CORPORATE INFORMATION

Transcription

1 CORPORATE INFORMATION Executive Directors Mr. Liang Yongjiu (Chairman) Mr. Che Chiqiang (Managing Director) Mr. Li Zhijie Mr. Yang Rixiang Independent Non-executive Directors Mr. Benjamin Pui-Tong Wong Mr. Chan Kay Cheung Mr. Choi Kim-Lui Ms. Yau Lai Man Company Secretary Mr. Ng Kin Yuen Audit Committee Mr. Benjamin Pui-Tong Wong Mr. Chan Kay Cheung Mr. Choi Kim-Lui Ms. Yau Lai Man Auditors PricewaterhouseCoopers Principal Banks Bank of China Nanyang Commercial Bank Bank of Communications Registered Office 22nd Floor, Chu Kong Shipping Tower 143 Connaught Road Central, Hong Kong Registrars Tengis Limited G/F Bank of East Asia Harbour View Centre 56 Gloucester Road, Wanchai, Hong Kong Business Headquarter 22nd Floor, Chu Kong Shipping Tower 143 Connaught Road Central, Hong Kong T: (852) F: (852) W:

2 Structure of the Group 02 Financial Highlights 03 Chairman s Statement 04 Management Discussion and Analysis 08 Report of the Directors 18 CONTENTS Report of the Auditors 32 Audited Accounts Consolidated: Profit and loss account 33 Balance sheet 34 Statement of changes in equity 36 Cash flow statement 37 Company: Balance sheet 35 Notes to the accounts 38 Financial Summary 87 Notice of Annual General Meeting 89

3 Structure of the Group 75% 25% 100% 100% 100% 100% 100% 100% 100% 100% Subsidiary Chu Kong Warehouse Properties Company Limited Chu Kong Container Transportation Company Limited Chu Kong Godown Wharf & Transportation Company Limited Chu Kong Agency Company Ltd. Chu Kong Transhipment & Logistics Company Limited Chu Kong Transportation (H.K.) Ltd. Chu Kong Infrastructure Investment Limited Chu Kong River Trade Terminal Company Limited Jointly controlled entity 60% 51% 40% 75% 51% 49% 100% 100% 49% 25% 90% 99% 60.83% 49% 30% 40% 30% 25% 37.5% 50% Chu Kong Logistics (Singapore) Pte. Ltd. Chu Kong Air-Sea Union Transportation Company Limited Shenzhen Yantian Port Zhujiang Logistics Co., Ltd. Chu Kong (Guangdong) International Freight Forwarding Co., Ltd. Shenzhen Zhu Chuan International Freight Forwarding Co., Ltd. Chu Kong International Airfreight Company Limited Ever Sky Transportation Limited Guangdong Zhu Chuan Navigation Company Limited Guangzhou-Foshan Expressway Ltd. Chu Kong Cargo Terminals (Qingyuan) Co., Ltd. Chu Kong Cargo Terminals (Gaoming) Co., Ltd. Chu Kong Cargo Terminals (Kangzhou) Co., Ltd. He Shan County Hekong Associated Forwarding Company Limited Dongguan Humen Great Trade Containers Port Company Limited Guangdong Sanbu Passenger and Freight Transportation Co., Ltd. Sanshui Sangang Containers Wharf Company Limited Foshan Nankong Terminal Co., Ltd. Foshan New Port Limited Chu Kong Cargo Terminals (Beicun) Co., Ltd. 2

4 Financial Highlights (HK$ Million) Change % Turnover Profit attributable to shareholders Total assets 1, , Net assets 1, Financial Ratios Operating profit margin (%) Current ratio (26.9) Debt ratio (%) Turnover % Shipping agency, river trade cargo direct shipment and transhipment Wharf cargo handling, cargo consolidation and godown storage 13.2% Container hauling and trucking 0.2% 3

5 Chairman s Statement For the year ended 31st December 2004, the Group recorded an audited consolidated turnover of HK$614,022,000, an increase of 24.5% as compared with last year. Consolidated net profit was HK$83,670,000, representing an increase of 22.9% as compared with last year. Basic earnings per share was HK11.2 cents. Amid a favourable global economic environment in 2004, overall recovery was seen in worldwide shipping transportation industry, while Hong Kong s economy had also recorded a higher rate of growth. Leveraging on such favourable external environment, through its greater efforts in market expansion, investments in potential river trade terminal projects in Mainland China, coupled with its consolidation of internal resources and its improvement in corporate governance and cost control measures, the Group recorded a relatively good operating results. Despite the adverse effects on Hong Kong s economy resulted from high oil prices and the macro-economic adjustment measures in Mainland China, the growing demand in Mainland China and overseas highlighted Hong Kong s prominent position as a transhipment port, the shipping industry was 4

6 benefited accordingly. In 2004, the container handling volume of Hong Kong reached 22,000,000 TEUs, representing an increase of 7.5% as compared with last year. The Group had put more effort in its market sales in a timely manner, upgraded its operating equipments, and enhanced its overall operating efficiency, which resulted in a historical high in terms of the volume of its core business. In 2004, the volume of containers handling amounted to 248,522 TEUs, representing an increase of 23.4%; the volume of container hauling and trucking on land was 144,662 TEUs, representing an increase of 45.1%; cargo storage volume amounted to 41,684 CBMs, representing an increase of 8.3%; container transportation volume amounted to 453,774 TEUs, representing an increase of 34.3%. As shown in the statistics from Hong Kong Marine Department, the In 2004, further initiatives of the Closer Economic Partnership Arrangement policy between Mainland China and Hong Kong was implemented, which presented unprecedented business opportunities to the Group. The Group captured this opportunity through the acquisition of additional 49% shareholdings in Chu Kong Cargo Terminals (Gaoming) Co., Ltd. ( Gaoming Terminals ), turning this major river trade terminals in Xijiang into a subsidiary of the Group. A comprehensive reform in Gaoming Terminals has been undergone generally by the Group, including the upgrade of operating equipments and the introduction of modern management philosophy. As a result, Gaoming Terminals business experienced a strong growth with substantial increase in profit, bringing in profit contribution of HK$6,758,000 in overall container river trade transportation volume of Hong Kong increased by 10.0% in The growth of the Group s business outperformed the industry, for beyond the average market level, demonstrating its strong core competitive edges and growth potential. 5

7 Chairman s Statement Capitalised the favourable opportunity created by the substantial growth of cargo transportation volume in Shenzhen Yantian Port, Shenzhen Yantian Port Zhujiang Logistics Co., Ltd., in which the Group owned 40% interests, embarked on progressive external expansion and strengthened its internal management, thus making it a leading logistics service provider in the Yantian Port Chu Kong Logistics (Singapore) Pte. Ltd., which was jointly-invested by the Group, commenced its operations in November 2004, marking the first step of the Group in the establishment of its overseas network. The Group will accelerate the expansion of overseas network based on results of scientific researches to provide solid support to its core businesses. District, achieving historical high profits and bringing in profit contribution of HK$2,156,000 to the Group. In 2005, the global economy will continue to gather pace and the demand of external trade will remain strong. The Pearl River Delta (the PRD ) region, During the year, Guangzhou-Foshan Expressway Ltd., in which the Group owned 25% interests, completed its major road repairs work. Traffic conditions were improved in all aspects and the traffic volume increased, bringing in profit contribution of HK$39,540,000 for the year. As the main segment of Guangdong expressway network, Guangzhou-Foshan Expressway will be more important in the near future, and it will generate ongoing stable return on investment to the Group. the world processing and manufacturing base has great demand on quality logistics services. The Group will continue to acquire major river trade terminals in the PRD region and introduce advanced equipments and management philosophy, so as to establish some logistics service bases in the PRD region. The Group will further expedite the development and application of modern information technology systems, in order to improve customer service and efficiencies. Based on the considerable 6

8 results achieved from the build up of regional marketing network, the Group will keep on consolidating its marketing network in the PRD region, implementing stringent cost control and achieving greater economies of scale. The Group will continue to improve its corporate governance, tighten its internal control and enhance its transparency, so as to protect the interests of investors. Finally, I would like to extend my sincere gratitude to all shareholders, customers and the public for their trust and support to the Group, and also my heartfelt thanks to our staff for their efforts and dedication throughout the year. Chairman Liang Yongjiu Hong Kong 19th April

9 Management Discussion and Analysis Review of Operations During the year ended 31st December 2004, the Group recorded a consolidated turnover of HK$614,022,000, an increase of 24.5% as compared with last year. Profit attributable to shareholders was HK$83,670,000, representing an increase of 22.9% as compared with last year. foreign trade remained its strong growth, whereas the confidence of the enterprises towards the future was strengthened. These factors contributed to a better operating environment for the transportation business as a whole, including the river trade transportation market between Guangdong and Hong Kong. Amidst a favourable external environment, the Group actively prepared itself by In 2004, Hong Kong economy has experienced a considerable improvement attributed to the substantial recovery of the global economy as well as the steady economic growth in Mainland China, the economic deflation which has dampening Hong Kong for some time was mitigated. In addition, the way of cautious planning to capitalise the opportunities arisen from both the economic recovery in 2004 and the implementation of the Closer Economic Partnership Arrangement between Hong Kong and Mainland China ( CEPA ), resulting in a better growth of the core businesses of the 8

10 Group, namely the river trade transportation business and investment business, in particular, the substantial growth of container business further increased the Group s market share in the industry, thus enhancing its leading position in the industry of river trade transportation in the Pearl River Delta (the PRD ) region. River trade transportation business With its strong and sound business background, healthy and sufficient financial resources, extensive trade transportation network, solid experience in the industry and prestigious brand name, the Group manages to maintain its competitive edge in the river trade transportation industry and is one of the major suppliers of river trade transportation services with high reputation. internal efforts in strengthening its market expansion, the growth momentum of river trade transportation business of the Group continued for the whole year. Major performance indexes of As mentioned above, leveraging on the benefits business operations are as follows: brought about by the continuing improvement of the external operating environment and the Group s Indicators Change Container transportation volume (TEU) 453, , % Import and export of shipping agency business (voyages) 21,479 20, % Container handling volume (TEU) 248, , % Volume of container hauling and trucking on land (TEU) 144,662 99, % Volume of break bulk cargoes handled (tons) 375, , % 9

11 Management Discussion and Analysis As shown in the table above, all container related businesses recorded larger increments. In 2004, the overall container river trade transportation volume of Hong Kong increased by 10.0%, while the Group achieved a growth of 34.3%, far beyond the growth of the industry and further enhanced the Group s market share in the industry. Meanwhile, the increase in container transportation volume also generated substantial growth for the related wharf formerly known as Foshan Gaoming Ming Chu Transportation Co., Ltd., increasing its shareholdings in Gaoming Terminals from originally 50% to 99%, upon which Gaoming Terminals became a subsidiary of the Group. In 2004, Gaoming Terminals recorded a relatively significant growth, of which throughput volume of port and container import and export volume increased by 49% and 55% respectively. container handling, and hauling and trucking on land businesses. However, the Group s break bulk cargoes business was constrained by the intensified competition from other means of transportation and the macro-economic adjustment measures of Mainland China, which led to a decrease of 15.9% in the volume of break bulk cargoes handled. Investment business Following the implementation of CEPA, the Group strategically commenced its acquisitions of certain river wharfs in the PRD region and additional equity interests in those wharfs. Aside from the acquisition of additional equity interests in Gaoming Terminals, the Group also completed its acquisition of The Group completed its acquisition of additional equity interests in Chu Kong Cargo Terminals (Gaoming) Co., Ltd. ( Gaoming Terminals ), additional equity interests in Chu Kong Cargo Terminals (Kangzhou) Co., Ltd., formerly known as Deqing Kangzhou Container Transportation Co., Ltd., increasing its shareholdings from originally 52% to 60.83%; completed its acquisition of 75% shareholdings of Chu Kong (Guangdong) International Freight Forwarding Co., Ltd.; and newly jointly-invested and established Chu Kong Logistics (Singapore) Pte. Ltd., in which the Group held 60% shareholdings. During the year, the overall performance of the Group s investment business continued to be steady and made significant contributions to the Group s profit. The Group newly jointly-invested and established Chu Kong Cargo Terminals (Beicun) Co., Ltd. 10

