SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of April, 2004
CHINA SOUTHERN AIRLINES COMPANY LIMITED
(Translation of registrant's name into English)
Baiyun International Airport
Guangzhou, People's Republic of China
(Address of principal executive offices)
(Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.)
Form 20-F. X Form 40-F.
------------ ------------
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes. No. X
------------- -------------
(If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82-________.)
China Southern Airlines Company Limited (the "Company") on April 26,
2004 published in local newspapers in Hong Kong an announcement in Chinese and
English, respectively, on the annual results of the Company for the year ended
December 31, 2003 (the "Announcement") and on April 25, 2004 distributed to
local news services a press release (the "Press Release") showing the highlights
of the Announcement. A copy of the Announcement and the Press Release (both in
English) are included in this Form 6-K of the Company.
[Chinese Characters]
CHINA SOUTHERN AIRLINES COMPANY LIMITED
(A joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 1055)
2003 ANNUAL RESULTS
The Board of Directors of China Southern Airlines Company Limited (the
"Company") hereby announces the audited consolidated results of the Company and
its subsidiaries (the "Group") for the year ended 31 December, 2003 together
with the comparative figures for the corresponding year of 2002 as follows:
FINANCIAL RESULTS
A. PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS
("IFRS")
CONSOLIDATED PROFIT AND LOSS ACCOUNT
2003
FOR THE YEAR ENDED 31 DECEMBER, VS 2002
------------------------------------------------- INCREASE/
2003 2002 2003 2003 (DECREASE)
Note RMB'000 RMB'000 HK$'000 US$'000 %
---- ---------- ---------- ---------- --------- ----------
Operating revenue:
Passenger 15,009,885 15,695,622 14,084,531 1,813,511 (4.4)
Cargo and mail 1,954,915 1,786,270 1,834,395 236,195 9.4
---------- ---------- ---------- ---------
16,964,800 17,481,892 15,918,926 2,049,706 (3.0)
Other operating revenue 505,323 536,728 474,170 61,053 (5.9)
---------- ---------- ---------- ---------
Total operating revenue 3 17,470,123 18,018,620 16,393,096 2,110,759 (3.0)
---------- ---------- ---------- ---------
Operating expenses:
Flight operations 7,070,031 6,732,543 6,634,166 854,209 5.0
Maintenance 2,588,613 2,333,419 2,429,026 312,759 10.9
Aircraft and traffic servicing 2,767,488 2,511,284 2,596,874 334,371 10.2
Promotion and sales 1,480,168 1,499,587 1,388,916 178,836 (1.3)
General and administrative 1,053,319 1,060,010 988,383 127,263 (0.6)
Depreciation and amortisation 2,037,971 1,839,871 1,912,331 246,230 10.8
Other 16,804 15,829 15,767 2,029 6.2
---------- ---------- ---------- ---------
1
2003
FOR THE YEAR ENDED 31 DECEMBER, VS 2002
------------------------------------------------- INCREASE/
2003 2002 2003 2003 (DECREASE)
Note RMB'000 RMB'000 HK$'000 US$'000 %
---- ---------- ---------- ---------- --------- ----------
Total operating expenses 5 17,014,394 15,992,543 15,965,463 2,055,697 6.4
---------- ---------- ---------- ---------
Operating profit 455,729 2,026,077 427,633 55,062 (77.5)
---------- ---------- ---------- ---------
Non-operating income/(expenses):
Share of associated
companies' results 47,798 36,988 44,851 5,775 29.2
Share of jointly controlled
entities' results (39,495) (3,352) (37,060) (4,772) 1,078.3
(Loss)/gain on sale of fixed assets 4 (22,217) 170,740 (20,848) (2,684) (113.0)
Interest income 13,061 52,618 12,256 1,578 (75.2)
Interest expense 5 (823,725) (959,193) (772,943) (99,523) (14.1)
Exchange loss, net (164,443) (175,451) (154,304) (19,868) (6.3)
Other, net 21,682 (9,328) 20,345 2,619 (332.4)
---------- ---------- ---------- ---------
Total net non-operating expenses (967,339) (886,978) (907,703) (116,875) 9.1
---------- ---------- ---------- ---------
(Loss)/profit before taxation and
minority interests 5 (511,610) 1,139,099 (480,070) (61,813) (144.9)
Taxation credit/(expense) 6 324,277 (398,227) 304,286 39,179 (181.4)
---------- ---------- ---------- ---------
(Loss)/profit before
minority interests (187,333) 740,872 (175,784) (22,634) (125.3)
Minority interests (170,934) (165,111) (160,396) (20,652) 3.5
---------- ---------- ---------- ---------
(Loss)/profit attributable to
shareholders (358,267) 575,761 (336,180) (43,286) (162.2)
========== ========== ========== =========
Basic (loss)/earnings per share 7 RMB(0.09) RMB0.17 HK$(0.09) US$(0.011) (162.2)
========== ========== ========== =========
Notes:
1 COMPANY BACKGROUND
The Company was established in the People's Republic of China (the "PRC",
"China" or the "State") on 25 March, 1995 as a joint stock limited company
as part of the reorganisation of the Company's holding company, China
Southern Air Holding Company ("CSAHC"). CSAHC is a state-owned enterprise
under the supervision of the PRC central government.
The Company's H shares ("H Shares") and American Depositary Shares ("ADS")
(each ADS representing 50 H Shares) are listed on the Stock Exchange of
Hong Kong Limited (the "Hong Kong Stock Exchange") and the New York Stock
Exchange, respectively since July 1997. In July 2003, the Company issued
1,000,000,000 A shares ("A Shares") which are listed on the Shanghai Stock
Exchange.
2
2 BASIS OF PREPARATION
The audited consolidated profit and loss account of the Group for the years
presented include the results of the companies comprising the Group. All
significant intercompany transactions and balances have been eliminated on
consolidation.
The principal accounting policies adopted in the preparation of the Group's
consolidated results for the 2003 financial year are consistent with those
adopted in preparing the Group's consolidated results for the 2002
financial year.
The audited consolidated profit and loss account has been prepared in
accordance with IFRS. IFRS differs in certain material aspects the PRC
Accounting Rules and Regulations ("PRC GAAP"). Differences which have a
significant effect on the consolidated (loss)/profit attributable to
shareholders for the year ended 31 December, 2003 are set out in Section C
below.
3 TURNOVER
The Group is principally engaged in the provision of passenger, cargo and
mail airline services in the domestic, Hong Kong regional and international
markets, with flights operating primarily from the Guangzhou Baiyun
International Airport which is both the main hub of the Group's route
network and the location of its corporate headquarters.
