NOTES
TO THE FINANCIAL STATEMENTS OF P&I RISKS
FEBRUARY
20 2005
Note1-Purpose
& Constitution
The Association
stands on a mutual basis and is to uphold prestige and safeguard the interests
of its Members, for which the Association affords insurance cover and offers
professional services. The principal activities of the Association are the
insurance of marine protecting and indemnity risks on behalf of the
Members. The liability of the
Members is limited to the calls and supplementary calls set by the directors
and in the event of its liquidation, any net assets of the Association are to
be returned equitably to those Members insured by it during its final
underwriting year.
Note2-Accounting
Principle
a
Accounting
Convention
These Financial
Statements have been prepared in accordance with the material Accounting
Principles based on applicable Chinese accounting standards and Generally
Accepted Accounting Principles.
b
Accounting
Year
The figures
under items as incorporated in the Financial Statements are up to Feb. 20th,
2005.
c
Annual
Accounting and Policy Year Accounting
The Income And
Expenditure Account is prepared on an annual accounting basis and includes all
the premiums for policies incepting in the year and the cost of claims and
reinsurance for the current year and any adjustments relating to earlier years
together with operating expenses, financial expenses and investment
income. All revenue transactions
appear in the Income And Expenditure Account and are
allocated to a policy year or to a reserve.
Calls and
premiums, reinsurance premiums, claims and claim recoverable from reinsurers or third parties are allocated to the policy
years to which they relate. Both the realised and unrealised investment income and operating expenses are
allocated to the current policy year.
d
Valuation
basis
The Association
adopts accrual basis in accounting unless otherwise stipulated. The values of all assets except the
equity investment of listed company which is stated at lower of its market
value and the net asset value per share at the balance sheet date are to be
recorded at historical costs at the time of acquisition.
e
Bookkeeping
base currency
The United
States Dollar is the bookkeeping base currency of the Association. The
Association adopts the principle of separate accounting for similar accounts.
Balances of RMB accounts at the end of year shall be translated into the US
Dollar at the official exchange rate prevailing on February 20th.
The differences arising from the translation are stated as gains or losses in
the Income and Expenditure Account.
f
Cash
Balance
Cash in hand,
bank deposits and other monetary assets which include cash in other cities,
cashier’s check，bank
draft，cash for
investment and advisory funds are listed separately for their different keeping
place and certain purpose in bookkeeping. Their total amount in the name of
cash balance is showed as a current asset in the Balance Sheet.
g
Calls and
Premiums Receivable
It refers to
the accumulated amount of calls and premiums receivable due from members. The Association conducts the direct
write-off method and the bad debts are charged to the reserves directly under
the Directors decision when the calls and premiums are discovered to be
uncollectible.
h
Guarantee
It refers to
cash balance held by domestic or overseas Banks for issuing letters of
guarantee.
i Investments
The equity
method is used when the Association has significant influence, control or
co-control over the operation of the invested listed company. In the equity method, the initial or
supplementary investment is firstly recorded at cost but later is adjusted each
year for changes in the equity in the invested company. The Association recognizes the balance
from the changes of the equity in the invested company as an investment income
or loss. The cost method is used
for other long-term investments.
The investment
income includes all the gains and losses. The investment income(or
loss) less the investment management cost is stated in the Income and
Expenditure Account.
Since the
policy year of 1998 developed the new cover of
j
Fixed
Assets
Fixed assets
refer to the assets whose useful life is over one year, unit value is above RMB
2000.00 and where original physical form remains during the process of
utilization. The straight-line method is used in fixed assets depreciation.
k
Short-term
Loans
Short-term loans are the loans
made which mature within 12 months.
l
Liabilities
Provision
Liabilities
provisions and reinsurance recoveries receivable of open and closed policy years
are drawn based on the best estimates of the managers and consent of the chief
underwriter to prepare for the claims which belong to the policy years
separately and their difference is charged to the Income and Expenditure
Account. They are also stated in
the Balance Sheet separately.
m
Reserves
The reserves
are the net assets of the Association and available to meet any deterioration
in the open and closed policy years and to contribute to overspill claims, actual or potential investment losses or other
certain purposes.
