大东海A(000613)ST东海Ｂ2003年年度报告（英文版）

Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 海南大东海旅游中心股份有限公司 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Annual Report 2003 （Overseas） Report Term: Year 2003 1 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. I. Important Statement 3 II. Company Profile 3 III. Financial Highlights 4 IV. Changes in Share Capital and Shareholders 5 V. Particulars about the Directors, Supervisors and Senior executives 7 VI. Management Structure 8 VII. About the Shareholders’ General Meeting 9 VIII. Report of the Board of Directors 9 IX. Report of the Supervisory Committee 14 X. Significant Events 15 XI. Financial Statement 17 XII. Documents Available for Inspection 31 2 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. I. Important Statement The Board of Directors of the Company guarantees that there are no significant omissions, fictitious or misleading statements in the Report and we will accept individual and joint responsibilities for the truthfulness, accuracy and completeness of the Report. Hainan Chongxin CPA and Grant Thornton CPA issued auditing reports respectively with “Unable to form an opinion”. The Board of Directors and the Supervisory Committee have made detailed specification on the relevant events. Shareholders are suggested to read the relevant statements carefully. Director Chen Haixiong and Xie Zhuang absent the meeting of the Board. Director Zhen Jirong entrusted director Huang Qingwang to present the meeting and vote on behalf of him. Mr. Li Shanhu, the Chairman of the Board, and Mr. Li Yuanbin, the General Manager, and Mr. Li Wei, the Chief Financial Officer declares: the Financial Statement in the report is secured for its truthfulness and completeness. II. Company Profile (I) Statutory name in Chinese: 海南大东海旅游中心股份有限公司 Statutory name in English: Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (II) Legal representative: Li Shanhu (III) Secretary of the Board: Liu Juntao Security affair liaison: Li Caijie Liaison address: Dadonghai, Sanya Tel: 0898-88219888 Ext.8264 Fax: 0898-88212298 Email: hnddht@21cn.com (IV) Registered address: Dadonghai, Sanya Office address: Dadonghai, Sanya Post code: 572021 (V) Press media stated by the Company for information disclosure: Security Times and Hong Kong Commercial Daily Website assigned by China Security Supervisory Committee for online publishing of this report: http://www.cninfo.com.cn Annual Report 2002 is prepared and ready for enquiring in: Stock Affair Department (VI) Stock listed in: Shenzhen Stock Exchange Abbreviation of stock name: ST Donghai A, ST Donghai B Stock code: 000613,200613 (VII) Supplementary information 1. Date of registration: April 26, 1993. Place of registration: Dadonghai, Hedong District, Sanya. Date of the latest change of registration: May 23, 2001. Place of registration: Dadonghai, Hedong District, Sanya. 2. Business license number: 4600001003983 3. Tax registration number: 460200201357188 4. Domestic accountant: Hannan Chongxin Certified Public Accountant Office address: Rom 1202, CMEC Building, Guomao Ave., Haikou, Hainan Overseas accountant: Grant Thornton 3 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Office address: 13th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong III. Financial Highlights (I) Major profit indices of the year (in thousand RMB) Total profit （54,752） Net profit （54,752） Net profit after deducting of irregular earnings/losses （17,318） Major business profit 11,137 Other business profit 438 Operation profit (45,820) Investment proceeds Allowance proceeds Net cash flow generated from operation activities (3,873) Net increasing of cash and cash equivalents (4,612) Note: The amount of irregular earnings/loss deducted is RMB-37,434 thousand. It is the net amount of non-business income. (II) There is no variation between the profit results audited in accordance with IAS on the net profit (III) Financial highlights of the previous 3 years (in thousand RMB) Items 2003 2002 2001 Turnover 13,333 24,280 22,652 Net profit （54,752） 4,775 4,324 Total asset 154,934 201,974 227,339 Shareholder’s equity (42,624) 12,128 7,353 Earnings per share (RMB) （0.15） 0.013 0.012 Net asset per share (RMB) （0.117） 0.033 0.020 Net asset per share after adjustment 0.020 0.006 Net cash flow per share generated from operation (0.011) 0.03 (0.04) activities Net earnings/asset ratio (%) 128.45 39.37 58.81 Weighted average net earnings/asset ratio (%) 358.24 49.02 83.30 Weighted average net earnings/asset ratio (%), deduct 113.58 (10.99) (285.55) irregular gains/losses (IV) Supplementary form of the Income Statement Net income/asset ratio (%) Gains per share (RMB/Share) Profit of the report term Fully Weighted Fully Weighted diluted average diluted average Profit of major business (26.13) (73.04) 0.03 0.03 Operation profit 107.50 300.50 (0.126) (0.126) Net profit 128.45 359.08 (0.15) (0.15) Net profit after deducting of 40.63 113.58 -0.048 -0.048 irregular gains/losses 4 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (V) Change of shareholders’ equity in the report term (in thousand RMB) Items Share Capital Surplus Statutory Profit Total of capital reserves reserves public distributable Shareholders’ welfare equity At the beginning 364,100 51,633 (403,605) 12,128 of term Increased this (54,752) (54,752) term Adjusted this year Decreased this term At the end of 364,100 51,633 (458,357) (42,624) term Causation of change: The movement of profit distributable and shareholders’ equity is due to the loss of the current year. IV. Changes in Share Capital and Shareholders (I) Change of share capital Change of shareholding (in 10 thousand shares) At Increase or decrease of the change(+，-) At End of Beginning Share Bonus Capita Oth Sub Year of Year allotted shares lized er - total (I) Non-current shares 1、Promoter’s shares 109,857 109,857 State-owned shares 96,327 (60, 36,327 000 ) Domestic legal person shares 1,353 60,0 7,353 00 Overseas legal person holding shares Others 2、Legal person shares invited 121,143 121,143 3、Employees’ shares 4、Preference shares or others Total of non-current shares 231,000 231,000 (II) Current shares 1、RMB common shares listed domestically 45,100 45,100 2、Foreign capital shares listed domestically 88,000 88,000 3、Foreign capital shares listed abroad 4、Others Total of current shares 133,100 133,100 (III) Total shares 364,100 364,100 As approved by Ministry of Finance with document Cai-Qi[2002]430, China Greatwall Asset Management Co. transferred the 60,000 thousand shares to Haikou Grocery Co., Ltd. The equity transferring procedures has been completed in Shenzhen Branch of China Securities Depository & Clearing Corporation Ltd. (II) Particulars about the shareholders 1. At the end of year 2003, there totally were 21,007 shareholders of the Company, including 14,218 5 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. of A-share holders, 6,789 of B-share holders and 2 senior management shareholders. 2. Top 10 shareholders: (in thousand shares) No. Name of Shareholder Shares Share Property of share Frozen held portion 1 Haikou Grocery Co., Ltd. 60,000 16.48% Legal person shares 2 China Great Wall Assets Management Co., Ltd. 36,327 9.98% State-owned shares 3 Hainan Shanya Yinnong Industrial Development Co., 9,900 2.72% Legal person shares Ltd. 4 Yangpu Jinyu Industrial Co., Ltd. 6,666 1.83% Legal person shares 5 Huaxia Security Co., Ltd. 6,600 1.81% Legal person shares 6,600 6 Shanghai Jinxian Investment Co., Ltd. 4,973 1.37% Legal person shares 7 China International Trade Trust & Investment Co., Ltd. 3,960 1.09% State-owned shares 8 Hainan Hongkong-Macau International Leasing Co., Ltd. 3,894 1.07% State-owned shares 3,894 9 Sanya Zhongxing Development Co., Ltd. 3,630 1.00% Legal person shares 10 China Agriculture Bank Haikou Jinmao Branch 3,300 0.91% State-owned shares 3. There isn’t any associated relationship between the 1st shareholder and the other shareholders among the top-10 list. None of them are regarded as “acting in concerts” in accordance with “The rules of information disclosure on change of shareholding.” Shareholders beyond the top-10 list are unknown for their condition of “associated relationship” and “acting in concert”. Among the top 10 shareholders, the followings are state-owned shareholders: China Great Wall Assets Management Co., Ltd., China International Trade Trust & Investment Co., Ltd., Hainan Hongkong-Macau International Leasing Co., Ltd., and China Agriculture Bank Haikou Jinmao Branch. 