Turnover comprises revenues from airline and airline-related services and
is stated net of sales tax and contributions to the Civil Aviation
Administration of China ("CAAC") Infrastructure Development Fund. The
contributions to the CAAC Infrastructure Development Fund for the year are
payable at 5% and 2%, respectively (2002: 5% and 2%, respectively) of the
Group's domestic and international/Hong Kong regional traffic revenue,
except for the period from 1 May, 2003 to 31 December, 2003 during which
the Group was exempted from contributing to the CAAC Infrastructure
Development Fund. The sales tax is payable at 3% (2002: 3%) of the Group's
traffic revenue in respect of domestic flights and international/Hong Kong
regional outbound flights, except for the period from 1 May, 2003 to 31
December, 2003 during which the Group's passenger revenue was exempted from
sales tax.
The breakdown of the Group's turnover and operating profit by geographic
region for the year is as follows:
HONG KONG
DOMESTIC REGIONAL INTERNATIONAL* TOTAL
RMB'000 RMB'000 RMB'000 RMB'000
---------- --------- --------- ----------
2003
Traffic revenue 13,086,939 807,677 3,070,184 16,964,800
Other operating revenue 436,122 -- 69,201 505,323
---------- --------- --------- ----------
Total turnover 13,523,061 807,677 3,139,385 17,470,123
========== ========= ========= ==========
Operating profit/(loss) 440,158 (29,210) 44,781 455,729
========== ========= ========= ==========
2002
Traffic revenue 13,197,589 1,118,695 3,165,608 17,481,892
Other operating revenue 485,046 -- 51,682 536,728
---------- --------- --------- ----------
Total turnover 13,682,635 1,118,695 3,217,290 18,018,620
========== ========= ========= ==========
Operating profit 1,614,975 193,440 217,662 2,026,077
========== ========= ========= ==========
* Mainly routes between the PRC and Asian countries, the United States
of America, the Netherlands, Belgium and Australia.
3
4 (LOSS)/GAIN ON SALE OF FIXED ASSETS
(Loss)/gain on sale of fixed assets represents:
2003 2002
Note RMB'000 RMB'000
---- ------- -------
Aircraft (a) (20,405) 199,394
Staff quarters (b) -- (17,624)
Flight equipment and others (1,812) (11,030)
------- -------
(22,217) 170,740
======= =======
(a) During 2003, the Group incurred a loss of RMB20,405,000 on early
retirement of two old Boeing 737-200 aircraft.
Pursuant to certain sale and leaseback arrangements, the Group sold
four Boeing 757-200 aircraft during 2002 to independent third parties
and then entered into operating leases with such parties to lease back
the aircraft for a period of eight to nine years. The Group recognised
a profit of RMB199,394,000, being the excess of the sale proceeds
which approximated the aircraft's fair value on the date of disposal,
over the aircraft's net book value and related disposal costs.
(b) In accordance with a comprehensive services agreement (the "Services
Agreement") dated 22 May, 1997 between the Company and CSAHC, CSAHC
agrees to provide adequate quarters to eligible employees of the Group
as and when required. In return, the Group agrees to pay a fixed
annual fee of RMB85,000,000 to CSAHC for a ten-year period effective
from 1 January, 1995.
During 2002, the Group provided additional quarters at its own expense
to certain employees who are not eligible for quarters pursuant to the
Services Agreement. These quarters were provided to the respective
employees in accordance with the relevant PRC housing reform policy.
For the year ended 31 December, 2002, the excess of the cost of these
additional quarters over the considerations received by the Group from
the employees of RMB17,624,000 was charged to expenses in 2002.
5 (LOSS)/PROFIT BEFORE TAXATION AND MINORITY INTERESTS
2003 2002
RMB'000 RMB'000
---------- ----------
(Loss)/profit before taxation and minority
interests is arrived at after charging:
Operating expenses
Jet fuel 3,866,932 3,519,005
Aircraft maintenance 2,376,635 2,134,705
Routes 4,363,277 4,297,767
Depreciation
-- owned assets 1,502,013 1,301,601
-- assets held under finance leases 495,869 537,692
Amortisation of deferred expenditure 40,089 578
Operating lease charges
-- aircraft and other flight equipment 1,536,466 1,416,524
-- buildings 135,528 129,982
4
2003 2002
RMB'000 RMB'000
---------- ----------
Staff costs
-- salaries, wages and welfare 1,496,191 1,538,617
-- contributions to retirement schemes 150,447 131,622
Office and administration 470,565 452,432
Other 580,382 532,018
---------- ----------
17,014,394 15,992,543
Interest expense
Interest on bank and other loans wholly repayable
within five years 288,293 335,953
Interest on other loans 176,026 142,679
Finance charges on obligations under finance leases 442,483 544,747
Less: borrowing costs capitalised (83,077) (64,186)
---------- ----------
Net interest expense 823,725 959,193
and after crediting:
Amortisation of gains on sale and leaseback
transactions -- 2,579
Dividend income from unlisted investments 17,220 7,116
========== ==========
6 TAXATION (CREDIT)/EXPENSE
Taxation (credit)/expense in the consolidated profit and loss account
comprises:
2003 2002
RMB'000 RMB'000
--------- ---------
PRC income tax 46,938 71,651
Share of taxation of associated companies 3,342 9,424
Share of taxation of jointly controlled entities 6,372 --
--------- ---------
56,652 81,075
Deferred taxation
-- current year 11,208 317,152
-- adjustment for change in income tax rate (392,137) --
--------- ---------
Taxation (credit)/expense (324,277) 398,227
========= =========
On 17 October, 2003 the Company's registered address was moved to Guangzhou
Economic & Technology Development Zone, Guangzhou, China. In accordance
with the Rules and Regulations for Implementation of Income Tax for Foreign
Investment Enterprises and Foreign Enterprises of the PRC and a taxation
approval document Guangzhou Municipal State Tax Bureau Suo De Shui Zi Que
020043, the Company is entitled to enjoy the preferential tax policy
implemented in the Guangzhou Economic & Technology Development Zone
effective 1 October, 2003. As a result, the Company's income tax rate has
been changed to 15% from 33% beginning from that date.
5
As a result of the reduction in income tax rate, the Company's net deferred
taxation liability balance brought forward from 31 December, 2002 of
RMB507,077,000 was reduced by RMB392,137,000 and a net deferred tax credit
of RMB392,137,000 was recognised for such reduction in income tax in the
consolidated profit and loss account for the year ended 31 December, 2003.
