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FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of May 2003
Commission File Number: 1-13750
JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED
No. 9 Longtan Street
Longtan District
Jilin City, Jilin Province
People's Republic of China
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
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Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1):
--------------------
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7):
--------------------
Indicate by check mark whether by furnishing the information contained in
this Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):
82- N.A.
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[JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED LOGO]
(a joint stock limited company incorporated in the People's Republic of China)
ANNUAL RESULTS ANNOUNCEMENT 2002
The Board of Directors (the "Board") of Jilin Chemical Industrial Company
Limited (the "Company") announces the audited consolidated results and financial
position of the Company and its subsidiaries (the "Group") for the year ended
December 31, 2002 together with the comparative figures for the previous year as
follows:
FINANCIAL HIGHLIGHTS
Financial information of the Group for the year ended December 31, 2002 prepared
in accordance with PRC accounting standards is set out below:
RMB millions
Loss before tax (1,031)
Net loss (1,026)
Net loss after non-operating loss (note) (245)
Profit from principal operations 765
Profit from other operations 3
Operating loss (369)
Loss from investment (8)
Subsidy income --
Net non-operating expense (654)
Net cash inflow from operations 1,860
Net decrease from cash and cash equivalents (4)
Note: Non-operating loss under PRC accounting standards was approximately RMB780
million, including income of approximately RMB7 million from disposal of
fixed assets, loss of RMB287 million from disposal of fixed assets,
inventory loss of RMB140 million, loss of RMB27 million from unscheduled
plant shutdowns, write down of carrying value of fixed assets of RMB322
million and other losses of RMB12 million.
Prepared in accordance with International Financial Reporting Standards ("IFRS")
Items
RMB millions
For the year ended December 31, 2002 2001 2000 1999 1998
Turnover 13,138 12,519 13,396 10,555 8,844
(Loss)/profit before tax (1,028) (1,815) (877) 227 105
Net (loss)/profit (1,023) (1,817) (836) 149 66
(Loss)/earnings per share (RMB0.29) (RMB0.51) (RMB0.24) RMB0.04 RMB0.02
As at December 31
Total assets 13,665 13,830 17,974 16,054 15,768
Shareholders' equity 2,083 3,106 5,874 6,199 6,085
Net assets per share RMB0.58 RMB0.87 RMB1.65 RMB1.82 RMB1.78
Prepared in accordance with PRC accounting standards
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Items
RMB millions
For the year ended December 31, 2002 2001 2000
Income from principal operations 12,319 11,914 13,847
Net loss (1,026) (1,803) (879)
Loss per share (fully diluted) (RMB0.29) (RMB0.51) (RMB0.25)
Loss per share (weighted average) (RMB0.29) (RMB0.51) (RMB0.25)
Net cash inflows from operating activities per share RMB0.52 RMB0.67 RMB0.04
Return on net assets (fully diluted) (35.92%) (46.45%) (15.45%)
Return on net assets (weighted average) (30.45%) (37.69%) (14.44%)
As at December 31,
Total assets 14,336 14,532 17,711
Shareholders' equity (excluding minority interests) 2,856 3,882 5,687
Net assets per share RMB0.80 RMB1.09 RMB1.60
Adjusted net assets per share RMB0.76 RMB1.04 RMB1.50
Notes:
1. The number of shares outstanding for each of the three years ended
December 31, 2002, 2001, 2000, was 3,561,078,000 shares, 3,561,078,000
shares, and 3,561,078,000 shares respectively.
2. The weighted average number of shares for 2002 was 3,561,078,000 shares.
3. The weighted average number of shares for 2001 was 3,561,078,000 shares.
4. The weighted average number of shares for 2000 was 3,551,025,000 shares.
The Differences under IFRS and PRC GAAP
For the year ended December 31, 2002, the net loss as reported under PRC GAAP
was approximately RMB1,025.73 million and the net loss as reported under IFRS
was approximately RMB1,023.10 million.
The significant differences between IFRS and PRC GAAP are set out in the
"Supplementary Information" section to this announcement.
REPORT HIGHLIGHTS
1. Operating Results
The Group's principal business consists of the production and sale of
petroleum products, petrochemical and organic chemical products, synthetic
rubber, chemical fertilizer and inorganic chemical products. The Group's
business is conducted in the PRC and most of its products are sold in the
domestic market.
In 2002, the Company carried out practical and effective measures to
reduce its losses and minimise the adverse impact of increased competition
in both domestic and international markets and China's entry into WTO on
its business.
In accordance with PRC GAAP, the Group's income from principal operations
for the year ended December 31, 2002 was approximately RMB12,319.14
million, representing an increase of 3.4% as compared with 2001. According
to IFRS, the Group's turnover was approximately RMB13,138.39 million,
representing an increase of 5.0% as compared with 2001. Under PRC GAAP and
IFRS, the Group recorded losses of RMB1,025.73 million and RMB1,023.10
million, respectively, reducing losses by approximately RMB777.29 million
and RMB794.27 million, respectively, compared to losses recorded in 2001.
After non-operating loss/profit, the net loss was RMB245.37 million under
PRC accounting standards.
In 2002, under PRC GAAP, income from petroleum products was approximately
RMB5,602.60 million, accounting for about 45.48% of the Group's total
income. The cost of goods sold for petroleum products was approximately
RMB4,931.89 million and gross profit ratio was approximately 11.97%.
Income from petrochemical and organic chemical products was approximately
RMB5,793.47 million, accounting for approximately 47.03% of the Group's
total income. The cost of goods sold of petrochemical and organic chemical
products was approximately RMB5,305.58 million and gross profit ratio was
approximately 8.42%.
2. Major Suppliers and Customers
As at December 31, 2002, the aggregate amount of purchases from the five
largest suppliers of the Company accounted for approximately 82% of the
Company's total amount of purchases. The aggregate sales revenue from the
Company's five largest customers accounted for approximately 65% of the
Company's total sales revenue for the year.
3. Problems and difficulties encountered in operations and proposed solutions
In 2002, prices of petrochemical products still remained at a relatively
lower level although the prices for certain chemical products of the
Company increased compared with 2001 as a result of increased demand for
such products in the domestic market. The Company recorded a loss in 2002
as a result of several adverse factors, including the disposal
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of certain fixed assets and current assets in order to reduce its
financial risks, certain accounting provisions, and the expenses related
to temporary shutdown of production facilities as part of the Company's
biennial maintenance program.
Facing intensified competition both in domestic and international markets,
the Company took effective measures, including maintaining steady
operations and high utilization rates, increasing the volume of crude oil
processing and production, and increasing sales revenue. As a result of
such measures, the Company recorded significantly lower losses in 2002 as
compared with 2001.
(1) Maintaining steady operation and increasing sales volume
During 2002, the processing volume of crude oil was about 4.56
million tons, representing an increase of 5% as compared with 2001,
which resulted in an increase of 2.3% in the sales volume, as
compared with 2001. The steady operation and high utilization rate
of major production facilities resulted in an increase in the
Company's sales revenue.
(2) Realizing overall optimization, reducing energy consumption
Through optimizing resources, the Company created profits of
RMB24.81 million as a result of processing approximately 606,000
tons of Russian crude oil, and profits of RMB24.04 million from
optimization of raw materials of ethylene product through purchasing
naphtha of approximately 485,000 tons. The percentage of unscheduled
shutdown and production fluctuation decreased by 71.83% as compared
with the same period of 2001. The Company also focused on the
control over consumption of materials and energy, and cost targets,
as a result of which the operation level of production facilities
were increased efficiently.
Compared to 2001, the production ratio of naphtha increased by
1.83%, the loss ratio from processing of crude oil decreased by
0.08%, the production ratio of ethylene increased by 0.11% and loss
ratio of ethylene decreased by 0.45%, and general crude consumption
per ton decreased by 35.95 kg. During the report period, main
consumption targets of the Company decreased significantly and main
technical targets recorded the best level as compared with 2001.
(3) Strengthening company management, improving cost control
During 2002, the Company implemented its "Six Checks and Six
Rectifications" program for all staff. By following the program's
strict rules and regulations, the Group strengthened labor
discipline and underwent significant changes to the whole outlook of
the Group.
The Company further strengthened financial management, including
increasing budget control, strengthening funds management and
reducing management expenses, as a result of which the management
expenses reduced significantly as compared with 2001.
Through strengthening the management of materials purchasing,
ensuring materials supply, reducing purchases, keeping reasonable
inventory level, and realizing efficient work, the purchasing cost
of the Company decreased as compared with 2001.
Through strengthening controls over marketing of products, the
Company took advantage of its system of storage, transport and
marketing of products and reached its targets for production, sales
and refunds. The Company also acquired the foreign equity interest
in Jilian (Jilin) Petrochemicals Limited, its jointly controlled
entity, and successfully integrated its production plant and related
employees.
Taking into account the completion of 1,400,000t/a catalytic
cracking unit and other upgrade programs during the report period,
the Company wrote off its original 90,000t/a catalytic cracking unit
and supplementary facilities. The net loss related to the disposal
of above-mentioned assets was approximately RMB283.42 million, which
was accounted for in the loss and profit statement ended December
31, 2002.
Following a detailed analysis of the Company's inventories, the
Company decided to provide approximately RMB139.99 million for
inventory losses.
Considering the lengthening of ageing of some prepaid expenses and
other current assets, the Company provided approximately RMB51.48
million for impairment to reduce potential risks during the report
period.
The Board considered that the above-mentioned accounting provisions
were in conformity with the actual operating conditions of the
Company.
INVESTMENTS
In 2002, the Company completed its expansion projects of 1,400,000t/a catalytic
cracking unit, 140,000t/a styrene unit and 60,000t/a AES unit. The construction
of 300,000t/a synthetic ammonia production unit was completed during the report
period. The total investment was RMB791.73 million as at December 31, 2002.
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In 2002, the Additional Seven Facilities of 300,000t/a ethylene project
(polyethylene, ethylene glycol, phthalic anhydride, phenol acetone, ABS,
acrylonitrile, and advanced alcohol units), of which polyethylene, ethylene
glycol, phthalic anhydride, phenol acetone, ABS units were transferred to
PetroChina Company Limited and the acrylonitrile and advanced alcohol units were
retained by Jilin Chemical Group Corporation, did not generate satisfactory
results. The Company's option to purchase the Additional Seven Facilities was
not exercised during 2002 and expired on December 31, 2002.
