大东海A(000613)ST东海Ｂ2004年年度报告（英文版）

海南大东海旅游中心股份有限公司 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Annual Report 2004 (International) Report term: Year 2004 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) Table of Contents I. Important Statement......................................................................................................... 3 II. Company Profile ............................................................................................................ 4 III. Financial Highlight ....................................................................................................... 5 IV. Changes in Share Capital and Shareholders.................................................................. 7 V. Particulars about the Directors, Supervisors, Senior Executives and Employees ........ 10 VI. Management Structure................................................................................................ 14 VII. Particulars about the Shareholders’ Meeting............................................................. 16 VIII. Report of the Board.................................................................................................. 17 IX. Report of the Supervisory Committee ........................................................................ 23 X. Significant Events ........................................................................................................ 25 XI. Financial Report.......................................................................................................... 26 XII. Documents for Reference.......................................................................................... 47 2 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) I. Important Statement The Board of Directors and the directors of the Company guarantee that there are no significant omissions, fictitious or misleading statements carried 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 Huang Qingwang and Zhu Xinglie absent the meeting of the Board. Director Huang Qingwang entrusted director Zheng Jirong to present the meeting and vote on behalf of him. Mr. Li Yuanbin, the Chairman of the Board, and Ms. Wu Yuanyuan, 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. 3 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) 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: Wu Chongfeng 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 CPA Office address: 13th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong 4 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) III. Financial Highlight (I) Major profit indices (RMB’000) Gross profit (12,279) Net profit (12,279) Net profit deducted non-recurring gain/loss (12,147) Major business profit 12,158 Other business profit 46 Operation profit (12,147) Investment income - Allowance income - None business income / expense (net) (132) Net Cash flow generated by business operation 1,630 Net decreasing of cash and cash equivalents 1,283 Less non-recurring gain/loss items (RMB’000) Non-recurring gain and loss items Amount None business income / expense (net) (132) Plus: 1. None-business income 329 Less: 2. Net loss of fixed asset disposal (400) Less: 3. Loss from debt reconstructuring (59) Less: 4. Other expenditures (2) (II) Diversities between the net profit results in accordance with IAS and China Accounting Standard for the report term. (RMB’000) (loss)/gain of the year Net value of (liability)/ assets Diversity between the international and Year ended Dec. 31 at Dec. 31 domestic accounting standards 2004 2003 2004 2003 Financial Statement under China (14,213) (54,752) (54,905) (42,624) Accounting Standard Influence of adjustment under IAS Interests of common reserves of legal items and reducing of other payables transferred to the profit of current year 1,934 - - - Re-presented amount (12,279) (54,752) (54,905) (42,624) 5 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) (III) Financial highlights of the previous 3 years (RMB’000) Items 2004 2003 2002 Major business turnover 13,354 13,333 24,280 Net profit (12,279) (54,752) 4,775 Gross Assets 147,388 154,934 201,974 Shareholders’ Equity (Exclude Minority Shareholders’ Equity) (54,903) (42,624) 12,128 Earnings per share (yuan/share) (0.034) (0.15) 0.013 Net asset per share (yuan/share) (0.151) (0.117) 0.033 Net asset per share, adjusted (RMB/share) (0.151) (0.117) 0.020 Net Cash flow per share generated by business operation (yuan/share) 0.004 (0.011) 0.03 Net earnings / capital ratio (%) - - 39.37 Net earnings / capital ratio basing on net profit after deducting of - - - non-recurring gain/loss (%) , weighted everage (IV) Supplementary Form of Income Statement Net earnings / capital ratio (%) Earnings per share (yuan/share) Profit of the report period On full weighted On full weighted amortizing basis average amortizing basis average Major business profit - - 0.03 0.03 Operation profit - - (0.03) (0.03) Net profit - - (0.03) (0.03) Earnings per share after (0.03) (0.03) deducting of non-recurring - - gain/loss (V) Movement of shareholders’ equity in the report term (RMB’000) Items Share Capital Surplus Statutory Un-distributed Total of capital reserves reserves public profit shareholders’ welfare equity Initial 364,100 47,454 - - (454,178) (42,624) Increased - - - - (12,279) (12,279) this term Decreased - - - - - - this term At the end 364,100 47,454 - - (466,457) (54,903) of term Causation of change: The movement of profit distributable and shareholders’ equity is due to the loss of the current year. 6 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) IV. Changes in Share Capital and Shareholders (I) Movement of Capital Share Table of capital share movement in thousand shares Before Changed (+,-) After the the Share Bonus Transferred New Others Sub-total changed change allotted shares from reserves offer I. None negotiable shares 1. Promoter’s 109,857 109,857 shares Incl. State-owned 36,327 36,327 shares 7,353 7,353 Domestic legal person shares Overseas legal person shares Others 2. Legal person 121,143 121,143 shares placed 3. Employees’ shares 4. Preference shares or others Total of 231,000 231,000 non-negotiable shares II. Negotiable shares 1. Common shares 45,100 45,100 in RMB 2. Foreign shares 88,000 88,000 in domestic market 3. Foreign shares in overseas market 4. Others Total of negotiable 133,100 133,100 shares III. Total of capital 364,100 364,100 shares (II) Particulars about the placing and listing of shares 1. Share placing status of the latest 3 years prior to the end of the report term. The Company didn’t issue any shares in the latest 3 years prior to the end of the report term. 2. The total capital share and the share structure has not been changed during the report term. 3. The Company didn’t issued any employees’ shares. 7 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) (III) Particulars about the shareholders 1. Ended Dec. 31 2004, there totally were 21,124 shareholders of the Company, including 13,795 of A-share holders, 7,329 of B-share holders and 2 senior management shareholders 2. The top 10 shareholders at the end of report term in thousand shares Total shareholders at the end of the report period 21,124 Full name of the Changed Shares Proportion Class of Pledged or Property of shareholder in the year held at the % share frozen shareholder (shares) end of year Haikou Grocery Co., Ltd. N/A 60,000 16.48 Non-negoti 60,000 able China Great Wall Assets N/A 36,327 9.98 Non-negoti N/A State-owned Management Co., Ltd. able Hainan Shanya Yinnong N/A 9,900 2.72 Non-negoti N/A Industrial Development able Co., Ltd. Huaxia Securities Co., N/A 6,600 1.81 Non-negoti 6,600 Ltd. able Shanghai Jinxian N/A 4,973 1.37 Non-negoti N/A Investment Co., Ltd. able China International Trade N/A 3,960 1.09 Non-negoti N/A State-owned Trust & Investment Co., able Ltd. Hainan Chuangye N/A 3,894 1.07 Non-negoti N/A State-owned Venture Capital Co., Ltd. able Sanya Zhongxing N/A 3,630 1.00 Non-negoti N/A Development Co., Ltd. able Yangpu Jinyu Industrial N/A 3,366 0.92 Non-negoti N/A Co., Ltd. able China Agriculture Bank N/A 3,300 0.91 Non-negoti N/A State-owned Haikou Jinmao Branch able Sanya United Credit N/A 3,300 0.91 Non-negoti N/A able 3. The first shareholder and the 7th shareholder – Hainan Chuangye Venture Capital Co., Ltd. are related parties, they are under the controlling of Hainan Chuangye Venture Capital Co., Ltd. None of the other shareholders are regarded as “acting in concerts” in accordance with “The rules of information disclosure on change of shareholding.” 