n
Calls and
Premiums
Calls and
premiums include gross calls, supplementary premiums and release call, less
return premiums. These calls and premiums are the total receivable for the
whole period of cover provided by the contracts incepting during the accounting
period together with any premium adjustments relating to prior accounting
periods. The amount of calls and
premiums less reinsurance premiums is credited to the Income and Expenditure
Account.
o
Reinsurance
Premiums
The liabilities
of the Association are reinsured above certain levels with other association
abroad. This item shows the amount
of the reinsurance premiums the Association paid to other association abroad.
p
Claims
The claims
include all claims paid during the year.
The reinsured recoveries and the claims recoveries from the third party
are both as the anti-items to the claims paid and credited in Income and
Expenditure Account.
q
Claims
Recoveries From the Third Party
It refers to
the amount recovered from the third liability party, which is credited into
Income and Expenditure Account as the deduction of claims.
r
Reinsured
Recoveries
The liabilities
of the Association are reinsured above certain levels with other association
abroad. It is the anti-item to the
claims paid and credited in the Income and Expenditure Account. Accordingly the
reinsurance recoveries receivable is listed as an asset in the Balance Sheet.
s
Operating
Expenses
These include
management costs and costs of Board of Directors. The management costs cover the cost of
providing offices, staff, communications, travel and administration. The costs of Directors include the cost
of meetings of members and Board meetings, travels and other costs. It has been drawn on the ratio in
accordance with the board of Director's instruction and is listed in the Income
and Expenditure Account.
t
Taxation
The Association
enforces the relevant tax policies of People’s Republic of
u
Related
Party Disclosures
The Association
has no share capital and is controlled by the Members who are also the insureds. The
subsequent insurance transactions are consequently deemed to be between related
parties but these are the only transactions between the Association and the
Members.
Note 3-Sundry
debtors/creditors
|
|
2004/2005 |
2003/2004 |
|
Sundry
debtors |
|
|
|
Account
with HM Risks |
- |
1,025,211.95
|
|
Staff
housing loan |
1,133,475.67 |
1,094,436.83 |
|
Other
debtors |
356,612.88 |
193,392.92 |
|
Total
Sundry debtors |
1,490,088.55 |
2,313,041.70 |
|
Sundry
creditors |
|
|
|
Account
with HM Risks |
4,131,326.68
|
- |
|
Other
creditors |
1,176,697.54 |
1,248,292.90 |
|
Total
Sundry creditors |
5,308,024.22 |
1,248,292.90 |
Note
4-Investments （see note 2i）
|
Items |
|
|
China
Everbright Bank |
14,988,219.66 |
|
China
Minsheng Bank Corp. |
83,217,239.18 |
|
COSCO
Jinjiang Development Co.,Ltd. |
1,933,518.06 |
|
Beijing
Vantone Industry Co.,Ltd. |
1,733,764.27 |
|
Hai Tong
Securities Co.,Ltd. |
12,813,757.58 |
|
Hai Shang Consultancy Co.,Ltd. |
4,832.96 |
|
Total
long-term investments |
114,691,331.71 |
|
Less:
Transfer to HM Cover Account |
2,259,151.78 |
|
Total
investments |
112,432,179.93 |
Up to 20th
February 2005, the Association, as the fourth biggest shareholder of China MingSheng Bank Corp. (hereinafter called as the Bank) , invested totally USD
Up to 31st
December 2004, the total shareholder’s equity of Hai
Tong Securities Co.,Ltd.
(hereinafter called as the Company) is RMB4631 million with 8734 million shares
totally. The Association holds her
200 million shares in the cost of RMB200 million and owns 2.2898% interest of
the Company. At 20th February 2005,
the Association recognized the amount of RMB106 million as the recoverable
value according to the 2004-year Annual Report of the Company and made the
provision for long-term investment in amount of RMB93.94 million which was
converted into USD11.35 million.