ANALYSIS OF FINANCIAL CONDITIONS
As at December 31, 2002, according to the consolidated balance sheet prepared
under PRC GAAP, total assets were valued at RMB14,336.23 million, representing
an decrease of 1.35% of write down of carrying value in fixed assets. Long-term
liabilities amounted to RMB3,826.81 million, representing a decrease of 36% as
compared with 2001, primarily due to the Company's repayment of loans.
Shareholders' equity was RMB2,855.87 million, representing a decrease of 26.43%
as compared with 2001. Profit from principal operations was RMB764.92 million,
representing an increase of 171% as compared with 2001, primarily due to an
increase in income from principal operations and a decrease in cost, as compared
with 2001. Net loss was RMB1,025.73 million, representing a decrease of
RMB777.29 million as compared with 2001, primarily due to increases in the
product prices and production volume. Cash and cash equivalents decreased by
RMB4.11 million as compared with 2001, primarily due to the Company's interest
expenses.
PROSPECTS
In 2003, continuous implementation of positive fiscal policies and stable
currency policy by the PRC government and the expected GDP growth of more than
7% in 2003 will provide favorable conditions for the domestic petroleum and
petrochemical industry and provide many opportunities for the Company to
increase its production volume as well as its market share. The Company expects
international prices for crude oil prices and petrochemical products to
fluctuate in the period during and after the war in Iraq, and are uncertain
about the impact of the atypical pneumonia outbreak on the PRC economy or the
Group's business. Furthermore, the continuing tariff cut and tariff reduction
measures following China's entry to WTO are expected to continue increasing
competition in the domestic petrochemical industry.
For the Company itself, the improvement of overall management standard and
commissioning of main upgrade programs in 2002 are positive steps towards
optimization of the Company's product mix and increase of production volume in
2003. There is no major shutdown maintenance planned in 2003, which will ensure
steady and safe production with high utilization rates. Notwithstanding such
measures, the Company expects to continue to face difficulties in its business
in 2003, taking into consideration its poor financial health, small production
scale and shortage of processing capacity as compared with international and
domestic competitors.
In order to increase profitability and further strengthen cost control, the
Company will put forward the following measures in the year to come. The Company
will make all its efforts to make profits in 2003, under the circumstance that
the crude oil price will not increase significantly and the petrochemical
products mark will not fluctuate significantly.
1. Focusing on its security and environmental protection to maintain safe and
stable operations with high utilization rates. The Company expects to
process 5.4 million tons of crude oil and produce 570,000 tons of
ethylene.
2. Adjusting product mix. The Company will optimise its resources through
processing more than 900,000 tons of crude oil from Russia and adjust its
product mix through optimizing production units according to market demand
and focus on its product quality through its upgrade program to increase
product prices, especially for EPR and AES products. The Company will
further focus on optimization of public utilities through its upgrade
program for its heating-supply system to increase its profitability.
3. Strengthening marketing management. The Company will further strengthen
market development and improve its marketing management system to maintain
a higher production and sales ratio.
4. Strengthening the management of materials purchasing to ensure supply of
bulk materials. The Company will bypass the middleman by increasing
purchasing through auctions and the Internet. The Group will strengthen
its "Five Open Policies" for management and supervision in order to
complete and perfect the checks and balances mechanisms for supervision,
and to decrease purchasing costs by every possible means.
5. Strengthening funds management to increase the utilization rate through
strict control over approval procedures and reduction of non-production
expense. The Company will focus on adjustment and restructure of loans to
repay loans with higher interest rates.
6. Speeding up technical innovation. The Company will focus on the scientific
research and strive to ensure the completion of various innovation
programs, such as the EPR and AES products, to increase production scale
and quality level of its products.
Proposed Profit Appropriation or Proposed Transfer from Common Reserves to Share
Capital
Under PRC accounting standards, the accumulated loss as at December 31, 2002 was
RMB3,692 million. The net loss for the year ended December 31, 2002 was RMB1,026
million and the accumulated loss as at January 1, 2002 was RMB2,666 million.
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Under IFRS, the accumulated loss as at December 31, 2002 was RM3,555 million.
The net loss in 2002 was RMB976 million and the accumulated loss as at January
1, 2002 was RMB2,581 million. As loss was incurred under both accounting
standards, the Company does not have profit to declare dividend for the year
ended December 31, 2002. Having regard to the Company's financial position in
the year of 2002 the Board has resolved not to declare any final dividend for
2002 or to transfer from common reserves to the Company's share capital.
The above proposal will be presented to the Company's shareholders for approval
at the 2002 Annual General Meeting to be held on June 24, 2003.
PURCHASE, SALES AND REDEMPTION OF SHARES
For the year ended December 31, 2002, there was no purchase, sale or redemption
by the Company, or any of its subsidiaries, of the Shares of the Company.
COMPLIANCE WITH CODE OF BEST PRACTICE
During 2002, to the knowledge of the Board, the Company has complied with the
Code of Best Practice which incorporates items set out in Appendix 14 to The
Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong
Limited.
TRUST DEPOSITS OR TRUST LOANS
During 2002, the Company had no trust deposits or trust loans and the Company
did not experience any difficulties in making withdrawals from financial
institutions.
HOUSING REFORMS
The Company disclosed details of its employee housing reform programme in its
1998 annual report. Since 1998, the Company has incurred a loss of RMB84.09
million due to the reimbursement offered to its employee to purchase staff
accommodations. The staff cost associated with the Company's employee housing
reform programme will be amortised on a straight-line basis to the profit and
loss account over a 20 year period which is the remaining expected average
employment period of the relevant employee in accordance with IFRS. Because of
recently signed service contracts with the employees, their employment period
has been changed to between three to ten years. The remaining average employment
period will also be changed to between three to ten years accordingly for the
purpose of preparing the financial statements.
From January 1, 1998 to December 31, 2002, the total amount amortised was
RMB31.25 million. The amount amortized in the year of 2002 was RMB9.32 million.
As at December 31, 2002, the above remaining deferred staff cost was
approximately RMB52.84 million. In the opinion of the Board, if the aforesaid
deferred staff cost was completely written off in the year 2002, the net assets
of the Company as at December 31, 2002 would be reduced by approximately
RMB52.84 million. Other than the employees' housing reform programme mentioned
above, the Company has not implemented any employees' housing plan.
The detailed annual results of the Company, including all the materials required
by paragraphs 45(1)-45(3) of Appendix 16 of The Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited ("Hong Kong Stock
Exchange"), will be released shortly on the website of Hong Kong Stock Exchange,
http://www.hkex.com.hk.
DISCLOSURE OF SIGNIFICANT EVENTS
1. Material litigation
The Group was not involved in any material litigation or arbitration
during the year ended December 31, 2002.
2. Merger, acquisition or restructuring
The Company entered into an equity transfer agreement in August 2002 for
the acquisition of the remaining 35% of Jilian (Jilin) Petrochemicals
Limited ("Jilian"), its jointly controlled entity, at a consideration of
RMB135 million. Upon receiving approval from the relevant state
department, the Company completed the acquisition in December 2002,
integrated Jilian into the Group's business and applied for revocation of
Jilian's business licence.
Following the acquisition of Jilian, RMB120 million of secured loans
granted to Jilian and RMB34 million of bank loans granted to one of the
Company's subsidiaries and guaranteed by Jilian were used appropriately by
the Company.
3. Material contracts
The Group did not enter into any material contracts during 2002.
4. During the period report, the Company did not entrust anybody with cash
assets administration, and no such plan in the future.
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5. Related party transactions
Pursuant to a letter from the Hong Kong Stock Exchange on September 5,
2000, the original waivers on certain connected transactions granted to
the Company by the Hong Kong Stock Exchange on May 11, 1995, April 20,
1999 and July 29, 1999 remain valid. The total amount of related party
transactions between the Company and JCGC for the year ended December 31,
2002 was approximately RMB1,278.14 million. The total amount of related
party transactions between the Company and a subsidiary of CNPC
(PetroChina) was approximately RMB13,530.18 million. The fees paid by the
Company for welfare and support services rendered by JCGC were based on
state-regulated prices, market prices or cost prices as provided for in a
service agreement entered into between the Company and JCGC. The fees paid
for the other related party transactions between the Company and JCGC were
based on normal commercial terms or on terms that were fair and reasonable
so far as the shareholders of the Company are concerned. Transactions
entered into with subsidiaries of CNPC were based on conditions approved
at the extraordinary general meetings held on December 30, 2001. The
above-mentioned connected transactions ensure the normal operation of the
Company. Details of these connected transactions are set out in the note V
to the financial statements prepared under PRC accounting standards.
6. Neither the Company, the board of directors nor any individual director of
the Company has experienced any reprimand by the China Securities
Regulatory Commission, stock exchanges or any regulatory authority during
the year.
7. During the period report, the Company did not enter into any trust
arrangement, guarantee or lease with any third party to reduce costs of
the Company or of the third parties.
8. No undertaking matters were disclosed in designated newspapers and website
by the Company or its shareholder holding more than 5% of the Company's
registered share capital.
9. Auditors
At the annual general meeting held on June 17, 2002,
PricewaterhouseCoopers (certified public accountants in Hong Kong) and
PricewaterhouseCoopers Zhong Tian CPAs Company Limited (registered
accountants in the PRC) were reappointed as the Company's international
and domestic auditors, respectively, to hold office until the next annual
general meeting. In 2002, the Company paid RMB2.7 million in auditing fees
to PricewaterhouseCoopers and PricewaterhouseCoopers Zhong Tian CPAs
Company Limited.
10. Medical Insurance for Employees
The Company has paid medical insurance for its employees from welfare
expenditure since January 1, 1997 in compliance with the Implementation
Rules of Medical Treatment System Reform and Eight Provisions of
Administration of JCGC. Such payments have no material adverse impact on
the profits of the Company.
11. Other Events
According to the Listing Rules of the Shenzhen Stock Exchange, following
three consecutive years of financial losses, the Company's A shares are
required to be suspended from trading on the Shenzhen Stock Exchange and
subject to de-listing procedures. The Company has recorded three
consecutive years of financial losses from January 1, 2002 to December 31,
2003. Upon publication of the Company's 2002 financial results on April
25, 2003, the Company's A shares will be suspended from trading. According
to the Listing Rules of the Shenzhen Stock Exchange, the Company may apply
for resumption of trading of its A shares if it generates financial
profits for the period ending the first six months of 2003. However, the
Company's A shares will be de-listed if the Company generates financial
losses for the year ended December 31, 2003.
