*ST东海B(200613)2005年年度报告（英文）

Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Annual Report 2005 (International) Report term: Year 2005 Contents I. Important notice and contents---------------------------------------------------- II. Company Profile-------------------------------------------------------------------- III. Summary of Accounting Highlights and Business Highlights------------ IV. Changes in Share Capital and Particulars about Shareholders---------- V. Particulars about Directors, Supervisors, Senior Executives and Employees-- VI. Administrative Structure -------------------------------------------------------- VII. Particulars about Shareholders’ General Meeting------------------------- VIII. Report of the Board of Directors-------------------------------------------- IX. Report of the Supervisory Committee---------------------------------------- IX. Significant Events----------------------------------------------------------------- XI. Financial Report------------------------------------------------------------------- XII. Documents for Reference ------------------------------------------------------ I. Important Note I. Board of Directors and Supervisory Committee of Hainan Dadonghai Tourism Centre (Holdings) Co.,Ltd. (hereinafter referred to as the Company) and its directors, supervisors and senior executives hereby confirm that there are no any important omissions, fictitious statements or serious misleading information carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. II. Director He Lanping was absent from the meeting due to the work, but entrusted Director Zhao Man to vote on her behalf. III. Hainan Chongxin CPA and Grant Thornton CPA issued unqualified with explanations of modified report. The Board of Directors and the Supervisory Committee have made detailed specification on the relevant matters; investors are suggested to read the relevant statements carefully. IV. Mr. Li Yuanbin, the Chairman of the Board, and Ms. Wu Yuanyuan, the General Manager, and Mr. Li Wei, the Chief Financial Officer hereby confirm that the Financial Report of Annual Report 2005 is authentic and complete. II. Company profile 1. Legal name in Chinese: 海南大东海旅游中心股份有限公司 Short form of the legal name in Chinese: 大东海 Legal name in English: Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Short form of the legal name in English: DADONGHAI, DADONGHAI-B 2. Legal representative: Li Shanhu 3. Secretary of Board of Directors: Wu Chongfeng Authorized Representative in Charge of Securities Affairs: Wang Hongjuan Contact Address: Dadonghai, Sanya Tel: 0898-88219888 Ext.8264 Fax: 0898-88212298 Email: hnddht@21cn.com 4. Registered address: Dadonghai, Sanya Office address: Dadonghai, Sanya Post code: 572021 E-mail: hnddht@21cn.com 5. Newspapers Chosen for Disclosing the Information of the Company: Securities Times (domestic) and Hong Kong Wen Wei Po (overseas) Internet Web Site for Publishing the Annual Report: http://www.cninfo.com.cn The Place Where the Annual Report is Prepared and Placed: Securities Department of the Company 6. Stock Exchange Listed with: Shenzhen Stock Exchange Short Form of the Stock: *ST Donghai A, *ST Donghai B Stock Code: 000613,200613 7. Other Relevant Information of the Company Initial registered date: April 26, 1993. Registered date after change: May 18, 2004 Registered address: Dadonghai, Hedong District, Sanya. Registered number for business license of the Company: 4600001003983 Registered number of taxation of the Company: 460200201357188 Domestic accountant engaed by the Company: Hannan Chongxin Certified Public Accountant Office address: Rom 1202, CMEC Building, Guomao Ave., Haikou, Hainan Overseas accountant engaged by the Company: Grant Thornton CPA Office address: 13th Floor, Gloucester Tower, The Landmark, 11 Pedder Street, Central, Hong Kong III. Summary of Accounting Highlights and Business Highlights I. Major profits index (Unit: RMB’000) Items Amounts Total profit 8,039 Net profit 8,039 Net profit after deducting non-recurring gains and losses (9,325) Profit form main operations 13,967 Other operating profit 46 Operating profit (9,325) Investment income - Subsidy income - Net non-operating income/expenses 17,364 Net cash flows arising from operating activities 6,907 Net increase/decrease in cash and cash equivalents 783 II. Items of deducting non-recurring gains and losses and the involved amounts are as following: (Unit: RMB’000) Items of non-recurring gains and losses Amount Net profit from non-operating activities 17,364 Including: Income from non-operating activities 17,407 Equity on transferring the land using rights 11,010 Switching back of the provision for devaluation 5,419 Income from compensation 352 Income from the disposal of fixed assets 16 Income from penalty 3 Others 607 Expenses from non-operating activities 43 Expenses from overdue fine and penalty 40 Expenses from donation 1 Expenses from compensation 2 III. Explanation on the difference in net profit as audited according to CAS and IAS respectively in the report period (Unit: RMB’000) Loss/gain in the report Net assets/liabilities period Differences by CAS and IAS Dec. 31 Ended as Dec. 31, 2005 2005 2004 2005 2004 Reported under CAS 7,494 (14,213) (46,864) (54,905) Influence amount of adjustment under International Financial Reporting Standard Interests of capital reserve of legal items and reducing of other payables transferred 545 1,934 - to the profit of current year Re-presented amount 8,039 (12,279) (46,864) (54,905) IV. Financial highlights of the previous 3 years (RMB’000) Item 2005 2004 2003 Income from main operation 14,789 13,354 13,333 Net profit 8,039 (12,279) (54,752) Total assets 159,273 147,388 154,934 Shareholders’ Equity (Excluding (46,864) (54,903) (42,624) minority shareholders’ interest) Earnings per share (RMB /share) 0.022 (0.034) (0.15) Net asset per share (RMB /share) (0.129) (0.151) (0.117) Net asset per share after adjustment (0.129) (0.151) (0.117) (RMB/share) Net cash flow arising from operating 0.019 0.004 (0.011) activities per share(RMB/share) Earnings on equity（%） - - - Weighted average earnings on equity calculated on the basis of the net profit - - - after deducting the non-recurring losses and gains（%） IV. Supplementary Form of Income Statement Earnings per share Earnings on equity (%) RMB/share) Profit of the report period Full weighted Full weighted diluted average diluted average Profit from main operations - - 0.0384 0.0384 Profit of operations - - (0.0256) (0.0256) Net profit - - 0.0206 0.0206 Profits after deducting the - - (0.0256) (0.0256) non-recurring gains/losses V. Changes of shareholders’ equity in the report period (Unit: RMB’000) Statutory Total of Share Capital Surplus Un-distributed Items public shareholders’ capital reserves reserves profit welfare equity Shareholders’ equity Amount in 364,100 47,454 - - (466,457) (54,903) year-begin Increase of the report - - - - 8,039 8,039 period Decrease of the report - - - - period Amount in 364,100 47,454 - - (458,418) (46,864) year-end Reasons for Realized change profits IV. Changes in Share Capital and Particulars about Shareholders I. Changes in Share Capital (1) Statement of changes in share Unit: Thousand Shares Increase/decrease of this time (+, - ) Before Capitalization After the the Share New Share of public shares Others Sub-total change change allotted offering issued reserve I. Unlisted Shares 1. Sponsors’ shares 109,857 109,857 Including: State-owned shares Domestic legal 36,327 36,327 person shares 7,353 7,353 Overseas legal person shares Others 2. Raised legal 121,143 121,143 person’s shares 3. Inner employees’ shares 4. Preference shares or others Total of unlisted 231,000 231,000 circulating shares II. Listed Shares 1. RMB ordinary 45,100 45,100 shares 2.Domestically 88,000 88,000 listed foreign shares 3. Overseas listed foreign shares 4. Others Total of listed 133,100 133,100 circulating shares III. Total shares 364,100 364,100 (2) All issuance and listing of shares in previous three years at the end of report period 1. At the end of report period, no shares issued in previous three years of the Company. 