深物业A(000011)深物业Ｂ2005年年度报告摘要（英文版）

SHENZHEN PROPERTIES & RESOURCES DEVELOPMENT (GROUP) LTD. SUMMARY OF ANNUAL REPORT 2005 §1. Important Notes 1.1 Board of Directors, Supervisory Committee, directors, supervisors and senior executives of Shenzhen Properties & Resources Development (Group) Ltd. (hereinafter referred to as the Company) individually and collectively accept responsibility for the correctness, accuracy and completeness of the contents of this report and confirm that there are no material omissions nor errors which would render any statement misleading. 1.2 Independent director Mr. Jiang Changlong and independent director Kong Yuquan were absent form the Board meeting due to business trip, but they examined the relevant information before the meeting, and they entrusted Independent Director Zhang Jianjun to vote on his behalf respectively with the aye on all proposals involved. Director Mr. Guo Yuanxian was absent from the Board meeting duet to some reason and did not entrust other director to vote. 1.3 Wuhan Zhonghuan CPAs Ltd. issued a Auditors’ Report with pinpoint events for the Company; and the Board of Directors and the Supervisory Committee of the Company made the corresponding explanations in details for the relevant matters, the investors are suggested to notice the content. 1.4 Chairman of the Board of the Company Tian Chenggang, Person in Charge of Accounting Work Mr. Zha Shengming and Manager of Financial Department Zhang Wei hereby confirm that the Financial Report enclosed in the Annual Report is true and complete. 1.5 This report has been prepared in Chinese version and English version respectively. In the event of difference in interpretation between the two versions, the Chinese version report shall prevail. §2. Company Profile 2.1 Basic information Short form of the stock Shen Wuye A, Shen Wuye B Stock code 000011, 200011 Listed stock exchange Shenzhen Stock Exchange Registered address and office address 39/F and 42/F, International Trade Center, Renmin South Road, Shenzhen Post code 518014 Internet Web Site www.szwuye.com.cn E-mail of the Company 0011@szwuye.com.cn 2.2 Contact person and method Secretary of the Board Securities Affairs Representative Name Guo Yumei Dong Wei Contact address 42/F, International Trade Center, 42/F, International Trade Center, Renmin South Road, Shenzhen Renmin South Road, Shenzhen Telephone (86) 755-82211020 (86) 755-82211020 Fax (86) 755-82210610 (86) 755-82212043 E-mail 0011@szwuye.com.cn 0011@szwuye.com.cn §3. Summary of Accounting Data and Financial Indexes 3.1 Major accounting data Unit: RMB Increase/decrease 2005 2004 over the last year 2003 （％） Income from main operations 963,481,024.09 1,326,289,977.75 -27.36 1,079,474,318.91 Total profit 98,970,133.62 126,160,243.54 -21.55 121,676,376.73 Net profit 82,902,699.63 90,449,977.35 -8.34 77,001,831.44 Net profit after deducting non-recurring gains and losses 56,104,024.05 86,865,043.72 -35.41 124,021,158.47 Net cash flow arising from operating activities 220,842,222.05 261,714,529.31 -15.62 187,629,855.85 Increase/decrease At the end of At the end of At the end of from the end of 2005 2004 2003 previous year（％） Total assets 1,792,535,811.46 2,302,935,990.54 -22.16 2,437,227,899.69 Shareholder’s equity (excluding minority interests) 650,258,392.78 567,128,809.36 14.66 474,222,712.97 3.2 Major financial indexes Unit: RMB Increase/decrease over 2005 2004 2003 the last year（％） Earnings per share 0.153 0.167 -8.38 0.142 Return on equity 12.75% 15.95% a decrease of 3.20% 16.24% Return on equity calculated based on net profit after deducting non-recurring gains 8.63% 15.32% a decrease of 6.69% 26.15% and losses Net cash flow per share arising from operating activities 0.408 0.483 -15.53 0.346 Increase or decrease At the end At the end from the end of At the end of 2005 of 2004 of 2003 previous year（％） Net assets per share 1.200 1.047 14.61 0.875 Net assets per share after adjustment 0.965 0.789 22.31 0.513 Items of non-recurring gains and losses √Applicable □Inapplicable Items of non-recurring gains and losses Amount 1. Gains/losses from disposal of long-term equity investment, fixed assets, project in construction, intangible assets and other long-term assets 7,569,770.61 2. Gains/losses from short-term investment -8,989,470.13 3. Various non-operating income after deducting daily reserve for impairment of assets in line with the regulations of Accounting System for Business Enterprise 1,653,326.05 4. Various non-operating expenses after deducting daily reserve for impairment of assets in line with the regulations of Accounting System for Business Enterprise -3,402,213.70 5. Switching back various reserve for