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 Chaungye Venture Capital Co., Ltd., and China Agriculture Bank Haikou Jinmao Branch. 4. Particulars about the controlling shareholder (1) The controlling shareholder z Name of the shareholder: Haikou Grocery Co., Ltd. z Legal representative: Fan Pingyue z Date of incorporation: August 28, 1998 z Registered capital: RMB113,693,900 z Major business: processing of animal and meat products, vending of frozen Grocerys and side 8 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) products of agriculture, refrigeration stoking, real-estate developing The shares held by the controlling shareholder has not been changed, all of the shares held are in pledge at December 31 2004. (2) Particulars about the practical controlling party z Nature person: Zhong Wenkui z Nationality: China z Obtain resident right in other nation or region: No z Occupation in latest 5 years: real-estate investment, enterprise investment, business operation and managment Profile of the practical controller: Mr. Zhong Wenkui, 47 of age, major background: use to be the vice chairman of Haikou Xingao Refrigeration Co., Ltd., currently he is the chairman of Hainan Juye Education Investment Co., Ltd. (3) Changing of controlling shareholder and practical controller of the Company The controlling shareholder and practical controller of the Company havn’t been changed during the report term. 5. Chart of relationships among the practical controller Zhong Wenkui 35% Hainan Chuangye Venture Capital Co., LTd. 69.4％ Haikou Grocery Co., Ltd. 16.48％ Hainan Dadonghai Tourism Center (Holdings) Co., Ltd. 6. The top 10 current-share holders at the end of 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 Li Jingji 761 7 Zhang Chi 760 8 Du Xuehui 668 9 TANG,LIXIN 609 10 Jiang Jianjun 597 9 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) 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.” V. Particulars about the Directors, Supervisors, Senior Executives and Employees (I) Directors, Supervisors and senior executives of the Company; Name Position Sex Age Job term Shares held at the Shares held Cause of beginning of term at the end of change term Li Yuanbin Director, Chairman M 53 2002.6-2005.6 0 0 - Fu Cai Director M 31 2002.6-2005.6 0 0 - Zheng Director M 45 2002.6-2005.6 2673 2673 - Jirong Huang Director M 34 2002.6-2005.6 0 0 - Qingwang Liu Juntao Director M 37 2002.6-2005.6 0 0 - Director, Vice GM, M 42 2002.6-2005.6 0 0 - Li Wei CFO Zhu Xinglie Director M 45 2002.6-2005.6 0 0 - Zhao Man Independent F 53 2002.6-2005.6 0 0 - Director Leng Independent M 50 2002.6-2005.6 0 0 - Mingquan Director Lin Kechang Independent M 61 2004.6-2005.6 0 0 - Director Huang Chairman of the M 36 2002.6-2005.6 0 0 - Wencai supervisory comission Li Caijie Supervisor M 42 2002.6-2005.6 0 0 - Wang Supervisor M 34 2002.6-2005.6 0 0 - Guobin Luo Supervisor M 59 2002.6-2005.6 0 0 - Wen’eng Yan Jianhua Supervisor M 42 2004.11-2005.6 0 0 - Wu General Manager F 29 2004.4-2005.6 0 0 - Yuanyuan Chen Vice General M 41 2002.6-2005.6 0 0 - Liurong Manager Wu Secretary of the M 32 2004.4-2005.6 0 0 - Chongfeng Board 10 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) (II) Particulars about the directors and supervisors taking positions in shareholders Get remuneration Name Name of the shareholder Job taken Job term or not China Great Wall Assets Management Co., Vice department Since Feb. Zheng Jirong No Ltd. director 2001 Huang China Great Wall Assets Management Co., Assistant of Since Feb. No Qingwang Ltd. department director 2001 Hainan Shanya Yinnong Industrial Since May Fu Cai Manager Yes Development Co., Ltd. 2003 Since Zhu Xinglie Sanya Zhongxing Development Co., Ltd. Manager No Aug. 1992 Huang Since Jun. Haikou Grocery Co., Ltd. Director No Wencai 2004 Wang China Industry & Commercial Bank Hainan Since July Deputy director No Guobin Trust Investment Co., Sanya Office 2004 (III) Major background of the directors, supervisors, senior executives and jobs taken in parties other than shareholding parties Directors Liang Yuanbin: Male, 53 years old, MBA degree, senior engineer. Mr. Liang once held the position of chairman of board of Haikou Haiyuan Co., and the position of director and general manager of Yangpu TIandi Sunshine Industry Co., he was held the position of chairman of board since April 2004 of the Company. Fucai: Male, 31 years old, university degree, economist, Mr. Fu once held the position of international balance people of Sanya agriculture sales department, vice general manager of Sanya agriculture sales department, vice general manager (principal) of Hainan Sanya agriculture bank industry development head office and was held the position of director of the Company since April 2004. Zheng Jirong: Male, 45 years old, university degree, party member, accounting, Mr. Zheng once held the position of director and director of accounting department of Hexi office of Sanya agriculture bank, president of Ledong county agriculture bank, vice director of Haikou office of China Great Wall Assets Management Co., team leader of Sanya project team and was held the position of director and vice chairman of board of the Company since 2002. Huang Qingwang: Male, 34 years old, economist. Mr. Huang once worked in customer manager department, credit department, futures trade office of sales department and Longkun branch office of sales department of Agriculture band, he once held the position of vice general manager, general manager, and director and vice general manager of of Hainan Dadonghai Traveling Co. Ltd, and assistant of integration department of China Great Wall Assets Management Co., he was taking the position of director of the Company since 2002. Liu Juntao: male, 37 years old, university degree, economist. Mr. Liu once held the position of director and worked in Gansu Construction Bank system and vice bank chairman of Construction Bank banch, secretary of the Board of Director of Haikou agriculture industry and trade (Luo Niushan) Co. Ltd., vice general manager of Hainan Dadonghai Traveling Co. Ltd., he was held the position of director of the Company since 2002. Liwei: male, 42 years old, graduate degree, CPA, Party member. Mr. Li once held the position of finance director of Yingshan county silk making Co., director and vice director of Yingshan county auditing office, bailiff of Yingshan county Chengguan county, supervisor of Hainan province internal auditing institute, he was held the position of finance majordomo, vice manager and finance majordomo. Zu Xinglie: male, 45 years old, university degree, economist and Zheng Gong professional, Mr. Zu once held the position of general manager of Sanya city Zhongxing development Co., he was held the position of director of the Company since 2002. Independent Directors 11 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) Zhaoman, female, 53 years old, doctor degree, tutor of doctorial degree, Ms. Zhao once held the position of vice-president of finance and public management college of Zhongnan finance and political university, independent director of Changjiang communication Co. Ltd. and Fuxing science and technology Co. Ltd, independent director of Wuahn Zhongshang Shopping Mall Co., Ltd., she was held the position of independent director of the Company since 2002. Leng Mingquan: male, 50 years old, graduate degree, Mr. Leng once held the position of secretary of Suizhou city propagandize department, director of cooperation office of Suizhou government, director of Suizhou city Haikou office, vice director and secretary, legal representative of Hainan entrepreneur institute, political commissary of the 3rd term of Hainan province and vice director of Hainan Motions Examination Committee, he was held the position of independent director of the Company since 2002. Supervisors Huang Wencai: male, 36 years old, university degree, Mr. Huang once held the position of vice director of Haikou meat association factory, director of Haikou food Co. Ltd. and assistant of general manager of Haikou food Co. Ltd., he was held the position of the Company since 2002. Li Caijie: male, 42 years old, university degree, accountant, Mr. Li once held the position of office director, secretary of the Board of Director and representative of securities transaction of Hainan