In respect of the Group's overseas airline activities, the Group has either
obtained exemptions from overseas taxation pursuant to the bilateral
aviation agreements between the PRC government and the relevant overseas
governments, or has sustained tax losses in these overseas jurisdictions.
Accordingly, no provision for overseas tax has been made for the year
(2002: nil).
Deferred tax is provided using the balance sheet liability method on all
temporary differences between the carrying amounts for financial reporting
purposes and the amounts used for taxation purposes, except differences
relating to the initial recognition of assets or liabilities which affect
neither accounting nor taxable profit/loss. The tax value of losses
expected to be available for utilisation against future taxable income is
recognised as a deferred tax asset and offset against the deferred tax
liability attributable to the same legal tax unit and jurisdiction. Net
deferred tax assets are reduced to the extent that it is no longer probable
that the related tax benefit will be realised.
7 BASIC (LOSS)/EARNINGS PER SHARE
The calculation of basic (loss)/earnings per share is based on the
consolidated loss attributable to shareholders of RMB358,267,000 (2002:
profit of RMB575,761,000) and the weighted average number of shares in
issue during the year of 3,831,712,000 (2002: 3,374,178,000).
The amount of diluted (loss)/earnings per share is not presented as there
were no dilutive potential ordinary shares in existence for both years.
8 DIVIDENDS
The Board of Directors of the Company does not recommend the payment of a
final dividend in respect of the year ended 31 December, 2003 (2002: Nil).
9 RESERVES
STATUTORY
STATUTORY PUBLIC DISCRETIONARY
SURPLUS RESERVE WELFARE FUND SURPLUS RESERVE
(a) (b) (c)
RMB'000 RMB'000 RMB'000
--------------- ------------ ---------------
Balance at 1 January, 2003 337,195 171,574 76,603
Transferred from consolidated profit and loss account 23,856 1,113 --
------- ------- ------
Balance at 31 December, 2003 361,051 172,687 76,603
======= ======= ======
(a) According to the PRC Company Law and the Articles of Association of
the Company and certain of its subsidiaries, the Company and the
relevant subsidiaries are required to transfer 10% of their annual net
profits after taxation, as determined under relevant PRC accounting
regulations, to a statutory surplus reserve until the reserve balance
reaches 50% of the registered capital. The transfer to this reserve
must be made before distribution of a dividend to shareholders.
Statutory surplus reserve can be used to offset prior years' losses,
if any, and may be converted into share capital by the issue of new
shares to shareholders in proportion to their existing shareholding or
by increasing the par value of the shares currently held by them,
provided that the balance after such issue is not less than 25% of the
registered capital.
6
(b) According to the PRC Company Law and the Articles of Association of
the Company and certain of its subsidiaries, the Company and the
relevant subsidiaries are required to transfer between 5% to 10% of
their annual net profits after taxation, as determined under PRC
accounting regulations, to the statutory public welfare fund. This
fund can only be utilised on capital items for the collective benefits
of the Company's and the relevant subsidiaries' employees such as the
construction of dormitories, canteen and other staff welfare
facilities. This fund is non-distributable other than in liquidation.
The transfer to this fund must be made before distribution of a
dividend to shareholders.
(c) The usage of this reserve is similar to that of statutory surplus
reserve, as set out in Note 9(a) above.
10 CONVENIENT TRANSLATION
The audited consolidated profit and loss account has been prepared in
Renminbi (RMB), the national currency of the PRC. Translations of amounts
from RMB into Hong Kong dollars (HK$) and United States dollars (US$)
solely for the convenience of readers have been made at the rates of
HK$1.00 to RMB1.0657 and US$1.00 to RMB8.2767, being the average of the
buying and selling rates as quoted by the People's Bank of China at the
close of business on 31 December, 2003. No representation is made that the
RMB amounts could have been or could be converted into HK$ or US$ at these
rates or at any other certain rates on 31 December, 2003 or on any other
date.
B. PREPARED IN ACCORDANCE WITH THE PRC ACCOUNTING RULES AND REGULATIONS
("PRC GAAP")
CONSOLIDATED INCOME STATEMENT
2003 2002
RMB'000 RMB'000
---------- ----------
REVENUE FROM PRINCIPAL OPERATIONS 17,351,006 18,805,510
Less: Transfer to CAAC Infrastructure
Development Fund 250,802 798,386
---------- ----------
NET REVENUE FROM PRINCIPAL OPERATIONS 17,100,204 18,007,124
Less: Costs of principal operations 14,221,965 13,118,104
Business taxes and surcharges 190,682 525,250
---------- ----------
PROFIT FROM PRINCIPAL OPERATIONS 2,687,557 4,363,770
Add: Profit from other operations 325,949 325,327
Less: Selling expenses 1,519,416 1,527,255
General and administration expenses 893,343 1,013,506
Financial expenses 995,550 1,095,219
---------- ----------
OPERATING (LOSS)/PROFIT (394,803) 1,053,117
Add: Investment income 61,676 10,473
Non-operating income 43,083 8,627
Less: Non-operating expenses 71,480 40,531
---------- ----------
(LOSS)/PROFIT BEFORE INCOME TAX (361,524) 1,031,686
Less: Income tax (604,727) 353,230
Less: Minority interests 228,715 165,111
---------- ----------
NET PROFIT FOR THE YEAR 14,488 513,345
========== ==========
Note: The significant accounting policies adopted by the Group in the
preparation of this audited consolidated income statement conform to
the Accounting Standards for Business Enterprises and the Accounting
Regulations for Business Enterprises, and other relevant regulations
issued by the Ministry of Finance of the PRC.