4. Particulars about the controlling shareholders Name of the shareholder: Haikou Grocery Co., Ltd. Legal representative: Fan Pingyue Date of incorporation: August 28, 1998 Registered capital: RMB113,693,900 Major business: processing of animal and meat products, vending of frozen Grocerys and side products of agriculture, refrigeration stoking, real-estate developing 5. The controlling shareholder of the Company stay unchanged. 6. Top 10 holders of current shares at the end of the report term (in thousand shares) No. Name of the shareholder Shares held (A shares) Shares held (B shares) 1 LIU ZILI 2,904, 2 FENG LINGMIN 2,016, 3 LIN MINGYU 1,275 4 XIANG XINGLIANG 1,069 5 JIANG HUORONG 937 6 ZHANG CHI 920 7 SEUNG YEOL PARK 763 8 LI JINGZHI 761 9 YANG YAOQIANG 750 10 LIU AIHUA 744 The Company is not informed any associated relationship among the top 10 current share holders, neither “acting in concert” as stated in “The rules of information disclosure on change of shareholding.” 6 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. V. Particulars about the Directors, Supervisors and Senior executives (I) Directors, Supervisors and Senior executives Name Position Gender Age Term Shares held at Shares held at the the beginning of end of year year Li Shanhu Chairman of the Board Male 64 2002-2005 0 0 Zheng Jirong Vice Chairman Male 44 2002-2005 2673 2673 Li Yuanbin Director, GM Male 52 2002-2005 0 0 Huang Director, Vice GM Male 33 2002-2005 0 0 Qingwang Liu Juntao Director, Vice GM, Secretary of the Male 35 2002-2005 0 0 Board Li Wei Director, Vice GM CFO Male 41 2002-2005 0 0 Zhu Xinglie Director Male 44 2002-2005 0 0 Chen Haixiong Director Male 42 2002-2005 2640 2640 Zhao Man Independent Director Female 52 2002-2005 0 0 Leng Mingquan Independent Director Male 49 2002-2005 0 0 Xie Zhuang Independent Director Male 50 Huang Wencai Chairman of Supervisory Committee Male 35 2002-2005 0 0 Li Caijie Supervisor Male 41 2002-2005 0 0 Wang Guobin Supervisor Male 33 2002-2005 0 0 Luo Weneng Supervisor Male 58 2002-2005 0 0 Ming Jinhua Supervisor Female 35 2002-2005 0 0 Chen Liurong Vice GM Male 40 2002-2005 0 0 (II) Particulars about Directors and Supervisors holding positions in shareholding entities Name Holds position in Position Zheng Jirong China Greatwall Assets Management Co., Ltd. Vice section Haikou Office director (III) Annual payrolls (1) Payrolls for the directors, supervisors and senior management are decided in accordance with the relevant standards of the company on salary and positions. (2) For the year 2003, the overall annual payrolls of the directors, supervisors and senior executives are amounted to RMB217.08 thousand. The annual payrolls of the top-3 directors are amounted to RMB126 thousand. The annual payrolls of the top-3 managements are amounted to RMB40.92 thousand. The allowances for independent directors are amounted to RMB12 thousand. (3) The range of the payrolls for the directors, supervisors and senior executives: 40~50 thousand --------- 4 people 20~40 thousand ----------1 people below 20 thousand -------1 people (4) The directors who are not taking salaries from the Company: Li Shanhu, Zhen Jirong, Huang Qingwang, Zhu Xinglie, and Chen Haixiong. Supervisors who are not taking salaries from the Company are: Huang Wencai, Wang Guobin and Luo Wen’en. They takes salaries from the shareholders or relevant entities. (IV) Leaving of directors, supervisors and senior executives in the report term 1. For transferring of job, Fu Zhen quit from his position of director during the report term. 7 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2. Wang Xiangyun quit from his position of vice general manager due to transferring of job. (V) Particulars about the employees There are totally 267 employees in the Company, including 137 of service employees, 29 of financial employees, 62 of technical employees, 39 of executive employees, 23.31% of the employees are with diploma or degrees. There is no retired employee in the company. VI. Management Structure (I) Particulars about the management of the company In accordance with the requirement of the relative laws and regulations of the Company Law, Security Law, Rules of Management of Public Companies, and official documents issued by China Securities Supervisory Council, the Company is improving the management structure and establishing a modern enterprise managing system. For the standardization of the operation, the Company established the Shareholders’ General Meeting, the Board of Directors, the Supervisory Committee, and committees specialized in of Strategies, Auditing, Nominating, and Salary Assessment respectively. Managing regulations of “The Article of Association”, “Rules for Shareholders’ General Meeting”, “Rules for the Board Meeting”, “Rules for the Supervisory Committee’s Meeting”, and “Internal Accounting System” were produced. The directors, supervisors and senior executives were exercising their duties with trustfulness and hardworking, and under the regulations of the “Article of Association” and “The Rules of Share Listing of Shenzhen Stock Exchange”. Information about the management of the Company was disclosed frankly, precisely, completely, and duly. 1. About the shareholders and shareholders’ general meeting: The Company secures the rights of au pair of the shareholders, especially the minority shareholders, to ensure they’re with the ability in exercising their rights. “The Rules for Shareholders’ General Meeting” was produced to rule the calling and holding of the meeting. The associated transactions were on basis of reasonable and justice with no harming of the benefit of the minority shareholders. 2. About the relationship between the controlling shareholder and the Company: The behaviors of the controlling shareholders are legalized and acts no interference surpassing the shareholders’ general meeting and/or indirectly. The Company is completely separated from the controlling shareholder in the aspect of personnel, assets, and financing. The Company is accounting independently and undertakes the liabilities and ventures by itself. 3. About the directors and the Board: The directors were elected with respecting of the procedures stated in the Article of Association. The formation of the Board was in corresponding with the relevant laws and regulations. The Board of Directors produced “Rules of the Board Meeting” in purpose of ruling the behaviors of the directors in the Board Meeting and the shareholders’ general meeting. 4. About the supervisors and the Supervisory Committee: The supervisors were elected with respecting of the procedures stated in the Article of Association. The formation of the Committee was in corresponding with the relevant laws and regulations. The Committee produced “Rule of the Supervisory Committee’s Meetings” in purpose of ruling the behaviors of the supervisors in the company. For the responsibilities representing the benefits of the shareholders, the Committee supervised on the legality of the behaviors of the financial departments, the directors, and the senior executives. 