12 ( Beicun Terminals ) in January The Group will invest HK$15,094,000 and hold 50% equity interests in Beicun Terminals. growth momentum experienced in the second half of Other jointly controlled entities held by the Group recorded sound business developments during the year without significant changes. Major road repairs work conducted by Guangzhou-Foshan Expressway Ltd. ( Guangfo Expressway ) has been completed in September 2004, recording a 15.3% increase in the traffic volume during 2004 as compared with last year, ensuring revenue and profit for Guangfo Expressway during the year. The trading position of Shenzhen Yantian Port Zhujiang Logistics Co., Ltd. ( Yantian Logistics ) remained stable and sound with remarkable operating results, continuing the Future Outlook As Hong Kong has been steadily developed into a regional logistics centre and the solid growth of economy in the region covered by the industry, the Group is optimistic about the prospect of river trade transportation industry between Guangdong and Hong Kong. The Group has been accumulating extensive experiences in river trade transportation industry for 43 years, it has built up leading edge in 11

13 Management Discussion and Analysis business network and long-term good reputation in the industry. Its possession of hardware resources, extensive sales and operating network in the PRD region and the gradual acquisition of shareholdings in river wharfs in Mainland China will be continued to bolster the steady development of the Group s businesses. construction and application of electronic communication to cater for the development of modern logistics; enhancing efficiency and improving customer services, and facilitating information exchanges within production departments and between the companies and their clients. The Group has successfully obtained certificate of ISO9001 in 2001 and is continuously In addition, in order to better serve the needs of the normal operation and long term development of the existing businesses, the Group is actively putting efforts in the consolidation of its internal resources, including taking initiatives to expand the upgrading its existing quality of service pursuant to its management standards and requirements. The Group adheres to its management philosophy of people-oriented and offers intensive skill training to its existing staff, recruits competent expertise and 12

14 has established an effective working team, to equip itself for the ongoing needs of businesses on the growth. While the internal management and cost control will be further strenghtened, the Group will also progressively replace part of its fixed assets to promote efficiency of operation in segments and maximise the potential of respective departments, whilst the potential safety issues of the operation will be minimised. Capitalising on its own competitive edge, the Group will continue to make related investments in Mainland China and Hong Kong, and will endeavour to explore international opportunities for the development of its overseas businesses in order to broaden the Group s international exposure. The Board remains confident about the future development of the Group. Financial Review Review of financial results During the year, profitability of the Group s core became stable. Benefited from the positive development of economy in Mainland China, the Group s investment projects performed steadily. The Group recorded profit attributable to shareholders of HK$83,670,000 in 2004, representing an increase of HK$15,601,000, or 22.9%, as compared with last year, details of which are as follows: business posted remarkable increase as the overall business volume rose significantly and the price Changes HK$ 000 HK$ 000 HK$ 000 Net operating profit* 40,792 19,251 21,541 Share of profit after taxation of jointly controlled entities 42,878 48,818 (5,940) Profit attributable to shareholders 83,670 68,069 15,601 * Net operating profit represents operating profit after finance costs, taxation and minority interests. 13

15 Management Discussion and Analysis For the year 2004, the Group recorded net operating profit of HK$40,792,000, an increase of HK$21,541,000, or 111.9% over last year. The significant increase in net operating profit was mainly due to: During 2004, the Group reported a share of profit after taxation of jointly controlled entities of HK$42,878,000, decreased by HK$5,940,000 as compared with last year. The decease was mainly due to the combined effect of the following: (1) gross profit of the core business increased by HK$33,125,000, or 41.0% as compared with last year. The increase was mainly attributable to the overall growth of the river (1) the transformation of Gaoming Terminals to a subsidiary during the year from a former jointly controlled entity, resulting in a decrease in net profit of HK$5,447,000; trade transportation business of the Group, particularly the substantial growth of the container business. Meanwhile, the price level of the core business has become stable since late last year, contributing to the improvement of gross profit margin of the core business. Despite the relatively higher increase in labor cost for the year, it was partly offset by the significant increase in (2) a loss recorded by Guangdong Sanbu Passenger and Freight Transportation Co., Ltd. ( Sanbu Transportation ) during the year as a result of the significant downturn of the passenger transportation business. In 2004, the Group s share of net profit of Sanbu Transportation decreased by HK$3,096,000 as compared with last year; gross profit; (3) a stable growth in profit recorded by (2) the transformation of Gaoming Terminals to a subsidiary during the year from a former jointly controlled entity, contributing a profit of HK$6,758,000 to the core business; Guangfo Expressway and Yantian Logistics during the year. The Group s share of net profit of Guangfo Expressway and Yantian Logistics in 2004 increased HK$1,533,000 and HK$1,166,000 respectively as compared (3) expenses related to the payment of with last year. termination benefits arising from the rationalisation of manpower and the write-off of old office improvement in

16 Dividend The Group has maintained a relatively stable dividend policy. The percentage of the profit attributable to shareholders to the amount of dividends paid ( Dividend coverage ) decreased in 2004, mainly for the consideration of capital requirement for the Group s long-term development. The Group s Dividend coverage in the past five years were as follows: Profit Dividends Total attributable to Dividend per share dividends shareholders coverage HK$ HK$ 000 HK$ ,500 92, % ,000 55, % ,500 63, % ,500 68, % 2004 (proposed) ,500 83, % 15

17 Management Discussion and Analysis Liquidity and Financial Resources As at 31st December 2004, total shareholders funds of the Group increased by HK$67,400,000 over last year, which were mainly derived from retained profit during the year. The Group obtained a credit facility of HK$25,541,000 from its bankers, of which HK$16,441,000 was utilised. As at 31st December 2004, cash and cash equivalents held by the Group was HK$261,515,000 (2003: HK$304,758,000) or 21.2% of the total assets (2003: 27.3%). As at 31st December 2004, the current ratio of the Group, represented by current assets to current liabilities, was 1.9 (2003: 2.6) and the debt ratio, represented by total liabilities to total assets, was 17.0% (2003: 14.5%). The Group s financial position remained healthy. Given its sufficient cashflow and available banking facilities, coupled with the overall sound and stable financial position and its good standing in raising funds from the capital market, it is believed that the Group is well-poised to seize good investment opportunities in the course of its business expansion. Capital Structure The capital structure of the Group was constantly monitored by the Company. The use of all capital instruments, including banking facilities, by each subsidiary was under the central co-ordination and arrangement of the Company. As at 31st December 2004, cash and cash equivalents held by the Group, of which 46% were Hong Kong dollars, were deposited with several banks of good reputation in the following denominations: Amount Percentage HK$ 000 % HKD 120, USD 28, RMB 112, , Financial Management and Control The Group consistently adopted a prudent financial policy. Fund management, financing and investment activities were all undertaken and monitored by the central management of the Group. 16

18 Given the characteristics of river trade transportation, which is the core business of the Group, emphasis of routine financial control is placed on the management of working capital, particularly the timely receipt of external trade receivables. As at 31st December 2004, net trade receivables of the Group amounted to HK$90,604,000, an increase of 3.6% over last year, which was mainly due to the significant increase in business volume, 92.4% of which was due and receivable within 3 months. The exposure to bad debts was controlled at a comfortable level. Currently, the ordinary operations and investments of the Group are concentrated in Guangdong and Hong Kong, with operating revenue and expenditure mainly denominated in HKD, as well as in RMB and USD. RMB revenue from Mainland China may be used for payment of expenses of the Group denominated in RMB incurred in Mainland China. HKD or USD revenue received in Mainland China may be remitted to the Group s accounts in Hong Kong through proper procedures as planned. So long as the pegged rate system in Hong Kong is maintained, it is expected that the Group will not be subject to any significant exposure associated with fluctuation in exchange rates. As at 31st December 2004, the Group pledged its fixed assets of approximately HK$63,336,000 to secure bank loans. Except for a bank loan of RMB15,000,000, which bore interest at a fixed rate and will be fall due on 11th July 2005, the Group has no other borrowings as at 31st December As at 31st December 2004, the counter-guarantees to banks in respect of bank guarantees provided to third parties by the Group amounted to HK$2,290,000 (2003: HK$1,450,000). Capital Commitments Details of capital commitments of the Group and the Company are set out in note 24 to the accounts. The Group has sufficient financial resources, which include cash on hand and cash equivalents, cash from operating activities and available banking facilities, for the payment of capital commitments. Employees As at 31st December 2004, the Group has approximately 321 employees in Hong Kong, not including employees in jointly controlled entities. The remuneration of employees was determined on the basis of employees job responsibility and individual performance. Other benefits available to eligible employees included share options, housing allowances and bonuses. The Group s remuneration policy ensures our competitiveness in the market. 17

19 Report of the Directors The front row (From left to right): Ms. Yau Lai Man (Independent non-executive director), Mr. Liang Yongjiu (Chairman), Mr. Chan Kay Cheung (Independent non-executive director), Mr. Choi Kim-Lui (Independent non-executive director). The back row (From left to right): Mr. Ng Kin Yuen (Company secretary), Mr. Che Chiqiang (Managing director), Mr. Li Zhijie (Executive director), Mr. Yang Rixiang (Executive director). The directors present their report and the audited accounts of the Company and of its subsidiaries (the Group ) for the year ended 31st December Principal activities and geographical analysis of operations The principal activity of the Company is investment holding. The principal activities of the subsidiaries and jointly controlled entities are set out in notes 13 and 14 to the accounts respectively. There were no significant changes in the principal activities of the Group during the year. An analysis of the Group s performance for the year by business and geographical segments is set out in note 2 to the accounts. 18

20 Results and appropriations The Group s results for the year ended 31st December 2004 is set out on page 33 of the annual report. An interim dividend of HK1 cent per ordinary share was declared during the year, totalling HK$7,500,000, which was paid on 27th October The directors recommend the payment of a final dividend of HK2 cents per ordinary share for the year, totalling HK$15,000,000, to shareholders on the register of members on 23rd May Financial summary A summary of the results, assets and liabilities of the Group for the last five financial years is set out on pages 87 and 88 of the annual report. This summary does not form part of the audited accounts. Fixed assets Details of movements in the fixed assets of the Company and of the Group are set out in note 12 to the accounts. Share capital Details of movements in the Company s share capital during the year are set out in note 20 to the accounts. Reserves Details of movements in the reserves of the Company and of the Group during the year are set out in note 21 to the accounts. Distributable reserves As at 31st December 2004, the Company s reserves available for distribution, calculated in accordance with the provisions of Section 79B of the Hong Kong Companies Ordinance, amounted to HK$132,898,000 of which HK$15,000,000 has been proposed as final dividend for the year. Major customers and suppliers In the year under review, the Group s sales to the five largest customers and purchases from the five largest suppliers accounted for less than 30% of the Group s turnover and purchases for the year respectively. 19

21 Report of the Directors Directors The directors of the Company during the year and up to the date of this report were as follows: Executive directors: Mr. Liang Yongjiu Mr. Che Chiqiang Mr. Li Zhijie Mr. Yang Rixiang Independent non-executive directors: Mr. Benjamin Pui-Tong Wong (resigned on 31st December 2004) Mr. Chan Kay Cheung Mr. Choi Kim-Lui (appointed on 8th September 2004) Ms. Yau Lai Man (appointed on 1st January 2005) In accordance with the bye-laws of the Company, Mr. Che Chiqiang, Mr. Choi Kim-Lui and Ms. Yau Lai Man will retire by rotation and, being eligible, will offer themselves for re-election at the forthcoming annual general meeting. Directors service contracts No director proposed for re-election at the forthcoming annual general meeting has a service contract with the Company which is not determinable by the Company within one year without payment other than statutory compensation. Directors and senior managers biographies Executive Directors Mr. Liang Yongjiu, aged 53, has been the chairman of the Company since June 2003 and is responsible for the strategic planning and policy making of the Group. He joined Chu Kong Shipping Enterprises (Holdings) Company Limited ( CKSE ) in 1999 and is currently the managing director of CKSE. Mr. Liang started his career in the shipping industry in He was the deputy general manager of Guangdong Province Navigation Material Supply Company from 1984 to 1995, and the managing director of Guangdong Lighter Co. from 1995 to He has over 35 years of experience in marine transportation management and administration. 20

