SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March, 2004
China Petroleum & Chemical Corporation
A6, Huixindong Street,
Chaoyang District Beijing, 100029
People's Republic of China
Tel: (8610) 6499-0060
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--------- ---------
(Indicate by check mark whether the registrant by furnishing the
information contained in this form 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
--------- ---------
(If "Yes" is marked, indicate below the file number assigned to
registrant in connection with Rule 12g3-2(b): 82-_________. )
N/A
This Form 6-K consists of:
The following announcements on March 26, 2004, in English of China
Petroleum & Chemical Corporation (the "Registrant"):
(1) Announcement of Annual General Meeting for the Year 2003
(2) Announcement of proposed amendments to the Articles of Association
(3) Announcement of the resolutions of the 7th meeting of the second
session of the Board of Directors
(4) Announcement on connected transactions
(5) Announcement of the results for the year ended December 31, 2003
Document (1)
CHINA PETROLEUM & CHEMICAL CORPORATION
(a joint stock limited company
incorporated in the People's Republic of China with limited liability)
NOTICE OF ANNUAL GENERAL MEETING FOR THE YEAR 2003
NOTICE IS HEREBY GIVEN that the Annual General Meeting ("Annual General
Meeting") of China Petroleum & Chemical Corporation ("Sinopec Corp.") for the
year 2003 will be held at Beijing Continental Grand Hotel International
Convention Center, No. 8 Beichendong Road, Chaoyang District, Beijing, China
on Tuesday, 18 May 2004 at 9:00 a.m. for the following purposes:
By way of ordinary resolutions:
1. To consider and approve the report of the Board of Directors of Sinopec
Corp. for the year ended 31 December 2003.
2. To consider and approve the report of the Supervisory Committee of
Sinopec Corp. for the year ended 31 December 2003.
3. To consider and approve the audited accounts and audited consolidated
accounts of Sinopec Corp. for the year ended 31 December 2003.
4. To consider and approve Sinopec Corp.'s 2003 profit appropriation plan
and the final dividend.
5. To re-appoint Messrs. KPMG Huazhen and KPMG as the PRC and international
auditors, respectively, of Sinopec Corp. for the year 2004 and to
authorise the Board of Directors to fix their remuneration.
By way of special resolutions:
1. The proposal to authorise the Board of Directors to allot and issue new
foreign shares listed overseas:
(a) subject to paragraphs (c) and (d) and pursuant to the Company Law
of The People's Republic of China ("PRC") ("Company Law") and the
listing rules of the relevant stock exchanges (as amended from
time to time), the exercise by the Board of Directors of Sinopec
Corp. of all the powers of Sinopec Corp. granted by the general
and unconditional mandate to issue new foreign shares listed
overseas during the Relevant Period and to determine the terms and
conditions for the allotment and issue of new shares including the
following terms:
(1) class and number of new shares to be issued;
(2) price determination method of new shares and/or issue price
(including price range);
(3) the starting and closing dates for the issue;
(4) class and number of the new shares to be issued to existing
shareholders; and
(5) the making or granting of offers, agreements and options
which might require the exercise of such powers.
(b) The approval in paragraph (a) shall authorise the directors of
Sinopec Corp. during the Relevant Period to make or grant offers,
agreements and options which would or might require the exercise
of such powers after the end of the Relevant Period.
(c) The aggregate nominal amount of overseas listed foreign shares and
domestic shares allotted and issued conditionally or
unconditionally (whether pursuant to an option or otherwise) by
the Board of Directors of Sinopec Corp. pursuant to the approval
in paragraph (a), otherwise than pursuant to issue of shares by
conversion of the surplus reserve into share capital in accordance
with the Company Law of the PRC and the Articles of Association of
Sinopec Corp., shall not exceed 20% of the existing overseas
listed foreign shares of Sinopec Corp.
(d) In exercising the powers granted under paragraph (a), the board of
directors of Sinopec Corp. must (1) comply with the Company Law of
the PRC and the relevant regulatory stipulations (as amended from
time to time) of the places where Sinopec Corp. is listed; and (2)
obtain approval from China Securities Regulatory Commission and
other relevant PRC government departments.
(e) For the purpose of this resolution:
"Relevant Period" means the period from the date of passing this
resolution until whichever is the earliest of:
(i) twelve months from the date of passing this resolution;
(ii) the conclusion of the next annual general meeting of Sinopec
Corp.; and
(iii) the revocation or variation of the mandate granted under
this resolution by special resolution of the shareholders in
general meeting.
(f) The board of directors, subject to the approval of the relevant
authorities of the PRC and in accordance with the Company Law of
the PRC, be and is hereby authorised to increase the registered
capital of Sinopec Corp. to the required amount upon the exercise
of the powers pursuant to paragraph (a) above, provided that the
registered capital shall not exceed RMB90,058,536,600.
(g) Authorise the board of directors to sign the necessary documents,
complete the necessary formalities and take other necessary steps
to complete the allotment and issue and listing of new shares,
provided the same do not violate the relevant laws, administrative
regulations, listing rules of the relevant stock exchanges and the
Articles of Association.
(h) Subject to the approval of the relevant PRC authorities, the board
of directors be and is hereby authorised to make appropriate and
necessary amendments to Article 20 and Article 23 of the Articles
of Association after completion of the allotment and issue of new
shares according to the method, type and number of the allotment
and issue of new shares by Sinopec Corp. and the actual situation
of the shareholding structure of Sinopec Corp. at the time of
completion of the allotment and issue of new shares in order to
reflect the alteration of the share capital structure and
registered capital of Sinopec Corp. pursuant to the exercise of
this mandate.
2. The proposal to amend Articles of Association and its schedules:
a) Addition of clauses in relation to external guarantees in the
Articles of Association and its schedules in accordance with the
"Notice on Certain Issues relating to Regulating Fund Transfers
between a Listed Company and Connected Parties and External
Guarantees of Listed Companies"
(1) To amend the Articles of Association
Article 107
Sub-paragraph (8) of Section 1 "to determine the risks
investment and security (including pledging of assets) of
the Company according to the authority given in the
shareholders' general meeting;"
shall be amended as follows: "to determine the risks
investments of the Company according to the authority given
in the shareholder's general meeting";
A sub-paragraph shall be inserted as sub-paragraph (9): "to
determine external guarantees (including pledging of assets)
of the Company according to the authority given in the
shareholder's general meeting";
The original sub-paragraphs (9) to (19) shall become
sub-paragraphs (10) to (20) accordingly.
Section 2: "Other than the board of directors' resolutions
in respect of the matters specified in sub-paragraphs (6),
(7) and (13) of this Article which shall be passed by the
affirmative vote of more than two-thirds of all the
directors, the board of directors' resolutions in respect of
all other matters may be passed by the affirmative vote of a
simple majority of the directors."
shall be amended as follows: "Other than the board of
directors' resolutions in respect of the matters specified
in sub-paragraphs (6), (7), (9) and (14) of this Article
which shall be passed by the affirmative vote of more than
two-thirds of all the directors, the board of directors'
resolutions in respect of all other matters may be passed by
the affirmative vote of a simple majority of the directors."
(2) To amend the Rules and Procedures for the Shareholders'
General Meeting
Sub-paragraph (3) of Article 13
Paragraph 1: "The Company shall not provide guarantees for
its shareholders, controlling subsidiaries of its
shareholders, subsidiary enterprises of shareholders or
personal liability. If the Company provides guarantees to
others, the guaranteed person shall provide
counter-guarantee to the Company or take other necessary
risk preventive measures."
shall be amended as follows: "The Company shall not provide
guarantees for its shareholders, controlling subsidiaries of
its shareholders, subsidiary enterprises of shareholders or
personal liability and shall not directly or indirectly
provide liability guarantee for debtors with an asset to
liability ratio exceeding 70%. If the Company provides
guarantees to others, the guaranteed person shall provide
counter-guarantee to the Company or take other necessary
risk preventive measures. The total amount of external
guarantees of the Company shall not exceed 50% of the net
assets stated in the consolidating accounting statements of
the latest accounting year of the Company."
(3) To amend the Rules and Procedures for the Board of Directors'
Meeting
Sub-paragraphs (8) of Section 1 of Article 2 "to determine
the risks investment and security (including pledging of
assets) of the Company according to the authority given in
the shareholders' general meeting";
shall be amended as follows: "to determine the risks
investment of the Company according to the authority given
in the shareholder's general meeting";
The following shall be inserted as sub-paragraph (9): "to
determine matters relating to external guarantees (including
pledging of assets) of the Company according to the
authority given in the shareholder's general meeting;".
The original sub-paragraphs (9) to (19) shall become
sub-paragraphs (10) to (20) accordingly.
A sub-paragraph (3) shall be inserted after sub-paragraph
(2) of section 4 of Article 33: "to determine to provide
external guarantees;"
The original sub-paragraph (3) of section 4 of Article 33
"to formulate proposals for any amendment to the Company's
Articles of Association" shall become sub-paragraph (4) of
section 4 of Article 33 accordingly, and the same shall be
amended as follows: "to formulate proposals for any
amendment to the Articles of Association and its schedules".
b) Addition of clauses in relation to shareholders' meetings and
board meetings in the Articles of Association and its schedules in
accordance with Appendix 3 and other provisions of the Listing
Rules of the Hong Kong Stock Exchange
(1) To amend the Articles of Association
A section shall be inserted in Article 74 as section 2: "If
any shareholder are required to abstain from voting or may
only vote for or against a matter according to the Rules
Governing the Listing of Securities of the Hong Kong Stock
Exchange Limited, any vote by such shareholder or his proxy
in violation of the relevant rules or restrictions referred
to above shall not be counted in the voting results."
Sub-paragraph (4) of Article 100: "if the shareholders who
individually or jointly hold 5% or more of the Company's
voting shares or the supervisory committee puts forward a
provisional motion in an AGM of the Company for election of
independent directors, a written notice stating their
intention to nominate a candidate for directors and the
nominee's consent to be nominated together with the written
proofs and undertaking of the nominee referred to in
sub-paragraphs (1) and (2) above shall be delivered to the
Company seven (7) days before the AGM".
shall be amended as follows: "if the shareholders who
individually or jointly hold 5% or more of the Company's
voting shares or the supervisory committee puts forward a
provisional motion in a general meeting of the Company
according to law for election of independent directors, a
written notice stating their intention to nominate a
candidate for directors and the nominee's consent to be
nominated together with the written proofs and undertaking
of the nominee referred to in sub-paragraphs (1) and (2)
above shall be delivered to the Company not less than seven
(7) days before the general meeting, and the period granted
by the Company for lodging the above notice and documents by
the relevant nominator (such period shall commence from the
date after the issue of the notice of the general meeting)
shall not be less than seven (7) days".
Sub-paragraph (3) of Article 101: "if the shareholders who
individually or jointly hold 5% or more of the Company's
voting shares or the supervisory committee puts forward a
provisional motion in an AGM of the Company for election of
non-independent directors, a written notice stating their
intention to nominate a candidate for directors and the
nominee's consent to be nominated together with the written
proofs and undertaking of the nominee referred to in
sub-paragraph (1) above shall be delivered to the Company
seven (7) days before the AGM".
shall be amended as follows: "if the shareholders who
individually or jointly hold 5% or more of the Company's
voting shares or the supervisory committee puts forward a
provisional motion in a general meeting of the Company
according to law for election of non-independent directors,
a written notice stating their intention to nominate a
candidate for directors and the nominee's consent to be
nominated together with the written proofs and undertaking
of the nominee referred to in sub-paragraph (1) above shall
be delivered to the Company not less than seven (7) days
before the general meeting, and the period granted by the
Company for lodging the above notice and documents by the
relevant nominator (such period shall commence from the date
after the issue of the notice of the general meeting) shall
not be less than seven (7) days".
Section (2) of Article 157 "Directors shall not vote on the
contract, transaction and arrangement where they own the
major rights and interests, and shall not be listed in the
quorum of the meeting"
shall be amended as follows: "If a director or his associate
(as defined in the Rules Governing the Listing of Securities
of the Hong Kong Stock Exchange Limited) have a material
interest in any contract, transaction, arrangement or other
matters that requires the approval of the board of
directors, the relevant director shall not vote for the
relevant matter at the meeting of the board of directors,
and shall not be listed in the quorum of the meeting."
Paragraph 1 of Section 1 of Article 76: "At any
shareholders' general meeting, a resolution shall be decided
on a show of hands unless a poll is demanded:"
shall be amended as follows: "At any shareholders' general
meeting, a resolution shall be decided on a show of hands
unless a poll is demanded or otherwise required by the
listing rules of the stock exchanges on which the Company's
shares are listed".
(2) To amend the Rules and Procedures for the Shareholders'
Meeting
A section shall be inserted in Article 62 as section 2: "If
any shareholder are required to abstain from voting or may
only vote for or against a matter according to the Rules
Governing the Listing of Securities of the Hong Kong Stock
Exchange Limited, any vote by such shareholder or his proxy
in violation of the relevant rules or restrictions referred
to above shall not be counted in the voting results."
(3) To amend the Rules and Procedures for the Board of Directors'
Meeting
Section 7 of Article 33: "In voting on the Company's
connected transactions by the board of directors, the
connected directors who have interests in the transactions
shall abstain from voting. Where resolutions cannot be
reached due to the abstention from voting of the connected
directors, the relevant motions shall be submitted directly
to the shareholders' general meeting for examination."
shall be amended as follows: "If a director or his associate
(as defined in the Rules Governing the Listing of Securities
of the Hong Kong Stock Exchange Limited) have a material
interest in any contract, transaction, arrangement or other
matters that requires the approval of the board of
directors, the relevant director shall not vote for the
relevant matter at the meeting of the board of directors,
and shall not be listed in the quorum of the meeting. Where
resolutions cannot be reached due to the abstention from
voting of the connected directors, the relevant motions
shall be submitted directly to the shareholders' general
meeting for examination."
c) Amendments to the Articles of Association and its schedules
regarding "Detailed Rules on the Work of the Secretary of the
Board"
(1) To amend the Articles of Association
Section 1 of Article 119: "The Company shall have one (1)
secretary of the board of directors. The secretary shall be
a senior officer of the Company accountable to the Company.
The Company shall draw up "Work Regulations for the
Secretary of the Board" to promote the management of the
Company and make provisions for disclosure of information."
shall be amended as follows: "The Company shall have one (1)
secretary of the board of directors. The secretary shall be
a senior officer of the Company accountable to the Company.
The Company shall formulate regulations in relation to the
work of the Secretary of the Board to promote the management
of the Company and make provisions for disclosure of
information and investor relationship."
(2) To Amend the Rules and Procedures for the Board of Directors'
Meetings
Article 20: "The Company shall formulate the "Work
Regulations for the Secretary of the Board", which shall set
out detailed provisions in respect of the duties and
responsibilities, roles, and the daily working body of the
secretary of the board of directors. Those Regulations shall
come into effect upon the submission to, and the approval
of, the board of directors."
shall be amended as follows: "The Company shall formulate
regulations in relation to the work of the secretary of the
board, and perform the work for disclosure of information
and investor relationship. The relevant system shall be
effective after reporting to the board of directors for
approval."
The contents of the referred to in the ordinary resolutions numbered 1 to 3
above are contained in the Annual Report of Sinopec Corp. for the year 2003
(the "Annual Report"), which are available for consideration at the website of
the Shanghai Stock Exchange (http://www.sse.com.cn).
By Order of the Board
CHEN GE
Secretary to the Board of Directors
Beijing, the PRC, 26 March 2004
Notes:
1. Eligibility for attending the Annual General Meeting
Holders of Sinopec Corp.'s H Shares whose names appear on the register of
members maintained by Hong Kong Registrars Limited and holders of domestic
shares whose names appear on the domestic shares register maintained by China
Securities Registration and Clearing Company Limited Shanghai Branch Company
at the close of business on Monday, 19 April 2004 are eligible to attend the
Annual General Meeting.
In order to be eligible to attend and vote at the annual general meeting of
Sinopec Corp. to be held on Tuesday, 18 May 2004, all transfers accompanied by
the relevant share certificates must be lodged with share registrars for H
Shares of Sinopec Corp. in Hong Kong, Hong Kong Registrars Limited, shops
1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong, not
later than 4:00 p.m. on Friday, 16 April 2004.
2. Proxy
(1) A member eligible to attend and vote at the Annual General Meeting is
entitled to appoint, in written form, one or more proxies to attend and
vote on its behalf. A proxy need not be a shareholder.
(2) A proxy should be appointed by a written instrument signed by the
appointor or its attorney duly authorised in writing. If the form of
proxy is signed by the attorney of the appointor, the power of attorney
authorising that attorney to sign, or other authorisation document(s)
must be notarised.
(3) To be valid, the power of attorney or other authorisation document(s)
which have been notarised together with the completed form of proxy must
be delivered, in the case of holders of domestic shares, to the
registered address of Sinopec Corp. and, in the case of holders of H
Shares, to Hong Kong Registrars Limited, not less than 24 hours before
the time designated for holding of the Annual General Meeting.
(4) A proxy may exercise the right to vote by a show of hands or by poll.
However, if more than one proxy is appointed by a shareholder, such
proxies shall only exercise the right to vote by poll.
3. Registration procedures for attending the Annual General Meeting
(1) A shareholder or his proxy shall produce proof of identity when
attending the meeting. If a shareholder is a legal person, its legal
representative or other persons authorised by the board of directors or
other governing body of such shareholder may attend the Annual General
Meeting by producing a copy of the resolution of the board of directors
or other governing body of such shareholder appointing such persons to
attend the meeting.
(2) Holders of H Shares and domestic shares intending to attend the Annual
General Meeting should return the reply slip for attending the Annual
General Meeting to Sinopec Corp. on or before Wednesday, 28 April 2004.
(3) Shareholders may send the above reply slip to Sinopec Corp. in person,
by post or by fax.
4. Closure of Register of Members
The register of members of Sinopec Corp. will be closed from Monday, 19 April
2004 to Tuesday, 18 May 2004 (both days inclusive).
5. Procedures for demanding a poll to vote on resolutions
Subject to the rules of the stock exchanges to which the shares of Sinopec
Corp. are listed, the follow persons may demand a resolution to be decided on
a poll, before or after a vote is carried out by a show of hands:
(1) the chairman of the meeting;
(2) at least two shareholders present in person or by proxy entitled to vote
thereat;
(3) one or more shareholders present in person or by proxy and representing
10% or more of all shares carrying the right to vote at the meeting singly
or in aggregate.
Unless a poll is demanded, a declaration shall be made by the chairman that a
resolution has been passed on a show of hands. The demand for a poll may be
withdrawn by the person who demands the same.
6. Other Business
(1) The Annual General Meeting will not last for more than one day.
Shareholders who attend shall bear their own travelling and
accommodation expenses.
(2) The address of the Share Registrar for H Shares of Sinopec Corp., Hong
Kong Registrars Limited is at:
Shops 1712-1716, 17th Floor
Hopewell Centre
183 Queen's Road East
Hong Kong
(3) The address of the Share Registrar for A Shares of Sinopec Corp., China
Securities Registration and Clearing Company Limited Shanghai Branch
Company is at:
72 Pu Jian Road
Pudong District
Shanghai
PRC
(4) The registered address of Sinopec Corp. is at:
A6 Huixindong Street
Chaoyang District
Beijing 100029
The People's Republic of China
Telephone No.: (+86) 10 6499 0060
Facsimile No.: (+86) 10 6499 0022
Document (2)
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
CHINA PETROLEUM & CHEMICAL CORPORATION
(a joint stock limited company incorporated in
the People's Republic of China with limited liability) (Stock Code: 386)
PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION
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| Sinopec Corp. proposes to amend the Articles of Association of Sinopec |
| Corp. (including the Rules and Procedures for the Shareholders' General |
| Meetings and the Rules and Procedures for the Board of Directors' |
| Meetings) in accordance with the "Notice on Certain Issues relating to |
| Regulating Fund Transfers between a Listed Company and Connected |
| Parties and External Guarantees of Listed Companies" (Zheng Jian Fa |
| [2003] No.56) jointly issued by the China Securities Regulatory |
| Commission and the State Assets Supervisory Management Commission on 28 |
| August 2003 and the revised Listing Rules of the Hong Kong Stock |
| Exchange which will come into effect on 31 March 2004. |
| In addition, both the current Articles of Association and the Rules and |
| Procedures for the Board of Directors' Meetings stipulated that Sinopec |
| Corp. should formulate "Detailed Rules on the Work of the Secretary to |
| the Board of Directors". As Sinopec Corp. already formulated the "Rules |
| on Corporate Information Disclosure" and "Rules on Corporate Investor |
| Relations" in December 2003 in accordance with the requirements of the |
| relevant PRC regulatory authorities, there will be an unnecessary |
| duplication of the contents if the "Detailed Rules on the Work of the |
| Secretary to the Board of Directors" are formulated again separately. |
| Accordingly, Sinopec Corp. proposes to remove references to the |
| formulation of the "Detailed Rules on the Work of the Secretary to the |
| Board of Directors" in the Articles of Association and Rules and |
| Procedures for the Board of Directors' Meetings. |
| |
| The proposed amendments to the Articles of Association of Sinopec Corp. |
| (including the Rules and Procedures for the Shareholders' General |
| Meetings and the Rules and Procedures for the Board of Directors' |
| Meetings) are subject to the approval of the shareholders of Sinopec |
| Corp. by way of special resolutions at the 2003 AGM. |
| |
| A circular containing details of the proposed amendments to the |
| Articles of Association of Sinopec Corp. (including the Rules and |
| Procedures for the Shareholders' General Meetings and the Rules and |
| Procedures for the Board of Directors' Meetings) together with the |
| notice of AGM for 2003, the proxy form and the reply slip are expected |
| to be despatched to the holders of H shares on or around 2 April 2004. |
| The proposed amendments to the Articles of Association of Sinopec Corp. |
| (including the Rules and Procedures for the Shareholders' General |
| Meetings and the Rules and Procedures for the Board of Directors' |
| Meetings) are also available for consideration at the website of the |
| Shanghai Stock Exchange (http://www.sse.com.cn). |
| |
| Sinopec Corp. and all the members of the Board of Directors warrant |
| that there are no material omissions from, or misrepresentations or |
| misleading statements contained in, this announcement, and severally |
| and jointly accept full responsibility for the authenticity, accuracy |
| and completeness of the information contained in this announcement. |
| |
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1. PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION OF SINOPEC CORP.
The China Securities Regulatory Commission and the State Assets Supervisory
Management Commission jointly issued the "Notice on Certain Issues relating to
Regulating Fund Transfers between a Listed Company and Connected Parties and
External Guarantees of Listed Companies" (Zheng Jian Fa [2003] No.56) on 28
August 2003 which requires that: "the Articles of Association of a listed
company shall make stipulations for the examination and approval procedures of
external guarantees and creditworthiness standards of the guaranteed objects.
External guarantees shall obtain the consent upon signing of more than
two-thirds of all the members of the board of directors or approval at the
shareholders' meeting; shall not directly or indirectly provide debt
guarantees for guaranteed objects with an asset-liability ratio of more than
70%."
The Hong Kong Stock Exchange has revised its Listing Rules based on the
results of the "Consultation Conclusions on Proposed Amendments to the Listing
Rules Relating to Corporate Governance Issues". The new changes require listed
companies to amend certain provisions of its Articles of Association. The
revised Listing Rules will come into effect on 31 March 2004.
China Petroleum & Chemical Corporation ("Sinopec Corp.") proposes to amend the
Articles of Association (including the Rules and Procedures for the
Shareholders' General Meetings and the Rules and Procedures for the Board of
Directors' Meetings) in accordance with the above regulations.
In addition, both article 119 of the current Articles of Association and
article 20 of the Rules and Procedures for the Board of Directors' Meetings
stipulated that Sinopec Corp. should formulate "Detailed Rules on the Work of
the Secretary to the Board of Directors". As Sinopec Corp. already formulated
the "Rules on Corporate Information Disclosure" and "Rules on Corporate
Investor Relations" in December 2003 in accordance with the requirements of
the relevant PRC regulatory authorities and that the Articles of Association
and the Rules and Procedures for the Board of Directors' Meetings already
contain relatively detailed description of the duties and work procedures of
the Secretary to the Board of Directors, there will be an unnecessary
duplication of the contents if the "Detailed Rules on the Work of the
Secretary to the Board of Directors" are formulated again separately.
Accordingly, Sinopec Corp. proposes to remove references to the formulation of
the "Detailed Rules on the Work of the Secretary to the Board of Directors" in
the Articles of Association and Rules and Procedures for the Board of
Directors' Meetings.
2. ANNUAL GENERAL MEETING
The proposed amendments to the Articles of Association (including the Rules
and Procedures for the Shareholders' General Meetings and the Rules and
Procedures for the Board of Directors' Meetings) of Sinopec Corp. are subject
to the approval of the Shareholders by way of special resolutions at the 2003
annual general meeting of Sinopec Corp. ("AGM"). The 2003 AGM will be held at
Beijing Continental Grand Hotel International Convention Center, No.8
Beichendong Road, Chaoyang District, Beijing, China at 9.00 a.m. on Tuesday,
18 May 2004. For further information regarding the amendments, please refer to
the notice of AGM to be published in domestic PRC newspapers - China
Securities News, Shanghai Securities News and Securities Times, and the
newspapers in Hong Kong - South China Morning Post and Hong Kong Economic
Times on 29 March 2004.