5. About information disclosure The secretary of the Board was authorized to in charge of the information disclosure and respond inquires of the shareholders. The Company implemented information disclosing under the principles of truthful, accurate, completed, and duly to ensure all the shareholders is able to get 8 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. information of the Company equally. (II) Particulars about the independent directors 3 positions of independent directors were setup within the Board of Directors. Since the engaging of the independent directors, they presented the board meeting and the shareholders’ general meeting actively, and issued independent opinions on the significant decision making in accordance with the relevant regulations. VII. About the Shareholders’ General Meeting The Company announced holding of the Shareholders’ General Meeting 2002 on the April 22, 2002 issues of Security Times and Hong Kong Commercial Daily. The meeting was held in the international convention hall of South China Grand Hotel on June 20th, 2003. 4 shareholders presented the meeting representing 101,937,100 shares (takes 28% of the total shares). The meeting was notarized by the lawyers from Hainan Fangyuan Lawyers Office. The following proposals were passed as resolutions through open balloting. 1. Annual Report of the Board of Directors 2002 2. Annual Report of the Supervisory Committee 2002 3. Annual Report 2002 and its Summary Version 4. Financial Statement 2002 5. Profit Distribution Preplan 2002 6. Accepted the resigning request of Ms. Fu Zhen, and elected Mr. Xie Zhuang as the independent director of the 4th term of Board in the mean time. The resolutions were published on the June 21, 2003 issues of Security Times and Hong Kong Commercial Daily. (V) Particulars about the changing of directors and supervisors 1. As the resolutions of the Shareholders’ General Meeting 2002, accepted the resigning request of Ms. Fu Zhen, and elected Mr. Xie Zhuang as the independent director of the 4th term of Board in the mean time. VIII. Report of the Board of Directors (I) Discussion and analysis of business operation 1) The business revenue of the company in 2003 was decreased in a large scale comparing with the same term in last year. The loss of this year mainly was affected by the following factors: (1) Many hotels were built in Sanya city in 2003, while the customer sources of the travel market was not increased distinctively, which results in a more fierce competition and worse business environment. South China Hotel has been established for more than ten years with comparatively old facility, the competitive capability of the hardware have been decreasing. (2) Due to the occurrence of unexpected “SARS”, from the Central Committee of CPC, State Department to every province and municipal district, the strict management and controlling measurement were taken. The central Committee put forward many relevant policies including the notice to restrict the traveler to travel in other cities, and cancel the “golden week” travel plan in May 1st holiday of 2003. As the company mainly handles with travel and hotel business, the company was the first objective of 9 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. the violent strike. So, the company suspend the business for 3 months. And the market gradually recovered to the previous level until October and the business finally came back. (3) The debt recombinating work of 2003 did not make the substantial progress. The liabilities burden was not relieved. As refunding capacity of short term liability was weak, the finance expense was highly loaded, which severely affect the profit capability of the company. (4) Due to the market change, the hold by the company devalued greatly. Pursuant to and , the devalued assets must be accounted into bad debt preparation. Therefore, the company predicted RMB 21,586,000 into the bad debt preparation provision, arising to 70%. Due to the said causes, the main business sales in 2003 materialized is RMB 13,333,000 that falling 45.09% in contrast with last year. The net profit is RMB(54,752,000), decreased by (1,246.64)% (II) Business operation of company 1. Main business scope of company Main business scope of company is: real estate development and sales, accommodation and food industry, travel service industry, photography, garden, grain and oil products, textile, general merchandise, hardware, daily commodity, industry production material, metal material, mechanic equipment business, sell ticket of airline and vessel on behalf. 2. Company’s business status (1) The company is a listed company engaging in travel line. Under the fierce competition and worsening environment, the company overall adjusted business and the thought to develop the margin business item and increase income, which assure a common operation of the company, and make positive negotiation with creditor. So, the foundation was built for future liability regroup. (2) Set up healthy and complete management system to enforce the internal business management and sources perfectization and integrity through the management of hotel and contract project, which forms a business situation of special operation, normal service and bilateral enhancing to perfect the business environment of the company. The main business income materialized in 2003 is RMB 13,333,000 with gross profit at 835.%. Main business profit is RMB 11,137,000, and net profit is RMB 54,752,000. 3. Business situation of subsidiary enterprise fully invested by the company (1) South China Hotel is a subsidiary company invested fully by the company, mainly handling accommodation, food, and travel service. The main business income materialized in this year is RMB 12,389,000, decreasing 42.91% comparing with last year, and occupying 92.92% of main business income. (2) Sanya Management Branch Company is the subsidiary company fully invested by the company mainly handling travel service. The main business income materialized in this year is RMB 944,000, 63.39% less than last year, and occupies 7.08% of main business income. 10 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (3) Main products than occupies more than 10% of main business income or profit Unit: RMB Item Business income Business cost Gross profit rate Hotel income 9,348,000 517,000 94.47% Resturant income 2,643,000 1,605,000 39.27% Lease and other income 1,342,000 74,000 94.49% 4. Problem and difficulty occurred in business operation and its solution In the business of 2003, the business environment was not changed. The market occupation rate is still a bit low. With the difficulty and no progress from liability regroup, as well as SARS influence, the main business income was reduced in a large scale. Facing the problems and difficulties, the company enforced the strengths of adjustment and negotiated with creditor to make a progress of regroup work and increase income, reduce the fiscal expenses. 5. Prediction of profit to be materialized of this year (III) Company Investment 1) The company totally raised net amount of RMB 124,050,000 of Stock A, and B issued in 1996 and 1997, of which RMB 19,860,000 was approved to invest in other project through legal process, the residue amount was occupied by Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. partially at RMB 90,690,000 and Hainan Dadonghai Travel Co.,Ltd. partially at RMB 13,500,000. 2) During report period, the company has no non-raise investment project. (IV) Company financial status Main fiscal index and causes of increase or decrease in report period Unit: RMB10 thousand Item Year 2003 Year 2002 Variation Variation causes degree Total assets 154,934 201,974 (23.29,) Operation loss Long term 920 88 945.45 Fixes asset increased from liabilities financing Shareholder rights (42,624) 12,128 -451.46 Operation loss Main business 11,137 21,159 -47.37 Business income decrease profit Net profit (54,752) 4,775 (1,246.64) Business loss (V) There is no key change of business environment, macro policy and regulation where the company’s industry lies in this year. (VI) Regarding the audit report made by CPAs with “unable to form an opinion,” The Board of Directors present the explanation about the involved affairs. 