22 Directors and senior managers biographies (continued) Executive Directors (continued) Mr. Che Chiqiang, aged 42, has been the managing director of the Company since September 2000 and is responsible for the strategic planning and policy making as well as the overall business operation and capital investment of the Group. He joined CKSE in 1999 after graduating from Southampton University in the United Kingdom with a master degree in international trade law. He is also a qualified lawyer in the PRC. Mr. Li Zhijie, aged 43, has been an executive director of the Company since March 2001, and is also a director and deputy general manager of CKSE. He graduated from the Shanghai Maritime University in 1987, majoring in water transportation. He joined CKSE in 1992, and had been appointed as a director and deputy general manager of Chu Kong Transhipment & Logistics Company Limited ( CKTL ), one of the Company s wholly-owned subsidiaries, the legal representative of Guangdong Hong Kong & Macau Freight Transport Trust Company and the chairman of Shenzhen Zhu Chuan International Freight Forwarding Co., Ltd. He has 24 years of experience in river trade transportation, inter-model transportation and cargo forwarding business. Mr. Yang Rixiang, aged 41, has been a deputy general manager of the Company since October 2002, and has been an executive director of the Company since June 2003, and is responsible for management of the Group s jointly controlled entities and the river trade related investment appraisal work. He joined CKSE after his studies of postgraduate from Guangdong University of Foreign Studies in He holds a bachelor degree of economics. He worked at various subsidiaries of CKSE, holding the positions as manager and general manager subsequently. Mr. Yang is a qualified economist in the PRC and has over 15 years of experience in corporate management. Independent Non-executive Directors Mr. Benjamin Pui-Tong Wong, aged 70, is a director of John Swire & Sons (H.K.) Ltd. and a number of other companies in the Swire Group. He has served for 47 years in the shipping and marine related industries. He is also a member of the Committee of the Port & Maritime Board of Hong Kong. He resigned on 31st December Mr. Chan Kay Cheung, aged 58, is an executive director and deputy chief executive of The Bank of East Asia, Limited. He joined the Bank in 1965, and possesses extensive knowledge and experience in the banking industry. He is a fellow member of the Hong Kong Institute of Bankers and a member of the MPF Industry Schemes Committee. He is also a director of Four Seas Food Investment Holdings Limited and China Electronics Corporation Holdings Company Limited. 21

23 Report of the Directors Directors and senior managers biographies (continued) Independent Non-executive Directors (continued) Mr. Choi Kim-Lui, 57, was appointed as the independent non-executive director of the Company on 8th September Mr. Choi graduated as a bachelor of social science at the Hong Kong University in 1972 and worked as a social worker in his early career years. In 1983, he joined as the executive director for the newly established Transward Limited and New Moonraker Motor Boat Company Limited to develop motor boat, tug boat, lighter and midstream operation services. Since then, he has actively participated in the trade associations of motor boats and lighters and has served as a member in the Marine Department s Port Operation Committee, Provisional Local Vessels Advisory Committee, Immigration Department s Users Committee, Vocational Training Council s Maritime Services Training Board and Logistics Council's S-Logistics Project Group. He was appointed by the government of Hong Kong Special Administrative Region as a Non- Official Justice of Peace in Ms. Yau Lai Man, aged 41, was appointed as an independent non-executive director on 1st January Ms. Yau graduated from The University of Warwick in the United Kingdom with a master degree in business administration. She is a Certified Public Accountant (Practicing) in Hong Kong and is a fellow of The Association of Chartered Certified Accountants in the United Kingdom. She has over 15 years auditing and commercial experiences. Ms. Yau presently is the financial controller of Essex Bio-Technology Limited listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the Stock Exchange ). Senior Management Mr. Xie Xiaohong, aged 47, has been a deputy general manager of the Company since 2000, and is responsible for the daily operations and marketing of the Group s shipping business. He joined CKSE in 1999, and was also formerly a director and deputy general manager of CKTL. Mr. Xie graduated from the Guangdong Province Navigation School in the PRC in 1980, majoring in water transportation management, and has been engaged in shipping and port operation and management since his graduation. He was the deputy chief of the Zhaoqing Port Authorities in Guangdong Province in 1985, and the vice-chairman of Zhaoqing Port & Navigation Holding Company Limited in Mr. Xie has over 24 years of management experience in shipping and wharf operations. Mr. He Weijian, aged 32, has been the financial controller of the Company since March 2003 and is responsible for the Group s financial management and control. He joined CKSE after his graduation from Shanghai Maritime University in the PRC in 1996 with a bachelor degree of economics, majoring in accounting. He is a qualified accountant and economist in the PRC. Mr. He has worked in the Company since He has over 9 years of experience in accounting and financial management. 22

24 Directors and senior managers biographies (continued) Senior Management (continued) Mr. Cheng Jie, aged 35, has been the managing director of CKTL since July 2002, and is responsible for the corporate administration and policy making of CKTL. He joined CKSE in Mr. Cheng graduated from Shanghai Maritime University in the PRC in 1992 with a bachelor degree in international trade law. He was formerly a general manager of Waithai Trading Co., Ltd. in Thailand which was an associated company of CKSE. Mr. Cheng has over 12 years of experience in river trade transport and logistics. Mr. He Weiping, aged 52, has been the managing director of Chu Kong Agency Company Limited ( CKA ), one of the Company s wholly-owned subsidiaries, since 1999, and is responsible for the corporate administration and policy making of CKA. Mr. He started his career in the shipping industry in From 1981 to 1986, he studied at the Dalian Maritime University and received a bachelor degree of engineering. He subsequently worked as the manager of Guangdong, Hong Kong and Macau Shipping Company. Mr. He is a member of the Hong Kong Local Shipping Consulting Committee. Mr. Huang Dabang, aged 43, has been the managing director of Chu Kong Godown Wharf & Transportation Company Limited ( CKGWT ), one of the Company s wholly-owned subsidiaries, since 1999, and is responsible for the corporate administration and policy making of CKGWT. He joined CKSE in He graduated from the Guangdong Province Navigation School in the PRC. He is also a qualified economist in the PRC. Mr. Huang has over 23 years of experience in shipping, wharf operations and container truck transportation. Directors interests in the shares of the Company Share options were granted to certain directors of the Company pursuant to the share option schemes of the Company. Details of the directors interests in share options granted to the directors by the Company are set out under the section headed Share Options below. Save as disclosed above, as at 31st December 2004, none of the directors or chief executives of the Company had any interest or short positions in any shares or underlying shares or interest in debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance ( SFO )) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests of short positions which they have taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code, to be notified the Company and the Stock Exchange. 23

25 Report of the Directors Share options The Company operates share option schemes for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group s operations. Eligible participants of the schemes include any full-time employees (including executive directors) in the service of the Group. On 10th May 2002, the share option scheme adopted on 7th May 1997 (the 1997 Scheme ) ceased to operate. The share options granted previously under the 1997 Scheme will remain in force and effective. On 14th May 2002, the Company adopted a new share option scheme (the 2002 Scheme ) which, unless otherwise cancelled or amended, will remain in force for 10 years from the date of adoption. No share options have been granted under the 2002 Scheme since adoption. The maximum number of unexercised share options currently permitted to be granted is an amount equivalent, upon their exercise, to 10% of the Company s shares in issue at any time. At 31st December 2004, the number of shares issuable under share options granted under the 1997 Scheme was 45,000,000 (2003: 45,000,000) ordinary shares, which represented approximately 6.0% (2003: 6.0%) of the Company s shares in issue as at that date. The maximum number of shares issuable under share options to each eligible participant within any 12-month period is limited to 1% of the shares of the Company in issue at any time. Any further grant of share options in excess of this limit is subject to shareholders approval in a general meeting. Share options granted to an executive director or a chief executive are subject to approval in advance by the independent non-executive directors. In addition, any share options granted to a substantial shareholder of the Company, or to any of their associates, in excess of 0.1% of the shares of the Company in issue at any time or with an aggregate value (based on the price of the Company s shares at the date of the grant) in excess of HK$5,000,000, within any 12-month period, are subject to shareholders approval in advance in a general meeting. The offer of a grant of share options may be accepted within 28 days from the date of the offer, upon payment of a nominal consideration of HK$10 in total by the grantee. An option may be exercised at any time within 10 years commencing on the date when the option is granted. The exercise price of the share options is determined by the directors, but may not be less than the higher of (i) the closing price of the Company s shares on the Stock Exchange on the date of the offer of the share options; (ii) the average closing price of the Company s shares on the Stock Exchange for the five trading days immediately preceding the date of the offer; and (iii) the nominal value of an ordinary share. 24

26 Share options (continued) Share options do not confer rights on the holders to dividends or to vote at shareholders meeting. Details of the share options outstanding under the 1997 Scheme are as follows: Number of share option outstanding at 1st January and 31st December 2004 Exercise price Grant date Exercise period Directors Mr. Liang Yongjiu 11,000, th May th May 2000 to 28th May 2010 Mr. Che Chiqiang 10,000, th October th October 2000 to 15th October ,000,000 Senior management 8,000, th May th May 2000 to 28th May 2010 Other employees 16,000, th May th May 2000 to 28th May ,000,000 During the year, no share options has been granted, exercised or lapsed. The exercise in full of the outstanding share options would, under the present capital structure of the Company, result in the issue of 45,000,000 (2003: 45,000,000) additional ordinary shares of the Company and additional share capital of HK$4,500,000 (2003: HK$4,500,000) and share premium of HK$19,950,000 (2003: HK$19,950,000) (before issue expenses). 25

27 Report of the Directors Directors rights to acquire shares or debentures Apart from the share option scheme noted above, at no time during the year was the Company or any of its holding companies, subsidiaries and fellow subsidiaries a party to any arrangement to enable the Company s directors, their respective spouse or children under 18 years of age to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Directors interests in contracts No contracts of significance in relation to the Group s business to which the Company, its subsidiaries, its fellow subsidiaries and its holding companies was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year. Substantial shareholders interests and short positions in the share and underlying shares of the Company So far as was known to any director of the Company, as at 31st December 2004, the interests of shareholders in the shares of the Company as recorded in the register required to be kept under Section 336 of the SFO were as follows: Ordinary shares of HK$0.10 each in the Company Number of shares (i) CKSE 562,500,000 (ii) Guangdong Province Navigation Holdings Company Limited ( GPNHCL ) 562,500,000 CKSE is wholly-owned by GPNHCL. Accordingly, the interests disclosed by parties (i) and (ii) above are in respect of the same shareholding. Save as disclosed above, as at 31st December 2004, the Company have not been notified of any interests and short positions in the shares and underlying shares of the Company which had been recorded in the register to be kept under Section 336 of the SFO. 26

28 Directors interests in competing businesses During the year, Mr. Li Zhijie, director of the Company was also director of several cargo terminal joint ventures in the Pearl River Delta Region in which CKSE has interests, which compete or are likely to compete, either directly or indirectly, with the Group s business. The percentage of interests held by CKSE of the said cargo terminals is listed out as follows: Percentage of interests Name of joint venture held by CKSE Dou Men-Hong Kong Cargo Shipping Integrated Co., Ltd. 25% Shunde Container Terminal Co., Ltd. 16.5% Zhongshan Port Goods Transportation United Co., Ltd. 25% Pan Kong Cargo Transportation Co., Ltd. 25% As the board of directors of the Company is independent from the boards of the above-mentioned companies and Mr. Li Zhijie cannot control the board of the Company, the Group is capable of carrying on its business independently of, and at arm s length from, the business of such companies. Connected transactions Details of connected transactions between the Group and its holding companies, CKSE and GPNHCL, and the subsidiaries, fellow subsidiaries and jointly controlled entities of CKSE and GPNHCL, are set out in note 26(a) to the accounts. The independent non-executive directors of the Company have reviewed and confirmed that those transactions were conducted in the ordinary and usual course of the Group s business and are fair and reasonable so far as the Company s shareholders are concerned, or in accordance with the terms of the agreements governing the transactions. The auditors of the Company have performed procedures on certain continuing connected transactions as disclosed in note 26(a) and reported that: (i) the shipping agency, river trade cargo direct shipment and transhipment income of HK$169,000 charged to a related entity had been approved by the board of directors of the Company and conducted on terms no less favourable than terms available to independent third parties. 27