2. In the report period, no changes occurred in total amount and structure of shares of the Company. 3. There existed no inner employees’ shares in the Company. II. About shareholders (1) Particulars about the top ten shareholders of the Company at the end of report period Unit: Thousand Shares Total amount of shareholders 18,914 Particulars about shares held by the top ten shareholders Full name of the shareholder Proportion Class of share Numbers of Nature of Total of shares of shares non-circulating shareholder held held shares held Haikou Grocery Co., Ltd. legal person 16.48 60,000 60,000 60,000 share China Great Wall Assets State-owned 9.98 36,327 36,327 0 Management Co., Ltd. share Hainan Shanya Yinnong legal person Industrial Development Co., 2.72 9,900 9,900 0 share Ltd. Huaxia Securities Co., Ltd. legal person 1.81 6,600 6,600 6,600 share Shanghai Jinxian Investment legal person 1.37 4,973 4,973 0 Co., Ltd. share China International Trade State-owned 1.09 3,960 3,960 0 Trust & Investment Co., Ltd. share Hainan Chuangye Venture State-owned 1.07 3,894 3,894 0 Capital Co., Ltd. share Sanya Zhongxing legal person 1.00 3,630 3,630 0 Development Co., Ltd. share Yangpu Jinyu Industrial Co., legal person 0.92 3,366 3,366 0 Ltd. share China Agriculture Bank State-owned Haikou Jinmao Branch 0.91 3,300 3,300 0 share Particulars about shares held by the top ten shareholders of circulation shares Number of circulation shares held at the Shareholders’ name Type of shares year-end (full name) (A share, B share, H share or others) (Unit: Thousand Shares) LIU ZI LI 1,880 B share XIANG XING LIANG 1,068.85 B share LIU RONG 884 B share LI ZHAO 785 B share LI CHUN XIANG 761.39 B share LI JING ZHI 761.39 B share JIANG JIAN JUN 740 B share LIU YU QIN 701.6 B share ZHANG TING 696.115 A share HAN TIE FU 622.9 B share Among the ten shareholders, The first shareholder and the 7th shareholder – Hainan Explanation on associated Chuangye Venture Capital Co., Ltd. are related parties, which was under the control of Hainan Chuangye Venture Capital Co., Ltd. Other shareholders did not have relationships, relationship or consistent or belongs to the consistent actor regulated by the Management Measure of Information action among the aforesaid Disclosure on Change of Shareholding for Listed Company among the other shareholders. The Company is unknown whether there exists associated relationship or belongs to the shareholders consistent actor regulated by the Management Measure of Information Disclosure on Change of Shareholding for Listed Company among the other shareholders. (2) Particulars about controlling shareholder of the Company: 1. The controlling shareholder 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 and sales of live pigs, cattle, sheep; dealings of agricultural by-products; storage of frozen products; deep freezing products and development of real-estate. The shares held by the controlling shareholder has not been changed in the report period, all of the shares held are in pledge at December 31 2005. 2. Particulars about the actual controlling shareholder Nature person: Zhong Wenkui Nationality: P. R.C Obtain resident right in other nation or region or not: No Occupation in latest 5 years: real-estate investment, enterprise investment, business operation and management Profile of the acutual controller: Mr. Zhong Wenkui, aged 49, And major backgrounds: He once acted as the vice chairman of Haikou Xingao Refrigeration Co., Ltd., concurrently chairman of Hainan Juye Education Investment Co., Ltd. Now, he is chairman of Hainan Juye Education Investment Co., Ltd. 3. Changing of controlling shareholder and actual controller of the Company The controlling shareholder and actual controller of the Company havn’t been changed during the report period. 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. V. Particulars about the Directors, Supervisors and Senior Executives and Employees I. Particulars about directors, supervisors and senior executives 1. Basic information Holding share Holding share Reason of Name Title Gender Age Office term at the at the year-end change year-begin Chairman of Board June,2005- Li Yuanbin Male 55 0 0 _ of Director June, 2008 Zheng Vice Chairman of June,2005- Male 45 2673 2673 _ Jirong Board of Director June, 2008 Huang June,2005- Director, Vice GM Male 35 0 0 _ Qingwang June, 2008 June,2005- Fu Cai Director Male 34 0 0 _ June, 2008 June,2005- Liu Juntao Director Male 37 0 0 _ June, 2008 June,2005- Li Wei Director Male 44 0 0 _ June, 2008 Independent June,2005- Zhao Man Female 53 0 0 _ Director June, 2008 Leng Independent June,2005- Male 50 0 0 _ Mingquan Director June, 2008 Independent June,2005- He Lanping Female 48 0 0 _ Director June, 2008 Chairman of the Huang June,2005- supervisory Male 36 0 0 _ Wencai June, 2008 committee June,2005- Yan Jianhua Supervisor Male 43 0 0 _ June, 2008 Wang June,2005- Supervisor Female 29 0 0 _ Hongjuan June, 2008 Wu Apr., 2004- General Manager Female 30 0 0 _ Yuanyuan June, 2008 Chen Vice General June,2002- Male 41 0 0 _ Liurong Manager June, 2008 Wu Secretary of the Apr., 2004- Male 33 0 0 _ Congfeng Board June, 2008 2. Particulars about directors and supervisors holding the position in Shareholding Company Drawing the Title in payment from the Name Name of Shareholding Company Shareholding Office term Shareholding Company Company (Yes / No) Zheng China Great Wall Assets Management Vice department Since Feb. 2001 Yes Jirong Co., Ltd. director Huang China Great Wall Assets Management Assistant of Qingwan Since Feb. 2001 Yes Co., Ltd. department director g Hainan Shanya Yinnong Industrial Fu Cai Manager Since May 2003 Yes Development Co., Ltd. Huang Haikou Grocery Co., Ltd. Director Since Jun. 2004 Yes Wencai 3. Major backgrounds of the directors, supervisors, senior executives and jobs taken or concurrently taken in parties other than shareholding parties Directors Li Yuanbin: male, 55, MBA degree, senior engineer. He once held the position of Chairman of Board of Haikou Haiyuan Co. Ltd and Yangpu TIandi Sunshine Industry Co.,Ltd, chairman and general manager of the Company, he held the position of chairman of board since April 2004 of the Company. Zheng Jirong: Male, 45 years old, undergraduate degree, member of China Communist Party, accountant, 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, 35 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 standing 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, undergraduate 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 and Softto Co., Ltd and director of Guohai Securities Co., Ltd., he held the position of director of the Company since 2002. Liwei: male, 44 