NOTES
TO THE FINANCIAL STATEMENTS OF P&I RISKS
FEBRUARY
20 2006
Note
1-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.
Note
2-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,
2006.
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
During this
accounting year, the Association has a new asset named “the free-float
right resulting from the shareholder structure reform” in accordance with
the new regulations formulated by the Ministry of Finance PRC with a view to
assess the value of the “free-float right” acquired by compensation
payment in the shareholder structure reform.
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
Operating expenses
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
|
|
2005/2006 |
2004/2005 |
|
Sundry debtors |
|
|
|
Account with HM
Cover |
2,199,144.14 |
- |
|
Staff housing
loan |
1,054,359.45 |
1,133,475.67
|
|
Other debtors |
622,573.65 |
356,612.88 |
|
Total Sundry
debtors |
3,876,077.24 |
1,490,088.55 |
|
Sundry creditors |
|
|
|
Account with HM
Cover |
- |
4,131,326.68 |
|
Other creditors |
2,224,935.74 |
1,176,697.54 |
|
Total Sundry
creditors |
2,224,935.74 |
5,308,024.22 |
Note
4-Investments （see note 2i）
|
Items |
|
|
|
China Everbright Bank |
|
15,413,192.85 |
|
China Minsheng Bank Corp. |
|
89,188,341.50 |
|
COSCO Jinjiang Development Co.,Ltd. |
|
1,988,340.67 |
|
Beijing Vantone Industry Co.,Ltd. |
|
1,782,923.10 |
|
Hai Tong Securities Co.,Ltd. |
|
13,177,076.49 |
|
Fujian Hairun properties Co.,Ltd |
|
496,999.37 |
|
Hai Shang Consultancy Co.,Ltd. |
|
4,969.99 |
|
|
|
122,051,843.97 |
|
Less: Transfer
to HM Cover Account |
|
7,010,238.28 |
|
|
|
115,041,605.69 |
|
Free-float right resulting from shareholder structure reform |
|
16,626,071.25 |
|
Total long-term investments |
|
131,667,676.94 |
China Minsheng Bank Corp. (hereafter called as the Bank), as a listed bank, enforced the shareholder structure reform in October 2005. The Association accordingly made a compensation payment in book value of RMB 133,811,609.26, equal to 65 million shares the Association owns, to gain the “free-float right” which is reflected as an asset under the item of “long-term investments” in the Balance Sheet.
The Association bought 16.5 million shares
of the Bank as the supplementary investment in December 2005. Up to February 20th 2006, the
Association, as the fifth biggest shareholder of the Bank, had invested totally
USD
On
February 20th 2005, the Association recognized the amount of RMB106 million as
the recoverable value according to the 2004-year Annual Report of Hai Tong Securities Co.,Ltd.
(hereinafter called as the Company).
The Association accordingly made the provision for long-term investment
in amount of RMB93.94 million which was equivalent to USD11.67 million at the
official exchange rate prevailing on February 20th 2006. The book value of the Company was
adjusted to USD13,177,076.49 which is listed in the above
table.
Note 5-Calls & Premiums （see note 2n/o）
|
|
|
|
|
|
|
Net Calls &
Premiums |
||||
|
|
|
2005/2006 |
2004/2005 |
|
|
Calls
& premiums |
A |
28,480,163.09 |
24,715,050.15 |
|
|
Reinsurance
premiums |
B |
11,117,427.76 |
9,033,342.91 |
|
|
Net
calls & premiums |
A－B |
17,362,735.33 |
15,681,707.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calls & Premiums |
||||
|
|
|
2005/2006 |
2004/2005 |
|
|
Policy
year |
|
|
|
|
|
2005 |
|
25,491,718.29 |
|
|
|
2004 |
|
97,858.38 |
21,720,452.39 |
|
|
2003 |
|
2,947,421.55 |
(16,005.33) |
|
|
2002 |
|
(56,835.13) |
3,010,603.09 |
|
|
Total |
|
28,480,163.09 |
24,715,050.15 |
|
|
|
|
|
|
|
|
|
||||
|
Reinsurance Premiums |
||||
|
|
|
2005/2006 |
2004/2005 |
|
|
Policy
year |
|
|
|
|
|
2005 |
