (5,896) (3,079) (2,989) - (41,941) Closing net book value 378, ,221 4,058 9, ,356 At 31 December 2003 Cost 593, ,808 24,046 21, ,527 Accumulated depreciation (214,867) (26,587) (19,988) (11,729) - (273,171) Net book value 378, ,221 4,058 9, ,356 (a) As at 31 December 2003, buildings and vessels with net book value of approximately RMB167 million (2002: RMB164 million) were mortgaged as collateral for the Group s bank loans. (Note 16(a) (ii)). (b) The following is the analysis of vessels leased to third parties under operating leases: Cost 469, ,321 Accumulated depreciation (209,223) (183,544) Net book value 260, ,777 (c) The land on which the buildings are situated are leasehold land which the Group has right to use for years from October The title to the land use right is still in process of being transferred to the Group.

68 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 12. Trade receivables, net Trade receivables 119, ,243 Less: provision for doubtful receivables (45,705) (40,757) 73, , Other receivables Other receivables 71,768 72,791 Less: provision for doubtful receivables (56,601) (19,382) 15,167 53, Cash Bank deposits 285, ,800 Cash at bank and in hand , ,118 For the purpose of the cash flow statement, cash comprises the following: Cash and bank balances 285, ,118 Less: Deposits pledged for bank loans (Note 16(a)) (84,138) (84,139) 201, , Accruals and other payables Business tax & other taxes payable 40,300 33,630 Accruals--damaged vessel overhaul expenses 20, others 7,291 9,476 Advances from customers 22,952 12,790 Construction fees 9,743 - Insurance fees 4,525 4,372 Salary and welfare payable 2,930 3,267 Others 71,124 31, ,865 95,149

69 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 16. Bank loans Short-term bank loans: Unsecured 52,000 38,471 Secured 158, ,000 Guaranteed by Tian Hai 353, , , ,504 Add: Current portion of long-term bank loans 69,148 15, , ,989 Long-term bank loans: Unsecured - 14,277 Secured 127, , , ,370 Less: Current portion of long-term bank loans (69,148) (15,485) 58, ,885 Total bank loans 691, ,874 (a) Short-term bank loans bear interest at rates ranging from 2.2% to 6.9% (2002: 3.1% to 7.8%) per annum while long-term bank loans bear interest at rates ranging from 2.3% to 6.0% (2002: 5.8% to 6.0%) per annum. (b) (c) (d) Collaterals and guarantee given for the secured bank loans are as follows: (i) certain buildings and vessels (Note 11), (ii) RMB84.1 million of bank deposits (2002: RMB 84.1 million) (Note 14) and Portion not covered by collaterals of certain vessel will be guaranteed by Tian Hai Repayment of the long-term bank loans is scheduled as follows: Year of repayment , ,148 62, ,454 72, , ,370

70 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 17. Commitments Capital commitments There is no outstanding capital expenditure contracted for at the balance sheet date but not recognized in the financial statements as at 31 December 2003 (2002:RMB32 million). Operating lease commitments group company as the lessee The future aggregate minimum lease payments under non-cancellable operating leases are as follows: Not later than 1 year 38,983 23,923 Later than 1 year and not later than 5 years 34,137-73,120 23,923 Operating lease commitments group company as the lessor As at 31 December 2003, the Group had operating lease agreements for vessels. The lease terms did not contain any renewal or purchase options, escalation clause and restrictions on the Group s activities concerning dividends, additional debt or further leasing. The future minimum lease payments receivable under non-cancellable operating leases are as follows: Not later than 1 year 23,784 19,145

71 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 18. Share capital Details of the Company s share capital are as follows: Balance at the beginning and end of year: Ordinary shares of Rmb 1 each: Shares in thousands Listed: A shares 103, , , ,689 B shares 180, , , ,000 Unlisted: Shares held by Tian Hai 184, , , ,089 Other legal person shares 24,871 24,871 24,871 24, , , , ,649 A shares rank pari passu with the B shares in all respects except that A shares can only be owned and traded by investors in the PRC and Qualified Foreign Institutional Investors; while B shares can be owned and traded in foreign currency by both PRC and foreign investors. 19. Reserves (a) Capital reserves Capital reserves mainly represent the premium on the issuance of shares. Pursuant to the Company s Articles of Association, share premium can only be used to increase share capital. (b) Statutory reserves According to the Articles of Association of the Company and its subsidiaries incorporated in the PRC, each is required to provide certain statutory reserves which are appropriated from the net profit as reported in the Statutory Accounts. According to the respective Articles of Association, 10% of net profit shall be set aside for the statutory reserve (which may be stopped when the reserve has reached 50% of the then share capital); 5% to 10% for the statutory common welfare fund and appropriation may be made to the discretionary reserve upon approval by the shareholders. These reserves cannot be used for purposes other than those for which they are created and are not distributable as cash dividends without the prior approval by shareholders under certain conditions.