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 held the position of finance officer, vice manager and finance officer. Now, he is the financial officer in Hainan Medical College; he held the position of director of the Company since 2002. Fucai: Male, 34 years old, undergraduate 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. Independent Directors 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 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 held the position of independent director of the Company since 2002. He Lanping: female, 49, undergraduate degree, majored construction financing credit in Zhongnan University of Economics and Law, senior accountant; he took the post of chief and vice chief of office of management and head of construction department of Zhongnan University of Economics and Law; now he is head of financial department of Zhongnan University of Economics and Law and took the post of chairman of supervisory committee of the Company since 2005. Supervisors Huang Wencai: male, 36 years old, undergraduate 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 held the position of the Company since 2002. Yan Jianhua: male, 41 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 held the position of supervisor of the Company since 2004. Wang Hongjuan, 29 years old, undergraduate, she took the post of office director of Hubei Zhonghe Herbal Medicine Co., Ltd; now, she is the office director and manager of securities department of Hainan Dadonghai Tourism Center (Holding) Co., Ltd and took the position of supervisor of the Company since 2005. Other senior executives Wu Yuanyuan: Female, 30, MBA degree, Ms. Wu once held the position of chief auditor of auditing consulting department of Beijing Branch of Deloitte CPAs Ltd., director of Hubei Guangji Medicine Co. Ltd. and teacher of China Geology University, she held the position of general manager of the Company since April 2004. Chen Liurong: male, 41 years old, undergraduate 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 Tourism Center (Holding) Co., Ltd Wu Congfeng: male, 32 years old, member of China Communist Party, graduate 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 held the position of secretary of the board of director of the Company since April 2004. 4. Annual remuneration (1) According to the relevant regulations of China and actual conditions of the Company, the Shareholders’ General Meeting and Board of Directors of the Company made the allowance standard and remuneration standard on directors, independent directors, supervisors and senior executives; directors, independent directors, supervisors and senior executives drew their remunerations according to the relevant regulation made by Shareholders’ General Meeting and Board of Directors and their positions of the Company (2) According to the implementations of the directors, independent directors, supervisors, their business charges to Shareholders’ General Meeting and meeting of Board of Directors, and conduct their office rights according to the Articles of the Association should be apply for reimbursement from the Company. (3) All directors, supervisors and senior executives drew the annual remuneration from the Company in the report period as follows: Drew from other Total annual remuneration shareholder company No Title Title （RMB’0000） or other related organ or not Chairman of Board 1 Li Yuanbin 6.80 No of Director Vice Chairman of 2 Zheng Jirong 0.80 Yes Board of Director Huang 3 Director, Vice GM 0.80 Yes Qingwang 4 Fu Cai Director 0.80 Yes 5 Liu Juntao Director 0.80 No 6 Li Wei Director 2.67 No 7 Zhao Man Independent Director 1.20 No Leng 8 Independent Director 0.80 No Mingquan 9 He Lanping Independent Director - No Chairman of the Huang 10 supervisory 0.80 Yes Wencai committee 11 Yan Jianhua Supervisor 10.00 No Wang 12 Supervisor - No Hongjuan 13 Wu Yuanyuan General Manager 6.00 No Vice General 14 Chen Liurong 5.62 No Manager Secretary of the 15 Wu Congfeng 6.42 No Board Total 43.51 5. Leaving position and reason of directors, supervisors and senior executives in the report period (1) On June 16, 2005, the 2004 Annual Shareholders’ General Meeting on election of changes of the Company was held. The 5th Board of Directors of the Company was constituted with 9 persons, they are: Mr. Li Yuanbin, Mr. Zheng Jirong, Mr. Huang Qingwang, Mr. Liu Juntao, Mr. Fu Cai, Ms. Zhao Man, Mr. Leng Mingquan, Ms. He Lanping, of which, Ms. Zhao Man, Mr. Leng Mingquan, Ms. He Lanping are the independent directors of the 5th board of directors of the Company. (2) Approved by 2004 Annual Shareholders’ General Meeting on election of changes of the Company, Mr. Huang Wencai was elected supervisor of shareholders of the 5th Supervisory Committee, he, Mr. Yan Jianhua and Ms. Wang Hongjuan who elected in Employee Representative Conference were combined with the 5th supervisory committee. The 1st meeting of 5th supervisory committee elected Mr. Huang Wencai chairman of the 5th supervisory committee. (3) Mr. Li Yuanbin and Mr. Zheng Jirong were respectively elected chairman and vice-chairman of the 5th board of directors of the Company in the 1st Extraordinary Meeting of the 5th Board of Directors. (4) The board of directors of the Company agreed that Mr. Li Wei resigned his posts of deputy general manager and CFO of the Company due to changes of his work dated Apr. 11, 2005. (5) The board of directors of the Company agreed that Mr. Li Caijie resigned his post of representative of the securities department of the Company due to mobilization of his work. At the same time, Ms. Wang Hongjuan was engaged as the representative of securities department of the Company by the board of directors. II. Particulars about employees The total number of employee of the Company within the report period was: 252, including: Service people 129, Finance people 27, Technical people 58, Administration people 38, the undergraduate degree occupied 26% of total number of employees and there was no retire employees. VI. Administrative Structure I. In accordance with the regulations on the management of listed companies promulgated by CSRC, the real management status of the Company remained differences with the requirements of the relevant documents. According to ZJGSZ [2005] No. 15 Notification on Supervising and Urging the Listed Company to Revise Articles of Association, ZJF [2004] No. 118 Regulations on Strengthening the Protection of Social Public Shareholders’ Rights, ZJF [2001] No. 102 Opinions on Establishing Rules of Independent Director in Listed Company and Stock Listing Rules of Shenzhen Stock Exchange (the revision of 2004) promulgated by CSRC; in order to protect the legal rights of investors, especially the social public shareholders, combining with the real condition of the Company, in the report period, the Company successfully completed the revisions on Articles of Association, Rules of Procedure of the Board of Directors, Rules of Procedure of Supervisory Committee and Rules of Procedure of Shareholders’ General Meeting. In accordance with Code of Corporate Governance for Listed Companies in China, the real condition of the Company was basically same with the aforesaid code. For the future, the Company will perfect its legal administrative structure and regulate the operation of the Company abiding by relevant rules and laws. After the elections of changes, there were