7
C. DIFFERENCE BETWEEN FINANCIAL RESULTS PREPARED UNDER IFRS AND PRC GAAP
2003 2002
RMB'000 RMB'000
-------- -------
Consolidated net profit under PRC GAAP 14,488 513,345
Adjustments:
Sale and leaseback accounting (30,710) 188,886
Staff housing charges (111,000) (95,833)
Revaluation of land use rights 3,872 3,645
Deferred tax effect (234,917) (34,282)
-------- -------
Consolidated net (loss)/profit under IFRS (358,267) 575,761
======== =======
OPERATING DATA SUMMARY
The following table sets forth certain financial information and operating data
by geographic region for the years ended 31 December, 2002 and 2003:
2003 VS 2002
FOR THE YEAR ENDED INCREASE/
31 DECEMBER, (DECREASE)
--------------------------------
2003 2002 %
------ ------ ------------
Traffic
Revenue passenger kilometres (RPK) (million)
- Domestic 21,294 22,092 (3.6)
- Hong Kong regional 778 1,081 (28.0)
- International 4,315 5,767 (25.2)
------ ------
Total 26,387 28,940 (8.8)
====== ======
Revenue tonne kilometres (RTK) (million)
- Domestic 2,424 2,532 (4.3)
- Hong Kong regional 78 108 (27.8)
- International 1,059 974 8.7
------ ------
Total 3,561 3,614 (1.5)
====== ======
Passengers carried (thousand)
- Domestic 18,259 18,535 (1.5)
- Hong Kong regional 1,019 1,369 (25.6)
- International 1,192 1,589 (25.0)
------ ------
Total 20,470 21,493 (4.8)
====== ======
8
2003 VS 2002
FOR THE YEAR ENDED INCREASE/
31 DECEMBER, (DECREASE)
--------------------------------
2003 2002 %
------ ------ ------------
Cargo and mail carried (thousand tonnes)
- Domestic 379 404 (6.2)
- Hong Kong regional 12 14 (14.3)
- International 73 52 40.4
------ ------
Total 464 470 (1.3)
====== ======
Capacity
Available seat kilometres (ASK) (million)
- Domestic 32,590 33,753 (3.4)
- Hong Kong regional 1,347 1,746 (22.9)
- International 6,930 8,746 (20.8)
------ ------
Total 40,867 44,245 (7.6)
====== ======
Available tonne kilometres (ATK) (million)
- Domestic 3,772 3,924 (3.9)
- Hong Kong regional 150 193 (22.2)
- International 1,999 1,798 11.2
------ ------
Total 5,921 5,915 0.1
====== ======
Load factors
Passenger load factor (RPK/ASK) (%)
- Domestic 65.3 65.5 (0.3)
- Hong Kong regional 57.8 61.9 (6.6)
- International 62.3 65.9 (5.5)
Overall 64.6 65.4 (1.2)
====== ======
Overall load factor (RTK/ATK) (%)
- Domestic 64.2 64.5 (0.5)
- Hong Kong regional 52.2 55.8 (6.5)
- International 53.0 54.2 (2.2)
Overall 60.1 61.1 (1.6)
====== ======
9
FOR THE YEAR ENDED 2003 VS 2002
31 DECEMBER, INCREASE/
------------------ (DECREASE
2003 2002 %
------- ------ -----------
Yield
Yield per RPK (RMB)
- Domestic 0.57 0.55 3.6
- Hong Kong regional 0.96 0.98 (2.0)
- International 0.47 0.42 11.9
Overall 0.57 0.54 5.6
==== ====
Yield per RTK (RMB)
- Domestic 5.40 5.21 3.6
- Hong Kong regional 10.35 10.36 (0.1)
- International 2.90 3.25 (10.8)
Overall 4.76 4.84 (1.7)
==== ====
Fleet
Total number of aircraft in service at
year end
- Boeing 108 102 5.9
- Airbus 24 20 20.0
---- ----
Total 132 122 8.2
==== ====
Overall utilisation rate (hours per day)
- Boeing 8.6 9.9 (13.2)
- Airbus 7.9 9.3 (15.6)
Overall 8.5 9.8 (13.8)
==== ====
Cost
- Operating cost per ASK (RMB) 0.42 0.36 16.7
==== ====
- Operating cost per ATK (RMB) 2.87 2.70 6.3
==== ====
10
BUSINESS OVERVIEW
OVERVIEW
In 2003, the Group encountered unprecedented challenges and difficulties. The
outbreak of the Severe Acute Respiratory Syndrome ("SARS") earlier this year
severely hit the PRC aviation industry. From April to June 2003, the Group's
passenger volume and passenger load factor dropped which caused the revenue
passenger kilometres ("RPK") for April, May and June of 2003 to fall by 40%,
83.5% and 61.5% respectively, as compared to the same period in 2002. In order
to minimise the negative impact of SARS, the Group implemented various measures
to adjust its operating capacity, for example by reducing the number of flights
and suspending certain routes, in response to the reduced air traffic demand
caused by the negative impact of SARS. The SARS was effectively under control in
the PRC in July 2003 and the domestic market started to recover in the third
quarter of 2003. The Group gradually resumed all its suspended flights since
July 2003.
In order to alleviate the financial pressure suffered by the PRC civil aviation
industry as a result of the SARS epidemic, the PRC government waived the levies
of the CAAC Infrastructure Development Fund, sale tax and related supplementary
taxes on passenger revenue payable by the PRC airlines, during the period from 1
May, 2003 to 31 December, 2003.
Besides, the political tension in the Middle East, in particular the Iraq war in
March 2003, led to a surge in oil prices which in turn caused an increase in the
Group's jet fuel cost.
The Group recorded a net loss of RMB358 million for 2003, as compared to a net
profit of RMB576 million for 2002. The Group's operating revenue decreased by
RMB549 million or 3.0% from RMB18,019 million in 2002 to RMB17,470 million in
2003. Passenger load factor decreased by 0.8 percentage point from 65.4% in 2002
to 64.6% in 2003. Passenger yield (in passenger revenue per RPK) increased by
5.6% from RMB0.54 in 2002 to RMB0.57 in 2003. Average yield (in traffic revenue
per RTK) decreased by 1.7% from RMB4.84 in 2002 to RMB4.76 in 2003. Operating
expenses increased by RMB1,021 million or 6.4% from RMB15,993 million in 2002 to
RMB17,014 million in 2003. As operating revenue decreased while operating
expenses increased, operating profit decreased by 77.5% from RMB2,026 million in
2002 to RMB456 million in 2003. The Group's net non-operating expenses increased
by 9.1%, from RMB887 million in 2002 to RMB967 million in 2003, mainly due to a
decrease in gain on disposal of fixed assets of RMB193 million, partly offset by
a decrease in interest expense of RMB135 million. Overall, the Group recorded a
net loss of RMB358 million in 2003, as compared to a net profit of RMB576
million in 2002.
OPERATING REVENUE
Substantially all of the Group's operating revenue is attributable to airline
operations. Traffic revenue in 2003 and 2002 accounted for 97.1% and 97.0%
respectively of total operating revenue. Passenger revenue and, cargo and mail
revenue accounted for 88.5% and 11.5% respectively of total traffic revenue in
2003. The balance of the Group's operating revenue is derived from commission
income, income from general aviation operations, fees charged for ground
services and for air catering services and net income from lease arrangements.
