RNS Number:6776X
Zhejiang Southeast Elec Power Co Ld
16 April 2004



This replaces the Annual Report and Accounts announcement released under 
RNS No 9195W on 25/03/04 at 10:18.  


              Zhejiang Southeast Electric Power Company Limited


                             Annual Report 2003


                                 March 2004



Important:

The Directors of Zhejiang Southeast Electric Power Company Limited (ZSEPC)
confirm that there are no false representations, misleading statements or
material omissions in this Report, and jointly and severally accept full
responsibility for the authenticity, accuracy and completeness of the
information contained herein.

The 2003 Annual Report of ZSEPC has been examined and approved at the seventh
meeting of the third board meeting of ZSEPC.  Independent director Huan Guocang
was unable to attend this meeting due to illness.

The Chairman of ZSEPC Sun Yongsen and the personnel in charge of accounting
affairs including General Manager Shou Desheng, Chief Accountant Hu Senjian and
Manager of Finance Department Yang Xiaodong state that the financial statements
contained herein are true and complete.


Contents





I. ZSEPC...................................................................... 1

II. Summary of Accounting Figures and Operating Figures....................... 2

III. Shareholders and Changes in Share Capital................................ 5

IV. Directors, Supervisors, Senior Management and Employees................... 9

V. Corporate Governance Structure............................................ 12

VI. Shareholders' General Meeting............................................ 15

VII. Report of Board of Directors.............................................16

VIII. Report of Supervisory Committee........................................ 32

IX. Important Events..........................................................36

X. Financial Statements 1.....................................................47

XI. Financial Statements 2....................................................48

XII. Documents Available for Inspection...................................... 56

I. ZSEPC



1.      Registered Name in Chinese:

   Registered Name in English:

   Zhejiang Southeast Electric Power Company Limited

   Abbreviation of the English Name of the Company: ZSEPC

2.      Legal Representative: Sun Yongsen

3.      Secretary to the Board of Directors: Xia Jinghan

   Address: 22-23 Floor, Biao Li Tower, 528 Yanan Road,

            Hangzhou, Zhejiang Province, the People's Republic of China

   Tel: 0571-85774566

   Fax: 0571-85774321

       E-mail Address: xjh@zsepc.com

4.      Registered Address and Office Location:

   22-23 Floor, Biao Li Tower, 528 Yanan Road,

   Hangzhou, Zhejiang Province, P.R. China

   Postal Code: 310006

   Website: http://www.zsepc.com/

5.      Designated Press for Information Release:

 Shanghai Securities News, China Securities Journal, South China Morning Post
(Hong Kong), Wen Wei Po (Hong Kong)

 Website for Publication of Annual Reports as designated by the China Securities
Regulatory Commission (CSRC):

 http://www.sse.com.cn/

    Places for Inspection of the Annual Report:

   Head Office of ZSEPC, Herbert Smith Hong Kong Office and London Office

6.      Information on Listing of Shares of ZSEPC

Listing Place of B Shares: Shanghai Stock Exchange

   Abbreviation of B Shares: ZSEPC B Shares

   Code of B Shares: 900949

   Listing place of GDRs: London Stock Exchange

   Code of GDRs: 0949QLT

7.      Other Information

(1) Initial Registration Date: 15 May 1997

   Initial Registered Address:

   Fengqi Building, 451 Fengqi Road, Hangzhou, Zhejiang Province

   Re-registration Date: 8 July 2002

   Re-registered Address:

   22-23 Floor, Biao Li Tower, 528 Yanan Road,

   Hangzhou, Zhejiang Province

(2)   Registration No. of Legal Person Business License: Qi Gu Zhe Zong Zi
No.002189

(3)   Taxation Registration No.: State Tax Registration No.330000142943450

                      Local Tax Registration No.330000142943450

(4)   Names and Office Addresses of Domestic and International Accountants
Appointed by ZSEPC:

Domestic Accountant: Zhejiang Pan-China Certified Public Accountants

Address: Qianjiang Sci-tech Building, 388 Wensan Road, Hangzhou, Zhejiang, China

International Accountant: PricewaterhouseCoopers Zhong Tian CPAs Co., Ltd.

Address: Ruian Plaza, 333 Mid-Huaihai Road, Shanghai, China

II. Summary of Accounting Figures and Operating Figures

1.  Main Accounting Figures

(1)   Accounting figures based on the Chinese accounting standards:
                               Item                                              Amount (RMB yuan)
Principal Operating Income                                                        4,738,196,944.73
Gross Profit                                                                      1,076,967,843.80
Net Profit                                                                          609,283,351.82
Net Profit After Deducting Non-recurring Gains/Losses (Note)                        623,702,351.21
Principal Operating Profit                                                        1,556,252,810.50
Other Operating Profit                                                                  759,658.17
Operating Profit                                                                  1,258,811,607.84
Returns on Investment                                                              -146,757,285.34
Subsidy Income                                                                                0.00
Net Value of Non-operating Income/Expense                                           -35,086,478.70
Net Cash Flow Generated from Operations                                           1,416,710,611.72
Net Increase/Decrease in Cash and Cash Equivalents                                  -37,397,618.65



Note: Items and amounts of non-recurring gains/losses
                               Item                                                     Amount (RMB yuan)
Returns on Investment - Income from management of trusted fund                              14,174,314.66
                      - Reversal of previous allocation of the                                  99,900.00
                        reserve for short-term investment devaluation
Non-operating income                                                                           668,046.95
Less: non-operating expenses                                                                35,754,525.65
Non-recurring gains/losses                                                                 -20,812,264.04
Impact of income tax on non-recurring gains/losses                                          -6,116,641.37
Impact of minority shareholders' gains/losses on non-recurring                                -276,623.28
gains/losses
Non-recurring gains/losses after deducting income tax and minority                         -14,418,999.39
shareholders' gains/losses



(2) Difference between New Profits Based on Chinese and International Accounting
Standards:
                                                                                         Unit: RMB1000 yuan
Net profit based on the PRC Accounting Standards                                                    609,284
Adjustment made based on the international financial report standards:
1. Reversal/(increase) of prepaid corporate income tax                                               -3,123
2. Deferred income tax                                                                               -9,055
3. Transferred to capital reserve                                                                    12,773
4. Offset against retroactive adjustment to corporate income tax                                          -
5. Offset against other retroactive adjustment                                                            -
Net profit based on the international financial report standards                                    609,879



2.  Main Financial Indicators

                                                                  Unit: RMB yuan
Item                                            Year 2003            Year 2002            Year 2001
Principal operating income               4,738,196,944.73     3,320,944,888.62     3,370,277,286.61
Gross profit                             1,076,967,843.80       812,753,137.31       958,949,587.73
Net profit                                 609,283,351.82       545,515,105.11       707,945,727.20
Net profit after deducting                 623,702,351.21       551,529,400.73       712,085,858.46
non-recurring gains/losses
Earnings per share (fully                            0.30                 0.27                 0.35
diluted)
Earnings per share                                   0.30                 0.27                 0.35
(weighted average)
Earnings per share after                             0.31                 0.27                 0.35
deducting non-recurring gains/
losses
Yield on net assets (fully                          10.14                 9.27                12.12
diluted) (%)
Yield on net assets                                  9.84                 8.92                11.95
(weighted average) (%)
Yield on net assets after                           10.08                 9.02                12.02
deducting non-recurring gains/
losses
(weighted average) (%)
Item                                     End of Year 2003     End of Year 2002     End of Year 2001
Total assets                             8,680,084,385.48     8,602,419,267.42     7,816,313,776.25
Shareholders' equity (excluding          6,008,838,568.82     5,885,261,727.00     5,842,246,621.89
minority shareholders' equity)
Net asset value per share                            2.99                 2.92                 2.91
Adjusted net asset value per                         2.97                 2.91                 2.90
share
Net cash flow generated from             1,416,710,611.72     1,040,154,528.73     1,297,137,638.21
operating activities
Net cash flow generated from                         0.70                 0.52                 0.65
operating activities per share




Annex to Statement of Profit during the reporting period:

                                         Yield on Net Assets (%)         Earnings per Share (yuan/
                                                                                   share)
  Profit during the reporting period       Fully Diluted      Weighted    Fully Diluted      Weighted
                                                               Average                        Average
Principal Operating Profit                         25.90         25.14             0.77          0.77
Operating Profit                                   20.95         20.34             0.63          0.63
Net Profit                                         10.14          9.84             0.30          0.30
Net Profit After Deducting                         10.38         10.08             0.31          0.31
Non-recurring Gains & Losses



3.  Changes in Shareholders' Equity during the reporting period

                                                                                             Unit: RMB yuan

Item         Share Capital  Capital Reserve        Surplus      Statutory   Undistributed     Shareholders'
                                                   Reserve        Welfare          Profit            Equity
                                                                  Reserve

Beginning 2,010,000,000.00 1,863,272,079.51 763,152,307.26 381,576,153.63 1,248,837,340.23 5,885,261,727.00
Amount
Increase              0.00    12,773,490.00 121,856,670.36  60,928,335.18   609,283,351.82   622,056,841.82
during
current
period
Decrease              0.00             0.00           0.00           0.00   620,336,670.36   498,480,000.00
during
current
period
Ending    2,010,000,000.00 1,876,045,569.51 885,008,977.62 442,504,488.81 1,237,784,021.69 6,008,838,568.82
Amount
Reasons                  - Incoming         10% statutory  10% statutory  Incoming         Increase in net
for                        transfer of the  common reserve public welfare transfer of net  profit and
Changes                    waived           fund and 10%   fund allocated profit realized  capital reserve
                           environmental    public welfare from the net   in current year  and profit
                           protection loan  fund allocated profit         after allocating distribution for
                           for the          from the net   realized in    statutory common 2002
                           desulfurization  profit         current year   reserve fund,
                           project of       realized in                   statutory public
                           Xiaoshan Power   current year                  welfare fund and
                           Plant (after                                   profit
                           deducting income                               distribution for
                           tax payable) and                               2002
                           payables unable
                           to be paid





III. Shareholders and Changes in Share Capital

1.      Changes in Share Capital


(1)   Table for Changes in Share Capital

                                                                                                       Unit : per share
                                           Before Change         Increase/decrease in current year         After Change
                                                                 (+, -)
1. Non-listed shares
1) Promoters' shares                       1,320,000,000                                          0       1,320,000,000
Including:
Shares held by the State                   1,315,000,000                                          0       1,315,000,000
Shares held by domestic legal                  5,000,000                                          0           5,000,000
persons
Shares held by foreign legal
persons
Other shares
2) Legal person shares by
subscription
3) Internal employee shares
4) Preference shares or other
shares
Subtotal                                   1,320,000,000                                          0       1,320,000,000
2. Listed outstanding shares
1) RMB   ordinary shares
2) Domestically listed foreign               690,000,000                                          0         690,000,000
investment shares
3) Offshore listed foreign
investment shares
4) Other shares
Subtotal                                     690,000,000                                          0         690,000,000
3. Total number of shares                  2,010,000,000                                          0       2,010,000,000

(2)   Issuance and Listing of Shares

a.       No issuance of shares was conducted in the last 3 years ending on 31
December 2003.

b.      There were no changes in the total number of ZSEPC's shares or the share
structure during this reporting period.

c.       ZSEPC has no internal employee share.

2.  Profile of Shareholders as at the end of the reporting period

(1) Total Number of Shareholders

As at 31 December 2003, ZSEPC has a total of 76,729 shareholders.

(2) Shareholding of the top 10 shareholders as at the end of the reporting
period

Full Name of     Increase/    Number of     Percentage of  Type of Shares  Number of     Nature of
Shareholder                   Shares Held    Shareholding                  Shares in     Shareholders
                 Decease in   at Year End                                  Pledge or
                 Current Year                                              Freeze
                 ("-" denotes
                 decrease)
Zhejiang                    0   799,963,200         39.799   Non-listed         Nil      State-owned
Provincial                                                                               Shares
Electric Power
Development
Company (ZPEPDC)
China Huaneng               0   514,036,800         25.574   Non-listed         Nil      State-owned
Group (CHNG)                                                                             Shares
NAITO SECURITIES    1,058,782    15,306,586          0.762     Listed         Unknown    Foreign
CO.LTD                                                                                   Investment
                                                                                         Shares
SCBHK A/C BROWN     5,031,000    14,143,918          0.704
BROTHERS
HARRIMAN AND
COBOSTON S/A CMO
EMERGING MARKETS
FUND


                                                                                         Foreign
                                                                                         Investment
                                                               Listed         Unknown    Shares
Hua Cong            7,230,514    14,038,339          0.698     Listed         Unknown    Foreign
Investment                                                                               Investment
Company Limited                                                                          Shares
JPM IRE / GT PRC    9,290,364    10,996,764          0.547     Listed         Unknown    Foreign
FUND                                                                                     Investment
                                                                                         Shares
TOYO SECURITIES       485,600     7,791,100          0.388     Listed      Unknown       Foreign
ASIA LTD. A/C                                                                            Investment
CLIENT                                                                                   Shares
MERRILL LYNCH       5,430,281     6,754,559          0.336     Listed         Unknown    Foreign
INTERNATIONAL                                                                            Investment
                                                                                         Shares
DEUTSCHE BANK       3,781,773     4,841,696          0.241     Listed         Unknown    Foreign
LONDON                                                                                   Investment
                                                                                         Shares
SKANDIA GLOBAL      4,533,625     4,533,625          0.226     Listed         Unknown    Foreign
FUNDS PLC                                                                                Investment
                                                                                         Shares

Note: There is no connection between the state-owned legal person shareholders
of ZSEPC. Also, ZSEPC is unaware whether other shareholders have any connection.

As at the end of this reporting period, the shareholders holding 5% and above of
ZSEPC's shares are ZPEPDC and CHNG.

(3)   About the Controlling Shareholder

The controlling shareholder of ZSEPC is ZPEPDC. As approved by Zhejiang
Provincial People's Government, the assets of ZPEPDC were wholly transferred to
Zhejiang Provincial Energy Group Corp. (ZPEGC), making ZPEPDC a wholly-owned
subsidiary of ZPEGC. Thus ZPEGC became the de facto controller of ZSEPC.

ZPEPDC is an enterprise owned by the whole people.  After being restructured,
its staff and organs were merged into ZPEGC. Therefore, the rights of the first
largest shareholder of ZSEPC shall be exercised directly by ZPEGC.

ZPEGC was founded in March 2001, with its business scope covering
state-authorized operations of the stated-owned assets and stocks of group
corporations and enterprises, investment in industrial development and technical
consulting services.  Its registered capital is RMB 3.5 billion yuan and its
legal representative is Sun Yongsen.

The controlling shareholders and the de facto controller of ZSEPC remained
unchanged during this reporting period.

(4)   Other Legal Person Shareholders Holding more than 10% of ZSEPC's Shares

China Huaneng Group (CHNG) holds 514,036,800 shares of ZSEPC, accounting for
25.57% of ZSEPC's total number of shares. According to Document Ji Ji Chu (2002)
2704 "The State Planning Commission's Approval of the Plan for
Restructuring of the Generation Assets of the State Power Corp." issued by
the State Planning Commission, the 514,036,800 state-owned legal person shares
of ZSEPC originally held by Zhejiang Provincial Electric Power Co. (ZPEPC) were
transferred to CHNG at no cost. Pursuant to the Share Transfer Agreement between
the two parties, the basis date of the transfer was 1 January 2003. After the
share transfer, CHNG held 514,036,800 shares of ZSEPC, accounting for 25.57% of
the total number of shares and became the second largest shareholder of ZSEPC.
An announcement on the above transfer was made on 23 April 2003.