29 Report of the Directors Connected transactions (continued) (ii) the shipping agency, river trade cargo direct shipment and transhipment income of HK$2,400,000 charged to a fellow subsidiary had been approved by the board of directors of the Company, entered into in accordance with the terms of the agreement governing the transactions, and the aggregate monetary value of the transactions did not exceed HK$2,400,000 for the year ended 31st December (iii) the shipping agency, river trade cargo direct shipment and transhipment expenses of HK$15,538,000 charged by a related entity had been approved by the board of directors of the Company, entered into in accordance with the terms of the agreements governing the transactions, and the aggregate monetary value of the transactions did not exceed 3% of the audited book value of the net tangible assets of the Group as disclosed in the audited consolidated accounts for the year ended 31 December (iv) the shipping agency, river trade cargo direct shipment and transhipment expenses of HK$182,000, vessel rental expense of HK$95,000 and office rental expense of HK$1,000 charged by a related entity for the period from 30th November 2004 to 31st December 2004 had been approved by the board of directors of the Company, entered into in accordance with the terms of the agreements governing the transactions or conducted on terms no less favourable than terms available to independent third parties, and the aggregate monetary value of the transactions for the period from 30th November 2004 to 31st December 2004 did not exceed HK$600,000. (v) the fuel charges of HK$12,725,000 charged by a fellow subsidiary had been approved by the board of directors of the Company, conducted on terms no less favourable than terms available to independent third parties, and the aggregate monetary value of the transactions did not exceed HK$13,100,000 for the year ended 31st December (vi) the vessel rental expenses of HK$12,547,000 charged by a related entity had been approved by the board of directors of the Company, entered into in accordance with the terms of the agreements governing the transactions and the aggregate monetary value of the transactions did not exceed HK$15,000,000 for the year ended 31st December (vii) the warehouse rental expenses of HK$5,000,000 charged by the immediate holding company had been approved by the board of directors of the Company, entered into in accordance with the terms of the agreement governing the transaction and the aggregate monetary value of the transaction did not exceed HK$5,000,000 for the year ended 31st December

30 Connected transactions (continued) (viii) the office rental expenses of HK$478,000 and HK$42,000 charged by the immediate holding company and a fellow subsidiary respectively had been approved by the board of directors of the Company and entered into in accordance with the terms of the agreements governing the transactions. (ix) the crew hire charges of HK$551,000 charged by a related entity had been approved by the board of directors of the Company, entered into in accordance with the terms of the agreements governing the transactions, and the aggregate monetary value of the transactions did not exceed HK$10,000,000 and 3% of the unaudited book value of the consolidated net tangible assets of the Group as disclosed in the unaudited interim consolidated accounts for the six months ended 30th June (x) the staff hire charges of HK$226,000 charged by a related entity had been approved by the board of directors of the Company and entered into in accordance with the terms of the agreement governing the transaction. Management contracts No contracts concerning the management and administration of the whole or any substantial part of the business of the Group were entered into or existed during the year. Purchase, redemption or sale of the Company s listed securities Neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company s shares during the year. The Company has not redeemed any of its listed shares during the year. 29

31 Report of the Directors Disclosure under rule of chapter 13 of the Listing Rules In relation to the provision of financial assistance by the Group to certain affiliated companies, a proforma combined balance sheet of the affiliated companies as at 31st December 2004 required to be disclosed under Rule of Charter 13 of the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules ) is set out below: HK$ 000 Non-current assets 884,957 Current assets 93,242 Current liabilities (274,884) Non-current liabilities (201,282) Net assets 502,033 Share capital 237,652 Reserves 264,381 Capital and reserves 502,033 As at 31st December 2004, the consolidated attributable interest of the Group in these affiliated companies amounted tohk$131,813,000. Appointment of new independent non-executive directors and resignation of an independent non-executive director The board of directors appointed Mr. Choi Kim-Lui as independent non-executive director, his duty began from 8th September 2004 and ended on the next Annual General Meeting. Mr. Choi Kim-Lui was also appointed as a member of the audit committee. The board of director appointed Ms. Yau Lai Man as independent non-executive director and member of audit committee. Her duty began from 1st January 2005 and ended on the next Annual General Meeting. Mr. Benjamin Pui-Tong Wong resigned for personal reason on 31st December The board of directors thanks for Mr. Wong for his valuable contribution to the Company. 30

32 Compliance with the Code of Best Practice In the opinion of the directors, the Company complied with the Code of Best Practice (the Code ) as set out in Appendix 14 of the Listing Rules, throughout the year, except that independent non-executive directors of the Company are not appointed for specific terms as required by Paragraph 7 of the Code because they are subject to retirement by rotation and re-election at the Company s annual general meeting in accordance with the provisions of the Company s articles of association. Adoption of Model Code for securities transaction by directors The Company has adopted a code of conduct prescribing standards and requirements no less than that required by the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules. The directors have complied with such code of conduct throughout the year. Audit committee The Company has an audit committee which was established in accordance with the requirements of the Code for the purposes of reviewing and providing supervision over the Group s financial reporting process and internal controls. The audit committee comprises the three independent non-executive directors of the Company. The audit committee meets at least twice a year and has written terms of reference. Auditors The accounts have been audited by PricewaterhouseCoopers who retire and, being eligible, offer themselves for re-appointment. ON BEHALF OF THE BOARD Che Chiqiang Managing Director Hong Kong, 19th April

33 Report of the Auditors AUDITORS REPORT TO THE SHAREHOLDERS OF CHU KONG SHIPPING DEVELOPMENT COMPANY LIMITED (incorporated in Hong Kong with limited liability) We have audited the accounts on pages 33 to 86 which have been prepared in accordance with accounting principles generally accepted in Hong Kong. Respective responsibilities of directors and auditors The Hong Kong Companies Ordinance requires the directors to prepare accounts which give a true and fair view. In preparing accounts which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those accounts and to report our opinion solely to you, as a body, in accordance with section 141 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Basis of opinion We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the accounts. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the accounts, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the accounts are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the accounts. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion the accounts give a true and fair view of the state of affairs of the Company and of the Group as at 31st December 2004 and of the profit and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Hong Kong Companies Ordinance. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 19th April

34 Consolidated Profit and Loss Account For the year ended 31st December Note HK$ 000 HK$ 000 Turnover 2 614, ,100 Cost of services rendered (500,112) (412,315) Gross profit 113,910 80,785 Other revenues 2 9,776 6,035 Administrative expenses (75,206) (61,856) Other operating income/(expenses), net 1,102 (767) Operating profit 3 49,582 24,197 Finance costs 4 (1,395) Share of profits less losses of jointly controlled entities 5 53,522 59,214 Profit before taxation 101,709 83,411 Taxation 6 (18,085) (15,342) Profit after taxation 83,624 68,069 Minority interests 46 Profit attributable to shareholders 7, 21 83,670 68,069 Dividends 8 Interim paid 7,500 7,500 Final proposed 15,000 30,000 22,500 37,500 Earnings per share 9 Basic HK11.2 cents HK9.1 cents Diluted HK10.9 cents HK8.9 cents 33

35 Consolidated Balance Sheet As at 31st December Note HK$ 000 HK$ 000 Non-current assets Fixed assets , ,110 Jointly controlled entities , ,189 Intangible assets goodwill 15 15,381 Deferred tax assets , ,594 Current assets Trade and other receivables , ,407 Bank balances and cash 261, , , ,165 Current liabilities Trade and other payables , ,402 Tax payable 2, Bank loan secured 19 14, , ,151 Net current assets 186, ,014 Total assets less current liabilities 1,025, ,608 Non-current liabilities Deferred tax liabilities 16 3,554 2,003 1,022, ,605 Financed by: Share capital 20 75,000 75,000 Reserves , ,674 Proposed dividend 21 15,000 30,000 Shareholders funds 1,019, ,674 Minority interests 3,301 2,931 1,022, ,605 Liang Yongjiu Director Che Chiqiang Director 34

36 Balance Sheet As at 31st December Note HK$ 000 HK$ 000 Non-current assets Fixed assets 12 51,181 50,448 Subsidiaries , ,432 Jointly controlled entities 14 49,376 31, , ,650 Current assets Prepayments and deposits , ,278 Bank balances and cash 38, , , ,589 Current liabilities Other payables and accruals 18 18,142 16,732 Tax payable 1,176 19,318 16,732 Net current assets 281, ,857 Total assets less current liabilities 697, ,507 Non-current liabilities Deferred tax liabilities , ,256 Financed by: Share capital 20 75,000 75,000 Reserves , ,256 Proposed dividend 21 15,000 30,000 Shareholders funds 697, ,256 Liang Yongjiu Director Che Chiqiang Director 35

37 Consolidated Statement of Changes in Equity For the year ended 31st December Note HK$ 000 HK$ 000 Shareholders funds as at 1st January 951, ,210 Share of capital reserve of a jointly controlled entity Surplus on revaluation of land of a subsidiary 21 21,230 Gains not recognised in the consolidated profit and loss account 21, Profit attributable to shareholders 21 83,670 68,069 Dividends paid 2003/2002 final dividend 21 (30,000) (30,000) 2004/2003 interim dividend 21 (7,500) (7,500) (37,500) (37,500) Shareholders funds as at 31st December 1,019, ,674 36

38 Consolidated Cash Flow Statement For the year ended 31st December Note HK$ 000 HK$ 000 Cash flows from operating activities Cash generated from operations 22(a) 84,672 54,079 Hong Kong profits tax paid (3,796) (4,007) PRC enterprise income tax paid (748) Interest paid (1,395) Net cash from operating activities 78,733 50,072 Cash flows from investing activities Purchase of fixed assets (41,254) (59,486) Proceeds from disposal of fixed assets 1,051 1,500 Acquisition of subsidiaries, net of cash acquired 22(b) (61,171) (13,212) Acquisitions of jointly controlled entities (17,612) (42,066) Loans to jointly controlled entities (2,993) (45,101) Repayments of loans to jointly controlled entities 23,585 Dividends received from jointly controlled entities 47,204 45,052 Interest received 4,309 5,129 Net cash used in investing activities (70,466) (84,599) Cash flows from financing activities 22(c) Dividends paid (37,500) (37,500) Repayment of loan from immediate holding company (6,604) Repayments of bank loans (7,075) Repayment of loan from a minority shareholder of subsidiary (331) Net cash used in financing activities (51,510) (37,500) Net decrease in bank balances and cash (43,243) (72,027) Bank balances and cash at 1st January 304, ,785 Bank balances and cash at 31st December 261, ,758 37

39 Notes to the Accounts 1 Principal accounting policies The principal accounting policies adopted in the preparation of the accounts are set out below: (a) Basis of preparation The accounts have been prepared in accordance with accounting principles generally accepted in Hong Kong and comply with accounting standards issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). They have been prepared under the historical cost convention. The HKICPA has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards ( new HKFRSs ) which are effective for accounting periods beginning on or after 1st January The Group has not early adopted these new HKFRSs in the accounts for the year ended 31st December The Group has already commenced an assessment of the impact of these new HKFRSs but is not yet in a position to state whether these new HKFRSs would have a significant impact on its results of operations and financial position. (b) Consolidation Subsidiaries are those entities in which the Company, directly or indirectly, controls the composition of the board of directors, controls more than half the voting power or holds more than half of the issued equity capital. The consolidated accounts include the accounts of the Company and its subsidiaries made up to 31st December. In the circumstances where a subsidiary over which the Company does not have unilateral control but joint control, the subsidiary is accounted for as a jointly controlled entity in accordance with the accounting policy set out in note 1(d) below. The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate. All significant intercompany transactions and balances within the Group are eliminated on consolidation. 38