1. The involved affairs in audit report and basic suggestion of CPA on the affairs. Until December 31, 2003, Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. fell into the debt which amount to RMB19,194,370,000 among which the current liability is 11 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. RMB 19,080.320,000 and net debt is RMB 4,262,420,000 ,the principal and interest of overdue debt owed bank and non- banking financial institution is RMB 163,270,000. The main creditor has already suited for this to the people's court and entered into the procedure of justice enforcement, the mainly management assets have been mortgaged and closed down by the court, once the main creditor execute compulsorily though the judicial procedure, the company has possibility of stopping operation. By the day of audit report, Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. expresses that they were recombinating debts actively. Because the debt recombination is still in implementing initial stage, we are unable to obtain the abundant, proper auditing evidence to judge whether they could improve the lasting management ability of Dadonghai shares. Consequently we are unable to tell the rationality of Dadonghai’s working out the accounting statement according to the lasting management; Due to the significant uncertainty about lasting management ability of Dadonghai influenced by the above-mentioned debts, we are unable to express the opinion on above-mentioned accounting statements. 2. Suggestions of the board of directors, the board of supervisors and administrative stratum of company on the affairs. The Board of directors, supervisors and administrative stratum think that the amount of company’s overdued debt and accumulative operational loss is considerably enormous and the law cases are so many, main assets have already been closed down. Which caused by the former big shareholder Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. , who occupied the fund raised for shares, produced the decrease of major business revenue, shrank the running project yearly and weaken the ability to repay the debts; In addition, the company accumulative operational loss is so enormous, which caused by the decrease of major business revenue yearly as well as the adjustment on all kinds of tracking allowance based on the increase of suppositional profit according to the law from 1993 to 1997; 3. The measure and influence to remove this affairs; (1) Expand the market and make great efforts to explore the tourist business markets of tourist corporation, the enterprises and institutions in domestic north , southwest , midwest on the basis of consolidating the existing market, meanwhile develop the Russian tourist market to heighten the room rate and increase the relevant income, turn over the unfavorable situation occurred in the hotel industry of facing lower price competition in Sanya at present so as to expand sale and make the major serving business in hotel more larger and powerful. (2) Raise the fund to reconstruct the facility in hotel and improve the hardware competitiveness of hotels to face the competitive pressures from newly-increased hotels of east sea area. (3) The branch of Sanya management company continue to raise fund to develop new project. (4) Continue to strengthen the financial administration, push to clear up debts and control the cost &expenses. 12 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (5) The Sanya branch of Agricultural Bank of China, Hainan branch of Communications Bank, China eastern property management company and China Tourism Entrustment and Investment corporation negotiated on the plan of debt recombination. (6) Make great efforts to gain the capital of shareholder, other guarantee measurement and support from government functionial department. (VII) Management plan of company in 2004 1. Continue consulting with creditor and governments at all levels and make great efforts to do well the work of removing the debt. 2. Take good use of company’s advantage and run well the current assets, explore new possibilities and the point of growth of profit, take back debts completely and lower costs . 3. Do a good job of the operation and management of the major business, strengthen the inside financial administration, control every budget strictly, manage the cost in an all-round way and continue to the work well on the energy conservation and exploration of potential power; 4. Take charge of the standardization, institutionalized, standardized management severely and do a good job of disclosure of information and " three meetings " work. 5. Strengthen the education of the staff’s own professional skill and overall qualities, promote the corporation culture completely. (VIII) The daily work situation of the Board of Directors 1. The situation of and the content of the meeting of the Board of Directors within the report period. (1) The 4th meeting of the 4th term Board of Directors has been held on April 18, 2003, the meeting passed the following items after discussion: ①Work Report of the Meeting of Board of Directors in 2002 ② Annual Report and summary in 2002 ③Financial Settlement Report 2002 ④The advanced proposal of profits distribution in 2002. ⑤The proposal of collect the allowance for asset depreciation and asset cancellation after verification. ⑥Agree with the special explanation on the affairs involved in the audit report with interpretative illustration took by the CPAs company. ⑦Approve director Fuzhen’s resign application and recommend Xiezhuang as the candidate of independent director of the 4th Board of Directors. ⑧Approve to appoint Li weizhi as vice general manager. ⑨Pass the proposal of collecting the encouragement fund. ⑩Determine to hold 2002 annual shareholders' meeting on June 20 , 2003. (2) The 5th meeting of the 4th term Board of Directors has been held on April 25,2003. 13 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. the meeting passed the following items: Pass the first quarter report in 2003 after discussing. (3) The 6th meeting of the 4th term Board of Directors has been held on June 20,2003, the meeting passed the following items: Approve Wang Xiangyun’s resign application and decide to remove her title as vice general manager. (4) The 7th meeting of the 4th term Board of Directors has been held on August 18,2003, the meeting passed the following items: ①Approve company's 2003 semi-annual reports and summary after discussing. ②Approve the proposal of collecting the allowance for asset depreciation and asset cancellation after verification. (5) The 8th meeting of the 4th term Board of Directors has been held on October 24,2003, the meeting passed the following items: Pass the third quarter report in 2003 after discussing. (IX) The advanced proposal of profit distribution or capital accumulation fund transferred to increase the stock. The net profit distribution in 2003 is RMB(54,752,000) in accordance with auditing of Hainan Congxin Certified Public Accountants and Grant Thornton Certified Public Accountants , together with undistributed profit in 2002 RMB(403,605,000). The distributable profit for shareholders of this year is RMB (458,357,000). The Board of directors has decided that neither profit distribution nor capitalizing of reserves will be implemented. (X) The company choose the newspaper “securities times” and “Hong Kong Commercial daily” to publish the information. IX. Report of the Supervisory Committee (I) Work Summary In the report period, the Supervisory Committee held altogether 3 meetings. 