CHNG was founded in 1989, with its business scope covering industrial
investment, operation and management; power source development, investment,
construction, operation and management; organization of electric power (heat)
production and sales, and engagement in the development, investment,
construction, production and sales of the information, transportation, new
energies and environmental protection, industries and products.  Its registered
capital is RMB 20 billion yuan, its legal representative is Li Xiaopeng.

(5)   Top 10 Shareholders of Listed Shares of ZSEPC at the End of the reporting
period
          Full Name of Shareholder                  Increase/    Number of           Percentage of    Type of Share
                                                  Decrease in  Shares Held            Shareholding
                                                 Current Year  at Year End                 (%)
                                                ("-" denotes
                                                    decrease)
NAITO SECURITIES CO.LTD                             1,058,782   15,306,586                0.762  Listed B shares
SCBHK A/C BROWN BROTHERS HARRIMAN AND               5,031,000   14,143,918                0.704  Listed B shares
COBOSTON S/A CMO EMERGING MARKETS FUND
Hua Cong Investment Company Limited                 7,230,514   14,038,339                0.698  Listed B shares
JPM IRE / GT PRC FUND                               9,290,364   10,996,764                0.547  Listed B shares
TOYO SECURITIES ASIA LTD. A/C CLIENT                  485,600    7,791,100                0.388  Listed B shares
MERRILL LYNCH INTERNATIONAL                         5,430,281    6,754,559                0.336  Listed B shares
DEUTSCHE BANK LONDON                                3,781,773    4,841,696                0.241  Listed B shares
SKANDIA GLOBAL FUNDS PLC                            4,533,625    4,533,625                0.226  Listed B shares
SCBHK A/C NOMURA TB/NOMURA ITM                      1,200,000    3,600,000                0.179  Listed B shares
SHENYIN WANGUO NOMINEES (H. K) LTD.                 3,081,561    3,512,561                0.175  Listed B shares

Note: ZSEPC is unaware whether the top 10 shareholders of listed shares of ZSEPC
have any  connection.



IV. Directors, Supervisors, Senior Management and Employees

1.  Directors, Supervisors and Senior Management

(1)   Profile
Name         Position      Sex        Age   Tenure           Shareholding at Shareholding at Causes of
                                                             Year Beginning  Year End        Changes
Sun Yongsen  Board         Male       58    6/2003-6/2006    0               0               -
             Chairman
Wang         Vice Chairman Male       57    6/2003-6/2006    0               0               -
Xiaosong
Shou Desheng Director,     Male       46    6/2003-6/2006    0               0               -
             General
             Manager
Xie Guoxing  Director      Male       49    6/2003-6/2006    0               0               -
Hu Genfa     Director      Male       48    6/2003-6/2006    0               0               -
Cao Lu       Director      Male       38    6/2003-6/2006    0               0               -
Liu Ranxing  Director      Male       41    6/2003-6/2006    0               0               -
Xing Junjie  Director      Male       45    6/2003-6/2006    0               0               -
Li Hua       Director      Female     45    6/2003-6/2006    0               0               -
Li Jianguo   Director      Male       45    6/2003-6/2006    0               0               -
Qian         Independent   Male       65    6/2003-6/2006    0               0               -
Zhongwei     Director
Wu Xianquan  Independent   Male       63    6/2003-6/2006    0               0               -
             Director
Huang        Independent   Male       48    6/2003-6/2006    0               0               -
Dongliang    Director
Mao Fugen    Independent   Male       40    6/2003-6/2006    0               0               -
             Director
Huan Guocang Independent   Male       54    6/2003-6/2006    0               0               -
             Director
Huang Lixin  Convener of   Male       37    6/2003-6/2006    0               0               -
             Supervisory
             Committee
Fu Muqing    Supervisor    Male       45    6/2003-6/2006    0               0               -
Yang         Supervisor    Male       31    6/2003-6/2006    0               0               -
Jianxiong
Sun Chaoyang Supervisor    Male       38    6/2003-6/2006    0               0               -
Chen Xi      Supervisor    Male       31    6/2003-6/2006    0               0               -
Wang Jiafu   Supervisor    Male       50    6/2003-6/2006    0               0               -
Huang        Supervisor    Male       45    6/2003-6/2006    0               0               -
Guanlin
Wu Yaozhong  Deputy        Male       55    6/2003-6/2006    0               0               -
             General
             Manager
Chen Juemin  Deputy        Male       50    6/2003-6/2006    0               0               -
             General
             Manager
Xia Jinghan  Deputy        Female     34    6/2003-6/2006    0               0
             General
             Manager,
             Secretary to
             Board of
             Directors
Hu Senjian   Chief         Male       48    6/2003-6/2006    0               0               -
             Accountant
Qiu Baoxing  Director of   Male       55    6/2003-6/2006    0               0               -
             Trade Union
             Committee



(2)   Directors/Supervisors Holding Office in Shareholder Organizations
Name        Shareholder             Position                     Tenure             Whether taking
            Organization                                                            remuneration or
                                                                                    allowances from
                                                                                    ZSEPC
Sun Yongsen Zhejiang Provincial     Board Chairman               3/2003To date      No
            Energy Group
            Corporation
Wang        China Huaneng Group     Deputy General Manager       1/2000To date      No
Xiaosong
            Huaneng International   Vice Chairman
            Power Co. Ltd
                                   
Xie Guoxing Zhejiang Provincial     Deputy Chief Engineer        7/2003 To date     No
            Energy Group
            Corporation
Hu Genfa    Zhejiang Provincial     Head of Finance Department   7/2003To date      No
            Energy Group
            Corporation
Cao Lu      Zhejiang Provincial     Head of Asset Operation      7/2003To date      No
            Energy Group            Department
            Corporation
Liu Ranxing Huaneng International   Deputy Manager of Safety and 2/2002To date      No
            Power Co. Ltd           Production Department
Xing Junjie Huaneng International   Deputy Manager of Planning & 12/2002To date     No
            Power Co. Ltd           Development Department
Li Hua      Huaneng International   Deputy Head of Stock         12/2002To date     No
            Power Co. Ltd           Management Department
Huang Lixin Huaneng International   Deputy Manager of Finance    8/2001To date      No
            Power Co. Ltd           Department
Yang        Zhejiang Provincial     Deputy Head of Planning &    7/2003To date      No
Jianxiong   Energy Group            Development Department
            Corporation
Sun         Zhejiang Provincial     Deputy Head of Finance       7/2003To date      No
Chaoyang    Energy Group            Department
            Corporation
Chen Xi     Huaneng International   Deputy Head of General       12/2002To date     No
            Power Co. Ltd           Division, Finance Department

Note: In accordance with Agreement on Trusted Management of Thermal Power
Generating Assets between China Huaneng Group, Huaneng International Power
Development Co. and Huaneng International Power Co. Ltd, China Huaneng Group
authorized Huaneng International Power Co. Ltd to recommend and appoint
independent directors, directors and supervisors on behalf of China Huaneng
Group to limited liability generating companies and joint stock companies in
which China Huaneng Group has controlling or non-controlling shares, the
validity of the authorization spanning from 26 February 2003 to 6 November 2007.



(3)   Annual Remuneration

The directors and supervisors not taking remuneration from ZSEPC will be paid by
the shareholder companies or related parties of the shareholder companies that
send them, without getting any additional salaries or benefits from ZSEPC; the
directors, supervisors and other senior management personnel taking remuneration
from ZSEPC will obtain remuneration in line with the salary system of ZSEPC. The
annual remuneration of the independent directors shall be decided in the
shareholders' general meeting. In accordance with the resolution adopted in the
2001 Shareholders' General Meeting, the annual allowances for the independent
supervisors of ZSEPC amount to RMB 50,000 yuan (excluding tax) (independent
director Huan Guocang does not take allowances for independent directors). The
expenses for their travelling and hotel rooms will be borne by ZSEPC.


Total annual remuneration                            RMB 2.5366 million yuan
Sum of remuneration of top 3 highest-paid directors  RMB 630,500 yuan
Sum of remuneration of top 3 highest-paid senior     RMB 884,700 yuan
management personnel
Allowances for independent directors                 RMB 50,000 yuan (excluding tax)/person per year
Other benefits for independent directors             Traveling and hotel expenses borne by ZSEPC
Names of directors and supervisors not taking        Sun Yongsen, Wang Xiaosong, Xie Guoxing, He Genfa,
remuneration or allowances from ZSEPC                Cao Lu, Liu Ranxing, Xing Junjie, Li Hua, Huan
                                                     Guocang, Huang Lixin, Yang Jianxiong, Sun Chaoyang,
                                                     Chenxi
Remuneration range
Below RMB 100,000 yuan                               5 persons
Between 100,000 and 200,000 yuan                     1 person
Between 200,000 and 300,000 yuan                     6 persons
More than 300,000 yuan                               2 persons



(4)   Names of Directors, Supervisors and Senior Management Personnel Leaving
Their Post during the Reporting Period and Reasons

As stipulated in the Company Law and the Articles of Association of ZSEPC, the
tenure of ZSEPC's directors and supervisors is 3 years. The 2nd Board of
Directors of ZSEPC was elected and formed in the Shareholders' General Meeting
in 2000, and their tenure expired in 2003. The 3rd Board of Directors and
Supervisory Committee of ZSEPC were elected and formed after being approved in
the 2002 Shareholders' General Meeting held on 30 June 2003. A new management
team of ZSEPC was elected and formed after being approved in the first meeting
of the 3rd Board of Director of ZSEPC.



The directors leaving their post were Hu Jiangchao, Shen Zhiyun, Zhang Huaiyu,
Li Yuan, Ke Jixin, Zhu Li, Fu Muqing, Dai Jiancheng, Wang Jiafu, Zhu Changrong
and Gu Gongyun; the supervisors leaving their post were Tang Xingen, Jiang
Huadong, Hu Genfa, Zhu Haiming, Wu Hongfei and Wang Guoqiang; the senior
management personnel leaving their post was Dai Jiancheng.



(5)   Employees

As at 31 December 2003, there were 4,081 employees in total in ZSEPC, of which
333 employees hold university degrees or above, representing 8.2% of the total
number of employees; 979 employees have post-secondary education, representing
24% of the total number of employees; 457 employees have technical school
education, representing 11.2% of the total number of employees; 2,309 employees
have senior middle school education or below, representing 56.6% of the total
number of employees.  There were 1,267 technical personnel and management
personnel, representing 31% of the total number of employees, of which 53
employees hold mid-level titles and 761 employees hold junior titles.

V. Corporate Governance Structure

1.  Corporate Governance Structure

In accordance with the Company Law, the Securities Law, the relevant
stipulations issued by CSRC and the Rules for Listing of Shares in Shanghai
Stock Exchange, ZSEPC constantly tries to perfect the corporate legal person
governance structure and regularize its operation.

Using the Articles of Association as the core, the corporate internal operating
system was further consolidated. Clear definition of the duties and authorities
of the Shareholders' General Meeting, the Board of Directors, the Supervisory
Committee and the management team and the open and clear rules of procedure
ensure the efficient operation of the corporate governance structure.

During the reporting period, the Shareholders' General Meeting was held in
strict accordance with the prescribed procedures to ensure that the shareholders
have ample time to communicate with ZSEPC effectively. The time, venue and the
voting manner of the meeting were so chosen as to allow as many shareholders to
attend the meeting as possible. When voting on connected transactions, the
connected shareholders abstained from voting to ensure fair and reasonable
connected transactions.

The Board of Directors were re-elected upon conclusion of their tenure of office
in this reporting period. After the election, independent directors make up 1/3
of the Board. The staff of the Strategic, Auditing, Remuneration and Appraisal
Committees under the Board were adjusted, of which the Auditing and the
Remuneration and Appraisal Committees are mainly comprised of independent
directors who also act as conveners. The Board meetings of ZSEPC were conducted
in strict accordance with the Articles of Association and the Rules of Procedure
for Board Meetings. The directors performed their duties honestly and
diligently.

The Supervisory Committee members were re-elected upon conclusion of their
tenure of office in this reporting period. The Supervisory Committee meetings
were held in strict accordance with the Articles of Association and the Rules of
Procedure for Supervisory Committee Meetings. The Supervisory Committee is
staffed and structured such that it can exercise its supervision right
independently and effectively. The Committee conducted effective supervision
over the performance of the directors and senior management personnel of ZSEPC.

Information disclosure awareness was strenthened in ZSEPC and its holding
subsidiaries during the reporting period. The internal connection system for
information disclosure was further perfected to ensure timely, accurate, true
and complete disclosure of the information about ZSEPC. The Methods for
Management of Relationship with Company Investors was formulated during the
reporting period to standardize and warrant the communication channels between
ZSEPC and the investors. It was closely followed in work to increase
communication with the investors through multiple channels. Timely disclosure of
information about ZSEPC and real time interaction with investors were realized
through road shows and ZSEPC's website construction.

2.  Performance of Independent Directors

Qian Zhongwei, Wu Xianquan, Huang Dongliang, Mao Fugen and Huan Guocang were
appointed as independent directors of ZSEPC in 2003. Since holding their post,
the independent directors have performed their duties and obligations in strict
accordance with the relevant laws and regulations and the Articles of
Association of ZSEPC, paid close attention to the production and operation and
lawful operation of ZSEPC, actively attended the shareholders' general meeting,
board meetings and special committee meetings, made serious examination of 
ZSEPC's regular reports, checked the office holding and remuneration of ZSEPC's
management team, expressed independent opinions on the various important matters
of ZSEPC, put forward reasonable proposals on standardized operation and
sustainable development, thus safeguarding the correctness and rationality of
its Board decision and protecting the interest of its medium and small
shareholders.

3.  Relationship between ZSEPC and its Controlling Shareholders

The controlling shareholders of ZSEPC exercised their rights as investors
according to law through the Shareholders' General Meeting. ZSEPC and its
controlling shareholders are independent of each other in terms of personnel,
assets, finance, organization and business operations. The Board of Directors,
the Supervisory Committee and the internal organs of ZSEPC can operate
independently.

(1)   In respect of staff, ZSEPC is completely independent of its controlling
shareholders in terms of management of labor, personnel and salary with sound
labor management system. All the senior management personnel of ZSEPC including
the General Manager, Deputy General Managers, Chief Accountant and Secretary to
the Board of Directors are full time employees and get paid from ZSEPC, none of
them taking payment or holding positions in controlling shareholder companies.

(2)   In respect of assets, ZSEPC owns an independent production system,
auxiliary production system and ancillary facilities. Intangible assets
including the land use rights, industrial properties, trade marks and
non-patented technology belong to ZSEPC.

(3)   In respect of financial affairs, ZSEPC established an independent
financial department, formulated an independent accounting system and financial
management system and opened an independent bank account.

(4)   In respect of organization, ZSEPC has an independent organization system
with the Board of Directors, the Supervisory Committee and the internal organs
of ZSEPC operating independently without any subordination relationship with the
functional departments of the controlling shareholders.

(5)   In respect of business operations, ZSEPC operates independently,
responsible for its own gains or losses with self-contained operational
structure.