CHANGES IN SHARE CAPITAL STRUCTURE
Unit: '000 shares Par value: RMB1.00
Increase/(decrease) during 2002
--------------------------------------------------------------------
As at Transferrd As at
January 1, Share from Additional December 31,
2002 placing Bonus premium issue Others Subtotal 2002
Unlisted shares
1. Promoter shares 2,396,300 -- -- -- -- -- -- 2,396,300
of which:
State-owned shares -- -- -- -- -- -- -- --
Domestic legal
person 2,396,300 -- -- -- -- -- -- 2,396,300
shares -- -- -- -- -- -- -- --
Foreign legal person -- -- -- -- -- -- -- --
shares -- -- -- -- -- -- -- --
Others -- -- -- -- -- -- -- --
2. Subscribed legal
person shares -- -- -- -- -- -- -- --
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3. Employees' shares
4. Preference shares
and others of which:
transferred or
placed shares
--------- --------- --------- --------- --------- --------- --------- ---------
Total unlisted shares 2,396,300 -- -- -- -- -- -- 2,396,300
========= ========= ========= ========= ========= ========= ========= =========
Listed shares
1. Domestic listed RMB 200,000 -- -- -- -- -- -- 200,000
ordinary shares
of which:
held by senior
management 14.20 -- -- -- -- 3.55 3.55 10.65
2. Domestic listed foreign
shares -- -- -- -- -- -- -- --
3. Overseas listed foreign 964,778 -- -- -- -- -- -- 964,778
shares
4. Others -- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Total listed shares 1,164,778 -- -- -- -- -- -- 1,164,778
========= ========= ========= ========= ========= ========= ========= =========
Total number of shares 3,561,078 -- -- -- -- -- -- 3,561,078
========= ========= ========= ========= ========= ========= ========= =========
Introduction of Shareholders
As at December 31, 2002, the Company had a total of 65,565 shareholders,
comprising 640 H shareholders, 64,924 A shareholders and one state-owned
shareholder.
Substantial Shareholders
As at December 31, 2002, the ten largest shareholders of the Company were as
follows:
Increase/
Number of (decrease) Percentage
shares held amount of holding
Name of shareholders Class (shares) (shares) (%)
1. PetroChina Company Limited A shares 2,396,300,000 -- 67.2914
(holder of state-owned legal
person shares)*
2. HKSCC NOMINEES LIMITED H shares 802,832,699 2,454,000 22.5400
3. HONG KONG & SHANGHAI H shares 135,095,300 20,000 3.7900
BANKING CORPORATION
(NOMINEES) LIMITED
4. NORTHWEST SECURITIES
COMPANY LIMITED A shares 3,351,074 3,351,074 0.0501
5. LIU WU RONG A shares 2,575,609 2,575,609 0.0900
6. ZHANG LI A shares 1,600,000 1,600,000 0.0449
7. WANG YAN E A shares 1,596,500 1,596,500 0.0448
8. QIAO LIANG A shares 1,480,000 1,480,000 0.0416
9. CHENG YU A shares 1,200,000 1,200,000 0.0337
10. DAI YU MIAO A shares 1,023,300 1,023,300 0.0287
Note: No relationship was found among the ten largest shareholders of the
Company.
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* The legal representative of PetroChina Company Limited ("PetroChina") is
Mr. Ma Fucai. PetroChina was established on November 5, 1999 and has a
registered capital of RMB175,824,176,000. The total share capital of
PetroChina is 175,824,176,000 shares, of which state-owned shares amounted
to 158,241,758,000 shares and foreign invested shares (H shares and ADSs)
amounted to 17,582,418,000 shares, accounting for 90% and 10% of the total
shares in issue, respectively. PetroChina's principal businesses consist
of the exploration and production of crude oil and natural gas, crude oil
refining and marketing of refined products, the production and marketing
of petrochemcial products and the supply, transmission and marketing of
natural gas. No shares of the Company held by PetroChina were pledged
during the report period.
China National Petroleum Corporation ("CNPC"), the controlling shareholder of
PetroChina, held 90% of the total share capital of PetroChina. CNPC was
established in July 1998 with a registered capital of RMB114.9 billion. Mr. Ma
Fucai is the legal representative of CNPC. The principal businesses of CNPC
consist of the exploration, production, marketing of crude oil and natural gas,
the production and sale of petroleum and petrochemical products, the
transmission of crude oil and natural gas, the construction of international and
domestic petroleum projects, and the import and export of petroleum technology.
There were no shareholders for whom HKSCC Nominees Limited and Hong Kong &
Shanghai Banking Corporation (Nominees) Limited act as agents, whose
shareholding accounted for more than 10% of the total number of issued shares of
the Company.
Shareholding of Directors, Supervisors and Senior Management in the Company
during 2002
Number of Number of
shares as at shares as at
January 1, December
Name Position Sex Age 2002 31, 2002 Service term
Yu Li Chairman male 44 0 0 2002.6.17 - 2004.2.27
Xu Fengli Deputy male 56 0 0 2001.2.28 - 2004.2.27
chairman
Shi Jianxun Director male 58 3,550 3,550 2001.2.28 - 2004.2.27
Zhang Xingfu Director male 50 0 0 2001.2.28 - 2004.2.27
Lan Yunsheng Director male 46 0 0 2001.2.28 - 2004.2.27
Ni Muhua Director male 52 3,550 3,550 2001.2.28 - 2004.2.27
Jiang Jixiang Director male 50 0 0 2001.2.28 - 2004.2.27
Xu Yuanxiang Director male 53 0 0 Resigned on
February 28, 2003
Wang Baifeng Independent director male 57 0 0 2002.6.28 - 2004.2.27
Lu Yanfeng Independent director male 43 0 0 2002.6.28 - 2004.2.27
Rupert Li Independent director male 46 0 0 2002.6.28 - 2004.2.27
Zou Haifeng Chairman of the board male 57 3,550 3,550 2001.2.28 - 2004.2.27
of supervisors
Yang Jigang Supervisor male 40 0 0 2001.2.28 - 2004.2.27
Yan Weidong Supervisor male 56 0 0 2001.2.28 - 2004.2.27
Li Shumin Supervisor male 53 0 0 2001.2.28 - 2004.2.27
Wang Huiqing Supervisor male 46 0 0 2001.2.28 - 2004.2.27
Li Chongjie Deputy manager male 40 0 0 --
Zhang Liyan Company secretary female 52 0 0 --
On behalf of the Board
Yu Li
Chairman
Jilin, PRC
April 24, 2003
FINANCIAL STATEMENTS
A. Prepared in accordance with IFRS
The Group's and the Company's accounts prepared under IFRS have been
audited by PricewaterhouseCoopers.
8
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CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the Year Ended December 31, 2002
(Amounts in thousands except for per share data)
2002 2001
Notes RMB RMB
Turnover 1 13,138,387 12,518,532
Cost of sales (12,518,955) (12,541,889)
----------- -----------
Gross profit/(loss) 619,432 (23,357)
Distribution costs (34,933) (62,198)
Administrative expenses (797,434) (1,216,263)
Shut down of manufacturing assets 9 (283,418) --
Other operating expenses (9,683) (6,662)
----------- -----------
Operating loss (506,036) (1,308,480)
Interest expense 3 (474,370) (598,882)
Interest income 1,364 3,431
Exchange loss (48,725) (17,582)
Exchange gain 7,675 67,043
Share of (loss)/profit of jointly controlled entities (7,671) 40,595
Share of profit/(loss) of an associated company 125 (1,259)
----------- -----------
Loss before taxation 4 (1,027,638) (1,815,134)
Taxation 5 (1,116) (821)
----------- -----------
Loss before minority interests (1,028,754) (1,815,955)
Minority interests 5,655 (1,414)
----------- -----------
Loss attributable to shareholders 6 (1,023,099) (1,817,369)
=========== ===========
Basic and diluted loss per share 7 (Rmb0.29) (Rmb 0.51)
=========== ===========
Dividend 8 -- --
=========== ===========
1. TURNOVER
Turnover represents revenues from the sale of petroleum, petrochemical and
chemical products.
2. EMPLOYEE COMPENSATION COSTS
2002 2001
RMB RMB
Wages and salaries 344,130 279,380
Retirement benefit cost 84,150 107,740
Staff welfare 89,080 62,440
------- -------
517,360 449,560
======= =======
The Group participates in the retirement benefit plan organised by the
provincial government under which it is required to make monthly
contributions to the plan at 25% of the base salary as set by the
government for the relevant periods. The Group currently has no additional
costs for the payment of retirement and other post-retirement benefits of
employees other than the monthly contributions described above.
3. INTEREST EXPENSE
2002 2001
RMB RMB
Interest on
Bank loans
- wholly repayable within five years 30,320 102,377
- not wholly repayable within five years 34,708 23,955
Other loans
- wholly repayable within five years 440,974 454,547
- not wholly repayable within five years 18,390 52,743
Less: Amounts capitalised (50,022) (34,740)
-------- --------
474,370 598,882
======== ========
Amounts capitalised are borrowing costs related to funds borrowed
specifically for the purpose of constructing qualifying assets.
Interest rates on such capitalised borrowings ranged from 5.50% to
5.86% (2001: 5.50% to 6.03%).
9
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4. LOSS BEFORE TAXATION
2002 2001
RMB RMB
Loss before taxation is arrived at after crediting and charging the following
items:
Crediting
Government grants and subsidies -- (2,175)
Charging
Amortisation of intangible assets (included in "administrative expenses") 79,980 79,307
Auditors' remuneration 3,000 2,700
Cost of inventories (approximates cost of sales) recognised as expense 12,518,955 12,541,889
Depreciation on property, plant and equipment 1,028,542 887,488
Writedown of carrying value of property, plant and equipment
(included in "administrative expenses") 323,844 --
Employee compensation costs (including directors'
and supervisors' emoluments) 517,360 449,560
Shut down of manufacturing assets 283,418 --
(Profit)/loss on disposal of property, plant and equipment (3,876) 168
Operating lease rentals on land and buildings 9,453 --
Operating lease rentals on plant and machinery -- 459
Provision for impairment of receivables (included in "administrative expenses") -- 599,609
Provision for impairment of prepaid expenses and other current assets
(included in "administrative expenses") 51,484 --
Provision for diminution in value of inventories and inventory writedowns 139,985 171,174
Repair and maintenance 560,010 251,382
Research and development expenditure 3,927 11,590
=========== ===========
5. TAXATION
2002 2001
RMB RMB
PRC income tax 352 812
Share of tax of jointly controlled entities 764 9
----------- -----------
1,116 821
=========== ===========
In accordance with the relevant PRC income tax rules and regulations, the
enacted PRC income tax rate applicable to the Group is 33% (2001: 33%). Certain
subsidiaries and jointly controlled entities are Sino-foreign joint ventures and
are entitled to certain tax concessions available to foreign investment
production enterprises operating in the PRC. These tax concessions include a
five-year tax holiday under which these enterprises are exempt from income tax
for the first two years commencing from the first profitable year of operation
followed by a 50% reduction in the income tax rate for three years thereafter.