3. GENERAL
A circular containing details of the proposed amendments to the Articles of
Association of Sinopec Corp. (including the Rules and Procedures for the
Shareholders' General Meeting and the Rules and Procedures for the Board of
Directors' Meetings) together with the 2003 annual report of Sinopec Corp.
which will contain the notice of the AGM for 2003, the proxy form and the
reply slip are expected to be despatched to the holders of H shares on or
around 2 April 2004 and are also available for consideration on the website of
the Shanghai Stock Exchange (address: http://www.sse.com.cn). Holders of
Sinopec Corp.'s shares whose names appear on the register of members of
Sinopec Corp. at the close of business on Monday, 19 April 2004 are eligible
to attend the 2003 AGM.
According to the Articles of Association of Sinopec Corp., the register of
members of Sinopec Corp. will be closed from Monday, 19 April 2004 to Tuesday,
18 May 2004 (both dates inclusive). Shareholders should note that during such
period no H share transfer will be registered.
By Order of the Board
CHEN GE
Secretariat to the Board of Directors
Beijing, PRC, 26 March 2004
Docuent (3)
CHINA PETROLEUM & CHEMICAL CORPORATION
(a joint stock limited company
incorporated in the People's Republic of China with limited liability)
Announcement of the Resolutions of the 7th Meeting of the
Second Session of the Board of Directors
-----------------------------------------------------------------------------
| Sinopec Corp. and all the members of the Board confirm the truth, accuracy |
| and completeness of the information contained in this announcement and |
| collectively and individually accept full responsibility for any fraudulent |
| representation, misrepresentation or material omission in this announcement.|
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The 7th meeting of the second session of the Board of Directors of China
Petroleum & Chemical Corporation ("Sinopec Corp.") was held at 8.30 am on 26
March 2004 at Sinopec Corp.'s head offices.
Mr Chen Tonghai, the Chairman, Mr Wang Jiming, Vice Chairman, Mr Zhang Jiaren,
Mr Cao Xianghong, Mr Liu Genyuan, Mr Fan Yifei, Mr Chen Qingtai, Mr Shi
Wenpeng, Mr Zhang Youcai and Mr Cao Yaofeng, Directors, were present at the
meeting. Mr Mou Shuling, Mr Liu Kegu and Mr Ho Tsu Kwok Charles, Directors,
could not attend the meeting for reason of official duties. Both Mr Mou
Shuling and Mr Liu Kegu, Directors, appointed Mr Wang Jiming, Vice Chairman,
and Mr Ho Tsu Kwok Charles, Director, appointed Mr Chen Qingtai, Director, to
vote on their behalf at the meeting. A quorum for a board meeting as set out
in the provisions of the Articles of Association of Sinopec Corp. was present.
The meeting was convened and chaired by Mr Chen Tonghai, the Chairman. After
examinations, the meeting unanimously passed the following resolutions:
1 to approve the 2003 year Work Report of the Board.
2 to approve the Report on Completion of Operations in 2003 and Work
Arrangements for 2004.
3 to approve the resolution on eight provisions. For the year ended 31
December 2003, the total amount of the eight provisions on asset
impairment under the PRC Accounting Rules and Regulations was RMB 7.654
billion, of which the amount for the allowance for doubtful accounts was
RMB 5.533 billion; the amount of provision for diminution in value of
inventories was RMB 0.519 billion; the provision for impairment losses
on long-term equity investments was RMB 0.271 billion; the amount for
the provision for impairment losses on fixed assets was RMB 1.331
billion.
4 to approve the resolution on the on-going connected transactions. The
total actual amount of connected transactions occurred in 2003 was RMB
102.001 billion, of which the amount for purchase transactions was RMB
63.558 billion and the amount for sales transactions was RMB 38.443
billion, which were all within the cap amounts of the waivers granted by
the Hong Kong Stock Exchange.
5 to approve the resolution on the 2003 audit fees for KPMG Huazhen and
KPMG.
6 to approve the re-appointment of KPMG Huazhen and KPMG as Sinopec
Corp.'s domestic and international auditors respectively for the year
2004, and to present the resolution to the shareholders authorising the
Board to determine the remunerations of KPMG Huazhen and KPMG.
7 to approve the 2003 Financial Report of Sinopec Corp. audited by KPMG
Huazhen and KPMG.
8 to approve the resolution on the Plan for Profit Appropriation for 2003.
As determined in accordance with the PRC Accounting Rules and
Regulations and International Financial Reporting Standards ("IFRS"),
Sinopec Corp.'s audited net profit in 2003 was RMB 19.011 billion and
RMB 21.593 billion respectively. In accordance with the Articles of
Association of Sinopec Corp., the amount distributable to shareholders
is the lower of the net profit for the financial year as determined in
accordance with the PRC Accounting Rules and Regulations and IFRS.
Accordingly, after deducting 10% to be transferred to the statutory
surplus reserve (being RMB 1.901 billion) and 10% to be transferred to
the statutory public welfare fund (being RMB 1.901 billion) from the net
profit of Sinopec Corp. this year with the addition of the undistributed
profit brought forward from the preceding year deducting the final
dividend for the year 2002 and the interim dividend for 2003, Sinopec
Corp.'s remaining undistributed profit of RMB 19.732 billion would be
carried forwarded to year 2004. Based on the total number of 86.702
billion shares in issue, the annual dividend for the year 2003 proposed
by the Board to be distributed is RMB 0.09 per share (including tax),
represented an increase of RMB 0.01 per share as compared to that in
2002. After deducting the interim dividend for 2003 of RMB 0.03 per
share which has been distributed, the final dividend for the year is RMB
0.06 per share (including tax) and the total cash dividend for the final
dividend is RMB 5.202 billion.
9 to approve the 2003 Annual Report, the annual results announcement and
Form 20-F of Sinopec Corp.
10 to approve the resolution on the general and unconditional mandate
authorising the Board to issue and place new foreign shares listed
overseas be presented at the 2003 annual general meeting for approval.
11 to approve the resolution on the amendments to Sinopec Corp.'s Articles
of Association (including its schedules).
12 to approve the resolution on the acquisition of the shares of Yanhua
Group Tianjin Lubricant & Grease Company Limited from Sinopec
Petrochemical Group Company.
13 to approve the convening of the annual general meeting for the year
2003, and approve the submission of the above resolutions numbered 1, 6,
7, 8 , 10 and 11 for approval at the annual general meeting for the year
2003.
By Order of the Board
CHEN GE
Secretary to the Board of Directors
Beijing, PRC, 26 March 2004
Document (4)
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
CHINA PETROLEUM & CHEMICAL CORPORATION
(a joint stock limited company incorporated in the
People's Republic of China with limited liability)
(Stock Code: 386)
ANNOUNCEMENT ON CONNECTED TRANSACTION
-----------------------------------------------------------------------------
| SPECIAL NOTICE |
| |
| Sinopec Corp. and all the members of the Board warrant that there are no |
| material omissions from, or misrepresentations or misleading statements |
| contained in, this announcement, and severally and jointly accept full |
| responsibility for the authenticity, accuracy and completeness of the |
| information contained in this announcement. |
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IMPORTANT NOTICE:
The 7th meeting of the second session of the Board was held on 26 March 2004
at which the Acquisition Agreement entered into between Sinopec Corp. and
Sinopec Group Company (authorised by Yanhua and represented Yanhua) was
reviewed and approved.
Sinopec Corp. entered into the Acquisition Agreement with Sinopec Group
Company on 26 March 2004. According to the Acquisition Agreement, Sinopec
Corp. will use cash from its internal resources to acquire 100% of the issued
shares of Jinzhi Company (which is owned by Yanhua which is, in turn, a
wholly-owned subsidiary of Sinopec Group Company) at a consideration for RMB
230 million. Sinopec Corp. is proposing to liquidate or dissolve Jinzhi
Company which will become a branch of Sinopec Corp. on or after the Delivery
Date.
The Acquisition will further enhance the competitiveness of Sinopec Corp. in
the area of lubricant and grease, strengthen the leading position of Sinopec
Corp. in the lubricant and grease market and bring better economic efficiency
to Sinopec Corp. On the other hand, the Acquisition will eliminate the
competition with Sinopec Group Company in the area of lubricant and grease,
reduce the number of connected transactions and improve Sinopec Corp.'s
independence in operations.
The Directors (including the independent directors of Sinopec Corp.) consider
that the Acquisition (including the consideration for the Acquisition and the
terms of the Acquisition Agreement) has been conducted on normal commercial
terms, the pricing is fair and reasonable, and accordingly the Acquisition is
in the interests of Sinopec Corp. and its shareholders, and did not discover
anything detrimental to the interests of the Independent Shareholders and
Sinopec Corp. Mr Chen Tonghai (the President of Sinopec Group Company) and Mr
Liu Genyuan (the Vice President of Sinopec Group Company), being connected
directors, abstained from the review and the voting.
As Sinopec Group Company is the controlling shareholder of Sinopec Corp. and
Yanhua is a wholly-owned subsidiary of Sinopec Group Company, the Acquisition
constitutes a connected transaction for Sinopec Corp. for the purposes of the
Listing Rules of the Shanghai Stock Exchange and the Listing Rules of the Hong
Kong Stock Exchange.
Completion of the Acquisition is subject to the relevant approval of Sinopec
Group Company and the filing of the Asset Valuation Reports by Sinopec Group
Company.
1. DEFINITIONS
In this announcement (including the Special Notice and the Important
Notice), unless otherwise indicated in the context, the following
expressions have the meanings set out below:
"Acquisition" the acquisition of the Target
Shares in accordance with the
terms of the Acquisition Agreement
"Acquisition Agreement" the acquisition agreement made
between Sinopec Corp. and Sinopec
Group Company (authorized by
Yanhua and represented Yanhua) on
26 March 2004 in respect of the
acquisition of Yuahua Group
Tianjin Lubricant & Grease Co.
Limited
"Asset Valuation Reports" the asset valuation report Zhong
Zheng Ping Bao Zi (2004) No. 012
with the Valuation Date as of 31
December 2003 in respect of the
Target Shares issued by Beijing
Zhongzheng Valuation Co., Ltd.
relating to the Acquisition, and
the property valuation report
Zhong Di Hua Xia [Ping] Zi Nos 36,
37, and 38 issued by Beijing
Zhongdi Huaxia Valuation
Consultation Centre Co., Ltd.
relating to the Acquisition
"Board" the board of directors of Sinopec
Corp.
"Delivery Date" (i) 30 June 2004 or (ii) the next
business day following the
satisfaction of all the conditions
precedent set out in the
Acquisition Agreement or waiver of
the conditions precedent in
writing by Sinopec Corp. and
Sinopec Group Company to the
extent permissible by applicable
laws (whichever is later)
"Directors" the directors of Sinopec Corp.
"Financial Report" the audited accounts of the Target
Shares for the year ended 31
December 2003 (including the
balance sheet, profit and loss
statement, cash flow statement and
the notes thereto) prepared by
Zhong Lei Certified Public
Accountants Company Limited in
accordance with the PRC Accounting
Rules and Regulations
"HK$" the lawful currency of Hong Kong
with a convertible rate of HK$1.00
for approximately RMB 1.06; but it
does not mean that HK$ can be
converted into RMB at this rate,
and vice versa
"Hong Kong Stock Exchange" The Stock Exchange of Hong Kong
Limited
"Independent Shareholders" the shareholders of Sinopec Corp.
other than Sinopec Group Company
and its associates (with the
meaning ascribed to it under the
Listing Rules of the Hong Kong
Stock Exchange)
"Jinzhi Company" Yanhua Group Tianjin Lubricant &
Grease Company Limited which was
incorporated in the PRC and is
wholly-owned by Yanhua
"Listing Rules of the Hong Kong the Rules Governing the Listing of
Stock Exchange" Securities on the Hong Kong Stock
Exchange
"Listing Rules of the Shanghai the Listing Rules of the Shanghai
Stock Exchange" Stock Exchange
"RMB" the lawful currency of the People's
Republic of China
"Shanghai Stock Exchange" the Stock Exchange of Shanghai
"Sinopec Corp." China Petroleum & Chemical
Corporation
"Sinopec Group" Sinopec Group Company and its
subsidiaries (other than Sinopec
Corp.)
"Sinopec Group Company" China Petrochemical Corporation,
being the controlling shareholder
of Sinopec Corp.
"Target Shares" 100% of the issued shares of
Jinzhi Company owned by Yanhua
"Valuation Date" 31 December 2003
"Yanhua" Sinopec Group Beijing Yanshan
Petrochemical Company Limited
which was incorporated in the PRC
and is wholly-owned by Sinopec
Group Company
2. SUMMARY OF THE CONNECTED TRANSACTION
The 7th meeting of the second session of the Board was held on 26 March
2004 at which the Acquisition Agreement entered into between Sinopec
Corp. and Sinopec Group Company was reviewed and approved. Mr Chen
Tonghai (the President of Sinopec Group Company) and Mr Liu Genyuan (the
Vice President of Sinopec Group Company), being connected directors,
abstained from the review and the voting.
For the purposes of transferring the Target Shares, Yanhua has
authorized Sinopec Group Company to sign the Acquisition Agreement on
its behalf. Based on the above authorization given to Sinopec Group
Company by Yanhua, Sinopec Corp. entered into the Acquisition Agreement
with Sinopec Group Company on 26 March 2004. According to the
Acquisition Agreement, Sinopec Corp. will use cash from its internal
resources to acquire the Target Shares at a consideration for RMB 230
million (approximately HK$216.9811 million).
According to the Asset Valuation Reports, taking 31 December 2003 as the
Valuation Date, the assessed total asset value (excluding land use
rights) of Jinzhi Company was RMB 263.3023 million (approximately
HK$248.3984 million), the assessed value of its total liabilities was
RMB 133.9646 million (approximately HK$126.3817 million), and the
assessed net asset value was RMB 129.3378 million (approximately
HK$122.0168 million). Taking 31 December 2003 as the Valuation Date, the
assessed value of the land use rights of Jinzhi Company was RMB 78.3709
million (approximately HK$73.9348 million). According to the above
valuation results, the assessed value of the Target Shares (taking 31
December 2003 as the Valuation Date) was RMB 207.7087 million
(approximately HK$195.9516 million) and the consideration for the
Acquisition is RMB 230 million (approximately HK$216.9811 million).
Jinzhi Company has two parcels of State allocated land. Sinopec Corp.
and Sinopec Group Company have agreed and confirmed that Sinopec Corp.
will pay for the land premium and deal with the procedures in obtaining
the land use rights, and the land premium paid by Sinopec Corp. (to be
determined) will be deducted from the consideration for the Acquisition,
being RMB 230 million.
As Sinopec Group Company is the controlling shareholder of Sinopec Corp.
and Yanhua is a wholly-owned subsidiary of Sinopec Group Company, the
Acquisition constitutes a connected transaction for Sinopec Corp. for
the purposes of the Listing Rules of the Shanghai Stock Exchange and the
Listing Rules of the Hong Kong Stock Exchange.
The Directors (including the independent directors of Sinopec Corp.)
consider that the Acquisition (including the consideration for the
Acquisition and the terms of the Acquisition Agreement) has been
conducted on normal commercial terms, the pricing is fair and
reasonable, and accordingly the Acquisition is in the interests of
Sinopec Corp. and its shareholders, and did not discover anything
detrimental to the interests of the Independent Shareholders and Sinopec
Corp.
Completion of the Acquisition is subject to the relevant approval of
Sinopec Group Company and the filing of the Asset Valuation Reports by
Sinopec Group Company.
3. CONNECTED PERSONS AND CONNECTED RELATIONSHIPS
3.1 Sinopec Group Company
(a) Basic information of Sinopec Group Company
Name of enterprise: China Petrochemical Corporation
Legal address: A6 Huixindong Street, Chaoyang District,
Beijing, PRC
Type of enterprise: State-owned enterprise
Legal representative: Mr. Chen Tonghai
Registered capital: RMB 104.9 billion (approximately
HK$98.962 billion)
(b) History and development of Sinopec Group Company
Sinopec Group Company is a large-scale petroleum and petrochemical
enterprise conglomerate established on the basis of the former
China Petrochemical Corporation in July 1998 in accordance with
the "Reform Proposal for Organisations under the State Council"
and "Reply to Certain Questions relating to the establishment of
Sinopec Group Company by the State Council", both approved by the
First Meeting of the Ninth Session of the National People's
Congress. Sinopec Group Company is a State-owned and authorised
investment enterprise. Pursuant to its corporate restructuring in
2000, Sinopec Group Company injected its petroleum and
petrochemical business into Sinopec Corp.
(c) Principal operations of Sinopec Group Company
Sinopec Group Company is principally engaged in the business of
industrial investments and investment management; crude oil and
natural gas exploration and development, storage, transportation
(including pipelines), sales and comprehensive utilisation; crude
oil refinery; wholesale of gasoline, kerosene and diesel;
production, sales, storage and transportation of petrochemical and
other chemical products; exploration, design, construction and
construction installation of petroleum and petrochemical
engineering; petroleum and petrochemical equipment repairing and
maintenance; mechanical and electrical equipment manufacturing;
research, development, application and consultancy relating to
technology, information and substitute energy products; import and
export of various merchandise and technologies as principal and
agent (except for those restricted or prohibited by the state from
import and export).
(d) Basic financial conditions of Sinopec Group Company
As at 31 December 2002, the net profits and net assets of Sinopec
Group Company were RMB3.69 billion (approximately HK$3.48 billion)
and RMB189.37 billion (approximately HK$178.65 billion)
respectively, based on the audited financial statements prepared
in accordance with PRC Accounting Rules and Regulations.
3.2 Principal operations of Sinopec Corp. and its subsidiaries
The principal operations of Sinopec Corp. and its subsidiaries include:
exploring for and developing, producing and trading crude oil and
natural gas; processing crude oil, producing petroleum products and
trading, transporting, distributing and marketing petroleum products,
producing, distributing and trading petrochemical products.
3.3 Yanhua
(a) Basic information of Yanhua
Name of enterprise: Sinopec Group Beijing Yanshan
Petrochemical Company Limited
Legal address: No. 1 Yanshan Gang Nan Road,
Fangshan District, Beijing
Type of enterprise: limited liability company
(wholly-owned by the State)
Legal representative: Mr. Du Guosheng
Registered capital: RMB 1,986.587 million (approximately
HK$1,874.14 million)
(b) History and development of Yanhua
Yanhua is a large petroleum and chemical enterprise established on
the basis of the former China Petrochemical Corporation's interest
in the original Beijing Yanhua Petrochemical Corporation in August
1997 in accordance with the "Approval Guo Jing Mao Qi (1997) No
194" issued by the former State Economic and Trade Commission.
After approval by the State Council, Yanhua was injected into
Sinopec Group Company in 1998.
(c) Principal operations of Yanhua
Yanhua is principally engaged in the operation and management of
State-owned assets; refining of crude oil; production and sales of
petrochemical products and raw materials of chemicals and light
chemicals; storage; development and transfer of technologies;
consulting services; manufacturing, repairing and installation of
petrochemical equipment; human resources training; provision of
labour services; Chinese restaurants; staff quarters; storage and
transportation of dangerous goods.
(d) Basic financial conditions of Yanhua
As at 31 December 2003, the net profit and net asset value of
Yanhua were RMB -134.7027 million (approximately HK$-127.0780
million) and RMB 3,336.0489 million (approximately HK$3,147.2159
million) respectively, based on the audited financial statements
prepared in accordance with PRC Accounting Rules and Regulations.
3.4 Connected relationships
Sinopec Group Company is the controlling shareholder of Sinopec Corp.
holding 47.742561 billion State-owned shares of Sinopec Corp.
(representing approximately 55.06% of the issued share capital of
Sinopec Corp.). At the same time, Sinopec Group Company is the sole
investor of Yanhua, holding 100% of the issued shares of Yanhua. As
such, according to the requirements under the Listing Rules of the
Shanghai Stock Exchange and the Listing Rules of the Hong Kong Stock
Exchange, Sinopec Group Company and Yanhua are connected persons of
Sinopec Corp., and the Acquisition constitutes a connected transaction
for Sinopec Corp. under the Listing Rules of the Shanghai Stock Exchange
and the Listing Rules of the Hong Kong Stock Exchange.
3.5 Amount of the connected transaction
The consideration for the Acquisition is RMB 230 million (approximately
HK$216.981 million) which does not exceed 3% of the net asset value of
Sinopec Corp. as shown in the audited financial statements for the
period ended 30 June 2003.
4. BASIC CONDITIONS OF THE TARGET ASSET SUBJECT TO THE CONNECTED TRANSACTION
4.1 Summary of the Target Shares
The target asset subject to this connected transaction is the Target
Shares which are the 100% issued shares of Jinzhi Company held by
Yanhua.
Jinzhi Company was established as a limited liability company
(wholly-owned by the State) on the basis of the former Beijing Yanshan
Petrochemical Corporation's interest in the original Tianjin Hangu
Petrochemical Factory in accordance with the "Approval Jin Jing Qi
[1998] No 26", after approval by and registration with the Tianjin
Commercial and Industrial Administration Bureau on 29 September 1998.
The present position of Jinzhi Company is as follows:
Name of enterprise: Yanhua Group Tianjin Lubricant &
Grease Company Limited
Legal address: Yingcheng Xi Street, Han Gu
District, Tianjin
Type of enterprise: limited liability company
(wholly-owned by the State)
Legal representative: Mr. Wang Yongjian
Registered capital: RMB 60.65 million (approximately
HK$57.2170 million)
Jinzhi Company is principally engaged in the production and processing
of lubricant and grease and petrochemical products; production and
processing of metal printing and pails; wholesale and retail sales of
metals, construction materials, chemicals and light chemicals,
hardwares, electricity, automobiles (excluding saloon cars) and parts;
export business of self-produced products and technologies and import
business of equipment, parts, raw materials, supplementary materials and
technologies required by the company (except for those which are subject
to specific restrictions imposed by the State).
The main products of Jinzhi Company include lubricant and grease, paints
for metallic art works and pails. In 2003, the Jinzhi Company's sales
and production volume amounted to 32,595 tonnes of grease, 39,673 tonnes
of lubricant, 400 tonnes of hot and cold rolling mill fluid and 12.85
million of pails.
The leading role of Jinzhi Company in lubricant and grease is
represented by: (a) the quality of its products and technologies. Jinzhi
Company is a first class research and development institution in
lubricant and grease in China and has strong research and development
capabilities. The type II grease for roller bearings in railroad cars
developed by it has been awarded the top award for lubricant in China;
the multi-purpose X03 lubricant has been awarded the Military Technology
Progress Award; the lithium and calcium compounded lubricant and the
relevant production technology have been patented in China; the
successful use of the high and low temperature lubricant in Shenzhou 5
spaceship; (b) its various product categories, product mix and product
brands. Jinzhi Company at present produces more than 139 different
categories of lubricant and more than 200 branded products. Its
advantageous edges in product types and product mix can better resist
risks of market fluctuations; the sales and production volume of
lubricating grease of Jinzhi Company ranks number four in the world and
number one in Asia. Its "Jinzhi Brand" lubricant has gained good
reputation in both the domestic and international markets.
Jinzhi Company has five subsidiaries (holding 74.5% in Tianjin Jinjiang
Petrochemical Company Limited, 50% in Tianjin Nisseki Lubricant & Grease
Co. Ltd., 70% in Lang Fang Jin Rui Pails Manufacturing Company Limited,
55% in Tianjin Jinzhi Pails Manufacturing Co. Ltd. and 100% in Tianjin
Jinzhi Lubricant & Grease Sales Co. Ltd.) and has an interest in one
enterprise (holding as to 12.35% in Lang Fang Jin Rui Metal Printing
Factory).
According to the Acquisition Agreement, Yanhua warrants that the
ownership of the assets to be transferred is lawful and valid; Yanhua
has the unfettered rights to deal with them; the Target Shares are not
subject to any pledges, charges, liens or other third party rights; and
there are no material litigations, disputes, claims or governmental
penalties relating to the assets to be transferred.