4.  Appraisal and Incentive Mechanism for Senior Management Personnel



A preliminary performance appraisal criterion and incentive mechanism linking
performance with targets for the senior management staff was established. The
senior management staff of ZSEPC are directly responsible to the Board of
Directors, subject to the appraisal and awards/penalties given by the Board of
Directors and the Remuneration and Appraisal Committee under the Board. The
senior management staff undertake to fulfill the responsibility targets of
operations, production safety and honest administration issued by the Board, who
will appraise their performance with reference to the responsibility system and
the profit target to give awards or penalties accordingly.



VI. Shareholders' General Meeting

1. Shareholders' General Meeting

One annual shareholders' general meeting and two extraordinary shareholders'
general meetings were held in 2003.

(1) The Annual Shareholders' General Meeting for 2002

The notice on convening the 2002 Shareholders' General Meeting was published in
China Securities Journal, Shanghai Securities News, Hongkong-based South China
Morning Post and Hongkong-based Wen Wei Po on 30 May 2003. The meeting was held
at Da Hua Hotel in Hangzhou on 30 June 2003. The shareholders and shareholders'
proxies present at the meeting totalled 23 and held 1,328,941,887 shares,
accounting for 66.12% of the total shares of ZSEPC, which conformed to the
Company Law and the Articles of Association of ZSEPC.

The meeting discussed and approved the following by way of voting:

(1)   the Work Report of the Board of Directors for Year 2002

(2)   the Work Report of the Supervisory Committee for Year 2002

(3)   the Final Accounting Statements for Year 2002

(4)   the Profit Distribution Proposal for Year 2002

(5)   the Budgetary Report for Year 2003

(6)   the Proposal to Renew Appointment of the Accounting Firms

(7)   the Proposal to Amend the Articles of Association of ZSEPC

(8)   the Proposal to Re-elect the Board of Directors upon Conclusion of Tenure
of Office

(9)   the Proposal to Re-elect the Supervisory Committee upon Conclusion of
Tenure of Office

The announcement on the resolutions of the above meeting was published in China
Securities Journal, Shanghai Securities News, South China Morning Post (Hong
Kong) and Wen Wei Po (Hong Kong) on 2 July 2003.

(2)   The First Extraordinary Shareholders' General Meeting in 2003

The notice to hold the first extraordinary shareholders' general meeting in 2003
was published in China Securities Journal, Shanghai Securities News,
Hongkong-based South China Morning Post and HongKong-based Wen Wei Po on 2 July
2003. The meeting took place at Da Hua Hotel, Hangzhou on 1 August 2003. The
shareholders and the proxies of shareholders attending the meeting totalled 31
and held 1,344,169,292 shares of ZSEPC in total, accounting for 66.87% of the
total number of shares, which conformed to the requirements of the Company Law
and the Articles of Association.

The meeting discussed and approved the Proposal to Invest in Tankeng Hydropower
Station Project by way of voting.

The resolution of the above meeting was published in China Securities Journal,
Shanghai Securities News, the Hongkong-based South China Morning Post and the
HongKong-based Wen Wei Po dated 2 August 2003.

(3)   The Second Extraordinary Shareholders' General Meeting in 2003

The notice on convening the second extraordinary shareholders' general meeting
in 2003 was published in China Securities Journal, Shanghai Securities News,
Hongkong-based South China Morning Post and HongKong-based Wen Wei Po on 16
September 2003. The meeting took place at Zhejiang Grand Hotel, Hangzhou on 16
October 2003. The shareholders and the proxies of shareholders attending the
meeting totalled 25 and held 1,361,088,090 shares of ZSEPC, accounting for
67.72% of the total number of shares, which conformed to the requirement(s) of
the Company Law and the Articles of Association.

The meeting discussed and approved the Proposal to Solely Invest in Xiaoshan
Power Plant Gas Turbine Generation Project by way of voting.

The resolution of the above meeting was published in China Securities Journal,
Shanghai Securities News, the Hong Kong-based South China Morning Post and the
HongKong-based Wen Wei Po on 17 October 2003.

2. Re-election of Directors and Supervisors

In 2003, The Board of Directors and the Supervisory Committee of ZSEPC were
re-elected upon expiry of tenure of office. It was approved in the shareholders'
general meeting for 2002 that Sun Yongsen, Wang Xiaosong, Shou Desheng, Xie
Guoxing, Hu Genfa, Cao Lu, Liu Ranxing, Xing Junjie, Li Hua and Li Jianguo were
elected as directors of the third Board of ZSEPC; that Qian Zhongwei, Wu
Xianquan, Huang Dongliang, Mao Fugen, Huan Guocang were elected as independent
directors; and that Huang Lixin, Fu Muqing, Yang Jianxiong, Sun Chaoyang, Chen
Xi, Wang Jiafu and Huang Guanlin were elected supervisors of the third
Supervisory Committee of ZSEPC, of whom Wang Jiafu and Huang Guanlin represent
the employees of ZSEPC.

VII. Report of Board of Directors

1.      Business Operations of ZSEPC

(1)   Business Scope and Status of Operations

a. Scope of Principal Business

The principal business of ZSEPC is investment in, development and operation of
the power business. As of the end of this reporting period, the installed
generating capacity owned by ZSEPC on consolidated statement basis amounts to
2,300 MW, of which the equity capacity of ZSEPC amounts to 2,090 MW.

b. Status of Business Operations

In 2003, with the continued rapid development of the national economy, the power
demand in Zhejiang registered a significant growth, both the social power
consumption and the maximum load reaching a record high. Against the backdrop of
the persistent power shortage, the generating units of ZSEPC sustained
continuous high load operation in a safe and stable manner all year around.
Based on the consolidated statements, power generation totalled 15.896 billion
kwh, the electricity sales amounted to 14.813 billion kwh, increasing by 47.79%
and 49.75% respectively in comparison with those in the previous year.

In the same year, the operating records of ZSEPC saw rapid growth. Its annual
principal operating income and principal operating profit increased by 42.68%
and 43.68% to RMB 4.738 billion yuan and 1.556 billion yuan respectively. After
allocating the devaluation reserve for long-term investment in China Southern
Securities Co., Ltd ("Southern Securities'") of RMB 180 million yuan,
the profit realized by ZSEPC in 2003 totalled RMB 1.076 billion yuan, increased
by 32.51% when compared with that of 2002. The net profit realized amounted to
RMB 609 million yuan, up by 11.69% when compared with that of 2002. The earnings
per share reached RMB 0.30 yuan.

c. Composition of Principal Business

1) Principal Business by Sector

All of the principal operating income and the principal operating profit of
ZSEPC come from production and sales of electric power and energy. Compared with
that of the preceding year, the composition of ZSEPC's principal business
underwent no change.
Sector or      Principal operating Principal operating Gross      Increase/        Increase/        Increase/
Product        income              cost                profit     decrease in      decrease in      decrease in
                                                       rate       principal        principal        gross profit
               (RMB yuan)          (RMB yuan)                     operating income operating cost   rate compared
                                                       (%)        compared with    compared with    with that in
                                                                  that in          that in          preceding year
                                                                  preceding year   preceding year   (%)
                                                                  (%)              (%)
Power             4,738,196,944.73    3,130,675,914.14      33.93            42.68            41.78             0.42
Generation
Of which:                     0.00    1,891,168,214.98          -          -100.00            40.55                -
related party
transaction
Pricing        ZSEPC enters into the Annual Coal Purchase Contract with the coal supplier each year to set down the
principles of  quality, specifications, quantity and price of the coal supply for that year. The coal supplier shall
the related    supply fuel to ZSEPC at a price neither higher than the price at which it charges other power plants
party          for the same type of fuel, nor higher than the price at which ZSEPC can purchase the same type of
transaction    fuel in the open market at the time of the price negotiation between both parties. Otherwise, ZSEPC
               shall have the right to purchase fuel at its own discretion.
Necessity and  The coal supplier of ZSEPC enjoys preferential price of bulk purchase and stable supply/
continuity of  transportation channels, which ensure the normal operations of the power plants under ZSEPC.
the related    Especially when the coal market price is on the rise, the long term cooperative relationship between
party          ZSEPC and the coal supplier is of great importance. ZSEPC will continue the cooperation with the coal
transaction    supplier on the precondition that the pricing principles remain unchanged.

2) Principal Business by Area
                Area                  Principal Operating Income       Increase/decrease in principal operating
                                                                       income compared with that in preceding
                                       (RMB yuan)                      year (%)
East China Area (Note)                                4,738,196,944.73                                      42.68

Note: Due to unified dispatch in the power grid, ZSEPC's power sales are
included into the East China power grid.

(2)   Operation and Results of Controlling and Non-controlling Subsidiaries

a. Zhejiang Changxing Power Generation Company Limited (ZCPGC)

  ZSEPC holds 65% of the equity interest of ZCPGC.

As at the end of the current reporting period, ZCPGC has a registered capital of
RMB 610 million yuan, with its business scope covering generation and sale of
electricity, related derivative industries and auxiliary services. It has two
300 MW generating units, of which Unit 1 commenced commercial operation in
December 2002, and Unit 2 commenced commercial operation in May 2003. Another
two 300 MW generating units are under construction.

ZCPGC achieved principal operating income of RMB 1.067 billion yuan and net
profit of RMB 176 million yuan in 2003.

b. Zhejiang Jiahua Power Generation Company Limited (ZJPGC)

  ZSEPC holds 24% of the equity interest of ZJPGC.

As at the end of the current reporting period, ZJPGC has a registered capital of
RMB 1,555.19 million yuan, with its business scope covering generation and sale
of electricity, related derivative industries and ancillary services. ZJPGC has
four 600 MW generating units under construction, and it is expected that Unit 1
will commence operation in the second half of 2004 and subsequently Unit 2, 3
and 4 will commence operation at an interval of 6 months.

ZJPGC yielded no profit yet in 2003.

(3)   Main Suppliers and Customers

a. Main Suppliers
                   Main Suppliers                                         Percentage of Total Purchase(%)
Ningbo Fuxing Electric Fuel Company Ltd                                                             49.53
Zhejiang Fuxing Electric Fuel Company Ltd                                                           43.18
Changxing Changfeng Energy Company Ltd                                                               2.46
Jingning Jingfeng Energy Company Ltd                                                                 1.96
Shanghai Steam Turbine Company Ltd                                                                   1.14



b. Customers

Due to the characteristics of the power industry, ZPEPC is the grid operator and
single buyer in Zhejiang power grid. All the electricity generated by ZSEPC is
sold to ZPEPC, with the sale income constituting 100% of the principal operating
income of ZSEPC.



(4)   Operational Problems/Difficulties and Solutions



a. Efforts to minimize the effect of coal price hike

The coal cost makes up more than 50% of the principal operating cost of ZSEPC.
In recent years, the coal price in China has risen continuously as the rapid
development of the downstream industries led to the strong demand for coal
products. ZSEPC attached great importance to the coal price hike and took a
number of measures to control the coal cost. Firstly, the equipment was
retrofitted to reduce the coal consumption for power generation; secondly, ZSEPC
sought to cultivate long term cooperative relationship with the coal supplier to
ensure smooth contract implementation and stable coal price so that the real
coal price for ZSEPC was RMB 386 yuan/ton in 2003, on a par with that of 2002;
thirdly, ZSEPC strengthened its internal management of coal consumption to raise
coal weighing accuracy, reduce transportation loss and mixed coal burning so as
to reduce coal losses.



b. Efforts to offset the adverse effect of the contractual power tariff drop in
Taizhou Power Plant

  As approved by Document Zhe Jia Shang (2003)36 of Zhejiang Provincial Pricing
Bureau (ZPPB), the contractual power tariff for Taizhou Power Plant under ZSEPC
was reduced by RMB 5 yuan/MWh compared with that of 2002 to RMB 352.42 yuan/MWh
(excluding tax), with effect from 1 January 2003. At the same time, due to the
synergic effect of some favorable factors such as the increase in utilization
hours of the generating units, the commissioning of new generators, the
suspension of Zhejiang power market since July and the increase in power tariff
for excess generation, the principal operating income of ZSEPC increased
substantially compared with that of 2002, of which the principal operating
income of Taizhou Power Plant increased by RMB 347 million yuan when compared
with that of 2002 to RMB 3,161 million yuan, completely offsetting the adverse
effect of the downward adjustment of its contractual power tariff.



2.      Investment

(1)   Use of Proceeds Raised Through Share Listing

The proceeds raised from the listing of ZSEPC's shares in 1997 totalled USD
230.59 million (equivalent to RMB 1,910.8759 million yuan). This fund has been
used in accordance with the Prospectus as follows:
Invested Projects             Amount      (in         Completion Time           Income
                              millions yuan)
Continued construction of            269.6475         Completed in 1998         Achieved sale income of
Unit 8 of Taizhou Power Plant                                                   RMB 746.2831 million yuan
                                                                                in 2003
Acquisition of Xiaoshan Power        903.6985         Completed in 1997         Achieved sale income of
Plant                                                                           RMB 509.6481 million yuan
                                                                                in 2003



As approved in the extraordinary shareholders' meeting in 2001, the remaining
amount of the proceeds raised from share listing was used to:

a.       make equity investment in Zhejiang Jiahua Power Generation Company
Limited (ZJPGC);

b.      supplement the working capital of ZSEPC.

ZSEPC holds 24% of the equity of ZJPGC. The equity investment in ZJPGC is
injected in instalments. Based on the Resolution on Increasing the Registered
Capital adopted in shareholders' general meeting 2002 of ZJPGC, the registered
capital of ZJPGC shall be increased to RMB 1,555,190,000 yuan (As of 31 December
2003, the registered capital of ZJPGC amounted to RMB 555.19 million yuan). Each
shareholder shall inject the additional amount in proportion to his equity
investment ratio in conformity with ZJPGC's Equity Capital Injection Plan 2003
in 4 instalments in 2003. ZSEPC injected equity capital totalling RMB 240
million yuan to ZJPGC in 2003. The registered capital of ZJPGC has been altered
to RMB 1,555.19 million yuan.

As at the end of the current reporting period, ZSEPC made cumulative equity
capital injection to ZJPGC amounting to RMB 373.2456 million yuan.

Jiaxing Power Plant Phase II to be built and operated by ZJPGC is now under
construction. It is planned that Unit 1 will be put into operation in the second
half of 2004, and the other 3 units to be commissioned by the end of June 2006.

(2)   Important Investment Using Capital Not Raised from Share Listing

 a. Zhejiang Changxing Power Generation Co. Ltd (ZCPGC)

 ZSEPC holds 65% of the equity of ZCPGC. As at the end of the current reporting
period, the registered capital of ZCPGC amounted to RMB 610 million yuan. In
accordance with the shareholding ratio, ZSEPC made equity capital injection
amounting to RMB 396.50 million yuan.

(a) Phase I (2 x 300 MW)

Unit 1 went into commercial operation on 15 December 2002; Unit 2 went into
commercial operation on 22 May 2003. In this reporting period, the total profit
realized amounted to RMB 176 million yuan. In accordance with the shareholding
ratio, the net profit reaped by ZSEPC based on the consolidated statements
amounted to RMB 114 million yuan.

(b) Phase II (2 x 300 MW)

As discussed and approved by the 5th meeting of the 2nd Board of Directors and
the 2nd shareholders' general meeting of ZCPGC, ZCPGC decided to construct the
extension project comprising 2 x 300 MW generating units. As the controlling
shareholder of ZCPGC, ZSEPC convened the 5th meeting of the 3rd Board of
Directors on 21 November 2003 to discuss and approve (by telecommunication)
investment in the extension project.

