ST东海B(200613)2008年年度报告（英文版）

Short Form of the Stock: ST Donghai-A, ST Donghai-B Stock Code: 000613, 200613 海南大东海旅游中心股份有限公司 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Annual Report 2008 Disclosure Date: April 28, 2009 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Contents I. Important Notice --------------------------------------------------------------------3 II. Company Profile--------------------------------------------------------------------4 III. Summary of Accounting Highlights and Business Highlights------------5 IV. Changes in Share Capital and Particulars about Shareholders----------7 V. Particulars about Directors, Supervisors, Senior Executives and Employees-13 VI. Administrative Structure --------------------------------------------------------18 VII. Particulars about Shareholders’ General Meeting-------------------------21 VIII. Report of the Board of Directors--------------------------------------------22 IX. Report of the Supervisory Committee----------------------------------------32 IX. Significant Events-----------------------------------------------------------------34 XI. Financial Report-------------------------------------------------------------------37 XII. Documents for Reference ------------------------------------------------------80 2 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report I. Important Notice 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 fictitious statements, misleading statements, or important omissions carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completion of the whole contents. All the directors attended the board meeting on examining the Annual Report. ZONZUN Accounting Office Ltd. issued the standard unqualified Auditors’ Report for the Financial Report 2008 of the Company. Mr. Li Yuanbin, Principal of the Company; Mr. Chen Liurong, Person in Charge of Financial Works; and Mr. Li Zhi, Person in Charge of Accounting Organ (Accounting Supervisor) hereby confirm that the Financial Report of Annual Report 2008 is authentic and complete. 3 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report 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: Mr. Li Yuanbin, 3. Secretary of Board of Directors: Ms. Wang Hongjuan Authorized Representative in Charge of Securities Affairs: Ms. 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 and Hong Kong Wen Wei Po 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 the latest change: May 17, 2007 Registered address: Dadonghai, Hedong District, Sanya. Registered number for business license of the Company: 4600001003983 Registered number of taxation of the Company: 460200201357188 Organization Code: 20135718-8 Certified accountant engaged by the Company: ZONZUN Accounting Office Ltd. Office address: 4/F, Guoxing Building, No.22, Shouti South Road, Haidian District, Beijing, China. 4 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report III. Summary of Accounting Highlights and Business Highlights I. Business data of the Company in the report period (Unit: RMB) Items Amount Operating profit -566,586.15 Total profit 431,855.37 Net profit attributable to the shareholders of the listed 431,855.37 company Net profit attributable to the shareholders of the listed -566,586.15 company after deducting non-recurring gains and losses Net cash flow arising from operating activities 9,315,408.71 Items of deducting non-recurring gains and losses and the involved amounts are as following: (Unit: RMB) Items of non-recurring gains and losses Amount Gains and losses from the disposal of non-current -17,052.26 assets Income from debt restructuring 857,449.73 Net amount of non-operating income and expense 158,044.05 excluded the aforesaid items Total 998,441.52 II. Explanation on the difference in net profit and net asset as audited according to CAS and IAS respectively in the report period (Unit: RMB) CAS IAS Net profit 431,855.37 431,855.37 Net asset 89,582,040.24 89,582,040.24 Explanations No differences on differences III. Main financial highlights and financial index over the previous 3 years ended the report period. (Unit: RMB) (1) Main accounting data Unit: RMB Increase/decrease this year 2008 2007 compared with that last year 2006 (%) Operating income 34,694,727.08 25,623,653.21 35.40% 13,294,904.03 Total profit 431,855.37 154,616,244.03 -99.72% -18,633,733.19 Net profit attributable to 431,855.37 154,616,244.03 -99.72% -18,633,733.19 shareholders of the listed company Net profit attributable to shareholders of the listed company -566,586.15 -5,666,753.99 -90.00% -16,214,498.69 after deducting non-recurring gains 5 