4.2 Valuation of the Target Shares
In accordance with the Asset Valuation Reports, the replacement cost
valuation method was used. Taking 31 December 2003 as the Valuation
Date, the total book value of the assets (excluding land use rights) of
Jinzhi Company was RMB 245.5598 million (approximately HK$231.6602
million), the adjusted book value of the assets was RMB 240.1322 million
(approximately HK$226.5398 million) and the assessed total asset value
was RMB 263.3023 million (approximately HK$248.3984 million) with the
rate of increase of 9.65%; the book value of its total liabilities was
RMB 111.1640 million (approximately HK$104.8717 million), the adjusted
value of its total liabilities was RMB 133.9646 million (approximately
HK$126.3817 million), and the assessed value of its total liabilities
was RMB 133.9646 million (approximately HK$126.3817 million); the book
value of the net assets was RMB 114.3958 million (approximately
HK$107.9206 million), the adjusted book value of the net assets was RMB
106.1676 million (approximately HK$100.1581 million), and the assessed
net asset value was RMB 129.3378 million (approximately HK$122.0168
million) with an assessed increment of RMB 23.1702 million
(approximately HK$21.8587 million) at the rate of 21.82%. The increase
in value was mainly due to the low book value of the main facilities
such as buildings, storage tanks and boilers etc and the increase in
value of the finished products. Taking 31 December 2003 as the Valuation
Date, the value of the land use rights of Jinzhi Company was RMB 78.3709
million (approximately HK$73.9348 million). Based on the Asset Valuation
Reports, the value of the Target Shares was RMB 207.7087 million
(approximately HK$195.9516 million) as at the Valuation Date of 31
December 2003.
According to the Asset Valuation Reports, Beijing Zhongzheng Valuation
Co., Ltd. has adopted income approach to valuate the Target Shares for
verification appraisal, with the value of RMB 239.4082 million which is
RMB 110.0704 million more than the value based on the replacement cost
method. The reasons for the difference in the values include: the value
of the land use rights of Jinzhi Company has not been included in the
replacement cost method but has been included in the income approach,
and the value of the intangible assets which Jinzhi Company may have has
not been reflected. There are systematic differences between these two
valuation methods.
4.3 Financial Provisions of the Target Shares
The financial statements of Jinzhi Company have been audited by Zhong
Lei Certified Public Accountants Co. Ltd. An audit report Zhong Lei Shen
Zi (2004) No. 1046 has been issued. The audit report confirms that the
financial statements attached to the audit report are in accordance with
the rules of business accounting promulgated by the State and the
regulations set out in the "Regulations of Business Accounting". The
financial statements reflected fairly in all material respects the
financial conditions of Jinzhi Company as at 31 December 2001, 31
December 2002 and 31 December 2003, and the business results and the
cash flows for the years 2001, 2002 and 2003.
As at 31 December 2003, the audited financial data of the Target Shares
prepared in accordance with the PRC Accounting Rules and Regulations are
as follows: the total current asset value was RMB 107.2899 million
(approximately HK$101.2169 million), the total asset value was RMB
245.5599 million (approximately HK$231.6603 million), the total current
liabilities was RMB 131.0449 million (approximately HK$123.6273
million), total liabilities was RMB 131.1640 million (approximately
HK$123.6273 million), the total accounts receivable was RMB 17.7293
million (approximately HK$16.7258 million), the value of contingencies
was RMB 44.40 million (approximately HK$41.8868 million), the net asset
value was RMB 114.3958 million (approximately HK$107.9206 million), the
income from principal operations was RMB 228.3552 million (approximately
HK$215.4294 million), the profit from principal operations was RMB
55.1419 million (approximately HK$52.0207 million) and the net profit
was RMB 28.6098 million (approximately HK$26.9904 million).
As at 31 December 2003, the audited consolidated financial data of the
Target Shares prepared in accordance with the PRC Accounting Rules and
Regulations are as follows: the total current asset value was RMB
226.4971 (approximately HK$ 213.6765 million), the total asset value was
RMB 370.3973 million (approximately HK$349.4314 million), the total
current liabilities was RMB 193.5340 million (approximately HK$182.5792
million), the total liabilities was RMB 193.6531 million (approximately
HK$182.6916 million), the total accounts receivable was RMB 51.42
million (approximately HK$48.5094 million), the value of contingencies
was RMB 44.40 million (approximately HK$41.8868 million), the net asset
value was RMB 114.3958 million (approximately HK$107.9206 million), the
income from principal operations was RMB 594.3486 million (approximately
HK$560.7062 million), the profit from principal operations was RMB
134.8648 million (approximately HK$127.2309 million) and the net profit
was RMB 28.6098 million (approximately HK$26.9904 million).
Based on the audited consolidated financial statements prepared in
accordance with the PRC Accounting Rules and Regulations, the
consolidated financial data of the Target Shares for the period ended 31
December 2003 and 2002 are:
2003 2002
(RMB millions) (RMB millions)
Profit before taxation, exceptional
and extraordinary items 58.1871 35.5819
Profit after taxation, exceptional
and extraordinaryitems 28.6098 19.8013
5. MAJOR TERMS AND PRICING POLICY OF THE CONNECTED TRANSACTION
5.1 Pricing and payment
The consideration for the Acquisition was determined by negotiations
between the parties to the transaction based on the valuation of the
Target Shares at the Valuation Date as of 31 December 2003 according to
the Asset Valuation Reports, the market conditions, profitability and
development potential, and the valuation methods commonly used
internationally. According to the Asset Valuation Reports, the assessed
value of the Target Shares was RMB 207.7087 million (approximately
HK$195.9516 million) and the consideration for the Target Shares was RMB
230 million (approximately HK$216.9811 million)
According to the Acquisition Agreement, Sinopec Corp. will pay RMB 230
million (approximately HK$216.9811 million) as consideration for the
Target Shares to Sinopec Group Company in cash subject to the deduction
of the amount of the land premium (to be determined) payable by Sinopec
Corp. as mentioned above.
According to the Acquisition Agreement, Sinopec Corp. will pay 50% of
the consideration price to Sinopec Group Company on the Delivery Date
and the balance, after deduction of the amount of the land premium paid
by Sinopec Corp. in accordance with the Acquisition Agreement, to
Sinopec Group Company within six months after the Delivery Date.
5.2 Conditions precedent of the Acquisition
According to the Acquisition Agreement, the conditions precedent for the
Acquisition are as follows:
(a) the independent financial adviser in PRC appointed by Sinopec
Corp. considered that the terms of the Acquisition are fair;
(b) the independent directors of Sinopec Corp. and the Board have
approved the Acquisition Agreement and the transaction under the
Acquisition Agreement;
(c) Yanhua has obtained the approvals of the Acquisition and the
Acquisition Agreement as required by its articles of association
and the applicable laws;
(d) Sinopec Group Company, as the owner of Yanhua, has approved the
Acquisition; and
(e) the Valuation Reports have been filed with Sinopec Group Company.
5.3 Profits and losses
During the period between the Valuation Date and the Delivery Date, any
profits and losses incurred in connection with the Target Shares shall
belong to and be borne by Yanhua provided that this is not inconsistent
with other terms of the Acquisition Agreement, while any profits and
losses in connection with the Target Shares occurred after the Delivery
Date shall belong to and be borne by Sinopec Corp.
5.4 Termination
If completion does not occur on 30 June 2004 or the other date agreed by
the parties (whichever is later), any party may terminate the
Acquisition Agreement in writing, or before the Delivery Date, any party
to the Acquisition Agreement may give written notice to the defaulting
party to rectify a material breach committed by it. If the defaulting
party has not rectified the breach within 30 days following receipt of
the written notice from the other party and the non-defaulting party
agrees to terminate the Acquisition Agreement, or before the Delivery
Date, Sinopec Corp. and Sinopec Group Company agree in writing to the
early termination of the Acquisition Agreement. Under the Acquisition
Agreement, the defaulting party has to compensate the non-defaulting
party. The actual amount of compensation has to be determined by
arbitration and will not exceed the consideration for the Acquisition.
6. EFFECT OF THE CONNECTED TRANSACTION ON SINOPEC CORP. AND PURPOSES
6.1 Reasons for the Acquisition
(a) Acquire good quality assets to enhance Sinopec Corp.'s
competitiveness in the area of lubricant and grease
Jinzhi Company has strong advantageous edges in the lubricant and
grease industry. Through the Acquisition, Sinopec Corp. can fully
ultilise the existing system of supply, production, sales,
research and development of Jinzhi Company to provide better asset
allocation and enhance the production, research and development
capabilities of Sinopec Corp. in the area of lubricant and grease.
(b) Rationalise low cost and expansion plan and economic efficiency
Through the Acquisition, Sinopec Corp. can enhance its capacity in
the area of lubricant and grease quickly at a lower cost, and
rationalize its economic efficiency.
(c) Consolidate resources and reduce competition
Through the Acquisition, the assets and business in relation to
lubricant and grease owned by Yanhua will be injected into Sinopec
Corp., thereby reducing the competition between Sinopec Corp. and
Sinopec Group Company in the area of lubricant and grease and the
number of connected transactions.
6.2 Impact of the Acquisition on Sinopec Corp.
(a) The Acquisition will eliminate the competition with Sinopec Group
Company in the area of lubricant and grease, and improve Sinopec
Corp.'s independence in operations and strengthen the level of
trust of investors and supervisory bodies on the compliance of
operational regulations and system of Sinopec Corp. after listing.
(b) After the completion of the Acquisition, Sinopec Corp. will become
the largest producer of lubricant and grease in Asia and China.
Sinopec Corp. will further enhance its production capacity and
market share in lubricant and grease and strengthen the
controlling capacity in the relevant market and competitiveness.
(c) Taking the opportunity of the cyclical recovery of the
petrochemical industry and the speedy development of the
automobile market in China, the Acquisition will enhance the
production capacity of Sinopec Corp. in the area of lubricant and
grease and profitability with a minimal impact on its financial
positions. This will enable Sinopec Corp. to rationalize its low
cost and development plan and to strengthen its economic
efficiency.
Sinopec Corp. is proposing to liquidate or dissolve Jinzhi Company which
will become a branch of Sinopec Corp. on or after the Delivery Date.
7. OPINION OF THE INDEPENDENT FINANCIAL ADVISER
The local independent financial adviser China Dragon Securities Co.,
Limited is of the view that the Acquisition is conducted strictly in
accordance with the relevant State laws, regulations and regulatory
documents and the Articles of Association of Sinopec Corp. The
Acquisition is based on the valuation assessed by the relevant valuation
bodies (which possess the qualification to do securities business) and
reported to the relevant departments for reference. In addition, the
overall market operation environment, profitability and development
potential of the Target Shares have been considered. The consideration
for the connected transaction has been determined by adopting the
valuation method that is commonly used internationally, and is fair and
reasonable to the shareholders of Sinopec Corp. The Acquisition will not
damage the legitimate interests of the minority shareholders and
Independent Shareholders of Sinopec Corp. After the completion of the
Acquisition, the reputation of Sinopec Corp. can be enhanced in both the
domestic and international capital markets; the competition and the
number of connected transactions between Sinopec Corp. and Sinopec Group
and its subsidiary enterprises can be reduced; Sinopec Corp. can
increase its control and competitiveness in the lubricant and grease
market. All these are favourable to the continuous, steady and healthy
development of Sinopec Corp. and are consistent with the interests of
all shareholders of Sinopec Corp.
8. OPINION OF THE INDEPENDENT DIRECTORS
The independent directors of Sinopec Corp., Messrs. Chen Qingtai, Ho Tsu
Kwok Charles, Shi Wanpeng and Zhang Youcai, expressed their views on the
connected transaction after reviewing the opinion of the independent
financial adviser. They approved the Acquisition on the basis that they
consider that the Acquisition (including the pricing of the Acquisition
and the terms of the Acquisition Agreement) has been conducted on normal
commercial terms, the pricing is fair and reasonable, and accordingly,
the Acquisition is in the interests of Sinopec Corp. and its
shareholders. They did not discover anything detrimental to the
interests of the Independent Shareholders and Sinopec Corp.
9. LIST OF DOCUMENTS FOR INSPECTION
The following documents will be available for inspection during normal
working hours at the legal address of Sinopec Corp. from the date of
this announcement:
(1) the Acquisition Agreement signed by Sinopec Corp. and Sinopec
Group Company;
(2) the resolution passed by the Board on 26 March 2004;
(3) the opinion of the independent directors of Sinopec Corp.;
(4) Zhong Zheng Ping Bao Zi (2004) No. 012 issued by Beijing Zhongzheng
Valuation Co., Ltd.;
(5) property valuation report of Zhong Di Hua Xia [Ping] Zi [2004]
Nos. 36, 37 and 38 issued by Beijing Zhongdi Huaxia Valuation
Consultation Centre Co., Ltd.;
(6) the audited Financial Report (Zhong Lei Shen Zi (2004) No.1046) of
Jinzhi Company prepared in accordance with the PRC Accounting
Rules and Regulations and issued by Zhong Lei Certified Public
Accountants Company Limited; and
(7) report of the independent financial adviser issued by China Dragon
Securities Co., Limited.
By Order of the Board
CHEN GE
Secretary to the Board of Directors
Beijing, PRC, 26 March 2004
Document (5)
CHINA PETROLEUM & CHEMICAL CORPORATION
(a joint stock limited company
incorporated in the People's Republic of China with limited liability)
Results for the Year Ended 31 December 2003
Section 1. IMPORTANT NOTICE
1.1 The Board of Directors of China Petroleum & Chemical Corporation
("Sinopec Corp.") and its Directors warrant that there are no
material omissions from, or misrepresentations or misleading
statements contained in this announcement, and jointly and
severally accept full responsibility for the authenticity,
accuracy and completeness of the information contained in this
announcement.
This announcement is a summary of the annual report. The entire
report is also contained in the website of the Shanghai Stock
Exchange (www.sse.com.cn) and Sinopec Corp. (www.sinopec.com.cn).
Investors should read the annual report for the year 2003 for more
details.
1.2 The annual report for this year has been approved unanimously at
the seventh meeting of the second session of the Board. No
Director has any doubt as to, or the inability to warrant, the
truthfulness, accuracy and completeness of the annual report.
Mou Shuling, Liu Kegu and Ho Tsu Kwok Charles, Directors, could
not attend the meeting of the Board for reason of official duties.
Mou Shuling and Liu Kegu, Directors, appointed and authorised Mr.
Wang Jiming, Vice Chairman, and Ho Tsu Kwok Charles, Director,
appointed and authorised Chen Qingtai, Director, to vote on their
behalf at the meeting of the Board.
1.3 The financial statements for the year ended 31 December 2003 of
Sinopec Corp. and its subsidiaries ("the Company") prepared in
accordance with the PRC Accounting Rules and Regulations and the
International Financial Reporting Standards ("IFRS") have been
audited by KPMG Huazhen and KPMG, respectively, and both firms
have issued unqualified opinions on such financial statements.
1.4 Mr. Chen Tonghai (Chairman of the Board), Mr. Wang Jiming (Vice
Chairman and President), Mr. Zhang Jiaren (Director, Senior Vice
President and Chief Financial Officer) and Mr. Liu Yun (Head of
the Accounting Department) warrant the authenticity and
completeness of the financial statements contained in the annual
report for the year ended 31 December 2003.
Section 2. BASIC INFORMATION ABOUT SINOPEC CORP.
2.1 Basic information
STOCK NAME SINOPEC CORP SINOPEC CORP SINOPEC CORP SINOPEC CORP
STOCK CODE 0386 SNP SNP 600028
PLACE OF LISTING Hong Kong Stock New York Stock London Stock Shanghai Stock
Exchange Exchange Exchange Exchange
REGISTERED
ADDRESS AND
OFFICE ADDRESS 6A Huixindong Street, Chaoyang District, Beijing, China
POSTCODE 100029
WEBSITE http://www.sinopec.com.cn
E-MAIL ir@sinopec.com.cn/media @sinopec.com.cn
2.2 Contact persons of Sinopec Corp. and means of communication
AUTHORISED REPRESENTATIVES SECRETARY TO THE REPRESENTATIVE
BOARD ON SECURITIES
MATTERS
NAME Mr. Wang Jiming Mr. Chen Ge Mr. Chen Ge Mr. Huang Wensheng
ADDRESS 6A Huixindong Street, Chaoyang District, Beijing, China
TEL 86-10-6499 0060 86-10-6499 0060 86-10-6499 0060 86-10-6499 0060
FAX 86-10-6499 0022 86-10-6499 0022 86-10-6499 0022 86-10-6499 0022
E-MAIL ir@sinopec.com.cn/media @sinopec.com.cn
Section 3. SUMMARY OF ACCOUNTING DATA AND FINANCIAL INDICATORS
3.1 Principal accounting data and financial indicators prepared under
the PRC Accounting Rules and Regulations for the year 2003
3.1.1 Principal accounting data
FOR THE
YEAR FOR THE YEAR ENDED FOR THE YEAR ENDED
ENDED 31 31 DECEMBER 2002 INCREASE/ 31 DECEMBER 2001
DECEMBER AFTER BEFORE DECREASE AFTER BEFORE
ITEM 2003 ADJUSTMENT ADJUSTMENT (%) ADJUSTMENT ADJUSTMENT
Income from principal
operations (RMB million) 417,191 324,184 324,184 28.69 304,347 304,347
Profit before taxation
(RMB million) 30,015 22,012 22,012 36.36 21,651 21,651
Net Profit (RMB million) 19,011 14,121 14,121 34.63 14,018 14,018
Net profit before
non-operating
profits/losses (RMB
million) 22,307 14,582 14,582 52.98 14,619 14,619
Net cash flow from
operating activities
(RMB million) 64,448 60,069 60,069 7.29 59,692 59,692
FOR THE FOR THE YEAR ENDED FOR THE YEAR ENDED
YEAR ENDED 31 DECEMBER 2002 INCREASE/ 31 DECEMBER 2001
31 DECEMBER AFTER BEFORE DECREASE AFTER BEFORE
ITEM 2003 ADJUSTMENT ADJUSTMENT (%) ADJUSTMENT ADJUSTMENT
Total assets (RMB million) 390,213 368,375 368,375 5.93 360,294 360,294
Shareholders' funds
(excluding minority
interests) (RMB million) 162,946 151,717 146,515 7.40 145,975 139,039
3.1.2 Principal financial indicators
FOR THE FOR THE YEAR ENDED FOR THE YEAR ENDED
YEAR ENDED 31 DECEMBER 2002 INCREASE/ 31 DECEMBER 2001
31 DECEMBER AFTER BEFORE DECREASE AFTER BEFORE
ITEM 2003 ADJUSTMENT ADJUSTMENT (%) ADJUSTMENT ADJUSTMENT
Earnings per share (RMB)
(Fully diluted) 0.219 0.163 0.163 34.36 0.162 0.162
Return on net assets (%)
(Fully diluted) 11.667 9.307 9.638 2.36 9.603 10.082
Return (adjusted for
non-operating
profits/(losses) on net
assets (%)
(Fully diluted) 13.690 9.611 9.953 4.08 10.015 10.514
(Weighted average) 14.137 9.787 10.040 4.35 10.787 11.061
Net cash flow from
operating activities per
share (RMB) 0.743 0.693 0.693 7.22 0.688 0.688
FOR THE FOR THE YEAR ENDED FOR THE YEAR ENDED
YEAR ENDED 31 DECEMBER 2002 INCREASE/ 31 DECEMBER 2001
31 DECEMBER AFTER BEFORE DECREASE AFTER BEFORE
ITEM 2003 ADJUSTMENT ADJUSTMENT (%) ADJUSTMENT ADJUSTMENT
Net assets per share 1.879 1.750 1.690 7.37 1.684 1.604
(RMB) (Fully diluted)
Adjusted net assets per 1.850 1.736 1.676 6.57 1.664 1.584
share (RMB)
Notes:
(i) The Company adopted the revised "Accounting Standard for
Business Enterprises - Events ocurring after the balance
sheet date" that resulted in a change in accounting policy
which has been applied retrospectively. Please refer to Note
2 of the financial statements prepared under the PRC
Accounting Rules and Regulations for details.
3.1.3 Items under non-operating profits/losses:
FOR THE YEAR ENDED 31
DECEMBER 2003
(INCOME)/EXPENSE
(RMB MILLION)
Loss on disposal of long-term
equity investments 23
Written back of provisions on
assets provided in previous years (205)
Non-operating expenses (excluding
normal provisions on assets
provided in accordance with the
Accounting Regulations for
Business Enterprises) 5,394
of which: loss on disposal of fixed assets 3,459
employee reduction expenses 1,014
donations 132
Non-operating income (292)
Tax effect (1,624)
Total 3,296
3.2 Principal accounting data and financial indicators prepared under
International Financial Reporting Standards ("IFRS") for the year
2003
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED INCREASE/ YEAR ENDED
ITEM 31 DECEMBER 31 DECEMBER DECREASE 31 DECEMBER
2003 2003 (%) 2001
Operating profit (RMB million) 37,267 28,679 29.95 27,669
Profit attributable to
shareholders (RMB million) 21,593 16,315 32.35 16,246
Return on capital employed* (%) 9.04 7.08 1.96 6.79
Basic earnings per share (RMB) 0.249 0.188 32.45 0.187
Net cash flow from operating
activities per share (RMB) 0.699 0.635 10.08 0.654
* Return on capital employed = operating profit x (1-income tax
rate)/capital employed
AS AT 31 AS AT 31 INCREASE/ AS AT 31
DECEMBER DECEMBER DECREASE DECEMBER
ITEM 2003 2002 (%) 2001
Current assets (RMB million) 99,328 103,982 (4.48) 112,070
Current liabilities (RMB million) 122,005 119,440 2.15 127,443
Total Assets (RMB million) 400,818 389,343 2.95 380,745
Shareholders' funds (excluding minority
interests) (RMB million) 167,899 163,823 2.49 156,704
Net assets per share (RMB) 1.937 1.889 2.54 1.807
Adjusted net assets per share (RMB) 1.908 1.876 1.71 1.788
3.3 Material differences between the PRC Accounting Rules and
Regulations and IFRS
|X| Applicable [ ] Not applicable
THE PRC ACCOUNTING
RULES AND REGULATIONS IFRS
Net profit (RMB million) 19,011 21,593
Explanation on the differences See Subsection 9.2.3
Section 4. CHANGES IN SHARE CAPITAL AND SHAREHOLDINGS OF THE PRINCIPAL
SHAREHOLDERS
4.1 Statement of changes in structure of share capital
[ ] Applicable |X| Not applicable
(Unit: million shares)
INCREASE/DECREASE
CAPITALIZATION
PRIOR TO OF SURPLUS AFTER
CHANGES PLACING BONUS RESERVES IPO OTHERS SUB-TOTAL CHANGES
1. Shares not listed
(i) Promoter shares 47,742.561 - - - - - - 47,742.561
of which:
State-owned shares 47,742.561 - - - - - - 47,742.561
(ii)Others 19,379.390 - - - - - - 19,379.390
Total number of 67,121.951 - - - - - - 67,121.951
shares not in
circulation
2. Shares listed and
in circulation
(i)Publicly listed 2,800.000 - - - - - - 2,800.000
domestic
shares ("A Shares")
(ii)Overseas listed 16,780.488 - - - - - - 16,780.488
foreign shares ("H
shares")
Total number of 19,580.488 - - - - - - 19,580.488
shares listed and in
circulation
3. Total number of 86,702.439 - - - - - - 86,702.439
shares
4.2 Shareholding of top ten shareholders and top ten shareholders with
tradable shares
Number of shareholders at the end of the reporting period: 348,255
in total of which 334,867 holders of domestic shares and 13,388
holders of foreign shares
Shareholding of top ten shareholders at 31 December 2003
NUMBER
OF TYPE OF NUMBER OF
SHARES SHARES PLEDGED
HELD AT (IN SHARES OR
INCREASE/ THE YEAR CIRCULATION SHARES
DECREASE END TOTAL OR NOT SUBJECT TYPE OF
FULL NAMES OF (THOUSAND (THOUSAND SHAREHOLDINGS IN TO SHARES
SHAREHOLDERS SHARES) SHARES) (%) CIRCULATION) LOCK-UPS HELD
China Petrochemical Not in No State owned
Corporation - 47,742,561 55.06 circulation shares
In
HKSCC(Nominees)Limited 2,691,475 11,639,618 13.42 circulation Not known H shares
Not in State owned
China Development Bank - 8,775,570 10.12 circulation No shares
China Cinda Asset Not in No State owned
Management Corp. - 8,720,650 10.06 circulation shares
ExxonMobil Far East In Not known H shares
Holdings Ltd. - 3,168,529 3.65 circulation
In
bp Oil Espana S.A. - 1,829,229 2.11 circulation Not known H shares
China Orient Asset Not in No State owned
Management Corp. - 1,296,410 1.50 circulation shares
Guo Tai Jun An State owned
Securities Corp. 10,428 597,188 0.69 (Note) No legal person
shares and
A shares
Social Security Fund In
Portfolio 107 (77,900) 72,100 0.08 circulation Not Known A shares
Xinghe Securities In
Investment Fund 33,656 61,948 0.07 circulation Not Known A shares
Explanation for the There are no connections among corporate shareholders.
relationships among the Sinopec Corp. is not aware of any connection or activities
top ten shareholders in concert between other holders of shares in circulation
or activities and is not aware of any pledges, lock-ups or trust of
in concert shareholdings of holders of H Shares. Sinopec Corp. is not
aware of any interests which are discloseable pursuant to
section 336 of the Securities and Futures Ordinance, Cap 571
of the Laws of Hong Kong. Sinopec Corp. is not aware of any
pledges, lock-ups or trust of shareholdings of holders of A Shares.