Dadonghai Traveling Co. Ltd., he was held the position of director of the Company since 2002. Wang Guobin: male, 34 years old, university degree, Mr. Guo once held the position of vice director and director of Commercial Bank of China Sanya Branch Yacheng Office, once work in Commercial Bank of China Liaoning Branch Credit office and manager of credit office of Commercial Bank of China Sanya city branch, he was held the position of director of the Company since 2002. Luo Wenen: 59 years old, assistant economist, college degree. Mr. Luo once held the position of general manager of Sanya Jindelai industry development Co., he was held the position of the Company since 2002. Yan Jianhua: male, 42 years old, graduate degree, CPA title, Mr. once worked in railroad No. 1 department Xinyun office, audit office, Xi’an CPAs special office of State Audit department Xi’an Bench, Shanxi Gongxin CPAs, Zhongya affiance and New Century Real Estate Development Co. from 1981-1995 and held the positions of Secretary, director, office director, finance director and general manage; he worked in Shanya Zhongya Hotel and Haikou Xinyuan Hot Spring Hotel as vice general manager, general management, vice chairman of the board and executive general manager of Sanya South China Hotel; He is now taking the position of general manager of Sanya South China Hotel and he was held the position of supervisor of the Company since 2004. Other Senior Managemant People Wu Yuanyuan: Female, MBA degree, Ms. Wu once held the position of chief auditor of auditing consulting department of DEqin CPAs Beijing Branch, director of Hubei Guangji Medicine Co. Ltd. and teacher of China Geology University, she was held the position of general manager of the Compoany since April 2004. Chen Liurong: male, 41 years old, university degree, accountant, Mr. Chen once held the position of vice finance manager, manager and assistant of general manager of Hainan Dadonghai Traveling Co. Ltd. and he is now taking the position of vice general manager of Hainan Dadonghai Traveling Co. Ltd. Wu Congfeng: male, 32 years old, Party member, gradate student of Zhongnan Finance and Economic University, he was once held the position of teach, lawyer, manager of stock department of Haikou agriculture industry and trade (Luo Niushan) Co. Ltd. and securities transaction representative, he was held the position of secretary of the board of director of the Company since April 2004. (III) Annual Reward Status 1. The reward of directors, supervisors and senior management people of the Company were identified according to the salary system and position of the Company. 2. Year 2004 total annual reward amount of directors, supervisors and senior management people of the Company was 12 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) RMB 348,000, the top 3 high reward directors’ total reward amount was RMB 176,000, the top 3 high reward supervisors’ total reward amount was RMB 176,000 and the allowance for independent director per year was RMB 12,000. 3. The reward distribution of directors, supervisors and senior management people every year was: 6 people had RMB 40000-RMB 60000 of the annual reward, 1 people had RMB 20000-RMB 40000 of the annual reward and 1 people had under RMB 20000 of the annual reward. 4. Directors not getting reward from the Company: Zheng Jirong, Huang Qingwang, Liu Juntao and Zu Xinglie, supervisors not getting reward from the company: Huang Wencai, Wang Guobin and Luo Wenen, they are all getting rewards from shareholder organization or related organization. (IV) The resignation status of directors, supervisors and senior management people during the report term. 1. The Company passed the resolution on 9th meeting of the 4th term that agreed Mr. Li Shanhu resigned the post of director and chairman of the board, agreed Mr. Xiezhuang resigned the post of independent director, and agreed Mr. Chen Haixiong resigned the post of director. Mr. Lin Kechang was voted to be the independent director of the 4th term of the board of director, Mr. Fucai to be the director of the 4th term of the board of director and Mr. Li Yuanbin was voted to be the chair of the board of the 4th term of the board of director. 2. Ms. Ming Jinhua resigned the post of supervisor because of individual job translation and voted Mr. Yan Jianhua to be the supervisor of the 4th term of the supervisory Committee after the voting by Employee Congress. 4. The formed resolution of the 9th meeting of 4th term the Board of the Director meeting and recommended by Chairman Li Yuanbin that Mr. Wu Yuanyuan was recruited to be general manager and Mr. Wu Congfeng was recruited to be the secretary of the Board of Director of the Company, agreed Mr. Liu Juntao resigned the post of vice general manager and secretary of the Board of Director. (V) The Employee Status The total number of employee of the Company within the report term was: 258, thereinto: Service people 132, Finance people 28, Technical people 60, Administration people 38, the university degree number occupied 23% of total number of employees and there was no retire employees. 13 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) VI. Management Structure (I) Company Administration 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. 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. With regarding of performance assessment and motivation mechanism The Company adopted a rigorous procedure on recruiting of senior management. People passed the procedure are sent to relative business departments or subsidiaries to build up their experience in the Company. They will be nominated by the GM and approved by the Board when proved to be fully qualified for the leading positions. The Company has a clear assessment system as well. At the beginning of each year, the business target was distributed to each senior executive in accordance with 14 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) his/her area. Relative assessment standards were produced accordingly. Assessment will be performed at the end of term and the results will be the basis of deciding whether he or she will be promoted or demoted. The motivating system is with regarding of aspects of career, economical and mental needs of the senior executive. 6. With regarding of 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 information of the Company equally. 7. With regarding of associated interests The Company fully respects and protects the legal interests of each relative party. With pursuing the balance and concordance among the shareholders, employees, and every aspects of the society, the Company is looking for a consistent and healthy development. (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. They are doing their duties upon sincerity and diligence. 1. Independent directors’ presenting of board meetings Name of Independent Times of board meetings Presented Presented by Absented Director to present personally proxy Leng Mingquan 4 4 0 0 Lin Kechang 4 2 0 2 Zhao Man 4 3 1 0 2. Objection upon relative events raised by the independent directors None of the 3 independent directors raised any objection upon any proposals of the board meeting or proposals beyond the board meeting. (III) Particulars about the “5-seperation” with the controlling shareholder 1. In aspect of business: the company has its independent and complete business operation capability. No competition exists between two of the entities by running same or similar businesses. The controlling shareholder made no interfering on the Company’s operation, neither directly nor indirectly. 2. In personnel: The labour management, personnel and salary management are operated independently. All of the managers, vice managers, accountants and senior managements get remuneration from the Company. 3. In assets: The Company is possessing and controlling over all of the assets belong to the Company. The controlling shareholder is not occupying any capital or asset of the Company. 4. In organization: The company has a mature and independent organization structure, including the 15 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) Board, the Supervisory Committee, and the General Manager, which completely separated from the controlling shareholder. 