three independent directors in board of directors of nine with occupation of one third, and in accordance with the requirements on Opinions on Establishing Rules of Independent Director in Listed Company. II． Performance of Independent Directors (I) 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 in accordance with the relevant requirements on Opinions on Establishing Rules of Independent Director in Listed Company and Articles of Association. They issued independent opinions on the operation and significant decision upon sincerity and diligence in professional aspects. (II) In the report period, the attendances to meeting of Board of Directors by independent directors Name of Independent Times of board Presented Presented by Absented Director meetings to present personally proxy Leng Mingquan 9 9 0 0 He Lanping 9 9 0 0 Zhao Man 9 9 0 0 (II) 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 in the report period. III. Separation in businesses, personnel, assets, organization and finance of the Company and control shareholders 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 aspect of personnel: The labor management, personnel and salary management are operated independently from controlling shareholders. All of the managers, vice managers, accountants and senior managements get remuneration from the Company. 3. In aspect of assets: The Company is possessing and controlling over all of the assets belonged to the Company. The controlling shareholder is not occupying any capital or asset of the Company. 4. In aspect of organization: The Company has a mature and independent organization structure, including the Board, the Supervisory Committee, and the General Manager, which completely separated from the controlling shareholder. 5. In aspect of accounting: The Company has its own independent accounting division, accounting system, bank account, and exercises its liability of taxation independently. IV. Establishment and implementation on evaluation and encouragement mechanism of performance of senior executives (I) The Company persists with the principal of “Rooted on human”, hires the persons facing with the society, and chooses the best applicants under the premise of publicity, justice and fairness. The qualified applicants, who are nominated by general manager and with the approval of Board of Directors, will be hired officially. (II) The Company implements explicit evaluation, makes relevant evaluation method in accordance with the achievements and implementations of senior executives, and conducts monthly and annual evaluation meanwhile by higher management group or group of same level; the evaluation results will be taken as the evidence for the fluctuation of the positions and rewards and penalty of the senior executives. (III) The Company established the effective encouragement mechanism, including the material encouragement and spiritual encouragement; tries to conduct explicit rewards and punishments; the achievements and remunerations connect closely; superior win and the inferior wash out; all these are to make the senior executives to make progress unceasingly, improve own comprehensive abilities and create the fast development of the Company. VII. Particulars about Shareholders’ General Meeting On June 16, 2005 the Company held 2004 Annual Sharehoilders’ General Meeting and the resolution notice has been published on Securities Times and Hong Kong Commercial Daily and website http://www.cninfo.com.cn dated June 17, 2005. VIII. Report of the Board of Directors I. Discussion and analysis to the whole operation in the report period (I) The overall operation The Company is only one listed company with co-existing of A and B share, and takes tourism services as the main business. The main business scopes of the Company are: development and management of real-estate, lodgings and catering, tourism services, proxy in sales of locomotive and ship tickets, etc. In recent year, with the rapid development of Hainan tourism, the traveling market ifn Sanya is exuberant day by day. In 2005, the Company comprehensively adjust the ideas of work and management; on the one hand, the Company established complete management rule, fully strengthened the interior management, implemented increase of production but savings, increased income but reduced expenses, successfully resisted the attack of typhoon, and reduced the losses caused by it; on anther hand, the Company enlarged the transformation investment on hotel, renewed the operation facility, improved the operation environment, promoted the competitive forces, fully utilized the geographic position and environment superiority of the hotels of the Company, held the chances of One Hundred Anniversary of Golden Chicken Film Festival, Carnival of Hainan Island and Miss World, held all opportunities to improve the profit-gaining ability of main operation, which all made large growth of the hotel management. At the same time, the Company completed effectively the reorganization of part of debts and optimization of hotel management, reduced the burden of part of interest, created new growth of profit and made foundations for turning losses into gains for the Company in the report period. However, with the newly-increasing of star hotels and family hotels in Sanya, the supply of guest room sharply increased, the malign competitions by cutting prices in hotel industry became more intense, which all cause the price on room service management glided down year by year. Under the larger growth of guest room reception, the income from main operation just realized growth of 11%. In the report period, the Company realized income from main operation amounting to RMB 14,789,000 with a increase of 10.75% over the same period of last year; the profit from main operation amounting to RMB 13,967,000 with a increase of 14.88% over the same period of last year; net profits amounting to RMB 8,039,000 with a increase of 165.47% over the same period of last year. Because the main business of the Company had no substantive changed, the main reorganization of debts have not completed, the financial expense on annual interest amounted to RMB 8,360,000. Excluding the non-recurring losses and gains, the Company gained losses amounting to RMB 9,320,000 with a decrease of RMB 4,760,000 over last year. (II) Main business and operation 1. Classified according to industries and products (RMB’000) Classified according to industries Increase/de Increase/decr crease in Gross Increase/decr ease in profit ratio profit ease in cost income from from the Income from main Cost of main operations ratio of of main industries (RMB) main main operations (RMB) main operations operations operation operation over the last over the last over the (%) year (%) year (%) last year (%) Hotel services 14,789 9 94.44 10.75 -31.27 3.39 Total 14,789 9 94.44 10.75 -31.27 3.39 Classified according to products Hotel services 14,789 9 94.44 10.75 -31.27 3.39 Total 14,789 9 94.44 10.75 -31.27 3.39 2. Main operations in various areas (Unit: RMB’000) Increase/decrease in income from Areas Income from main operations main operations over the last year (%) 14,789 10.75 3. Major suppliers and customers The total purchase amount from the top five suppliers amounted to RMB 902,000 accounting for 62.72% of the Company’s total purchase amount of the year; the total sales amount to the top five customers amounted to RMB 