|
9,432,882.59 |
|
|
|
2004 |
|
1,063,403.03 |
7,668,669.72 |
|
|
2003 |
|
603,345.09 |
870,765.96 |
|
|
2002 |
|
17,797.05 |
493,907.23 |
|
|
Total |
|
11,117,427.76 |
9,033,342.91 |
|
Note 6-Claims （see note 2p/q/r）
|
Net
Claims |
|||
|
|
|
2005/2006 |
2004/2005 |
|
Claims |
A |
12,411,842.22
|
11,498,082.17
|
|
Less: Recoveries from 3rd party |
B |
- |
87,694.61 |
|
Other P&I Association |
C |
3,030,529.44 |
1,376,770.19 |
|
Net claims
|
A-B-C=D |
9,381,312.78 |
10,033,617.37 |
|
|
|
|
|
|
|
|
|
|
|
Recoveries From 3rd Party |
|||
|
|
|
2005/2006 |
2004/2005 |
|
Policy year |
|
|
|
|
2005 |
|
- |
- |
|
2004 |
|
- |
- |
|
2003 |
|
- |
12,344.43 |
|
2002 |
|
- |
75,350.18 |
|
Total |
|
- |
87,694.61 |
|
|
|
|
|
|
|
|||
|
Recoveries From
Other P&I Association |
|||
|
|
|
2005/2006 |
2004/2005 |
|
Policy year |
|
|
|
|
2005 |
|
4,249.22 |
- |
|
2004 |
|
944,233.25
|
- |
|
2003 |
|
- |
215,544.19
|
|
2002 |
|
2,082,046.97
|
1,161,226.00
|
|
Total |
|
3,030,529.44
|
1,376,770.19
|
|
Claims |
|||||
|
Policy year Items |
2005 |
2004 |
2003 |
2002 |
Total |
|
Correspondents
fee |
232,827.85 |
286,100.76 |
68,475.98 |
102,679.35 |
690,083.94 |
|
Survey fee |
597,739.14 |
361,341.25 |
16,491.03 |
11,184.60 |
986,756.02 |
|
Injury illness
or death of seaman |
614,840.34 |
1,157,083.12 |
299,411.52 |
89,919.51 |
2,161,254.49 |
|
Cargo damage |
389,154.85 |
2,402,671.45 |
790,793.64 |
454,515.45 |
4,037,135.39 |
|
Collision |
32,291.12 |
409,380.71 |
148,229.74 |
624,990.38 |
1,214,891.95 |
|
Pollution risks |
577,024.69 |
263,332.56 |
|
- |
850,259.87 |
|
Lawyer's fee |
121,495.98 |
280,439.85 |
292,022.74 |
528,583.27 |
1,222,541.84 |
|
Others |
109,399.07 |
260,325.77 |
158,130.10 |
363,771.38 |
891,626.32 |
|
Wreck disposal |
317,743.00 |
- |
- |
- |
317,743.00 |
|
P&I |
2,992,516.04 |
5,420,675.47 |
1,783,457.37 |
2,175,643.94 |
12,372,292.82 |
|
FDD |
- |
- |
- |
39,549.40 |
39,549.40 |
|
Total claims
paid |
2,992,516.04 |
5,420,675.47 |
1,783,457.37 |
2,215,193.34 |
12,411,842.22 |
Note 7-Investment income （see note 2i）
|
|
|
2005/2006 |
|
2004/2005 |
|
Realised investment income: |
|
|
|
|
|
Equity capital |
|
2,406,166.83 |
|
2,458,195.60 |
|
|
|
- |
|
1,074,989.37 |
|
Bonds |
|
2,112.25 |
|
- |
|
House Property |
|
23,291.90 |
|
3,680.98 |
|
Others |
|
770,419.51 |
|
- |
|
|
|
3,201,990.49 |
|
3,536,865.95 |
|
Add: Unrealised investment income |
12,789,806.37 |
|
16,977,367.63 |
|
|
Less: Provision for
long-term investments |
- |
|
11,351,046.38 |
|
|
|
|
15,991,796.86 |
|
9,163,187.20 |
|
Less: Investment
cost |
|
1,279,343.75 |
|
733,054.98 |
|
Net income of
investments |
14,712,453.11 |
|
8,430,132.22 |
|
Note 8-Liabilities Provision &
Liabilities Provision Transfer （see note
|
Liabilities
Provision Transfer |
||||||
|
|
|
Estimated
provision of liability |
Provision
of liability |
|||
|
2005/2006 |
|
14,131,129.00
|
- |
|||
|
2004/2005 |
|
8,614,940.00 |
10,664,323.46
|
|||
|
2003/2004 |
|
8,132,216.00 |
10,673,722.07
|
|||
|
2002/2003 |
|
11,475,396.00
|
18,793,728.11 |
|||
|
Total |
|
(A) |
42,353,681.00
|
(B) |
40,131,773.64 |
|
|
Transfers to liabilities provision (A)-(B) |
2,221,907.36
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
Provision |
||||||
|
Policy year |
|
|
|
|||
|
2005 |
|
|
|
|
14,131,129.00
|
|
|
2004 |
|
|
|
|
8,614,940.00
|
|
|
2003 |
|
|
|
|
8,132,216.00
|
|
|
Closed policy years |
|
|
|
11,475,396.00
|
||
|
Total |
|
|
|
|
42,353,681.00
|
|
Note 9-Reserves （see note
|
|
2005/2006 |
2004/2005 |
|
Claims |
105,126,029.35
|
87,256,525.66 |
|
Investments |
3,276,702.57 |
1,136,046.09 |
|
Management |
9,358,027.08 |
6,765,994.21 |
|
Total |
117,760,759.00 |
95,158,565.96 |