5. In accounting: The company has its own independent accounting division, accounting system, bank account, and exercise its liability of taxation independently. (IV) Assessment, motivation, and rewarding mechanism for senior executives The Company adopts the assessment mechanism on the senior executives’ performance and fulfilling of duties at both monthly and annually basis. VII. Particulars about the Shareholders’ Meeting The Company announced holding of the Shareholders’ General Meeting 2003 on the April 22, 2004 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 25th, 2003. 3 shareholders presented the meeting representing 97,647,000 shares (takes 26.82% 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. The Board of Directors work report for year 2003. 2. The Supervisory Committee work report for year 2003. 3. The Annual Report 2003 of the Company and the summary version; 4. The financial settlement report for year 2003. 5. Dividend distribution proposal for year 2003. 6. The proposal on drawing of impairment provision on the land using rights. 7. The proposal on drawing of impairment provision on the land exchanging certificate. 8. The proposal on drawing of impairment provision on the assets and writing off of long-term amortizable expenses. 9. The proposal on revising the Article of Association. 10. The proposal on drawing of impairment provision on the land exchanging certificate. The above resolutions were published by June 25th 2004 issues of Securities Times and Hong Kong Commercial Daily. Altering of Directors and Supervisors 1. As the proposal of altering the director adopted by the Shareholders’ General Meeting 2003, Mr. Xie Zhuang was approved to resign from the position of independent director, and Mr. Li Shanhu and Mr. Chen Haixiong were approved to resign from the positions of directors. Mr. Lin Kechang and Mr. Fu Cai were elected the independent director and director of the 4th term of Board respectively. 2. On Dec. 3rd, 2004, Ms. Jin Minghua applied to resign from the position of employee supervisor due to movement of job. Mr. Yan Jianhua was elected the employee supervisor by the employees’ delegate conference. 16 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) VIII. Report of the Board (I) Business operation and performance of the Company The major business income of year 2004 was about the same with last year. If regardless the contracted restaurant of the hotel, the major business income has increased slightly over that of the last year. But the overall business result was still negative. The followings are the major aspects that influenced the result: (1) For the past few years, the Company has increased the investment in reconstruction of South China Hotel, which including redecoration of the out wall, some of the villas and hotel rooms, changing of TV sets and air-conditioners. The business environment was improved, and brought increasing in guest flow over year 2003. Though for the recent years, the number of star-ranked hotels and hostels was increasing sharply, which was making the market competitive more and more severe. The rent rate was falling for successively several years. The hotel income only increased in small scale though the guest flow increased significantly. (2) Shift the business strategy to cutting down cost by the mean time of increasing output. Since 2004, the hotel has leased the profit-losing department out, which may reduce the internal costs. This has brought good economical effect to the Company. (3) In the 1st half of 2004, the government of Sanya city performed macro adjustment on the prices of tourism market. That caused major loss in tour groups during May and June over the whole city. The strike of tour guides occurred in October has influenced the local market on certain level. (4) No practical progress was made on business reconstruction and debt reconstruction in 2004. The business income was not changed significantly. The debt burden was still heavy. The Company will keep forward on improving the hotel facilities and enhance training on increasing service standard. The staffs of the Company will do everything possible to achieve better results in year 2005. (II) Business Situation of the Report Term 1. Major business range The business range of the Company covers: developing of real-estate, hotel & food services, tour services, photographing, gardening, crop & oil products, textile, general retailing, hardware and electronics, commodity, industrial materials, metal materials, machinery equipment, and tickets agents. 2. Business operation (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 assures the normal operation of the company, and make positive negotiation with creditor. So, the foundation was built for future liability restructuring. (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 17 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) forms a business situation of special operation, normal service and bilateral enhancing to perfect the business environment of the company. For year 2004, the Company realized major business income of RMB13,354,000, gross profit ratio of 96.55%, and major business profit of RMB12,159,000, well the net profit of RMB(14,213,000). 3. Distribution of major business income and profit on industrials, products and regions. (RMB’000) Gross Major business cost Major Major Increase/decrease profit increased/decreased Gross profit ration On industries business business of major business ratio over corresponding increased/decreased turnover cost turnover (%) % term Hotel and 13,354 461 96.55 0.16 (68.45) 8.62 recreation service Total 13,354 461 96.55 0.16 (68.45) 8.62 Incl. Related 20 100.00 transaction Gross Major business cost Major Major Increase/decrease profit increased/decreased Gross profit ration On products business business of major business ratio over corresponding increased/decreased turnover cost turnover (%) % term Hotel and 13,354 461 96.55 0.16 (68.45) 8.62 recreation service Incl. Related 20 100.00 transaction Total 13,354 461 96.55 0.16 (68.45) 8.62 Major business Regions Increase/decrease of major business turnover (%) turnover Sanya 13,354 0.16 4. The market share of major products or services Hotel and recreation services are the only business that takes over 10% of the major business income and profit. It is in the business of tourism. The following is the status of the major products: Market share Sales income On products Sales cost RMB’000 Gross profit ratio % (%) RMB’000 Hotel and recreation 13,354 461 96.55 service 5. No major movement occurred on the major business structure and profitability during the report term comparing with the previous report term. 6. Business operation and performance of major controlled subsidiaries and shareholding subsidiaries (1) South China Hotel is the subsidiary owned by the Company completely. Mainly involved in hotel, restaurant, and tourism services. It realized major business turnover of RMB12,231,000 which decreased by 15.76% and count for 91.58% of the overall turnover. (2) Sanya Branch is another subsidiary owned by the Company completely. It is mainly involved in tourist services. It realized major business turnover of RMB1,123,000 which increased by 17.94% and count for 8.42% of the overall turnover. 7. Major vendors and clients The purchases from top 5 vendors were amounted to RMB1,310,000, count for 52.61% of the total purchasing of the year. Whereas the sales to top 5 clients were estimated to RMB1,080,000 and count 18 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) for 8.10% of the total sales. 8. Problems and difficulties encountered and solutions In the business of 2004, the business environment was not changed. The market occupation rate was still low and the business operation was still in great difficult. With the difficulty and no progress from liability restructuring, as well as influence of severe environment, the main business turnover realized no significant growth. Facing the problems and difficulties, the company enforced the strengths of adjustment and negotiated with creditor to make a progress of restructuring work and increase income, reduce the fiscal expenses. 