Note: Including 586.76 million Stated-owned Shares and 10.428 million A Shares
TOP TEN SHAREHOLDERS WITH TRADABLE SHARES
NUMBER OF
INCREASE/ SHARES
TYPE OF DECREASE HELD TOTAL
SHARES (THOUSAND (THOUSAND SHAREHOLDINGS
FULL NAMES OF SHAREHOLDERS HELD SHARES) SHARES) %
HKSCC (Nominees) Limited H Shares 2,691,475 11,639,618 13.42
ExxonMobil Far East Holdings Ltd. H Shares - 3,168,529 3.65
bp Oil Espana S.A. H Shares - 1,829,229 2.11
Social Security Fund Portfolio 107 A Shares (77,900) 72,100 0.08
Xinghe Securities Investment Fund A Shares 33,656 61,948 0.07
Qingdao Port Authority A Shares - 60,000 0.07
Guangfa Jufu Securities Investment Fund A Shares 47,800 47,800 0.06
Yunan Hongta Investment Co. A Shares - 40,000 0.05
Ningbo Port Authority A Shares (2,350) 37,650 0.04
Tianyuan Securities Investment Fund A Shares 27,643 36,102 0.04
Explanation for the There are no connections among corporate shareholders. Sinopec
relationships among the top Corp. is not aware of any connection or activities in concert
ten shareholders with shares between other holders of shares in circulation and is not aware
in circulation or activities of any pledges, lock-ups or trust of shareholdings of holders of
in concert H Shares. Sinopec Corp. is not aware of any interests which are
discloseable pursuant to section 336 of the Securities and
Futures Ordinance, Cap 571 of the Laws of Hong Kong. Sinopec
Corp. is not aware of any pledges, lock-ups or trust of
shareholdings of holders of A Shares.
4.3 Information about the controlling shareholder and the actual
controlling persons
4.3.1 Changes of the controlling shareholder and the actual
controlling persons in the reporting period
|_| Applicable |X| Not applicable
4.3.2 Basic information about the controlling shareholder and the other
actual controlling persons
(1) Controlling Shareholder
The controlling shareholder of Sinopec Corp. is China
Petrochemical Corporation ("Sinopec Group Company").
Established in July 1998, Sinopec Group Company is the State
authorized investment arm and a State-owned controlling
company. Its registered capital is RMB 104.9 billion, and
the legal representative is Mr Chen Tonghai. Through
reorganization in 2000, Sinopec Group Company injected its
principal petroleum and petrochemical operations into
Sinopec Corp., and retained operations in certain
petrochemical facilities and smaller-scale refineries. It
provides well-drilling services, oil testing services,
in-well operation services, services in connection with
manufacturing and maintenance of production equipment,
engineering construction and utility services and social
services.
(2) Basic Information of Other Legal Person Shareholders Holding
10% or More of Shares of Sinopec Corp., Other Than HKSCC
(Nominees) Limited
i. China Development Bank: established in 1994, with a
registered capital of RMB 50 billion. Its authorised
legal representative is Mr Chen Yuan. China
Development Bank is primarily engaged in the
management and operation of the operating construction
funds and interest discount funds within the State
budget; providing loans to significant infrastructure
industries and projects and pillar industries;
handling of re-lending loans from foreign governments
and international financial institutions; issuance of
corporate bonds; appraisal, consultation and
guarantees of construction project loans; underwriting
enterprise bonds and indirect syndications.
ii. China Cinda Asset Management Corp.: China Cinda Asset
Management Corp. was established on 20 April 1999,
with a registered capital of RMB 10 billion. Its legal
representative is Mr Zhu Dengshan. China Cinda Asset
Management Corp. is primarily engaged in the
acquisition and operation of non-performing assets
segregated from China Construction Bank; debt
collections, and exchange, transfer and sale of
assets; debt reorganization and enterprise
restructuring; debt-equity swap and holding of equity
for certain period; securitisation of assets; listing
recommendations within the scope of asset management
and underwriting of bonds and stocks; issuance of
bonds and commercial borrowings; borrowing from
financial institutions; valuation of assets and
projects; enterprise audits, bankruptcy and liquidation.
Section 5. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT AND EMPLOYEES
5.1 Information on the changes in the shares held by the
directors, supervisors and senior management and employees
[ ] Applicable |X| Not applicable
5.2 Information on the directors, supervisors and senior management
and the changes in the shares held by them
5.2.1 Information of Directors
SINOPEC CORP.'S
POSITION WITH |SHARES HELD REASON
NAME GENDER AGE SINOPEC CORP. TERM OF OFFICE |(AT 31 DECEMBER) OF CHANGE
2002 2003
Chen Tonghai Male 55 Chairman Apr.2003-Apr.2006 - - -
Wang Jiming Male 61 Vice Chairman, Apr.2003-Apr.2006 - - -
President
Mou Shuling Male 59 Director, Apr.2003-Apr.2006 - - -
Senior Vice
President
Zhang Jiaren Male 59 Director, Apr.2003-Apr.2006 - - -
Senior Vice
President and
Chief
Financial
Officer
Cao Xianghong Male 58 Director, Apr.2003-Apr.2006 - - -
Senior Vice
President
Liu Genyuan Male 58 Director Jun.2003-Apr.2006 - - -
Liu Kegu Male 56 Director Jun.2003-Apr.2006 - - -
Fan Yifei Male 40 Director Apr.2003-Apr.2006 - - -
Chen Qingtai Male 66 Independent Apr.2003-Apr.2006 - - -
Non-executive
Director
Ho Tsu Kwok Male 54 Independent Apr.2003-Apr.2006 - - -
Charles Non-executive
Director
Shi Wanpeng Male 66 Independent Apr.2003-Apr.2006 - - -
Non-executive
Director
Zhang Youcai Male 62 Independent Apr.2003-Apr.2006 - - -
Non-executive
Director
Cao Yaofeng Male 50 Employee Apr.2003-Apr.2006 - - -
Representative
Director
Note: Mr. Liu Genyuan, Mr. Liu Kegu and Mr. Fan Yifei receive
salary from China Petrochemical Corporation, China
Development Bank and China Construction Bank, respectively.
5.2.2 Information of Supervisors
SINOPEC CORP.'S
POSITION WITH |SHARES HELD REASON
NAME GENDER AGE SINOPEC CORP. TERM OF OFFICE |(AT 31 DECEMBER) OF CHANGE
2002 2003
Wang Zuoran Male 53 Chairman of Apr.2003-Apr.2006 - - -
the
Supervisory
Committee
Zhang Chongqing Male 59 Supervisor Apr.2003-Apr.2006 - - -
Wang Peijun Male 58 Supervisor Apr.2003-Apr.2006 - - -
Wang Xianwen Male 59 Supervisor Apr.2003-Apr.2006 - - -
Zhang Baojian Male 59 Supervisor Apr.2003-Apr.2006 - - -
Kang Xianzhang Male 55 Supervisor Apr.2003-Apr.2006 - - -
Cui Jianmin Male 71 Independent Apr.2003-Apr.2006 - - -
Supervisor
Li Yonggui Male 63 Independent Apr.2003-Apr.2006 - - -
Supervisor
Su Wensheng Male 47 Employee Apr.2003-Apr.2006 - - -
Representative
Supervisor
Cui Guoqi Male 50 Employee Apr.2003-Apr.2006 - - -
Representative
Supervisor
Zhang Xianglin Male 57 Employee Apr.2003-Apr.2006 - - -
Representative
Supervisor
Zhang Haichao Male 46 Employee Apr.2003-Apr.2006 - - -
Representative
Supervisor
5.2.3 Other Members of the Senior Management and Employees
SINOPEC CORP.'S
POSITION WITH |SHARES HELD REASON
NAME GENDER AGE SINOPEC CORP. TERM OF OFFICE |(AT 31 DECEMBER) OF CHANGE
2002 2003
Wang Tianpu Male 41 Senior Vice Apr.2003 - - -
President
Wang Zhigang Male 47 Vice President Apr.2003 - - -
Zhang Jianhua Male 40 Vice President Apr.2003 - - -
Cai Xiyou Male 42 Vice President Apr.2003 - - -
Li Chunguang Male 48 Vice President Apr.2003 - - -
Chen Ge Male 42 Secretary to Apr.2003-Apr.2006 - - -
the Board of
Directors
5.3 Information about the directors and supervisors that are also
employed by any shareholder unit
|X| Applicable |_| Not applicable
WHETHER THEY
RECEIVE
REMUNERATIONS
AND ALLOWANCES
POSITION WITH FROM
NAME OF EMPLOYING EMPLOYING SHAREHOLDER
NAME SHAREHOLDER HAREHOLDER UNIT TERM OF OFFICE UNIT (YES/NO)
Chen Tonghai Sinopec Group Company President Apr.2003-Apr.2006 No
Liu Genyuan Sinopec Group Company Managing Vice Jun.2003-Apr.2006 No
President
Liu Kegu China Development Bank Vice President Jun.2003-Apr.2006 Yes
Fan Yifei China Cinda Asset Assistant to the Apr.2003-Apr.2006 Yes
Management Corp. Governor of China
Construction Bank
Wang Zuoran Sinopec Group Company Director of Apr.2003-Apr.2006 No
Disciplinary
Supervisory
Committee
Zhang Chongqing Sinopec Group Company Director of Apr.2003-Apr.2006 No
General
Administrative
Office
Wang Peijun Sinopec Group Company Director of Human Apr.2003-Apr.2006 No
Resources
Department
Zhang Baojian Sinopec Group Company Deputy Chief Apr.2003-Apr.2006 No
Accountant
5.4 Annual remunerations for the directors, supervisors and senior
management and employees
Sinopec Corp. has established and continuously improved a fair and
transparent performance evaluation standard and an incentive and
constraint mechanism for the directors, supervisors and other senior
management officers. It has implemented such incentive policies as the
Performance Evaluation and Salary Incentive Plan for the Senior
Management of Sinopec Corp.", "the Plan of Stock Appreciation Rights for
the Senior Management of Sinopec Corp.". and "the Measures on the First
Granting of Stock Appreciation Rights to the senior Management of
Sinopec Corp"., all of which were approved by the Fourth Extraordinary
General Meeting of Shareholders of Year 2000 held on 7 September 2000.
In 2003, Sinopec Corp. implemented the incentive policies such as "the
Implementing Measures of Salary for Senior Management of Sinopec Corp.
(Tentative)"
Total annual remuneration RMB4,190,754
Total annual remuneration for the three highest paid directors RMB717,476
Total annual remuneration for the three highest paid senior
management and employees RMB852,740
Total allowances for independent directors and independent supervisors RMB165,000
Other benefits for independent directors Nil
Names of the directors and supervisors who receive no remunerations Liu Genyuan,
and allowances from Sinopec Corp. Liu Kegu,
Fan Yifei,
Chen Qingtai,
Ho Tsu Kwok Charles,
Shi Wanpeng, Zhang
Youcai,
Cui Jianmin,
Li Yonggui
Levels of remunerations Number of persons
Above RMB300 thousand 2
RMB200 to 300 thousand 4
RMB150 to 200 thousand 15
RMB100 to 150 thousand 1
5.5 Information on new appointment or removal of directors, supervisors
and senior management and employees
The first Extraordinary General Meeting of Sinopec Corp. for the year
2003 was held on 22 April 2003 at which the second session of the Board of
Directors and the Supervisory Committee of Sinopec Corp. were elected
whereby Messrs. Chen Tonghai, Wang Jiming, Mou Shuling, Zhang Jiaren, Cao
Xianghong, Fan Yifei, Chen Qingtai, Ho Tsu Kwok Charles, Shi Wanpeng, Zhang
Youcai and Cao Yaofeng were appointed as the members of the second session
of the Board of Directors of Sinopec Corp., and Messrs. Wang Zuoran, Zhang
Chongqing, Wang Peijun, Wang Xianwen, Zhang Baojian, Kang Xianzhang, Cui
Jianmin, Li Yonggui, Su Wensheng, Cui Guoqi, Zhang Xianglin and Zhang
Haichao were appointed as the members of the second session of the
Supervisory Committee of Sinopec Corp.
On the same date, the first meeting of the second session of the Board
of Directors was held, whereby Mr. Chen Tonghai was elected as the chairman
and Mr. Wang Jiming was elected as the vice chairman, Mr. Wang Jiming was
appointed as the president; Mr. Mou Shuling, Mr. Zhang Jiaren, Mr. Cao
Xianghong and Mr. Wang Tianpu were appointed as senior vice presidents; Mr.
Wang Zhigang, Mr. Zhang Jianhua, Mr. Cai Xiyou and Mr. Li Chunguang were
appointed as vice presidents; Mr. Zhang Jiaren was also appointed as the
chief financial officer and Mr. Chen Ge was appointed as the secretary of
the Board of Directors.
The 2002 Annual General Meeting of Sinopec Corp. was held on 10 June
2003. Mr. Liu Genyuan and Liu Kegu were appointed as directors of the
second session of the Board of Directors.
Section 6. REPORT OF THE BOARD OF DIRECTORS
6.1 Business review in the reporting period
In 2003, despite the negative influence exerted by SARS, China's
economy still sustained a rapid and healthy growth with a GDP growth rate
of 9.1%, and domestic demands for petroleum and petrochemical products
increased accordingly. According to the estimation of the Company, the
domestic consumption of refined oil products (gasoline, diesel oil and
kerosene including jet fuel) reached 133.97 million tonnes in 2003, up by
7.22% over 2002 whilst the domestic apparent consumption of petrochemical
products (in terms of ethylene) reached 15.055 million tonnes, up by 9.65%
over 2002.
In 2003, the Company overcame the unfavorable market condition
resulting from the significant fluctuations of international oil prices
which affected its production and business operation, and also underwent
severe challenges characterized by the slow down in domestic demands for
refined oil products in the first half of 2003 due to SARS and dramatic
demands growth in the second half of 2003. Faced with the complex and
ever-changing market situations as such, the Company closely monitored the
domestic and international market situation, adjusted its operating
strategy with flexibility, and ensured safety in production. In addition,
the Company adjusted its asset structure, increase the total production and
sales volume, further reduced costs and headcount, and improved its
economic and technical indicators. Thanks to the joint efforts of our
employees, the Company achieved reasonably sound operating results. The
Exploration and Production Segment continued to post a solid performance.
The Refining Segment and Marketing & Distribution Segment recorded a stable
growth of their operating results. The Chemicals Segment also posted a
growth in profit at a relatively quick pace. Overall, advantage of
integrated operation has gradually emerged.
6.1.1 Review of Market Environment
(1) Crude oil market
Due to various factors, the international crude oil prices
in 2003 remained at a relatively high level. The Platts
global spot price averaged US$ 28.83 per barrel, up by US$
3.87 per barrel over 2002. The domestic crude oil price has
basically followed the trend in the international market.
Average realized price of crude oil produced by the Company
was US$ 27.56 per barrel, up by US$ 5.14 per barrel over
2002.
[GRAPHIC OMITTED]
Price Trend of International Crude Oil
(2) Refined oil products market
In 2003, domestic prices of refined oil products underwent
relatively slight changes while domestic demand for refined
oil products grew at a higher rate. In particular after
SARS, demand for refined oil products surged dramatically as
a result of rapid economic growth, increased number of
automobile and power supply shortage in certain parts of the
country.
(3) Chemicals market
In 2003, China's domestic demands for chemical products
continued to grow robustly. The annual apparent consumption
of synthetic resins, synthetic fibers, monomer and polymer
for synthetic fibers, and synthetic rubbers amounted to
29.02 million tonnes, 12.25 million tonnes, 19.12 million
tonnes and 2.20 million tonnes, respectively, representing
an increase of 11.2%, 14.7%, 11.9% and 8.9%, respectively,
over 2002.
As the global chemical business gradually recovered, the
gross margin of chemical production improved. The domestic
price trend of the major chemical products basically
followed the trend on the international market. The average
realized prices of synthetic resins and synthetic fibers,
which are the principal chemical products of the Company,
increased by 15.2% and 14.3%, respectively, over 2002.
[GRAPHIC OMITTED]
Monthly Average Prices of the Company's Major Chemical
Products in 2002 and 2003
6.1.2 Review of Production Operations
In 2003, the Company continued to closely follow the market demands,
and proactively implemented its operating strategies, which are "expanding
resources, expanding markets, reducing costs and disciplining investments",
hence good achievements have been attained in both business operations and
reform development.
(1) Exploration and production segment
In 2003, the Company seized the opportunity of high crude oil
prices, and made further efforts in exploration and achieved
relatively good results in exploration, development and
production of crude oil and natural gas.
In connection with exploration activities, the Company
completed a planar seismic belt of 29,168 kilometers, a three-
dimensional seismic belt of 7,927 square kilometers and drilled
550 test wells, with a drilling footage of 1,443 kilometers.
Certain achievements were attained in terms of exploration of
hidden oil reserves in the newly blocks, buried hill and new
series of strata within the Shengli Oil Field in East China,
which enabled the Company to deliver a stable production and
enhanced its reserves in the near run. In western part of
China, the Company identified three zones (Tahe Region, Tazhong
region in Tarim Basin, and the Eastern Part in the Hinterlands
of Junger basin) as the important areas where more oil reserves
could be discovered, thus providing important supplemental
resources for addition of oil reserves as well as production of
crude oil and natural gas in the last two years of the Tenth
Five-Year Plan period. In South China and Ordos Basin, new
progress was made in terms of exploration of natural gas, thus
providing resources for the Company to expand its natural gas
business. All these efforts resulted in the Company's
improvement in reserve profile of crude oil and natural gas,
making it possible to enhance its future oil reserve and
production. Owing to the joint venture for the development of
oil and natural gas at Xihu Trough, East China Sea, the
Company's proved reserves of crude oil were reduced by 25.4
million barrels, and proved reserves of natural gas were
reduced by 649 billion cubic feet. In addition, in accordance
with the evaluation guideline used by the Company, those
undeveloped reserves of crude oil and natural gas over 3 years
were re-categorized. For these reasons, the newly added proved
reserves of crude oil and natural gas in 2003 declined. In
terms of development, the Company drilled 1,880 development
wells in 2003, with a drilling footage of 4,258 kilometers and
newly built crude oil and natural gas production capacity of
crude oil and natural gas by 5.93 million tonnes per year, and
890 million cubic meters per year respectively. In 2003, the
Company's production of crude oil and natural gas reached
270.96 million respectively, barrels and 187.7 billion cubic
feet, representing an increase of 0.43% and 4.98%,
respectively, over 2002.
Summary of operations of the exploration and production segment
CHANGE FROM
2002 TO 2003
2003 2002 2001 (%)
Crude oil production (mmbbls) 270.96 269.80 269.16 0.43
Natural gas production (bcf) 187.7 178.8 162.8 4.98
Newly added proved reserves of
crude oil (mmbbls) 208 375 316 (44.53)
Newly added proved reserves of
natural gas (bcf) (254.3) 20.2 309.0 (1,358.9)
Year end proved reserves of crude
oil (mmbbls) 3,257 3,320 3,215 (1.90)
Year end proved reserves of natural
gas (bcf) 2,887.6 3,329.4 3,488.0 (13.27)
Year end proved reserves of crude
oil and natural gas (mmboe) 3,738 3,875 3,796 (3.54)
(2) Refining segment
In 2003, faced with ever-changing market situations, the
Company further optimized its allocation of crude oil resources
and improved coordination practices to ensure its oil refining
facilities were operating at high load. In 2003, the Company
processed 116.26 million tonnes of crude oil, up by 10.71% over
2002. The Company endeavored to adjust its product mix,
increased the production of higher value-added products and
chemical feedstock to meet market demands. Meanwhile, the
Company made efforts to revamp its existing oil refining
facilities to improve the product quality. The quality of its
gasoline and diesel has met the required new national
standards. The Company produced 9.23 million tonnes of
high-grade gasoline, up by 38.8% over 2002. The Company
continued its reform in the lubricating oil marketing system,
integrated its resources, launched a unified brand onto the
market, and managed to expand its market shares. In addition,
the company continued to reinforce management practices and
scientific and technological advancement. As a result, all of
the major economic and technical indicators of the Refining
Segment all improved. In 2003, the light product yield reached
73.80%, up by 0.58 percentage point over 2002. The refining
yield reached 92.63%, up by 0.13 percentage point over 2002.
2003 2002 2001 CHANGE FROM
2002 TO 2003
(%)
Crude throughout (mbbls/day) 2341.0 2114.6 2042.4 10.7
of which: sour crude throughout 478.7 402.8 387.6 18.8
(mbbls/day)
Refinery utilization (%) 87.8 79.3 77.9 8.5
percentage
points
Gasoline, diesel and kerosene
including jet fuel (million tonnes)
of which: Gasoline (million tonnes) 21.74 19.62 18.74 10.8
Diesel (million tonnes) 41.67 37.74 37.93 10.4
Kerosene including jet 5.31 5.06 4.47 4.9
fuel (million tonnes)
Chemical feedstock (million tonnes) 16.46 15.04 12.36 9.4
Light product yield (%) 73.8 73.22 72.33 0.58
percentage
points
Refining yield (%) 92.63 92.50 92.23 0.1
percentage
points
Notes:
a) Crude oil processing volume is converted at 1 tonne = 7.35 barrels.
b) All the operating data excluded Xi'an Petrochemical and Tahe
Petrochemical.
(3) Marketing and Distribution segment
In 2003, based on the market demands, the Company made efforts to
expand its total sales volume while further optimizing its
various marketing channels to increase retail sales volume and
distribution volume. In addition, the Company reinforced its
internal management and resource allocation, improved its service
quality, and paid close attention to the coordination between
production and sales. At the same time, the Company further
improved its distribution network by speeding up the construction
of sales outlets, focusing on increasing the number of its petrol
stations along expressways and main roads, and expanding its
presence in rural areas and along the rivers. As a result, the
Company's ability to control the end-customer market has been
reinforced.
In 2003, the total domestic sales volume of refined oil products
reached 75.92 million tonnes, representing an increase of 8.3%
over 2002, of which the retail volume amounted to 38.85 million
tonnes, up by 11.9% over the previous year. The Company's market
share of retail volume in its principal markets reached 69%, up
by 1 percentage over the preceding year. The efficiency of petrol
stations kept growing with the annual throughput per petrol
station reached 1,686 tonnes, up by 8.1% compared with that in
the previous year. The retail sales volume together with direct
distribution volume of refined oil products accounted for 71.36%
of the total domestic sales volume, up by 3.76 percentage over
2002. At the end of 2003, the Company has 24,506 self-operated
petrol stations, and 5,736 franchised petrol stations. In 2003,
the Company adjusted its export volume to keep in line with
market demand. In 2003, the Company exported 6.083 million tonnes
of refined oil products, up by 21.2% over that in 2002.
Summary of Marketing and Distribution Segment
CHANGE FROM
2002 TO
2003 2002 2001 2003(%)
Total domestic sales of refined oil 75.92 70.09 67.74 8.3
products (million tonnes)
of which:
Retail volume (million tonnes) 38.85 34.73 30.43 11.9
Direct Distribution volume (million 15.33 12.63 11.64 21.4
tonnes)
Wholesale volume (million tonnes) 21.74 22.73 25.67 (4.4)
Average annual throughput per
petrol station (tonne/station) 1,686 1,560 1,473 8.1
Number of total petrol stations
under
SINOPEC brand at year-end 30,242 28,127 28,246 7.5
(stations)
of which:
Number of petrol stations operated 24,506 24,000 24,062 2.1
(stations)
Number of franchised petrol 5,736 4,127 4,184 39.0
stations (stations)
Percentage of retail to total 51.2 49.6 44.9 1.6
domestic sales volume (%) percentage
points
(4) Chemicals segment
In 2003, the Company continued to coordinate and optimize supply
of chemical feedstock, and actively promoted its experience in
operating facilities for longer running periods and thus
maintained the high utilization rate of chemical facilities. As a
result, the production of its major petrochemical products has
all increased dramatically. In 2003, the Company produced 3.169
million tonnes of ethylene, up by 16.67% over that in 2002. The
production of its major chemical products such as synthetic
resins, synthetic fibers, monomers and polymers for synthetic
fibers, and synthetic rubber have all increased significantly.
Since the Company resorted to scientific and technological
measures to improve its product mix, the production of higher
value-added products was further enhanced. Furthermore, the
Company actively tapped the market, and managed to register a
growth in terms of the production outputs, prices and sales
volumes of its chemical products. In addition, the Company
proactively carried forward the reform to its distribution system
of chemical products, and established an acrylic fibre marketing
branch, thus making a solid stride forward in terms of reforming
its chemicals marketing system.
PRODUCTION OF MAJOR CHEMICALS
UNIT: 1,000 TONNES
CHANGE FROM
2003 2002 2001 2002 TO 2003(%)
Ethylene 3,169.1 2,716.4 2,153 16.67
Synthetic resins 4,691.0 4,004.8 3,204 17.13
of which: performance compound 2,304.9 1,846.9 1,332 24.80
resins
Synthetic rubbers 501.9 457.7 398 9.66
Monomers and polymers for Synthetic 4,417.5 3,833.5 3,598 15.23
fibers
Synthetic fibers 1,279.5 1,153.0 1,028 10.97
of which: differential fibers 477.4 402 326 18.76
Urea 2,027.6 2,666.3 2,342 (23.95)
Notes: all the operating data excluded Maoming Ethylene.