According to the Feasibility Study Report for ZCPGC Project Phase II, the
estimated total dynamic investment of Phase II will be RMB 2.585 billion yuan,
of which the project equity accounting for 20% of the total investment, i.e.
approximately RMB 520 million yuan. The capital needed other than the equity
will be sourced from bank loans. After the project approval is given, the equity
capital of the Project Phase II will be contributed by the shareholders in
proportion to their shareholding ratio. It is expected that ZSEPC will make a
contribution of RMB 338 million yuan to the project equity capital according to
its shareholding ratio, the final total project investment, project equity and
the amount of ZSEPC's contribution to the equity being subject to the approval
of the feasibility study report. As of the end of this reporting period, ZSEPC
has not yet made any additional capital injection to ZCPGC.

At present, the pre-construction preparation work for Phase II is advancing
rapidly. As at 31 December 2003, the cumulative expenses of ZCPGC incurred for
Phase II amounted to RMB 154.3535 million yuan.

b. Zhejiang Beihai (Tankeng) Hydropower Station Project

As approved by the 1st meeting of the 3rd Board of Directors and the 1st
extraordinary shareholders' general meeting of ZSEPC in 2003, Zhejiang
Provincial Energy Group Corp., Lishui Municipal State-owned Assets Operation Co.
Ltd and ZSEPC will make joint investment to construct Zhejiang Beihai (Tankeng)
Hydropower Station Project, of which ZSEPC will hold 25% of equity capital. The
Project will comprise of 3 x 200 MW units with a reservoir volume of 4.19
billion cubic meters. The Project Proposal has been approved by the relevant
government departments.

According to the Feasibility Study Report for Tankeng Hydropower Station
Project, the total budgetary project investment amounts to RMB 4.642 billion
yuan, of which 30% equity will be contributed by the investors in proportion to
their investment ratio and the remaining 70% will be financed by bank loans. The
final total project investment, project equity and the amount of ZSEPC's
contribution to the equity will be subject to the approval of the feasibility
study report. As of the end of this reporting period, ZSEPC has not yet made any
capital injection to the Project.

The pre-construction preparation work for Tankeng Hydropower Station Project is
now under way expeditiously.

c. Xiaoshan Power Plant Gas Turbine Generation Project

As approved by the 3rd meeting of the 3rd Board of Directors (by
telecommunication) and the 2nd extraordinary shareholders' general meeting of
ZSEPC in 2003, ZSEPC will solely invest in Xiaoshan Power Plant Gas Turbine
Generation Project, which is also referred to as Xiaoshan Power Plant Phase II
to build 2 sets of 300 MW gas-steam combined cycle generating units combusting
the natural gas from the East Sea, in addition to the existing 2 x 130 MW
coal-fired generating units of Xiaoshan Power Plant Phase I wholly owned by
ZSEPC. The Project is a downstream key gas consumption project to go with the
East Sea gas development project. Its Project Proposal has been approved by the
relevant government departments.

According to the Feasibility Study Report for Gas Turbine Generation Project,
the planned project investment totals RMB 2.576 billion yuan, of which 25%
equity will be paid by ZSEPC solely and the remaining 75% will be financed by
bank loans. As of 31 December 2003, the project cost incurred by Xiaoshan Power
Plant amounted to RMB 10.2483 million yuan.

The pre-construction preparation work for Xiaoshan Power Plant Gas Turbine
Generation Project is now under way expeditiously.

d. Zheneng Lanxi Power Generation Co. Ltd

As approved by the 6th meeting of the 3rd Board of Directors (by
telecommunication) and the 1st extraordinary shareholders' general meeting of
ZSEPC in 2004, Zhejiang Provincial Energy Group Corp., Lanxi Municipal Power
Development Investment Co. Ltd and ZSEPC will co-finance to establish Zheneng
Lanxi Power Generation Co. Ltd to invest in the construction and operation of
Zheneng Lanxi Power Plant, of which ZSEPC will hold 25% of equity capital. The
total installed capacity of Zheneng Lanxi Power Generation Co. Ltd. is 4 x 600
MW units.

According to the Feasibility Study Report for Zhejiang Zheneng Power Plant
Project, the total budgetary dynamic project investment amounts to RMB 11.025
billion yuan, of which 20% i.e. approximately RMB 2.2 billion yuan will be
equity capital and the remaining will be financed by bank loans. It is estimated
that ZSEPC will make a contribution of approximately RMB 550 million yuan to the
project equity capital according to its investment ratio, the final total
project investment, project equity and the amount of ZSEPC's contribution to the
equity being subject to the approval of the feasibility study report.

The registered capital of Zheneng Lanxi Power Generation Co. Ltd will be
contributed by the shareholders in proportion to their investment ratio in
instalments according to the project progress. The initial registered capital of
Zheneng Lanxi Power Generation Co. Ltd will be RMB 132 million yuan. Accordingly
the first instalment of ZSEPC's contribution will be RMB 33 million yuan. As of
the end of this reporting period, ZSEPC has not yet made any capital injection
to the Project.

The pre-construction preparation work for Zheneng Lanxi Power Plant Project is
now under way expeditiously

3.      Analysis of Financial Position, Operating Results and Cash Flow

(1)   Analysis of Financial Position

a. Total asset

The total asset of ZSEPC in the current reporting period amounts to RMB 8.680
billion yuan, which increased by RMB 78 million yuan in comparison with the
amount of RMB 8.602 billion yuan in 2002, representing no significant changes.

b. Shareholders' equity

The shareholders' equity in the current reporting period amounts to RMB 6.009
billion yuan, which increased by RMB 124 million yuan as opposed to RMB 5.885
billion yuan in 2002. For detailed reasons of the change, please refer to Item 3
of Section II herein entitled "Changes in Shareholders' Equity in Current
Reporting Period".

(2)   Analysis of Operating Results

a. Principal Operating Income

The principal operating income realized by ZSEPC grew by 42.68% to RMB 4.738
billion yuan in the current reporting period when compared with that of the
preceding year, due to an increase of 49.57% in the amount of electricity sale.



The increase in the electricity sales resulted from the following factors:

(a) ZCPGC's Unit 1 coming into operation on 15 December 2002 and Unit 2 coming
into operation on 22 May 2003 increased ZCPGC's electricity sales by 3.427
billion kwh when compared with that in the previous year;

(b) Against the backdrop of continuous rapid economic development and lasting
heat wave and drought giving rise to unprecedented power shortage in Zhejiang,
ZSEPC seized the market opportunity to utilize the potential of the available
generators for more power generation and sales to the extent that production
safety is ensured.


Power Plants wholly       Electricity Sales (in hundred million        Principal Operating Income
owned or controlled by                     kwh)
ZSEPC                                                                 (in RMB hundred million yuan)
                               2003      2002   Increase/Decrease     2003    2002   Increase/Decrease
Taizhou Power Plant           96.77     82.76              16.93%    31.61   28.14              12.33%
Xiaoshan Power Plant          16.55     15.75               5.08%     5.10    4.89               4.29%
ZCPGC                         34.81      0.53            6467.92%    10.67    0.18            5827.78%
                                       (Note)                               (Note)
Total                        148.13     99.04              49.57%    47.38   33.21              42.68%

Note: Unit 1 of ZCPGC went into commercial operation in December 2002 and Unit 2
in May 2003.

b. Principal Operating Profit

  The principal operating profit of ZSEPC increased by 43.68% to RMB 1.556
billion yuan in the current reporting period when compared with that of 2002,
which is mainly attributable to the increase in the principal operating income.

c. Returns on Investment

  The returns on investment of ZSEPC decreased by RMB 180 million yuan to RMB
C147 million yuan in this reporting period when compared with that of 2002,
which is mainly due to the allocation of the devaluation reserve for long-term
investment amounting to RMB 180 million yuan after Southern Securities was taken
over by the government.

d. In this reporting period, the non-principal operating profit and the net
value of the non-operating income/expenditure of ZSEPC did not have any
significant changes. ZSEPC had no subsidy income.

e. Net Profit

  The net profit realized by ZSEPC in this reporting period increased by 11.69%
to RMB 609 million yuan when compared with that of 2002. The increase of the net
profit is less than the increase of the principal operating profit mainly
because of the allocation of the devaluation reserve for long term investment
and the deduction of the minority shareholders' gains/losses.

(3) Analysis of Cash Flow

Net increase in cash and cash equivalents:

The net increase in cash and cash equivalents amounted to RMB C37,397,618.65
yuan, of which the net cash flow generated from the operating activities was RMB
1,416,710,611.72 yuan, the net cash flow generated from the investment
activities was RMB C932,488,417.09 yuan, and the net cash flow generated from
the financing activities was RMB C521,526,787.83 yuan.

4.      Loss of Corporate Assets

(1) Allocation of Devaluation Reserve for Long-term Investment

  As approved in the 7th meeting of the 2nd Board of Directors of ZSEPC, ZSEPC
made capital contribution of RMB 220 million yuan to acquire 200 million shares
of Southern Securities, accounting for 5.78% of the total stock of the latter.
As of the end of 2002, the book investment cost of ZSEPC amounted to RMB 220
million yuan.

  Due to its disorderly management, weak internal control and improper
operation, the financial position of Southern Securities deteriorated so much
that on 2 January 2004 China Securities Regulatory Commission and Shenzhen
Municipal Government issued a joint announcement to take over the administration
of Southern Securities. In the light of the aforesaid situation, ZSEPC decided
to allocate devaluation reserve for this long-term investment in accordance with
the relevant accounting standards.

  As Southern Securities is now under thorough auditing and investigation, it is
impossible to make accurate allocation of the devaluation reserve for long-term
investment before release of the auditing result. For accounting soundness, it
is decided that ZSEPC shall allocate the devaluation reserve for long-term
investment amounting to RMB 180.15 million yuan based on the auditing
information provided by the auditor of Southern Securities.

(2) Retirement and Inventory Loss of Corporate Assets

  In 2003, technical renovation and expiry of equipment service life led to net
losses on retirement of fixed assets of ZSEPC amounting to RMB 29.4461 million
yuan; equipment replacement and natural depletion led to net losses on
retirement and inventory loss of current assets amounting to RMB 649,400 yuan.
The above losses has been examined and confirmed by Zhejiang Pan-China Certified
Public Accountants.

5.      Changes in Accounting Policies and Accounting Assumptions

(1) The cash dividends in the profit distribution proposal made by the Board of
Directors between the balance sheet date of the reported year and the approval
of the financial statements was previously treated by ZSEPC as post-adjustment
and recorded as " dividends payable". Now this will be disclosed
separately in the notes to financial statements without accounting treatment in
line with the accounting system and the relevant stipulations. Through
retroactive adjustment, this accounting policy change led to adjustment of the
beginning amount of retained earnings and other beginning amounts of relevant
accounting items. The columns of the amount in previous year in the statement of
profit and profit distribution were filled in with the adjusted figures. The
cumulative impact of the above accounting policy change amounts to RMB
498,480,000.00 yuan. Due to this accounting policy change, the dividends payable
at the end of 2002 was decreased by RMB 498,480,000.00 yuan; the retained
earnings/undistributed profit at the beginning of 2003 was increased by RMB
498,480,000.00 yuan; the beginning amount of undistributed profit in the
statement of profit and profit distribution for the previous year was increased
by RMB 502,500,000.00 yuan.

The Board of Directors consider that the above changes in the accounting policy
and accounting assumptions were made according to the Chinese enterprise
accounting standards, systems and related explanations, and that they have no
substantive effect on the Company.

6.      Impact of Changes in Operational Environment, Policies and Regulations
on Production and Operations of ZSEPC

(1)   Zhejiang Power Market

As Zhejiang province suffered severe power shortage, Zhejiang Power Market
Dispatching and Trade Center suspended operation of the power market in
accordance with the Market Code on 2 July 2003. Up to now, the market has not
been re-opened. The electricity sale is settled at the contractual price.

(2)   East China Power Market

The State Electricity Regulatory Commission (SERC) issued the Notice on Pilot
East China Power Market to carry out the pilot power market in East China, which
will cover Shanghai, Jiangsu, Zhejiang, Anhui and Fujian. Subsequently, SERC
issued Document Ban Shi Chang No.(2004)3 entitled the Notice on Preparation for
Simulated Operation of East China Power Market taking into account the actual
situation of East China power grid and general arrangement for establishment of
the pilot East China power market. Pursuant to the Notice, the simulated
operation of East China Power Market will commence on 18 May 2004. The market
code governing the market operation will be set forth before mid-April 2004.

As all the power plants owned or controlled by ZSEPC are located in the area
covered by East China power market, ZSEPC will closely follow and study the
operating code of East China power market. In view of the power shortage in East
China at present, it is anticipated that the establishment of East China power
market will have minimal impact on ZSEPC in the near future.

(3)   Power Tariff

Pursuant to the Document Zhe Jia Shang No.(2003)445 Notice on Adjustment of
Power Tariff Applicable to ZPEPC-dispatched Coal-fired Power Plants from ZPPB,
the tariff rate applicable to the ZPEPC-dispatched coal-fired power plants will
be raised by 0.007 yuan/kwh (including tax), effective from 1 January 2004. This
applies to Taizhou Power Plant, Xiaoshan Power Plant and ZCPGC. This move will
reduce the cost pressure brought about by the coal price hike.

(4)   Coal Price

The market price of coal continues to rise with the mounting coal demand. It was
proposed by the relevant governmental departments in the national coal order
placing meeting in 2004 that the coal price should increase by RMB 12 yuan/ton
on average nationwide. But the coal price rise sustained by ZSEPC is still
greater than this amount. In addition, coal transportation cost went up by a
wide margin, which contributed to the increase in coal purchase cost of ZSEPC 
(based on coal price to power plant). ZSEPC is negotiating with the coal supplier
in relation to the coal price for 2004 and the relevant agreement has not been
signed.

(5)   Emission Charges

Pursuant to the Emission Charges Standards Management Method jointly issued by
the State Planning Commission, the Ministry of Finance and the State Agency of
Environmental Protection, the emission charges of sulfur dioxide will be
collected at a rate of RMB 0.2 yuan per unit of pollutants for the first year,
RMB 0.4 yuan per unit for the second year (effective from 1 July 2004) and RMB
0.6 yuan per unit for the third year (effective from 1 July 2005). The emission
of NOx is not charged before 1 July 2004, but will be charged at RMB 0.6 yuan
per unit of pollutants from 1 July 2004. The raising of the charge standards
will increase the cost expenditure of ZSEPC.

7.      The financial statements of ZSEPC for 2003were audited by Zhejiang
Pan-China Certified Public Accountants and PricewaterhouseCoopers Zhong Tian
CPAs Co. Ltd. Both produced standard auditor's reports without reservations.
The document number of the auditor's report of Zhejiang Pan-China Certified
Public Accountants is Zhe Tian Hui Shen (2004) No.448 and it was signed by
Chinese certified accountants Wang Yuehao and Wu Yan.