devaluation allotted over the previous years 28,788,501.24 Impact on income tax 1,178,761.51 Total 26,798,675.58 3.3 Difference of net profit and net assets as audited by Chinese Accounting Standard (CAS) and International Accounting Standard (IAS) √Applicable □Inapplicable Adjustment statement on differences of financial statement Unit: RMB Items Net profit as of Net assets as at year 2005 Dec. 31, 2005 As calculated in accordance with CAS 82,903 650,258 Switching back into fixed assets from amortization amount -6,368 Adjustment of expenses amortization -1,165 -1,316 Other -2,207 -14,578 As calculated in accordance with IAS 79,531 627,996 §4. Changes in Share Capital and Particulars about Shareholders 4.1 Statement of change in shares Year 2005 Unit: share Before the Increase/decrease in this time (+, - ) After the change Capitalization change (number and Issuance of Bonus (number and of public Others Subtotal proportion) new shares shares proportion) reserve I. Unlisted shares 1. Sponsors’ shares Including: 323,747,713 323,747,713 Shares held by the State (59.75%) (59.75%) Shares held by domestic 65,200,850 65,200,850 legal person (12.03%) (12.03%) Shares held by foreign legal person 2. Raised corporate shares 3. Inner employees’ shares 4. Preference shares or others 388,948,563 388,948,563 Total unlisted shares (71.78%) (71.78%) II. Listed shares 91,355,000 91,355,000 1. RMB ordinary shares (16.86%) (16.86%) 2. Domestically listed 61,459,312 61,459,312 foreign shares (11.34%) (11.34%) 3. Overseas listed foreign shares 4. Frozen shares held by 36,300 36,300 senior executives (0.0067%) (0.0067%) 152,850,612 152,850,612 Total listed shares (28.21%) (28.21%) III. Total shares 541,799,175 541,799,175 4.2 Statement of shares held by the top ten shareholders and the top ten shareholders of circulation share By the end of the report period, the Company has 38,805 shareholders Total number of shareholders in total, including 30,834 ones of A-share, 7,971 ones of B-share. Particulars about shares held by the top ten shareholders Total Number of Share Type of Proportion Full name of Shareholder number of non-circulation pledged or shareholders (%) shares held shares held frozen SHENZHEN CONSTRUCTION State-owned 59.75 323747713 323747713 0 INVESTMENT HOLDINGS share Directional SHENZHEN INVESTMENT HOLDING corporate 10.45 56628000 56628000 0 CORPORATION shares LABOR UNION OF SHENZHEN Directional INTERNATIONAL TRADE PROPERTY corporate 0.46 2516800 2516800 0 MANAGERMENT COMPANY shares Directional SHENZHEN SPECIAL ZONE corporate 0.29 1573000 1573000 0 DUTY-FREE COMMODITY CO. shares Directional SHANGHAI ZHAODA INVESTMENT corporate 0.19 1010000 1010000 0 CONSULTANT CO., LTD. shares Circulation YOU XIAN HUI 0.17 930000 0 Unknown A-share Circulation DU NIAN 0.15 802663 0 Unknown A-share 786500 Directional shares were CHINA EAGLE SECURITIES CO., LTD. corporate 0.15 786500 786500 frozen shares judicially Directional SHANGHAI KUNLING INDUSTRY & corporate 0.12 629200 629200 0 TRADE CO., LTD. shares GUOTAIJUNAN SECURIES B-share 0.10 539803 0 Unknown HONGKONG LIMITED Explanation on associated There exists no associated relationship or consistent action among the relationship among the above top three shareholders. For other shareholders, the Company was shareholders or consistent action unknown whether there exists associated relationship or consistent action. Particulars about shares held by the top ten shareholders of circulation share Name of shareholders Numbers of circulation share held Type of share YOU XIAN HUI 930000 A DU NIAN 802663 A GUOTAIJUNAN SECURIES 539803 B HONGKONG LIMITED ZENG YING 536900 B CHENG BIN 536000 A SHAO XIANG WEN 534380 A WAN TAO 531700 A CHEN WEN JIAN 506899 A ZHENG GUI LIANG 497200 A CHEN SHEN YING 486201 A Explanation on associated The Company did not know whether there exists associated relationship relationship among the above among the top ten shareholders of circulating share and the top ten shareholders of circulation share or shareholders or not. consistent action 4.3 Particulars about controlling shareholders and actual controller of the Company 4.3.1 Particulars about change in controlling shareholders and actual controller of the Company □Applicable √Inapplicable 4.3.2 Introduction of especial situation for controlling shareholder and other actual controller At the end of report period, the controlling shareholder of the Company is still Shenzhen Construction Investment Holdings (“the holding company”) in register book. In 2004, Shenzhen Municipal Government incorporated Shenzhen Construction Investment Holdings with the other two municipal companies, namely Shenzhen Investment Holding Corporation and