The Association accordingly adjusted the book value of the Company which
decreased to USD12,813,757.58 at the Balance Sheet
date.
|
Note 5-Calls &
Premiums （see note 2n/o） |
|
||||||||
|
|
|||||||||
|
Net Calls & Premiums |
|||||||||
|
|
|
2004/2005 |
2003/2004 |
||||||
|
Calls & premiums
|
A |
24,715,050.15 |
22,430,020.45 |
||||||
|
Reinsurance premiums
|
B |
9,033,342.91 |
8,947,187.08 |
||||||
|
Net calls &
premiums |
A－B |
15,681,707.24 |
13,482,833.37 |
||||||
|
|
|
|
|
||||||
|
|
|
|
|
||||||
|
Calls & Premiums |
|||||||||
|
|
2004/2005 |
2003/2004 |
|
||||||
|
Policy year |
|
|
|
||||||
|
2004 |
21,720,452.39 |
- |
|
||||||
|
2003 |
(16,005.33) |
17,328,526.40 |
|
||||||
|
2002 |
2,068,823.38 |
522,112.21 |
|
||||||
|
2001 |
941,779.71 |
4,579,381.84 |
|
||||||
|
Total |
24,715,050.15 |
22,430,020.45 |
|
||||||
|
|
|
|
|
||||||
|
|
|
||||||||
|
Reinsurance Premiums |
|
||||||||
|
|
2004/2005 |
2003/2004 |
|
||||||
|
Policy year |
|
|
|
||||||
|
2004 |
7,668,669.72 |
- |
|
||||||
|
2003 |
870,765.96 |
6,701,968.46 |
|
||||||
|
2002 |
489,475.22 |
843,495.21 |
|
||||||
|
2001 |
4,432.01 |
1,401,723.41 |
|
||||||
|
Total |
9,033,342.91 |
8,947,187.08 |
|
||||||
|
|
|
|
|
||||||
|
Note 6-Claims （see note 2p/q/r） |
|||||||||
|
|
|
|
|
||||||
|
Net Claims |
|||||||||
|
|
|
2004/2005 |
2003/2004 |
||||||
|
Claims |
A |
11,498,082.17 |
11,824,256.12 |
||||||
|
Less: Recoveries
from 3rd party |
B |
87,694.61 |
360,191.84 |
||||||
|
Other P&I
Association |
C |
1,376,770.19 |
717,404.09 |
||||||
|
Net claims
|
A-B-C=D |
10,033,617.37 |
10,746,660.19 |
||||||
|
|
|||||||||
|
|
|||||||||
|
Recoveries From 3rd
Party |
|||||||||
|
|
2004/2005 |
2003/2004 |
|
||||||
|
Policy year |
|
|
|
||||||
|
2004 |
- |
- |
|
||||||
|
2003 |
12,344.43 |
- |
|
||||||
|
2002 |
17,395.10 |
- |
|
||||||
|
2001 |
57,955.08 |
360,191.84 |
|
||||||
|
Total |
87,694.61 |
360,191.84 |
|
||||||
|
|
|
|
|
||||||
|
|
|
||||||||
|
Recoveries From
Other P&I Association |
|
||||||||
|
|
2004/2005 |
2003/2004 |
|
||||||
|
Policy year |
|
|
|
||||||
|
2004 |
- |
- |
|
||||||
|
2003 |
215,544.19 |
- |
|
||||||
|
2002 |
- |
- |
|
||||||
|
2001 |
1,161,226.00 |
717,404.09 |
|
||||||
|
Total |
1,376,770.19 |
717,404.09 |
|
||||||
|
|
|
|
|
||||||
|
Claims |
|||||||||
|
|
|||||||||
|
Policy year |
2004 |
2003 |
2002 |
2001 |
Total |
||||
|
Items |
|||||||||
|
Correspondents fee |
131,473.08 |
108,360.98 |
97,446.34 |
110,242.08 |
447,522.48 |
||||
|
Survey fee |
470,029.49 |
275,906.95 |
57,813.79 |
52,652.54 |
856,402.77 |
||||
|
Injury illness or
death of seaman |
464,238.53 |
541,947.59 |
260,674.76 |
264,626.00 |
1,531,486.88 |
||||
|
Cargo damage |
1,286,762.11 |
816,869.56 |
874,351.02 |
1,536,950.10 |
4,514,932.79 |
||||
|
Collision |
109,808.19 |
526,187.11 |