40 1 Principal accounting policies (continued) (b) Consolidation (continued) The gain or loss on the disposal of a subsidiary represents the difference between the proceeds of the sale and the Group s share of its net assets together with any unamortised goodwill or negative goodwill and any related accumulated foreign currency translation reserve. Minority interests represent the interests of outside shareholders in the operating results and net assets of subsidiaries. In the Company s balance sheet, the investments in subsidiaries are stated at cost less provision. The results of subsidiaries are accounted for by the Company on the basis of dividend income. (c) Goodwill/negative goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group s share of the net assets of the acquired subsidiary or jointly controlled entity at the date of acquisition. Goodwill on acquisitions is recognised in the consolidated balance sheet as an intangible asset and is amortised using the straight line method over its estimated useful life. Goodwill is generally amortised over a period of 15 to 20 years. Negative goodwill represents the excess of the fair value of the Group s share of the net assets acquired over the cost of acquisition. Negative goodwill is presented in the same balance sheet classification as goodwill. To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the Group s plan for the acquisition and can be measured reliably, but which do not represent identifiable liabilities at the date of acquisition, that portion of negative goodwill is recognised in the consolidated profit and loss account when the future losses and expenses are recognised. Any remaining negative goodwill, not exceeding the fair values of the identifiable non-monetary assets acquired, is recognised in the consolidated profit and loss account over the remaining weighted average useful life of those identifiable acquired depreciable/amortisable assets; negative goodwill in excess of the fair values of those non-monetary assets is recognised in the consolidated profit and loss account immediately. 39

41 Notes to the Accounts 1 Principal accounting policies (continued) (d) Jointly controlled entities A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity which is subject to joint control and none of the participating parties has unilateral control over the economic activity. The consolidated profit and loss account includes the Group s share of the results of jointly controlled entities, and the consolidated balance sheet includes the Group s share of the net assets of the jointly controlled entities and goodwill or negative goodwill (net of accumulated amortisation) on acquisition. In the Company s balance sheet, the investments in jointly controlled entities are stated at cost less provision. The results of jointly controlled entities are accounted for by the Company on the basis of dividend income. (e) Fixed assets (i) Construction in progress Construction in progress represents vessels under construction and software under development which are carried at cost less any accumulated impairment losses. Construction in progress included construction and development expenditure incurred and other direct costs attributable to the construction and development. On completion, the construction in progress is transferred to appropriate categories of other fixed assets. No depreciation is provided for construction in progress. (ii) Other fixed assets Other fixed assets are stated at cost or valuation less accumulated depreciation and impairment. Land use rights are amortised based on the cost or valuation less accumulated impairment losses over the remaining period of the leases on a straight line basis. Leasehold land is amortised based on the cost less accumulated impairment losses over the remaining period of the lease on a straight line basis. 40

42 1 Principal accounting policies (continued) (e) Fixed assets (continued) (ii) Other fixed assets (continued) Other fixed assets are depreciated at rates sufficient to write off their cost less accumulated impairment over their estimated useful lives on a straight line basis. The principal annual rates are as follows: Buildings 2% 4.5% Leasehold improvements 12% 20% Plant and machinery 12% 25% Furniture, fixtures and equipment 12% 33.33% Motor vehicles 12% 33.33% Containers 12% 24% Vessels and barges 12% 12.5% The gain or loss on disposal of a fixed asset is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the profit and loss account. Major costs incurred in restoring fixed assets to their normal working condition are charged to the profit and loss account. Improvements are capitalised and depreciated over the expected useful lives to the Group. (f) Trade receivables Provision is made against trade receivables to the extent they are considered to be doubtful. Trade receivables in the balance sheet are stated net of such provision. (g) Impairment of assets At each balance sheet date, both internal and external sources of information are considered to assess whether there is any indication that the assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated and where relevant, an impairment loss is recognised in the profit and loss account to reduce the asset to its recoverable amount. 41

43 Notes to the Accounts 1 Principal accounting policies (continued) (h) Deferred taxation Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the accounts. Tax rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred taxation is provided on temporary differences arising on investments in subsidiaries and jointly controlled entities, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. (i) Translation of foreign currencies Transactions in foreign currencies are translated at exchange rates ruling at the transaction dates. Monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated at rates of exchange ruling at the balance sheet date. Exchange differences are dealt with in the profit and loss account. The balance sheets of subsidiaries and jointly controlled entities expressed in foreign currencies are translated at the rates of exchange ruling at the balance sheet date whilst the profit and loss accounts are translated at average exchange rates. Exchange differences are dealt with as a movement in reserves. (j) Operating leases Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. 42

44 1 Principal accounting policies (continued) (j) Operating leases (continued) Where the Group leases out assets under operating leases, the assets are included in the balance sheet according to their nature and where applicable, are depreciated in accordance with the Group s depreciation policies, as set out in note 1(e) above. Revenue arising from assets leased out under operating leases is recognised in accordance with the Group s revenue recognition policies, as set out in note 1(n) below. Payments made under operating leases net of any incentives received from the leasing company are charged to the profit and loss account on a straight line basis over the lease periods. (k) Employee benefit obligations (i) Employee leave entitlements Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the balance sheet date. Employee entitlements to sick leave and maternity leave are not recognised until the time of leave. (ii) Bonus entitlements The expected cost of bonus payments is recognised as a liability when the company has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made. Liabilities for bonus are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled. 43

45 Notes to the Accounts 1 Principal accounting policies (continued) (k) Employee benefit obligations (continued) (iii) Retirement benefit obligations Contributions to the retirement benefit scheme which is defined contribution in nature and available to all employees in Hong Kong are charged to the profit and loss account as incurred. Contributions to this scheme are calculated based on a fixed percentage of the employees applicable payroll costs or fixed sums as appropriate. The assets of the scheme are held separately from the Group s. Pursuant to the regulations of the relevant authorities in the People s Republic of China (the PRC ), the subsidiaries of the Group in this country participate in respective government retirement benefit schemes (the Schemes ) whereby the subsidiaries are required to contribute to the Schemes to fund the retirement benefits of eligible employees. Contributions made to the Schemes are calculated based on certain percentages of the applicable payroll costs as stipulated under the requirements in the PRC. The relevant authorities of the PRC are responsible for the entire pension obligations payable to the retired employees. The only obligation of the Group with respect to the Schemes is to pay the ongoing required contributions under the Schemes. (iv) Equity compensation benefits No compensation cost is recognised in the profit and loss account in connection with share options granted to directors and employees. When the share options are exercised, the proceeds received net of any transaction costs are credited to share capital (nominal value) and share premium. (l) Provision Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the company expects a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. (m) Contingent liabilities A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably. 44

46 1 Principal accounting policies (continued) (m) Contingent liabilities (continued) A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that the outflow is probable, it will then be recognised as a provision. (n) Revenue recognition Revenues from the rendering of services in shipping agency and river trade cargo transportation, wharf cargo handling, cargo consolidation and godown storage and container hauling and trucking are recognised when services are rendered. Interest income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable. Operating lease rental income is recognised on a straight line basis. (o) Segment reporting In accordance with the Group s internal financial reporting, the Group has determined that business segments are presented as the primary reporting format. Unallocated income and expenses represent corporate income and expenses. Segment assets consist primarily of intangible assets, fixed assets, receivables and operating cash. Segment liabilities comprise operating liabilities and exclude tax payables. Capital expenditure comprises additions to intangible assets and fixed assets including additions resulting from acquisitions of subsidiaries. In respect of geographical segment reporting, sales are based on the country in which the customer is located. Total assets and capital expenditure are where the assets are located. 45

47 Notes to the Accounts 2 Turnover, revenues and segment information HK$ 000 HK$ 000 Turnover Shipping agency, river trade cargo direct shipment and transhipment 531, ,096 Wharf cargo handling, cargo consolidation and godown storage 81,219 61,947 Container hauling and trucking 1,355 1, , ,100 Other revenues Interest income loans to jointly controlled entities (note 14(c)) 2,714 1,884 others 1,595 3,245 Sundries 5, ,776 6,035 Total revenues 623, ,135 The Group is principally engaged in shipping agency, river trade cargo direct shipment and transhipment, wharf cargo handling, cargo consolidation and godown storage and container hauling and trucking. The Group and jointly controlled entities are organised into four main business segments: (i) Cargo transportation Shipping agency, river trade cargo direct shipment and transhipment (ii) Cargo handling and storage Wharf cargo handling, cargo consolidation and godown storage (iii) Container hauling and trucking (iv) Expressway operation 46

48 2 Turnover, revenues and segment information (continued) Business segments Cargo Cargo handling Container hauling Expressway transportation and storage and trucking operation Eliminations Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Sales: external 531, ,096 81,219 61,947 1,355 1, , ,100 intersegments ,913 45,595 53,575 37,810 (118,618 ) (83,536 ) Other revenues external 2, , , intersegments (505 ) (505 ) Total 533, , , ,153 54,977 38,871 (119,123 ) (84,041 ) 619, ,071 Segment results 10, ,804 28,125 10,087 3,775 57,439 32,215 Unallocated income 4,557 5,064 Unallocated expenses (12,414 ) (13,082 ) Operating profit 49,582 24,197 Finance costs (1,395 ) Share of profits less losses of jointly controlled entities ,284 10,225 2, ,542 48,398 53,522 59,214 Profit before taxation 101,709 83,411 Taxation (18,085 ) (15,342 ) Profit after taxation 83,624 68,069 Minority interests 46 Profit attributable to shareholders 83,670 68,069 47

49 Notes to the Accounts 2 Turnover, revenues and segment information (continued) Business segments (continued) Cargo Cargo handling Container hauling Expressway transportation and storage and trucking operation Eliminations Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Segment assets 212, , , ,083 39,783 18,761 (159,822 ) (93,732 ) 581, ,981 Jointly controlled entities allocated 20,153 2, , ,354 15,406 13, , , , ,136 unallocated 18,081 18,053 Unallocated assets 296, ,589 Total assets 1,231,581 1,116,759 Segment liabilities 206, , ,696 42,664 21,659 15,156 (159,822 ) (93,732 ) 184, ,047 Unallocated liabilities 24,297 33,107 Total liabilities 209, ,154 Capital expenditure allocated 16,688 4, ,108 28,548 1, ,903 32,673 unallocated 2,345 49, ,248 82,312 Depreciation and amortisation allocated 2,611 2,454 14,365 6, ,313 9,269 unallocated 1,688 1,143 19,001 10,412 Non-cash income/(expenses) allocated 254 (2,780 ) 577 1, (1,220 ) unallocated (1 ) (56 ) 994 (1,276 ) 48

50 2 Turnover, revenues and segment information (continued) Geographical segments Over 90% of the Group s revenue is derived from operations carried out in Hong Kong and customers are located in Mainland China and Hong Kong. The directors consider that it is impracticable to allocate the revenue and segment results to geographical segments. The analysis of the Group s total assets and capital expenditure by geographical segments is as follows: Total assets Capital expenditure HK$ 000 HK$ 000 HK$ 000 HK$ 000 Hong Kong 706, ,869 30,655 56,764 Mainland China 172,076 26, ,593 25, , , ,248 82,312 Jointly controlled entities 352, ,189 1,231,581 1,116,759 49

51 Notes to the Accounts 3 Operating profit Operating profit is stated after crediting and charging the following: HK$ 000 HK$ 000 Crediting Write-back of provision for bad and doubtful debts (net) 203 Negative goodwill 246 Gain on disposal of fixed assets 791 Operating lease rental income land and buildings 2,534 1,360 vessels and barges 1,800 others Charging Auditors remuneration 1,084 1,148 Depreciation 17,976 10,412 Amortisation of goodwill (note 15) 1,025 Loss on disposal of fixed assets 330 Provision for bad and doubtful debts (net) 946 Operating lease rental expenses vessels and barges 38,911 31,704 land and buildings 5,833 8,533 containers Staff costs (including directors emoluments) (note 10) 80,599 61,477 50