1,311,000 accounting for 8.86% of the Company’s total sales amount. (III) Constitution of assets of the Company in the report period (Unit: RMB’000) At the end of 2005 At the end of 2004 Changes on Proportion Proportion proportion in Increase/decease Item Amount in the total Amount in the total the total asset proportion asset (%) asset (%) (%) Account 848 0.54 1,157 0.81 (0.27) (26.71) receivable Inventories 360 0.23 370 0.26 (0.03) (2.70) Long-term investment of - - - - - equity Fixed asset 87,140 55.72 91,588 64.32 (8.60) (4.86) Project in 209 0.13 150 0.11 0.02 39.33 progress Short-term 16,098 10.29 28,328 19.86 (9.57) (43.17) loan Long-term 87,964 56.25 83,760 58.72 (2.47) 5.02 loan Reasons for changes: (1) The reason for the decreasing of short-term loan was that Hainan Jingwei Investment Co., Ltd transferred the debts of Haina Hongkong Macau Trust& Investment Co., Ltd. (2) The reason for the increasing of long-term loan was that the relevant accrued interest for withdrawal of loans. (IV) Changes compared between period expense and income tax (Unit: RMB’ 000) Increase and increase and Item 2005 2004 decrease decrease amount proportion（％） Operating expense 8,780 10,361 -1,581 -15.26 Administrative 6,313 7,453 -771 -15.30 expense Financial expense 8,286 8,891 -605 -6.80 Income tax Reasons for changes: (1) The main reason for the decreasing of operating expense was that: RMB 1,020,000 in 2004 was listed for the expenses on renewing the exterior wall of the Company; in Apr. 2004, the Company began to take Food& Beverage Department of Hotel for external contract, and reduced the relevant 3 months expenses of Food& Beverage Department over the year of 2004. (2) The reason fro the decreasing of administrative expense was due to strengthen the expense management and save the expenses. (3) The reason for the decreasing of financial expense was that: Hainna Jingwei Investment Co., Ltd stopped counting interests of debts. (V) Changes of index on cash flow statement (Unit: RMB’000) Increase/ decrease Item 2005 2004 amount Net cash flow arising from 6,907 1,630 5,277 operating activities Net cash flow arising from 15,304 45 15,259 investing activities Net cash flow arising from (21,428) (392) (21,036) financing activities Reasons for changes: (1) The reason for the increasing of net cash flow arising from operating activities was that: Increase the drawing back of the accountant receivable (2) The reason for the increasing of net cash flow arising from investing activities was due to the sales of management of Lichee Park (3) The reason for the decreasing of net cash flow arising from financing activities was that: Pay the account payable in advance on debts reorganization of Hainan Jingwei Investment Co., Ltd, which acted as an agent of the Company. (VI) Business operation and achievement of the Company’s main holding subsidiaries and share-holding companies There were no net profit influenced by the investment income from single share controlling company or shareholding company which exceeding over 10% in the Company. Explanations: There were no net profit influenced by the investment income from single shareholding company which exceeding over 10% in the Company. II. Prospect for the future development of the Company (I) The development tendency in the industry of the Company and the market competition pattern the Company faced The Company is only one listed company with co-existing of A and B share, and has a long history, takes an important status in Saya tourism. However, the Company faced many difficulties in operations. First of all, the main assets of the Company are hotel whose operation lasted for ten years with obsolete equipment and facilities; compared with newly-built hotels, the operations were in disadvantageous status. In addition, in recent year, there are many hotels, family hotels emerging in Sanya, the guest room supply increased sharply to make the demand of tourism services in Sanya remain saturated conditions, the malign competitions by cutting prices in hotel industry became more intense, the operation price of room services glided down, local government has not yet formed regulated administration on local tourism, and the external environment of operation are not easily to predict. In the New Year, the Company will actively make endeavors, increase the investment on hotel, unceasingly perfect an renew the operation equipment of hotel, strengthen the technical training and improve the service quality, fully utilize the superior geographic position and natural environment, continuously implement “Increase production and save expense, increase income and reduce expense”, unite with all level of the Company, enhance the ability of main operations, and strive for the accomplishment of 2006 business plan. (II) The development strategy of the Company 1. To expand the strategy of brand: on the basis of stable operation, fully develop the superior resources like geographic and humane environments, strengthen the management, expand the domestic and international sales network, improve the market share and make the brand much bigger and stronger. 2. Release the burden left by the history: try to obtain the strong support from the local government, negotiate well with the creditors, seek for common ground when putting aside difference, eliminate or reduce the burden of debts left by the history while taking Share Merger Reform. 3. Attract merchants or bring in capital, expand the scale strategy of company: hold the chance, try to obtain all the cooperation chance available for the Company, implement the conformity, reorganization of optimization of assets or introduce investment of capital, enlarge the transformation on interior and exterior environments, promote the image of hotel brand to enlarge the scale of the Company. (III) Operation plan for New Year 1. Continue to strive for the support of the local government and shareholders, impel the process of Share Merger Reform and reorganization of debts, fulfill the relevant plans on asset reorganization and decreasing the debts, solve the problem left by the history to make foundations for the future operations and development of the Company. 2. Take development as the main line, “bring about economic income, reduce load” as target. Strictly in accordance with the requirements on relevant law, regulations, Articles of Association; regulate the operation, improve the profit-gaining ability of main operations, reduce expense and increase income, continue to improve the financial conditions to make sure of the unceasing operation ability of the Company. 3. To fully utilize the advantages of geographic position of hotel, optimize and conform the current resources. Strengthen the liquidation of assets and revitalization, strive for revitalizing the current inventory asset and operation items, and make the valuation of assets increase in flow, to develop new growth of profit. (IV) Demand of fund and using plan in the future development of the Company The Company collects its needed fund by its own fund and financings to complete its development plan of the Company. (V) Risks which would bring adverse effects to the realization of the future management strategy an operation goal of the Company 1. Risks by the natural disaster Hainan Island belongs to the marine climate, especially catastrophe weather occurs in summer, such as Sanya becomes the land for typhoon, and possibly creates big destruction to the facilities of the Company; thus it possibly influenced the normal operation of the operation of the Company. Countermeasures to be taken: Strengthen the construction and maintenance of infrastructure, continue to purchase insurance, take effective preventive measures, and improved the prevention on the natural disaster. 