8.      Day-to-day Work of Board of Directors

(1)   Board Meetings and Resolutions

Nine board meetings were held in 2003. The subjects of the meetings and
resolutions formed are as follows:

a. The 24th meeting of the 2nd board of directors of ZSEPC was held on 26 March
2003. The meeting discussed and approved:

(a) the Work Report of the Board of Directors for 2002;

(b) the General Manager's Work Report for 2002;

(c) the Final Accounting Statement for 2002, and the Statement on Changes in
Accounting Policies, Accounting Assumptions and Correction of Important
Accounting Errors;

(d) the 2002 Annual Report and its summary;

(e) the Profit Distribution Proposal for 2002;

The Company distributed cash dividends in the sum of RMB2.48 yuan (including
tax) per 10 shares totalling RMB498,480,000.00 yuan using the total share
capital of 2.01 billion shares at the year of 2002 as the base figure.

(f) the Financial Budget for 2003;

(g) the proposal to renew appointment of the accounting firms;

(h) the proposal to change shareholders of Zhejiang Natural Gas Development Co.
Ltd (ZNGDC), which agrees to let China Sea Oil Corp. transfer its 37% equity of
ZNGDC to its wholly owned subsidiary C Zhonghai Oil Gas & Power Generation Co.
Ltd; and

(i) the proposal to change shareholders of ZCPGC, which agrees to let ZPEPDC
transfer its 20% equity of ZCPGC to Zhejiang Hongfa Energy Co. Ltd.

The resolutions formed in this board meeting were announced in China Securities
Journal, Shanghai Securities News, Hongkong-based South China Morning Post and
Hongkong-based Wen Wei Po on 28 March 2003.

b. The 25th board meeting of ZSEPC was held through telecommunication on 21
April 2003. The meeting discussed and approved the Quarterly Report for the
first quarter of 2003, which was published in China Securities Journal, Shanghai
Securities News, Hongkong-based South China Morning Post and Hongkong-based Wen
Wei Po on 23 April 2003.

c. The 26th board meeting of ZSEPC was held on 28 May 2003. The meeting
discussed and approved the following:

(a) the proposal to amend the Articles of Association of ZSEPC;

  Article 97 of the Articles of Association reads "the Board of Directors
is made up of 17 directors, of which 3 are independent directors'". It is
amended to read "the Board of Directors is made up of 15 directors, of
which 5 are independent directors'".

(b) the proposal to re-elect the Board of Directors upon expiry of tenure of
office;

Upon expiry of the tenure of the second Board of Directors of ZSEPC, the
nomination and election procedures prescribed in the Articles of Association was
followed and votes were taken to elect the following persons to be the
candidates of the third Board of Directors of ZSEPC: Sun Yongsen, Wang Xiaosong,
Shou Desheng, Xie Guoxing, Hu Genfa, Cao Lu, Li Hua, Xing Junjie, Liu Ranxing,
Li Jianguo, Wu Xianquan, Qian Zhongwei, Huang Dongliang, Huan Guocang and Mao
Fugen, of whom Wu Xianquan, Qian Zhongwei, Huang Dongliang, Huan Guocang and Mao
Fugen are candidates of independent directors.

(c) the proposal to hold the shareholders' general meeting for 2002.

The resolutions formed in this board meeting were announced in China Securities
Journal, Shanghai Securities News, Hongkong-based South China Morning Post and
Hongkong-based Wen Wei Po on 30 May 2003.

d. The 1st meeting of the 3rd Board of Directors of ZSEPC was held on 30 June
2003. The meeting discussed and approved:

(a) the proposal to elect Chairman of Board of Directors of ZSEPC, electing Sun
Yongsen to be Board Chairman;

(b) the proposal to elect Vice Chairman of Board of Directors of ZSEPC, electing
Wang Xiaosong to be Vice Chairman;

(c) the proposal to staff special committees under the 3rd Board of Directors as
follows:

  Strategic Committee: Sun Yongsen (Director), Wang Xiaosong, Qian Zhongwei, Xie
Guoxing, Wu Xianquan and Shou Desheng

  Auditing Committee: Huang Dongliang (Director), Mao Fugen, Hu Genfa, Xing
Junjie and Huan Guocang

  Remuneration & Appraisal Committee: Qian Zhongwei (Director), Huang Dongliang,
Wu Xianquan, Mao Fugen, Liu Ranxing, Cao Lu, Li Hua and Li Jianguo

(d) the proposal to appoint General Manager of ZSEPC, appointing Shou Desheng as
General Manager;

(e) the proposal to appoint Deputy General Managers and Chief Accountant,
appointing Wu Yaozhong, Chen Juemin and Xia Jinghan as Deputy General Managers
and Hu Senjian as Chief Accountant of ZSEPC;

(f) the proposal to appoint Secretary to Board of Directors of ZSEPC, appointing
Xia Jinghan as Secretary to Board of Directors;

(g) the proposal to invest in Tankeng Hydropower Station Project using ZSEPC's
own capital to hold 25% of the equity of Tankeng Hydropower Station; and

(h) the proposal to hold the first extraordinary shareholders' general meeting
in 2003.

The resolutions formed in this board meeting were announced in China Securities
Journal, Shanghai Securities News, Hongkong-based South China Morning Post and
Hongkong-based Wen Wei Po on 2 July 2003.

e. The 2nd meeting of the 3rd Board of Directors was held through
telecommunication on 8 August 2003. The following resolutions were formed in the
meeting:

(a) The Interim Report for 2003 and its summary were discussed and approved for
release to the public;

(b) It is agreed that no interim profit distribution for 2003 will be made, nor
conversion of common reserves into bonus shares.

The Interim Report for 2003 was published in China Securities Journal, Shanghai
Securities News, Hongkong-based South China Morning Post and Hongkong-based Wen
Wei Po on 12 August 2003.

f. The 3rd meeting of the 3rd Board of Directors was held through
telecommunication on 12 September 2003. The following resolutions were formed in
the meeting:

(a) It is agreed that ZSEPC will solely invest in Xiaoshan Power Plant Gas
Turbine Generation Project;

(b) It is agreed that the proposal to solely invest in Xiaoshan Power Plant Gas
Turbine Generation Project will be submitted to the second extraordinary
shareholders' general meeting for review.

The resolutions formed in this board meeting were announced in China Securities
Journal, Shanghai Securities News, Hongkong-based South China Morning Post and
Hongkong-based Wen Wei Po on 16 September 2003.

g. The 4th meeting of the 3rd Board of Directors was held through
telecommunication on 29 October 2003. The meeting discussed and approved

(a) the Quarterly Report of ZSEPC for the 3rd quarter of 2003;

(b) Stipulations on Management of Relationship between ZSEPC Investors

The resolutions formed in this board meeting were announced in China Securities
Journal, Shanghai Securities News, Hongkong-based South China Morning Post and
Hongkong-based Wen Wei Po on 31 October 2003.

h. The 5th meeting of the 3rd Board of Directors was held through
telecommunication on 21 November 2003. The following resolutions were adopted in
the meeting:

(a) It is agreed for ZCPGC to construct Changxing Power Plant Phase II;

(b) It is agreed for ZCPGC to pay for the pre-construction cost to ensure smooth
progress of the pre-construction preparation which including site levelling and
supply of electricity, water, telecommunication and transportation facilities;

(c) In view of the fact that the project equity of Phase II will be contributed
by the same shareholders by adding their capital injection in proportion to
their shareholding ratio, the Board of Directors of ZSEPC will review the
additional capital injection again after the project approval is obtained.

The resolutions formed in this board meeting were announced in China Securities
Journal, Shanghai Securities News, Hongkong-based South China Morning Post and
Hongkong-based Wen Wei Po on 25 November 2003.

i. The 6th meeting of the 3rd Board of Directors was held through
telecommunication on 19 December 2003. The following resolutions were adopted in
the meeting:

(a) It is agreed that ZSEPC will invest in Zheneng Lanxi Power Generation Co.
Ltd (ZLPGC) and contribute 25% of the equity of ZLPGC.

(b) It is agreed that, in conformity with the resolution of the board meeting
and the shareholders' general meeting of ZLPGC, the capital injection will be
made in instalments according to the project progress; and that the initial
instalment of ZSEPC will amount to RMB 33 million yuan as required by ZLPGC to
put in place its initial registered capital.

(c) It is agreed to refer this proposal to the shareholders' general meeting for
review, with the details in relation to holding of the shareholders' general
meeting to be determined by the Board Chairman.

The resolutions formed in this board meeting were announced in China Securities
Journal, Shanghai Securities News, Hongkong-based South China Morning Post and
Hongkong-based Wen Wei Po on 23 December 2003.

(2)   Implementation of Resolutions of Shareholders' General Meeting by the
Board of Directors

In the current reporting period, the Board of Directors of ZSEPC strictly
carried out the various resolutions passed at the shareholders' general meeting,
focusing their work on the various targets set by the shareholders' general
meeting. Through the joint effort of all the staff, ZSEPC over-fulfilled the
profit targets laid down in the shareholders' general meeting, maintained
production safety and workforce stability, and made breakthroughs in power
project investment.

All the cash dividends of ZSEPC have been distributed. The dividends payable to
the domestic investment shareholders were directly transferred to their
designated accounts; the dividends payable to B share holders have been
distributed by China Securities Registration & Settlement Company Ltd Shanghai
Branch, the agent entrusted by ZSEPC for distribution of dividends to B share
holders.

9. Profit Distribution Proposal

According to the Proposal on Profit Distribution for 2003 confirmed at the 7th
meeting of the 3rd board of directors' meeting on 23rd March 2004 : taking the
after-tax profit of the parent company in the amount of RMB609,283,351.82
audited by the domestic accountants as the base, 10%, that is RMB60,928,335.18,
will be allocated as statutory common reserve fund and statutory public welfare
fund respectively, totalling RMB121,856,670.36.  The profit of the Company
distributable to the shareholders is RMB1,736,264,021.69.  After distribution of
dividend in the sum of RMB498,480,000.00 for 2002, the undistributed profit of
the Company for 2003 is RMB1,237,784,021.69.

According to the accounting statements audited by domestic and international
accounting firms, following the principle of "whichever the lower" and
taking the 2.01 billion shares in the total share capital of the Company at the
end of 2003 as the base number, a cash dividend of RMB2.50 (including tax) will
be distributed per 10 shares, totalling RMB502,500,000.00.

10. Other Matters



XXXXX

VIII. Report of Supervisory Committee

1.      Meetings of Supervisory Committee

Three supervisory committee meetings were convened in the current reporting
period.  The contents of the meeting and resolutions are as follows:

(1)   The 8th meeting of the 2nd supervisory committee was held on 26 March
2003, which discussed and approved:

a. The Supervisory Committee's Work Report for 2002

b. The 2002 Annual Report and its summary

The supervisory committee considers that the 2002 Annual Report and its summary
are true, accurate and complete, free of false statement, material omissions or
serious misleading information; shall agree to the Statement on Changes in
Accounting Policies, Accounting Assumptions and Correction of Important
Accounting Errors; that the Auditor's Reports in their standard form without
reservations produced by both the domestic and the international accounting
firms give a true and fair account of the financial position and operating
results of ZSEPC; and that ZSEPC has been operating by the law with no problem
with its financial position, use of the proceeds raised from share listing,
purchase of assets and related party transactions.

The resolutions formed in this Supervisory Committee meeting were announced in
China Securities Journal, Shanghai Securities News, HongKong-based South China
Morning Post and Hongkong-based Wen Wei Po on 28 March 2003.

(2)   The 9th meeting of the 2nd Supervisory Committee was held on 28 May 2003.
The meeting discussed and approved the proposal to re-elect supervisory
committee members upon conclusion of their tenure of office.

   Upon conclusion of the tenure of the second Supervisory Committee of ZSEPC,
the following persons were elected to be the candidates of the third Supervisory
Committee of ZSEPC representing shareholders and employees after taking votes in
compliance with the nomination and election procedures prescribed in the
Articles of Association: Huang Lixin, Yang Jianxiong, Sun Chaoyang, Fu Muqing,
Chen Xi, Wang Jiafu and Huang Guanlin, of which Wang Jiafu and Huang Guanlin are
representatives of the employees.

The resolutions formed in this Supervisory Committee meeting were announced in
China Securities Journal, Shanghai Securities News, Hongkong-based South China
Morning Post and Hongkong-based Wen Hui Bao dated 30 May 2003.

(3)   The 1st meeting of the 3rd Supervisory Committee of ZSEPC in 2003 was held
on 30 June 2003. The meeting discussed and approved the proposal to elect
convener of the Supervisory Meeting, electing Huang Lixin to be the convener of
the Supervisory Committee meeting.

The resolutions formed in this Supervisory Committee meeting were announced in
China Securities Journal, Shanghai Securities News, Hongkong-based South China
Morning Post and Hongkong-based Wen Wei Po on 2 July 2003.

2.      Independent Opinion of Supervisory Committee

(1)    Supervision of ZSEPC's Operation According to the Law

In 2003, with the power conferred by the Company Law and the Articles of
Association, the Supervisory Committee exercised supervision over the
organizational structure of the board, the proceeding of the board meetings, the
resolutions, the board's execution of the resolutions of the shareholders'
general meeting and the performance of duties by the senior management, and
formed the opinion that ZSEPC carried out its operations in accordance with the
relevant laws/ regulations and the administrative rules/systems.

The Board of Directors of ZSEPC was re-elected in 2003 upon expiry of tenure.
Three special committees, namely the Strategic Committee, the Auditing Committee
and the Remuneration and Appraisal Committee under the new Board were
established. Independent directors make up 1/3 of the Board. They predominate in
the Auditing Committee and the Remuneration and Appraisal Committee and act as
conveners. The organizational structure of the Board conforms to the Rules for
Governance of Listed Companies, with its internal control mechanism further
perfected.

The Supervisory Committee considers that the Board of Directors and the
management team of ZSEPC performed their duties in accordance with the law,
regulations and the Articles of Association and carried out the various
resolutions with the aim to maximize the interest of the shareholders.

(2)    Supervision of Financial Position of ZSEPC

The Supervisory Committee deems examination of the corporate financial position
as its first and foremost responsibility. It scrutinized the regular financial
statements and documents of ZSEPC, listened to the reports given by the
management team and gained a full and accurate understanding of the financial
position of ZSEPC.

The Committee considers that the rapid increase in the operating results of
ZSEPC is not only due to the power shortage in Zhejiang. But more importantly,
it is due to ZSEPC's serious efforts to adhere to production safety, focus on
economic benefit, strengthen corporate management, further improve equipment
health, expedite investment in power construction and asset expansion.

The Supervisory Committee is of the opinion that the Financial Statements of
ZSEPC for 2003 gives a true, accurate and complete account of the financial
position and operating results of ZSEPC. Both Zhejiang Pan-China Certified
Public Accountants and PricewaterhouseCoopers Zhong Tian CPAs Co. Ltd produced
the Auditor's Reports in their standard forms with no reservations.

(3)    Supervision of Important Decisions

The Supervisory Committee attended the Board meeting and shareholders' general
meetings as observers to exercise supervision before, after and driving the
course of making important decisions with good effectiveness.

In 2003, ZSEPC seized the opportunity to make external investment to hold
controlling or non-controlling shares of power plants with good potential. The
Supervisory Committee is of the opinion that power generation is the principal
business of ZSEPC and extension of installed capacity is the main means for
ZSEPC to increase income. Against the backdrop of rapid economic development and
severe power shortage in Zhejiang, ZSEPC got hold of the favorable opportunity
to actively participate in the construction of new generators so as to lay the
foundation and provide potential for its future development.