(5) Technology development
In order to enhance its core competitiveness, the Company
launched an active drive for scientific and technological
innovation and advancement, and has succeeded in implementing a
number of technological projects, including exploration of
concealed oil and gas reserves in tertiary system strata in
Jiyang Trough and related technologies and second generation of
packaged technology for 200,000 tonnes/year loop polypropylene
unit. In addition, a number of technological advancements have
been commercialized, including the detailed profiling and
developing technology for severe heterogeneous petroleum
reserves, flexible and multi-functional catalytic cracking
technologies and 70,000 tonnes/year cyclohexanone oxime
technology. Besides, the technologies such as prospecting and
monitoring the distribution of remaining petroleum reserve at
high water content stage, and catalyst and promoter for olefin
concentration reduction in cat-cracked gasoline were applied on a
wide range. Among others, a series of techniques, which have been
developed solely by the Company, have allowed the Company to
produce gasoline that complies with China's new quality standard
with a lower investment. Besides, the Company also made new
progress in a number of research projects, such as technology for
desulfuration and reduction of olefin concentration in
cat-cracked gasoline by aromatisation. Furthermore, the "Great
Wall" branded specialty lubricant and grease developed by the
Company have been successfully used in China's Shenzhou 5
spaceship.
Major breakthroughs were made in terms of pilot test and
implementation of ERP programs. So far, the application results
of ERP are becoming apparent. The Company also made progress in,
among other areas, applying domestically-made high-performance
computers in exploration and development of crude oil and natural
gas, application of IC cards at petrol stations, developing and
applying the "Ningbo-Shanghai-Nanjing crude oil transportation
and distribution management system", "comprehensive oil field
management system", and "advanced process control system".
(6) Cost saving
In 2003, the Company made significant efforts in carrying out its
cost saving plans. Regarding the cost saving plan for major
purchases such as crude oil, the Company focused on minimizing
material consumption, energy consumption and controlling
expenses. The results in cost saving were remarkable.
In 2003, the Company effectively saved costs by RMB 2.722
billion, which exceeded the original target of RMB 2.5 billion by
RMB 222 million. Of the total costs saved, the Exploration and
Production Segment achieved a cost saving totaled RMB 805
million. As the Company took the market opportunity of higher
crude oil prices, the Company increased certain in-well
operation, and incurred more costs in order to resume production
in those fields that suffered stormy sea tide and flood. The
lifting cost increased from US$ 6.12 per barrel in 2002 to US$
6.47 per barrel in 2003. The Refining Segment achieved a cost
saving of RMB 740 million with cash operating cost sligthly
declined to US$ 2.00 per barrel from US$ 2.02 per barrel. The
Chemicals Segment achieved a cost saving of RMB 639 million, the
cash operating costs of ethylene dropped to US$ 142.63 per tonne
from US$ 149.24 per tonne. The Marketing and Distribution Segment
achieved a cost saving of RMB 538 million. As the Company made
efforts to increase its retail sales volume and distribution
volume, the transportation costs increased accordingly. The cash
operating cost in the segment went up to RMB 174.95 per tonne in
2003, from RMB 166 per tonne in 2002.
(7) Capital expenditure
In 2003, the Company's capital expenditure was RMB 45.049
billion. Among which, the expenditure for Exploration and
Production Segment was RMB 20.628 billion. The Company found new
reserves and increased oil and gas production, reinforced the
foundation of its resources, and improved its profile of the
possible, probable and proved reserves. The expenditure for
Refining Segment was RMB 9.729 billion. With the investment, a
number of facilities were revamped to improve the product
quality, and to increase refining capacity. Refining capacity
increased by 5.5 million tones per year for the whole year. The
Ningbo-Shanghai-Nanjing Imported Crude Oil Pipeline will soon be
put into operation, which will help optimize the allocation of
crude oil and reduce the transportation costs. The expenditure
for the Marketing and Distribution Segment was RMB 6.826 billion,
which was mainly used to construct pipelines of refined oil
products, and to further optimize the marketing networks by
building new petrol stations and upgrading existing petrol
stations. As a result of the investment, the Company secured its
leading position in its principal market, raised brand awareness
and further enhanced customer loyalty. The expenditure for the
Chemicals Segment was RMB 7.348 billion. With the investment, the
Qilu ethylene revamp project was under construction and the
chemical fertilizer revamp projects have all started. The
ethylene capacity increased by 70,000 tonnes/year, and capacity
of monomers polymers for synthetic fibers increased by 770,000
tonnes/year. Capital expenditure for corporate and others was
were RMB 518 million, which was principally used in the
construction of information technology system.
In addition, the Company's joint ventures including the project
with BP in Shanghai were progressing smoothly, the capital
expenditure by the Company for these joint ventures were RMB
4.193 billion in 2003.
(8) Cooperation with foreign partners
In 2003, the Company's major joint ventures progressed smoothly.
The joint venture with CNOOC, Shell and US Unocal for exploration
and development of natural gas at Xihu Trough, East China Sea was
officially launched. The joint venture ethylene projects with
BASF in Nanjing and with BP in Shanghai, both of which are
expected to be put into operation in early 2005, are under
construction in full scale. The joint venture with Shell for Coal
Gasification in Hunan province is under construction, which is
expected to complete construction in 2005. The feasibility study
of joint venture with ExxonMobil and Saudi Aramco for an
integration oil refining and chemicals project in Fujian, has
already been approved by the government authorities and
preparation work is under way. The joint feasibility study of
joint venture with Shell in Jiangsu province for retail business
cooperation of refined oil products has been approved by the
State Council, and a joint venture company is to be established
soon. The joint feasibility study of joint ventures with BP in
Zhejiang for retail business cooperation of refined oil products
has been submitted to the Ministry of Commerce of the People's
Republic of China for approval. All these joint venture projects
will help the Company in adopting advanced technologies and
managerial expertises of multinational corporations, and hence
enhance its market competitiveness and help the Company satisfy
the growing demands of products in China and Asian Pacific
regions.
6.2 Management's Discussion And Analysis
The following discussion and analysis should be read in
conjunction with the Company's audited financial statements and
the accompanying notes. Part of the financial information
presented in this section is derived from the Company's audited
financial statements that have been prepared in accordance with
International Financial Reporting Standards ("IFRS").
6.2.1 Consolidated Results of Operations
In 2003, the Company's turnover and operating profit were RMB
424.3 billion and RMB 37.3 billion, respectively, representing an
increase of 28.9% and 30.0%, respectively, over those in the
previous year. These changes are largely attributable to a number
of factors. First, the Company closely monitored the changes in
market demands, and quickly responded to such changes through
adjustments of its operating strategy. Second, to take advantage
of the favorable opportunity of higher prices of crude oil and
chemical products in the global market and the rapid growth of
Chinese economy, the Company managed to overcome the negative
impact caused by SARS and further expanded its target market. In
addition, the Company continued to strive for better operating
results through more strengthened management, further corporate
reforms, better asset structure and more efficient operation.
The table below sets forth the major items in the consolidated
income statement of the Company for the indicated periods.
YEAR ENDED 31 DECEMBER
2003 2002 CHANGE
RMB billions (%)
Turnover and other operating revenues 443.1 345.1 28.4
of which: Turnover 424.3 329.1 28.9
Other operating revenues 18.8 16.0 17.5
OPERATING EXPENSES (405.8) (316.4) 28.3
of which:
Purchased crude oil, products and (312.5) (237.6) 31.5
operating supplies and expenses
Selling, general and administrative (25.9) (21.5) 20.5
expenses
Depreciation, depletion and amortisation (26.7) (25.3) 5.5
Exploration expenses (including dry (6.1) (4.4) 38.6
holes)
Personnel expenses (16.2) (14.4) 12.5
Employee reduction expenses (1.0) (0.2) 400.0
Taxes other than income tax (13.5) (11.9) 13.4
Other operating expenses, net (3.9) (1.1) 254.5
Operating profit 37.3 28.7 30.0
Net finance costs (3.8) (4.2) (9.5)
Investment income, share of profits less 0.6 0.6 0.0
losses from associates and gain from
issuance of shares by a subsidiary
PROFIT FROM ORDINARY ACTIVITIES BEFORE 34.1 25.1 35.9
TAXATION
Taxation (10.6) (7.7) 37.7
PROFIT FROM ORDINARY ACTIVITIES AFTER 23.5 17.4 35.1
Taxation
MINORITY INTERESTS (1.9) (1.1) 72.7
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 21.6 16.3 32.5
(1) Turnover and other operating revenues
In 2003, the Company's turnover and other operating revenues were
RMB 443.1 billion, representing an increase of 28.4% compared with
2002. Turnover was RMB 424.3 billion, representing an increase of
28.9% compared with 2002. In 2003, prices of crude oil, petroleum
products and chemical products in the global market all went up.
To seize the market opportunity, the Company increased its
refining throughput and increased the sales volume of its refined
products. In addition, the Company's sales volume of major
petrochemical products increased significantly. The Company's
other operating revenues went up to RMB 18.8 billion in 2003,
representing an increase of 17.5% compared with 2002. The "other
operating revenues" mainly constituted of sales revenue from its
sale of raw and auxiliary materials and other products and
services to China Petrochemical Corp. and its subsidiaries and to
third parties. The turnover and other operating revenues
principally consisted of the following:
Sale of crude oil and natural gas
Most of crude oil and a small portion of natural gas produced by
the Company were internally used by its refining and chemical
production. The remaining was sold to the refineries controlled by
the Company's controlling shareholder, China Petrochemical Corp.
and other customers. In 2003, turnover from crude oil and natural
gas that were sold externally amounted to RMB 14.9 billion,
accounting for 3.4% of the Company's turnover and other operating
revenues, representing an increase of 36.7% compared with that of
RMB 10.9 billion in 2002. Such increase was mainly due to the
increase in both price and sales volume of crude oil. The external
sales price of crude oil increased to RMB 1,493 per tonne from RMB
1,189 per tonne in 2002, representing an increase of 25.6%. The
external sales volume went from 6.35 million tonnes in 2002 to
7.22 million tonnes in 2003, representing an increase of 13.7%.
The external sales price of natural gas rose from RMB 574 per
thousand cubic meters in 2002 to RMB 591 per thousand cubic meters
in 2003, and the external sales volume increased from 3.2 billion
cubic meters in 2002 to 3.4 billion cubic meters in 2003.
Sale of petroleum products
The Company's Refining Segment and Marketing and Distribution
Segment sell petroleum products (mainly consisting of gasoline,
diesel, jet fuel, kerosene and other refined petroleum products)
to third parties. In 2003, the external sales revenue of petroleum
products by these two segments were RMB 295.9 billion, accounting
for 66.8% of the Company's turnover and other operating revenues,
representing an increase of 28.4% compared with that of RMB 230.5
billion in 2002. The sales revenue of gasoline and diesel was RMB
209.1 billion, accounting for 70.7% of the total sales revenue of
petroleum products, representing an increase of 23.5% from that of
RMB 169.3 billion in 2002. Among others, the sales revenue of
gasoline in 2003 was RMB 77 billion, representing an increase of
21.6% compared with 2002. The sales revenue of diesel was RMB
132.1 billion, representing an increase of 24.6% compared with
2002. The increase of sales revenue of gasoline and diesel was due
to both the rise of gasoline and diesel prices and the increased
sales volume as a result of the Company's proactive efforts. In
2003, the average external sales price of gasoline was RMB 3,298
per tonne, representing an increase of 17.5% compared with 2002,
and the average external sales price of diesel was RMB 2,794 per
tonne, representing an increase of 16% compared with 2002. The
external sales volume of gasoline was 23.36 million tonnes,
representing an increase of 3.6% compared with 2002, and the
external sales volume of diesel was 47.29 million tonnes,
representing an increase of 7.4% compared with 2002. The combined
sales volume of gasoline and diesel was 6.1% higher than that of
2002.
Sales of chemical products
In 2003, the Company's external sales revenue of chemical products
was RMB 80.7 billion, accounting for 18.2% of its turnover and
other operating revenues, representing an increase of 27.9%
compared with that of RMB 63.1 billion in 2002. The increase was
mainly due to the significant increase in both chemical products
prices and sales volumes of major chemical products as a result of
strong domestic demand for chemical products. In 2003, the Company
completed the revamp of certain of its ethylene and other
downstream facilities, which increased the Company's production
capacity of certain chemical products. In 2003, the external sales
volumes of synthetic resin, synthetic fiber, synthetic rubber,
synthetic fiber monomer and polymer were, respectively, 4.52
million tonnes, 1.33 million tonnes, 550 thousand tonnes and 2.41
million tonnes, representing an increase of 18%, 12.7%, 7.8% and
33.9%, respectively, compared with 2002. The external sales prices
of such products were, respectively, RMB 6,042 per tonne, RMB
9,639 per tonne, RMB 8,513 per tonne and RMB 5,788 per tonne,
representing an increase of 15.2%, 14.3%, 31.6% and 7.9%,
respectively, compared with 2002.
(2) Operating expenses
In 2003, the Company's operating expenses were RMB 405.8 billion,
representing an increase of 28.3% compared with 2002. The
operating expenses mainly consisted of the following:
Purchased crude oil, products, and operating supplies and expenses
The Company's purchased crude oil, products and operating supplies
and expenses were RMB 312.5 billion, accounting for 77% of the
operating expenses, up by RMB 74.9 billion compared with 2002,
representing an increase of 31.5%. Among others:
o Purchased crude oil expenses were RMB 164.3 billion,
accounting for 40.5% of the total operating expenses, up by
RMB 45 billion compared with 2002, representing an increase
of 37.7%.
To meet the increasing demands in the market associated with
the rapid growth of the Chinese economy, the Company
increased its crude oil throughput. In 2003, the Company's
crude oil throughput was 116.66 million tonnes (excluding
amounts processed for third parties), representing an
increase of 11.23 million tonnes, or 10.7%, compared with
2002. Of the Company's crude oil throughput, the Exploration
and Production Segment supplied 28.08 million tonnes, down
by 1.46 million tonnes compared with 2002, representing a
decrease of 4.9%. The Company also processed 88.58 million
tonnes of crude oil purchased from third parties, up by
12.69 million tonnes compared with 2002, representing an
increase of 16.7%. Since March 2003, crude oil price in the
global market has gradually increased. The Company's average
cost for crude oil purchased from third parties in 2003 was
RMB 1,855 per tonne, up by RMB 283 per tonne compared with
2002, representing an increase of 18%.
o In 2003, the Companyi|s other purchase expenses were RMB
148.2 billion, accounting for 36.5% of the total operating
expenses, up by RMB 29.9 billion compared with 2002,
representing an increase of 25.3%. This increase was mainly
due to the increased costs of oil products and chemical
feedstock caused by the increase in crude oil price.
Selling, general and administrative expenses
In 2003, the Company's selling, general and administrative
expenses were RMB 25.9 billion, up by RMB 4.4 billion compared
with 2002, representing an increase of 20.5%. This increase was
largely due to:
o In 2003, provision for bad debts increased by RMB 1.15
billion compared with 2002.
o In connection with the upgrade of production facilities and
improved technologies, the Company disposed of certain low
efficiency production equipment in 2003 causing an increase
in the expense related to disposal of relevant spare parts
by RMB 500 million compared with 2002.
o Expenses in research and development increased by RMB 0.59
billion compared with 2002.
o Operating lease rentals increased by RMB 0.39 billion
compared with 2002, mainly because the Company leased some
additional petrol stations to further expand its
distribution channels of oil products.
o After the expansion and upgrading of some chemical
facilities, sales volume of chemical products increased. In
addition, proportion of retail over the total sales volume
of refined oil products, and total sales volume of refined
oil products increased. Accordingly, the selling expenses
(such as transportation costs) increased by RMB 690 million
compared with 2002;
Depreciation, depletion and amortization
In 2003, the Company's depreciation, depletion and amortization
were RMB 26.7 billion, up by 5.5% over 2002. The increase was
mainly because of the addition of property, plant and equipment as
a result of capital expenditure.
Exploration expenses
In 2003, the Company's exploration expenses were RMB 6.1 billion,
representing an increase of 38.6% compared with 2002. The increase
was principally because the Company continued to increase
investment in the exploration activities, especially in those
major new blocks in the western and southern part of China.
Personnel expenses
In 2003, the Company's personnel expenses were RMB 16.2 billion,
representing an increase of 12.5% compared with 2002. The increase
was largely because the Company introduced a market-rate based
employee compensation system reform. As a result, wage, salary and
welfare expenses increased by RMB 1.6 billion.
Employee reduction expenses
As part of its voluntary staff reduction plan, the Company
incurred approximately RMB 1 billion as staff reduction expenses
for approximately 21,000 employees who voluntarily terminated
their employment with the Company in 2003.
Taxes other than income tax
In 2003, the Company's taxes other than income tax were RMB 13.5
billion, representing an increase of 13.4% compared with 2002. The
increase was largely because of the increase of consumption tax
and surcharges as a result of the increased sales volume of
gasoline and diesel of the Company.
Other operating expenses, net
In 2003, the Company's other operating expenses (net) were RMB 3.9
billion, representing an increase of RMB 2.8 billion compared with
2002. The increase was largely due to:
o To facilitate its long-term development strategy, the
Company further improved its asset structure and its overall
asset quality. In 2003, the Company incurred a net loss of
RMB 2.22 billion on disposal of certain low efficiency
assets, which included RMB 90 million from the Exploration
and Production Segment, RMB 740 million from the Refining
Segment, RMB 370 million from the Marketing and Distribution
Segment, RMB 1.01 billion from the Chemicals Segment, and
RMB 10 million from others, up by RMB 1.42 billion compared
with 2002.
o In order to allocate its internal resources more
efficiently, the Company revised the production plans for
certain less efficient facilities in 2003, and accordingly
made a provision for impairment of long-lived assets of RMB
0.88 billion representing the difference between the
expected recoverable value and the net book value of this
assets.
(3) Operating profit
In 2003, the Company's operating profit was RMB 37.3 billion,
representing an increase of 30% compared with 2002.
(4) Net finance costs
In 2003, the Company's net finance costs were RMB 3.8 billion,
down by RMB 400 million compared with 2002, representing a
decrease of 9.5%. This was primarily because the Company further
reduced the aggregate amount of its short-term loan and adjusted
its financing structure to include, among others, certain US
dollar loans. The interest expense was RMB 3.7 billion in 2003,
decreased by RMB 0.4 billion compared with 2002.
(5) Profit from ordinary activities before taxation
In 2003, the Company's profit from ordinary activities before
taxation was RMB 34.1 billion, representing an increase of 35.9%
compared with 2002.
(6) Taxation
In 2003, the Company's taxation was RMB 10.6 billion, representing
an increase of 37.7% compared with 2002.
(7) Minority interests
In 2003, the Company's minority interests were RMB 1.9 billion,
representing an increase of 72.7% compared with 2002.
(8) Profit attributable to shareholders:
In 2003, the Company's profit attributable to shareholders was RMB
21.6 billion, representing an increase of 32.5% compared with 2002.
6.2.2 Assets, liabilities, shareholders' funds, and working capital
The Company's primary sources of funding were from operating
activities, short-term and long-term borrowings, and primary uses
of funds were for operating expenses, capital expenditures and
repayments for short-term and long-term loans.
(1) Assets, liabilities and shareholders' funds
Monetary unit: RMB Million
AS AT 31 DECEMBER
2003 2002 CHANGES
Total assets 400,818 389,343 11,475
Current assets 99,328 103,982 (4,654)
Non-current assets 301,490 285,361 16,129
Total liabilities 207,053 201,511 5,542
Current liabilities 122,005 119,440 2,565
Non-current liabilities 85,048 82,071 2,977
Minority interests 25,866 24,009 1,857
Net assets 167,899 163,823 4,076
Shareholders' funds 167,899 163,823 4,076
Share capital 86,702 86,702 -
Reserves 81,197 77,121 4,076
At the end of 2003, the Company's total assets were RMB 400.818 billion,
total liabilities were RMB 207.053 billion, minority interests were RMB
25.866 billion, shareholders' funds was RMB 167.899 billion. Changes in
the assets and liabilities items compared with those at the end of 2002
and the principal reasons for such changes are as follows:
The Company's total assets were RMB 400.818 billion, up by RMB 11.475
billion over those at the end of 2002. Of which, current assets were RMB
99.328 billion, down by RMB 4.654 billion compared with those at the end
of 2002. The change was mainly because the Company's cash and time
deposits decreased by RMB 1.769 billion in 2003. At the same time, the
Company reinforced its management control over working capital, reduced
the occupancy of funds by various current assets. As a result, the
accounts receivable were down by RMB 1.516 billion, and the prepaid
expenses and other current assets reduced by RMB 1.307 billion.
Non-current assets were RMB 301.490 billion at the end of 2003, up by
RMB 16.129 billion compared with those at the end of 2002. The change
was primarily because property, plant and equipment were up by RMB 7.159
billion, while the construction in progress were up by RMB 7.281
billion.
Total liabilities were RMB 207.053 billion, up by RMB 5.542 billion
compared with those at the end of 2002. Of which, current liabilities
were RMB 122.005 billion, up by RMB 2.565 billion compared with those at
the end of 2002. The change was mainly because the accrued expenses and
other payables were up by RMB 10.826 billion, which were mainly due to
the payables to China Petrochemical Corporation and its subsidiaries for
the acquisition of Maoming Ethylene assets and the increased accrued
expenditure. Accounts payable were up by RMB 3.227 billion, which were
principally payables to third parties. As the cost of funding in the
monetary market rose, the increased discount rate of bills payable
resulted in the decrease in the bills payable by RMB 6.281 billion. The
Company reduced the amount of short-term debt by RMB 6.751 billion,
which were mainly in the form of decrease in short-term bank loans.
Non-current liabilities were RMB 85.048 billion at the end of 2003, up
by RMB 2.977 billion compared with those at the end of 2002. The change
was mainly because long-term loans of the Company's jointly controlled
entities were up by RMB 1.45 billion, and deferred tax liabilities were
up by RMB 1 billion.
Shareholders' funds were RMB 167.899 billion at the end of 2003, up by
RMB 4.076 billion compared with that at the end of 2002, increasing the
reserves by RMB 4.076 billion.
(2) Cash Flow
In 2003, net decrease in cash and cash equivalent was RMB 2.94 billion
(i.e. a decrease from RMB 18.16 billion as at 31 December 2002 to RMB
15.22 billion as at 31 December 2003). The following table shows the
major items on the consolidated cash flow statements and their
respective changes in 2002 and 2003.
Major items in 2003 2002
Cash flow Statement RMB 100 millions RMB 100 millions
Net cash flow from
operating activities 606.30 550.46
Net cash flow from
investing activities (503.43) (427.76)
Net cash flow from
inancing activities (132.32) (158.13)
Net decrease in cash
and cash equivalents (29.45) (35.43)
o Net cash flow from operating activities was RMB 60.630 billion.
In 2003, profit from ordinary activities before taxation was RMB
34.081 billion, and after adjusting for the operating expenses items
that have no cash flow (i.e. non-cash expense items), the adjusted
cash inflow from operating activities of RMB 66.45 billion. Major
non-cash expense items are: depreciation, depletion of amortization
of RMB 26.735 billion, costs of dry holes of RMB 2.789 billion,
losses from disposals of property, plant and equipment of RMB 2.221
billion, impairment losses on long-lived assets of RMB 877 million.
The changes in operating-related receivable and payable items added
cash inflow by RMB 3.676 billion, which was mainly because:
The Company reinforced its control over working capital, made more
efforts to collect the accounts receivable, reduced the occupancy of
funds by various current assets. The net value of other current
assets such as accounts receivable, notes receivable, inventory and
prepaid expenses declined, all the above factors contributed to an
increased cash inflow of RMB 2.271 billion.
Due to the expanded business activities and increased purchasing
costs, accounts payable increased and cash outflow was reduced by RMB
9.294 billion.
As the discount rate of notes rose and notes payable decreased, the
cash outflow was increased by RMB 6.251 billion.
Other operating-related receivables and payables increased the cash
outflow by RMB 1.638 billion.
After adjusting the non-cash expense items and receivable and payable
items with regard to the profit from ordinary business activities
before taxation, and then deducting the cash outflow caused by
payment for income tax totaling RMB 9.496 billion, the net cash flow
from operating activities was RMB 60.630 billion.
o Net cash flow from investing activities was RMB 50.343 billion.
The net cash outflow from investing activities was mainly because the
Company had cash outflow for capital expenditure of RMB 44.057
billion, and the Company's joint venture had cash outflow for capital
expenditure of RMB 4.107 billion.
o Net cash flow from financing activities was RMB 13.232 billion.
The net cash flow from financing activities was mainly because the
amount of repayments of bank loans and other loans by the Company and
its joint ventures was larger than the amount of newly added bank
loans and other loans, thus resulting in a cash outflow of RMB 5.649
billion. In addition, the Company distributed the final dividend for
2002 and interim dividend for 2003, resulting in a cash outflow of
RMB 7.803 billion.