52 4 Finance costs HK$ 000 HK$ 000 Interest on bank loans 1,230 Interest on loan from immediate holding company 165 1,395 The interest on loan from immediate holding company was charged at a rate of 6% per annum. 5 Share of profits less losses of jointly controlled entities Share of profits less losses of jointly controlled entities includes the net amortisation charge of goodwill and negative goodwill of HK$932,000 (2003: HK$1,544,000). 6 Taxation HK$ 000 HK$ 000 Current taxation Hong Kong profits tax 4,851 4,176 PRC enterprise income tax 901 over-provisions in prior years (33) (6) Deferred taxation (note 16) 1, Share of taxation attributable to jointly controlled entities 7,441 4,946 PRC enterprise income tax 10,644 10,396 18,085 15,342 51

53 Notes to the Accounts 6 Taxation (continued) Hong Kong profits tax has been provided at the rate of 17.5% (2003: 17.5%) on the estimated assessable profit for the year. Taxation of the PRC and Singapore have been calculated on the estimated assessable profit for the year at the rates of taxation prevailing in the countries where the subsidiaries and jointly controlled entities operate. The taxation on the profit before taxation differs from the theoretical amount that would arise using the Hong Kong profits tax rate applicable to the Company as follows: HK$ 000 HK$ 000 Profit before taxation 101,709 83,411 Calculated at a taxation rate of 17.5% (2003: 17.5%) 17,799 14,597 Effect of different taxation rates applicable to the subsidiaries and jointly controlled entities in the PRC 876 (236) Income not subject to taxation (62,371) (49,003) Expenses not deductible for taxation purposes 61,814 49,903 Increase in tax due to increase in tax rate 87 Other items (33) (6) Taxation charge 18,085 15,342 7 Profit attributable to shareholders The profit attributable to shareholders is dealt with in the accounts of the Company to the extent of HK$18,327,000 (2003: HK$18,846,000). 52

54 8 Dividends HK$ 000 HK$ 000 Interim, paid, of HK1 cent (2003: HK1 cent) per ordinary share 7,500 7,500 Final, proposed, of HK2 cents (2003: HK4 cents) per ordinary share 15,000 30,000 22,500 37,500 On 19th April 2005, the board of directors proposed a final dividend of HK2 cents per ordinary share. This proposed dividend will be reflected as an appropriation of retained profits for the year ending 31st December Earnings per share The calculation of earnings per share is based on the Group s profit attributable to shareholders of HK83,670,000 (2003: HK$68,069,000). The basic earnings per share is based on 750,000,000 (2003: 750,000,000) ordinary shares in issue during the year. The diluted earnings per share is based on 750,000,000 (2003: 750,000,000) ordinary shares in issue during the year plus the weighted average number of 21,127,000 (2003: 16,570,000) ordinary shares deemed to be issued at no consideration as if all outstanding options had been exercised. 10 Staff costs (including directors emoluments) HK$ 000 HK$ 000 Salaries and allowances 77,977 57,256 Retirement benefit scheme contributions 2,619 2,250 Termination benefits 3 1,971 80,599 61,477 53

55 Notes to the Accounts 10 Staff costs (including directors emoluments) (continued) Contributions totalling HK$397,000 (2003: HK$426,000) were payable to the fund as at 31st December Details of the share options granted to the staff of the Company are set out in note Directors and senior management s emoluments (a) Directors emoluments HK$ 000 HK$ 000 Fees 1,580 1,800 Other emoluments: Basic salaries, housing allowances, other allowances and benefits in kind Discretionary bonuses Retirement benefit scheme contributions ,113 2,843 The emoluments of the directors fell within the following bands: Number of directors Emolument bands Nil HK$1,000, HK$1,000,001 HK$1,500,000 1 Directors fees include HK$530,000 (2003: HK$500,000) paid to independent non-executive directors. Details of the share options granted to the directors are set out in note

56 11 Directors and senior management s emoluments (continued) (b) Senior management s emoluments The five individuals whose emoluments were the highest in the Group for the year include two (2003: two) directors whose emoluments are shown above. The emoluments paid and payable to the remaining three (2003: three) highest paid individuals during the year are as follows: HK$ 000 HK$ 000 Basic salaries, housing allowances, other allowances and benefits in kind Bonuses 1, Retirement benefit scheme contributions ,137 1,367 During the year, the emoluments of each of the three (2003: three) individuals were below HK$1,000,000. Details of the share options granted to senior management are set out in note 20. (c) During the year, no emoluments have been paid by the Group to the directors or the five highest paid individuals as an inducement to join or upon joining the Group, or as compensation for loss of office. None of the directors waived or has agreed to waive any emoluments. 55

57 Notes to the Accounts 12 Fixed assets Group Land use Furniture, rights Leasehold Construction Leasehold fixtures Vessels outside land and in improve- Plant and and Motor and Hong Kong buildings progress ments machinery equipment vehicles Containers barges Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Cost or valuation At 1st January , ,220 3,037 25,487 12,692 36,048 8,021 17, ,005 Additions 1,502 2,810 11,178 6,098 11,490 2,311 3,399 2,466 41,254 Acquisition of a subsidiary (note (a)) 63,528 40,725 6, ,588 Disposals (1,889 ) (2,153 ) (438 ) (1,533 ) (79 ) (6,092 ) At 31st December , ,755 11,178 7,246 41,725 15,472 38,441 10,408 17, ,755 Accumulated depreciation At 1st January ,014 2,090 21,297 6,175 33,684 3,603 15, ,895 Charge for the year 1,879 8, ,939 1,877 1,009 1, ,976 Disposals (1,752 ) (2,153 ) (408 ) (1,449 ) (70 ) (5,832 ) At 31st December ,879 46,871 1,193 21,083 7,644 33,244 4,664 15, ,039 Net book value At 31st December , ,884 11,178 6,053 20,642 7,828 5,197 5,744 1, ,716 At 31st December , , ,190 6,517 2,364 4,418 2, ,110 The analysis of the cost or valuation as at 31st December 2004 of the above assets is as follows: Land use Furniture, rights Leasehold Construction Leasehold fixtures Vessels outside land and in improve- Plant and and Motor and Hong Kong buildings progress ments machinery equipment vehicles Containers barges Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Cost or valuation At cost 10, ,755 11,178 7,246 41,725 15,472 38,441 10,408 17, ,227 At directors valuation (note (a)) 63,528 63,528 74, ,755 11,178 7,246 41,725 15,472 38,441 10,408 17, ,755 All the fixed assets as at 31st December 2003 are stated at cost. 56

58 12 Fixed assets (continued) Company Leasehold Leasehold land and improve- Office Motor buildings ments equipment vehicles Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Cost At 1st January ,627 1,693 1,479 1,710 55,509 Additions 1, ,345 Disposals (1,693) (1,693) At 31st December ,627 1,923 1,580 2,031 56,161 Accumulated depreciation At 1st January ,692 1,254 1,413 5,061 Charge for the year 1, ,611 Disposals (1,692) (1,692) At 31st December , ,375 1,633 4,980 Net book value At 31st December ,908 1, ,181 At 31st December , ,448 (a) The land use right of a subsidiary in the PRC was carried at directors valuation by reference to a valuation carried out by a PRC valuer for the purpose of the acquisition of the subsidiary by the Group (note 22(b)). The revaluation surplus has been dealt with in the accounts of revaluation reserve of HK$21,230,000, goodwill of HK$20,805,000 and minority interest of HK$425,000 respectively as at 1st January

59 Notes to the Accounts 12 Fixed assets (continued) (b) The net book values of leasehold land and buildings are analysed as follows: Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 In Hong Kong, held on: Leases of over 50 years 48,908 49,925 48,908 49,925 Leases of between 10 to 50 years 233, , , ,723 48,908 49,925 Outside Hong Kong, held on: Leases of over 50 years 1,981 2,033 Leases of between 10 to 50 years 55,716 14,450 57,697 16, , ,206 48,908 49,925 (c) The net book value of fixed assets pledged as security for the bank loan of the Group amounted to HK$63,336,000 (2003: Nil). 58

60 13 Subsidiaries Company HK$ 000 HK$ 000 Unlisted investments, at cost 296, ,980 Amount due from a subsidiary (note (b)) 18,452 18, , ,432 (a) Details of the subsidiaries as at 31st December 2004 are as follows: Place of establishment/ Particulars of Interest held Name operation Principal activities issued/paid up capital Direct subsidiaries Chu Kong Agency Hong Kong Shipping agency and 100 ordinary shares of 100% 100% Company Limited freight forwarding HK$1 each agency 100,000 deferred shares of HK$1 each (note (c)) Chu Kong Container Hong Kong Container and cargo 100 ordinary shares 100% 100% Transportation transportation and of HK$1 each Company Limited towing 10,000 deferred shares of HK$1 each (note (c)) Chu Kong Godown Hong Kong Godown and wharf 100 ordinary shares of 100% 100% Wharf & Transportation operations HK$1 each Company Limited 1,000,000 deferred shares of HK$1 each (note (c)) 59

61 Notes to the Accounts 13 Subsidiaries (continued) Place of establishment/ Particulars of Interest held Name operation Principal activities issued/paid up capital Direct subsidiaries (continued) Chu Kong Infrastructure British Virgin Investment holding 2 ordinary shares of 100% 100% Investment Limited Islands/PRCUS$1 each Chu Kong River Trade British Virgin Investment holding 2 ordinary shares of 100% 100% Terminal Co., Ltd. Islands/PRC US$1 each Chu Kong Transhipment Hong Kong Transhipment and 100 ordinary shares of 100% 100% & Logistics transportation HK$1 each Company Limited 100,000 deferred shares of HK$1 each (note (c)) Chu Kong Transportation Hong Kong Wharf cargo handling 100 ordinary shares of 100% 100% (H.K.) Limited and transportation HK$1 each 100,000 deferred shares of HK$1 each (note (c)) Chu Kong Warehouse British Virgin Property holding 100 ordinary shares of 100% 100% Properties Company Islands/ US$1 each Limited Hong Kong 9,900 preferred shares of US$1 each (note (d)) Indirect subsidiaries Chu Kong International Hong Kong Freight forwarding 10,000 ordinary shares 100% 100% Airfreight Company of HK$1 each Limited Ever Sky Transportation Hong Kong Wharf cargo handling 10,000 ordinary shares 100% 100% Limited of HK$1 each Chu Kong Cargo Terminals PRC Wharf cargo handling RMB27,460,000 90% 90% (Qingyuan) Co., Ltd. (formerly Qingyuan Chu Kong Shipping Port Co., Ltd.) Chu Kong Cargo Terminals PRC Cargo transportation RMB31,112,720 99% (Gaoming) Co., Ltd. and consolidation (formerly Foshan Gaoming Ming Chu Transportation Co., Ltd.) (notes 14(a) and 22(b)) 60

62 13 Subsidiaries (continued) (b) The amount is unsecured, interest free and not repayable within the next twelve months from the balance sheet date. (c) The holders of the deferred shares of respective subsidiaries are entitled to minimal rights as to dividends and returns of capital, but are not entitled to share the subsidiary s profits, to attend or vote at any general meeting of the subsidiary or to have the rights which are vested in the holding of the ordinary shares. (d) The holders of the preferred shares have a non-cumulative preferential right to the profit of the subsidiary at 8% of the nominal amount of the share capital of that subsidiary, but are not entitled to receive notice of or to attend or vote at any meeting of members or directors. (e) Chu Kong Cargo Terminals (Qingyuan) Co., Ltd. ( Qingyuan Terminals ) and Chu Kong Cargo Terminals (Gaoming) Co., Ltd ( Gaoming Terminals ) are sino-foreign equity joint ventures established in the PRC. All other subsidiaries are limited liability companies in Hong Kong. 14 Jointly controlled entities Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Unlisted investments, at cost 32,666 15,060 Share of net assets 247, ,519 Unamortised goodwill and negative goodwill 14,861 23,068 Loans to jointly controlled entities (note (c)) 90,595 87,602 28,810 28,810 Less: Provision (12,100) (12,100) 352, ,189 49,376 31,770 61