(4)    Supervision of Use of Proceeds Raised from Share Listing

As approved in the extraordinary shareholders' meeting in 2001, the remaining
amount of the proceeds raised from share listing was used to:

a.  make equity investment in Zhejiang Jiahua Power Generation Company Limited
(ZJPGC);

b. supplement the working capital of ZSEPC.

According to the Resolution on Increasing Registered Capital adopted in the
shareholders' general meeting for 2002 of ZJPGC, ZSEPC injected equity capital
totalling RMB 240 million yuan to ZJPGC in 2003 as per its investment ratio of
24%. As at the end of 2003, the registered capital of ZJPGC amounted to RMB
1,555.19 million yuan, to which ZSEPC has made cumulative capital contribution
amounting to RMB 373.25 million yuan.

The construction of 4 x 600 MW generating units of ZJPGC has been going ahead
smoothly since commencement as a result of the joint efforts of the owner and
the constructor to improve construction management and tap construction
potential while ensuring safety, quality and cost control. The original plan to
commission the first generating unit at the end of 2004 can be advanced, and so
can the other generating units. The Supervisory Committee believes that
commissioning of the 4 x 600 MW generating units one after another will become
the new profit engines of ZSEPC.

(5)    Supervision of Related Party Transactions

The Supervisory Committee is of the opinion that the related parties
transactions between ZSEPC and the related parties in the past year were
governed by the agreements or contracts between them. Both sides exercise their
rights and fulfill their obligations in strict accordance with the agreement/
contract without damaging of the interest of ZSEPC and the interest of the
medium and small shareholders of ZSEPC. There were no insider transactions
between them.

(6)    Explanation on Allocation of Long-term Investment Devaluation Reserve and
Losses on Retirement of Corporate Assets

 a. Allocation of Long-term Investment Devaluation Reserve

Southern Securities in which ZSEPC invested was taken over by the government on
2 January 2004 due to its disorderly management, weak internal control and
improper operation leading to deteriorating financial position. The Supervisory
Committee considers that ZSEPC's move to allocate devaluation reserves for this
long-term investment amounting to RMB 180.15 million yuan before release of the
auditing and investigation result conforms to the principle of accounting
soundness.

The Supervisory Committee further considers that ZSEPC should draw a lesson from
the incident of Southern Securities, conduct thorough investigation beforehand
and make prudent investment decisions so as to safeguard the interest of ZSEPC
and its shareholders.

 b. Losses on Retirement of Corporate Assets

In 2003, technical renovation and expiry of equipment service life led to net
losses on retirement of fixed assets of ZSEPC amounting to RMB 29.4416 million
yuan; equipment replacement and natural depletion led to net losses on
retirement and inventory loss of current assets amounting to RMB 649,400 yuan.

The Supervisory Committee considers that it is reasonable for ZSEPC to take
stock of the fixed assets and the inventory items at year end and dispose of
retired assets in accordance with the prevailing accounting system. The above
losses have been examined and confirmed by Zhejiang Pan-China Certified Public
Accountants.

IX. Important Events

1.  Major Events of Litigation or Arbitration

ZSEPC was not subjected to any major events of litigation or arbitration during
the current reporting period.

2.  Purchase/Sale of Assets and Acquisition/Merger

ZSEPC carried out no purchase/sale of assets or acquisition/merger in the
current reporting period.

3.  Important Related Party Transactions

(1)   Purchase of Goods
Related Party      Transaction   Pricing            Amount        Settlement Method Percentage out
                                 Principle                                          of Same Type of
                                                  (RMB Yuan)                        Transaction
Zhejiang Fuxing    Coal purchase Note 1            880,824,043.31 Based on the                49.53%
Electric Power                                                    actual volume of
Fuel Company Ltd                                                  annual purchase
Ningbo Fuxing      Coal purchase Note 1          1,010,344,171.67 Based on the                43.18%
Electric Power                                                    actual volume of
Fuel Company Ltd                                                  annual purchase
Changxing          Purchase of   Agreement          50,209,183.38 Based on the                 2.46%
Changfeng Energy   fuel oil and  price                            actual volume of
Co. Ltd            production                                     annual purchase
                   material      (Note 2)
Jingning Jingfeng  Purchase of   Agreement          39,933,021.49 Based on the                 1.96%
Energy Co.Ltd      production    price                            actual volume of
                   material                                       annual purchase
                                 (Note 2)

Note 1: The fuel needed by ZSEPC for power generation is supplied by Zhejiang
Fuxing Electric Power Fuel Company Limited (ZFEPFC) (of which ZSEPC has
non-controlling shares) and its subsidiary Ningbo Fuxing Electric Power Fuel
Company Limited (NFEPFC), who entered into the Fuel Supply Agreement with ZSEPC
in May 1997. The Agreement is valid for 20 years. Pursuant to the Agreement,
both parties shall agree an Annual Coal Supply Contract each year to determine
the quality, specifications, quantity and price of the coal supply for that
year. ZFEPFC and NFEPFC shall supply fuel to ZSEPC at a price neither higher
than the price at which it charges other power plants for the same type of fuel,
nor higher than the price at which ZSEPC can purchase the same type of fuel in
the open market at the time of the price negotiation between both sides.
Otherwise, ZSEPC shall have the right to purchase fuel at its own discretion.

Note 2: ZCPGC signed the Agreement on Trusted Purchase and Custody with
Changxing Changfeng Energy Co. Ltd (whose day-to-day management involves ZCPGC)
and Jingning Jingfeng Energy Co. Ltd (whose day-to-day management involves
ZCPGC) on 28 December 2002 and 25 March 2003 respectively. Pursuant to the
Agreement, ZCPGC purchased fuel oil and production material from the two
companies in this reporting period. The two agreements will be valid until 30
September 2003. Starting from 1 October 2003, ZCPGC will make purchase on its
own.

(2) Supply of Labor Services
Related Party      Transaction   Pricing            Amount        Settlement Method Percentage out
                                 Principle                                          of Same Type of
                                                  (RMB Yuan)                        Transaction
Taizhou City       (Note 3)      Agreement          32,009,871.00 Based on annual             23.09%
Haitian Electric                 Price                            project
Power Engineering                                                 construction
Corp.                                                             completed

Note 3: ZSEPC and its subsidiary ZCPGC paid RMB 32,009,871.00 yuan to Taizhou
City Haitian Electric Power Engineering Corp. (whose day-to-day management
involves Taizhou Power Plant) for overhaul of auxiliary equipment and common
facilities.

(3) Credits and Debts

a. Repayment of Long-term Liabilities

ZSEPC repaid long-term to ZPEPDC.  Please refer to item (7) "Liability
Contract" under paragraph 5 "Important Contracts and Implementation" for 
details.

b. Trust loans

(a) ZSEPC entrusted Industrial & Commercial Bank of China, Hangzhou Qingchunlu
Branch to provide trust loans to Zhejiang Changxing Power Generation Company
Limited.
    Time          Loan Amount         Term    Repayment Time   Annual      Income
                                                               Interest
              (RMB million yuan)                               Rate
30/01/2002            50             1 year      29/01/2003       5.85%    Total income from trust
25/09/2002            50             1 year      24/09/2003       5.31%    loan amounts to RMB
25/10/2002            50             1 year      24/10/2003       5.31%    13.1253 million yuan.
25/12/2002            50             1 year   Advanced to 18/     5.31%    After deducting the bank
                                                  12/2003                  deposit interest rate for
27/01/2003            50             1 year   Advanced to 18/     5.31%    the same period, it
                                                  12/2003                  amounts to RMB 8.4
29/01/2003            50             1 year   Advanced to 18/     5.31%    million yuan. The trust
                                                  12/2003                  loan income is cancelled
04/03/2003            50             1 year   Advanced to 18/     5.31%    out in the consolidated
                                                  12/2003                  statements.

ZSEPC provided trust loan to ZCPGC because (a) ZCPGC needs a large amount of
bank loan for construction of 2 x 300 MW generating units; (b) ZSEPC has surplus
fund to provide its subsidiary with power construction fund in order to raise
capital use efficiency while preserving capital safety.

China Securities Regulatory Commission issued the Notice on Regulating Capital
Move between Listed Companies and Related Parties and External Guarantees by
Listed Companies (Document Zheng Jian Fa (2003)56) in August 2003. In the light
of the stipulation in the Notice that "Listed companies shall not provide
trust loans to related parties through banks or non-bank financial 
institutions'", ZSEPC terminated the agreement and recovered the trust loan in 
full in December 2003.

(b) In the current reporting period, ZPEPDC provided trust loans in amount of
RMB 26 million yuan and RMB 134 million yuan totalling RMB 160 million yuan
through China Construction Bank Hangzhou Zhijiang Branch to ZCPGC, with the
terms of the two loans being from 2 July 2003 to 2 July 2004 and from 15
December 2003 to 14 December 2004 respectively. The trust loan in the amount of
RMB 320 million that ZPEPDC provided to ZCPGC in the previous period was
recovered in this reporting period.

(c) ZPEGC provided trust loan in the amount of RMB 200 million yuan to ZCPGC
through China Construction Bank Hangzhou Zhijiang Branch with the loan term
being from 15 December 2003 to 21 December 2012.

(4) External Guarantees

a. Providing ZCPGC with Shareholder's Guarantee In Proportion to Shareholding
Ratio

ZCPGC is the project company responsible for construction and operation of ZCPGC
Project Phase I 2 x 300 MW(originally called Changxing Power Plant Phase IV,
commissioned on 22 May 2003) and Phase II 2 x 300 MW (under construction). ZSEPC
holds 65% of its equity. The other shareholders of ZCPGC as at the end of this
reporting period are Zhejiang Hongfa Energy Investment Co. and ZPEPDC.

Pursuant to the Document Jing Mao Tou Zhi (2001)460 Approval of Feasibility
Study Report for Changxing Power Plant Phase IV issued by the State Economic and
Trade Commission, the planned total investment of ZCPGC Project 2 x 300 MW
amounts to RMB 2.593 billion yuan, of which 25% is the project equity, 75% are
bank loans.

ZCPGC and China Construction Bank Changxing County Branch signed the Fixed
Assets Loan Contract for the Project in December 2001, based on which China
Construction Bank Changxing County Branch agreed to provide ZCPGC with a loan
amounting to RMB 1.5 billion yuan (In addition, the shareholders provided trust
loans amounting to RMB 300 million yuan).

Since the amount of loan is substantial, the Bank required shareholders'
guarantees to ensure security of the loan capital. So the shareholders of ZCPGC
separately signed the Guarantee Contract with China Construction Bank Changxing
County Branch based on the principle of providing shareholders' guarantees for
the project loan in proportion to their shareholding ratios without joint
liability among shareholders. According to the Guarantee Contract, ZSEPC is to
provide guarantee for the loan to ZCPGC up to a ceiling of RMB 1.07 billion yuan
(which was obtained by multiplying ZCPGC's loan ceiling of RMB 1.8 billion by
65% minus ZSEPC's trust loan of RMB 100 million yuan), with the term of
guarantee being from 18 December 2001 to 17 June 2019.

ZSEPC completed the formalities required for the guarantee provided to ZCPGC. In
accordance with Rules for Listed Companies, the provision of this guarantee was
endorsed in the 15th meeting of the second Board of Directors of ZSEPC. The
resolution was announced in China Securities Journal, Shanghai Securities News,
Hongkong-based South China Morning Post and HongKong-based Wen Wei Po on 10
November 2001.

As of the end of this reporting period, the balance of ZCPGC's loan amounts to
RMB 560 million yuan, of which the amount of RMB 392 million yuan is guaranteed
by ZSEPC. In this reporting period, ZCPGC's balance of loan increased by RMB 110
million yuan, so ZSEPC's guaranteed amount increased by RMB 63 million yuan.

The 2 x 300 MW generating units of ZCPGC Project Phase I were put into
commercial operation on 15 December 2002 and 22 May 2003 respectively. They are
now in good operation. ZCPGC achieved principal operating income amounting to
RMB 1,067 million yuan and net profit amounting to RMB 176 million yuan. As at
the end of the current reporting period, there are no signs of anticipated joint
liabilities.

b. Providing ZJPGC with Shareholder's Guarantee In Proportion to Shareholding
Ratio

ZJPGC is the project company responsible for construction and operation of
Jiaxing Power Plant Phase II 4 x 600 MW. ZSEPC holds 24% of its equity. The
other shareholders of ZCPGC as at the end of this reporting period are ZPEPDC
holding 53% of its equity, Beijing Guohua Electric Power Co. Ltd holding 20% and
Zhejiang Provincial Electric Power Construction Co. holding 3%.

Pursuant to the Document Ji Ji Chu (2002)2349 State Planning Commission's
Approval of Adjustment to Construction Plan of Zhejiang Jiaxing Power Plant
Phase II issued by the State Development Planning Commission, the adjusted
dynamic investment of ZJPGC totals RMB 10.28 billion yuan. The adjusted project
equity amounts to RMB 2.57 billion yuan, accounting for 25% of the total
investment. The capital needed for the project other than the equity will be
sourced from Industrial & Commercial Bank of China (providing a loan of RMB 4.5
billion yuan) and China Construction Bank (providing a loan of RMB 3.21 billion
yuan) separately.

In 2001, ZJPGC signed the Fixed Assets Loan Contract in relation to the project
with Industrial & Commercial Bank of China Zhejiang Branch and China
Construction Bank Zhejiang Branch respectively.  Industrial & Commercial Bank of
China Zhejiang Branch and China Construction Bank Zhejiang Branch agreed to
provide loans to ZJPGC up to RMB4.5 billion yuan and RMB3.2 billion yuan
respectively.

Since the amount of the loan is substantial, the Bank required shareholders'
guarantees to ensure security of the loan capital. So ZSEPC and the other
shareholders of ZCPGC signed the Guarantee Contract with Industrial & Commercial
Bank of China Zhejiang Branch and China Construction Bank Zhejiang Branch
separately. The contract is up to a ceiling, with the actual guarantee based on
the actual amount of the principal and interest of the loan. According to the
Guarantee Contract, ZSEPC is to provide guarantee for the 24% of the loan to
ZJPGC without joint liability between shareholders, with the term of guarantee
being from 17 December 2001 to 16 June 2026.

ZSEPC completed the formalities necessary for the guarantee provided to ZJPGC.
The provision of this guarantee was endorsed in the 15th meeting of the second
Board of Directors and the extraordinary shareholders' general meeting of ZSEPC
in 2001. The resolutions of the Board meeting and the shareholders' meeting were
announced in Shanghai Securities News, Hongkong-based South China Morning Post
and HongKong-based Wen Wei Po on 10 November 2001 and 11 December 2001
separately.

As of 31 December 2003, the balance of ZJPGC's loan amounts to RMB 2,000 million
yuan, of which the amount of RMB 480 million yuan or 24% of the total (i.e.
ZSEPC's equity contribution ratio) is guaranteed by ZSEPC. During the period
from January to December 2003, ZJPGC's balance of loan increased by RMB 1,900
million yuan, so ZSEPC's guaranteed amount increased by RMB 456 million yuan.