For the cash flow situation during 2003, the Company further
strengthened its control on cash management. Cash and cash
equivalents were healthily reduced as funds were better used and
overall efficiency was improved.
(3) Contingent liabilities
Refer to the descriptions under "Major Guarantees and Performance" in
the section entitled "Disclosure of significant events".
(4) Capital expenditure
Refer to the descriptions under "Capital Expenditure" in the section
entitled "Business Review and Prospects".
(5) Research and Development Expenses and Environmental Expenses
Research and development expenses refer to the expenses that have
been recognized during the period in which they incurred. In 2003,
the Company's research and development expenses were RMB 2.111
billion, up by RMB 591 million compared with 2002, reflecting the
Company's continued committment in technological development with the
view to achieving sustained growth.
Environmental expenses refer to the normal routine pollutant
discharge fees paid by the Company, excluding any capitalised costs
of pollutant discharge facilities. In 2003, the Company's
environmental expenses were RMB 245 million, which was similar to
those in 2002.
(6) Analysis of financial statements prepared under the PRC Accounting
Rules and Regulations
The major differences between the Company's financial statements
prepared under the PRC Accounting Rules and Regulations and those
under IFRS are set out in the 2003 Annual Report.
The table below sets forth each of its segments' income and profit
from principal operations, costs of principal operations, taxes and
surcharges, as prepared under the PRC Accounting Rules and
Regulations.
YEAR ENDED 31 DECEMBER
2003 2002
RMB millions RMB millions
INCOME FROM PRINCIPAL OPERATIONS
Exploration and Production Segment 62,223 50,327
Refining Segment 266,253 208,895
Marketing and Distribution Segment 240,812 186,707
Chemicals Segment 82,334 65,605
Others 60,600 42,775
Elimination of inter-segment sales (295,031) (230,125)
Consolidated income from principal operations 417,191 324,184
COSTS OF SALES, SALES TAXES AND SURCHARGES
Exploration and Production Segment 31,596 28,788
Refining Segment 254,360 198,115
Marketing and Distribution Segment 210,456 163,701
Chemicals Segment 73,116 60,429
Others 59,984 42,378
Elimination of costs of inter-segment sales (293,037) (230,377)
Consolidated costs of sales, sales taxes
and surcharges 336,475 263,034
PROFIT FROM PRINCIPAL OPERATIONS
Exploration and Production Segment 28,785 21,973
Refining Segment 11,741 10,598
Marketing and Distribution Segment 30,356 23,006
Chemicals Segment 9,218 5,176
Others 616 397
Consolidated profit from principal operations 80,716 61,150
Financial data prepared under the PRC Accounting Rules and Regulations:
AS AT/(YEAR ENDED) 31 DECEMBER
2003 2002 CHANGE
RMB millions RMB millions %
Total assets 390,213 368,375 5.93
Long-term liabilities 80,109 76,152 5.20
Shareholders' funds 162,946 151,717 7.40
Profit from principal operations 80,716 61,150 32.00
Net profit 19,011 14,121 34.63
Analysis of changes:
Total assets: at the end of 2003, the Company's total assets were
RMB 390.213 billion, up by RMB 21.838 billion compared with 2002.
This was mainly because in 2003, the Company increased the
investments in fixed assets, in order to meet the market demands.
As a result, fixed assets was increased by RMB 21.809 billion.
Long-term liabilities: at the end of 2003, the Company's long-term
liabilities were RMB 80.109 billion, up by RMB 3.957 billion
compared with 2002. This was largely because the long-term loans,
arranged pursuant to the Company's investment plan for projects,
were increased by RMB 5.513 billion and the debentures payable of
RMB 1.5 billion, which would become due in July 2004, were
reclassified as current liabilities.
Shareholders' funds: at the end of 2003, shareholders' funds of
the Company was RMB 162.946 billion, up by RMB 11.229 billion
compared 2002. This was principally because: first, the realized
net profit in 2003 reached RMB 19.011 billion; second, in 2003,
the distribution of its final dividend for 2002 totaling RMB 5.202
billion and its interim dividend for 2003 totaling RMB 2.601
billion.
Profit from principal operations: in 2003, the profit from
principal operations realized by the Company was RMB 80.716
billion, up by RMB 19.566 billion compared with that in 2002,
representing a growth rate of 32%. This was mainly because in
2003, the prices of crude oil, petroleum products and
petrochemical products went up. In addition, demands for these
products went up as well. The Company seized these market
opportunities and managed to improve its operating results at a
stable pace.
Net profit: in 2003, the net profit realized by the Company was
RMB 19.011 billion, up by RMB 4.89 billion compared with that in
2002, representing a growth of 34.63%. The increase was mainly due
to the increase of the Company's profit from its principal
operations.
(7) Significant differences between the financial statements prepared
under IFRS and U.S. GAAP
The major difference between the Company's financial statements prepared
under IFRS and US GAAP are set out in the Annual Report of Sinopec Corp.
for Year 2003.
6.2.3 The Principal Operations Categorized by Business Segments and the
Status of the Connected Transactions
The following data are extracted from the financial statements prepared
under the PRC Accounting Rules and Regulations.
INCREASE/
INCREASE/ DECREASE
INCREASE/ DECREASE OF GROSS
DECREASE OF COST OF PROFIT
OF INCOME PRINCIPAL MARGIN
FROM OPERATIONS, RATIO
PRINCIPAL TAXES AND COMPARED
COST OF OPERATIONS SURCHARGES WITH THE
INCOME PRINCIPAL COMPARED COMPARED SAME
FROM OPERATIONS, WITH THE WITH THE PERIOD OF
PRINCIPAL TAXES AND SAME SAME PRECEDING
OPERATIONS SURCHARGES GROSS PERIOD OF PERIOD OF YEAR
RMB RMB PROFIT PRECEDING PRECEDING (PERCENTAGE
Categorized by business segments millions millions RATIO(%) YEAR(%) YEAR(%) POINTS)
Exploration and production 62,223 31,596 46.26 23.64 9.75 2.60
Refining 266,253 254,360 4.41 27.46 28.39 (0.66)
Chemicals 82,334 73,116 11.20 25.50 20.99 3.31
Marketing and distribution 240,812 210,456 12.61 28.98 28.56 0.29
Others 60,600 59,984 1.02 41.67 41.55 0.09
Elimination of inter-segment sales (295,031) (293,037) Inapplicable Inapplicable Inapplicable Inapplicable
Total 417,191 336,475 19.35 28.69 27.92 0.49
Of which: connected transactions 31,648 28,272 10.67 38.60 36.28 1.52
Details of connected transactions Refer to the section 6.2.4 of Connected Transactions
Principle of pricing for (1)Government-prescribed prices and government-guided prices
connected transactions are adopted for products or projects if such prices are
available; (2) Where there is no government-prescribed price
or government-guided price for products or projects, the
market price (inclusive of bidding price) will apply; (3)
Where none of the above is applicable, the price will be
decided based on the cost incurred plus a reasonable profit
of not more than 6% of the price.
6.2.4 Connected Transaction
6.2.4.1 Connected transactions entered into by the Company during
this year
As reviewed by the auditors of Sinopec Corp., the aggregate amount of
connected transactions actually occurred in relation to the Company during
this year was RMB 102.001 billion, of which, incoming trade amounted to
RMB 63.558 billion, and outgoing trade amounted to RMB 38.443 billion
(including, RMB 38.291 billion of sales of products and services, RMB 111
million of interest earned, RMB 41 million of receivable agency fee). All
of these satisfied the conditions of waiver imposed by the Hong Kong Stock
Exchange. In 2003, the products and services provided by Sinopec Group
Company (purchase, storage and transportation, exploration and production
services and production-related services) to the Company amounted to RMB
58.158 billion, representing 14.33% of the Company's annual operating
expenses, a decrease of 0.22% compared with those in 2002, which were
within the cap of 18% for waiver. The auxiliary and community services
provided by Sinopec Group Company to the Company amounted to RMB 1.821
billion, representing 0.45% of operating expenses, with a slight decrease
as compared with 0.62% in the preceding year, which were within the cap of
3% for waiver. In 2003, the product sales from the Company to Sinopec
Group Company amounted to RMB 38.291 billion, representing 8.64% of the
Company's operating income, which were within the cap of 16% for waiver.
With regard to the Leasing Agreement of Land Use Rights, the amount of
rent payable by the Company for the year ended 31 December 2003 was
approximately RMB 2 billion. With regard to the premium payable under the
SPI Fund Document, the amount of fund payable per annum by the Company
shall not be less than the amount specified in the SPI Fund Document.
Please refer to Note 33 to the financial statements prepared pursuant to
the IFRS in the annual report for details of the connected transactions
actually occurred during this year.
The Principal Operations Categorized by Business Segments and the Status
of the Connected Transactions
The above mentioned connected transactions in 2003 have been approved at
the seventh meeting of the second session of the Board of Directors of
Sinopec Corp.
The auditors of Sinopec Corp. have confirmed to the Board of Directors in
writing that:
(a) The transactions have been approved by the Board of Directors;
(b) The transactions have been entered into at considerations
consistent with the pricing policies as stated in the relevant
agreements;
(c) The transactions have been entered into in accordance with the
terms of the respective agreements and documents governing the
respective transactions; and
(d) The relevant amount has not exceeded the relevant cap for waiver.
After reviewing the above relevant transactions, the independent directors
of Sinopec Corp. have confirmed that:
(a) The transactions have been entered into by Sinopec Corp. in its
ordinary course of business;
(b) The transactions have been concluded on any one of the following
terms:
i. on normal commercial terms;
ii. on terms no less favorable than those available from/to
independent third parties; or
iii. on terms that are fair and reasonable as to the shareholders
of Sinopec Corp., where there is no available comparison to
determine whether item i or ii is satisfied; and
(c) the aggregate values of the transactions have not exceeded the
respective limits.
6.2.4.2 Other material connected transactions occuring during this year
(1) Connected transactions for leasing of Sinopec Group Company's
petrol stations
On 20 January 2003, Sinopec Corp. issued an announcement about
the leasing of petrol stations by a number of Sinopec Corp.'s
branches from a number of Sinopec Group Company's subsidiaries.
The two parties signed 983 new lease agreements, each of which
would expire on 31 December 2003 for a term of one year. For
details, please refer to the relevant announcement published in
China Securities News, Shanghai Securities News, and Securities
Times in China, and South China Morning Post and Hong Kong
Economic Times in Hong Kong on 21 January 2003. The total amount
of rent incurred during the period of the annual report was
about RMB 84.18 million, which was in conformity with the
conditions of waiver approved by the Hong Kong Stock Exchange
for such connected transactions.
(2) Connected transactions for new leasing of land use rights
At the third meeting of the second session of the Board of
Directors of Sinopec Corp., the Board approved "the Proposal
Concerning the New Leasing of Land Use Right from Sinopec Group
Company", and approved the lease of the land use rights by
Sinopec Corp. of an area of 51.71 million square meters from
Sinopec Group Company at an annual rent of RMB 273.4717 million.
The two parties signed an "Agreement on Lease of Land Use
Rights". For details, please refer to the relevant announcement
published in China Securities News, Shanghai Securities News,
Securities Times in China, South China Morning Post and Hong
Kong Economic Times in Hong Kong on 25 August 2003. The amount
of rent under the leasing agreement incurred in this reporting
period was about RMB 263.31 million.
(3) Connected transactions for acquisition of Maoming Ethylene
At the fourth meeting of the second session of the Board of
Directors of Sinopec Corp. held on 28 October 2003, the Board
approved the proposal regarding Sinopec Corp.'s acquisition of
the production and operating assets for principal businesses
owned by Maoming Petrochemical Co., Ltd. ("Maoming Ethylene") at
a price of RMB 3.3 billion. The two parties entered into an
acquisition agreement. For details, please refer to Sinopec
Corp.'s relevant announcement published in China Securities
News, Shanghai Securities News, Securities Times in China, and
South China Morning Post and Hong Kong Economic Times in Hong
Kong on 29 October 2003.
(4) Acquisition of Tahe Petrochemicals and Xi'an Petrochemicals
At the fifth meeting of the second session of the Board of
Directors of Sinopec Corp. held on 29 December 2003, the Board
approved the Company to acquire the entire operating assets and
liabilities of Tahe Oilfield and Petrochemical Plant ("Tahe
Petrochemicals") and the entire operating assets and liabilities
of Xi'an Petrochemical Plant General ("Xi'an Petrochemicals") in
cash respectively, which were both wholly owned by Sinopec Group
Company. The purchase prices were about RMB 135 million and RMB
221 million respectively. For details, please refer to Sinopec
Corp.'s relevant announcement published in China Securities
News, Shanghai Securities News, Securities Times in China, South
China Morning Post and Hong Kong Economic Times in Hong Kong on
30 December 2003.
(5) Ongoing connected transactions:
At the time of listing in 2000, Sinopec Corp. and Sinopec Group
Company signed a series of agreements regarding ongoing
connected transactions. The Hong Kong Stock Exchange
conditionally granted a waiver from disclosure requirements of
ongoing connected transactions, which had a term of three years
(from 2001 to 2003). At the end of 2003, this waiver has
expired. Sinopec Corp. readjusted the cap amount for waiver from
disclosure requirements of ongoing connected transactions, and
re-applied for a new 3-year waiver from disclosure requirements
of ongoing connected transactions and approval by shareholders
from the Hong Kong Stock Exchange with regard to the relevant
major ongoing connected transactions (as defined in the
announcement dated 28 October 2002) in accordance with the the
Listing Rules of the Hong Kong Stock Exchange, and re-applied
for a new waiver from disclosure requirements of ongoing
connected transactions from the Hong Kong Stock Exchange with
regard to the cap amount of ongoing connected transactions (as
defined in the public announcement dated on 28 October). Those
major ongoing connected transactions concerning disclosure of
ongoing connected transactions and waiver from disclosure with
approval from shareholders, and at the request of the Shanghai
Stock Exchange, those de minimus ongoing connected transactions
concerning a waiver from disclosure of ongoing connected
transactions, were approved by the General Meeting of
Shareholders. On 16 January 2004, the Hong Kong Stock Exchange
conditionally agreed to grant the new waivers from ongoing
disclosure obligations to Sinopec Corp. and granted Sinopec
Corp. a waiver for a period of three financial years expiring on
31 December 2006. Within such a period of time, Sinopec Corp.
does not need to follow the requirements for disclosure of
connected transactions under the Listing Rules, but Sinopec
Corp. must satisfy the conditions of waiver. The conditions for
the waivers of ongoing disclosure obligations were set out in
the letter from the Chairman incorporated in the circular
concerning connected transactions and ongoing connected
transactions which was dispatched to the holders of H shares by
Sinopec Corp. on 29 October 2003, and were published in the
announcement of the Third Extraordinary General Meeting of
Shareholders for Year 2003 in China Securities News, Shanghai
Securities News, and Securities Times on 29 October 2003.
6.3 Principal operations in different regions
|_| Applicable |X| Not applicable
6.4 Information about suppliers and customers
Total amount of purchase 59,486 Percentage in 19%
from the top five Sinopec Corp.'s
suppliers (RMB million) total amount of purchase
Total amount of sales 61,502 Percentage in Sinopec 15%
to the top Corp.'s total
five customers amount of sales
(RMB million)
6.5 Operations of equity subsidiaries (applicable to the circumstance
when the return on investment is more than 10% of the listed
company's net profit)
|_| Applicable |X| Not applicable
6.6 Explain the reason of material changes in the principal operations
and their structure
|_| Applicable |X| Not applicable
6.7 Explain the reason of material changes in the principal operations'
earning power (gross profit ratio) as compared to the preceding year
|_| Applicable |X| Not applicable
6.8 Analyze the reason of material changes in operating result and
profit composition as compared to the preceding year
|X| Applicable |_| Not applicable
See 6.1 Discussion and Analysis of overall operations in the
reporting period and business review and 6.2 Management's Discussion
And Analysis
Analyze the reason of material changes in the overall financial
position as compared to the preceding year
|_| Applicable |X| Not applicable
See 6.1 Discussion and Analysis of overall operations in the
reporting period and business review and 6.2 Management's Discussion
And Analysis
Other operations having a material impact on net profit
|_| Applicable |X| Not applicable
6.9 Explanation of the material changes in operating environment and
macro policies and rules and regulations that have produced, are
producing or will produce significant influences on the company's
financial conditions and operating result
|_| Applicable |X| Not applicable
6.10 Fulfillment of the predicted profit
|_| Applicable |X| Not applicable
6.11 Fulfillment of the operating plan
|_| Applicable |X| Not applicable
The Company has not disclosed the Operating Plan for Year 2003
(including profit and expenses etc), and therefore it is not
applicable.
6.12 Use of the proceeds from share issue
|X| Applicable |_| Not applicable
6.12.1 Use of the proceeds from H share issue
(less the expenses of the issue of H shares)
Monetary unit: RMB billion
Total proceeds from share
issue after deducting
the issurance expenses 24.326
Total amount of proceeds used in this year 3.273
Total amount of proceeds already used 24.326
REPORTING PERIOD
WHETHER THE
PLANNED PROGRESS
PROPOSED IS THERE AND EXPECTED
INVESTMENT ANY ACTUAL RETURN ARE
PROJECTS UNDER COMMITMENT IN THIS YEAR CHANGE INVESTMENT SATISFIED
Oil and natural gas
exploration and production 2.373 No 2.373 Yes
Shanghai Secco, BASF-YPC
integration project and
Yueyang coal gasification
project 0.54 No 0.54 Yes
ERP construction of the
Company's headquarters and
subsidiaries 0.36 No 0.36 Yes
Total 3.273 - 3.273 -
6.12.2 Use of the proceeds from A share issue
(less the expenses of the issue of A shares)
Monetary unit: RMB billion
Total proceeds from share
issue after deducting the
issurance expenses 11.648
Total amount of proceeds used in this year 1.514
Total amount of proceeds already used 9.976
REPORTING PERIOD
WHETHER THE
PLANNED
PROPOSED PROGRESS AND
PROJECTS UNDER INVESTMENT ANY ACTUAL EXPECTED RETURN
COMMITMENT IN THIS YEAR CHANGE INVESTMENT YIELD ARE SATISFIED
Ningbo-Shanghai-Nanjing
Crude Oil pipeline 0.814 No 0.814 - Yes
Southwest refined oil
product pipeline
project 0.7 No 0.7 - Note
Total 1.514 - 1.514 - -
Reason of failure to Through optimization and adjustment for the Southwest
satisfy the planned refined oil product pipeline project, the State Council
progress and expected has approved the feasibility study report on 27 May
return (Note) 2003. The total investment is RMB 3.54 billion. The
pipeline is 1.691 km long and it is expected to be
completed and put into operation in the beginning of 2005.
Reason and procedure No
of change (by projects)
6.12.3 Change of projects
|_| Applicable |X| Not applicable
6.13 Projects not funded by proceeds from share issue
|X| Applicable |_| Not applicable
CAPITAL
INVESTMENT IN
PROJECT NAME PROJECT PROJECT PROGRESS PROFIT FROM PROJECT
(RMB billion)
Exploration and
production segment:
Exploration of Shengli 18.255 progressing Realized the optimization of
Oilfields and smoothly reserves and growth of oil and
construction of gas production, reinforced the
Xinjiang Tahe facilities foundation of its resources,
and rationalized the possible,
probable and proved reserves
Refining segment:
Expansion and 8.915 with the Refining capacity was
development of refining investment, a increased by 5.5 million tones
and projection batch of upgrading per year for the whole year
improving product projects, which
quality aimed to improve
the product
quality, have been
built up and put
into production
in succession
Marketing and
distribution segment:
Mainly on construction 6.126 progressing Further optimized the
of new pipeline for smoothly marketing networks by building
refined oil products new petrol stations and
and construction and upgrading existing petrol
renovation of petrol stations. With the investment,
stations the Company has secured its
leading position in the
principal market and raised
brand awareness and further
enhanced customer loyalty
Chemicals segment:
Redevelopment of Qilu 7.348 The Qilu ethylene The ethylene production
Ethylene Plant in rapid project upgrading capacity has increased by
progress and project on was being 70,000 tonnes/year, while
redevelopment of undergoing and the capacity of monomers polymers
fertilizers already chemical for synthetic fibers was
commenced fertilizer increased by 770,000
upgrading projects tonnes/year
has all been
started in an
all-round way
Corporate and others
segment:
Mainly on the 0.518 progressing The efficiency of management
development project of smoothly was increased
the Company's
information system
The joint venture 4.172 progressing -
projects of BASF-YPC smoothly
and SECCO
Total 45.324 - -
6.14 Explanation of the board of directors about the accounting firm's
"non-standard comments"
|_| Applicable |X| Not applicable
6.15 Operating plan for the new fiscal year formulated by the board of
directors
|X| Applicable |_| Not applicable
Business Prospect
6.15.1 Market Analysis
Looking forward for year 2004, in terms of the domestic and
international market, the Company will be confronted with both
good opportunities and severe challenges.
(1) Opportunities
The recovery of global economy is expected to accelerate.
Both refining and chemicals business seem to be moving into
cyclical upturn. China's economy also presents a significant
opportunity for strategic development. It is predicted that
China's GDP growth rate will be around 7% in 2004, which will
drive consumption for petroleum and petrochemical products,
and further provide a sound environment for the Company's
business growth.
(2) Challenges
Aside from the above opportunities, the Company is also faced
with various challenges: (1) the international oil market is
undergoing big fluctuations, and the crude oil price is
likely to fall below the 2003 average, (2) a number of
factors including the further opened domestic market to
overseas competitiors, cancellation of import quota of state
designated trading company for importing refined oil
products, the increased import quota of non-state designated
trading companies for importing refined oil products, as well
as additional reduction of import duty of chemical products,
will give rise to even fiercer competitions in the market.
6.15.2 Production Operations
Faced with the opportunities and challenges in 2004, the Company
intends to adopt a flexible operating strategy and focus on the
following areas:
Exploration and Production Segment: The Company will adhere to
the principle of "balanced reserves, production, investment and
efficiency", set up a notion of "operations of oil reserves",
make efforts to add supplemental resources, and reduce costs, as
well as to enhance the recovery rate and commodity rate.
Meanwhile, the Company will give priority to the exploration in
the western areas to increase the production in those areas. In
addition, the Company will make efforts to further tap the
existing resources in the eastern matured areas and maintain the
stable production of crude oil and natural gas so that the
Company can keep balance between newly added reserve and
production, and at the same time ensure a sustainable growth of
its exploration and production business.
In 2004, the Company plans to produce 38.60 million tonnes of
crude oil, 5.8 billion cubic meters of natural gas, and newly
build production capacity of crude oil would be 5.98 million
tonnes per year and that of natural gas 1.534 billion cubic
meters per year.
Refining Segment: the Company intends to rationally arrange its
crude oil throughput in line with market demands, optimize the
allocation and transportation of crude oil resources, as well as
adjust its product mix. For the year 2004, the Company plans to
process 120.3 million tonnes of crude oil. The Company will
continue to tap the market for the petroleum products other than
gasoline, diesel and kerosene, and will endeavor to increase the
production of high value-added products, such as LPG, propylene,
high-grade road asphalt, and lubricating oil, to further increase
the major techno-economic indicators with the target for light
products yield at 74% and refining yield at 92.7%.
Marketing and Distribution Segment: The Company will continue to
strengthen its awareness and concept of "market, competitiveness
and services" and proactively tap the market. Meanwhile, the
Company will further adjust its marketing structure, increase its
retail and direct distribution volume, and increase the retail
market shares. The Company intends to continue to optimize the
allocation of refined oil products, reduce costs and improve its
efficiency. Based on the domestic and international market
situation, the Company will rationalize domestic sales and export
volume. In 2004, the Company plans to have a total domestic sales
volume of refined oil products of 80 million tonnes, including a
retail sales volume of 42 million tonnes, and a direct
distribution volume of 16.5 million tonnes.
Chemicals Segment: Efforts will be made to "ensure safe, stable,
sustained and optimal production at a high utilization rate", and
to increase the total production and sales volume. The Company
will continue to monitor the market demands and make efforts in
marketing promotion and customer service. In addition, the
Company will speed up its reform of its marketing system to
improve the competitiveness in the market. In the 2004, the
Company plans to produce 3.56 million tonnes of ethylene, 5.4
million tonnes of synthetic resins, 520 thousand tonnes of
synthetic rubbers, 1.28 million tonnes of synthetic fiber, and
4.76 million tonnes of synthetic fiber monomers and polymers. The
priority will be given to quality, varieties and cost control. As
a result, the Company intends to further improve its
competitiveness, and increase the production of performance
compound resins and differential fibers.