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report and losses Net cash flow arising from 9,315,408.71 6,623,022.91 40.65% 2,425,457.97 operating activities Increase/decrease at the end of this year compared with At the end of 2008 At the end of 2007 At the end of 2006 that at the end of last year (%) Total assets 132,281,018.92 135,406,198.96 -2.31% 140,997,292.13 Owners’ equity(Shareholders’ 89,582,040.24 89,150,184.87 0.48% -65,466,059.16 equity) Share capital 364,100,000.00 364,100,000.00 0.00% 364,100,000.00 (2) Main financial indexes Unit: RMB Increase/decrease this year 2008 2007 2006 compared with that last year (%) Basic earnings per share (RMB/Share) 0.0012 0.42 -99.71% -0.05 Diluted earnings per share (RMB/Share) 0.0012 0.42 -99.71% -0.05 Basic earnings per share after deducting -0.0016 -0.02 -92.00% -0.04 non-recurring gains and losses (RMB/Share) Fully diluted return on equity (%) 0.48% 173.43% -172.95% Weighted average return on equity (%) 0.48% 1,305.65% -1,305.17% -33.17% Fully diluted return on equity after deducting -0.63% -6.36% 5.73% non-recurring gains and losses (%) Weighted average return on equity after -0.63% -47.85% 47.22% -28.86% deducting non-recurring gains and losses (%) Net cash flow per share arising from operating 0.03 0.02 50.00% 0.01 activities (RMB/Share) Increase/decrease at the end of At the end of At the end of At the end of this year compared with that at 2008 2007 2006 the end of last year (%) Net asset per share attributable to shareholders of 0.25 0.24 4.17% -0.18 listed company (RMB/Share) IV. The Company’s return on equity and earnings per share as of the year 2008 as calculated in accordant with Requirements on the Information Disclosure of Companies Publicly Issuing Shares (No. 9) were as follows: Return on equity (%) Earnings per share (RMB/Share) Profit in the report period Fully Weighted Basic earnings per Diluted earnings diluted average share per share Net profit attributable to common shareholders 0.48 0.48 0.0012 0.0012 of the Company Net profit attributable to common shareholders of the Company after deducting the -0.63 -0.63 -0.0016 -0.0016 non-recurring losses and gains 6 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report IV. Changes in Share Capital and Particulars about Shareholders I. Changes in Shares Capital (1) Explanations on changes in shares 1. On June 20, 2007, the relevant shareholders’ meeting on share merger reform scheme of the Company approved the Share Merger Reform Scheme of Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd., that is, to adopt the shceme of Debt Restructuring+Bonus Shares. During the subsequent works after Share Merger Reform, releasing restriction and repayment by part shaerholders on behalf were dealt in according to relevant regulations, thus, the shares structure of the Company has changed but the total shares remained unchanged. 2. Statement on changes in shares capital Unit: Share Before the change Increase or decrease of this time (+) After the change New Conversion Bonus Amount Proportion shares of public Others Subtotal Amount Proportion shares issued reserve I. Restricted shares 217,514,659 59.74% 0 0 0 -120,915,575 -120,915,575 96,599,084 26.53% 1. State-owned shares 2. State-owned legal 37,450,200 10.29% 0 0 0 -22,288,200 -22,288,200 15,162,000 4.16% person’s shares 3. Other domestic shares 180,064,459 49.45% 0 0 0 -98,627,375 -98,627,375 81,437,084 22.37% Including: Domestic non-state-owned legal 180,019,800 49.44% 0 0 0 -100,563,900 -100,563,900 79,455,900 21.82% person’s shares Domestic natural person’s 44,659 0.01% 0 0 0 1,936,525 1,936,525 1,981,184 0.54% shares 4. Foreign shares 0 0 0 Including: Foreign legal 0 0 0 person’s shares Foreign natural person’s 0 0 0 shares 5. Senior executives’ shares 0 0 0 II. Unrestricted shares 146,585,341 40.26% 0 0 0 120,915,575 120,915,575 267,500,916 73.47% 1. RMB Ordinary shares 58,585,341 16.09% 0 0 0 120,915,575 120,915,575 179,500,916 49.30% 2.Domestically listed 88,000,000 24.17% 0 0 0 0 0 88,000,000 24.17% foreign shares 3. Overseas listed foreign shares 4. Others 7 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report III. Total shares 364,100,000 100.00% 0 0 0 0 0 364,100,000 100.00% 3. Particulars about the top ten restricted shareholders and changes on restricted shares of other restricted shareholders in the report period (Unit: Share) Restricted Restricted Restricted Restricted shares shares Reason for Date for releasing Name of shareholders shares in shares in released increased restricted trade restricted trade year-begin year-end this year this year Statutory August 19, 2008 Haikou