The tax on the Group's profit before taxation differs from the theoretical
amount that would arise using the basic tax rate in the PRC applicable to the
Group as follows:
2002 2001
RMB RMB
Loss before taxation (1,027,638) (1,815,134)
----------- -----------
Tax calculated at a rate of 33% (339,121) (598,994)
Unrecognised deferred tax assets 345,141 597,881
Other (Note b) (4,904) 1,934
----------- -----------
Tax expense 1,116 821
=========== ===========
(a) Subsidiaries and jointly controlled entities entitling to tax
concessions referred to above made losses during the year, therefore
there is no reconciling item in this regard.
(b) Other primarily represents the deferred tax effect on the difference
between the asset base under IFRS and their tax base.
10
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6. LOSS ATTRIBUTABLE TO SHAREHOLDERS
The loss attributable to shareholders is dealt with in the financial
statements of the Company to the extent of Rmb 976,198 (2001: Rmb
1,824,978) for the year ended December 31, 2002.
7. BASIC AND DILUTED LOSS PER SHARE
Basic and diluted loss per share for the year ended December 31, 2002 have
been computed by dividing net loss for the year by the weighted average
number of 3,561,078,000 (2001: 3,561,078,000) shares issued and
outstanding for the year.
There are no dilutive potential ordinary shares.
8. DIVIDEND
No dividend was declared in respect of 2001 and 2002.
9. SHUT DOWN OF MANUFACTURING ASSETS
During the year ended December 31, 2002, the Group recorded direct charges
totalling RMB283,418 representing property, plant and equipment
permanently withdrawn from use as a result of management decisions to shut
down certain less efficient manufacturing facilities. The cost to
dismantle or to remove related shut-down facilities were minimal and have
been included in the profit and loss account.
10. SEGMENT INFORMATION
(a) Primary reporting format - business segments
The Group is principally engaged in the following four business
segments in the PRC, petroleum products, petrochemical and organic
chemical products, chemical fertilisers and inorganic chemicals, and
synthetic rubber products.
(i) The petroleum products segment is engaged in the production of
gasoline, diesel oil, solvent oil and other by-products such
as lubricants. While certain of the products produced by the
Group are used as raw materials in the production of
petrochemicals, a major portion is sold to outside customers.
(ii) The petrochemical and organic chemical products segment
primarily produces ethanol, acetic acid and acetic anhydride.
(iii) The chemical fertilisers and inorganic chemicals segment
principally produces ammonium nitrate, urea, ammonium
chloride, sulphuric acid and slag.
(iv) The synthetic rubber products segment primarily produces
styrene-butadiene-rubber.
In addition to these four major business segments, the other
products and services segment includes utilities, maintenance and
other related services.
Operating segment information for the years ended December 31, 2001
and 2002 is presented below.
Chemical
fertilisers Other
Petrochemical and Synthetic products
Petroleum and organic inorganic rubber and
Year ended December 31, 2002 products chemicals products products services Total
RMB RMB RMB RMB RMB RMB
Profit and loss
Sales (including intersegment) 7,971,951 6,180,161 123,325 782,559 1,559,678 16,617,674
Less: Intersegment sales (2,805,763) (430,086) -- -- (243,438) (3,479,287)
----------- ----------- ----------- ----------- ----------- -----------
Total sales to external customers 5,166,188 5,750,075 123,325 782,559 1,316,240 13,138,387
=========== =========== =========== =========== =========== ===========
Segment results (210,741) (156,705) (153,268) 119,724 (105,046) (506,036)
Finance costs - net (514,056)
Share of loss of jointly controlled entities -- (7,671) -- -- -- (7,671)
Share of profit of an associated company -- -- -- -- 125 125
-----------
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Loss before taxation (1,027,638)
Taxation (1,116)
Minority interests 5,655
----------
Net loss (1,023,099)
==========
Shut down of manufacturing assets 160,617 43,241 51,972 -- 27,588 283,418
Writedown of carrying value of property,
plant and equipment 60,749 203,651 26,412 5,797 27,235 323,844
Depreciation and amortisation 438,367 481,247 16,853 55,867 116,188 1,108,522
Assets and liabilities
Segment assets 2,652,543 8,160,438 1,057,622 616,960 1,114,611 13,602,174
Interests in jointly controlled entities -- 44,058 -- -- -- 44,058
Investment in an associated company -- -- -- -- 18,909 18,909
----------
Total assets 2,652,543 8,204,496 1,057,622 616,960 1,133,520 13,665,141
Segment liabilities 303,790 1,445,169 274,780 57,613 104,896 2,186,248
Borrowings 9,363,490
----------
Total liabilities 11,549,738
==========
Segment capital expenditure 35,146 226,491 733,064 11,171 77,366 1,083,238
Chemical
fertilisers Other
Petrochemical and Synthetic products
Petroleum and organic inorganic rubber and
Year ended December 31, 2002 products chemicals products products services Total
RMB RMB RMB RMB RMB RMB
Profit and loss
Sales (including intersegment) 6,141,415 6,894,381 107,090 781,690 2,184,195 16,108,771
Less: Intersegment sales (933,462) (1,507,901) -- -- (1,148,876) (3,590,239)
----------- ----------- ----------- ----------- ----------- -----------
Total sales to external customers 5,207,953 5,386,480 107,090 781,690 1,035,319 12,518,532
=========== =========== =========== =========== =========== ===========
Segment results (361,866) (719,848) (124,881) (21,722) (80,163) (1,308,480)
Finance costs - net (545,990)
Share of profit of jointly controlled entities -- 40,595 -- -- -- 40,595
Share of loss of an associated company -- -- -- -- (1,259) (1,259)
----------
Loss before taxation (1,815,134)
Taxation (821)
Minority interests (1,414)
----------
Net loss (1,817,369)
==========
Depreciation and amortisation 297,174 423,829 3,907 164,451 77,434 966,795
Assets and liabilities
Segment assets 2,969,199 7,653,882 1,290,935 283,364 1,331,175 13,528,555
Interests in jointly controlled entities -- 282,499 -- -- -- 282,499
Investment in an associated company -- -- -- -- 18,784 18,784
----------
Total assets 2,969,199 7,936,381 1,290,935 283,364 1,349,959 13,829,838
==========
Segment liabilities 156,502 744,500 141,557 29,680 81,738 1,153,977
Borrowings 9,527,048
----------
Total liabilities 10,681,025
==========
Segment capital expenditure 27,931 185,989 582,576 8,878 61,484 866,858
12
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(b) Secondary reporting format - geographical segments
All assets and operations of the Group are located in the PRC,
which is considered as one geographic location in an economic
environment with similar risks and returns.
B. Prepared in accordance with PRC accounting standards
The Company's and the Group's accounts prepared under PRC GAAP have been
audited by Mr. Zhou Zhong Hui and Mr. Li Dan of PricewaterhouseCoopers
Zhong Tian CPAs Ltd. and an audited report with an unqualified audit
opinion was issued on April 24, 2003.