63 Notes to the Accounts 14 Jointly controlled entities (continued) (a) Details of the jointly controlled entities as at 31st December 2004 are as follows: Place of Percentage of interest in establishment/ ownership/voting power/ Name operation Principal activities profit sharing Direct jointly controlled entities Shenzhen Yantian Port Zhujiang PRCContainer transportation 40% 40% Logistics Company Limited and repairs Chu Kong (Guangdong) PRC Shipping agency and International Freight freight forwarding 75%/60%/75% Forwarding Co., Ltd. ( CKIFF ) agency (note (d)) Chu Kong Air-Sea Union Hong Kong Operation and 51%/60%/51% 51%/60%/51% Transportation Company management of a Limited (note (e)) marine cargo terminal Chu Kong Logistics (Singapore) Singapore Shipping agency and 60% Pte. Ltd. freight forwarding agency Indirect jointly controlled entities Chu Kong Cargo Terminals PRC Wharf cargo handling 60.83%/60%/60.83% 52%/60%/52% (Kongzhou) Co., Ltd. and godown storage (formerly Deqing Kangzhou Container Transportation Co., Ltd.) Dongguan Humen Great Trade PRCWharf cargo handling 30%/29%/30% 30%/29%/30% Containers Port Co., Ltd. and godown storage Foshan New Port Ltd. PRCCargo transportation 37.5%/40%/37.5% 37.5%/40%/37.5% and consolidation Guangdong Sanbu Passenger PRCCargo and passenger 40%/43%/40% 40%/43%/40% and Freight Transportation transportation Co., Ltd. 62

64 14 Jointly controlled entities (continued) Place of Percentage of interest in establishment/ ownership/voting power/ Name operation Principal activities profit sharing Indirect jointly controlled entities (continued) Guangdong Zhu Chuan PRC Cargo transportation 49%/40%/49% 49%/40%/49% Navigation Co., Ltd. Guangzhou-Foshan PRCOperation of an 25%/40%/25% 25%/40%/25% Expressway Ltd. (note (f)) expressway He Shan County Hekong PRC Wharf cargo handling, 49%/50%/49% 49%/50%/49% Associated Forwarding Co., godown storage and Ltd. river trade cargo transportation Foshan Nankong Terminal Co., PRC Cargo transportation and 25% 25% Ltd (formerly Nankong consolidation Warehouse & Consolidator Co., Ltd.) Sanshui Sangang Containers PRC Cargo transportation and 30%/25%/30% 30%/25%/30% Wharf Co., Ltd. consolidation Shenzhen Zhu Chuan PRC Freight forwarding 87%/40%/87% 49%/40%/49% International Freight agency Forwarding Co., Ltd. Chu Kong Cargo Terminals PRC Cargo transportation and 50% (Gaoming) Co., Ltd. consolidation (notes 13(a) and 22(b)) (b) Except for Chu Kong Logistics (Singapore) Pte. Ltd and Chu Kong Air-Sea Union Transportation Company Limited, which are limited liability companies in Singapore and Hong Kong respectively, all other jointly controlled entities are sino-foreign equity joint ventures in the PRC. (c) The loans to the jointly controlled entities by the Group are unsecured, not repayable within the next twelve months from the balance sheet date and interest free except for loans of HK$61,596,000 (2003: HK$58,653,000) which bear interest at rates ranging from 4.9% to 9.0% per annum (2003: 4.9% to 9.0% per annum). The loans to a jointly controlled entity by the Company is unsecured, interest free and not repayable within the next twelve months from the balance sheet date. 63

65 Notes to the Accounts 14 Jointly controlled entities (continued) (d) During the year, the Group acquired 75% of the equity interest in CKIFF from the ultimate holding company at a consideration of approximately HK$16,048,000. (e) Chu Kong Air-Sea Union Transportation Company Limited is a subsidiary of the Company as defined by section 2(4) of the Hong Kong Companies Ordinance but the Company does not have unilateral control but joint control over it. Accordingly, it is accounted for as a jointly controlled entity in accordance with Statement of Standard Accounting Practice No. 21 Accounting for interests in joint ventures in the consolidated accounts of the Group. (f) A summary of the financial information of Guangzhou-Foshan Expressway Ltd., a significant jointly controlled entity of the Group, prepared based on its PRC audited accounts, after making appropriate adjustments to conform to the Group s accounting policies is set out as follows: HK$ 000 HK$ 000 Results for the year: Turnover 290, ,708 Profit before taxation 194, ,593 Taxation (36,009) (33,279) Profit after taxation 158, ,314 Group s share of results 39,540 40,079 Net assets: Non-current assets 736, ,894 Current assets 37,364 46,150 Current liabilities (204,945) (224,841) Non-current liabilities (102,618) (85,964) 466, ,239 Group s share of net assets 116, ,810 64

66 15 Intangible assets goodwill Group HK$ 000 HK$ 000 Cost Additions during the year and at 31st December ,406 Accumulated amortisation Charge for the year and at 31st December 2004 (1,025) Net book value At 31st December , Deferred taxation Deferred taxation is calculated in full on temporary differences under the liability method using a principal taxation rate of 17.5% (2003: 17.5%). The movements on the net deferred tax liabilities are as follows: Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1st January 1, Charged/(credited) to profit and loss account (note 6) 1, (135) 109 At 31st December 3,430 1,

67 Notes to the Accounts 16 Deferred taxation (continued) The deferred tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) are as follows: Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Deferred tax assets provision for doubtful debts (217) (255) tax losses (43) (231) accelerated accounting depreciation (26) others (33) (200) Deferred tax liabilities (293) (712) accelerated tax depreciation 3,723 2, ,430 1,

68 16 Deferred taxation (continued) Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after appropriate offsetting, are shown in the Group s and the Company s balance sheets: Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Deferred tax assets (124) (295) Deferred tax liabilities 3,554 2, ,430 1, The amounts shown in the balance sheet include the following: Deferred tax assets to be recovered after more than 12 months (124) (260) Deferred tax liabilities to be settled after more than 12 months 2,646 1,

69 Notes to the Accounts 17 Trade and other receivables Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade receivables from: (note (a)) third parties 60,718 41,398 fellow subsidiaries ,035 jointly controlled entities 29, other related companies 46 1,989 90,604 87,458 Other receivables from: (note (b)) immediate holding company 3,891 5,858 fellow subsidiaries 271 8,314 subsidiaries 260, ,788 jointly controlled entities 28,027 2,441 other related companies ,355 17, , ,788 Deposits and prepayments 7,979 12, , , , ,278 68

70 17 Trade and other receivables (continued) (a) The ageing analysis of the trade receivables is as follows: Group HK$ 000 HK$ 000 Within 3 months 86,441 79,611 4 to 6 months 2,433 6,312 7 to 12 months 1,395 1,152 Over 12 months 3,260 3,758 93,529 90,833 Less: Provision for doubtful debts (2,925) (3,375) 90,604 87,458 The normal credit periods granted by the Group to customers on open accounts range from seven days to three months from the date of invoice. (b) The other receivables due from related companies are unsecured, interest free and have no fixed terms of repayment. 69

71 Notes to the Accounts 18 Trade and other payables Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade payables to: (note (a)) third parties 97,050 72,175 immediate holding company 10,000 5,000 fellow subsidiaries 1, jointly controlled entities 15,791 15,681 other related companies 5,738 3, ,308 97,101 Other payables due to: (note (b)) immediate holding company 11,178 7,096 1, fellow subsidiaries a subsidiary 11,179 11,211 jointly controlled entities 11,862 16,200 other related companies 6,248 4,676 29,828 28,124 12,256 11,834 Other payables and accruals 29,045 34,177 5,886 4, , ,402 18,142 16,732 70

72 18 Trade and other payables (continued) (a) The ageing analysis of the trade payables is as follows: Group HK$ 000 HK$ 000 Within 3 months 99,243 75,412 4 to 6 months 18,808 11,010 7 to 12 months 3,189 10,077 Over 12 months 9, ,308 97,101 (b) The other payables due to related companies are unsecured, interest-free and have no fixed terms of repayment. 19 Secured bank loan The bank loan of the Group was secured by certain fixed assets (note 12). 71

73 Notes to the Accounts 20 Share capital HK$ 000 HK$ 000 Authorised: 2,000,000,000 ordinary shares of HK$0.10 each 200, ,000 Issued and fully paid: 750,000,000 ordinary shares of HK$0.10 each 75,000 75,000 The Company operates share option schemes for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group s operations. Eligible participants of the schemes include any full-time employee (including executive directors) in the service of the Group. On 10th May 2002, the share option scheme adopted on 7th May 1997 (the 1997 Scheme ) ceased to operate. The share options granted previously under the 1997 Scheme will remain in force and effective. On 14th May 2002, the Company adopted a new share option scheme (the 2002 Scheme ) which, unless otherwise cancelled or amended, will remain in force for 10 years from the date of adoption. No share options have been issued under the 2002 Scheme since its adoption. The offer of a grant of share options may be accepted within 28 days from the date of the offer, upon payment of a nominal consideration of HK$10 in total by the grantee. An option may be exercised at any time within 10 years commencing on the date when the option is granted. The exercise price of the share options is determined by the directors, but may not be less than the higher of (i) closing price of the Company s shares on The Stock Exchange of Hong Kong Limited (the Stock Exchange ) on the date of the offer of the share options; (ii) the average closing price of the Company s shares on the Stock Exchange for the five trading days immediately preceding the date of the offer; and (iii) the nominal value of an ordinary share. 72

74 20 Share capital (continued) Details of the share options outstanding and granted under the 1997 Scheme are as follows: Number of share options outstanding At 1st Granted Exercised Lapsed At 31st January during during during December Exercise Vested percentage 2004 the year the year the year 2004 price Grant date Exercise period HK$ Directors Mr. Liang Yongjiu 11,000,000 11,000, th May th May % 100% to 28th May 2010 Mr. Che Chiqiang 10,000,000 10,000, th October th October % 100% to 15th October ,000,000 21,000,000 Senior management 8,000,000 8,000, th May th May % 100% to 28th May 2010 Other employees 16,000,000 16,000, th May th May % 100% to 28th May ,000,000 45,000,000 73

75 Notes to the Accounts 21 Reserves Group Share Exchange Capital Other Retained premium reserve reserve reserves profits Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1st January ,185 (415) 14, , ,210 Share of capital reserve of a jointly controlled entity Profit attributable to shareholders 68,069 68,069 Transfer of reserves 44 (44) 2002 final dividend (30,000) (30,000) 2003 interim dividend (7,500) (7,500) At 31st December ,185 (415) , , ,674 Representing: 2003 final dividend proposed 30,000 30,000 Others 489,185 (415) , , , ,185 (415) , , ,674 Retained by: Company and subsidiaries 489,185 (415) 245, ,307 Jointly controlled entities , , ,367 At 31st December ,185 (415) , , ,674 74

76 21 Reserves (continued) Group Share Exchange Revaluation Capital Other Retained premium reserve reserve reserve reserves profits Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1st January ,185 (415) , , ,674 Surplus on revaluation of land of a subsidiary 21,230 21,230 Profit attributable to shareholders 83,670 83,670 Transfer of reserves 2,904 (2,904) 2003 final dividend (30,000) (30,000) 2004 interim dividend (7,500) (7,500) At 31st December ,185 (415) 21, , , ,074 Representing: 2004 final dividend proposed 15,000 15,000 Others 489,185 (415) 21, , , , ,185 (415) 21, , , ,074 Retained by: Company and subsidiaries 489,185 (415) 21, , ,702 Jointly controlled entities 16, , ,372 At 31st December ,185 (415) 21, , , ,074 In accordance with the PRC regulations, subsidiaries and jointly controlled entities in the PRC are required to transfer part of their profit after taxation to the enterprise expansion and reserve funds. The quantum of the transfers are subject to the approval of the board of directors of these subsidiaries and jointly controlled entities in accordance with their respective joint venture agreements. The funds are required to be retained in the accounts of respective subsidiaries and jointly controlled entities for specific purposes. 75

77 Notes to the Accounts 21 Reserves (continued) Company Share Retained premium profits Total HK$ 000 HK$ 000 HK$ 000 At 1st January , , ,910 Profit for the year 18,846 18, final dividend (30,000) (30,000) 2003 interim dividend (7,500) (7,500) At 31st December , , ,256 Representing: 2003 final dividend proposed 30,000 30,000 Others 489, , ,256 At 31st December , , ,256 At 1st January , , ,256 Profit for the year 18,327 18, final dividend (30,000) (30,000) 2004 interim dividend (7,500) (7,500) At 31st December , , ,083 Representing: 2004 final dividend proposed 15,000 15,000 Others 489, , ,083 At 31st December , , ,083 76