Grocery Co., Ltd. (Haikou commitment August 19, 2009 Agriculture & Industry & Trade 60,000,000 14,962,420 0 45,037,580 on Share (Luoniushan) Co., Ltd.) Merger August 19, 2010 Reform Statutory August 19, 2008 commitment Shi Yajun 18,327,000 18,205,000 0 122,000 on Share August 19, 2009 Merger Reform Statutory commitment Wuhan Turui Technology 18,000,000 18,000,000 0 0 on Share August 19, 2008 Development Co., Ltd. Merger Reform Statutory commitment Hainan Sanya Yinnong Industrial 6,930,000 6,930,000 0 0 on Share August 19, 2008 Development Co., Ltd. Merger Reform Statutory commitment China AMC 6,600,000 6,600,000 0 0 on Share August 19, 2008 Merger Reform Statutory August 19, 2008 Yangpu Tongrong Investment commitment August 19, 2009 Management Consultation Co., Ltd. 6,514,500 3,242,580 7,508,400 10,780,320 on Share Merger August 19, 2010 Reform Statutory commitment Yangpu Jinyu Industrial Co., Ltd. 4,666,200 4,666,200 0 0 on Share August 19, 2008 Merger Reform Sanya Zhongxing Development Co., 3,630,000 3,630,000 0 0 Statutory August 19, 2008 8 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Ltd. commitment on Share Merger Reform Statutory commitment Shanghai Jingxian Investment Co., 3,481,100 3,481,100 0 0 on Share August 19, 2008 Ltd. Merger Reform Statutory commitment China Agriculture Bank Haikou 3,300,000 3,300,000 0 0 on Share August 19, 2008 Jinmao Branch Merger Reform Statutory August 19, 2008 commitment Other shareholders with restricted 144,651,200 137,142,800 0 7,508,400 on Share After repaid the conditions Merger substitutive shares Reform Total 276,100,000 220,160,100 7,508,400 63,448,300 － － Note: The Company has implemented Share Merger Reform Scheme on August 8, 2007; excluded the shareholders whose shares were released restriction according to the relevant regulations and shareholders’ commitment in the shareholders with resctricted conditions of the Company, other restricted shares which needed repaying part substitutive shares in Share Merger Reform but not repaying part substitutive shares already, after repaying the part substitutive shares in Share Merger Reform, the shares with restrctricted conditons could be listed for trade. (2) All issuance and listing of shares During the previous 3 years ended the report period, no shares and derivative securities were issued. In the report period, there existed no inner employees’ shares in the Company. II. About shareholders (1) Particulars about the number of the shareholder the Company and the shares held at the end of report period Unit: Shares Total amount of shareholders 31,640 ended as the report period Particulars about shares held by the top ten shareholders Proportion Nature of Amount of Amount of restricted Shares pledged or Names of shareholders of share shareholder share held shares held frozen held Haikou Grocery Co., Ltd. (Haikou Domestic 16.48% 60,000,000 45,037,580 0 9 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Agriculture & Industry & Trade non-state-owned (Luoniushan) Co., Ltd.) legal person Domestic natural Shi Yajun 4.31% 15,704,100 122,000 Unknown person Domestic Yangpu Tongrong Investment non-state-owned 3.85% 14,022,900 10,780,320 Unknown Management Consultation Co., Ltd. legal person Domestic Wuhan Turui Technology non-state-owned 3.31% 12,051,581 0 Unknown Development Co., Ltd. legal person Domestic Hainan Sanya Yinnong Industrial non-state-owned 1.90% 6,930,000 0 Unknown Development Co., Ltd. legal person Domestic China AMC non-state-owned 1.81% 6,600,000 0 Unknown legal person Domestic Yangpu Jinyu Industrial Co., Ltd. non-state-owned 1.28% 4,666,200 0 Unknown legal person Domestic Sanya Zhongxing Development Co., non-state-owned 1.00% 3,630,000 0 Unknown Ltd. legal person Domestic China Agriculture Bank Haikou non-state-owned 0.91% 3,300,000 0 Unknown Jinmao Branch legal person Overseas CITRINE CAPITAL LIMITED 0.90% 3,265,200 0 Unknown legal person Particulars about shares held by the top ten unrestricted shareholders Amount of unrestricted shares Name of shareholder Type of share held Shi Yajun 15,582,100 RMB common share Haikou Grocery Co., Ltd. (Haikou Agriculture & Industry & 14,962,420 RMB common share Trade (Luoniushan) Co., Ltd.) Wuhan Turui Technology Development Co., Ltd. 12,051,581 RMB common share Hainan Sanya Yinnong Industrial Development Co., Ltd. 6,930,000 RMB common share Yangpu Jinyu Industrial Co., Ltd. 4,666,200 RMB common share Domestically listed foreign CITRINE CAPITAL LIMITED 3,265,200 share Yangpu Tongrong Investment Management Consultation 3,242,580 RMB common share Co., Ltd. China Foreign Economy and Trade Trust Co., Ltd. 2,772,000 RMB common share SANYA RURAL CREDIT UNION. 