Shenzhen Trade and Business Corporation, and established Shenzhen Investment Holding Co., Ltd.. Thus, the Company’s actual controlling shareholder is Shenzhen Investment Holding Co., Ltd., a sole state-funded limited company, who was established in Oct. 13, 2004; its legal representative is Mr. Chen Hongbo and the registered capital is RMB 4 billion. Main business scope: providing guarantee to municipal state-owned enterprises, management of state-owned equity, assets reorganization of enterprises, reformation and assets operation, and equity investment and etc.. As a government department, State-owned Assets Supervision and Administration Commission of Shenzhen implemented management for Shenzhen Investment Holding Co., Ltd. on behalf of Shenzhen municipal government. Thus, the final controller of the Company is State-owned Assets Supervision and Administration Commission of Shenzhen with locating at Investment Bldg., Shen Nan Av., Futian District, Shenzhen and postcode of “518026”. 4.3.3 Property right and controlling relationship between the actual controller of the Company and the Company is as follows: State-owned Assets Supervision and Administration Commission of Shenzhen 100% Shenzhen Investment Holding Co., Ltd. 70.2% The Company §5. Particulars About Directors, Supervisors and Senior Executives 5.1 Particulars about changes in shares held by directors, supervisors and senior executives and their remuneration Drawing Total payment from payment Change of the drawn from shares held in shareholding Name Title Sex Age Office term the Company the report companies or in the report period other related period parties or not (RMB’0000) (Yes / No) Jun. 2004- 0 share Tian Chenggang Chairman of the Board Male 52 Jun. 2007 (unchanged) 63.84 No Jun. 2004- Guo Yuanxian Director Male 52 Jun. 2007 Ditto - Yes Jun. 2004- Wang Huimin Director Female 39 Jun. 2007 Ditto - Yes Jun. 2004- Li Zhen Director Male 43 Jun. 2007 Ditto - Yes Director, Deputy Jun. 2004- 18150 shares Zha Shengming General Manager Male 58 Jun. 2007 (unchanged) 49.07 No Director, Deputy Jun. 2004- 0 share Yang Shuncheng General Manager Male 58 Jun. 2007 (unchanged) 48.95 No Jun. 2004- Zhang Jianjun Independent Director Male 42 Jun. 2007 Ditto Note 1 No Jun. 2004- Jiang Changlong Independent Director Male 41 Jun. 2007 Ditto Note 1 No Jun. 2004- Kong Yuquan Independent Director Male 41 Jun. 2007 Ditto Note 1 No Chairman of the Jun. 2004- Cao Ziyang Supervisory Committee Male 55 Jun. 2007 Ditto 63.84 No Supervisor, Manager of 43 Jun. 2004- Tong Qinghuo Human Resource Male Ditto 37.22 No Jun. 2007 Supervisor, Deputy Director of the Jun. 2004- Liu Jiake Discipline Inspection Male 57 Jun. 2007 Ditto 33.17 No Office Supervisor, Deputy Jun. 2004- Jin Chenggui Manager of Auditing Male 58 Jun. 2007 Ditto 27.77 No Department Supervisor, Leader of Jun. 2004- Ma Deqin Labor Union Female 52 Jun. 2007 Ditto 37.45 No Luo Rurong General Manager Male 49 Apr. 2005- Ditto - Yes Wei Yuxin Chief Financial Officer Female 46 Apr. 2005- Ditto - Yes Deputy General Jan. 2003- Luo Junde Manager Male 56 Jun. 2004 Ditto 48.89 No Mar. 2003- Liu Yinhua Chief Engineer Male 46 Jun. 2004 Ditto 49.49 No Secretary of the Board, Jun. 2004- Guo Yemei Director of the Board of Female 46 Jun. 2007 Ditto 37.37 No Directors Office Note 1: To draw allowance of independent director of RMB30,000. §6. Report of the Board of Directors 6.1 Discussion and analysis on the whole operation in the report period By the end of report period, the Company realized income form main operations amounting to RMB 963,481,024.09, down 27% compared with RMB 1,326,289,977.75 realized in the same period of the last year, which was due to the decrease of sale areas of real estate projects, so that sale income has decreased; the Company realized profit from main operations amounting to RMB 288,641,976.60, a decrease of 32% compared with RMB 423,765,125.70 realized in the same period of the last year, which was because sale income of real estate projects reached the condition of settlement and transferred has decreased over the same period of last year; the Company realized net profit amounting to RMB 82,902,699.63, a drop of 8% compared with RMB 90,449,977.35 realized in the same period of the last year, which was due to decrease of operating profit. In 2005, the real estate market in home appeared the quick development tendency continually, the Company grasped the opportunity in time, strengthened sales work of products, so as to obtain good outstanding sales achievement from all real estate projects and take back capital effectively. Of which, project of Junfeng Lishe was sold out before the end of 2005, and all funds from building