Operating revenue decreased by 3.0% from RMB18,019 million in 2002 to RMB17,470
million in 2003. This decrease was primarily due to a 4.4% fall in passenger
revenue from RMB15,696 million in 2002 to RMB15,010 million in 2003 resulting
from lower traffic volume caused by SARS. The total number of passengers carried
decreased by 4.8% to 20.4 million passengers in 2003. RPKs decreased by 8.8%
from 28,940 million in 2002 to 26,387 million in 2003, primarily as a result of
a decrease in passengers carried. However, passenger yield increased by 5.6%
from RMB0.54 in 2002 to RMB0.57 in 2003, mainly as the result of the exemption
of CAAC Infrastructure Development Fund and sales tax during the period from 1
May, 2003 to 31 December, 2003.
11
Domestic passenger revenue, which accounted for 81.6% of the total passenger
revenue in 2003, increased slightly by 0.1% from RMB12,234 million in 2002 to
RMB12,242 million in 2003. Domestic passenger traffic in RPKs decreased by 3.6%,
mainly due to a decrease in passengers carried. Passenger yield, however,
increased from RMB0.55 in 2002 to RMB0.57 in 2003, mainly as the result of the
aforesaid exemption of CAAC Infrastructure Development Fund and sales tax.
Hong Kong passenger revenue, which accounted for 5.0% of total passenger
revenue, decreased by 28.9% from RMB1,055 million in 2002 to RMB750 million in
2003. For Hong Kong flights, passenger traffic in RPKs decreased by 28.0%, while
passenger capacity in ASKs decreased by 22.9%, resulting in a 4.1 percentage
point decrease in passenger load factor from 2002. Passenger yield decreased
from RMB0.98 in 2002 to RMB0.96 in 2003 mainly due to slack in traffic volume.
International passenger revenue, which accounted for 13.4% of total passenger
revenue, decreased by 16.2% from RMB2,407 million in 2002 to RMB2,018 million in
2003. For international flights, passenger traffic in RPKs decreased by 25.2%,
while passenger capacity in ASKs decreased by 20.8%, resulting in a 3.6
percentage point fall in passenger load factor from 2002. Passenger yield
increased by 11.9% from RMB0.42 in 2002 to RMB0.47 in 2003 mainly as the result
of the aforesaid exemption of CAAC Infrastructure Development Fund and sales
tax.
Cargo and mail revenue, which accounted for 11.5% of the Group's total traffic
revenue and 11.1% of total operating revenue, increased by 9.5% from RMB1,786
million in 2002 to RMB1,955 million in 2003. The increase was primarily due to
the full year effect of the opening of two international cargo routes to Los
Angeles of the United States of America and Leige of Belgium in late 2002.
Other operating revenue decreased by 6.0% from RMB537 million in 2002 to RMB505
million in 2003. The decrease was primarily due to a decrease in aircraft
short-term lease income of RMB46 million.
OPERATING EXPENSES
Total operating expenses in 2003 amounted to RMB17,014 million, representing an
increase of 6.4% or RMB1,021 million over 2002, primarily due to the combined
effect of increases in jet fuel costs, maintenance expenses and aircraft and
traffic servicing expenses. Total operating expenses as a percentage of total
operating revenue increased from 88.8% in 2002 to 97.4% in 2003.
Flight operations expenses, which accounted for 41.6% of total operating
expenses, increased by 5.0% from RMB6,733 million in 2002 to RMB7,070 million in
2003, primarily as a result of increases in jet fuel costs and operating lease
payments, partly offset by a decrease in catering expenses. Jet fuel costs,
which accounted for 54.7% of flight operations expenses, increased by 9.9% from
RMB3,519 million in 2002 to RMB3,867 million in 2003 mainly as a result of
increased jet fuel prices. Operating lease payments increased by 8.4% from
RMB1,417 million in 2002 to RMB1,536 million in 2003, primarily due to the full
year effect of the addition of new operating leases in respect four Boeing
757-200 aircraft in late 2002 and four Airbus 319-100 aircraft and three Boeing
737-700 aircraft during 2003. Catering expenses decreased by 18.4% from RMB625
million in 2002 to RMB510 million in 2003, primarily reflecting a tighter cost
controls exercised by the Group. Aircraft insurance costs decreased by 23.4%
from RMB256 million in 2002 to RMB196 million in 2003, primarily because of a
reduction in the rate of aircraft insurance premiums prescribed by the PRC
insurance company. Labour costs for flight personnel decreased by 6.8% from
RMB781 million in 2002 to RMB728 million in 2003, largely due to a decrease in
flight hours.
Maintenance expenses which accounted for 15.2% of total operating expenses,
increased by 11.0% from RMB2,333 million in 2002 to RMB2,589 million in 2003.
The increase was primarily attributable to an 11.3% increase in aircraft
maintenance and repair charges from RMB2,135 million in 2002 to RMB2,377 million
in 2003, mainly as the result of the effect of fleet expansion in recent years.
12
Aircraft and traffic servicing expenses, which accounted for 16.3% of total
operating expenses, increased by 10.2% from RMB2,511 million in 2002 to RMB2,767
million in 2003. The increase primarily resulted from an 8.9% rise in landing
and navigation fees from RMB2,354 million in 2002 to RMB2,563 million in 2003,
due to an increase in the charge rate for domestic landing and navigation fees
effective September 2002.
Promotional and marketing expenses, which accounted for 8.7% of total operating
expenses, decreased by 1.3% from RMB1,500 million in 2002 to RMB1,480 million in
2003. The decrease was due to 9.3% decrease in labour costs from RMB248 million
in 2002 to RMB225 million in 2003, as fewer bonuses were given because of
reduced sales volume in 2003.
General and administrative expenses, which accounted for 6.2% of the total
operating expenses, decreased slightly by 0.7% from RMB1,060 million in 2002 to
RMB1,053 million in 2003. This was mainly due to a decrease in scale of
operations during SARS period.
Depreciation and amortisation, which accounted for 12.0% of total operating
expenses, increased by 10.8% from RMB1,840 million in 2002 to RMB2,038 million
in 2003. This increase was primarily as a result of the additions of aircraft
during 2003.
OPERATING PROFIT
Operating profit decreased by 77.5% from RMB2,026 million in 2002 to RMB456
million in 2003. This was mainly because operating revenue decreased by RMB549
million or 3.0% from 2002 while operating expenses increased by RMB1,021 million
or 6.4% over the same period.