2,310,000 RMB common share China Huarong Asset Management Corporation 1,848,000 RMB common share st nd th Explanation on associated Among the ten shareholders, the top 1 , 2 and 4 shareholders had related relationships 10 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report rd rd relationship or accordant action with the 3 shareholder; the 3 shareholder was jointly funded by those three shareholders. among the aforesaid shareholders The Company is unknown whether there exists associated relationship or belongs to the 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 The former first largest shareholder Haikou Grocery Co., Ltd has the Company’s 60 million shares instead owned by HaiKou Agriculture ＆ industry ＆ Trade (LUONIUSHAN) Co., Ltd. The first largest shareholder is actually HaiKou Agriculture＆industry＆Trade(LUONIUSHAN) Co., Ltd. and details can be seen in the Suggestive Notice on Significant Event of Hainan Dadonghai Tourism Center (Holdings) Co., Ltd published on Security Times, Hong Kong Wen Wei Po and Juchao Website www.cninfo.com.cn dated on April 26, 2008. HaiKou Agriculture＆lndustry＆Trade(LUONIUSHAN) Co., Ltd. (stock abbreviation: Luoniushan, stock code: 000735) with Hu Dianling as its legal representative; the founding date is Oct. 15, 1993; registering capital is RMB 880,132,000.00; registering address is No.50 Renmin Road, Haikou city; operation covers seeding breeding industry, developing industry, operation of real estate developing, construction and decoration engineer, manufacture and sales of fertilizer, processing and sales of agricultural products and feeds, accessories of technical automobiles and motorcycles, electronic products, metallic materials (except for exclusive business), chemical and industrial products (except for exclusive business), household appliances, modern office supplies, document supplies, daily-use articles, food, construction materials, sales of agricultural specialties, restaurant industry, development and construction of trading market and leasing services. 2. Particulars about actual controllers of the Company HaiKou Agriculture ＆ lndustry ＆ Trade(LUONIUSHAN) Co., Ltd’s first largest shareholder is the Hainan Luoniushan Holding Group Co. Ltd with Ma Yaowu as its legal representative; registering capital is RMB 35 million; registering address is No.50 Renmin Road, Haikou city; operation covers agriculture developing, planting, breeding, processing and selling of agricultural products, tourism developing (all projects operated with administrative licenses). Share holding proportion of Hainan Luoniushan Holding Group Co. Ltd is relatively scattered. Shareholders with above 5% shares are: Xu Zili invested RMB 8,862,000 which accounts 25.32% of the registered capital; Ruifu Investment Co., Ltd invested RMB 5.8 million which accounts 16.57% of the registered capital; Hainan Liqin Investment Co., Ltd invested RMB 5,560,600 which accounts 15.89% of the registered capital; Ma Yaowu invested RMB 5 million which accounts 14.29% of the registered capital; Hu Dianling invested RMB 5 million which accounts 14.29% of the registered capital. Xu Zili: was born in 1966, with the Han nationality, and is a senior engineer with a master degree. He was the vice president of Hubei Huangshi Mine Bureau Machinery, 11 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Vice Chairman of the Board and General Manager of the 5th Board of Director of the HaiKou Agriculture＆lndustry＆Trade(LUONIUSHAN) Co., Ltd., Vice-president of Haikou Ciiy Enterprise Directors Association and President of Hainan Animal Agriculture Association and the member of the 12th Standing Committee of Haikou Political Committee. Ruifu Investment Co., Ltd with Wang Hao as its legal representative; registering capital is RMB 0.1 billion; registering type is limited company (nationally joint venture); operation covers industry development, project investment and management, asset operation and management, comprehensive agriculture development, agriculture investment and management and investment information consulting etc. And the actual controller of the Company is Chenjianjun. Hainan Liqin Investment Co., Ltd with Zhong Jinxiong as its legal representative; registering capital is RMB 21 million; registering type is limited company; operation covers Hi-Tec comprehensive agriculture and enterprises’ investment, management and planning etc. And the actual controller of the Company is Shao Huibing and Xu Zili. Ma Yaowu is the chairman of the board and general manager of Hainan Luoniushan Holding Group Co. Ltd. Hu