72 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 19. Reserves (continued) (b) Statutory reserves (continued) As the Company incurred a loss for the year ended 31 December 2003, the Directors did not propose any profit appropriation plan for the Company but the profitable subsidiaries made the reserve appropriation accordingly (2002: nil). 20. Cash generated from operations Net loss for the year (562,573) (73,173) Adjustments for: Minority interests (10,763) (1,116) Income tax paid 2,318 3,695 Provision for doubtful receivables 374,966 50,002 Depreciation of property and equipment and amortization of other assets 43,670 36,510 Loss on disposal of property equipment 40 - Interest expenses 37,822 36,623 Interest income (4,049) (4,912) Investment income (31) - Exchange gain (3,701) (1,899) (122,301) 45,730 Changes in working capital: Decrease in due from the largest shareholder 24, Decrease / (increase) in accounts receivables 22,680 (16,654) Decrease / (increase) in due from other related companies 66,330 (107,605) Decrease / (increase) in other current assets 30,352 (16,074) (Decrease) / increase in trade payables (14,549) 48,484 Increase / (decrease) in other current liabilities 47,922 (55,314) Cash generated from / (used in) operations 54,941 (100,944)

73 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 21. Significant related party transactions Other than as stated elsewhere in this report, significant related party transactions during the year are as follows: (a) Transactions with related parties Container shipping income generated through: Tenjin Shipping Co., Ltd. ( Tenjin ) 233, ,777 Jinyun Shipping Agent Co., Ltd. ( Jinyun ) 17, , , ,162 Agency commission income 3,694 3,610 Container rental expense (10,418) (4,333) Vessels lease expense (49,164) (54,432) Tenjin and Jinyun, subsidiaries of Tian Hai, are the Group s sole agents in Japan and Hong Kong respectively. (b) Loan to Tian Hai On 3 January 2003, the Company loaned approximately RMB 100 million to Tian Hai. This loan which was interest free had been fully repaid on 31 December 2003.

74 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 21. Significant related party transactions (continued) (c) Amounts due from related companies Included in restructured debt plan as detailed below: Tian Hai 89, ,261 Tenjin 463, ,429 Jinyun 318, , , ,017 Less: Provision for restructured debt (324,757) - 547, ,017 Other related subsidiaries 98, ,184 Less: Provision for doubtful receivables (86,407) (78,365) 12,402 27,819 Net amount due from related parties 559, ,836 Comprising: Non-current portion 488, ,836 Current portion 71, , ,836 All amounts due from related companies are non-interest bearing. The amount due from Tian Hai is unsecured but the amounts due from subsidiaries and associates of Tian Hai are guaranteed by Tian Hai. In April 2004, the Company negotiated a repayment plan with Tian Hai resulting in the following major arrangements: As to the amount of approximately Rmb90 million directly due from Tian Hai, the agreement is to be paid in cash over a three year period in equal half yearly instalments commencing from November 2004; As to the amount due from the two subsidiaries, Tian Hai agreed to further negotiate another repayment plan for approximately Rmb457 million; and Tian Hai has offered certain of its assets as collaterals. The Directors believe, to the best of their knowledge, that Tian Hai will substantially fulfill its obligations. However, in the financial statements as at and for the year ended 31 December 2003, a provision of RMB325 million has been made against that portion of the outstanding debt for which a repayment plan has yet to be initiated.

75 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 22. Financial instruments (a) Fair value The carrying amounts of the Group s cash and cash equivalents, trade receivables, other receivables, trade payables, other payables and short-term bank borrowings approximate their fair values because of the short maturity term of these instruments. (b) Credit risk The carrying amounts of cash, trade and other receivables and amount due from related companies represented the Group s maximum exposure to credit risk in relation to financial assets. Cash is placed with reputable banks and the weighted average effective interest rate on deposits was 0.8% (2002: 0.9%) per annum. The Group performs ongoing credit evaluations of its third party customers financial condition and generally does not require collateral on trade receivables. The Group maintains a provision for doubtful accounts and actual losses have been within management s expectation. The Group s risk to amount due from related parties is as described in Note 21 (c). No other financial assets carry a significant exposure to credit risk.