BALANCE SHEETS AS AT DECEMBER 31, 2002
In Rmb Yuan
December 31, December 31, December 31, December 31,
2002 2001 2002 2001
ASSETS Group Group Company Company
CURRENT ASSETS
Cash and bank 32,804,641 36,917,002 29,575,296 25,161,349
Short-term investments
Notes receivable 6,355,009 45,708,324 6,355,009 25,867,970
Dividend receivable -- 1,860,000 -- 21,600,295
Interest receivable
Accounts receivable 678,569,672 735,406,409 703,699,081 726,747,085
Other receivables 53,421,209 289,037,977 34,320,967 261,771,043
Advances to suppliers 181,636,501 208,534,117 181,392,379 208,032,155
Subsidy receivable
Inventories 1,394,227,961 1,179,815,974 1,385,901,762 1,169,364,322
Prepaid expenses
Long-term bond investments maturing
within one year
Other current assets 17,392,209 62,724,200 16,749,750 62,453,195
--------------- --------------- --------------- ---------------
Total current assets 2,364,407,202 2,560,004,003 2,357,994,244 2,500,997,414
--------------- --------------- --------------- ---------------
LONG-TERM INVESTMENTS
Long-term equity investments 62,967,330 301,283,112 173,718,909 439,521,264
Long-term bond investments
--------------- --------------- --------------- ---------------
Total long-term investments 62,967,330 301,283,112 173,718,909 439,521,264
Including: Consolidation difference
--------------- --------------- --------------- ---------------
FIXED ASSETS
Fixed assets-cost 14,256,524,163 13,032,296,702 13,888,213,906 12,676,954,991
Less: Accumulated depreciation (5,044,779,819) (3,981,761,970) (4,907,349,217) (3,863,825,506)
Fixed assets-net book value 9,211,744,344 9,050,534,732 8,980,864,689 8,813,129,485
Less: Impairment of fixed assets (323,843,932) -- (309,861,188) --
Fixed assets-net book amount 8,887,900,412 9,050,534,732 8,671,003,501 8,813,129,485
Construction materials 4,525,097 6,835,620 4,525,097 6,835,620
Construction in progress 1,590,672,260 1,177,442,908 1,590,672,260 1,177,442,908
Fixed assets pending disposal
Total fixed assets 10,483,097,769 10,234,813,260 10,266,200,858 9,997,408,013
--------------- --------------- --------------- ---------------
INTANGIBLE AND OTHER ASSETS
Intangible assets 1,303,212,386 1,336,274,160 1,302,048,855 1,335,026,340
Long-term deferred expenses 122,546,224 99,576,935 122,546,224 99,576,935
Other long-term assets
Total intangible and other assets 1,425,758,610 1,435,851,095 1,424,595,079 1,434,603,275
--------------- --------------- --------------- ---------------
DEFERRED TAXES
Deferred tax assets
--------------- --------------- --------------- ---------------
TOTAL ASSETS 14,336,230,911 14,531,951,470 14,222,509,090 14,372,529,966
=============== =============== =============== ===============
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In Rmb Yuan
December 31, December 31, December 31, December 31,
LIABILITIES AND 2002 2001 2002 2001
SHAREHOLDERS' EQUITY Group Group Company Company
CURRENT LIABILITIES
Short-term loans 3,876,460,000 3,138,600,000 3,792,860,000 3,020,000,000
Notes payable
Accounts payable 1,424,133,274 654,014,009 1,422,262,548 641,650,966
Advances from customers 257,236,354 195,071,689 246,439,988 179,511,613
Salaries payable 73,643,339 16,284,259 64,289,563 15,070,000
Welfare payable 21,767,283 13,741,464 15,227,441 11,236,585
Dividend payable -- 1,150,198 -- --
Taxes payable (86,116,348) (62,643,930) (86,999,589) (63,579,546)
Other levies payable
Other payables 365,354,975 164,960,426 396,753,167 200,012,198
Accrued expenses 28,397,947 97,813,982 28,397,947 97,813,982
Provisions
Long-term liabilities due within
one year 1,660,224,778 402,884,868 1,660,224,778 402,884,868
Other current liabilities
--------------- --------------- --------------- ---------------
Total current liabilities 7,621,101,602 4,621,876,965 7,539,455,843 4,504,600,666
--------------- --------------- --------------- ---------------
LONG-TERM LIABILITIES
Long-term loans 2,935,908,319 4,836,973,714 2,935,908,319 4,836,973,714
Debentures payable
Payables due after one year
Special project payables
Other long-term liabilities 890,896,547 1,148,589,531 890,896,547 1,148,589,531
Total long-term liabilities 3,826,804,866 5,985,563,245 3,826,804,866 5,985,563,245
--------------- --------------- --------------- ---------------
DEFERRED TAXES
Deferred tax liabilities
TOTAL LIABILITIES 11,447,906,468 10,607,440,210 11,366,260,709 10,490,163,911
--------------- --------------- --------------- ---------------
MINORITY INTERESTS 32,455,217 42,766,634 -- --
--------------- --------------- --------------- ---------------
SHAREHOLDERS' EQUITY
Share capital 3,561,078,000 3,561,078,000 3,561,078,000 3,561,078,000
Capital surplus 2,293,618,886 2,293,618,886 2,293,618,886 2,293,618,886
Statutory common reserve fund 701,442,717 701,064,536 693,730,248 693,730,248
Including: Statutory common
welfare fund 126,834,279 126,834,279 125,287,623 125,287,623
Accumulated losses (3,700,270,377) (2,674,016,796) (3,692,178,753) (2,666,061,079)
Foreign exchange difference
reserve
Total shareholders' equity 2,855,869,226 3,881,744,626 2,856,248,381 3,882,366,055
--------------- --------------- --------------- ---------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 14,336,230,911 14,531,951,470 14,222,509,090 14,372,529,966
=============== =============== =============== ===============
PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2002
In Rmb Yuan
2002 2001 2002 2001
Items Group Group Company Company
1. SALES REVENUE 12,319,139,488 11,914,082,480 12,221,905,890 11,825,250,060
Less: Cost of sales (11,074,404,199) (11,191,603,870) (10,999,275,434) (11,151,434,697)
Sales tax and other levies (479,813,089) (439,901,437) (479,813,089) (439,901,437)
--------------- --------------- --------------- ---------------
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2. GROSS PROFIT ON SALES 764,922,200 282,577,173 742,817,367 233,913,926
Add: Other operating profit/(loss) 3,252,925 (46,807,586) 13,916,856 (39,110,500)
Less: Selling expenses (34,932,224) (62,197,882) (32,242,641) (58,372,043)
General and administrative
expenses (587,427,232) (1,435,766,454) (569,738,533) (1,416,840,761)
Financial expenses, net (514,647,486) (545,469,215) (506,707,642) (535,757,343)
--------------- --------------- --------------- ---------------
3. OPERATING LOSS (368,831,817) (1,807,663,964) (351,954,593) (1,816,166,721)
Add: Investment income/(loss) (8,308,243) 39,326,864 (34,234,815) 43,234,942
Subsidy income -- 2,174,512 -- 2,174,512
Non-operating income 7,721,827 22,958,532 7,101,470 22,950,667
Less: Non-operating expenses (661,617,796) (54,197,030) (647,029,736) (53,779,731)
--------------- --------------- --------------- ---------------
4. TOTAL LOSS (1,031,036,029) (1,797,401,086) (1,026,117,674) (1,801,586,331)
Less: Income tax (351,996) (4,206,747) -- (3,394,265)
Minority interests 5,655,464 (1,413,724) -- --
--------------- --------------- --------------- ---------------
5. NET LOSS (1,025,732,561) (1,803,021,557) (1,026,117,674) (1,804,980,596)
=============== =============== =============== ===============
Supplementary Information
2002 2001
Group Company Group Company
1. Income from sale and disposal of
departments or investees -- -- -- --
2. Loss from natural catastrophe -- -- -- --
3. Increase in total profit
resulting from change
in accounting policies -- -- -- --
4. Increase in total profit
resulting from change
in accounting estimates -- -- -- --
5. Loss from debt restructuring -- -- -- --
6. Other -- -- -- --
=============== =============== =============== ===============
PROFIT APPROPRIATION STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2002
In Rmb Yuan
2002 2001 2002 2001
Items Group Group Company Company
1. NET LOSS (1,025,732,561) (1,803,021,557) (1,026,117,674) (1,804,980,596)
Add: Accumulated losses at the
beginning of the year (2,674,016,796) (864,213,661) (2,666,061,079) (861,080,483)
Transfer from other sources
--------------- --------------- --------------- ---------------
2. ACCUMULATED LOSSES (3,699,749,357) (2,667,235,218) (3,692,178,753) (2,666,061,079)
Less: Transfer to statutory common
reserve fund (378,181) (4,822,537) -- --
Transfer to statutory common
welfare fund
Transfer to staff and workers'
bonus and welfare fund (142,839) (1,959,041) -- --
--------------- --------------- --------------- ---------------
3. ACCUMULATED LOSSES (3,700,270,377) (2,674,016,796) (3,692,178,753) (2,666,061,079)
Less: Dividend for preference stocks
Transfer to discretionary
common reserve fund
Dividend for common stocks
Dividend for common stocks
transferred to capital
--------------- --------------- --------------- ---------------
4. ACCUMULATED LOSSES AT
THE END OF THE YEAR (3,700,270,377) (2,674,016,796) (3,692,178,753) (2,666,061,079)
=============== =============== =============== ===============
15
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CASH FLOW STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2002
In Rmb Yuan
Items Group Company
1. Cash flows from operating activities
Cash received from sale of goods or rendering of services 16,476,646,108 16,267,033,425
Refund of tax
Cash received relating to other operating activities 1,364,376 1,344,533
--------------- ---------------
Sub-total of cash inflows 16,478,010,484 16,268,377,958
--------------- ---------------
Cash paid for goods and services (12,868,905,297) (12,809,493,787)
Cash paid to and on behalf of employees (379,834,895) (329,122,820)
Payment of all types of taxes (1,033,985,878) (1,014,069,353)
Cash paid relating to other operating activities (335,338,047) (326,146,035)
--------------- ---------------
Sub-total of cash outflows (14,618,064,117) (14,478,831,995)
--------------- ---------------
Net cash flows from operating activities 1,859,946,367 1,789,545,963
--------------- ---------------
2. Cash flows from investing activities
Cash received from sale of investments
Cash received from return of investments 1,860,000 21,600,295
Net cash received from disposal of fixed assets 7,141,127 7,141,127
Cash received relating to other investing activities
--------------- ---------------
Sub-total of cash inflows 9,001,127 28,741,422
--------------- ---------------
Cash paid to acquire fixed assets, intangible assets
and other long-term assets (799,267,492) (784,457,262)
Cash paid to acquire investments (73,086,014) (73,086,014)
Cash paid relating to other investing activities
--------------- ---------------
Sub-total of cash outflows (872,353,506) (857,543,276)
--------------- ---------------
Net cash flows from investing activities (863,352,379) (828,801,854)
--------------- ---------------
3. Cash flows from financing activities
Proceeds from issuing shares
Including: Cash received from minority shareholders
Proceeds from borrowings 4,867,374,651 4,783,774,651
Proceeds relating to other financing activities
--------------- ---------------
Sub-total of cash inflows 4,867,374,651 4,783,774,651
--------------- ---------------
Cash repayment of borrowings (5,335,404,588) (5,216,804,588)
Cash payment for interest expense and distribution of dividends (532,676,412) (523,300,225)
Including: Dividends paid to minority shareholders (1,732,787) --
Cash paid relating to other financing activities
Including: Cash paid to minority shareholders due to
reduction of capital of subsidiaries
--------------- ---------------
Sub-total of cash outflows (5,868,081,000) (5,740,104,813)
--------------- ---------------
Net cash flows from financing activities (1,000,706,349) (956,330,162)