65,961.42 |
94,003.44 |
795,960.16 |
||||
|
Pollution risks |
369,526.98 |
98,022.04 |
12,290.57 |
134,431.21 |
614,270.80 |
||||
|
Lawyer's fee |
80,386.09 |
212,684.51 |
387,423.93 |
509,608.53 |
1,190,103.06 |
||||
|
Others |
262,605.03 |
446,540.39 |
177,721.89 |
634,616.40 |
1,521,483.71 |
||||
|
FDD |
- |
- |
25,919.52 |
- |
25,919.52 |
||||
|
Total |
3,174,829.50 |
3,026,519.13 |
1,959,603.24 |
3,337,130.30 |
11,498,082.17 |
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
|
Note 7-Investment income （see note 2i） |
|||||||||
|
|
|
|
|
|
|||||
|
|
|
2004/2005 |
2003/2004 |
|
|||||
|
Realised investment income: |
|
|
|
||||||
|
Equity capital |
|
2,458,195.60 |
1,525,636.16 |
|
|||||
|
|
|
1,074,989.37 |
- |
|
|||||
|
Bonds |
|
- |
- |
|
|||||
|
House Property |
|
3,680.98 |
19,547.93 |
|
|||||
|
Others |
|
- |
84,908.81 |
|
|||||
|
Investment income |
|
3,536,865.95 |
1,630,092.90 |
|
|||||
|
Add: Unrealised investment income |
16,977,367.63 |
22,612,090.79 |
|
||||||
|
Less: Provision for
long-term investment |
11,351,046.38 |
- |
|
||||||
|
Total investment income |
|
9,163,187.20 |
24,242,183.69 |
|
|||||
|
Less: Investment
cost |
|
733,054.98 |
1,939,374.69 |
|
|||||
|
Net income of
investment |
8,430,132.22 |
22,302,809.00 |
|
||||||
|
At 20th February 2005, the
Association made the provision for long-term investment in amount of RMB93.94
million, converted into USD11.35million,which was
offset the investment income. |
|
||||||||
|
Note 8-Liabilities
Provision & Liabilities Provision Transfer （see note |
||||||||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Liabilities
Provision Transfer |
||||||||||||||||
|
|
Estimated provision
of liability |
Provision of
liability |
||||||||||||||
|
2004/2005 |
10,664,323.46 |
- |
||||||||||||||
|
2003/2004 |
10,673,722.07 |
17,686,894.19 |
||||||||||||||
|
2002/2003 |
4,238,632.45 |
7,486,248.51 |
||||||||||||||
|
2001/2002 |
14,555,095.66 |
23,768,454.30 |
||||||||||||||
|
Total |
(A) |
40,131,773.64 |
(B) |
48,941,597.00 |
||||||||||||
|
Transfers to
liabilities provision
(A)-(B) |
(8,809,823.36) |
|||||||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Liabilities Provision |
||||||||||||||||
|
Policy year |
|
|
|
|||||||||||||
|
2004 |
|
|
|
10,664,323.46 |
|
|||||||||||
|
2003 |
|
|
|
10,673,722.07 |
|
|||||||||||
|
2002 |
|
|
|
4,238,632.45 |
|
|||||||||||
|
Closed policy years |
|
|
|
14,555,095.66 |
|
|||||||||||
|
Total |
|
|
|
40,131,773.64 |
|
|||||||||||
|
|
|
|
|
|
||||||||||||
|
Note 9-Reserves （see note |
|||
|
|
|
|
|
|
|
2004/2005 |
2003/2004 |
|
|
Claims |
87,256,525.66 |
67,594,018.82 |
|
|
Investment |
1,136,046.09 |
799,149.58 |
|
|
Management |
6,765,994.21 |
5,374,722.31 |
|
|
Total |
95,158,565.96 |
73,767,890.71 |
|
|
|
|
|
|