Scientific and Technological Development: The Company accelerated
its development of core technology and proprietary technology. In
light of the difficulties in maintaining stable production in
those matured fields in the east of China and the breakthrough in
those newly developed fields, the Company will focus on
conducting in-depth research of concealed reserves of crude oil
and natural gas and the formation mechanism of natural gas
reserves, and intensifying its study of the general geology in
the west and south of China, and to solve the engineering
roadblocks in terms of the technology for development of oil
reserves in carbonate rock cavity, and to improve the technology
for enhancing the recovery rate in those matured fields. Besides,
the Company has followed market demands closely, made efforts to
increase the aggregate operating results of the Refining and
Chemicals Segments, and endeavored to achieve such operating
objectives as "improving the product quality and adjusting the
product mix". Moreover, the Company pooled its resources and made
efforts in developing a number of techniques for production of
clean fuel, production increase of chemical feedstock, production
of low-cost hydrogen, and the "Localization of packaged
technology for large-scale ethylene unit", with an aim to develop
its core technology, proprietary technology and popular products
of its own. Meanwhile, the Company formed its own investment plan
with reference to the actual needs of each of its business
segments in terms of production and business operation, and made
further efforts in promoting its scientific and technological
research results.
Continued efforts were made in the construction of information
system with a focus on ERP, reinforce the building of information
system in production level. Additionally, the Company urged its
affiliated subsidiaries to apply the ERP system, and improve and
optimize the functions of the ERP system as well, set up the
information management system to work in conjunction with its
established modern logistics system. The Company also intends to
promote the application of the primary and secondary logistic
optimization programs for refined oil products in a full range,
and realize the full-process monitoring over and deployment
optimization of Ningbo-Shanghai-Nanjing crude oil pipeline
transportation and distribution management system, as well as
initialize the construction of an information management system
for the crude oil pipeline along the Yangtze River and southwest
refined oil products pipeline at an appropriate time.
Cost Saving: In 2004, the Company will resort to scientific and
technological advancement, reinforce its management practices,
and intensify its reform measures, enhance its operating
efficiency. It plans to achieve a cost saving of RMB 2.5 billion,
of which Exploration and Production Segment is going to achieve a
cost saving by RMB 600 million, Refining Segment RMB 600 million,
Chemicals Segment RMB 700 million, and Marketing and Distribution
Segment RMB 600 million.
Prudent Investment: The Company is going to assume the adjustment
on investment structure as the starting point, motivate the
streamlining on existing assets through adjusting newly added
investments. In 2004, the Company is expected to budget its
capital expenditure at RMB 50.2 billion, of which RMB19.9 billion
for the Exploration and Production Segment, RMB11.8 billion for
Refining Segment, RMB 9.5 billion for Chemicals Segment, RMB 8.0
billion for Marketing and Distribution Segment, and RMB 1 billion
for ERP system construction and other sectors. The capital
expenditure in 2004 will focus on the following areas:
Exploration and Production Segment: While maintaining stable
production and ensuring a balance between newly added reserves
and production in eastern China, efforts are to be made to speed
up the exploration in those new blocks in southern China and in
western China, proactively adjust crude oil and natural gas
resource structure to enhance reserves and production, further
improve reserve series and reduce cost.
Refining Segment: In accordance with the regional demand of
refined oil products, the company will speed up the revamp of
costal refineries such as Shanghai Petrochemical, Gaoqiao,
Maoming and Guangzhou refinery. The Ningbo-Shanghai-Nanjing crude
oil pipeline is to be put into operation to help the optimization
of crude oil resources. Moreover, the Company will further
develop its competitive advantage for integration of oil refining
and chemical production facilities, further optimize product mix
and increase chemical feedstock production.
Chemicals Segment: The Company will speed up the adjustment on
product mix and technological innovation for chemical business,
focus on core business and increase total production. Emphasis
will be drawn on the second-round upgrading projects for Qilu and
Maoming ethylene facilities and the project of substituting oil
by coal as raw materials in some chemical fertilizer enterprises.
Marketing and Distribution Segment: the Company will complete the
construction of southwest refined oil products pipeline, and
further optimize the marketing and distribution network. Efforts
are to be made to construct petrol stations along expressways and
rivers and in rural areas, and to set up distribution networks in
major cities, to consolidate the Companyi|s leading position in
the market, and to improve the Company's profitability and market
share.
In addition, the two world-class ethylene joint ventures with
BASF and BP is at critical construction phase. The Company will,
according to schedule and scale of construction determined by the
board of directors of the two joint ventures and the Sinopec
Corp.'s percentage of shareholdings in the joint ventures, inject
investment in a timely manner. The investment to be incurred
shall be included in the Company's investment in associates and
the Company's capital expenditure as appropriate.
In this year, we are confident that under leadership of the Board
of Directors and with the joint efforts made by our employees,
the Company will further improve its competitiveness, and
continue to post reasonably good operating results.
Profit forecast for the new fiscal year
[ ] Applicable |X| Not applicable
6.16 Plan of the board of directors for profit appropriation or
transfer of statutory surplus reserve to capital for this year
According to the consolidated income statement prepared pursuant
to the PRC Accounting Rules and Regulations and the consolidated
income statement prepared pursuant to IFRS, the Company's audited
net profit in 2003 was RMB 19.011 billion and RMB 21.593 billion
respectively. In accordance with the provisions of the Sinopec
Corp.'s Articles of Association, the appropriation of the profit
after tax for the relevant fiscal year would be conducted on the
basis of the net profit after tax as determined in accordance
with the PRC Accounting Rules and Regulations or under IFRS,
whichever is lower. After transferring 10% to the statutory
surplus reserve and 10% to the statutory public welfare fund from
Sinopec Corp.'s net profit, together with the undistributed
profits brought forward from the preceding year, and deducting
the final dividend for Year 2002 and the interim dividend for
2003 distributed in 2003, the amount of distributable profit of
Sinopec Corp. carried forward to the fiscal year of 2004 would be
RMB 19.732 billion. On the basis of the total number of
86,702,439,000 shares in issue at the end of 2003, according to
the resolution approved at the seventh meeting of the second
session of the Board of Directors of Sinopec Corp., the proposed
cash dividends to be distributed in cash would be RMB 0.09 per
share (including tax) and the total amount of cash dividends in
2003 amounted to RMB 7.803 billion. After deducting the cash
dividends of RMB 0.03 per share distributed in the interim of
2003 (totaled RMB 2.601 billion), the final cash dividends for
Year 2003, declared after the Balance Sheet date, would be RMB
0.06 per share (totaled RMB 5.202 billion). No statutory surplus
reserve would be transferred to capital this year. This
preliminary plan for profit appropriation will be implemented
subject to the consideration and approval at the Annual General
Meeting of Shareholders for Year 2003 proposed to be convened on
18 May 2004 (Tuesday).
The proposed final dividend will be distributed on or before 28
June 2004 (Monday) to those shareholders whose names appear on
the register of members of Sinopec Corp. at the close of business
on 4 June 2004 (Friday). The register of members of Sinopec
Corp.'s H shares will be closed from 31 May 2004 (Monday) to 4
June 2004 (Friday) (both dates are inclusive). In order to
qualify for the year end dividend for H shares, the shareholders
must lodge all share certificates accompanied by the transfer
materials with Hong Kong Registrars Limited, at Shops 1712 to
1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong
Kong before 4:00 pm on Friday, 28 May 2004 for registration.
Dividend will be denominated and declared in Renminbi. The
dividend for holders of domestic shares will be paid in Renminbi
and the dividend for holders of foreign shares will be paid in
Hong Kong dollars. The exchange rate for the dividend to be paid
in Hong Kong dollars will be the mean of the exchange rates of
Hong Kong dollars to Renminbi as announced by the People's Bank
of China during the week prior to the date of declaration of
dividend.
Section 7 . SIGNIFICANT EVENTS
7.1 Acquisition of assets
[X] Applicable [ ] Not applicable
NET PROFIT
CONTRIBUTED TO
THE LISTED CONNECTED
COMPANY IN THE TRANSACTION OR
PERIOD FROM THE NOT (IF YES,
DATE OF EXPLAIN THE
COUNTERPART OF ACQUISITION TO PRINCIPLE OF
TRANSACTION AND THE DATE OF ACQUISITION THE END OF THIS PRICE
ASSETS ACQUIRED ACQUISITION PRICE YEAR* DETERMINATION)
1. Acquisition of Dec. 31, 2003 RMB3.3 billion Nil Yes
Maoming ethylene Appraised price
assets from
Sinopec Group
Company
2. Acquisition of Dec. 31, 2003 RMB0.135 billion Nil Yes
the entire RMB0.221 billion Appraised price
operating assets
and liabilities
of Tahe Oilfield
and Petrochemical
Plant ("Tahe
Petrochemicals")
and Xian
Petrochemical
Plant General
("Xian
Petrochemicals"),
both of which are
wholly-owned by
Sinopec Group
Company
* In accordance with PRC Accounting Rules and Regulations
The above events do not have any material impact on the continuity of the
Company's business or the stability of the management.
7.2 Sales of assets
|_| Applicable |X| Not applicable
7.3 Material guarantees
|X| Applicable |_| Not applicable
DATE OF
OCCURRENCE WHETHER FOR
(DATE OF AMOUNT WHETHER A CONNECTED
EXECUTION OF RMB PERFORMED PARTY
BORROWER AGREEMENT) million TYPE TERM OR NOT (OR NOT)
Shanghai Secco Feb. 9, 2002 2,930 Joint and Feb. 9, 2002 No Yes
Petrochemical several - Dec. 20, 2021
Co., Ltd. liability
Shanghai Secco Feb. 9, 2002 4,062 Joint and Feb. 9, 2002 No Yes
Petrochemical several - Dec. 20, 2013
Co., Ltd. liability
BASF-YPC Mar. 7, 2003 4,680 Joint and Mar. 7, 2003 No
Co., Ltd several - Dec. 31, 2008
liability
Yueyang Dec. 10, 2003 377 Joint and Dec. 10, 2003 No Yes
Sinopec Shell several - Dec. 10, 2017
Coal liability
Gasification
Co., Ltd.
Others 358 Joint and No
several
liability
Total amount of guarantee provided by the Sinopec Corp. for its controlling RMB 173
subsidiaries million
Total amount of guarantee provided by Sinopec Corp. not in compliance with RMB 184
the requirements of Zheng Jian Fa [2003] No. 56 million
Total amount of guarantee as a percentage of the Company's net assets 8%
Total amount of guarantee provided RMB5,241
million
Total amount of guarantee outstanding RMB12,407
million
Of which: total outstanding amount of guarantee provided to connected RMB12,407
parties million
Note: These guarantees were granted to a subsidiary and an associate of Sinopec
Corp. Pursuant to "Notice on Certain Issues Relating to Regulating Funds
Transfers between a Listed Company and Connected Parties and the External
Guarantees of the Listed Company" Zheng Jian Fa (2003) No.56 promulgated by
the China Securities Regulatory Commission and the State-owned Assets
Supervision and Administration Commission of the State Council, as the total
liabilities to total assets ratios of this subsidiary and associate were over
70%, the provision of these guarantees is subject to restrictions.
Material Items of Guarantee under Performance
At the fourteenth meeting of the first session of the Board of
Directors of Sinopec Corp., the Board approved Sinopec Corp. to
provide guarantee with conditions in both domestic and foreign
currency for Shanghai Secco's project loan, and the amount of
guarantee was equal to RMB 6.992 billion. For relevant details,
please see Sinopec Corp.'s 2001 annual results announcement published
in China Securities, Shanghai Securities and Securities Times in
China and South China Morning Post and Hong Kong Economic Times in
Hong Kong on 2 April 2002.
At the twenty-second meeting of the first session of the Board of
Directors of Sinopec Corp., the Board approved the proposal
concerning Sinopec Corp.'s provision of equity pledge for the
BASF-YPC project loan on the condition that BASF should provide
equity pledge on the same terms. The Board also approved the proposal
concerning Sinopec Corp.'s provision of guarantee for Yueyang Sinopec
Shell Coal Gasification Co., Ltd., of an amount of RMB 377 million.
On 7 March 2003, Sinopec Corp. signed a "Guarantee Agreement for
Completion of Construction" with domestic and foreign banks, whereby
it guaranteed 40% of a domestic and foreign currencies denominated
loan equivalent to around RMB 11.7 billion provided by such banks to
BASF-YPC Co., Ltd. for completion of construction.
7.4 Connected obligatory rights and debts
|X| Applicable |_| Not applicable
Unit: RMB million
FUNDS PROVIDED TO FUND PROVIDED TO THE COMPANY
CONNECTED PARTY CONNECTED PARTY BY CONNECTED PARTY
OCCURRENCE AMOUNT BALANCE OCCURRENCE AMOUNT BALANCE
Sinopec Group Company and (2,236) 8,894 4,889 14,515
its subsidiaries
Total (2,236) 8,894 4,889 14,515
7.5 Trust financial management
[ ] Applicable |X| Not applicable
7.6 Performance of commitments
|X| Applicable [ ] Not applicable
(1) As at the end of the reporting period, the undertakings made
by Sinopec Corp. included:
(a) Carrying out the reorganization of its three
subsidiaries, namely, Sinopec Shengli Oilfield Company
Limited, Sinopec Sales Company Limited and Sinopec
International Company Limited, in accordance with the
PRC Company Law within a specific period of time;
(b) Changing the logo at the petrol stations within a
specific period of time;
(c) Setting up separate office buildings between Sinopec
Group Company and Sinopec Corp. within a specific
period of time; and
(d) Complying with the relevant applicable provisions and
rules of the Stock Exchange of Hong Kong Limited (the
"Hong Kong Stock Exchange") regarding the waiver of
connected transactions.
(2) As at the end of the reporting period, the major
undertakings given by Sinopec Group Company included:
(a) Complying with the agreements concerning connected
transactions;
(b) Resolving the issues arising from the land use right
certificates and building ownership certificates
within a specific period of time;
(c) Implementing the Reorganization Agreement (as referred
to in the prospectus for the issue of H Shares);
(d) Granting licenses for intellectual property;
(e) Avoiding competition within the industry; and
(f) Resolving the business competition and conflict of
interests with Sinopec Corp.
(3) As at the end of the reporting period, China Development
Bank and China Cinda Asset Management Corporation gave the
material undertakings that they would not sell or transfer
the shares of Sinopec Corp. held by them within a specific
period of time.
Details of the above undertakings were included in the
preliminary prospectus published by Sinopec Corp. in the
China Securities News, Shanghai Securities News and
Securities Times on 22 June 2001.
In this reporting period, Sinopec Corp. did not breach and
was not aware itself or any of the principal shareholders
above having breached the undertakings.
7.7 Litigation and arbitration of significant importance
[_] Applicable |X| Not applicable
7.8 Independent directors' performance of their duties
During the reporting period, the independent directors performed
their duties seriously in strict compliance with the requirements of
the relevant laws, regulations and the Articles of Association, and
participated in major decision making with good faith, diligence and
responsibility. Furthermore, they have actively attended the meetings
of the Board of Directors and acted as members of the Board of
Directors' professional committees, and also acted as member of the
Audit Committee and the Remuneration & Evaluation Committee
respectively. The independent directors put forth many constructive
comments and advice on the Company's development strategy, corporate
governance, internal reform and business operations. They have also
independently examined material connected transactions, including the
leasing of petrol stations from the parent company, the leasing of
additional land use rights from the parent company, ongoing connected
transactions, acquisitions of Maoming Ethylene, Xi'an Petrochemicals
and Tahe Petrochemicals, etc. from the parent company, and provided
their independent comments. Moreover, with respect to the appointment
or dismissal of directors and the employment of senior management
officers as well as guarantees, etc., the independent directors have
put forth independent comments, thus safeguarding the interests of
the Company and all its shareholders.
7.9 Analysis and explanation for other significant events, their
impacts and solutions
7.9.1 Issuance of corporate bonds
At the third meeting of the second session of the Board of Directors of
Sinopec Corp. held on 22 August 2003, the Board considered and approved
"the Proposal Concerning the Issuance of Domestic Corporate Bonds
Amounting to RMB 3.5 billion". This proposal was approved at Sinopec
Corp.'s second Extraordinary General Meeting of Shareholders for Year 2003
held on 15 October 2003. On 16 January 2004, Sinopec Corp. obtained the
approval from the National Development and Reform Commission ("NDRC") to
issue 10-year domestic corporate bonds of RMB 3.5 billion. On 23 February
2004, the sixth meeting of Sinopec Corp.'s second session of the Board of
Directors and the NDRC determined the coupon rate at of the corporate
bonds to be 4.61%. As of the date of 8 March 2003, the corporate bonds of
Sinopec Corp. have been issued successfully. For relevant details, please
refer to Sinopec Corp.'s announcement published in China Securities,
Shanghai Securities, and Securities Times in China, and South China
Morning Post and Hong Kong Economic Times in Hong Kong, respectively on 25
August 2003, 15 October 2003, 30 January 2004, 9 February 2004, and 24
February 2004.
7.9.2 Joint development of natural gas project in east china sea
On 19 August 2003, Sinopec Corp., CNOOC, Shell and Unocal entered into an
agreement regarding the joint exploration, development and sales of the
natural gas, petroleum and condensed oil resources in East China Sea
region. The above agreement included 5 contracts, the subject areas of
which are all located at the Xihu Trough in East China Sea, including 3
contracted exploration areas and 2 contracted development areas, covering
a total area of approximately 22,000 square kilometers. Sinopec Corp. and
CNOOC will each share 30% of the total rights and interests of this
project, while Shell and Unocal will each have 20% of the total rights and
interests. CNOOC will serve as the operator in the above 5 contracted
areas. Under this framework, Sinopec Corp. will lead the Natural Gas
Marketing Department in East China Sea and be jointly responsible for the
sales of natural gas produced in this project. This marks the official
commencement of the Natural Gas Co-operative Development Project in Xihu
Trough of East China Sea.
The above 5 contracted areas represent a large acreage, and bear numerous
discoveries and yet are relatively under-explored with considerable
potential. Chunxiao Project is the first one under the five contracts
which has been invested in and developed, and is expected to be put into
production in mid-2005 and to supply natural gas to users in eastern
China.
7.9.3 Evaluation and incentive mechanism of senior management
Sinopec Corp. has established and continuously improved a fair and
transparent performance evaluation standard and an incentive and
constraint mechanism for the directors, supervisors and other senior
management officers. It has implemented such incentive policies as a the
Performance Evaluation and Salary Incentive Plan for the Senior Management
of Sinopec Corp.", "the Plan of Stock Appreciation Rights for the Senior
Management of Sinopec Corp". and "the Measures on the First Granting of
Stock Appreciation Rights to the Senior Management of Sinopec Corp"., all
of which were approved by the Fourth Extraordinary General Meeting of
Shareholders held on 7 September 2000. In 2003, Sinopec Corp. implemented
the incentive policies such as "the Implementing Measures of Salary for
Senior Management of Sinopec Corp. (Tentative)"
During the period of this report, the reserves for the stock appreciation
rights to be granted at the first time have already been prepared
according to "the Measures on the First Granting of Stock Appreciation
Rights for the Senior Management of Sinopec Corp.".
7.9.4 Employees reduction
Sinopec Corp. plans to reduce the number of employees by 100,000 persons
by means of retirement, voluntary resignation and/ or redundancy within
the period of 5 years from 2001 to 2005, so as to enhance its efficiency
and operating profit. As of the end of 2003, the net aggregate reduction
in the past 3 years amounted to 108,000 persons. In 2003, the Company has
recorded employees reduction expenses of RMB 1.014 billion for about
21,000 employees who voluntarily resigned.
Section 8. REPORT OF THE SUPERVISORY COMMITTEE
During this reporting period, all members of the Supervisory Committee,
observing the principle of good faith, duly fulfilled their supervising duties
to safeguard the rights of Sinopec Corp.'s shareholders and the interest of
the Company in accordance with the Company Law of the People's Republic of
China and the Articles of Association of Sinopec Corp.
During this reporting period, the Supervisory Committee held five meetings. At
the twelfth meeting of the first session of the Supervisory Committee held on
20 January 2003 by way of written resolutions, the Committee reviewed and
approved the "Amended Rules of Procedures for the Supervisory Committee of
Sinopec Corp.", and agreed to submit the above rules to the first
Extraordinary General Meeting of Year 2003 for approval. At the thirteenth
meeting of the first session of the Supervisory Committee held on 22 January
2003, the Committee reviewed and approved the "Working Report of the First
Session of the Supervisory Committee of Sinopec Corp.", and agreed to report
to the first Extraordinary General Meeting for the Year 2003; and issued the
notification of the investigation report for four significant investment
projects and the review meeting of the Supervisory Committee of Sinopec Corp..
At the fourteenth meeting of the first session of the Supervisory Committee
held on 28 March 2003, the Committee heard the "Report on the Operating
Business and Financial Position of Sinopec Corp. for the Year 2002" prepared
by the Finance Department and the explanation about KPMG's audit report,
examined and approved the "Annual Financial Statements of Sinopec Corp. for
the Year 2002", the "Annual Report of Sinopec Corp. for the Year 2002" and the
"Annual Report of the Supervisory Committee for the Year 2002", and passed the
relevant resolutions. At the first meeting of the second session of the
Supervisory Committee held on 22 April 2003, the Committee elected its new
chairman and passed the resolution. At the second meeting of the second
session of the Supervisory Committee held on 22 August 2003, the Committee
heard the "Report on the Operating Business and Financial Positions of Sinopec
Corp. in the first half of 2003" prepared by the Finance Department and the
explanation about KPMG's audit report, examined and approved the "Interim
Report of Sinopec Corp. for the Year 2003", the "Proposal for Issuance of
Corporate Bond of Sinopec Corp." and the "Proposal for Lease of Additional
Land Use Rights from Sinopec Group Company", and passed the relevant
resolutions.
In 2003, through reviewing the Company's financial reports and carrying out
investigation and examination, the Supervisory Committee effectively
supervised the Company's financial positions and the senior executives'
performance of their duties. In the opinion of the Supervisory Committee,
Sinopec Corp. abided by the operation principles of standardization, precision
and integrity and carried out operations according to law. The Company
overcame many unfavorable factors affecting its production and management such
as the sharp fluctuation of oil price in international market and outbreak of
SARS, implemented the operating strategy of "expanding resources and market,
reducing cost and disciplining investment" and reached the goals of both
business operation and economic benefit, so the Company's economic benefits
increased significantly and its actual strength was further enhanced.
Firstly, the financial statement for Year 2003 has been prepared respectively
in accordance with the PRC Accounting Rules and Regulations and the IFRS. The
principle of consistency has been followed in financial reporting, and the
reported data truly and fairly reflect Sinopec Corp.'s financial positions and
operating performance. The income from principal operations and net profits in
accordance with the PRC Accounting Rules and Regulations were RMB 417.191
billion and RMB 19.011 billion respectively. The operating incomes and profit
attributable to shareholders in accordance with the IFRS were RMB 443.136
billion and RMB 21.593 billion respectively.
Secondly, the Company utilized the funds from previous years' financing
activities of RMB 4.787 billion in conformity with its undertakings for
projects. As of 31 December 2003, there were no balanced proceeds from the H
Shares' issuance while a balance of RMB 1.672 billion from the proceeds of A
Shares issuance remained unused.
Thirdly, the Company's asset reorganization and capital operation were in
conformity with the relevant regulations and were effective. During the
reporting period, the Company reorganised and set up an Acrylic Fiber Sales
Division; the Company purchased Maoming Ethylene, Xi'an Petrochemicals and
Tahe Petrochemicals from Sinopec Group at reasonable prices, and there were no
problems that were detrimental to the shareholders' interests and led to
Sinopec Corp.'s loss of assets. By taking such measure as asset
reorganization, Sinopec Corp. speeded up its structural adjustment,
strengthened and expanded its principal business and enhanced its market
competitiveness, thus achieving its strategic goal of sustainable growth.
Fourthly, the Company's standardized internal control rules was established.
In this year, the Company enhanced its fundamental management tasks,
formulated and issued "Internal Control Manual", whereby it established a
unified internal control principle, business flow control system and
guidelines of restrictions on internal authorization ranging from investment,
production, operation, finance and supervisory inspection, etc. These have
enhanced the unification of each control system of the Company and further
facilitated the standardization of management for the benefit of the Company's
healthy development.
Fifthly, the operation of connected transactions was in conformity with the
relevant regulations. All connected transactions between the Company and
Sinopec Group were in conformity with the relevant regulations of the Stock
Exchange of Hong Kong and the Shanghai Stock Exchange. The connected
transaction were reasonable and fair in price and abided by the principle of
"fair, justified and open", and no problems which were detrimental to the
non-connected shareholders and the Company's benefits were discovered.
Sixthly, the Board of Directors assumed carefully the rights and obligations
stipulated by the Company Law of People's Republic of China and the Articles
of Association of Sinopec Corp., and comprehensively carried out the
resolutions passed at the General Meetings of Shareholders. The policy-making
on significant issues, such as the Company's production and business
objectives, sustainable development measures, legitimate and standardized
operation, etc, were performed in conformity with lawful procedures and in a
timely manner. The Directors, President and the other senior management of
Sinopec Corp. adhered to the principles of diligence, integrity and good faith
in carrying out business operations with an aim to maximize the interests of
the Company. There was no infringement of the relevant laws, regulations and
Articles of Association and no harm to the shareholders' interests was caused
by the above personnel during the discharge of their duties during the
reporting period.