9. No profit prediction was made for the current year. (III) Investment in the report term 1. No project invested by raised capital during the report term. 2. No project invested by non-raised capital during the report term either. (IV) Financial position (1) Main fiscal index and causes of increase or decrease in report period - RMB’000 Items Year 2004 Year 2003 Movement % Cause of change Gross Assets 147,388 154,934 (4.87) Loss and disburse of payables Shareholders’ (54,903) (42,624) (28.81) operational loss equity Net profit Impairment provisions drawn (12,279) (54,752) 74.04 on land using in previous year Major business Increasing of hotel rent and profit 12,158 11,137 9.17 reducing of internal cost of restaurant Net increasing of cash and Costs and decreasing of 1,283 (4,612) 127.82 cash payables equivalents (V) No significant changes occurred on the macro environment, and governmental policies and regulations. (VI) Changing of accounting policies and estimations and correcting of accounting errors No changing of accounting policies and estimations or correcting of accounting errors occurred during the report term. (VII) Statement of the Board on the auditing report issued by the CPAs with “unable to form an opinion”. 1. Issues involved in the auditors’ report and the basic opinions of the auditors As more fully explained in note 2 to the financial statements, although the Company reported net current liabilities of RMB181,886,000 and net liabilities of RMB54,903,000 as of 31 December 2004, 19 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) 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, to reduce the value of assets to their recoverable amounts and, to provide for any future liabilities which might arise. Such adjustments may have a consequential significant effect on the Company's net liabilities as of 31 December 2004 and its loss for the year then ended. We consider that appropriate disclosure have been made but the inherent uncertainty surrounding the circumstances under which the Company might successfully continue to adopt going concern basis 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 state of the Company's affairs as of 31 December 2004 or of its loss for the year then ended in accordance with International Financial Reporting Standards. 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 2004 in accordance with International Financial Reporting Standards. 2. Statement of the Board, Supervisory Committee and senior management on the matters referred to by the auditors’ report The Board of directors, supervisors and the management 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 retrospective adjustment on all kinds of tracking allowance based on the increase of suppositional profit according to the law from 1993 to 1997; 3. Measurement to offset the impact of above issues (1) The new management team will concentrate on expanding 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 unfavourable 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) Sanya Branch Company will do its best to employ capital on developing of new projects. (3) Keep improving financial management, enforcing clearing of receivables and controlling of costs and expenses. (4) Start up operation or disposal of bad assets. (5) Get every possible assistant on the negotiation with Sanya branch of Agricultural Bank of China, Haikou Nanhang Branch of Agriculture Bank, China Xinda Capital Management Company and China Eastern Property Management Company on the plan of debt restructuring. (6) Make great efforts to gain the capital of shareholder, other guarantee measurement and support 20 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) from government department. (VIII) Business plan for year 2005 1. Do everything possible to obtain support from the shareholders and government to push forward the debt restructuring process. Enforce communication and negotiation with the government department and relative creditors, carry out relative capital restructure and debt offsetting plans. Completely get away from the loss from accumulation of negative assets. Do every effort to complete the debt restructuring work to lay a good foundation to turn the negative position around. 2. Concentrate on development and target on increasing business performance and reducing of liabilities. Keep following with the relative laws, regulations and the Article of Association of the Company, do every effort to improve the financial situation and turn around the negative operation. 3. Fully develop the advantages and optimize resources available. Start up supplementary businesses and new businesses to raise new profit points. 4. Increasing of major business turnover (1) The new management team will concentrate on expanding 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 unfavourable 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) Stress on the specialized operation and standardized services. Enhance the optimising and maintaining of accessory facilities and surroundings. Improve the competitive of hard wares of the hotel. Promote people-centred management, recruit experienced stuffs. Fully develop the overall standard of the employees to upgrade the management and image of the hotel. 5. Continue to strengthen the financial administration. Intensive controlling on the budget, fully adopt cost management process. Push forward to clear up debts and control the cost &expenses. 6. Take charge of the standardization, institutionalised, standardized management severely and do a good job of disclosure of information and " three meetings " work. (IX) Daily work of the Board 1. Particulars about the board meetings and resolutions (1) The 9th meeting of the 4th term of Board was held on April 13th 2004. The following resolutions were examined and passed: ① The Board of Directors’ working report for year 2003. ② Financial settlement report for year 2003 ③ Dividend distribution plan for year 2003; ④ The proposal on drawing of impairment provision on the assets and writing off of long-term amortizable expenses. ⑤ Special statement of the Board of Directors on the auditor’s report issued by the CPAs with “unable to form an opinion”; ⑥ Annual Report 2003 and summary ⑦ The proposal on revising the Article of Association. 21 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) ⑧ The proposal on redecoration and reconstruction of South China Hotel ⑨ The proposal on changing of directors; ⑩ Proposal on holding of shareholders’ general meeting 2003 (2) The 10th meeting of the 4th term of Board was held on April 20th 2004. The first quarterly report 2004 was examined and passed: (3) The 11th meeting of the 4th term of Board was held on August 19th 2004. The following resolutions were examined and passed: ① The Semi-annual Report 2004 and summary; ② The proposal on drawing and writing off of impairment provision on the asset; ③ Inspection report on account receivables and other receivables. (4) The 12th meeting of the 4th term of Board was held on October 14th 2004. The 3rd quarterly report 2004 was examined and passed: (IX) Execution of the resolutions of shareholders’ general meeting by the Board The Board of Directors has been implementing all of the resolutions adopted by the Shareholders’ Meeting in the report term. None of dividend distribution and capitalizing of common reserves will be carried out during the year of 2004. None of share allotting and issuing of new shares been implemented during the report term. (X) The proposal of dividend distribution and capitalizing of common reserves for current year The net profit distribution in 2004 is RMB(14,213,000) in accordance with auditing of Hainan Congxin Certified Public Accountants and Grant Thornton Certified Public Accountants , together with undistributed profit in 2003 RMB(54,752,000). The distributable profit for shareholders of this year is RMB (472,570,000). The Board of directors has decided that neither profit distribution nor capitalizing of reserves will be implemented for the Company was still in losing position for the current year. (XI) Newspapers Designated for Information Disclosing: Securities Times, Hong Kong Commercial Daily 22 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) IX. Report of the Supervisory Committee (I) Daily work of the Supervisory Committee The committee held 2 meetings during the report term. 1. The 7th meeting of the 4th term of committee was held on April 13th 2004, the following resolutions were examined and passed: (1) The Supervisory Committee work report for year 2003. (2) Annual Report 2003 and the summary; (3) The proposal on drawing of impairment provisions on land using right; (4) Statement of the Board of Directors on the issues involved in the auditors’ report; 2. The 8th meeting of the 4th term of committee was held on August 19th 2004, the Semi-annual Report 2004 was examined and passed: (II) Independent statement of the Supervisory Committee 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 specified 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 opinion of the Supervisory Committee, the Company conducted its operation in a standardized way, implemented 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 the interests of the Company. 