76 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 22. Financial instruments (continued) (c) Interest rate risk The interest rates and terms of repayment of short-term and long-term bank loans are disclosed in Note 16. The Directors believe the Group s exposure to interest rate risk of financial assets and liabilities as at 31 December 2003 was minimal since their deviation from their respective fair values was not significant. (d) Liquidity risk The Group s policy is to maintain sufficient cash and cash equivalents or have available funding through continuing support from certain financial institution to meet its current operation requirements. (e) Foreign exchange risk The foreign exchange risks of the Group relate to its business activities denominated in foreign currencies, principally USD and Japanese Yen. The Group does not enter into any foreign exchange forward contracts to hedge against foreign currency fluctuations. However, the Directors believe that the Group s exposure to foreign exchange risk can be controlled by keeping net foreign currency balance at minimum requirement.

77 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 23. Principal subsidiaries As at 31 December 2003, the Company had the following principal subsidiaries whose principal activities are the same as that of the Company: Percentage of equity Country of Registered interest held Name incorporation capital Direct Indirect Zhu Hai Bei Yang Shipping Company PRC 70,000 90% 10% Tianjin PFTZ New Century International PRC 42,000 90% 10% Logistics Co., Ltd. Shanghai TMSC Marine Shipping Co., Ltd. PRC 35, % 2.1% Yangzhou Yuyang Shipping Co., Ltd. PRC 16,000 52% - TMSC Freight Agencies Co. PRC 15,000 90% 10% TMSC Shipping Agencies Co. PRC 10,000 90% 10% Shanghai TMSC Freight Agencies Co., Ltd. PRC 8, % 29.25% Beijing TMSC North Freight Agency Co., PRC 5, % 53.61% Ltd. Bohai Foreign Trade Joint Service Co., Ltd. PRC 5,000 60% - Dalian TMSC Fright Agencies Co., Ltd. PRC 5,000 45% 55% Tianjin TMSC Air-transportation Agencies PRC 3,615 83% 17% Co., Ltd. Dalian TMSC Shipping Agencies Co., Ltd. PRC 3,000 70% 30% Shanghai TMSC Shipping Agencies Co., Ltd. PRC 3,000 70% 10% Tianjin TMSC Customs Broker PRC 2, % - Qingdao Jinhaiyun Shipping Agency Co., Ltd PRC % 10% Guangzhou Jinhai Shipping Agency Co., Ltd PRC % Tianjin TMSC Crew Service Co., Ltd. PRC % 33.33% Asian Eagle Shipping Company Limited Hong Kong 53, % - Asian Pioneer Maritime Limited Sky Glory Shipping Ltd. Sky Fortune Shipping Ltd. Brilliant Star Limited Sky Star Limited Republic of Liberia Republic of Liberia Republic of Liberia Republic of Liberia Republic of Liberia 500 shares without par value 500 shares without par value 500 shares without par value 500 shares without par value 500 shares without par value 100% % - 100% - 100% - 100%

78 TIANJIN MARINE SHIPPING CO., LTD. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2003 (Unless otherwise indicated, all amounts are stated in Renminbi thousands) 24. Impact of IFRS adjustments on Group s net loss /net assets These consolidated financial statements were prepared in conformity with IFRS, which differ from standards applied in the preparation of the Statutory Accounts. The principal adjustments made to conform with IFRS are as follows: Net loss for the year ended 31 December Net assets as at 31 December As reported in the Statutory Accounts (557,074) (72,583) 500,625 1,067,243 Impact of adjustments - Reversal of revaluation surplus 4,206 3,825 (13,142) (17,348) - Reversal of equity investment difference and its amortization (2,818) (2,818) 17,381 20,200 - Reversal of unrecognized investment loss in subsidiaries (9,544) (1,352) Others 2,657 (245) (239) (2,897) As reported in the IFRS financial statements (562,573) (73,173) 504,625 1,067, Contingent liabilities On 2 December 2003, one of the Group s vessels met with a collision. The Directors upon consultation with the Group s legal counsel estimated that approximately Rmb20 million of potential loss or expenses may not be covered by insurance. This potential loss has been fully provided for in the financial statements for year ended 31 December The Directors believe that in their best estimation the Group will not suffer any significant loss, compensation or claims in excess of the provision already been made. 26. Post balance sheet event There were no material subsequent events occurred for the Group up to the date of the auditors report. 27. Reclassification of comparative figures Certain comparative figures have been reclassified to conform to the current year presentation. 28. Approval of financial statements These consolidated financial statements have been approved for issuance by the Board of Directors on 28 April 2004.