--------------- ---------------
4. Effect of foreign exchange rate changes on cash
5. Net (decrease)/increase in cash and cash equivalents (4,112,361) 4,413,947
=============== ===============
16
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Supplementary Information In Rmb Yuan
Items Group Company
1. Reconciliation of net loss to cash flows from
operating activities
Net loss (1,025,732,561) (1,026,117,674)
Add: Minority interests (5,655,464) --
Provision for impairment of assets 384,028,412 370,045,668
Depreciation of fixed assets 753,954,097 733,162,986
Amortisation of intangible assets 93,201,856 93,117,567
Amortisation of long-term deferred expenses 116,302,776 116,302,776
Decrease in prepaid expenses 2,208,228 2,579,682
Increase in accrued expenses
Gain on disposal of fixed assets (7,141,127) (7,141,127)
Loss on scrapping of fixed assets 286,682,529 286,137,818
Financial expenses 474,370,460 466,727,060
Investment loss 8,308,243 34,234,815
Deferred tax debit
Increase in inventories (65,852,850) (67,978,303)
Decrease in operating receivables 341,719,032 284,686,963
Increase in operating payables 503,552,736 503,787,732
-------------- --------------
Net cash flows from operating activities 1,859,946,367 1,789,545,963
-------------- --------------
2. Investing and financing activities that do not involve
cash receipts and payments
Investments in the form of fixed assets
Convertible bonds maturing within one year
Finance lease of fixed assets
3. Net (decrease)/increases in cash and cash equivalents
Cash at end of the year 32,804,641 29,575,296
Less: Cash at beginning of the year (36,917,002) (25,161,349)
Cash equivalents at end of the year
Less: Cash equivalents at beginning of the year
-------------- --------------
Net (decrease)/increases in cash and cash equivalents (4,112,361) 4,413,947
============== ==============
Supplementary Information
Assets impairment provision as at December 31, 2002
Appendix I
As at January 1, 2002 Transfer from Jilian Current year addition
Items Group Company Group Company Group Company
1. Bad debt provision 863,843,540 863,839,983 26,125,819 26,125,819 51,483,723 51,483,723
Including: Accounts receivable 840,378,422 840,374,865 24,836,343 24,836,343 -- --
Other receivables 23,465,118 23,465,118 1,289,476 1,289,476 51,483,723 51,483,723
2. Provision for short-term investments
Including: Equity investments
Bond investments
3. Inventory provision 236,631,105 236,631,105 7,960,842 7,960,842 8,700,757 8,700,757
Including: Raw materials 35,691,091 35,691,091 4,645,832 4,645,832 6,333,244 6,333,244
Work in progress 24,439,710 24,439,710 -- -- -- --
Finished goods 21,833,438 21,833,438 3,315,010 3,315,010 2,367,513 2,367,513
Spare parts 154,666,866 154,666,866 -- -- -- --
4. Provision for long-term investments
Including: Long-term equity investments
Long-term bond investments
5. Impairment provision for fixed assets -- -- -- -- 323,843,932 309,861,188
Including: Buildings -- -- -- -- 58,153,374 57,553,374
Machinery -- -- -- -- 208,243,922 206,691,178
Equipment -- -- -- -- 52,908,460 44,378,460
Motor Vehicles -- -- -- -- 4,538,176 1,238,176
Current year write-off As at December 31, 2002
Items Group Company Group Company
1. Bad debt provision -- -- 941,453,082 941,449,525
Including: Accounts receivable -- -- 865,214,765 865,211,208
Other receivables -- -- 76,238,317 76,238,317
2. Provision for short-term investments
Including: Equity investments
Bond investments
3. Inventory provision (74,529,144) (74,529,144) 178,763,560 178,763,560
Including: Raw materials -- -- 46,670,167 46,670,167
Work in progress (16,079,006) (16,079,006) 8,360,704 8,360,704
Finished goods -- -- 27,515,961 27,515,961
Spare parts (58,450,138) (58,450,138) 96,216,728 96,216,728
4. Provision for long-term investments
Including: Long-term equity investments
Long-term bond investments
5. Impairment provision for fixed assets -- -- 323,843,932 309,861,188
Including: Buildings -- -- 58,153,374 57,553,374
Machinery -- -- 208,243,922 206,691,178
Equipment -- -- 52,908,460 44,378,460
Motor Vehicles -- -- 4,538,176 1,238,176
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6. Impairment provision for intangible
assets
Including: Technical know-how Patent
7. Impairment provision for construction
in progress
8. Provision for trust loan
Related party balances
December 31, 2002 December 31, 2001
Accounts receivable from
- PetroChina Group Companies 242,923,710 184,290,549
- JCGC Group Companies 346,502,613 376,414,732
- Lianli 24,131,819 --
Accounts receivable due from related parties are for goods sold
Other receivables from
- PetroChina Group Companies -- 40,234,452
- JCGC Group Companies 8,320,638 58,523,690
- Jilian -- 50,611,278
Other receivables due from related parties are mainly for
expenses paid on their behalf
Advances to suppliers to
- JCGC Group Companies 2,772,794 104,521,354
The balance mainly represents advance payments for import
of machinery through JCGC
Accounts payable to
- CNPC Group Companies (1,526,853) (3,302,453)
- PetroChina Group Companies (58,086,005) --
- JCGC Group Companies (121,904,421) (54,108,024)
Advances from customers from
- JCGC Group Companies (5,382,817) (1,143,965)
Other payables to
- JCGC Group Companies (182,970,214) (30,613,978)
Short-term loans from
- CP Finance (3,577,860,000) (3,020,000,000)
Long-term loans from
- CP Finance (2,932,700,000) (3,750,800,000)
Other long-term liabilities from
- JCGC Group Companies (1,185,891,420) (1,366,142,531)
The consolidated financial statements prepared in accordance with PRC GAAP and
the consolidated financial statements prepared in accordance with IFRS differ in
certain respects. Such differences involve methods for measuring the amounts
shown in the consolidated financial statements as well as disclosures.
Effect on net loss of significant differences between PRC GAAP and IFRS is
summarised below:
2002 2001
RMB RMB
Net loss as reported under PRC GAAP (1,025,733) (1,803,022)
Adjustments to conform with IFRS:
- - Depreciation expense due to revaluation of
fixed assets at February 28, 1995 (1,452) (1,452)
- - Additional loss on write-off of fixed assets (1,683) --
- - Depreciation expense on fixed assets due to
difference in exchange gains capitalised (7,311) (7,311)
- - Interest expense capitalised in construction in
progress -- (17,917)
- - Interest income from share proceeds -- (520)
- - Appropriation to staff bonus and welfare fund (142) (1,959)
- - Amortisation of housing subsidy cost (9,319) (9,319)
- - Reversal of amortisation of land use rights 22,541 20,739
- - Tax adjustment -- 3,392
---------- ----------
Net loss as reported under IFRS (1,023,099) (1,817,369)
========== ==========
18
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Effect on shareholders' equity of significant differences between PRC GAAP and
IFRS is summarised below:
At December 31,
2002 2001
RMB RMB
Shareholders' equity as reported under PRC GAAP 2,855,869 3,881,744
Adjustments to conform with IFRS:
- - Surplus on revaluation of fixed assets at
February 28, 1995 29,033 29,033
- - Deferred tax effect on revaluation surplus on
revaluation of fixed assets at February 28, 1995 (9,580) (9,580)
- - Depreciation expense due to revaluation of
fixed assets at February 28, 1995 (11,373) (9,921)
- - Difference in loss on write-off of fixed assets
due to revaluation at February 28, 1995 (6,309) (4,626)
- - Exchange gains in respect of funds borrowed for
fixed assets 112,471 112,471
- - Depreciation expense on fixed assets due to
difference in exchange gains capitalised (42,384) (35,073)
- - Housing subsidy cost 52,840 62,159
- - Deferred tax effect on housing subsidy cost (23,587) (23,587)
- - Adjustment of land use rights at January 1, 2001 (907,200) (929,741)
- - Tax adjustment 33,167 33,167
---------- ----------
Shareholders' equity as reported under IFRS 2,082,947 3,106,046
========== ==========
NOTICE FOR 2002 ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the 2002 Annual General Meeting of Jilin Chemical
Industrial Company Limited ("the Company") will be held at 9:00 a.m. on June 24,
2003, at No. 9 Longtan Street, Longtan District, Jilin City, Jilin Province, the
PRC to consider and, if thought fit, approve the following resolutions:
1. To consider and approve the 2002 report of the board of directors of the
Company;
2. To consider and approve the 2002 report of the board of supervisors of the
Company;
3. To consider and approve the 2002 audited financial statements of the
Company;
4. To consider and approve the proposed profit distribution plan for 2002 of
the Company;
5. To consider and approve the remuneration of the directors and the
supervisors for 2003;
6. To consider and approve the re-appointment of PricewaterhouseCoopers
(certified public accountants in Hong Kong) and PricewaterhouseCoopers
Zhong Tian CPAs Company Limited (registered accountants in the PRC) as the
Company's international and domestic auditors, respectively, to hold
offices until the conclusion of the 2003 Annual General Meeting, and to
authorize the directors of the Company to determine their remuneration;
7. To elect Wang Peirong as independent director of the Company;
8. To consider the suspension and possible de-listing of the Company's A
shares pursuant to the Listing Rules of the Shenzhen Stock Exchange and to
authorize the directors of the Company to take such actions as is
necessary and in compliance with such Listing Rules, including without
limitation, appointing a qualified securities firm to advise on the
possible de-listing and possible subsequent measures and to appoint China
Registrars and Clearing Limited to act as clearing house for transfer of
the Company's A shares.
9. To consider and approve amendment the Articles of Association of the
Company.
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By Order of the Board
Zhang Liyan
Company Secretary
Jilin, PRC
April 24, 2003
Notes:
(A) Holders of the Company's shares whose names appear on the register of
members of the Company at the close of business on May 23, 2003 are
entitled to attend the Annual General Meeting with their passports or
other identity papers.
(B) The register of members of the Company will close from May 26, to June 24,
2003 (both days inclusive), during which time no share transfer will be
effected.
(C) Each shareholder who has the right to attend and vote at the Annual
General Meeting is entitled to appoint one or more proxies, whether they
are members or not, to attend and vote on his behalf at the Annual General
Meeting.
(D) A proxy of a shareholder who has appointed more than one proxy may only
vote on a poll.
(E) The instrument appointing a proxy must be in writing under the hand of the
appointor or his attorney duly authorized in writing. If that instrument
is signed by an attorney of the appointor, the power of attorney
authorizing that attorney to sign, or other documents of authorization,
and the form of proxy must be delivered to the registered office of the
Company not less than 24 hours before the time appointed for the holding
of the Annual General Meeting.
(F) Shareholders intending to attend the Annual General Meeting should return
the accompanying reply slip to the Secretary's Office to the Company
before June 3, 2003 personally or by mail, cable or facsimile.
(G) The Annual General Meeting is expected to last half a day. Shareholders
attending the Annual General Meeting will be responsible for their own
transportation and accommodation expenses.