1. The 4th meeting of the 4th Supervisory Committee was held on April 18, 2003. The meeting examined and adopted: (1) 2001 Work Report of the Supervisory Committee; (2) 2001 Annual Report and the Summary; (3) The Board’s statement on the events referred by the auditor’s report. 2. The 5th meeting of the 4th Supervisory Committee was held on April 25, 2003. The meeting examined and adopted: The 1st Quarterly Report of 2003 3. The 6th meeting of the 4th Supervisory Committee was held on August 18, 2003. The meeting examined and adopted: The Semi-annual Report of 2003 (II) Independent Opinion In the report year, the Supervisory Committee seriously implemented various supervisory functions and safeguarded the interest of the Company and the shareholders according to its duties specificed in the PRC Company Law and the Articles of Association of the Company. 1. Operation According to the Law In the report period, the Supervisors attended all the Board meetings as non-voting delegates. In the 14 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. opinion of the Supervisory Committee, the Company conducted its operation in a stadandardized way, implemended various resolutions in a practical way, the decision-making procedures complied with the relevant provisions of the PRC Company Law and the Articles of Association of the Company; the Company established complete internal control system; directors and senior executives did their jobs with due diligence in a work-respecting and honest way, and performed no action against the laws, regulations, the Articles of Association or harmful to th einterest of the Company. 2. Financial Inspection Hainan Cong Xin Certified Public Accountants and Grant Thornton Certified Public Accountants audited the Company’s 2003 Financial Report according to the Chinese Accounting Standards and the International Accounting Standards and produced auditor’s report with “unable to form an opinion”. In the opinion of the Supervisory Committee, the Auditor’s Report truly reflected the Company’s financial position and operation result of the year. 3. The year the Company made the latest issue is 1997. Except the small amount which has been invested in the projects as committed, most of the proceeds raised through the issuing has been diverted by the original principal shareholders. Reserve for bad debts has been fully provided and the projects have been stopped as they have become out of date. 4. In the report period, the Company had not been involved in such activities as acquisition and sales of assets. 5. In the report period, the related transactions were on fair base and harmed no interests of the Company. 6. Hainan Cong Xin Certified Public Accountants and Grant Thornton Certified Public Accountants audited the Company’s 2003 Financial Report, and produced auditor’s report with “unable to form an opinion”. The Board of Directors has made special explanation on the events referred to in the report. The Board also issued detailed statement on the influence of the events and measures to resolve the influence. In the opinion of the Supervisory Committee, the auditor’s report has truly and objectively reflected the Company’s financial position and operation result. The explanation of the Board of Directors on the events involved in the auditors’ reserved opinion was in compliance with the Company’s practical situation and the measures planned to be taken are practical and effective. The Supervisory Committee shall urge and assist the Board of Directors and the management to carry out the measures as soon as possible so as to improve the Company’s financial position and operation situation and ensure the Company to conduct normal and sustainable operation. X. Significant Events (I) Material Lawsuits and Arbitrations 1. In the report period, the Company had no material lawsuits or arbitrations. 2. Material Lawsuits and Arbitrations Disclosed in 2003 Semi-annual Report (1) According to the judgment of Hainan Higher People’s Court, the Company owed RMB 30,978,051.00 and payable interest of RMB 5,144,638 in arrears for completed projects to No.2 Engineering Bureau under the Ministry of Railways (No. 2 Bureau). As of December 31, 2001, the Company repaid RMB 34,678,270.00, not including the fee of title transfer. (2) The Company provided guarantee for the loan of RMB 10 million borrowed by the original shareholder Dadonghai Group Co. from Bank of Communications, Hainan Branch. The loan was overdue. Sanya Intermediate People’s Court judged that Company should bear the liability for guarantee and attached the Company’s real estate with title certificate No. of SHZFZZ No. 97. The Company stated the principal and interests of the loan as estimated liabilities in accounts. (3) The Company obtained loan of RMB 5 million and long-term credit loan of RMB 6 million from Bank of Communications, Hainan Branch by means of mortgage on December 23, 1997. The loan was 15 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. overdue. Sanya Intermediate Court judged that Company should repay the principal and corresponding interests and attached the Company’s real estate with title certificate No. SHZFZZ No. 102. (4) The Company borrowed loans of RMB 11.430 million and USD 88,000 from Hainan Hong Kong and Macao International Trust Investment Co., Ltd. The loans were overdue. Haikou Intermediate Court judged that Company should repay the said principals and corresponding interest and attached the Company’s real estate with title certificate No. of SHZFZZ No. 96. On June 25, 2002, China Orient Asset Management Corporation replaced Hainan Hong Kong and Macao International Trust Investment Co., Ltd. and became the Company’s creditor. (5) China Tourism International Trust Investment Co., Ltd. brought an action in Beijing Intermediate People’s Court against the Company in respect of the loan with the principal of RMB 20 million. After the Company appealed to Beijing Higher People’s Court, Beijing Higher People’s Court judged with (2000) GJZZ No. 20 Judgment that the Company should repay the principal of RMB 20 million and corresponding interests on March 30, 2000. (The Company has repaid RMB 9.2 million). (II) In the report period, the Company had conducted no such activities as assets acquisition, sales, absorption or consolidation. (III) Related transactions. China Great Wall Asset Management Co. has an balance of RMB46,613.14 of arrearage at the end of report year. (IV) Material Contracts in the Report Period 1. In the report period, the Company had no material guarantees offered or any guarantee which had not been implemented. 2. In the report period, the Company neither entrusted others to manage cash assets nor had any cash assets entrusted to others for management incurred previously and carried down to the report period. (V) In the report period, the Company or any shareholder holding over 5% of the share capital had not been involved in any commitments. 1. In the report period, the Company prepared 2003 Profit Distribution Proposal and implemented the proposal accordingly in 2003. 