NON-OPERATING INCOME/(EXPENSES)
Interest expense decreased by 14.1% from RMB959 million in 2002 to RMB824
million in 2003, mainly reflecting the combined effect of scheduled debt
repayments and the replacement of certain RMB denominated bank loans with US$
denominated bank loans with lower interest rates.
Interest income decreased by 75.2% from RMB53 million in 2002 to RMB13 million
in 2003. This was mainly attributable to a decrease in average cash balances.
The Group recorded a net loss on sale of fixed assets of RMB22 million in 2003,
mainly resulting from retirement of two old Boeing 737-200 aircraft.
During 2003, the Group recorded a net exchange loss of RMB164 million
predominantly due to its Japanese yen denominated borrowings as a result of the
Japanese yen appreciation. Such amount comprised mostly unrealised translation
loss.
TAXATION
On 17 October, 2003, the Company's registered address was moved to Guangzhou
Economic & Technology Development Zone, Guangzhou, China. In accordance with the
Rules and Regulations for Implementation of Income Tax for Foreign Investment
Enterprises and Foreign Enterprises of the PRC and a taxation approval document
Guangzhou Municipal State Tax Bureau Suo De Shui Zi Que 020043, the Company is
entitled to enjoy the preferential tax policy implemented in the Guangzhou
Economic & Technology Development Zone effective from 1 October, 2003. As a
result, the Company's income tax rate has been changed to 15% from 33% beginning
from that date.
13
The Group recorded an income tax credit of RMB324 million for 2003 compared to
an income tax expense of RMB398 million for 2002. As a result of the reduction
in income tax rate, the Company's net deferred taxation liability balance
brought forward from 31 December, 2002 of RMB507 million was reduced by RMB392
million and a net deferred tax credit of RMB392 million was recognised such
reduction in income tax rate in 2003 accordingly.
MINORITY INTERESTS
Minority interests increased by 3.6% from RMB165 million in 2002 to RMB171
million in 2003, primarily reflecting the net profits earned by certain of the
Group's airline subsidiaries for the year.
LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL STRUCTURE
As at 31 December, 2003, the Group's borrowings totalled RMB18,460 million,
representing a decrease of RMB815 million from RMB19,275 million last year. Such
borrowings were denominated, to a larger extent, in United States dollars and,
to a smaller extent, in Japanese yen and Renminbi, with a significant portion
being fixed interest rate borrowings. Of such borrowings, RMB8,395 million,
RMB1,716 million, RMB1,601 million, RMB1,660 million and RMB5,088 million will
be repayable in 2004, 2005, 2006, 2007, 2008 and thereafter respectively. As at
31 December, 2003, cash and cash equivalents of the Group totalling RMB2,080
million, of which 22.2% were denominated in foreign currencies, decreased by
44.8% from RMB3,771 million last year. Net debts (total borrowings net of cash
and cash equivalents) increased by 5.7% to RMB16,380 million.
As at 31 December, 2003, the Group's shareholders' equity amounted to RMB11,896
million, representing an increase of RMB2,283 million from RMB9,613 million last
year. The increase was mainly due to the issuance of 1,000,000,000 A shares with
an issue price of RMB2.70 per share by way of public offering in July 2003 in
the PRC.
Net debt/equity ratio of the Group at 31 December, 2003 was 1.38 times, as
compared to 1.61 times last year.
FINANCIAL RISK MANAGEMENT POLICY
In the normal course of business, the Group is exposed to fluctuations in
foreign currencies and jet fuel prices. The Group's exposure to foreign
currencies was as a result of its debt which are denominated in foreign
currencies. Depreciation or appreciation of the RMB against foreign currencies
affects the Group's results significantly because the Group's foreign currency
payments generally exceed its foreign currency receipts. The Group is not able
to hedge its foreign currency exposure effectively other than by retaining its
foreign currency denominated earnings and receipts to the extent permitted by
the State Administration of Foreign Exchange, or subject to certain restrictive
conditions, by entering into forward foreign exchange contracts with certain
authorised PRC banks.
The Group is required to procure a majority of its jet fuel consumption
domestically at PRC spot market prices. There are currently no effective means
available to manage the Group's exposure to the fluctuations in domestic jet
fuel prices.
CHARGES ON ASSETS
As at 31 December, 2003, certain aircraft of the Group with an aggregate
carrying value of approximately RMB14,576 million (2002: RMB14,783 million) were
mortgaged under certain loan and lease agreements.
14
COMMITMENTS AND CONTINGENCIES
At December 31, 2003, the Group had capital commitments of approximately
RMB13,628 million. Of such amounts, RMB10,615 million related to the acquisition
of aircraft and related flight equipment and RMB2,072 million related to the
Group's facilities and equipment to be constructed and installed at the
Guangzhou new airport. The remaining amount of RMB941 million related to the
Group's other airports and office facilities and equipment, overhaul and
maintenance bases and training facilities.
As at 31 December, 2003, the Group was committed to make a capital contribution
of approximately RMB446 million to its jointly controlled entities.
The Company is currently involved in a civil litigation (Hong Kong High Court
Action No. 515 of 2001) ("Litigation"). According to the writ of summons for the
Litigation, New Link Consultants Limited, the plaintiff, claimed against the
Group (as one of the defendants to the Litigation) on the basis of certain
evidence proving that United Aero-Supplies System of China, Limited ("UASSC")
entered into an agreement with the defendants for exclusive purchase of aviation
equipment consigned to UASSC for sale. As the defendants failed to perform the
agreement, UASSC has the right to compensation. Since UASSC is in the course of
its winding up proceedings, all the rights and benefits of UASSC in connection
with the claim have been transferred to the plaintiff. The Company, as one of
the defendants to the Litigation, has been claimed for unspecified damages for
breach of the agreement. Given that the Litigation is still at its preliminary
stage, it is difficult to predict the result of the court judgment. However, the
Company's instructing solicitors are of the opinion that the Company has a
reasonable chance of success in its defence to the claim. At present, the
Company has filed an objection in respect of the jurisdiction of the court, and
has requested the court to transfer the case to Mainland China for trial.
There have been no material changes in the contingent liabilities of the Group
subsequent to 31 December, 2002.
DIVIDENDS
The Board of Directors does not recommend the declaration of any dividend for
the year 2003.