2. Risks of main operations In recent year, there are many hotels, family hotels emerging in Sanya, the guest room supply increased sharply to make the demand of tourism services in Sanya remain saturated conditions, the malign competitions by cutting prices in hotel industry became more intense, the operation price of room services glided down, and the external environment of operation are not easily to predict. Countermeasures to be taken: The Company continues to enlarge the transformation investment on the facilities and equipments of the hotel to improve the interior and exterior operation environment of hotel. Strengthen the technical training and improve the service quality, promote the competitive force in hardware and software of the hotel. Change the operation idea, enlarge the sales. On the basis of original sales network, utilize the advantages of closing to seas, unceasing develop senior domestic and international tourism market; improve the lodging ration and single room price, all to improve the integrated profits. III. Investment of the Company (I) Use of raised fund In the report period, there was no such situation that the application of raised proceeds in the report period or proceeds raised before the report period continuing to the report period. (II) Use of non-raised fund In the report period, there were no significant investing projects of non-raising funds IV. CPAs issued the unqualified with explanations of modified report, the Board of Directors of the Company made explanations on relevant matters 1. The matters concerned in auditor’s report and the basic opinions from CPA are as follows: The annual report was audited by Hainan Chongxin CPA and Grant Thornton CPA (International), which issued unqualified with explanations of modified report, with the details as followings: Certified Public Accountants issued unqualified audit report with explanatory paragraph Grant Thornton CPA thought, the aforesaid financial report has reflected the financial situation dated October 31, 2005 and profit and cash flow ended as of the disclosed date based on International Financial Report Standards with authentic and just & sound. Otherwise, the CPAs presented no qualified opinion so submit to pay attention to statement of attachment II, the net current liability and net liability of the Company respectively amounted to RMB 154,807,000 and RMB 46,864,000 on October 31, 2005. These condition and other items in statement of attachment II showed material uncertain elements existed or which would impact on capacity of the Company’s sustainable operation. 2. Explanations of the Board of Director of the Company in view of the continuous operation concerned in auditor’s opinions are as follows In aspect of debts reorganization, with the negotiation between the Company and creditors, the Company obtained understanding and support from most of creditors. The Company continued to negotiate with creditors, further conducted the debts reorganization, and tried to reduce the debts to the minimum in various methods. In aspect of main operation, the Company held the market chance of gradual flourishing of Hainan tourism, timely adjusted the marketing strategy, enlarged to develop the domestic and international tourism market. Attracting merchants and bringing in capital, enlarged to renew the investment on hotel and enhance its competitive forces. At the same time, improve the management, besides make the main business bigger and stronger, fully utilize the owned resources advantages, and enlarge the operation project to increase the business income. At the same time, obtain actively preferential policy from the relevant national department. In aspect of Share Merger Reform, the Company actively strove for obtaining support from the local government and shareholders, and strengthened the communication with shareholders of the Company to achieve common thoughts on preplan of Share Merger Reform. Through the common endeavors of the Company and the shareholders of the Company, preplan on Share Merger Reform could be smoothly implemented. Actively adopting various measures, try to deal well with main operations while getting hold of the works on asset reorganization, debts reorganization and Share Merger Reform; the Company anticipate improving the continuous operations as soon as possible. V. Routine work of the Board of Directors (I) In the report period, the meetings and resolutions of the Board of Directors: 1. The 13th meeting of the 4th Board of Directors It was held on April 11, 2005, the relevant resolutions were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn dated on April 13, 2005. 2. The 14th meeting of the 4th Board of Directors It was held on April 21, 2005, the relevant resolutions were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn dated on April 23, 2005. 3. The Extraordinary meeting of the 4th Board of Directors It was held on April 29, 2005, the relevant resolutions were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn dated on May 9, 2005. 4. The 1st Extraordinary meeting of T the 5th Board of Directors It was held on June 16, 2005, the relevant resolutions were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn dated on June 17, 2005. 5. The 2nd Extraordinary meeting of T the 5th Board of Directors It was held on August 4, 2005, the relevant resolutions were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn dated on August 6, 2005. 6. The 3rd Extraordinary meeting of T the 5th Board of Directors It was held on October 13, 2005, the relevant resolutions were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn dated on October 15, 2005. 7. The 4th Extraordinary meeting of T the 5th Board of Directors It was held on Nov. 16, 2005; the meeting examined and approved the proposal on Signing Agreement on Agency by Mandate. 8. The 5th Extraordinary meeting of T the 5th Board of Directors It was held on Nov. 17, 2005; the meeting examined and approved the proposal on Signing Agreement on Letter of Intent on Asset Transfer 9. The 6th Extraordinary meeting of T the 5th Board of Directors It was held on Dec. 22, 2005, the relevant resolutions were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn dated on Dec. 23, 2005. (II) Implementation of the Board of Directors about resolutions of Shareholders’ General Meeting: In the report period, the Board of Directors of the Company seriously implemented all resolutions passed by the Shareholders’ General Meeting. In the report period, the Company shall not distribute profit to shareholders nor convert capital public reserve into share capital in 2004 temporarily. In the report period, the Company did not convert share-allotting, new issues of shares, etc. VI. Profit distribution preplan or preplan on converting capital public reserve into share capital of the year After being audited by Hainan Chongxin CPA and Grant Thornton CPA, the net profits the Company realized in 2005 amounted to RMB 8,039,000; with carrying forward the undistributed profit amounting to