sales has been entered in an account, which established the solid base for the Group realized the whole operation target in 2005 and alleviated the partial capital pressure. The actual sales rate of the project of “Huangyuyuan B” reached over 90% and the relevant funds were entered in an account timely, and the volume of other buildings was less, and the Company estimated that the rest buildings will sell out in the first quarter of 2006. The prophase development work of the project of “land A and B of Huangyuyuan C” was making good progress; the project of “Fenghe Rili B” has started formally before the end of 2005. In the report period, the State set up a series of macro-control measures on the real estate market. In the long run, these measures will be in favor of the stabilization and maintenance of market, and help the development of real estate industry in path of the health. Along with rapid urbanization process and economic development, the domestic real estate market will have a wide development space. As a listed company engaging in the real estate development as main operations for many years, the Company insisted on operating with honesty and standardization, held plenty of development experience and professional and bridle-wise management group, and took the certain influence force and reputation. The Company is also faced with new challenge along with the furious market competition, thus, the further expansion of enterprise’s comprehensive strength and the cultivation of enterprise’s development aftereffect are problems that the Company needs to solve urgently. 6.2 Statement of main operations classified according to industry or product Unit: RMB’000 Industries Income from Cost of Gross Increase/decrease in Increase/decrease in Increase/decrease main main profit income from main cost of main in gross profit operations operations ratio (%) operations operations compared ratio compared compared with the with the previous with the previous previous year (%) year (%) year (%) Real estate development 751338 464730 38.15 -32.45 -29.33 -6.68 Property 136472 118219 13.37 -0.76 6.97 -31.89 management management and lease Commercial retail 27378 26258 4.09 -20.17 -18.19 -36.19 Taxi passenger transport 37522 9690 74.18 11.99 7.77 1.38 Tourism and food 13674 6687 51.10 5.37 5.56 -0.16 6.3 Particulars about main operations classified according to areas Unit: RMB’000 Areas Income from main Increase/decrease in income from main operations operations over the last year (%) Shenzhen 928787 -10.76 East China 24045 -91.27 Hainan 10649 6.31 6.4 Application of the raised proceeds □Applicable √Inapplicable 6.5 Application of the non-raised proceeds √Applicable □Inapplicable Unit: RMB’000 Amount of Earning of Earnings rate Name of project Progress of project investment project of project Fuchang 2nd Phase 10000 Primary preparation —— —— Stake base about to Fenghe Rili B 15500 —— —— complete Land A in basic construction stage; Land A, B of 44380 Land B in design —— —— Huangyuyuan C and construction application stage Total 69880 —— —— —— 6.6 Explanation of the Board of Directors on the “Qualified Opinion” made by the Certified Public Accountants √Applicable □Inapplicable Wuhan Zhonghuan Certified Public Accountants had furnished an unqualified Auditors’ Report with emphasized issues. Explanation on the Auditors’ Report furnished by Wuhan Zhonghuan Certified Public Accountants is as follows: As stated in Note (IX), 1, (1) of the Accounting Statements, the appeal for second instance on the real estate sales contracts signed with the 8 property owners, including Haiyi (Shenzhen) Industrial Co., Ltd, etc, submitted by the Company to Guangdong Senior People’s Court had been rejected in 2003. The 8 properties owners including Haiyi (Shenzhen) Industrial Co., Ltd have not applied to Guangdong Senior People’s Court for compulsory execution after the appeal for second instance were rejected. The Company is handling the application for second instance to the Supreme Court right now. According to the assets book value, the loss estimated by the Company totaled RMB 41,772,906.07. As stated in Note (IX), 1, (2) of the Accounting Statements, in July 2001, Guangdong Senior People’s Court ruled that Shenzhen Jiyong Properties Development Company should pay the Company a transfer fund amounting to RMB 143,860,000. In November of the same year, the Company appealed to Guangdong Senior People’s Court (hereinafter referred to as the Court) for compulsory execution, and the Court sealed up that company’s housing properties of approximately 28,000 square meters. Since the Zhejiang Branch of the Industrial and Commercial Bank of China objected the