SHARE CAPITAL STRUCTURE
With the approval of the China Securities Regulatory Commission, the Company
issued 1,000,000,000 A Shares of RMB1 each to public at an issue price of RMB2.7
each from 10 July to 17 July, 2003 and successfully raised gross share proceeds
of RMB2.7 billion. The A Shares issued are listed on the Shanghai Stock Exchange
since 25 July, 2003 ( Abbreviation: Southern Airlines; stock code: 600029).
Owing to the issuance of A Shares, the Company's total share capital has
increased from the original 3,374,178,000 shares to 4,374,178,000 shares. The
share capital of the Company is set out below:
BEFORE ISSUANCE OF AFTER ISSUANCE OF
A SHARES A SHARES
APPROXIMATE APPROXIMATE
PERCENTAGE OF PERCENTAGE OF
TOTAL SHARE TOTAL SHARE
TYPE OF SHARES NUMBER OF SHARES CAPITAL (%) NUMBER OF SHARES CAPITAL (%)
-------------- ---------------- ------------------ ---------------- -------------------
1. Unlisted shares
State-owned shares (A Shares) 2,200,000,000 shares 65.2 2,200,000,000 shares 50.30
2. Listed shares
1. Overseas listed foreign
shares (H Shares) 1,174,178,000 shares 34.8 1,174,178,000 shares 26.84
2. Domestic listed ordinary
shares (A Shares) -- -- 1,000,000,000 shares 22.86
Total share capital 3,374,178,000 shares 100 4,374,178,000 shares 100
PARTICULARS OF SHAREHOLDERS
The total number of shareholders of the Company as at 31 December, 2003 was
152,747, of which 150,147 were shareholders of A Shares and 2,600 were
shareholders of H Shares.
Particulars of shareholdings of the Company's ten largest shareholders as at the
end of the reporting period are as follows:
SHAREHOLDINGS OF TEN LARGEST SHAREHOLDERS
SHAREHOLDINGS NUMBER OF
NAME OF INCREASE/DECREASE AT THE END TYPE OF PLEDGED OR NATURE OF
NO. SHAREHOLDERS DURING THE YEAR OF THE YEAR PERCENTAGE SHARES FROZEN SHARES SHARES HELD
--- ------------ ----------------- ------------- ---------- ------- ------------- -----------
(%)
1. CSAHC 0 2,200,000,000 50.30 Unlisted 0 State-owned shares
(A Shares)
2. HKSCC NOMINEES LIMITED 314,000 1,149,955,998 26.29 Listed Unknown H Shares
3. Huaxia Growth 59,000,000 59,000,000 1.35 Listed Unknown A Shares
4. Huaxia Return 56,865,741 56,865,741 1.3 Listed Unknown A Shares
5. Xinghua Fund 30,160,190 30,160,190 0.69 Listed Unknown A Shares
6. Yinfeng Fund 25,697,368 25,697,368 0.59 Listed Unknown A Shares
7. Xinghe Fund 24,536,588 24,536,588 0.56 Listed Unknown A Shares
8. Anxin Fund 21,001,852 21,001,852 0.48 Listed Unknown A Shares
9. Fenghe Value 20,940,086 20,940,086 0.48 Listed Unknown A Shares
10. Yuyuan Fund 15,007,147 15,007,147 0.34 Listed Unknown A Shares
16
SUBSTANTIAL SHAREHOLDERS
As at 31 December, 2003, to the knowledge of the Directors, chief executive and
Supervisors of the Company, the interests and short positions of the following
persons other than the Directors, chief executives or Supervisors in the shares
and underlying shares of the Company as recorded in the register of the Company
required to be kept under section 336 of the Securities and Futures Ordinance
(the OSFOO) or otherwise persons who have an interest of 10% or more in the
Company's shares are as follows:
% OF THE % OF THE TOTAL % OF THE
TOTAL ISSUED ISSUED SHARE TOTAL ISSUED
NAME OF TYPE OF TYPE OF NUMBER OF H SHARES OF THE CAPITAL OF DOMESTIC SHARES
SHAREHOLDER SHAREHOLDING SHARE SHARE HELD COMPANY THE COMPANY OF THE COMPANY SHORT POSITION
----------- ------------ ------- ---------- --------------- -------------- --------------- --------------
CSAHC Direct holding State-owned 2,200,000,000 -- 50.30% 68.75% --
shares (A Shares)
HKSCC
Nominees
Limited Direct holding H Shares 1,149,955,998 97.94% 26.29% -- --
Details of the interests of the Company's shareholders as at 31 December, 2003
will be set forth in the 2003 Annual Report of the Company.
PURCHASE, SALE OR REDEMPTION OF SHARES
Neither the Company nor any of its subsidiaries purchased, sold or redeemed any
shares of the Company during 2003.
USE OF PROCEEDS FROM H SHARE AND A SHARE OFFERINGS
As stated in the 2002 Annual Report of the Company, as of 31 December, 2002, the
Company had RMB40 million remaining from the proceeds of the initial public
offering of the H Shares of the Company. As at 31 December, 2003, the RMB40
million has been used for the development of the Company's computerised
accounting system and flights controlling system in accordance with the
disclosure in the Prospectus of the Company dated July 1997.
The proceeds from the issue of A Shares have been used for the purchases of
Boeing 737-800 aircraft in consistent with the disclosure in the Prospectus for
Offering of the A Shares. There has been no change in the use of proceeds.
PRE-EMPTIVE RIGHTS
Neither the Articles of Association of the Company nor the laws of the PRC
provide for any pre-emptive rights requiring the Company to offer new shares to
existing shareholders in proportion to their existing shareholdings.
COMPLIANCE WITH THE CODE OF BEST PRACTICE
In the opinion of the Directors of the Company, the Group has complied with the
Code of Best Practice set out in Appendix 14 of the Listing Rules issued by Hong
Kong Stock Exchange throughout the year ended 31 December, 2003.