2. Financial Inspection Hainan Cong Xin Certified Public Accountants and Grant Thornton Certified Public Accountants audited the Company’s 2004 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. 23 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) 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 2004 Financial Statements, 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. 24 Hainan Dadonghai Tourism Center Holdings Ltd. Annual Report 2004 (International) X. Significant Events (I) Material Lawsuits and Arbitrations In the report period, the Company had no material lawsuits or arbitrations. (II) In the report period, the Company had conducted no such activities as assets acquisition, selling, takeover or consolidation. (III) Related transactions In the report term, China Great Wall Asset Management Company, the 2nd shareholder, incurred RMB20 thousand of consuming expenses in South China Hotel. Till present, this company has a balance of debt amounted to RMB67 thousand. These transaction was on market price and made no material influence on the business results and financial position of the Company. (IV) Material Contracts in the Report Period 1. The Company has never been involved in such events as keeping as custodian, contracted or leased any other company’s assets and vice versa in the report period or extended from the previous years. 2. In the report period, the Company had no material guarantees offered or any guarantee which had not been implemented. 3. 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. 4. No other material contract occurred in the report term. No situation of capital adopting by controlling shareholders or subsidiaries exists in the Company. (V) Commitment of the Company and its shareholders holding over 5% of the Company’s total shares occurred in the report term. No commitment of the Company and its shareholders holding over 5% of the Company’s total shares occurred in the Annual Report 2004. (VI) Particulars about the CPAs 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 4 years and the Company paid the remuneration totally RMB 320,000.00 to these two certified public accountants for the report year. (VII) Penalty, criticizing or condemn from the stock exchange In the report period, the Company, the Board of Directors or any director had 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 both in English and Chinese. When there is any conflict in understanding, the Chinese version shall prevail. 25 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. XI. Financial Report Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Report and Financial Statements For the year ended 31 December 2004 Contents Auditors' report 1 Statement of income 2 Balance sheet 3 Statement of changes in equity 4 Cash flow statement 5 Notes to the financial statements 6 Expressed in Renminbi Yuan ("RMB") 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 were engaged to audit accompanying balance sheet of Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (the "Company") as of 31 December 2004, and the related statements of income and cash flows for the year then ended. The financial statements as set out on pages 2 to 20 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 RMB181,886,000 and net liabilities of RMB54,903,000 as of 31 December 2004, 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, to reduce the value of assets to their recoverable amounts and, to provide for any future liabilities which might arise. Such adjustments may have a consequential significant effect on the Company's net liabilities as of 31 December 2004 and its loss for the year then ended. We consider that appropriate disclosure have been made but the inherent uncertainty surrounding the circumstances under which the Company might successfully continue to adopt going concern basis 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 state of the Company's affairs as of 31 December 2004 or of its loss for the year then ended in accordance with International Financial Reporting Standards. 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 2004 in accordance with International Financial Reporting Standards. Grant Thornton Certified Public Accountants Hong Kong 11 April 2005 1 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Statement of income for the year ended 31 December 2004 Notes 2004 2003 RMB'000 RMB'000 Turnover 4 13,354 13,333 Cost of sales (1,196) (2,196) Gross profit 12,158 11,137 Other revenue 5 2,268 438 Selling expenses (10,361) (11,030) General and administrative expenses (7,453) (12,474) Impairment charges on land use right - (12,305) Impairment charges on land exchange right - (21,586) Loss from operations 6 (3,388) (45,820) Net finance costs 7 (8,891) (8,932) Loss before taxation (12,279) (54,752) Taxation 8 - - Loss for the year (12,279) (54,752) Loss per share (RMB Fen) 9 (3.37) (15.04) 2 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Balance sheet as of 31 December 2004 Notes 2004 2003 RMB'000 RMB'000 ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 10 91,738 97,940 Land use right 11 35,907 36,776 127,645 134,716 Current assets Land exchange right 12 9,251 9,251 Inventories 13 370 612 Trade and other receivables 14 3,136 3,814 Tax recoverable 4,630 5,468 Cash at banks and in hand 2,356 1,073 19,743 20,218 Current liabilities Bank loans 15 105,128 105,128 Trade and other payables 96,281 91,290 Finance lease – current portion 16 220 220 201,629 196,638 Net current liabilities (181,886) (176,420) Non-current liabilities Bank loans 15 - 35 Finance lease – non-current portion 16 662 885 662 920 Net liabilities (54,903) (42,624) CAPITAL AND RESERVES Share capital 17 364,100 364,100 Reserves 18 (419,005) (406,724) Capital deficits (54,903) (42,624) __________________________ __________________________ Director Director 3 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Statement of changes in equity for the year ended 31 December 2004 Share Capital Accumulated capital reserve losses Total RMB'000 RMB'000 RMB'000 RMB'000 Balance 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 and at 1 January 2004 364,100 47,454 (454,178) (42,624) Loss for the year - - (12,279) (12,279) Balance at 31 December 2004 364,100 47,454 (466,457) (54,903) 4 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Cash flow statement for the year ended 31 December 2004 2004 2003 RMB'000 RMB'000 Cash flows from/(used in) operating activities Loss before taxation (12,279) (54,752) Adjustments for : Depreciation 4,606 5,103 Impairment charges on trade and other receivables 192 185 Amortisation of land use right 869 1,141 Impairment charges on land use right - 12,305 Impairment charged on land exchange right - 21,586 Interest income (2) (2) Interest expense 8,893 8,934 Loss on disposal of property, plant and equipment 396 4,181 Operating profit/(loss) before changes in working capital 2,675 (1,319) Decrease/(Increase) in trade and other receivables 486 (2,068) Decrease in inventories 242 1,245 Decrease in tax recoverable 838 543 Decrease in trade and other payables (2,611) (2,274) Cash generated from/(used in) operations 1,630 (3,873) Cash flows from investing activities Purchases of property, plant and equipment (708) (734) Proceeds from disposal of property, plant and equipment 751 71 Interest received 2 2 Net cash generated from/(used in) investing activities 45 (661) Cash flows from financing activities Repayment of bank loans (35) (53) Repayment of finance lease (223) (25) Interest paid (134) - Net cash used in financial activities (392) (78) Net increase/(decrease) in cash and cash equivalents 1,283 (4,612) Cash and cash equivalents at beginning of year 1,073 5,685 Cash and cash equivalents at end of year 2,356 1,073 5 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Notes to the financial statements for the year ended 31 December 2004 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, the PRC. The average number of employees of the Company during the year was 234 (2003: 267). 