2.On December 5, 2001 China Great Wall Assets Management Co., Ltd. and Haikou Grocery Co., Ltd. entered into Equity Custody Agreement respectively. As approved by the Ministry of Finance with document Cai-Qi [2002]430, the public notice on the equity transfer was published on Securities Times and Hong Kong Commercial Daily dated January 15, 2003 and the equity transfer procedures were completed with China Securities Registration and Clearing Co., Ltd. Shenzhen Branch. After the equity transfer was finished, the Equity Custody Agreement entered in 2001 become ineffective automatically. (VI) Engagement of CPA In the report period, the Company extended the engagement of Hainan Cong Xin Certified Public Accountants and Grant Thornton Certified Public Accountants as the Company’s domestic and international auditors. The two certified public accountants had offered auditing services to the Company successively for 3 years and the Company paid the remuneration totally RMB 320,000.00 to these two certified public accountants for the report year. (VII) In the report period, the Company, the Board of Directors or any director had 16 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. never been inspected, experienced administrative penalty or been criticized by circulating a notice of criticism by China Securities Regulatory Commission, or condemned in public by Shenzhen Stock Exchange. (VIII) This report is prepared in both Chinese and English. Should there be any difference in interpretation between the two versions, the Chinese version shall prevail. XI. Financial Statement Auditors' report To the members of Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (incorporated in the People's Republic of China with limited liability) We have audited the financial statements of Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (the "Company") for the year ended 31 December 2003 on pages 2 to 17 which have been prepared in accordance with International Financial Reporting Standards as promulgated by the International Financial Reporting Standards Board. The financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing issued by the International Federation of Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As more fully explained in note 2 to the financial statements, although the Company reported net current liabilities of RMB176,420,000 and net liabilities of RMB42,624,000 as at 31 December 2003, the financial statements have been prepared on a going concern basis, the validity of which is dependent on the successful completion of formal debt restructuring agreement between the Company and its bankers and other lenders in order to enable the Company to continue as a going concern. Had the going concern basis not been used, adjustments would have to be made to reclassify non-current assets as current assets and non-current liabilities as current liabilities, reduce the value of assets to their recoverable amounts and provide for any future liabilities which might arise. Such adjustments may have a consequential significant effect on the Company's net liabilities as at 31 December 2003 and its loss for the year then ended. We consider that appropriate disclosure have been made but the fundamental uncertainty relating to whether the going concern basis is appropriate is so extreme that we have disclaimed our opinion. Because of the significance of the matters referred to in the preceding paragraph, we are unable to form an opinion as to whether the financial statements give a true and fair view of the Company's state of affairs as at 31 December 2003 or of its loss for the year then ended. In our opinion the financial statements give a true and fair view of the cash flows of the Company for the year ended 31 December 2003. Grant Thornton Certified Public Accountants 17 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Hong Kong 13 April 2004 Income statement for the year ended 31 December 2003 Notes 2003 2002 RMB'000 RMB'000 Turnover 4 13,333 24,280 Cost of sales (2,196) (3,121) Gross profit 11,137 21,159 Other income 5 438 5,845 Selling, general and administrative expenses (23,504) (18,038) Provision for impairment of land use right (12,305) - Provision for impairment of land exchange right (21,586) - (Loss)/Profit from operations (45,820) 8,966 Net finance costs 6 (8,932) (4,191) (Loss)/Profit before taxation 7 (54,752) 4,775 Taxation 8 - - (Loss)/Profit for the year (54,752) 4,775 (Loss)/Earnings per share (RMB Fen) 9 (15.04) 1.31 Balance sheet as at 31 December 2003 Notes 2003 2002 RMB'000 RMB'000 ASSETS AND LIABILITIES Non-current assets 18 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Property, plant and equipment 10 97,940 105,431 Land use right 11 36,776 50,222 134,716 155,653 Current assets Land exchange right 12 9,251 30,837 Inventories 13 612 1,857 Trade and other receivables 14 3,814 1,931 Tax recoverable 5,468 6,011 Cash at banks and in hand 1,073 5,685 20,218 46,321 Current liabilities Bank loans 15 105,128 105,128 Trade and other payables 91,290 84,630 Finance lease – current portion 16 220 - 196,638 189,758 Net current liabilities (176,420) (143,437) Non-current liabilities Bank loans 15 35 88 Finance lease – non-current portion 16 885 - 920 88 Net (liabilities)/assets (42,624) 12,128 CAPITAL AND RESERVES Share capital 17 364,100 364,100 Reserves 18 (406,724) (351,972) (Capital deficits)/Shareholders’ funds (42,624) 12,128 Cash flow statement for the year ended 31 December 2003 2003 2002 RMB'000 RMB'000 Cash flows (used in)/from operating activities (Loss)/Profit before taxation (54,752) 4,775 Adjustments for : Depreciation 5,103 5,391 Provision for doubtful receivables 185 1,067 Amortisation of land use right 1,141 1,142 Provision for impairment of land use right 12,305 - Provision for impairment of land exchange right 21,586 - Interest income (2) (3) Interest expense 8,934 4,194 Loss/(Gain) on disposal of property, plant and equipment 4,181 (244) Operating (loss)/profit before changes in working capital (1,319) 16,322 19 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Increase in trade and other receivables (2,068) (1,232) Decrease in inventories 1,245 460 Decrease in tax recoverable 543 880 Decrease in trade and other payables (2,274) (4,751) Cash used in operations (2,554) (4,643) Net cash (used in)/generated from operating activities (3,873) 11,679 Cash flows from/(used in) investing activities Purchases of property, plant and equipment (734) (216) Proceeds from disposal of property, plant and equipment 71 349 Interest received 2 3 Net cash (used in)/generated from investing activities (661) 136 Cash flows used in financing activities Repayment of bank loans (53) (1,675) Repayment of finance lease (25) - Repayment of other payables - (9,300) Net cash used in financial activities (78) (10,975) (Decrease)/Increase in cash (4,612) 840 Cash at beginning of year 5,685 4,845 Cash at end of year 1,073 5,685 20 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Statement of changes in equity for the year ended 31 December 2003 Share Capital Accumulated capital reserve losses Total RMB'000 RMB'000 RMB'000 RMB'000 Balance at 1 January 2002 364,100 47,454 (404,201) 7,353 Profit for the year - - 4,775 4,775 Balance at 31 December 2002 and as at 1 January 2003 364,100 47,454 (399,426) 12,128 Loss for the year - - (54,752) (54,752) Balance at 31 December 2003 364,100 47,454 (454,178) (42,624) Notes to the financial statements for the year ended 31 December 2003 1. GENERAL Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (the "Company") was established as a joint stock limited company in the People's Republic of China (the "PRC") on 26 April 1993 as part of the reorganisation of its predecessor, Hainan Sanya Dadonghai Tourism Centre Development Co., Ltd. pursuant to the approval on 3 January 1993 of the Joint Stock Committee of Hainan Province. On 6 May 1996, the Company transferred part of the existing assets and liabilities of its non-core business to a new company, Hainan Dadonghai Tourism Industry (Holdings) Co., Ltd. After the restructuring, the Company retained the assets and liabilities relating to the business of South China Hotel. The principal activities of the Company are hotel operations and management. The registered office of the Company is located at Dadonghai, Sanya, Hainan, PRC. The average number of employees of the Group during the year was 267 (2002: 250). 