sealing of the properties, the Court finally ruled that the Company end the sealing about 10,000 square meters of Shenzhen Jiyong Properties Development Company’s properties. The Company had filed objection to the Court. In September 2005, the Court sent Shenzhen State land and housing properties registration sections the rule on the end of the seal, and the seal of the above-mentioned properties about 10,000square meters formally ended. As stated in Note (IX), 1, (3) of the Accounting Statements, (2002) YGFMYZZ No. 90 Judgment issued by the Court ruled that the Company refund the construction fund totaling RMB 10.8 million and relevant bank interests to the Shenzhen Business Office of Hubei Foreign Trade and Economic Cooperation Bureau. The Company did not agree with the judgment and filed an appeal to the Supreme Court for second instance. In August 2005, the Supreme Court ruled that the Court give the case second instance, and that the original judgment be suspended during the second instance. According to the (2002) YGFMYZZ No. 90 Judgment issued by the Court, the relevant loss estimated by the Company totaled RMB 9,655,160.25. The Company has made reasonable estimation on the losses arising during the aforesaid cases, and the contents in the section would not influence the Auditors’ opinions given by Wuhan Zhonghuan Certified Public Accountants. 6.7 The preplan on the profit distribution and capitalization of capital public reserve of the Board of Directors √Applicable □Inapplicable The retained profit at the beginning of the year 2005 totaled RMB -436,909,934.66. Offset with the capital reserve of RMB 374,278,076.18 left over at the end of 2004 (approved by the 2004 Shareholders’ General Meeting held on Jun. 28, 2005), the retained profit totaled RMB -62,631,858.48. 1. The net profit of 2005 totaling RMB 82,902,699.63 would be used to make up the loss of RMB 62,631,858.48 previously made; 2. 10% of net profit amounting to RMB 2,027,084.12 would be withdrawn as statutory surplus reserve according to the Articles of Association; 3. 5% of net profit amounting to RMB 1,013,542.06 would be withdrawn as statutory public welfare fund; 4. After the above arrangements, the balance of the retained profit at the end 2005 totaled RMB 17,230,214.97, which would be used for the normal operation of the Company. This profit distribution preplan could only be carried out after being examined and approved by the 2005 Shareholders’ General Meeting. The Company did not appropriate share distribution preplan though the Company achieved the profit in the report period √Applicable □Inapplicable The reasons why the Company did not appropriate share distribution preplan though the Company Usage and plan of undistributed profit achieved the profit in the report period As audited by Wuhan Zhonghuan Certified Public The balance of the retained profit at the Accountants Ltd, the 2005 net profit of the Company end 2005 totaled RMB 17,230,214.97, amounted to RMB 82,902,699.63. According to Article 4 which would be used for the normal in the Share Transfer Agreement signed by Shenzhen operation of the project Fenghe Rili. Construction Investment Co., Ltd, Shenzhen Investment Management Company and Zhuojian Investment Co., Ltd: The business profit made by Shen Wuye during the transition period would be used to make up the losses arising previously, and neither the assigners nor the assignee should demand Shen Wuye to issue bonus shares or grant dividends with the operating achievements made during the transition period according to the shareholders’ equity. §7. Significant Events 7.1 Purchase of assets □Applicable √Inapplicable 7.2 Sales of assets □Applicable √Inapplicable 7.3 Important guarantee √Applicable □Inapplicable Unit: RMB’000 External guarantees of the Company (excluding guarantees for shareholding subsidiaries) Name of Date of occurrence For related Guarantee Guarantee Guarantee Accomplished companies (agreement signing parties or not amount type term or not guaranteed day) (yes or no) Jintian Company June 2298 6000 Warrant 11 months Yes No Jintian Company October 1998 48000 Warrant 6 months Yes No Jintian Company December 1998 2600 Warrant 9 months No No Total guarantee amount occurred in the report period -33680 Total guarantee balance at the end of the report period 2600 Guarantees for shareholding subsidiaries by the Company Total guarantee amount occurred in the report period for shareholding 32000 subsidiaries Total guarantee balance at the end of the report period for shareholding 81000 subsidiaries Total guarantee amount of the Company (including guarantees for shareholding subsidiaries) Total guarantee amount 83600 Proportion