RMB-466,457,000 in 2004, the profit distributable to the shareholders this year amounted to RMB-458,418,000. Because the Company gained profits this year, the accumulative undistributed profit was minus. The Board of Directors of the Company planned that it did not conduct profit distribution this year, and did not covert capital reserve into shares. Examined by the 1st meeting of the 5th Board of Directors, the pre-plan on profit distribution of 2005 was as follows: Because the Company gained profits this year, the accumulative undistributed profit was minus. The Board of Directors of the Company planned that it did not conduct profit distribution this year, and did not covert capital reserve into shares. The said pre-plan should be submitted to 2005 Annual Shareholders’ General Meeting. VII. Other events In the report period, the newspapers for information disclosure engaged by the Company were Securities Times and Hong Kong Commercial Daily. In 2006, they will change to Securities Times and Hong Kong Wen Wei Po. The relevant notices were published on Securities Times, Hong Kong Wen Wei Po and www.cninfo.com.cn dated on Feb. 14, 2006. IX. Report of the Supervisory Committee I. Meetings of the Supervisory Committee held in the report period and decisions made In the report period, Supervisory Committee of the Company held three meetings, with details as follows: (I) The 9th meeting of the 4th Supervisory Committee On April 11, 2005, the meeting examined and approved Work Report of the Supervisory Committee 2004, Annual Report 2004 and Summary of the Annual Report, Proposal on Election of Changes on Supervisory Committee and Nominating Shareholder Representative as Supervisors of the 5th Supervisory Committee, Opinions on Explanations on Matters Concerned in Auditor’s Report by Board of Directors, Proposal on Revision on Rules and Procedure of the Supervisory Committee. The relevant resolutions were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn dated on April 13, 2006. (II) Extraordinary meeting of the 5th Supervisory Committee It was held on June 16, 2005, the meeting examined and approved the Proposal on Election on Chairman of the 5th Supervisory Committee, and the relevant resolutions were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn dated on June 17, 2005. (III) The 1st meeting of the the 5th Supervisory Committee It was held on August 4, 2005, the meeting examined and approved the Semi-Annual Report 2005 and Summary, and the relevant resolutions were published on Securities Times, Hong Kong Commercial Daily and www.cninfo.com.cn dated on August 6, 2005. II. Independent opinions of the Supervisory Committee 1. Operation of the Company according to law According to relevant State laws and regulations, the Supervisory Committee of the Company supervised the holding procedures and resolutions of the Shareholders’ General Meeting and the Board of Directors, implementation of the resolutions of the Shareholders’ General Meeting by the Board, implementation of duties of the senior executives and the management system of the Company, and believed that, the information disclosure was timely and accurate, the directors and senior executives of the Company could perform strictly according to the national laws, regulations and Articles of Association, strictly implemented all the resolutions of shareholders’ general meeting; there were no behaviors against laws, regulations or Articles of Association of the Company, nor behaviors that had done harm to the interest of the Company. 2. Inspection of the financial status of the Company In the report period, Supervisory Committee of the Company aperiodically inspected and supervised the financial statements, operations and other important activities of the Company; examined the various financial reports, annual final account; meanwhile, checked the implementation of the financial systems and management rules and no behaviors against the relevant regulations. In the report period, Supervisory Committee of the Company aperiodically inspected and supervised the financial statements, operations and other important activities of the Company; examined the various financial reports, annual final account; meanwhile, checked the implementation of the financial systems and management rules and no behaviors against the relevant regulations. Hainan Chongxin CPA and Grant Thornton CPA respectively audited the 2005 financial report of the Company and issued the unqualified with explanatory paragraph of modified report. The Supervisory Committee believed that the Financial Report 2005 of the Company could truly reflect the financial status and operation achievement of the Company, and the auditor’s report was fair, objective, true and faithful. 3. Use of the latest raised fund of the Company The latest issues of shares of the Company happened in 1997, of which small amount was invested in the commitment project, others were appropriated by the original largest shareholder. At present, the total amount was withdrawn the bad account and the project was stopped. 4. In the report period, the procedures on purchase of asset of the Company was legal, and the transaction was reasonable, there were no harm to the equity of the shareholder, losses of assets of the Company. In the report period, the Company had no purchase or sales of assets occurred. 5. In the report period, the Company had no significant related transactions, and there were no harm to the equity of the Company. X. Important Events I. In the report period, significant lawsuits of the Company In the report period, there were no significant lawsuits and arbitrations of the Company. II In the report period, purchases or sales of assets, takeovers or mergers of the Company (I) Sales of assets of the Company in the report period On Dec. 22, 2005, the Company and Hainan Enbi Industry Co., Ltd signed Agreement on Asset Transfer. The Company transferred the land using rights and ownerships held by the Company with the amount of RMB 18,000,000 to Hainan Enbi Industry Co., Ltd, and the relevant procedures of transferring have done; with the land using rights and ownerships are as follows: the land using rights with 396 acres in Team 18, Farm, Guoying East Road, Wenchang, Hainnan Province (total 30 years from Oct. 1, 2005 to Sep. 30, 2035) and ownership of affiliates (About 16000 lychees and relevant facilities); and the land using rights of faming land with 300 acres of seedless base in Qiaotou Town, Chengmai County, Hainan Province (total 30 years from Oct. 26,2005 to Oct. 25, 2035) and ownership of affiliates(About 9000 lychees and relevant facilities). Thus, the Company obtained profits before tax amounted to RMB 11,010,000 accounting for 147% of the total amount. The transferring of assets changed the financial status of the Company and became the main profits for the Company to turn losses into gains, and made foundations for the future operations and development of the Company. (II) In the report period, there were no matters on purchase, takeovers or mergers. III Significant related transactions 1. In the report period, the Company had no related transactions on significant purchase and sales, supplying or accepting labor forces. 2. In the report period, the Company had no related transactions on transferring the assets and equity. 3. In the report period, the Company had no related transactions on external investment combined with the related parties. 