In the year ahead, the Supervisory Committee will further carry out
investigation and examination with the focus on improvement and implementation
of internal control rules, execution of the fixed asset investment plan, asset
acquisition or swap, the flow of connected transactions and the execution of
financial budget. The Supervisory Committee will further strengthen its
supervision and investigation of the Company's financial conditions and, based
on the principle of aggressing in an honest and bona fides manner, will
perform its supervisory functions thoroughly to promote the growth of the
Company's profit in 2004 and safeguard the shareholders' interests.
Section 9. FINANCIAL STATEMENTS
9.1 Auditors' opinion
Financial Statements [ ] Unaudited |X| Audited
Auditor's opinion |X| Standard unqualified [ ] Not standard
opinion opinion
9.2 The Group's and the Company's balance sheets and income statements
with comparatives, and cash flow statements for the year
9.2.1 Financial statements prepared in accordance with the PRC
Accounting Rules and Regulations
(1) Balance Sheet
AT 31 DECEMBER 2003 AT 31 DECEMBER 2002
THE THE THE THE
GROUP COMPANY GROUP COMPANY
RMB RMB RMB RMB
millions millions millions millions
CURRENT ASSETS:
Cash at bank and in hand 17,405 6,581 18,712 8,428
Bills receivable 5,953 1,282 4,684 1,478
Trade accounts receivable 9,284 7,080 10,670 9,885
Other receivables 15,457 24,861 16,817 23,661
Advance payments 3,904 2,990 3,193 2,189
Inventories 44,915 22,793 44,932 24,907
Total current assets 96,918 65,587 99,008 70,548
LONG-TERM EQUITY INVESTMENT:
(Including the Group's and the
Company's equity investment
differences of RMB 400 million
and RMB 395 million
respectively (2002: RMB 532
million and 537 million)) 11,150 98,334 11,025 91,501
FIXED ASSETS:
Fixed assets, at cost 461,128 223,015 431,391 201,705
Less: Accumulated depreciation 213,804 94,138 199,602 84,891
247,324 128,877 231,789 116,814
Less: Provision for impairment
loss of fixed assets 1,331 764 391 391
Net book value of fixed assets 245,993 128,113 231,398 116,423
Construction materials 1,226 263 1,403 283
Construction in progress 28,513 19,858 21,122 15,394
Total fixed assets 275,732 148,234 253,923 132,100
INTANGIBLE ASSETS AND
OTHER ASSETS:
Intangible assets 4,564 3,712 4,062 3,659
Long term deferred expense 97 - - -
Total intangible assets and
other assets 4,661 3,712 4,062 3,659
DEFERRED TAXATION:
Deferred tax assets 1,752 1,510 357 108
Total assets 390,213 317,377 368,375 297,916
Current liabilities:
Short-term loans 20,904 9,787 26,979 14,828
Bills payable 23,958 18,006 30,139 23,055
Trade accounts payable 22,704 18,117 19,212 18,310
Receipts in advance 5,908 4,077 3,767 2,008
Wages payable 1,850 643 1,447 443
Staff welfare payable 1,230 583 1,024 450
Taxes payable 6,986 2,975 3,380 1,094
Other payables 1,237 380 1,054 302
Other creditors 27,537 26,102 19,787 17,134
Accrued expenses 303 133 561 221
Current portion of long-term
liabilities 8,175 4,428 8,573 5,996
Total current liabilities 120,792 85,231 115,923 83,841
LONG-TERM LIABILITIES:
Long-term loans 79,221 68,723 73,708 61,890
Debentures payable - - 1,500 -
Other long-term payables 888 461 944 411
Total long-term liabilities 80,109 69,184 76,152 62,301
DEFERRED TAXATION:
Deferred tax liabilities 289 16 474 57
TOTAL LIABILITIES 201,190 154,431 192,549 146,199
MINORITY INTERESTS 26,077 - 24,109 -
SHAREHOLDERS' FUNDS:
Share capital 86,702 86,702 86,702 86,702
Capital reserve 36,852 36,852 36,588 36,588
Surplus reserves
(Including statutory public
welfare fund of RMB 6,330
million (2002:
RMB 4,429 million)) 19,660 19,660 15,858 15,858
Unrecognised investment losses (243) - - -
Undistributed profit
(Including dividend declared
after the balance sheet date in
respect of the year 2003 of RMB
5,202 million (2002:
RMB 5,202 million)) 19,975 19,732 12,569 12,569
TOTAL SHAREHOLDERS' FUNDS 162,946 162,946 151,717 151,717
TOTAL LIABILITIES AND
SHAREHOLDERS' FUNDS 390,213 317,377 368,375 297,916
(2) Income statement and profit appropriation statement
FOR THE YEAR ENDED 31 FOR THE YEAR ENDED 31
DECEMBER 2003 DECEMBER 2002
THE THE THE THE
GROUP COMPANY GROUP COMPANY
RMB millions RMB millions RMB millions RMB millions
INCOME FROM PRINCIPAL
OPERATIONS 417,191 275,426 324,184 215,862
Less: Cost of sales 323,104 228,387 251,182 177,346
Sales taxes and
surcharges 13,371 8,413 11,852 7,381
PROFIT FROM PRINCIPAL
OPERATIONS 80,716 38,626 61,150 31,135
Add: Profit from other
operations 856 146 889 120
Less: Selling expenses 14,582 9,591 13,279 8,940
Administrative expenses 21,219 14,038 17,253 10,540
Financial expenses 4,129 2,337 4,327 2,793
Exploration expenses,
including dry holes 6,133 4,483 4,363 2,965
OPERATING PROFIT 35,509 8,323 22,817 6,017
Add: Investment income 548 22,844 505 15,580
Non-operating income 292 104 333 169
Less: Non-operating expenses 6,334 3,599 1,643 1,142
PROFIT BEFORE TAXATION 30,015 27,672 22,012 20,624
Less: Taxation 9,361 8,904 6,809 6,503
Minority interests 1,886 - 1,082 -
Add: Unrecognised investment
losses 243 - - -
NET PROFIT 19,011 18,768 14,121 14,121
Add: Undistributed profits
at the beginning of year 12,569 12,569 16,942 16,942
DISTRIBUTABLE PROFITS 31,580 31,337 31,063 31,063
Less: Transfer to statutory
surplus reserve 1,901 1,901 1,412 1,412
Transfer to statutory
public welfare fund 1,901 1,901 1,412 1,412
Transfer to
discretionary surplus
reserve - - 7,000 7,000
DISTRIBUTABLE PROFITS TO
SHAREHOLDERS 27,778 27,535 21,239 21,239
Less: Ordinary shares' final
dividend 5,202 5,202 6,936 6,936
Ordinary shares'
interim dividend 2,601 2,601 1,734 1,734
UNDISTRIBUTED PROFIT
(Including dividend declared
after the balance sheet date
in respect of the year 2003 of
RMB 5,202 million (2002: RMB
5,202 million)) 19,975 19,732 12,569 12,569
(3) Cash Flow Statement
FOR THE YEAR ENDED
31 DECEMBER 2003
THE GROUP THE COMPANY
Note RMB millions RMB millions
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sale of goods and
rendering of services 505,489 335,409
Rentals received 370 207
Other cash received relating to operating
activities 2,925 1,789
SUB-TOTAL OF CASH INFLOWS 508,784 337,405
Cash paid for goods and services (371,086) (258,814)
Cash paid for operating leases (4,224) (2,785)
Cash paid to and on behalf of employees (15,964) (7,595)
Value added tax paid (19,429) (11,678)
Income tax paid (9,486) (2,009)
Taxes paid other than value added tax and
income tax (12,904) (8,047)
Repayments of borrowings on behalf of a
subsidiary - (962)
Other cash paid relating to operating
activities (11,243) (18,582)
SUB-TOTAL OF CASH OUTFLOWS (444,336) (310,472)
Net cash flow from operating activities (a) 64,448 26,933
CASH FLOWS FROM INVESTING ACTIVITIES
Cash received from sales of investments 107 111
Dividend received 442 9,067
Net cash received from sales of fixed
assets and intangible assets 380 184
Maturity of time deposits with financial
institutions 1,700 434
Other cash received relating to investing
activities 300 125
SUB-TOTAL OF CASH INFLOWS 2,929 9,921
Cash paid for acquisition of fixed assets
and intangible assets (43,966) (25,151)
Cash paid for acquisition of fixed assets
and intangible assets of jointly controlled
entities (4,107) -
Cash paid for purchases of investments (1,545) (1,121)
Increase in time deposits with financial
institutions (2,871) (449)
SUB-TOTAL OF CASH OUTFLOWS (52,489) (26,721)
NET CASH FLOW FROM INVESTING ACTIVITIES (49,560) (16,800)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from contribution from minority
interests 580 -
Proceeds from borrowings 228,654 142,118
Proceeds from borrowings of jointly
controlled entities 1,450 -
SUB-TOTAL OF CASH INFLOWS 230,684 142,118
Repayments of borrowings (235,175) (143,893)
Cash paid for dividends, distribution of
profit or interest (12,520) (10,220)
Dividend paid to minority shareholders by
subsidiaries (360) -
SUB-TOTAL OF CASH OUTFLOWS (248,055) (154,113)
NET CASH FLOW FROM FINANCING ACTIVITIES (17,371) (11,995)
EFFECT OF FOREIGN EXCHANGE RATE 5 -
NET DECREASE IN CASH AND CASH EQUIVALENTS (c) (2,478) (1,862)
NOTE TO THE CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED
31 DECEMBER 2003
THE GROUP THE COMPANY
RMB millions RMB millions
(a) RECONCILIATION OF NET PROFIT TO CASH
FLOWS FROM OPERATING ACTIVITIES
Net profit 19,011 18,768
Add: Allowance for doubtful accounts 1,902 1,956
Provision for/(written back of)
diminution in value of inventories 114 30
Depreciation of fixed assets 27,151 11,734
Amortisation of intangible assets 520 442
Impairment loss on fixed assets 940 373
Impairment loss on long term
investments 115 21
Net loss on disposal of fixed
assets and intangible assets 3,291 1,866
Financial expenses 4,129 2,337
Dry hole costs 2,789 1,780
Investment income (515) (15,211)
Deferred tax (1,580) (1,443)
Decrease in inventories 676 2,700
Increase in operating receivables (866) (862)
Increase in operating payables 4,885 2,442
Minority interests 1,886 -
NET CASH INFLOW FROM OPERATING ACTIVITIES 64,448 26,933
(b) FINANCING ACTIVITIES NOT REQUIRING THE
USE OF CASH OR CASH EQUIVALENTS
Current portion of convertible bond 1,500 -
(c) NET DECREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at the end of the year 15,221 6,345
Less: Cash and cash equivalents at the
beginning of the year 17,699 8,207
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,478) (1,862)
9.2.2 Financial statements prepared in accordance with International
Financial Reporting Standards
CONSOLIDATED INCOME STATEMENTS
FOR THE YEAR FOR THE YEAR
ENDED 31 ENDED 31
DECEMBER DECEMBER
2003 2002
RMB millions RMB millions
TURNOVER AND OTHER OPERATING REVENUES
Turnover 424,318 329,116
Other operating revenues 18,818 16,029
443,136 345,145
OPERATING EXPENSES
Purchased crude oil, products and operating supplies
and expenses (312,488) (237,581)
Selling, general and administrative expenses (25,940) (21,461)
Depreciation, depletion and amortisation (26,735) (25,286)
Exploration expenses, including dry holes (6,133) (4,363)
Personnel expenses (16,182) (14,417)
Employee reduction expenses (1,014) (244)
Taxes other than income tax (13,491) (11,956)
Other operating expenses, net (3,886) (1,158)
Total operating expenses (405,869) (316,466)
OPERATING PROFIT 37,267 28,679
FINANCE COSTS
Interest expense (3,728) (4,176)
Interest income 308 345
Foreign exchange losses (413) (384)
Foreign exchange gains 30 60
NET FINANCE COSTS (3,803) (4,155)
Gain from issuance of shares by a subsidiary 136 -
Investment income 75 229
Share of profits less losses from associates 406 332
Profit from ordinary activities before taxation 34,081 25,085
Taxation (10,545) (7,650)
PROFIT FROM ORDINARY ACTIVITIES AFTER TAXATION 23,536 17,435
Minority interests (1,943) (1,120)
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 21,593 16,315
BASIC EARNINGS PER SHARE (RMB) 0.25 0.19
DIVIDENDS ATTRIBUTABLE TO THE YEAR:
Interim dividend declared during the year 2,601 1,734
Final dividend proposed after the balance sheet date 5,202 5,202
7,803 6,936
BALANCE SHEET
AT 31 DECEMBER 2003 AT 31 DECEMBER 2002
THE THE THE THE
GROUP COMPANY GROUP COMPANY
RMB millions RMB millions RMB millions RMB millions
NON-CURRENT ASSETS
Property, plant and equipment 256,748 131,043 249,589 129,009
Construction in progress 28,973 20,272 21,692 15,869
Interest in subsidiaries - 96,308 - 90,566
Investments 2,582 478 2,697 561
Interests in associates 8,081 5,946 8,049 5,434
Interests in jointly controlled
entities - 1,043 - 375
Deferred tax assets 2,144 1,526 732 108
Lease prepayments 810 - 829 -
Other assets 2,152 1,321 1,773 1,378
TOTAL NON-CURRENT ASSETS 301,490 257,937 285,361 243,300
CURRENT ASSETS
Cash and cash equivalents 15,221 6,345 18,161 8,478
Time deposits with financial
institutions 2,184 236 1,013 221
Trade accounts receivable 9,284 7,080 10,800 9,968
Bills receivable 5,953 1,282 5,053 1,922
Inventories 46,112 23,056 47,074 25,768
Prepaid expenses and other
current assets 20,574 29,108 21,881 26,715
TOTAL CURRENT ASSETS 99,328 67,107 103,982 73,072
CURRENT LIABILITIES
Short-term debts 25,158 11,894 31,909 19,003
Loans from Sinopec Group Company
and fellow subsidiaries 3,921 2,321 3,674 2,452
Trade accounts payable 22,704 18,117 19,477 18,488
Bills payable 23,958 18,006 30,239 23,070
Accured expenses and other
payables 42,187 33,895 31,361 22,564
Income tax payable 4,077 2,012 2,780 1,311
TOTAL CURRENT LIABILITIES 122,005 86,245 119,440 86,888
NET CURRENT LIABILITIES (22,677) (19,138) (15,458) (13,816)
TOTAL ASSETS LESS CURRENT
LIABILITIES 278,813 238,799 269,903 229,484
NON-CURRENT LIABILITIES
Long-term debts 41,450 31,037 39,479 26,248
Loans from Sinopec Group Company
and fellow subsidiaries 37,771 37,686 37,703 37,616
Deferred tax liabilities 4,599 1,425 3,599 1,042
Other liabilities 1,228 752 1,290 755
TOTAL NON-CURRENT LIABILITIES 85,048 70.900 82,071 65,661
MINORITY INTERESTS 25,866 - 24,009 -
NET ASSETS 167,899 167,899 163,823 163,823
SHAREHOLDERS' FUNDS
Share capital 86,702 86,702 86,702 86,702
Reserves 81,197 81,197 77,121 77,121
TOTAL SHAREHOLDERS' FUNDS 167,899 167,899 163,823 163,823
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED
31 DECEMBER 2003
Note RMB millions
CASH FLOWS FROM OPERATING ACTIVITIES (a) 60,630
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditure (44,057)
Capital expenditure of jointly controlled entities (4,107)
Purchase of investments and investments in associates (1,511)
Proceeds from disposal of investments and investments
in associates 123
Proceeds from disposal of property, plant and equipment 380
Increase in time deposits with financial institutions (2,871)
Maturity of time deposits with financial institutions 1,700
NET CASH USED IN INVESTING ACTIVITIES (50,343)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from bank and other loans 230,262
Proceeds from bank and other loans of jointly
controlled entities 1,450
Repayments of bank and other loans (237,361)
Distributions to minority interests (360)
Contributions from minority interests 580
Dividend paid (7,803)
NET CASH USED IN FINANCING ACTIVITIES (13,232)
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,945)
EFFECT OF FOREIGN EXCHANGE RATE 5
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 18,161
CASH AND CASH EQUIVALENTS AT END OF YEAR 15,221
FOR THE YEAR ENDED 31
DECEMBER 2003
RMB millions
(a) RECONCILIATION OF PROFIT FROM ORDINARY ACTIVITIES BEFORE
TAXATION TO CASH FLOWS FROM OPERATING ACTIVITIES
Profit from ordinary activities before taxation 34,081
Adjustments for:
Depreciation, depletion and amortisation 26,735
Dry hole costs 2,789
Share of profits less losses from associates (406)
Investment income (75)
Interest income (308)
Interest expense 3,728
Gain from issuance of shares by a subsidiary (136)
Unrealised foreign exchange loss 289
Loss on disposal of property, plant and equipment, net 2,221
Impairment losses on long-lived assets 877
Decrease in trade accounts receivable 1,449
Increase in bills receivable (1,019)
Decrease in inventories 712
Decrease in prepaid expenses and other current assets 1,129
Decrease in lease prepayments 19
Increase in other assets (823)
Increase in trade accounts payable 3,329
Decrease in bills payable (6,251)
Increase in accrued expenses and other payables 5,965
Decrease in other liabilities (13)
CASH GENERATED FROM OPERATIONS 74,292
Interest received 303
Interest paid (4,914)
Investment and dividend income received 445
Income tax paid (9,496)
CASH FLOWS FROM OPERATING ACTIVITIES 60,630
9.2.3 Major differences between the financial statements prepared under
the PRC Accounting Rules and Regulations and IFRS
Other than the differences in the classifications of certain
financial statements captions and the accounting for the items
described below, there are no material differences between the
Group's financial statements prepared under the PRC Accounting
Rules and Regulations and IFRS. The major differences are:
Effects of major differences between the PRC Accounting Rules and
Regulations and IFRS on net profit are analysed as follows:
FOR THE FOR THE
YEAR ENDED YEAR ENDED
31 DECEMBER 2003 31DECEMBER 2002
RMB millions RMB millions
NET PROFIT UNDER THE PRC ACCOUNTING RULES
AND REGULATIONS 19,011 14,121
ADJUSTMENTS:
Depreciation of oil and gas properties 1,784 2,311
Disposal of oil and gas properties 1,260 -
Capitalization of general borrowing costs 389 338
Acquisition of Sinopec Maoming, Xi'an Petrochemical 326 235
and Tahe Petrochemical
Acquisition of Sinopec National Star 117 117
Gain from issuance of shares by a subsidiary 136 -
Gain from debt restructuring 82 -
Revaluation of land use rights 18 18
Unrecognized losses of subsidiaries (182) -
Pre-operating expenditures (169) -
Effects of the above adjustments on taxation (1,179) (825)
NET PROFIT UNDER IFRS* 21,593 16,315
* Effects of major differences between the PRC Accounting
Rules and Regulations and IFRS on shareholders' funds are
analysed as follows:
AT AT
31 DECEMBER 31 DECEMBER
2003 2002
RMB millions RMB millions
SHAREHOLDERS' FUNDS UNDER THE PRC
ACCOUNTING RULES AND REGULATIONS 162,946 151,717
ADJUSTMENTS:
Depreciation of oil and gas properties 10,885 9,112
Disposal of oil and gas properties 1,260 -
Capitalization of general borrowing costs 1,125 736
Acquisition of Sinopec Maoming, Xi'an
Petrochemical and Tahe Petrochemical - 9,338
Acquisition of Sinopec National Star (2,812) (2,929)
Revaluation of land use rights (870) (822)
Effect of minority interests on
unrecognised losses of subsidiaries 61 -
Pre-operating expenditures (169) -
Impairment losses on long-lived assets (113) (113)
Government grants (326) (291)
Effects of the above adjustments on taxation (4,088) (2,925)
SHAREHOLDERS' FUNDS UNDER IFRS* 167,899 163,823
* The above financial information is extracted from the
financial statements prepared in accordance with IFRS which
have been audited by KPMG.
9.2.4 Supplemental information for North American Shareholders
The Group's accounting policies conform with IFRS which differ in
certain significant respects from accounting principles generally
accepted in the United States of America ("US GAAP"). See the text
of the Annual Report for details.
The effect on profit attributable to shareholders of significant
differences between IFRS and US GAAP is as follows:
AT 31 DECEMBER
2003 2003 2002
US$ millions RMB millions RMB millions
Profit attributable to shareholders
under IFRS 2,609 21,593 16,315
US GAAP adjustments:
Foreign exchange gains and losses 9 76 76
Capitalisation of property, plant
and equipment 1 12 12
Reversal of deficit on revaluation of
property, plant and equipment 10 86 -
Depreciation on revalued property,
plant and equipment 483 3,998 4,126
Disposal of property, plant and
equipment 159 1,316 544
Exchange of assets 3 23 -
Reversal of impairment of long-lived
assets, net of depreciation effect 6 47 59
Capitalised interest on investments in
associates 17 141 110
Goodwill amortisation for the year - - 6
Cumulative effect of adopting SFAS No.
142 - - 11
Deferred tax effect of US GAAP
adjustments (207) (1,715) (1,509)
Profit attributable to shareholders
under US GAAP 3,090 25,577 19,750
BASIC AND DILUTED EARNINGS PER SHARE
UNDER US GAAP US$0.04 RMB0.30 RMB0.23
BASIC AND DILUTED EARNINGS PER ADS
UNDER US GAAP* US$3.56 RMB29.50 RMB22.78
* Basic and diluted earnings per ADS is calculated on the
basis that one ADS is equivalent to 100 shares.
The effect on shareholders' funds of significant differences
between IFRS and US GAAP is as follows:
FOR THE YEAR ENDED 31 DECEMBER
2003 2003 2003
US$ millions RMB millions RMB millions
Shareholders' funds under IFRS 20,286 167,899 163,823
US GAAP adjustments:
Foreign exchange gains and losses (43) (352) (428)
Capitalisation of property, plant and
equipment (1) (12) (24)
Revaluation of property, plant and
equipment (1,564) (12,943) (18,327)
Deferred tax adjustments on revaluation 484 4,004 5,628
Exchange of assets (67) (555) (578)
Reversal of impairment of long-lived
assets (68) (561) (608)
Capitalised interest on investments in
associates 39 321 180
Goodwill 2 17 17
Deferred tax effect of US GAAP
adjustments 48 398 484
SHAREHOLDERS' FUNDS UNDER US GAAP 19,116 158,216 150,167
Note: United States dollar equivalents
For the convenience of readers, amounts in Renminbi have been
translated into United States dollars at the rate of US$1.00 = RMB
8.2767 being the noon buying rate in New York City on 31 December
2003 for cable transfers in Renminbi as certified for customs
purposes by the Federal Reserve Bank of New York. No representation
is made that the Renminbi amounts could have been, or could be,
converted into United States dollars at that rate.
9.3 CHANGE IN ACCOUNTING POLICY
The Company and its subsidiaries (the "Group") changed its
accounting policy to conform with the revised "Accounting standard
for business enterprises - Events occurring after the balance
sheet date" (hereinafter referred to as the "Revised Standard").
According to the original "Accounting standard for business
enterprises - Events occurring after the balance sheet date", the
appropriation of profit for the current year approved by the Board
of Directors after the balance sheet date was an adjusting event.
Pursuant to the revised "Accounting standard for business
enterprises - Events occurring after the balance sheet date"(Cai
Kuai [2003] No. 12) issued by the Ministry of Finance on 14 April
2003, cash dividends for the current period declared and approved
by the Board of Directors after the balance sheet date, but before
the financial statements are authorised for issue, should be
presented separately under shareholders' funds on the balance
sheet. The Company has adopted the Revised Standard to account for
cash dividends retrospectively.
As a result of the above change in accounting policy, the
Company's opening balance of undistributed profits at the
beginning of the year 2003 has been increased by RMB 5,202
million. The cumulative effect of the change in accounting policy
for prior years is set out below:
BEFORE AFTER
ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
RMB millions RMB millions RMB millions
Undistributed profits at
1 January 2002 10,006 6,936 16,942
Undistributed profits at
31 December 2002 7,367 5,202 12,569
Dividend payable at
31 December 2002 5,202 (5,202) -
9.4 As compared to the last annual report, there are no changes in the
scope of consolidation.
Section 10. REPURCHASE, SALES AND REDEMPTION OF SHARES
[ ] Applicable |X| Not applicable
Section 11. COMPLIANCE WITH THE CODE OF BEST PRACTICE
The Board of Directors believes that, during this reporting period,
Sinopec Corp. complied with the Code of Best Practice as set out in Appendix
14 of the Listing Rules of the Hong Kong Stock Exchange.
Section 12. A detailed results announcement containing all the information
required by Paragraphs 45 (1) to (3) of Appendix 16 to the Listing
Rules of the Stock Exchange will be published on the website of the
Hong Kong Stock Exchange in due course.
This announcement is published in both English and Chinese languages. The
Chinese version shall prevail.
By order of the Board
CHEN TONGHAI
Chairman
Beijing, China, 26 March 2004
SIGNATURE
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.
China Petroleum & Chemical Corporation
By: /s/ CHEN GE
Name: Chen Ge
Title: Secretary to the Board of Directors
Date: March 26, 2004