of the Company’s net assets taken by the total guarantee amount 13 percent Including: Guarantee amount for shareholders, the actual controller or its related ------ parties Guarantee amount for the debts of the guaranteed companies with an ------ asset-liability ratio of over 70%, directly or indirectly The amount by which the total guarantee amount exceeded 50% of the net ------ assets Total amount of the above three guarantees ------ 7.4 Significant related transactions 7.4.1 Related transactions concerning routine operation √Applicable □Inapplicable Unit: RMB’000 Selling products and offering Purchasing products and labor service to related parties accepting labor service Related parties Proportion taking up Proportion taking up Amount the amount of the same Amount the amount of the same kind of transactions kind of transactions Shenzhen Jianye Construction Engineering ----- ----- 18740 8.14 percent Company Shenzhen Yuezhong (Group) ----- ----- 31260 13.57 percent Co., Ltd Total ----- ----- 50000 21.71 percent An amount of RMB 0 that occurred during the related transactions of the Listed Company selling products or providing labor service to the controlling shareholder or its subsidiaries in the report period. 7.4.2 Related credits and liabilities current √Applicable □Inapplicable Unit: RMB’0000 Capital provided to the Capital provided to Listed Company by related parties Related Parties related parties Amount Amount Balance Balance occurred occurred Shenzhen Guomao Tian’an Properties Co., Ltd 0 29706 ---- ---- Shenye Real Estate Development Co., Ltd 0 134517 ---- ---- Anhui Nanpeng Papermaking Co., Ltd -402 11075 ---- ---- Shenzhen Construction Investment -6784 0 ---- ---- Holding Company Shenzhen Guomao Industrial 0 2432 ---- ---- Development Co., Ltd Shenzhen Wufang Pottery & Porcelain 0 1747 ---- ---- Industrial Co., Ltd Shenzhen Construction Group Finance ---- ---- -6800 13200 Company Shenzhen Property Jifa Storage Co., Ltd ---- ---- -118 2146 Shenzhen International Trade Plaza ---- ---- -39521 0 Property Development Co., Ltd Shenzhen Guomao Shopping Mall Co., ---- ---- 1458 4972 Ltd Shenzhen Yuezhong (Group) Co., Ltd -51830 8405 Shenzhen Jianye Construction Engineering -30883 1389 Co., Ltd Total -89899 189271 -44981 20318 In the report period, the controlling shareholder Shenzhen Construction Investment Holding Company had refunded the Company RMB 6.78 million, and the balance at the end of the report period was RMB 0. Also in the report period, the subsidiary of the controlling shareholder, Shenzhen Yuezhong (Group) Co., Ltd and Shenzhen Jianye Construction Engineering Co., Ltd contracted the Company’s construction projects, and the Company had paid them project fund of RMB 82.71 million, with the balance at the end of the report period being RMB 9.79 million. 7.4.3 Capital occupation and plan for clearing: □Applicable √Inapplicable 7.5 Financing entrustment □Applicable √Inapplicable 7.6 Implementation of commitments √Applicable □Inapplicable On Dec. 12, 2005, the Company officially launched its Share-Trading Reform. In the modified final Plan of Share-Trading Reform issued on Dec. 21, the main consideration executor and potential controlling shareholder of the Company Zhuojian Investment Co., Ltd promised: “Zhuojian Investment Co., Ltd would abide by the relevant laws, regulations and rules, and, besides fulfilling the legal responsibilities promised, it would also promised not to trade or transfer the non-circulating shares held within 36 months since the day those shares get the right to circulate. Should Zhuojian Investment Co., Ltd broke its promise by selling its shares, the capital obtained by it would be transferred to and owned by the Listed Company. It is also promised that within 3 years since the non-circulating shares are granted with the rights to circulate, Zhuojian Investment Co., Ltd would go through relevant procedures to make the proposal of issuing bonus shares and dividends at the annual Shareholders’ General Meetings of Shen Wuye, with the bonus shares and dividends no lower than 30 percent of the net profit available for distribution, and give its vote of agreement to the proposal at the Shareholders’ General Meetings. Zhuojian Investment Co., Ltd promised: all relevant expenses arising during Shen Wuye’s Share-Trading Reform would be paid by Zhuojian Investment Co., Ltd. The Shareholders’ General Meeting held on Jan. 13, 2006 has approved Shen Wuye’s Plan of Share-Trading Reform. By the disclosing day of this report, relevant procedures of Share-Trading Reform are still under way. 7.7 Significant lawsuits and arbitrations √Applicable □Inapplicable I. Progress of the significant lawsuits