The 4 x 600 MW generating units of ZJPGC are now under construction. It is
planned that Unit 1 will be put into operation in the second half of 2004. As at
the end of the current reporting period, there are no signs of anticipated joint
liabilities.

c. The purpose of above guarantees provided by ZSEPC is to advance the
development of the principal business of ZSEPC and protect the fundamental
interest of the company and its shareholders, to no detriment of the interest of
its medium and small shareholders. The guarantees are proportional to its
investment ratios with proportional liabilities without inter-shareholder joint
liability or related transactions. For details, please refer to "
Independent Directors' Specific Statement and Independent Opinion about ZSEPC's
Guarantees'" under "Other Matters'" of Section VIII "Report of
Board of Directors'".

(4) Other Related Party Transactions

a. In the current reporting period, Taizhou Power Plant under ZSEPC paid Taizhou
Power Plant Industrial Company in accordance with the Labor Borrowing Agreement
and the Transportation Service Contract with Taizhou Power Plant Industrial
Company for labor borrowing and commuting buses to/from work totalling RMB
22,658,017.28 yuan. Taizhou Power Plant is involved in the daily management of
Taizhou Power Plant Industrial Company.

b. In the current reporting period, ZSEPC and its subsidiary ZCPGC paid for Unit
4 automation design, installation and testing as well as waste water treatment
totalling RMB 23,601,639.50 yuan. ZSEPC is involved in the daily management of
Hangzhou Dongfa Environmental Protection Engineering Co. Ltd .

c. In the current reporting period, Xiaoshan Power Plant and ZCPGC under ZSEPC
paid Hangzhou Xiaoshan Linjiang Industrial & Trade Company Limited in accordance
with the signed Vehicle Transport Contract and Logistic Service Contract for
rental and logistic service charges totalling RMB 20,134,581.45 yuan. Xiaoshan
Power Plant is involved in the daily management of Hangzhou Xiaoshan Linjiang
Industrial & Trade Company Limited.

d. Pursuant to the Operators and Maintenance Personnel's Service Contract,
Contract for Unit 2 Commissioning Test and Material Conveyance Service Contract
signed between ZCPGC and Changxing Changfeng Energy Co. Ltd, ZCPGC paid the
latter for operators and maintenance service fee and commissioning test fee
totalling RMB 21,284,840.00 yuan.

e. Pursuant to the Waste Ash and Slag Handling Contract signed between ZCPGC and
Jingning Jingfeng Energy Co. Ltd, ZCPGC paid the latter for handling of waste
ash/slag and landscaping totalling RMB 6,940,000.00 yuan.

  Pursuant to the Coal Transportation Contract for 2003 signed between ZCPGC and
Jingning Jingfeng Energy Co. Ltd (who assigned the contractual service in
November and December to Changxing Chengfeng Energy Co. Ltd), ZCPGC paid
Jingfeng Co. for coal transportation totalling RMB 9,439,936.00 yuan and
Changfeng Co. for coal transportation totalling RMB 2,582,096,00 yuan.

f. ZSEPC rented the non-operating assets divested from Taizhou Power Plant at
the time of restructuring from ZPEPDC. And ZCPGC rented warehouses and other
assets from Changxing Changfeng Energy Co. Ltd. For details, refer to Paragraph
3 "Trust Custody, Contracting and Renting" of Item 5 "Important
Contracts and Implementation" of this section herein.

5.  Important Contracts and Implementation

(1)   Sale of Electricity

Owing to the special characteristics of the power sector, all the electricity
generated by ZSEPC was sold to the single buyer in Zhejiang power grid, ZPEPC.
Of the total electricity sales, the contractual amount was settled at the
contract price approved by ZPPB; and the competitive bidding amount was settled
at the market price on real time basis. As the power supply in Zhejiang is in
serious shortage, the bidding in Zhejiang power market was suspended from 2 July
2003. So the bidding amount was settled at the contract price.

In the current reporting period, ZSEPC completed electricity sale to ZPEPC
amounting to 14.813 billion kwh and achieved principal operating income
totalling RMB 4.738 billion yuan.

(2)   Construction of Xiaoshan Power Plant Desulfurization Project

In line with the 10th National Environmental Protection Plan and the policy to
encourage desulfurization of servicing coal-fired generating units, after
competitive bidding, ZSEPC selected Zhejiang Tiandi Environmental Protection
Engineering Co. to undertake construction of the flue gas desulfurization
project for Xiaoshan Power Plant 2 x 130 MW.

The construction cost of Xiaoshan Power Plant Desulfurization Project will be
entirely borne by ZSEPC. Pursuant to the Document Zhe Ji Ji Chu (2003)240
Approval of Xiaoshan Power Plant Desulfurization Project issued by Zhejiang
Provincial Development Planning Commission, the planned total investment of the
project amounts to RMB 183.18 million yuan. The project construction has
commenced in December 2003. It is planned that it will be put into operation by
the end of 2005.

(3)   Trust Custody, Contracting and Renting

In the current reporting period, ZSEPC made no important trust custody,
contracting or renting of other companies' assets, nor did other companies make
any trust custody, contracting or renting of ZSEPC's assets.

Pursuant to the Agreement on Renting of Divested Asset signed between ZSEPC and
ZPEPDC on 8 November 2000, the Company rented the non-operating assets divested
from Taizhou Power Plant at the time of restructuring at a rental cost of RMB
1,058,581.44 yuan.

Pursuant to the Contract on Renting of Ash Silos and Contract on Renting of
Assets signed between ZCPGC and Changxing Changfeng Energy Co. Ltd, the former
paid the latter for the rental cost of ash silos and other assets amounting to
RMB 11,447,000.00 yuan in the current reporting period.

(4)   Important Guarantees

ZSEPC provided no guarantees other than the guarantees proportional to its
investment ratio for invested power projects as mentioned under the subheading 
"Guarantees'" of "Important Related Party Tractions'" of this
section.

Pursuant to the Guarantee Contract between ZPEPDC and China Construction Bank
Changxing County Branch, ZPEPDC is to provide guarantee for the loan to ZCPGC up
to a ceiling of RMB 430 million yuan (which was obtained by multiplying ZCPGC's
loan ceiling of RMB 1.8 billion by 35% minus ZPEPDC's trust loan of RMB 200
million yuan), with the term of guarantee being from 18 December 2001 to 17 June
2019.

(5)   Trust fund Management

  In line with the resolution of the 1st meeting of the 2nd Board of Directors
of ZSEPC, the management team was authorized to invest in state treasury bonds
and other securities not exceeding RMB300 million yuan.  On 22 January 2003,
ZSEPC signed the Agreement on Trust Fund Management with Zhejiang International
Trust Investment Corporation (ZITIC) up to a ceiling of RMB 300 million yuan for
a term from the date of the trust fund arriving at the account designated by
ZITIC to 21 January 2004.  Pursuant to this Agreement, ZSEPC provided three
trust funds amounting to RMB 100 million, 50 million and 100 million yuan
totalling RMB 250 million yuan. ZSEPC terminated the Agreement ahead of time and
recovered the principal of RMB 250 million on 25 December 2003, receiving an
investment income of RMB 14.1743 million yuan on the same date.

(6)   Trust loan

Refer to Item 3 "Credits and Debits'" under Paragraph 3 
"Important Related Party Transactions'" herein.

(7)   Liabilities contract

ZSEPC signed a Liabilities Contract with the creditors, namely ZPEPDC and ZPEPC
in 1997, whereby ZSEPC borrowed a loan for construction of Tai Zhun Power Plant
Phase IV Project (Units 7 and 8) for 10 years. It is specified in the Contract
that ZSEPC shall repay the principal and interest in instalments after
completion of the trial production of the new generating units. Then ZSEPC and
the creditors made some amendment to the terms and conditions of the Liabilities
Contract in March 1999. And they signed the Supplementary Agreement to
Liabilities Contract subsequently on 22nd March 1999, which re-adjusted and
confirmed the actual investment, the liability ratio and the amount of
liabilities of the creditors.  In December 1999, ZPEPC and (Huadong Electric
Power Group Finance Company Limited) entered into the Trust Loan Agreement and
the liabilities under ZPEPC were changed to entrusted borrowing totalling
RMB1.70638 billion yuan.  On 29 December 2000, ZPEPC and Shanghai Pudong
Development Bank Hangzhou Branch entered into the Trust Loan Contract, by which
the remaining debt owing to ZPEPC up to the end of 2000 was transformed to
4-year-term trust borrowing totalling RMB 317,892,000 yuan. After repayment, the
amount of this long-term liability as at the end of 2001 was RMB 978,180,000.00
yuan. Pursuant to the Agreement on Liabilities Repayment in 2001 and Thereafter
signed by the 3 parties on 28 February 2001, the amount of the repayment in 2003
and the changes are as follows:

                                                      Shanghai Pudong      (Huadong            Total
                                                     Development Bank      Electric
                                                      Hangzhou Branch         Group 
                                                 (long-term borrowing)      Finance
                                                                            Company 
                                                                           Limited) 
                                                                         (long-term 
                                                                         borrowing)

Total amount of liabilities at the end of 2001         238,419,000.00 739,761,000.00 978,180,000.00
Amount repaid in 2002                                   79,473,000.00 246,587,000.00 326,060,000.00
Amount repaid in 2003                                   79,473,000.00 246,587,000.00 326,060,000.00
Transferred to long-term liabilities due within 1 year  79,473,000.00 246,587,000.00 326,060,000.00
Amount of long-term liabilities as at the end of 2003            0.00           0.00           0.00

6.  Commitment

(1) ZSEPC will invest in Zhejiang Beihai (Tankeng) Hydropower Station Project to
hold 25% of its equity.

(2)   ZSEPC will invest in Xiaoshan Power Plant Gas Turbine Power Generation
Project a sole investor.

(3)   ZSEPC will invest in Zheneng Lanxi Power Generation Limited Liability Co.
to hold 25% of its equity.

(4)   ZSEPC will invest in ZCPGC extension project Phase II to hold its majority
shares.

For the details of the above commitments, refer to Item 2 "Use of
Proceeds not Raised from Share Listing" of Paragraph 2 "Investment"
of Section 7 "Report of Board of Directors'" herein.

7.  Appointment of Accountants

In this reporting period, ZSEPC renewed appointment of Zhejiang Pan-China
Certified Public Accountants as its domestic auditor and PricewaterhouseCoopers
Zhong Tian CPAs Co. Ltd as its international auditor. Up to the end of this
reporting period, Zhejiang Pan-China Certified Public Accountants and
PricewaterhouseCoopers Zhong Tian CPAs Co. Ltd had provided their auditing
service for ZSEPC for 7 consecutive years. The remuneration to the accounting
firms in the past two years were as follows:

     Name of Accounting Firms      Year 2003           Year 2002           Note
Zhejiang Pan-China Certified       RMB                 RMB                 ZSEPC bears no travelling
Public Accountants                 1,000,000.00 yuan   950,000.00          expenses of the
                                                       yuan                accountants.

                                                       
PricewaterhouseCoopers Zhong Tian  RMB                 RMB                 ZSEPC bears no travelling
CPAs Company Limited               1,100,000.00 yuan   1,050,000.00        expenses of the
                                                       yuan                accountants.

                                                       

8. ZSEPC was free from any audit, administrative punishment or open criticism by
CSRC, or open accusation by the stock exchanges in this reporting period.

9.      Other Important Matters

(1) Pursuant to the Document Zhe Jia Shang (2003)15 Approval of ZCPGC's Power
Sale Tariff issued by ZPPB, the power tariff applicable to ZCPGC was RMB 0.38
yuan/kwh (including tax), effective from the date of commissioning up to the end
of 2003.

(2) Pursuant to the Document Zhe Jia Shang (2003)36 Notice on Adjustment to
Power Tariff of Taizhou Power Plant under ZSEPC issued by ZPPB, the power tariff
applicable to Taizhou Power Plant was RMB 352.42 yuan/MWh (excluding tax) (as
opposed to RMB 357.42 yuan/MWh for 2002)

(3) Pursuant to the Document Zhe Jia Shang (2003)372 Notice on Power Tariff of
Excess Generation by Coal-Fired Power Plant Under Unified Dispatch in 2003
issued by ZPPB, the power tariff for 80% of the excess generation over and above
6,000 generating hours in 2003 was RMB 0.205 yuan/kwh (as opposed to RMB 0.20
yuan/kwh) for Taizhou Power Plant, and RMB 0.202 yuan/kwh (as opposed to RMB
0.197 yuan/kwh) for Xiaoshan Power Plant. The remaining 20%, i.e. the amount in
bidding in the power market previously, was settled at the contractual rate due
to suspension of the power market bidding.

(4) Pursuant to the Document Zhe Jia Shang (2003)445 Notice on Power Tariff of
Coal-Fired Power Plant Under Unified Dispatch issued by ZPPB, the power tariff
applicable to the coal-fired generating units was raised by RMB 0.007 yuan/kwh
(including tax), effective from 1 January 2004. This applies to Taizhou Power
Plant, Xiaoshan Power Plant and ZCPGC under ZSEPC.

(5) It was endorsed in the 7th meeting of the 3rd Board of Directors of ZSEPC
that the ZSEPC employees would be given a total bonus of RMB 20 million yuan for
2003, the amount of which was recorded as administrative expenses in 2003.
Corresponding income tax adjustment was made.

(6) CSRC and Shenzhen Municipal Government issued a joint announcement on 2
January 2004 to take over the administration of Southern Securities starting
from the same date. During the administrative custody, an administrative
taking-over group composed of CSRC, Shenzhen Municipal Government, the People's
Bank of China and the Ministry of Public Security will be responsible for
operation management and risk management of Southern Securities. The
administrative taking-over group will exercise the corporate power of Southern
Securities, with the group head assuming the rights and responsibility of the
legal representative of the company. The responsibilities of the shareholders'
general meeting, the board of directors and the supervisory committee of
Southern Securities were suspended, so were the duties of its directors,
supervisors and senior management staff.

ZSEPC holds 200 million shares of Southern Securities, with the book investment
cost amounting to RMB 220 million yuan. In the current reporting period, ZSEPC
allocated long-term investment devaluation reserve amounting to RMB 180.15
million yuan based on the information provided by the auditor of Southern
Securities.



X. Financial Statements 1

(based on the Chinese Enterprise Accounting Standards)



1.      Auditor's Report



Zhe Tian Hui Shen (2004) 448

To: The Shareholders of Zhejiang Southeast Electric Power Company Limited



We have accepted the appointment to audit the Balance Sheet and the Consolidated
Balance Sheet as at 31 December 2003, the Profit & Profit Distribution Statement
and the Consolidated Profit & Profit Distribution Statement, and the Cash Flow
Statement and the Consolidated Cash Flow Statement of ZSEPC for 2003. These
accounting statements are prepared by ZSEPC. It is our responsibility to form
audit opinion on these accounting statements. We conducted our audit in
accordance with Independent Auditing Standards of the Certified Public
Accountant in the People's Republic of China (PRC). In the course of audit, we
have reviewed practical situations of ZSEPC and conducted audit procedures which
we considered necessary including random examination of accounting records.



In our opinion, the above accounting statements have complied with the
Enterprise Accounting Standards and the relevant provisions of the Enterprise
Accounting Systems. The statements give a fair view, in all material respects,
of the state of financial affairs of ZSEPC as at 31st December 2003 and of the
operating results and cash flows of ZSEPC for 2003. The accounting policies are
applied consistently.