78 22 Notes to the consolidated cash flow statement (a) Reconciliation of operating profit to cash generated from operations HK$ 000 HK$ 000 Operating profit 49,582 24,197 Depreciation 17,976 10,412 Negative goodwill (246) Amortisation of goodwill 1,025 (Gain)/loss on disposal of fixed assets (791) 330 Interest income (4,309) (5,129) Operating profit before working capital changes 63,483 29,564 (Increase)/decrease in trade receivables and other receivables (9,032) 20,933 Increase in trade payables and other payables 30,221 3,582 Cash generated from operations 84,672 54,079 77

79 Notes to the Accounts 22 Notes to the consolidated cash flow statement (continued) (b) Acquisition of subsidiaries HK$ 000 HK$ 000 Net assets acquired Fixed assets 112,588 25,548 Trade receivables 5, Prepayments, deposits and other receivables Bank balances and cash 3, Trade payables (6,515) (559) Other payables and accruals (3,779) (75) Amounts due to related companies (1,005) (28) Loan from immediate holding company (6,604) Tax payable (28) Bank loans (21,226) Shareholders loans (519) Minority interests (747) (2,931) 82,126 22,561 Less: Share of net assets held by the Group (41,928) Goodwill/(negative goodwill) 16,406 (246) Consideration satisfied by cash 56,604 22,315 Amount paid 56,604 13,767 Amount payable 8,548 Total consideration 56,604 22,315 78

80 22 Notes to the consolidated cash flow statement (continued) (b) Acquisition of subsidiaries (continued) Analysis of the net cash outflow on acquisition of subsidiaries: HK$ 000 HK$ 000 Net cash outflow in respect of the acquisition of a subsidiary during the year: Cash consideration paid 56,604 13,767 Bank balances and cash acquired (3,981) (555) 52,623 13,212 Net cash outflow in respect of the acquisition of a subsidiary in the prior year: Cash consideration paid 8,548 Total 61,171 13,212 The subsidiary acquired during the year contributed HK$15,557,000 (2003: Nil) to the Group s net cash from operating activities, utilised HK$10,526,000 (2003: Nil) for investing activities and paid HK$1,968,000 (2003: Nil) for financing activities. During the year, the Group acquired an additional 49% of the equity interest in a then jointly controlled entity, Gaoming Terminals from its joint venture partner at a consideration of approximately HK$56,604,000. Upon completion of the acquisition, Gaoming Terminals became a 99% owned subsidiary of the Group in In 2003, the Group acquired 90% equity interest in Qingyuan Terminals from its joint venture partner at total considerations of approximately HK$22,315,

81 Notes to the Accounts 22 Notes to the consolidated cash flow statement (continued) (c) Analysis of changes in financing during the year Loan from immediate Secured Minority holding company bank loan interests HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1st January 2,931 Acquisition of a subsidiary (note 22(b)) 6,604 21, ,931 Minority interests share of profits less losses of subsidiaries (46) Cash outflows (6,604) (7,075) (331) At 31st December 14,151 3,301 2,931 The minority interests include a loan from a minority shareholder of HK$94,000 (2003: HK$425,000) which is unsecured, interest free and has no fixed terms of repayment. 80

82 23 Contingent liabilities Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Counter-guarantees to banks in respect of bank guarantees provided to third parties 2,290 1,450 Corporate guarantee for banking facilities granted to subsidiaries 8,600 17,600 2,290 1,450 8,600 17, Commitments (a) Capital commitments Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Contracted but not provided for Investments 15,660 16,048 16,048 Fixed assets 2,473 4,976 4,476 Authorised but not 18,133 21,024 20,524 contracted for 18,133 21,024 20,524 81

83 Notes to the Accounts 24 Commitments (continued) (a) Capital commitments (continued) The Group s share of capital commitments of the jointly controlled entities themselves not included in the above is as follows: Group HK$ 000 HK$ 000 Contracted but not provided for 17,403 Authorised but not contracted for 67,489 3,870 67,489 21,273 (b) Commitments under operating leases The future aggregate minimum lease payables under non-cancellable operating leases are payable as follows: Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Land and buildings: Not later than one year 5,113 5, Later than one year and not later than five years 5,000 12,263 10,113 17, Vessels and barges: Not later than one year 17,343 13,438 Later than one year and not later than five years ,343 13,938 27,456 31,

84 25 Future operating lease arrangements The future aggregate minimum lease receipts under non-cancellable operating leases are receivable as follows: Group Company HK$ 000 HK$ 000 HK$ 000 HK$ 000 Land and buildings: Not later than one year 2,740 2, Later than one year and not later than five years 1,094 3, ,834 5, Vessels and barges: Not later than one year 1,800 Others: Not later than one year Later than one year and not later than five years ,231 7, Related party transactions In addition to those disclosed elsewhere in the accounts, the following is a summary of related party transactions which, in the opinion of the directors, were carried out in the normal course of the Group s business during the year: 83

85 Notes to the Accounts 26 Related party transactions (continued) (a) Transactions with ultimate holding company, immediate holding company, fellow subsidiaries and related entities (which include an entity which is 49% and 51% owned by the Group and the ultimate holding company respectively, an entity which is 40% and 50% owned by the Group and the ultimate holding company respectively, an entity which is 75% and 25% owned by the Group and the ultimate holding company respectively and another entity which is 25% and 15% owned by immediate holding company and ultimate holding company respectively): Group Note HK$ 000 HK$ 000 Revenues: Shipping agency, river trade cargo direct shipment and transhipment income (i) fellow subsidiaries 2, related entities Expenses: Shipping agency, river trade cargo direct shipment and transhipment expenses (i) a fellow subsidiary (12,112) related entities (17,593) (614) Wharf cargo handling, cargo transportation and godown storage expenses (i) a related entity (177) Fuel charges (iii) a fellow subsidiary (12,725) (5,182) Vessel rental expenses (ii) a fellow subsidiary (960) (2,562) related entities (13,338) (10,535) Warehouse rental expenses (iv) immediate holding company (5,000) (5,000) Office rental expenses (ii) immediate holding company (488) (2,047) a fellow subsidiary (42) (877) a related entity (11) Crew hire charges (ii) a related entity (551) (591) Staff hire charges (ii) fellow subsidiaries (232) a related entity (404) Marine supplies expenses (iii) a fellow subsidiary (44) (18) Vessel repairs and maintenance expenses (iii) fellow subsidiaries (87) (233) Loan interest expense (v) immediate holding company (165) Acquisition of a jointly controlled entity (note 14(d)) ultimate holding company (16,048) Interchange of use of properties (vi) immediate holding company 84

86 26 Related party transactions (continued) (b) Transactions with other related entities: Group Note HK$ 000 HK$ 000 Revenues: Shipping agency, river trade cargo direct shipment and transhipment income (i) a jointly controlled entity of the immediate holding company 5,457 3,971 jointly controlled entities of the Group 7,225 6,432 Expenses: Shipping agency, river trade cargo direct shipment and transhipment expenses (ii) jointly controlled entities of the immediate holding company (17,493) (7,498) jointly controlled entities of the Group (14,057) (13,508) Wharf cargo handling, cargo consolidation and godown storage expenses (ii) a jointly controlled entity of the immediate holding company (12,423) (11,684) jointly controlled entities of the Group (20,297) (20,186) 85

87 Notes to the Accounts 26 Related party transactions (continued) Notes: (i) These transactions were conducted at terms pursuant to agreements as entered into between the Group and the respective related parties or as mutually agreed between the Group and the respective related parties. (ii) These transactions were conducted at terms pursuant to agreements as entered into between the Group and the respective related parties. (iii) These transactions were conducted at terms as mutually agreed between the Group and the respective related parties. (iv) The Group leased a warehouse from the immediate holding company and the rental was charged by the immediate holding company at HK$5,000,000 for the year ended 31st December 2004 (2003: HK$5,000,000). (v) The interest on loan from the immediate holding company was charged at a rate of 6% per annum. (vi) During the year, the Company and the immediate holding company have interchanged the use of certain own floors of Chu Kong Shipping Tower free of charge. 27 Ultimate holding company The directors regard Guangdong Province Navigation Holdings Company Limited, a company incorporated in the PRC, as being the ultimate holding company. 28 Approval of accounts The accounts were approved by the board of directors on 19th April

88 Financial Summary Results HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Turnover 614, , , , ,016 Operating profit 49,582 24,197 28,329 38,401 63,557 Finance costs (1,395) (2) (2) (8) Share of profits less losses of jointly controlled entities 53,522 59,214 50,829 27,215 39,593 Profit before taxation 101,709 83,411 79,156 65, ,142 Taxation (18,085) (15,342) (15,439) (10,403) (10,503) Profit after taxation 83,624 68,069 63,717 55,211 92,639 Minority interests 46 Profit attributable to shareholders 83,670 68,069 63,717 55,211 92,639 Basic earnings per share (HK cents) Dividends (HK$ 000) 22,500 37,500 37,500 30,000 37,500 Dividend per share (HK cents)

89 Financial Summary Assets and liabilities HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Non-current assets 839, , , , ,365 Current assets 392, , , , ,926 Total assets 1,231,581 1,116,759 1,068,351 1,029,997 1,021,291 Current liabilities 205, , , , ,468 Non-current liabilities 3,554 2,003 1, Total liabilities 209, , , , ,612 Minority interests 3,301 2,931 1,019, , , , ,679 88

90 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of CHU KONG SHIPPING DEVELOPMENT COMPANY LIMITED ( the Company ) will be held at 18th Floor, Chu Kong Shipping Tower, 143 Connaught Road Central, Hong Kong on 15th June 2005 at 10:00 a.m. for the following purposes: 1. To receive and consider the audited consolidated financial statements of the Company and the reports of the Directors and the auditors of the Company for the year ended 31st December To declare a final dividend for the year ended 31st December To re-elect Directors in place of those retiring and to authorize the Directors to fix the remuneration of Directors. 4. To appoint auditors and to authorize the Directors to fix their remuneration. As special business, to consider and, if thought fit, pass with or without amendments, the following ordinary resolutions: 5. (A) THAT (1) subject to paragraph (3) of this resolution, the exercise by the Directors during the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional shares in the share capital of the Company and to make or grant offers, agreements and options (including bonds, warrants, debentures and other securities convertible into shares of the Company (the Shares ) and other rights to subscribe for any Shares) which would or might require the exercise of such powers, be and is hereby generally and unconditionally approved; (2) the approval in paragraph (1) of this resolution shall authorize the Directors during the Relevant Period to make to grant offers, agreements and options (including bonds, warrants, debentures and other securities convertible into Shares and other rights to subscribe for any Shares) which would or might require the exercise of such powers after the end of the Relevant Period; (3) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) by the Directors pursuant to the approval in paragraph (1) of this resolution, other than pursuant to (i) a Rights Issue (as hereinafter defined); (ii) an issue of Shares as scrip dividends pursuant to the bye-laws of the Company from time to time; or (iii) an issue of Shares under any option scheme or similar arrangement for the time being adopted for the grant or issue to officers and/or employees of the Company and/or any of the subsidiaries of Shares or rights to subscribe for Shares, shall not exceed 20% of the aggregate nominal amount of the issued share capital of the Company as at the date of passing this resolution and the said approval shall be limited accordingly; and (4) for the purpose of this resolution: Relevant Period means the period from the passing of this resolution until whichever is the earliest of: (i) (ii) (iii) the conclusion of the next Annual General Meeting of the Company; the expiration of the period within which the next Annual General Meeting of the Company is required by the bye-laws of the Company or any applicable law to be held; and the date on which the authority set out in this resolution is revoked or varied by an ordinary resolution of the shareholders of the Company in general meeting; and Rights Issue means the allotment, issue or grant of Shares pursuant to any offer of Shares open for a period fixed by the Directors to the holders of Shares whose names appear on the register of member of the Company on a fixed record date in proportion to their then holdings of such Shares as at that date (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognized regulatory body or any stock exchange in, any territory outside Hong Kong applicable to the Company). 89