or arbitrations of previous years: 1. The “Haiyi Company” case disclosed in the Annual Reports during 2000 and 2004 made no new progress. The 8 properties owners including Haiyi (Shenzhen) Industrial Co., Ltd have not applied to Guangdong Senior People’s Court for compulsory execution. The Company is preparing the application for second instance to the Supreme Court right now. 2. As to the “Jiyong Company” case disclosed in a provisional public notice on Apr. 12, 2001 and in the Annual Reports during 2000 and 2004, Shenzhen Intermediate People’s Court had ruled that the Company’s appeal for second instance be accepted and the case be given second instance in Aug. 2005. The court opened on Dec. 15, 2005 to hear the case, and the hearing is still under way. 3. As to the “Luohu Restaurant” bankruptcy case disclosed in a provisional public notice on Jul. 23, 2003 and in the Annual Reports during 2001 and 2004, after confirmed by the liquidation team and the court, the Company could recover a bankruptcy claim of RMB 25,888,863.08. At the end of January 2005, authorized by the Guangdong Senior People’s Court, Guangzhou Railway Transportation Intermediate Court took the case of Hubei Foreign Trade and Economic Cooperation Bureau suing the Company. Guangzhou Railway Transportation Intermediate Court sent the judgment of sealing to the Luohu Restaurant liquidation team and sealed up the Company’s credit claim of RMB 23,000,000 in from Luohu Restaurant, which was then transferred to the Guangzhou Railway Transportation Intermediate Court. The Company filed objection to the judgment right away. In the end, the Supreme Court issued the (2004) MEJZ No. 146-1 Civil Judgment, which ruled that the Court give the case second instance and the execution be suspended during the second instance. The rest of the Company’s bankruptcy claim from Luohu Restaurant had been recovered. 4. As to the case of the Company being sued by Hubei Foreign Trade and Economic Cooperation Bureau disclosed in Annual Report 2004, the Company did not agree with the Court’s judgment of refunding the construction fund totaling RMB 10.8 million and relevant bank interests to the Shenzhen Office of Hubei Foreign Trade and Economic Cooperation Bureau, and had filed an appeal to the Supreme Court for second instance. On Jan. 18, 2005, the Supreme Court gave the case a hearing. In August 2005, the Supreme Court issued the (2004) MEJZ No. 146-1 Civil Judgment and ruled that the Court give the case second instance and the execution be suspended during the second instance. The Court heard the case on Dec. 5, 2005. II. Significant lawsuits of this year In 2003, the Company signed a Real Estate Lease Contract with Shenzhen Shengfenglu Guomao Jewel & Gold Co., Ltd (hereinafter referred to as “Jewel & Gold Company”), and leased the business stores in Guomao Building (A 1st to 5th floor) originally run the Company to Jewel & Gold Company, which would also to use the premises for commodity sales. The lease term started on May 1, 2003 and would end on Apr. 30, 2013 (see Annual Report 2003 for details.). Since Jewel & Gold Company had not punctually paid its rents, management charges as well as power charges, the Company put an end to the Lease Contract with Jewel & Gold Company on Sep. 27, 2005 according to the Contract Law and the Lease Contract. In the mean time, the Company filed an appeal to the court for a judgment demanding Jewel & Gold Company to compensate the Company’s principal loss of RMB 34,357,599.6 ended Sep. 27, 2005. The Company also appealed for Lin Nuohua to take the joint responsibility of RMB 10,053,000 for Jewel & Gold Company’s debts. The court has accepted the case. §8. Report of the Supervisory Committee Wuhan Zhonghuan Certified Public Accountants had furnished an unqualified Auditors’ Report with emphasized issues. The Supervisory Committee had made careful consultation on the matters mentioned in the Auditors’ Report. It believed that the explanation given by the Board and the Management team on the issues mentioned had conformed to the actual status of the Company, and that the relevant accounting measures taken had been in accordance with the financial accounting policies. §9. Financial Report (attached) 9.1 Auditing opinions Auditors’ Report ZHSZ (2006) No. 098 Shareholders of Shenzhen Properties & Resources Development (Group) Ltd.: We, Wuhan Zhonghuan Certified Public Accountants Ltd, has audited the Balance Sheet and the Consolidated Balance Sheet ended Dec. 31, 2005, Profit Statement and the Consolidated Profit Statement of 2005, as well as the Cash Flow Statement and the Consolidated Cash Flow Statement of 2005 compiled by Shenzhen Properties & Resources (Group) Ltd (hereinafter referred to as “SPRG”). While it is SPRG’s business to prepare these accounting statements, our responsibility is to conduct auditing work over these accounting statements and give our opinions on them. We has planned and performed our auditing duties strictly in accordance with the Independent Auditing Standards of China, so as to reasonably make sure whether there are significant errors in the accounting statements or not. Our auditing work includes inspecting the evidences supporting the figures in the accounting statements and the disclosure of the accounting statements based upon sampling, commenting on the accounting policies taken and important accounting estimations by the management team while compiling the accounting statements, and commenting on the overall contents reflected by the accounting statements. We believe that our auditing work has provided us a reasonable base to express our opinions. We believe that the above-mentioned accounting statements have been in conformity with the State Business Accounting Standards and the Business Accounting System issued, and that these statements have fairly and squarely reflected the financial status ended Dec. 31, 2005, as well as the business achievements and cash flows of 2005 of SPRG in all significant aspects. Apart from those above, we hereby call for the attention of all users of these accounting statements to the following matters: As stated in Note (IX), 1, (1) of the Accounting Statements of SPRG, the appeal for second instance on the real estate sales contracts signed with the 8 property owners, including Haiyi (Shenzhen) Industrial Co., Ltd, etc, submitted by SPRG to Guangdong Senior People’s Court had been rejected in 2003. SPRG is handling the application for second instance to the Supreme Court right now. According to the assets book value, the loss estimated by SPRG totaled RMB 41,772,906.07. As stated in Note (IX), 1, (2) of the Accounting Statements, in July 2001, Guangdong Senior People’s Court ruled that Shenzhen Jiyong Properties Development Company should pay SPRG a transfer fund amounting to RMB 143,860,000. In November of the same year, SPRG appealed to Guangdong Senior People’s Court (hereinafter referred to as the Court) for compulsory execution, and the Court sealed up that company’s housing properties of approximately 28,000 square meters. Since the Zhejiang Branch of the Industrial and Commercial Bank of China objected the sealing of the properties, the Court finally ruled that the Company end the sealing about 10,000 square meters of Shenzhen Jiyong Properties Development Company’s properties. SPRG had filed objection to the Court. In September 2005, the Court sent Shenzhen State land and housing properties registration sections the rule on the end of the seal, and the seal of the above-mentioned properties about 10,000square meters formally ended. As stated in Note (IX), 1, (3) of the Accounting Statements, (2002) YGFMYZZ No. 90 Judgment issued by the Court ruled that SPRG refund the construction fund totaling RMB 10.8 million and relevant bank interests to the Shenzhen Business Office of Hubei Foreign Trade and Economic Cooperation Bureau. SPRG did not agree with the judgment and filed an appeal to the Supreme Court for second instance. In August 2005, the Supreme Court ruled that the Court give the case second instance, and that the original judgment be suspended during the second instance. According to the (2002) YGFMYZZ No. 90 Judgment issued by the Court, the relevant loss estimated by SPRG totaled RMB 9,655,160.25. SPRG has made reasonable estimation on the losses arising during the aforesaid cases, and the contents in the section would not influence the Auditors’ opinions given by us. Wuhan Zhonghuan Certified Public Accountants Ltd CPA: China Wuhan CPA: Mar. 9, 2006 9.2 Disclosure of Balance Sheet, Profit and Profit Distribution Statement as well as Cash Flow Statement of comparative consolidated and the parent company. 9.3 Whether there have been any changes in the accounting policies, accounting estimation or accounting methods compared with the latest Annual Report or not. 9.4 There aren’t any significant accounting errors in the report period. 9.5 Should there be any changes in the consolidated scope compared with the latest Annual Report, give detailed explanations. Change in consolidation scope: Consolidated last Consolidated this Reasons for the Date of Name year or not year or not change change Shenzhen Property End of system No Yes 2005 Engineering Construction reform Supervision Co., Ltd Board of Directors of Shenzhen Properties & Resources Development (Group) Ltd. Mar. 11, 2006