17
DIRECTORS, SUPERVISORS AND SENIOR ADMINISTRATIVE OFFICERS
Directors, Supervisors and Senior Administrative Officers of the Company in 2003
were as follows:
CAPACITY
NUMBER OF IN WHICH
SHARES OF THE THE SHARES
NAME AGE POSITION COMPANY HELD WERE HELD
---- --- -------- ------------- ----------
Yan Zhi Qing 62 Chairman of the Board of Directors 0 --
Liu Ming Qi 60 Vice Chairman of the Board of
Directors 0 --
Wang Chang Shun 47 Vice Chairman of the Board of
Directors, President 0 --
Peng An Fa 56 Director 0 --
Wang Quan Hua 50 Director 0 --
Zhao Liu An 56 Director 0 --
Zhou Yong Qian 59 Director 0 --
Zhou Yong Jin 61 Director 0 --
Xu Jie Bo 39 Director, Chief Financial Officer,
Vice President 0 --
Wu Rong Nan 62 Director 0 --
Simon To 53 Independent Non-Executive Director 100,000 Interest of
H Shares spouse
Peter Lok 68 Independent Non-Executive Director 0 --
Wei Ming Hai 40 Independent Non-Executive Director 0 --
Wang Zhi 62 Independent Non-executive Director 0 --
Sui Guang Jun 43 Independent Non-executive Director 0 --
Liang Hua Fu 62 Chairman of the Supervisory
Committee 0 --
Gan Yu Hua 76 Supervisor 0 --
Li Qi Hong 56 Supervisor 0 --
Jiang Ping 54 Vice President 0 --
Li Kun 44 Vice President 0 --
Yuan Xin An 47 Vice President 1,000 Beneficial
A Shares owner
Zheng En Ren 59 Vice President 0 --
Hao Jian Hua 54 Vice President 0 --
Su Liang 42 Company Secretary 0 --
On 13 May, 2003, Mr. Liu Ming Qi, Mr. Peng An Fa, Mr. Wang Quan Hua, Mr. Zhao
Liu An, Mr. Zhou Yong Qian, Mr. Wang Zhi and Mr. Sui Guang Jun respectively were
appointed as Directors of the Company at the Shareholders' meeting of the
Company.
On 13 May, 2003, Mr. Wang Shao Xi and Mr. Zhang Rui Ai tendered their
resignations to the Company as Directors of the Company due to retirement. Their
resignations were approved at the Shareholders' meeting of the Company.
On 30 July, 2003, the Board of Directors resolved to appoint Mr. Hao Jian Hua
and Mr. Xu Jie Bo as Vice Presidents of the Company. On the same day, Mr. Yang
Guang Hua resigned as Vice President of the Company due to work arrangement.
18
INTERESTS AND SHORT POSITION OF DIRECTORS AND SUPERVISORS IN THE COMPANY AND
ASSOCIATED CORPORATIONS
As at 31 December, 2003, the interests and short positions of the Directors and
Supervisors of the Company in the shares, underlying shares and debentures (as
the case may be) of the Company or its associated corporations (within the
meaning of Part XV of the SFO) which were notified to the Company and the Hong
Kong Stock Exchange pursuant to SFO (including interests or short positions
which are taken or deemed to have under such provisions of the SFO), or recorded
in the register maintained by the Company pursuant to Section 352 of the SFO or
which were notified to the Company and the Hong Kong Stock Exchange pursuant to
the "Model Code for Securities Transactions by Directors of the Listed
Companies" in Schedule 10 of the Listing Rules are as follows:
% TO THE % TO THE
TOTAL TOTAL % TO THE
ISSUED ISSUED TOTAL
THE SHARE DOMESTIC ISSUED
COMPANY/ NUMBER CAPITAL SHARES H SHARES
ASSOCIATED TYPES OF TYPE OF OF SHARES OF THE OF THE OF THE SHORT
NAME CORPORATION INTEREST SHARES HELD COMPANY COMPANY COMPANY POSITION
---- ----------- -------- ------- --------- -------- -------- -------- --------
Simon To the Company Interest H Shares 100,000 0.002% -- 0.009% --
of spouse
(note 1)
Note 1. The spouse of Mr. Simon To is the owner of these 100,000 H Shares of
the Company and accordingly, Mr. Simon To, is taken to be interested in
these 100,000 H Shares by virtue of the SFO.
Save as disclosed above, as at 31 December, 2003, none of the Directors or
Supervisors of the Company has interests or short positions in the shares,
underlying shares and/or debentures (as the case may be) of the Company or its
associated corporations (within the meaning of Part XV of the SFO) which were
notified to the Company and the Hong Kong Stock Exchange pursuant to SFO
(including interests or short positions which are taken or deemed to have under
such provisions of the SFO), or recorded in the register maintained by the
Company pursuant to Section 352 of the SFO or which were notified to the Company
and the Hong Kong Stock Exchange pursuant to the "Model Code for Securities
Transactions by Directors of the Listed Companies" in Schedule 10 of the Listing
Rules.
SERVICE CONTRACTS OF THE DIRECTORS AND SUPERVISORS
All Directors and Supervisors of the Company have entered into service contracts
with the Company for a term of three years commencing on 16 April, 2001. The
service contracts of Liu Ming Qi, Peng An Fa, Wang Quan Hua, Zhao Liu An, Zhou
Yong Qian, Wang Zhi and Sui Guang Jun expired on 13 May, 2003 for this session
of the Board. Except for such service contracts, none of the Directors or
Supervisors of the Company has entered or proposed to enter into any other
service contracts with the Company or its subsidiaries. None of the Directors or
Supervisors has entered into any service contracts with the Company which is not
determinable by the Company within one year without payment of compensation,
other than statutory compensation.
INTERESTS OF DIRECTORS AND SUPERVISORS IN CONTRACTS
In 2003, none of the Directors and Supervisors of the Company had a material
interest in any contract of significance to which the Company or any of its
subsidiaries was a party.
19
DESIGNATED DEPOSITS AND OVERDUE TIME DEPOSITS
As at 31 December, 2003, the Group's deposits placed with financial institutions
or other parties did not include any designated deposits or overdue time
deposits against which the Group failed to receive repayments.
MATERIAL LITIGATION
The Group was not involved in any material litigation or dispute in 2003.
By Order of the Board of Directors
YAN ZHI QING
Chairman of the Board of Directors
Guangzhou, the PRC
23 April, 2004.
As at the date of this announcement, the Directors of the Company include Yan
Zhi Qing, Wang Chang Shun, Zhou Yong Jin, Xu Jie Bo, Wu Rong Nan, Liu Ming Qi,
Peng An Fa, Wang Quan Hua, Zhao Liu An and Zhou Yong Qian as executive
Directors; and Simon To, Peter Lok, Wei Ming Hai, Wang Zhi and Sui Guang Jun as
independent non-executive Directors.
The annual report of the Group for the year ended 31 December, 2003 will be
published on the website of the Hong Kong Stock Exchange
(http://www.hkex.com.hk) in due course.
"Please also refer to the published version of this announcement in China Daily"
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHINA SOUTHERN AIRLINES COMPANY LIMITED
By /s/ Su Liang
------------------------------------
Name: Su Liang
Title: Company Secretary
Date: April 28, 2004