2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS As shown in the balance sheet, the Company reported net current liabilities of RMB181,886,000, net liabilities of RMB54,903,000 and accumulated losses of RMB466,457,000 as of 31 December 2004. Further, all of the bank loans have been overdue and the bankers and other lenders have demanded for repayment of the amounts due to them. The Company is in the process of negotiating with the bankers and other lenders to 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 debt restructuring agreement between the Company and its bankers and other lenders in order to enable the Company to continue as a going concern. The directors are of the opinion that the Company will be able to secure the ongoing support of its bankers and other lenders and to finalise the debt restructuring arrangements 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 debt restructuring arrangements are not successful. Should the Company be unable to successfully finalise the formal debt 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. 6 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 3. PRINCIPAL ACCOUNTING POLICIES The non-statutory financial statements are prepared under the historical cost convention and in accordance with International Financial Reporting Standards ("IFRS"). The basis of accounting differs from that used in the statutory financial statements of the Company, which are prepared in accordance with the Accounting Standards for Business Enterprises and the Accounting System for Business Enterprises promulgated by the State of the PRC. Adjustments incorporated to restate the financial statements for conformity with IFRS have not been taken up in the Company's books. The impact of the adjustments between the statutory financial statements and the non-statutory financial statements are summarised in note 21. The Company's operations are principally conducted in the PRC. Accordingly, the financial statements of the Company have been prepared in Renminbi Yuan ("RMB"), being the functional currency 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 of property, plant and equipment over their estimated useful lives 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 Entertainment equipment 16 years Motor vehicles 7-12 years Other equipment 8 years (ii) Measurement bases Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The cost of an asset comprises its purchase price and any directly attributable cost of bringing the asset to the working condition and location for its intended use. When assets are sold or retired, 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 pf income. 7 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (a) Property, plant and equipment (Continued) Construction in progress, which represents leasehold improvement under construction, and plant and machinery pending installation, is stated at cost less any impairment losses. Cost comprises direct costs incurred during the periods of construction, installation and testing. No depreciation is provided on construction in progress. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use. (b) Land use right Land use right is up-front payment to acquire long-term interests in the usage of land. It is stated at cost and is charged to the statement of income over the remaining period of the lease on the straight line basis, net of any impairment charges. (c) Land exchange right Land exchange right is stated at face value less provision for impairment loss where necessary. (d) Inventories Inventories comprise raw materials and supplies, purchased goods. At the balance sheet date, inventories are carried at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less any applicable selling expenses. (e) Trade receivables Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment of trade receivables is established when there is an objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowers. (f) Borrowing costs All borrowing costs are charged to the statement of income in the periods in which they are incurred. 8 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (g) 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 an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversal of impairment An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (h) Income tax Income tax comprises current and deferred taxes. Current tax is the expected tax payable on the taxable income for the year using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. The PRC corporate income tax is provided at rates applicable to an enterprise in the PRC on income for financial reporting purpose, adjusted for income and expenses items which are not assessable or deductible for income tax purposes. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. 9 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (h) Income tax (Continued) The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profit will be available. Deferred tax assets and liabilities are not discounted. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. (i) Retirement benefits Pursuant to the relevant regulations of the PRC government, the Company participates in a local municipal government retirement benefits scheme (the "Scheme"), whereby the Company is required to contribute a certain percentage of the basic salaries of its employees to the Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees of the Company. The only obligation of the Company with respect to the Scheme is to pay the ongoing required contributions under the Scheme mentioned above. Contributions under the Scheme are charged to the statement of income as incurred. There are no provisions under the Scheme whereby forfeited contributions may be used to reduce future contributions. (j) Recognition of revenue Revenue from hotel room and other ancillary services are recognised when the services are rendered. (k) 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. Exchange differences are dealt with in the statement of income. 10 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (l) 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. (m) 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 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. (n) Segmental reporting A segment is a distinguishable component of the Company that is engaged either in a particular business (business segment), or conducting business in a particular geographical area (geographical segment), which is subject to risks and rewards that are different from those of other segments. No segment information is presented in the financial statements as the Company only has hotel operation in the PRC and all assets are located in the PRC. (o) 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 statement of income 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. 11 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 3. PRINCIPAL ACCOUNTING POLICIES (Continued) (p) Cash and cash equivalents Cash comprises cash on hand and demand deposits repayable on demand with any bank or other financial institution. Cash includes deposits denominated in foreign currencies. Cash equivalents represent short-term, highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management are also included as a component of cash and cash equivalents for the purpose of the cash flow statement. 4. TURNOVER Turnover comprises hotel revenue and other ancillary services revenue. 5. OTHER REVENUE 2004 2003 RMB'000 RMB'000 Waiver of interest and other payables 1,932 - Others 336 438 2,268 438 6. LOSS FROM OPERATIONS 2004 2003 RMB'000 RMB'000 Loss from operations is arrived at after charging : Amortisation of land use right 869 1,141 Depreciation of property, plant and equipment - owned assets 4,391 5,085 - leased assets 215 18 Impairment charges on trade and other receivables 192 185 Loss on disposal of property, plant and equipment 396 4,181 Staff costs excluding retirement benefits 3,220 4,229 Retirement benefits 614 558 3,834 4,787 12 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 7. NET FINANCE COSTS 2004 2003 RMB'000 RMB'000 Interest expenses 8,893 8,934 Interest income (2) (2) 8,891 8,932 8. TAXATION No income tax has been provided in the financial statements as the Company did not derive any assessable profit for the year. Presentation between tax expenses and accounting loss at applicable tax rate : 2004 2003 RMB'000 RMB'000 Loss before taxation (12,279) (54,752) Tax on loss before taxation, calculated at the rate applicable to the tax jurisdiction which is 15% (1,842) (8,213) Tax effect of expenses that are not deductible in determining taxable profit - 5,449 Tax effect of income that are not taxable in determining taxable profit (330) - Unrecognised tax losses 2,172 2,764 Tax expense - - Deferred tax asset in respect of tax losses has not been recognised in the financial statements due to the unpredictability of future profit streams. The Company has unrecognised tax losses of RMB7,853,000 (2003 : RMB8,421,000) to carry forward against future taxable income. The tax losses will expire in five years under the current tax legislation. 