(H) The details of the Secretary's Office of the Company are as follows:
No. 9 Longtan street
Longtan District
Jilin City
Jilin Province
PRC
Postal code: 132021
Tel: (86432) 3903651
Fax: (86432) 3028126
(I) Pursuant to Governance Rules of Listed Company and the Standard Opinion In
respect of the General Meeting of Listed Companies and Guided Opinion
Regarding Establishment of Independent Director System in Listed Companies
promulgated and implemented by the China Securities Regulatory Commission,
the Company intends to make the following amendments to the Articles of
Association, of which 26 are newly added articles and 10 are amended
articles.
I. Newly added articles:
1. New Article 59 Annual general meeting or any general meeting
convened upon the request of shareholders, or supervisory
committee shall not adopt resolutions by way of circulating
written resolutions. Extraordinary general meeting may not
adopt resolutions by way of circulating written resolutions
when considering and approving the following matters:
(1) Increase or reduction of registered capital of the
Company;
(2) Issuance of the Company's debenture;
(3) Division, merger, dissolution and liquidation of the
Company;
(4) Amendment to the Articles of Association of the Company;
(5) Profit distribution plan and loss compensation plan;
(6) Appointment and removal of directors and supervisors;
(7) Change on the use of proceeds;
(8) Connected transaction which is subject to approval by
shareholders at general meeting;
(9) Acquisition or disposal of asset which is subject to
approval by shareholders at general meeting;
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(10) Change of accountants' firm.
2. New Article 62 With respect to tentative motions of annual
general meeting, the board of directors shall review the
aforesaid motions according to the following principles:
(1) Related party matters
The board of directors shall review any tentative
motions proposed by shareholders. The resolutions which
are directly related to the Company and do not
contravene the laws, regulations nor exceed the scope of
functions of general meetings as required by the
Articles of Association of the Company shall be proposed
at general meetings for discussion. The motions which do
not comply with the aforesaid requirements shall not be
proposed at general meetings for discussion. In the
event that the board of directors determines not to take
any motions proposed by shareholders to general meetings
for voting, the board of directors shall explain and
state the reasons therefor at such meeting.
(2) Procedural matters
The board of directors may make a decision in respect of
procedural matters proposed by a motion of shareholders.
If the motion is to be decided by voting separately or
jointly, the consent from the shareholder proposing the
motion shall be obtained. If the shareholder proposing
the motion does not consent to the change, the chairman
of the general meeting may seek a decision at the
general meeting concerning procedural matter, and there
will be discussions according to the procedures decided
at the general meeting.
3. New Article 80 With respect to the motion for election of
directors and supervisors, resolutions shall be made
separately. When resolutions of reappointment of directors and
supervisors are passed at the general meeting, the newly
appointed directors and supervisors shall be accession.
4. New Article 81 The Company shall disclose detailed information
of candidates for directors to ensure shareholders' fully
understanding of candidates before voting.
5. New Article 82 The candidates for directors shall make written
commitment to before meeting of general shareholders to
promise the truth and completeness of the disclosed
information and to carry out duties of directors after
appointment.
6. New Article 83 The Company shall adopt accumulated voting
method in the election of directors. In the election, every
shareholding of the Company held by shareholders equal to the
number of directors to be elected. Shareholders may vote for
one candidate with all his shareholdings or voting for
different candidates. The Company shall appoint directors in
turn according to the votes of candidates.
7. New Article 97 When considering related party transactions at
the general meeting, the related shareholders shall not
participate in voting and their shares carrying voting right
shall not be counted in the total number of valid votes.
Announcement regarding resolution passed at general meeting
shall fully disclose the details in respect of non-related
shareholders' votes. In the event of exceptional circumstances
under which the related shareholders cannot abstain from
voting, after obtaining consent of related department and
Stock Exchange of Hong Kong (if necessary), voting may be
carried out according to the normal procedures, and detailed
explanation shall be given in the announcement regarding
resolutions passed at the general meeting.
8. New Article 102 The board of directors shall establish special
committees including strategy committee, auditing committee,
nominating committee, and reward and examination committee,
all members of which shall be held by directors of the
Company. Among the members of the auditing committee,
nominating committee, and reward and examination committee,
independent directors shall in the majority and preside at the
meeting. In the auditing committee, at least one independent
director is accountant.
9. New Article 113 The Company shall establish an independent
director system. An independent director refers to an
independent director who does not act in other capacities in
the Company other than independent director, nor there any
relationship between the Company's substantial shareholders
and related persons which may affect the director in making
objective judgements.
10. New Article 114 Unless otherwise stated, the contents of these
Articles of Association regarding to the directors are
applicable to independent directors.
11. New Article 115 An independent director shall meet the
following requirements:
(1) Possess the qualifications as a director of a listed
company according to the laws, administrative
regulations and other related regulations;
(2) Have the independency as stipulated in Article 100 of
the Articles of Association;
(3) Have the basic knowledge in respect of the operations of
listed companies, familiarize with the relevant laws,
administrative regulations, rules and regulations;
21
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(4) Have more than five years' working experience in
practising law, finance or the other experiences
necessary for discharging the duties as an independent
director.
(5) Other requirements as specified by these Articles of
Association.
12. New Article 116 An independent director shall have his own
independency. The following persons shall not act as an
independent director:
(1) any employees of the Company or its subsidiaries and
his/her spouse, parents, children, brothers, sisters,
parents-in-law, sons/daughters-in-law, spouses of
brothers and sisters, brothers and sisters of spouse;
(2) natural persons holding, directly or indirectly, 1
percent or above of the shares of the Company in issue
or being a top 10 shareholders of the Company and
his/her spouse, parents or children;
(3) employees of a shareholder which directly or indirectly
holds 5 percent or above of issued shares or being
employees of the top 5 shareholders unit and his/her
spouse, parents, children;
(4) any person who satisfy any of the above 3 situations
during the most recent year;
(5) any person who provides financial, legal, consultation
services for the Company or its subsidiaries or an
employee who works for the related companies;
(6) any person specified by the Articles of Association;
(7) any person who is specified by the China Securities
Regulatory Commission.
13. New Article 117 The Company's board of directors, supervisory
committee, shareholder individually or jointly holding more
than 1 percent of the issued shares of the Company may
nominate a candidate for independent director and a decision
by voting will be made at the general meeting.
14. New Article 118 The nominator of an independent director shall
obtain the consent of the nominee before nomination. The
nominator shall fully understand the nominee's profession,
educational level, job title, detailed working experience, all
part-time job details, and shall give an opinion regarding the
nominee's qualifications and independence in acting as
independent director. The nominee shall make an announcement,
expressedly stating that there is no relationship between the
Company and himself, which may affect him in making
independent and objective judgements.
15. New Article 119 Before the general meeting is convened to
elect an independent director, the Company shall submit the
particulars of all nominees to the China Securities Regulatory
Commission, its Changchun Securities Administrative Office and
the Shenzhen Stock Exchange. The board of directors which
holds a dissenting view in respect of the nominees shall
concurrently submit its written opinion.
A nominee, against whom a dissenting view is expressed by the
China Securities Regulatory Commission, may act as a candidate
for director of the Company, but not a candidate for
independent directors. During the election of the independent
director at the general meeting, the board of directors shall
explain whether the candidate for independent director has
received a dissenting view from the China Securities
Regulatory Commission or the Stock Exchange of Hong Kong.
16. New Article 120 The term of independent director is the same
as that of any other directors. An independent director who is
re-elected may serve for another term not exceeding 6 years if
he/she is re-elected after his/her term of office expires.
17. New Article 121 The board of directors shall propose to the
general meeting to dismiss an independent director who
consecutively fails to attend the board meeting in person for
3 times. Except for the situation which prohibit anyone from
serving as directors or independent directors as provided by
the aforesaid company law and these Articles of Association,
an independent director cannot be removed without stating a
reason therefor before expiration of his term. The Company
shall disclose the early removal of an independent director as
a special disclosable matter. The independent director who
believes his removal unjustifiable may make a public statement
in relation thereto.
18. New Article 122 An independent director may resign before
expiration of his term. An independent director shall submit
his resignation report in writing to the board of directors
explaining the details regarding his/her resignation in
his/her opinion or anything that the shareholders and the
debtors of the Company should pay attention to.
If the resignation of the independent director results in the
ration of independent directors against the total number of
directors in the board dropping to less than one-third, the
resignation report shall be effective only when the next
independent director has filled his position.
19. New Article 123 Apart from the powers vested by the Company
Law and other related laws, regulations and these Articles of
Association, an independent director shall be vested with the
following special powers and duties:
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(1) any connected transaction entered into between the
Company and any connected persons, the aggregate
consideration for which is more than RMB3 million or
more than 5 percent of the latest audited net asset or
exceeds 3% of the net tangible asset of the Company as
disclosed in the latest published audited accounts or
consolidated accounts (if applicable), whichever is
higher, subject to confirmation by the independent
directors, shall be submitted to the board of directors
for discussion. Before the independent directors make a
judgement, they can appoint intermediaries to issue an
independent financial report as the basis for their
judgement;
(2) propose to the board of directors for the appointment or
dismissal of an accountants' firm;
(3) propose to the board of directors for convening an
extraordinary general meeting;
(4) propose to convene the board meeting;
(5) appoint an external auditing firm or consultant firm
independently;
(6) collect the voting rights from shareholders before the
general meeting is convened.
An independent director shall obtain at least half of the
consent of all independent directors when he exercises the
above powers. Should the above proposal not be adopted or the
above powers can not be exercised normally, the Company shall
disclose the above matters.
20. New Article 124 Apart from performing the aforesaid duties, an
independent director shall provide an independent view to the
board of directors or at general meeting in respect of the
following matters:
(1) nomination, appointment and dismissal of directors;
(2) employment or dismissal of senior management personnel;
(3) remuneration of directors and senior management
personnel;
(4) any existing or new loan or other financial transaction
by the Company shareholders, de facto controlling person
and related enterprises which is more than RMB3million
or more than 5 percent of the latest audited net asset
of the Company and whether the company has adopted
effective measures to recover the debt;
(5) matters which an independent director deems detrimental
to the benefits of medium and small shareholders;
(6) other matters stipulated by the Company's Articles of
Association.
An independent director shall give one of the following
opinions in respect of the aforesaid matters-consent;
qualified opinion and reason; objection views and its reason;
inability of giving an opinion and its difficulties.
If the matter shall be disclosed necessarily, the Company
shall announce the independent director's opinion. Where there
are dissenting opinions among the independent directors
resulting in lack of unanimity, the board of directors shall
disclose all independent directors' opinions separately.