Zhejiang Pan-China Certified Public Accountants

PRC Certified Public Accountant   Wang Yuehao

PRC Certified Public Accountant   Wu Yan



Dated: 23 March 2004

XI. Financial Statements 2

c.       Balance Sheet (attached)

d.       Statement of Profit and Profit Distribution (attached)

e.       Statement of Cash Flow (attached)


                                    Balance Sheet

                            As at 31st December 2003

                   Prepared by: Zhejiang Southeast Electric Power Company Limited   Unit: RMB Yuan

             Assets                              Consolidated                     Parent Company
                                 Note   Ending Amount   Beginning Amount  Ending Amount   Beginning Amount

Current assets
  Monetary assets                1     1,279,205,146.47 1,316,602,765.12 1,268,177,544.16 1,275,444,909.15
  Short term investments         2        42,074,980.00    45,066,100.00    42,074,980.00   245,339,100.00
  Bills receivable
  Share dividends receivable
  Interests receivable
  Accounts receivable            3       259,777,666.62   189,310,963.44   119,040,954.43   101,911,910.02
  Other receivables              4        26,071,484.65    34,892,310.31    22,575,971.02    34,336,919.77
  Prepayments                    5        11,912,907.66    12,461,180.00    11,780,907.66    12,461,180.00
  Subsidy receivable
  Inventories                    6       126,475,405.97   109,881,758.45    97,589,340.72    89,186,432.87
  Deferred expenses
  Long term investments in bond
  due within 1 year
  Other current assets
  Total current                        1,745,517,591.37 1,708,215,077.32 1,561,239,697.99 1,758,680,451.81
  assets
Long term investments:
  Long term equity investments   7     1,268,400,000.00 1,208,550,000.00 1,741,834,317.95 1,567,688,293.33
  Long term debt investments
  Total long term investments          1,268,400,000.00 1,208,550,000.00 1,741,834,317.95 1,567,688,293.33
  Including: consolidated price
differences
  Including: equity investments
differences
Fixed assets:
  Costs of fixed assets          8     8,865,174,966.21 8,262,163,609.22 6,680,890,382.07 6,663,381,995.97
Less: Accumulated depreciation   9     3,785,806,165.46 3,315,214,904.61 3,629,538,867.45 3,313,017,453.44
  Net value of fixed assets      10    5,079,368,800.75 4,946,948,704.61 3,051,351,514.62 3,350,364,542.53
   Less: Reserve for fixed
assets devaluation
  Net value of fixed assets            5,079,368,800.75 4,946,948,704.61 3,051,351,514.62 3,350,364,542.53
  Project material               11       82,466,727.42    32,013,043.90    18,616,208.82    21,012,643.90
  Construction in progress       12      254,184,753.87   458,328,216.40   123,818,356.35    80,280,204.67
Disposal of fixed assets
           Total fixed assets          5,416,020,282.04 5,437,289,964.91 3,193,786,079.79 3,451,657,391.10
Intangible assets and other
assets:
  Intangible assets              13      216,733,557.76   221,098,737.29   215,985,272.92   221,098,737.29
  Long term deferred expenses    14       33,412,954.31    27,265,487.90    33,412,954.31    24,564,741.71
  Other long term assets
  Total intangible and other             250,146,512.07   248,364,225.19   249,398,227.23   245,663,479.00
assets
Deferred tax:
  Deferred tax debit
           Total assets                8,680,084,385.48 8,602,419,267.42 6,746,258,322.96 7,023,689,615.24


Liabilities and shareholders'
equity
Current liabilities:
  Short term borrowings          15      627,000,000.00   553,390,000.00     7,000,000.00     3,390,000.00
  Bills payable                                            56,963,000.00
  Accounts payable               16      422,716,632.11   456,384,684.26   183,341,484.44   144,452,442.30
  Accounts received in advance
  Salaries payable               17       76,857,556.01    86,668,618.65    76,857,556.01    86,879,011.39
  Welfare expenses payable                27,519,279.78    26,425,375.38    27,337,551.98    26,056,228.71
  Dividends payable
  Tax payable                    18       98,183,145.97   116,153,980.49    47,967,594.97   108,557,056.55
  Other payments due             19        7,473,689.75     1,584,804.17     6,130,616.49     1,320,983.85
  Other payables                 20       68,904,368.51   122,446,669.53    62,724,950.25   115,652,165.44
  Accruals                       21          909,773.33       934,800.00
  Anticipated liabilities
  Long term liabilities due      22      326,060,000.00   326,060,000.00   326,060,000.00   326,060,000.00
within one year
  Other current liabilities
         Total current                 1,655,624,445.46 1,747,011,932.48   737,419,754.14   812,367,888.24
liabilities
Long term liabilities:
  Long term borrowings           23      760,695,200.00   776,763,450.00                    326,060,000.00
  Bonds payable
  Long term payables
  Special payables
  Other long term liabilities
       Total long term                   760,695,200.00   776,763,450.00                    326,060,000.00
liabilities
Deferred tax:
  Deferred tax credit
Total liabilities                      2,416,319,645.46 2,523,775,382.48   737,419,754.14 1,138,427,888.24
Minority shareholders' equity            254,926,171.20   193,382,157.94
Shareholders' equity
Share capital                    24    2,010,000,000.00 2,010,000,000.00 2,010,000,000.00 2,010,000,000.00
  Less: investments paid back
  Net value of share capital           2,010,000,000.00 2,010,000,000.00 2,010,000,000.00 2,010,000,000.00
  Capital reserve                25    1,876,045,569.51 1,863,272,079.51 1,876,045,569.51 1,863,272,079.51
  Surplus reserve                26      885,008,977.62   763,152,307.26   885,008,977.62   763,152,307.26
  Including: statutory common    26      442,504,488.81   381,576,153.63   442,504,488.81   381,576,153.63
welfare reserve
  Undistributed profits          27    1,237,784,021.69 1,248,837,340.23 1,237,784,021.69 1,248,837,340.23
  Foreign currency statement
conversion difference
Total shareholders' equity             6,008,838,568.82 5,885,261,727.00 6,008,838,568.82 5,885,261,727.00
Total liabilities and owners'          8,680,084,385.48 8,602,419,267.42 6,746,258,322.96 7,023,689,615.24
equity


                  Statement of Profit and Profit Distribution

                                  Year 2003

      Prepared by: Zhejiang Southeast Electric Power Company Limited

Unit: RMB Yuan

           Item            Note            Consolidated                     Parent Company
                                    Ending Amount Beginning Amount    Ending Amount Beginning Amount

1. Income from principal     1   4,738,196,944.73 3,320,944,888.62 3,670,972,684.16 3,303,121,784.34
operating activities

Less: Principal operating    1   3,130,675,914.14 2,208,191,596.44 2,440,007,934.01 2,197,760,669.91
costs

        Principal            2   51,268,220.09    29,631,064.15    39,821,558.24    29,518,549.61
operating tax and surtax

2. Profit from principal         1,556,252,810.50 1,083,122,228.03 1,191,143,191.91 1,075,842,564.82
operating activities

Add: Profit from other       3   759,658.17       489,090.01       759,658.17       489,090.01
activities

Less: Operating expenses

        Administrative           235,580,541.51   229,175,442.48   197,755,599.64   173,026,072.79
expenses

        Financial expenses   4   62,620,319.32    41,228,922.57    13,110,622.12    40,081,923.83

3.Operating profit               1,258,811,607.84 813,206,952.99   981,036,628.32   863,223,658.21

Add: Investment income       5   -146,757,285.34  33,459,111.29    -19,335,916.62   2,552,849.05
        Subsidy income

        Non-operating        6   668,046.95       399,756.67       668,046.95       399,756.67
income

Less: Non-operating          7   35,754,525.65    34,312,683.64    34,578,096.95    34,295,269.99
expenses

4.Gross profit                   1,076,967,843.80 812,753,137.31   927,790,661.70   831,880,993.94

Less: Income tax                 406,140,478.72   287,355,874.26   318,507,309.88   286,406,513.83

Minority shareholders'           61,544,013.26    -20,117,842.06
gains and losses

5.Net profit                     609,283,351.82   545,515,105.11   609,283,351.82   545,474,480.11

Add: Undistributed profit        1,248,837,340.23 1,314,917,131.14 1,248,837,340.23 1,314,957,756.14
at year beginning

        Profit transferred
from others

6.Distributable profit           1,858,120,692.05 1,860,432,236.25 1,858,120,692.05 1,860,432,236.25

Less: Allocation of              60,928,335.18    54,547,448.01    60,928,335.18    54,547,448.01
statutory surplus reserve

 Allocation of statutory         60,928,335.18    54,547,448.01    60,928,335.18    54,547,448.01
common welfare reserve

      Allocation of
employee bonus and welfare
fund

     Allocation of reserve
fund

     Allocation of
corporate development fund

     Profit payback to
investments

7.Profit Distributable to        1,736,264,021.69 1,751,337,340.23 1,736,264,021.69 1,751,337,340.23
shareholders

Less: Preference share
dividends payable

       Allocation of
discretionary surplus
reserve

        Ordinary share           498,480,000.00   502,500,000.00   498,480,000.00   502,500,000.00
dividends payable

Dividends of ordinary
shares converted to share
capital

8.Undistributed profit           1,237,784,021.69 1,248,837,340.23 1,237,784,021.69 1,248,837,340.23

Supplementary information

Income from sales/disposal
of departments or invested
organizations

Loss caused by natural
calamities

Increase/decrease in total
profit caused by
accounting policy changes

Increase/decrease in total
profit caused by
accounting assumption
changes

Loss on debt restructuring

Others

                                   Statement of Cash Flow
                                        Year 2003

Prepared by: Zhejiang Southeast Electric Power Company Limited

Unit: RMB

                             Item                              Note  Consolidated       Parent company
                                                                     Ending Amount      Ending Amount

1.Cash flow generated from operating activities

Cash received from sale of goods and supply of labor service           5,477,538,987.75   4,277,732,201.85

Cash received from refund of taxes

Other cash received relating to operating activities                       2,931,812.81         492,667.37

Sub-total of cash inflow                                               5,480,470,800.56   4,278,224,869.22

Cash paid for purchase of goods and labor services                     2,602,546,997.48   2,001,740,713.31

Cash paid to and for the employee                                        402,373,731.76     348,647,474.23

  Taxes paid                                                           1,026,013,411.11     841,189,964.79

Other cash paid relating to operating activities                   1      32,826,048.49      20,320,342.85

Sub-total of cash outflow                                              4,063,760,188.84   3,211,898,495.18

Net cash flow generated from operating activities                      1,416,710,611.72   1,066,326,374.04

2.Cash flow generated from investment activities

Cash received from investment recovery                                   250,000,000.00     600,000,000.00

Including: cash received from sale of subsidiaries

Cash received from investment income                                      36,392,444.66      49,790,788.76

Net cash received from disposal of fixed assets, intangible                3,544,678.50       3,544,678.50
assets and other long-term assets

Other Cash received relating to investment activities                     27,801,963.87      27,056,888.96

Sub-total of cash inflow                                                 317,739,087.03     680,392,356.22

Cash paid for purchase/building of fixed assets, intangible              760,218,894.12     271,868,839.37
assets and other long-term assets

Cash paid for investment                                                 490,008,610.00     640,008,610.00

  Including: cash paid for purchase of subsidiaries

Other cash paid relating to investment activities

Sub-total of cash outflow                                              1,250,227,504.12     911,877,449.37

Net cash flow generated from investment activities                      -932,488,417.09    -231,485,093.15

3. Cash flow from financing activities

Cash received by absorbing investment

 Including: cash received by subsidiaries absorbing minority
shareholders' equity investment

Cash received from borrowing                                           1,072,000,000.00      22,000,000.00

Other cash received in relation to financing activities

Sub-total of cash inflow                                               1,072,000,000.00      22,000,000.00

Cash paid for debt service                                               996,060,000.00     326,060,000.00

Cash paid for distribution of dividend or profit or payment of           597,466,787.83     537,955,620.43
interest

   Including: distribution of dividend from subsidiaries to
minority shareholders

Other cash paid in relation to financing activities

  Including: cash paid to minority shareholders by
subsidiaries decreasing equity in accordance with the law

Sub-total of cash outflow                                              1,593,526,787.83     864,015,620.43

Net cash flow generated from financing activities                       -521,526,787.83    -842,015,620.43

4. Impact of foreign exchange fluctuation on cash                            -93,025.45         -93,025.45

5. Net increase in cash and cash equivalents                             -37,397,618.65      -7,267,364.99


Supplementary Information

1. Net profit converted to operating cash flow

   Net profit                                                              609,283,351.82     609,283,351.82

   Add: Minority shareholders' gains and losses                             61,544,013.26

       Allocated reserve for assets devaluation                            185,906,443.25     182,314,244.41

       Depreciation of fixed assets                                        580,986,371.40     426,916,524.56

       Amortization of intangible assets                                     6,362,696.53       6,337,471.37

       Amortization of long term deferred expenses                           9,452,533.59       6,751,787.40

       Decrease in deferred expenses (less: increase)

       Increase in pre-allocated expenses (less: decrease)

       Loss on disposal of fixed assets, intangible assets and              29,001,316.80      29,001,316.80
other long-term assets

 (less: income)

       Loss on retirement of fixed assets

       Financial expenses                                                   61,220,727.29      11,741,349.22

       Loss on investment (less: income)                                   -35,214,314.66    -162,635,683.38

       Deferred tax credit (less: debit)

       Decrease in inventory (less: increase)                              -16,593,647.52      -8,402,907.85

       Decrease in operational receivables (less: increase)                -60,518,620.31      -6,122,759.73

       Increase in operational payables (less: decrease)                   -14,720,259.73     -28,858,320.58

       Others

      Net cash flow generated from operating activities                  1,416,710,611.72   1,066,326,374.04

2. Investment and financing activities not involving cash income
and expenditure

   Debt transferred to capital

   Convertible corporate bonds due within 1 year

   Fixed assets leased in by financing lease

3. Net increase in cash and cash equivalents:

Ending balance of cash                                                   1,279,205,146.47   1,268,177,544.16

Less: Beginning balance of cash                                          1,316,602,765.12   1,275,444,909.15

Add: Ending balance of cash equivalents

Less: Beginning balance of cash equivalents

Net increase in cash and cash equivalents                                  -37,397,618.65      -7,267,364.99


Supplementary Data


1. Reasons for Differences of Net Assets/Net Profits Based on Chinese
Accountants and International Accountants:


(1) Difference of Net Profits
                                                                                         Unit: RMB'000 yuan

Net profit based on the Chinese Enterprise Accounting System                                        609,284

Adjustment made based on the international accounting standards

1. Reversal of prepaid corporate income tax                                                          -3,123

2. Deferred income tax                                                                               -9,055

3. Transferred to capital reserve                                                                    12,773

4. Offset against retroactive adjustment to corporate income tax                                          -

5. Offset against other retroactive adjustment                                                            -

Net profit based on the international accounting standards                                          609,879


(2) Differences of Net Assets

XII. Documents Available for Inspection


1.      Financial Statements affixed with the signatures and stamps of the Legal
Representative, Chief Accountant and Accounting Department Manager;

2.      Originals of Audited Report affixed with the stamps of the accounting
firms, the signatures and stamps of the certified public accountants;

3.      Originals of all the documents and announcements published on the press
designated by CSRC during the reporting period;

4.      Annual Report published on the London Stock Exchange.

                                 Board of Directors
                 Zhejiang Southeast Electric Power Company Limited
                                 25 March, 2004

                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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