2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS As shown in the financial statements, the Company reported net current liabilities of RMB176,420,000, net liabilities of RMB42,624,000 and accumulated losses of RMB454,178,000 as at 31 December 2003. Further, certain of the bank loans have been overdue and the bankers and other lenders have demanded repayment of amounts due to them. The Company is in the process of negotiating with most of the bankers and other lenders to 21 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. restructure the repayment of certain bank loans and other payables but no formal agreement has been reached up to the date of approval of the financial statements. Notwithstanding the foregoing, the financial statements have been prepared on a going concern basis, the validity of which is dependent upon the successful completion of formal debts restructuring agreement between the Company and its bankers and other lenders. The directors are of the opinion that the Company will be able to secure the ongoing support of its bankers and other lenders, finalise the debts restructuring arrangement as mentioned above in order to enable the Company to continue as a going concern. On this basis, the directors consider that it is appropriate to prepare the financial statements on a going concern basis. The financial statements do not include any adjustments that would be resulted if the aforementioned debts restructuring arrangements are not successful. Should the Company be unable to successfully finalise the formal debts restructuring arrangements, the Company may not be able to continue in business as a going concern. Accordingly, adjustments would have to be made to reclassify non-current assets as current assets and non-current liabilities as current liabilities, to reduce the value of assets to their recoverable amounts and to provide for any future liabilities which might arise. 3. PRINCIPAL ACCOUNTING POLICIES The financial statements on page 2 to 17 are prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Financial Reporting Standards Board ("IFRSB") and interpretations issued by the Standing Interpretation Committee of the IFRSB as if those standards had been applied consistently throughout the year. This basis of accounting differs from that used in the statutory accounts of the Company which were prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises in the PRC. The financial statements are prepared under the historical cost convention as modified by the revaluation of certain assets and liabilities of the Company. The following principal accounting policies were adopted in preparation of the financial statements of the Company to conform to IFRS : (a) Property, plant and equipment (i) Depreciation Depreciation is provided to write off the cost or valuation of property, plant and equipment over their estimated useful lives, taking into account the estimated residual value, using the straight line method. The estimated useful lives of property, plant and equipment are as follows : Buildings 40 years Plant and machinery 20 years 22 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Entertainment equipment 16 years Motor vehicles 7-12 years Other equipment 8 years (ii) Measurement bases Property, plant and equipment are stated at cost or valuation less provision for impairment and accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to the working condition and location for its intended use. Subsequent expenditure relating to property, plant and equipment is added to the carrying amount of the assets if it can be demonstrated that such expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the assets. When assets are sold, any gain or loss resulting from their disposal, being the difference between the net disposal proceeds and the carrying amount of the assets, is included in the statement of income. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (b) Impairment The carrying amounts of the Company's assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. All impairment losses are recognised in the statement of income. Calculation of recoverable amount The recoverable amount of the Company's receivables is calculated as the present value of expected future cash flows, discounted at the original effective interest rate inherent in the asset. Receivables with a short duration are not discounted. The recoverable amount of other assets is the greater of their net selling price and value in use. In accessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market situations. (c) Land use right Land use right are stated at cost less provision for impairment where necessary and is amortised over 50 years, taking into account the estimated residual value, using the straight line method. (d) Land exchange right 23 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Land exchange right are stated at face value less provision for impairment where necessary. (e) Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials computed using weighted average method and, where applicable, direct labour and those overheads that have been incurred in bringing the inventories to their present location and condition. Net realisable value is calculated as the actual or estimate selling price less all further costs of completion and the estimated costs necessary to make the sale. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (f) Foreign currencies Transactions in foreign currencies are translated into Renminbi Yuan at the rates of exchange ruling at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into Renminbi Yuan at the rates of exchange ruling at that date. Profits and losses arising on exchange are dealt with in the statement of income. (g) Financial instrument Financial instruments of the Company include loans and receivables, cash and bank balances, creditors and other payables. The accounting policies for various types of investments of the Company are set out in the individual accounting policies associated with these investments. Other financial instruments are stated at cost. (h) Recognition of revenue Revenue from hotel room and other ancillary services are recognised when the services are rendered. (i) Related parties Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. (j) Provision A provision is recognised in the balance sheet when the Company has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits 24 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (k) Finance leases Leases are classified as finance leases whenever the terms of the leases transfer substantially all the risks and rewards of ownership of the assets to the lessee. Assets acquired by way of finance leases are stated at an amount equal to the lower of the fair value and the present value of the minimum lease payments at inception of the leases. The corresponding liabilities, net of finance charges, are recorded as finance leases payables. Finance charges implicit in the lease payments are charged to the income statement over the periods of the leases so as to produce a constant periodic rate of interest on the remaining balance of the obligation for each accounting period. (l) Cash and cash equivalent For the purpose of the cash flow statement, cash and cash equivalents comprise cash in hand and amounts repayable on demand with banks and short-term highly liquid investments which are readily convertible into known amounts of cash without notice and which were within three months of maturity when acquired, less advances from banks repayable within three months from the date of the advance. 4. TURNOVER Turnover comprises hotel revenue and other ancillary services revenue. 