9. LOSS PER SHARE Loss per share was calculated based on the loss for the year of RMB12,279,000 (2003 : loss of RMB54,752,000) and on the weighted average number of 364,100,000 shares (2003 : 364,100,000 shares). 13 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 10. PROPERTY, PLANT AND EQUIPMENT Plant and Entertainment Motor Buildings machinery Equipment vehicles RMB'000 RMB'000 RMB'000 RMB'000 Gross carrying amount 127,942 21,849 10,787 2,147 Accumulated depreciation (41,311) (13,765) (9,826) (1,902) Carrying amount at 1 January 2004 86,631 8,084 961 245 Gross carrying amount 125,205 21,441 8,831 1,450 Accumulated depreciation (43,784) (14,218) (8,010) (986) Carrying amount at 31 December 2004 81,421 7,223 821 464 The carrying amounts of property, plant and equipment for the periods presented in the financial stat follows: Plant and Entertainment Motor Buildings machinery equipment vehicles RMB'000 RMB'000 RMB'000 RMB'000 Carrying amount at 1 January 2004 86,631 8,084 961 245 Additions - separately acquired - 8 199 266 Assets disposed (2,050) (70) (121) - Depreciation (3,160) (799) (218) (47) Carrying amount at 31 December 2004 81,421 7,223 821 464 The cost of properties, plant and equipment includes an amount of RMB1,130,000, classified under "Pl finance leases (2003 : RMB1,130,000) and the related accumulated depreciation amounts to RMB233,0 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 11. LAND USE RIGHT 2004 2003 RMB'000 RMB'000 Opening net book amount, at 1 January 36,776 50,222 Amortisation for the year 869 1,141 Impairment - 12,305 \ Closing net book amount, at 31 December 35,907 36,776 Land use right represents the right to use the land at Sanya City for a period for 50 years from 1996 to 2046. 12. LAND EXCHANGE RIGHT 2004 2003 RMB'000 RMB'000 Cost less provision for impairment losses 9,251 9,251 Land exchange right represents the face value of a right which the Company can use as a cash coupon for 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 having been taken back by the authority. 13. INVENTORIES Inventories represent consumable store, food and beverage in relation to hotel operations and are stated at cost. 1 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 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 (2003 : RMB240,519,000), and a former related company, Hainan Dadonghai Tourism Industry (Holdings) Co., Limited of RMB54,723,000 (2003 : RMB54,723,000). 2004 2003 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 have no fixed terms of repayment. 15. BANK LOANS 2004 2003 RMB'000 RMB'000 Bank loans 105,128 105,163 Less : Current portion due within one year included under current liabilities (105,128) (105,128) Non-current portion included under non-current liabilities - 35 As of 31 December 2004, over 99% (2003 : 99%) of the bank loans were in RMB. The bank loans bear interest at rates of 5.33% to 7.56% per annum (2003 : 5.33% to 5.76%). Fair value of the above bank loans amounted to approximately RMB105 million (2003 : RMB105 million). Fair values of bank loans have been determined based on discounted cash flow using a discount rate based on the fixed effective market interest rates available to the Company at the balance sheet date. 2 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 16. FINANCE LEASE The Company currently has one finance lease agreement which relates to the Company's computer equipment for hotel operations. The assets are included under "plant and machinery" which form an integral part of "property, plant and equipment" (also see note 10). The obligation under finance lease as of 31 December 2004 is as follows : in the second within one year to fifth years Total RMB'000 RMB'000 RMB'000 Lease payments 360 1,046 1,406 Future finance charges (140) (384) (524) 220 662 882 The obligation under finance lease as of 31 December 2003 is as follows : in the second within one year to fifth years Total RMB'000 RMB'000 RMB'000 Lease payments 354 1,410 1,764 Future finance charges (134) (525) (659) 220 885 1,105 17. SHARE CAPITAL 2004 2003 RMB'000 RMB'000 Registered and fully paid : 109,857,000 Promoter shares of RMB1 each 109,857 109,857 121,143,000 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 3 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 18. RESERVES Capital Accumulated reserve losses Total RMB'000 RMB'000 RMB'000 Balance at 31 December 2004 47,454 (466,459) (419,005) Balance at 31 December 2003 47,454 (454,178) (406,724) 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 2004, various bankers and lenders have taken legal actions to request the Company to repay the amounts due to them. Land and buildings amounted to RMB70,708,000 (2003: RMB75,157,000) are pledged or sequestrated to various bankers and lenders to secure bank loans and other borrowings granted to the Company. 4 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 20. IMPACT OF IFRS ADJUSTMENTS ON LOSS FOR THE YEAR AND NET LIABILITIES Loss for the year Net liabilities 2004 2003 2004 2003 RMB'000 RMB'000 RMB'000 RMB'000 As reported in statutory accounts (14,213) (54,752) (54,903) (42,624) 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 1,934 - - - As restated (12,279) (54,752) (54,903) (42,624) 21. FINANCIAL INSTRUMENTS As at 31 December 2004, the Company's financial instruments mainly consisted of cash at banks and in hand, trade and other receivables, trade and other payables, bank loans and finance lease. (i) Interest rate risk The Company has no significant interest rate risk as interest rate is stable in the PRC currently. (ii) Foreign currency risk The Company has no significant foreign currency risk due to limited foreign currency trade related transactions. The Company does not use derivative financial instruments to hedge its foreign currency risk. The Company performs ongoing credit evaluation of its customers' financial position and requires no collateral from its customers. The allowance for doubtful debts is based upon a review of the expected collectibility of all trade receivables. 5 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 21. FINANCIAL INSTRUMENTS (Continued) (iii) Credit risks The Company's bank balances are maintained with state-owned banks in the PRC. The carrying amounts of the trade receivables and other receivables included in the balance sheet represent the Company's maximum exposure to credit risk in relation to the Company's financial assets. No other financial assets carry a significant exposure to credit risk. The Company has no concentration of credit risk due to its large customer base. (iv) Fair value The directors consider that the carrying amount of cash, trade and other receivables, trade and other payables and bank loans approximates to their fair value. No fair value changes have been included in statement of income for the year as non-current finance lease is carried at amortised cost in the balance sheet. 22. APPROVAL OF THE FINANCIAL STATEMENTS The financial statements on pages 2 to 20 were approved by the board of directors on 11 April 2005. 6 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. XII. Documents for Reference 1. Accounting Statements with signatures and seals of the legal representative, Chief Financial Officer and Manager of the Accounting Department; 2. Original copy of the Auditors’ Report under the seal of the CPA and signed by and under the seal of certified accountants. 3. All the originals of the Company’s documents and public notices disclosed in the newspapers designated by China Securities Regulatory Commission in the report period; The above documents are available in the Securities Office of the Company. The Board of Directors of Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. The Chairman: Mr. Li Yuanbin April 11th 2005 7