21. New Article 125 To safeguard the independent director to
exercise his power effectively, the Company shall provide an
independent director with essential conditions.
(1) The Company shall guarantee the independent director
have the same right to know the facts as other
directors. The Company shall inform the independent
director of matters which are decided by the board of
directors before the statutory time and provide enough
information simultaneously. Should an independent
director regard the information provided is not enough,
he may request supplementary information. Whenever 2 or
more than 2 independent directors regard the information
provided is insufficient or the evidence is not
explicit, they can jointly request the board of
directors in writing to postpone the board meeting or
postpone considering that matter and the board of
directors shall accept accordingly. The company shall
provide the essential conditions to enable the
independent director to carry out his duties. The
secretary of the board of directors shall positively
provide assistance to enable the independent director to
carry out his duties; the secretary of the board of
directors shall arrange announcements with the
securities exchange timely if any independent opinion,
proposal and written explanation issued by the
independent director shall be announced.
(2) When an independent director exercises his powers,
relevant staff of the Company shall positively
coordinate, shall not refuse, obstruct or cover up,
shall not interfere his independent right to exercise
his powers;
(3) Expenses shall be borne by the Company in respect of
employment of an intermediary organization by an
independent director or an independent director's
exercising his powers;
(4) The Company shall give appropriate subsidies to the
independent director. The remuneration standard shall be
proposed to the general meeting by the board of
directors and disclose them in the Company's annual
report after approval of general meeting.
23
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Apart from the above subsidies, an independent director shall
not obtain extra and undisclosed benefits from the Company and
its major shareholders or organizations or people with
conflict of interest.
22. New Article 126 An independent director has a fiduciary and
diligent obligation to the Company and all shareholders.
23. New Article 127 According to the relevant laws, regulations,
standard documents and the requirements of these Articles of
Association, an independent director shall perform his duties
seriously, uphold the overall interest of the Company and, in
particular, prevent the benefit of medium and minority
shareholder from damaged.
24. New Article 128 An independent director shall carry out his
duties independently without being affected by the majority
shareholders of the Company, de facto controller or unit or
individual with a conflict of interest with the Company.
25. New Article 170 Equipped with auditing staff, the Company
practices internal auditing system by supervising and auditing
the Company's incomes and expenses, as well as its economic
activities.
26. New Article 171 The internal auditing system and the duties of
the auditing staff shall be implemented after the approval of
the board of directors. The officer-in-charge of the auditing
team shall be responsible to the board of directors and report
the work accordingly.
II. Amended articles (other articles are renumbered correspondingly due
to the newly added articles)
1) Original Article 60 Where the Company convenes an annual
general meeting, shareholders holding not less than 5 per
cent. or more of the total shares of the Company shall be
entitled to submit new motions in writing to the Company. The
Company shall include in the agenda of the meeting all items
in the motion that fall within the scope of a shareholders'
general meeting.
Amended Article 61 Shareholders severally and jointly holding
five per cent. or more of the voting rights of the Company or
the supervisory committee are entitled to propose to the
Company in writing in writing tentative motions.
Any tentative motion which is not included in the notice of
convening board of directors' meeting as a new matter and
falls into the category as set out in Article 59, the person
proposing such motion shall submit the same motion to the
board of directors 10 days prior to the holding of the general
meeting, which will be announced by the board of directors
after review.
2) Original Article 79 A shareholders' general meeting shall be
convened by the chairman of the board who shall preside as
chairman of the meeting. If the chairman of the board cannot
attend the meeting for any reason, the board of directors may
designate a director of the Company to convene and preside at
the meeting as chairman on its behalf. If a chairman has not
been designated, shareholders attending the meeting may elect
a person to act as chairman. If for any reason the
shareholders cannot elect a chairman, the shareholder with the
greatest number of voting shares (including representatives)
present at the meeting whether in person or by proxy shall act
as chairman.
Amended Article 85 A shareholders' general meeting shall be
convened by the chairman of the board who shall preside as
chairman of the meeting. If the chairman of the board cannot
attend the meeting for any reason, vice chairman may preside
under the designation of chairman of the board. If both the
chairman and vice chairman can not attend the meeting, the
board of directors may designate a director of the Company to
convene and preside at the meeting as chairman on its behalf.
If a chairman has not been designated, shareholders attending
the meeting may elect a person to act as chairman. If for any
reason the shareholders cannot elect a chairman, the
shareholder with the greatest number of voting shares
(including representatives) shall act as chairman.
3) Original Article 93 Directors are elected by the shareholders'
general meeting. The board of directors shall be elected at a
meeting of shareholders from candidates nominated by the board
of directors or by shareholders representing 5 per cent or
more of the issued shares of the Company. A notice in writing
of the intention to propose a candidate for election as a
director and a notice in writing by that candidate of his
willingness to be elected shall have been given to the Company
at least 50 days before the date of the shareholder's meeting.
Directors shall serve a term of 3years. Upon the expiration of
his term and if re-elected, a director may serve consecutive
terms. The chairman of the board is elected and removed by a
majority of all the directors. The chairman of the board shall
be appointed for a term of 3 years, and may serve consecutive
terms if re-elected.
Directors are not required to hold shares in the Company.
Amended Article 100 Directors are elected by the shareholders'
general meeting. Directors shall serve a term of 3 years. Upon
the expiration of his term and if re-elected, a director may
serve consecutive terms. The board of directors shall be
elected at a meeting of shareholders from candidates nominated
by the board of directors or by shareholders representing 5
percent or more of the issued shares of the Company. A notice
in writing of the intention to propose a candidate for
election as a director and a notice in writing by that
candidate of his willingness to be elected shall have been
given to the Company at least 50 days before the date of the
shareholders' meeting. The chairman and vice chairman of the
board of directors are elected and removed by a majority of
all the directors. The chairman and vice chairman shall be
appointed for a term of 3 years, and may serve consecutive
terms if reelected.
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4) Original Article 96 The chairman of the board shall exercise
the following functions and powers:
(1) to preside at shareholders' general meetings and to
convene and preside at meetings of the board of
directors;
(2) to examine the implementation of resolutions of the
board of directors;
(3) to sign securities issued by the Company;
(4) other functions and powers conferred by the board of
directors.
Where the chairman of the board is unable to exercise his
functions and powers, he may instruct a director to exercise
such functions and powers on his behalf.
Amended Article 104 The chairman of board shall exercise the
following functions and powers:
(1) to preside at shareholders' general meetings and convene
and preside at meetings of the board of directors;
(2) to examine the implementation of resolution of
resolutions of the board of directors;
(3) to sign securities issued by the Company;
(4) to decide total investment of less than Rmb50 million;
(5) to decide the purchase and sale of assets under 10
percent of the Company's net assets;
(6) other functions and powers conferred by the board of
directors.
Where the chairman of the board is unable to exercise his
functions and powers, he may instruct vice chairman to
exercise such functions and powers on his behalf. Where
chairman and vice chairman are both unable to exercise the
functions and powers, the chairman may instruct a director to
exercise such functions and powers on his behalf.
5) Original Article 97 Meetings of the board of directors shall
be convened at least twice every year. Such meetings shall be
convened by the chairman of the board by giving notice to all
the directors not less than 10 days before the meeting date.
In the event of emergency matters, an extraordinary board of
directors' meeting may be proposed by more than 10 directors
or by the general manager of the Company.
Amended Article 105 Meetings of the board of directors are
required to be held at least four times every year. The board
of directors' meetings shall be convened by the chairman of
the board by giving notice to all the directors 10 days before
the date of the meetings.
An extraordinary board of directors' meeting may be convened
under any of the circumstances set out below:
(1) when the chairman deems necessary;
(2) when jointly proposed by more than one-third of the
directors;
(3) when proposed by the supervisory committee;
(4) when proposed by the general manager;
(5) when proposed by independent directors.
6) Original Article 102 Meetings of the board of directors shall
be attended by the directors in person. If a director cannot
attend for any reason, he may authorize another director in
writing to represent him at the board meeting. The relevant
authorization letter shall state the scope of authority. A
director who attends a board meeting on behalf of another
director shall exercise the rights of a director within the
given scope of authority in the authorization letter. A
director who fails to attend a particular board meeting and
who has not appointed a representative to do so shall be
deemed to have waived his voting rights in respect of that
meeting.
Amended Article 110 Meetings of the board of directors shall
be attended by the directors in person. If a director cannot
attend for any reason, he may authorize another director in
writing to represent him at the board meeting. The relevant
authorization letter shall state the scope of authority. A
director who attends a board meeting on behalf of another
director shall exercise the rights of a director within the
given scope of authority in the authorization letter.
(1) A director who fails to attend a particular board
meeting and who has not appointed a representative to do
so shall be deemed to have waived his voting rights in
respect of that meeting.
(2) A director who fails to attend board meetings in person
and has not appointed representatives for two
consecutive times shall be deemed as failing to carry
out his duties and shall be removed at the shareholders'
general meeting.
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7) Original Article 105 The Company shall have a secretary of the
board of directors, who shall be a senior officer of the
Company.
Amended Article 129 The Company shall have a secretary of the
board of directors, who shall be a senior officer of the
Company. The secretary of the board shall be responsible for
the board of directors.
8) Original Article 117(5) to propose to convene an extraordinary
general meeting of shareholders;
Amended Article 141(5) to propose to convene an extraordinary
general meeting and a meeting of board of directors.
9) Original Article 145 The Company shall publish in newspapers
in accordance with these Articles two financial reports every
fiscal year. The interim report shall be published within 60
days of the end of the first six months of the fiscal year and
the annual report shall be published within 120 days of the
end of the fiscal year.
Amended Article 168 The Company shall publish in newspapers in
accordance with these articles four times every fiscal year.
The quarterly reports shall be published within 30 days after
the first quarter and the third quarter, respectively. The
interim report shall be published within 60 days after the
first six months of the fiscal year and the annual report
shall be published within 120 days after the end of the fiscal
year.
10) Original Article 146 No books of account other than those
provided under the law may be established by the Company.
Amended Article 169 Apart from the Company's statutory
accounting books, no other books shall be kept. The Company's
assets shall not be deposited in any account under the name of
any other persons.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JILIN CHEMICAL INDUSTRIAL COMPANY LIMITED
By: Shi Jianxun
------------------------------------
Name: Shi Jianxun
Title: General Manager
Date: May 2, 2003