4. In the report period, the Company had no liabilities, debts and guarantees with the related parties. IV. Important contracts and implementation In the report period, operations of the Company were normally implemented, no significant contracts occurred. 1. In the report period, the Company had no entrustment, contracting or leasing from other companies; or other companies had no entrustment, contracting or leasing from the Company. 2. In the report period, the Company had no significant guarantee. 3. In the report period, the Company did not entrust others to conduct management of cash and assets. 4. In the report period, the Company had no other significant contracts. V, Commitment on Share Merger Reform While asking the non-circulating shareholders, the Company estimates to enter the procedure of Share Merger Reform before June. 30, 2006. VI. Approved by 2004 Annual Shareholders’ General Meeting, the Company renewal to engage Hainan Chongxin CPA and Grant Thornton CPA as the domestic and international auditing institutions of the Company; and the remunerations that the Company paid to the Certified Public Accountants totally amounting to RMB 320,000, and the two Certified Public Accountants has continually provided auditing services for 5 years. VII. In the report period, the Company, the Board of the Company and directors had not been supervised or inspected by CSRC, or received administrative penalty or circulating criticisms, nor had them ever been criticized publicly by CSRC. VIII. The report is prepared in bilingual versions using Chinese and English respectively, in the event of any discrepancy in understanding the two aforementioned versions, the Chinese version shall prevail. XI. Financial report (I) Auditor’s opinion 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 accompanying balance sheet of Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. (the "Company") as of 31 December 2005, and the related statements of income, cash flows and statement of changes in equity for the year then ended. The financial statements as set out on pages 2 to 31 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. 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. In our opinion, the financial statements give a true and fair view of the financial position of the Company as at 31 December 2005 and of its profit and cash flows for the year then ended in accordance with International Financial Reporting Standards. Without qualifying our opinion, we draw attention to note 2 to the financial statements which indicates that the Company reported net current liabilities of RMB154,807,000 and net liabilities of RMB46,864,000 as at 31 December 2005. These conditions, along with other matters as set out in note 2, indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern. Grant Thornton Certified Public Accountants Hong Kong 19 April 2006 (II) Financial statements Income Statement for the year ended 31 December 2005 Notes 2005 2004 RMB'000 RMB'000 Revenue 6 14,789 13,354 Cost of sales (822) (1,196) Gross profit 13,967 12,158 Other income 7 17,451 2,268 Selling expenses (8,780) (10,361) General and administrative expenses (6,313) (7,453) Profit / (Loss) from operations 8 16,325 (3,388) Net finance costs 9 (8,286) (8,891) Profit / (Loss) before taxation 8,039 (12,279) Income tax expense 10 - - Profit / (Loss) for the year 8,039 (12,279) Earning / (Loss) per share (RMB Fen) 11 2.21 (3.37) Balance sheet as of 31 December 2005 Notes 2005 2004 RMB'000 RMB'000 ASSETS AND LIABILITIES Non-current assets Property, plant and equipment 12 87,349 91,738 Land use right 13 35,039 35,907 122,388 127,645 Current assets Land exchange right 14 8,670 9,251 Inventories 15 360 370 Trade and other receivables 16 21,898 3,136 Tax recoverable 2,818 4,630 Cash at banks and in hand 3,139 2,356 36,885 19,743 Current liabilities Trade and other payables 95,574 96,281 Borrowings 17 96,118 105,348 191,692 201,629 Net current liabilities (154,807) (181,886) Non-current liabilities Borrowings 17 14,445 662 Net liabilities (46,864) (54,903) EQUITY Equity attributable to equity holders of the Company 18 364,100 364,100 Share capital Reserves 19 (410,964) (419,003) Capital deficits (46,864) (54,903) __________________________ __________________________ Director Director Statement of changes in equity for the year ended 31 December 2005 Equity attributable to equity holders of the Company Share Capital Accumulated capital reserve losses Total RMB'000 RMB'000 RMB'000 RMB'000 Balance at 1 January 2004 364,100 47,454 (454,178) (42,624) Loss for the year - - (12,279) (12,279) Total recognised income and expense for the year - - (12,279) (12,279) Balance at 31 December 2004 and at 1January 2005 364,100 47,454 (466,457) (54,903) Profit for the year - - 8,039 8,039 Total recognised income and expense for the year - - 8,039 8,039 Balance at 31 December 2005 364,100 47,454 (458,418) (46,864) Cash flow statement for the year ended 31 December 2005 2005 2004 RMB'000 RMB'000 Cash flows from/(used in) operating activities Profit / (Loss) before taxation 8,039 (12,279) Adjustments for : Depreciation 4,599 4,606 Amortisation of land use right 868 869 Impairment charge 860 192 Loss on disposal of property, plant and equipment - 396 Impairment provision write back (17,419) - Loss on disposal of farms' operation right 990 - Interest income (4) (2) Interest expense 8,290 8,893 Operating profit before changes in working capital 6,223 2,675 (Increase)/Decrease in trade and other receivables (22) 486 Decrease in inventories 10 242 Decrease in tax recoverable 1,812 838 Decrease in trade and other payables (1,086) (2,611) Cash generated from operations 6,937 1,630 Interest paid (30) - Net cash generated from operating activities 6,907 1,630 Cash flows from investing activities Purchases of property, plant and equipment (210) (708) Proceeds from disposal of property, plant and equipment - 751 Net proceeds from disposal of farms' operation right 15,510 - Interest received 4 2 Net cash generated from investing activities 15,304 45 Cash flows from financing activities Repayment of bank loans and other loan (3,000) (35) Capital element of finance lease liability (194) (223) Advance to a lender (18,100) - Interest element of finance lease payment (134) (134) Net cash used in financial activities (21,428) (392) Net increase in cash and cash equivalents 783 1,283 Cash and cash equivalents at 1 January 2,356 1,073 Cash and cash equivalents at 31 December 3,139 2,356 XII. Documents for Reference 1. Accounting statements carrying with personal signatures and seals of legal representative, person in charge of the financial affairs and person in charge of accounting institution 2. Original of Auditors’ Report carrying with the seal of Certified Public Accountants as well as personal signatures and seals of certified public accountants. 3. Originals of all documents and manuscripts of Public Notices of the Company publicly disclosed on Securities Times and Hong Kong Wen Wei Po. The Company will provide timely the above documents for reference provided that China Securities Regulatory Commission or Stock Exchange demands or shareholders requires according to the regulations and Articles of Association. Chairman of the Board of Directors: Li Yuanbin Board of Directors Hainan Dadonghai Tourism Centre (Holding) Co., Ltd. April 22, 2006