5. OTHER INCOME 2003 2002 RMB'000 RMB'000 Compensation from local authority - 3,973 Gain on disposal of property, plant and equipment - 244 Waiver of payables - 528 Others 438 1,100 438 5,845 6. NET FINANCE COSTS 25 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2003 2002 RMB'000 RMB'000 Interest expense 8,934 4,194 Interest income (2) (3) 8,932 4,191 7. (LOSS)/PROFIT BEFORE TAXATION 2003 2002 RMB'000 RMB'000 (Loss)/Profit before taxation is arrived at after charging : Depreciation of property, plant and equipment 5,103 5,391 Staff cost 4,787 3,252 Amortisation of land use right 1,141 1,142 Loss/(Gain) on disposal of property, plant and equipment 4,181 (244) 8. TAXATION The Company provides for taxation on the basis of its income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes. 9. (LOSS)/EARNINGS PER SHARE (Loss)/Earnings per share was calculated based on the loss for the year of RMB54,752,000 (2002 : profit of RMB4,775,000) and on the weighted average number of 364,100,000 shares (2002 : 364,100,000 shares). 10. PROPERTY, PLANT AND EQUIPMENT Land Plant and Entertain Motor Other and machinery ment vehicle equipment Total building equipmen s t RMB'00 RMB'000 RMB'000 RMB'000 RMB'000 RMB'00 0 0 At cost less impairments At 1 134,328 22,310 10,780 2,611 9,414 179,443 January 26 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2003 Additions - 13 160 - 1,691 1,864 Disposals (6,386) (474) (153) (464) (83) (7,560) At 31 127,942 21,849 10,787 2,147 11,022 173,747 December 2003 Accumulated depreciation At 1 39,946 13,430 9,685 2,326 8,625 74,012 January 2003 Charge for 3,797 610 254 26 416 5,103 the year Written (2,432) (275) (113) (450) (38) (3,308) back on disposal At 31 41,311 13,765 9,826 1,902 9,003 75,807 December 2003 Net book value At 31 86,631 8,084 961 245 2,019 97,940 December 2003 At 31 94,382 8,880 1,095 285 789 105,431 December 2002 The cost of properties, plant and equipment includes an amount of RMB1,130,000 in respect of assets held under finance leases (2002 : nil) and the related accumulated depreciation amounts to RMB18,000 (2002 : nil). 11. LAND USE RIGHT 2003 2002 RMB'000 RMB'000 Cost less accumulated amortisation and provision for impairment 36,776 50,222 Land use right represents the right to use the land at Sanya City for a period for 50 years from 1996 to 2046. During the year, the Company made a provision for impairment for the land use right amounting to 27 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. RMB12,305,000. The provision was made by reference to the valuation carried out by Sanya Property Valuation Limited Liability Company. The valuation method adopted is open market value basis. 12. LAND EXCHANGE RIGHT 2003 2002 RMB'000 RMB'000 Cost less provision for impairment 9,251 30,837 Land exchange right represents the face value of a right where the Company can use it as a cash coupon for consideration of purchasing land in future. The right can be sold to other parties. The land exchange right was issued to the Company by the Sanya City authority as a result of certain of the land use right in Sanya previously owned by the Company being taken back by the authority. During the year, the Company made a provision for impairment for the land exchange right amounting to RMB21,586,000. The provision was made by reference to the estimated market value of land exchange right in Hainan Province. 13. INVENTORIES Inventories represent consumable store, food and beverage in relation to hotel operations. 14. TRADE AND OTHER RECEIVABLES Included in the trade and other receivables are receivables from a former major shareholder, Hainan Dadonghai Tourism Centre Group Co., Limited of RMB240,519,000 (2002 : RMB240,519,000), and a former related company, Hainan Dadonghai Tourism Industry (Holdings) Co., Limited of RMB54,723,000 (2002 : RMB54,723,000). 2003 2002 RMB'000 RMB'000 Amount outstanding 295,242 295,242 Less : Provision (295,242) (295,242) - - The amounts due from these companies are unsecured, non-interest bearing and has no fixed terms of repayment. 15. BANK LOANS 2003 2002 RMB'000 RMB'000 28 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Bank loans 105,163 105,216 Less : Current portion due within one year included under current liabilities (105,128) (105,128) Non-current portion included under non-current liabilities 35 88 16. FINANCE LEASE The obligation under finance lease is as follows : 2003 2002 RMB'000 RMB'000 Due within one year 354 - Due in the second to fifth years 1,410 - 1,764 - Future finance charges on finance lease (659) - Present value of finance lease liabilities 1,105 - The present value of finance lease liabilities is as follows : Due within one year 220 - Due in the second to fifth years 885 - 1,105 - Less : portion due within one year included under current liabilities (220) - Non-current portion included under non-current liabilities 885 - 17. SHARE CAPITAL 2003 2002 RMB'000 RMB'000 Registered and fully paid : Promoter shares of RMB1 each 109,857 109,857 Legal person shares of RMB1 each 121,143 121,143 45,100,000 "A" shares of RMB1 each 45,100 45,100 88,000,000 "B" shares of RMB1 each 88,000 88,000 364,100 364,100 29 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 18. RESERVES Capital Accumulated reserve losses Total RMB'000 RMB'000 RMB'000 Balance at 31 December 2003 47,454 (454,178) (406,724) Balance at 31 December 2002 47,454 (399,426) (351,972) According to the Company Law of the PRC and the Article of Association of the Company, when distributing net profit of each year, the Company shall set aside 10% of its net profits as reported in the statutory accounts for the statutory common reserve fund (except when the fund has reached 50% of the Company's registered share capital) and 5% to 10% for the statutory common welfare fund. These reserves cannot be used for purposes other than those for which they are created and are not distributable as cash dividends. 19. LITIGATION MATTERS AND PLEDGE OF ASSETS As at 31 December 2003, various bankers and lenders have taken legal actions to request the Company to repay the amounts due to them. Most of the land and buildings are pledged or sequestrated to various bankers and lenders to secure bank loans and other borrowings granted to the Company. 20. IMPACT OF IFRS ADJUSTMENTS ON (LOSS)/PROFIT FOR THE YEAR AND NET (LIABILITIES)/ASSETS (Loss)/Profit for the year Net (liabilities)/assets 2003 2002 2003 2002 RMB'000 RMB'000 RMB'000 RMB'000 As reported in statutory accounts (54,752) 227 (42,624) 12,128 Impact of IFRS adjustments - wavier of interest and other payables recognised as capital reserve in PRC statutory accounts now adjusted as income for the year - 4,155 - - - reversal of opening balances adjustment of taxation overprovided in previous years - 393 - - 30 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. As restated for the Company (54,752) 4,775 (42,624) 12,128 21. FINANCIAL INSTRUMENTS (a) Fair value of financial instruments The directors consider that the carrying amount of cash, trade and other receivables, trade and other payables and banks and other loans approximates to their fair value. (b) Credit risks At balance sheet date, the Company has no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. 22. APPROVAL OF THE FINANCIAL STATEMENTS The financial statements on pages 2 to 17 were approved by the board of directors on 13 April 2004. XII. Documents Available for Inspection 1. Accounting Statements with signatures and seals of the legal representative, Chief Accountant and person in charge of accounting affairs; 2. Original copy of the Auditors’ Report under the seal of the accounting firm and signed by and under the seal of certified accountants. 3. Originals of all documents and manuscripts of Public Notices of the Company disclosed in public in the newspapers as designated by China Securities Regulatory Commission. Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. April 13, 2004 31