Dianling: born is 1961 with the Han nationality, and is a lawyer as well as a China Communist Party member with a master degree. He was once Office Director, Secretary of The Board, Deputy General Manager, Director of of HaiKou Agriculture ＆lndustry＆Trade(LUONIUSHAN) Co., Ltd. from Aug. 1993 to Dec. 1999 and during the period he got enterprise management master degree of Jilin University and lawyer qualification; Director and Standing Deputy General Manager of Hubei Guangji Pharmaceutical Co., Ltd. from Jan. 2000 to Apr. 2001; and Director as well as General Manager of Hubei Guangji Pharmaceutical Co., Ltd. from Apr. 2001 to Aug. 2006; And now he is the Chairman of the Board for HaiKou Agriculture＆lndustry＆ Trade(LUONIUSHAN) Co., Ltd, Vice President of Hainan Enterprise Association and the 14th National People's Congress Representative of Haikou. 3. Property right and controlling relationships between the actual controller of the Company and the Company is as follows: Chen Jiangjun 64％ Dongcheng Xingye Investment Co., Ltd. Shao Huibing Xu Zili 81.58％ 50％ 50% Shanghai Siping Development & Operation (Group) Co. Hainan Huijia Trading Co., Ltd 70％ 56.45％ Xu Zili Hainan Liqin Investment Co., Ltd Ma Yaowu Hu Dianling Ruifu Investment 12 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report 25.32％ 16.57％ 15.89％ 14.29％ 14.29％ Hainan Luoniushan Holding Group Co., Ltd. 10.31％ Haikou Grocery Co., Ltd (HaiKou Agriculture＆lndustry＆Trade(LUONIUSHAN) Co., Ltd.) 16.48％ Hainan Dadonghai Tourism Center (Holding) Co., Ltd. 4. The Company did not have other shareholders who held above 10% shares (included 10%) V. Particulars about the Directors, Supervisors and Senior Executives and Employees I. Particulars about directors, supervisors and senior executives 1. Basic information Total remuneratio Shar Shar n drawn Drawing es from the remunerati es Rea on from held Company held son shareholder Beginning date of Terminating date of at in the Names Titles Sex Age of s’ units or office term office term the at report cha other year the period nge related -beg year (RMB’000 units or not in -end 0)(before tax) Chairman, Li Yuanbin General Male 58 June 5, 2008 June 4, 2011 0 0 _ 10.41 No Manager Independent Zhao Man Female 56 June 1, 2005 June 5, 2008 0 0 _ 1.80 No Director Leng Independent Male 53 June 1, 2005 June 5, 2008 0 0 _ 1.80 No Mingquan Director Independent He Lanping Female 51 June 1, 2005 June 5, 2008 0 0 _ 1.80 No Director Fu Cai Director Male 37 June 1, 2005 June 5, 2008 0 0 _ 1.80 Yes Li Wei Director Male 47 June 5, 2008 June 4, 2011 0 0 _ 3.60 No Liu Juntao Director Male 40 June 5, 2008 June 4, 2011 0 0 _ 3.60 No 13 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Li Independent Male 62 June 5, 2008 June 4, 2011 0 0 _ 1.80 No Guangzhong Director Independent Wu Yuhua Male 64 June 5, 2008 Aug. 28, 2008 0 0 _ 0.90 No Director Independent Feng Da’an Male 61 June 5, 2008 June 4, 2011 0 0 _ 1.80 No Director Li Zhi Supervisor Male 28 June 5, 2008 June 4, 2011 0 0 _ 0.90 No Zhu Wusong Supervisor Male 51 June 5, 2008 June 4, 2011 0 0 _ 0.90 No Yan Jianhua Supervisor Male 45 June 1, 2005 June 5, 2008 0 0 _ 0.90 No Huang Supervisor Male 39 June 5, 2008 June 4, 2011 0 0 _ 1.80 No Wencai Deputy Chen Liurong General Male 44 June 1, 2002 June 4, 2011 0 0 _ 6.29 No Manager Secretary of Wu Congfeng Male 37 April 1, 2004 Jan. 28, 2008 0 0 _ 0.48 No the Board Deputy Wu Congfeng General Male 37 April 22, 2006 Jan. 28, 2008 0 0 _ 0.00 No Manage Wang Secretary of the Board Female 32 April 27, 2008 June 4, 2011 0 0 _ 3.39 No Hongjuan Wang Supervisor Female 32 June 1, 2005 April 25, 2008 0 0 _ 0.60 No Hongjuan Total - - - - - 0 0 - 44.57 - 2. There were no directors, supervisors and senior executives holding the position in other Shareholding Company 3. Major backgrounds of the directors, supervisors, senior executives and jobs taken or concurrently taken in parties other than shareholding parties in recent five years Directors: Mr. Li Yuanbin: born in June 1950, Han nationality, 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, director and general manager of the Company, now he is chairman of the Board and general manager, vice chairman of Hainan Enterpreneurs’ Association, and permanent member of Hainan Federation of Industry Chamber of Industry & Commerce and Vice-president of Hainan Provincial Association for Beverages Hotels and Food. Mr. Liu Juntao: born in Oct. 1968, Han nationality, undergraduate degree, economist. Mr. Liu once held the position of vice bank chairman of Gansu Construction Bank banch, secretary of the Board of Director of Haikou Agriculture Industry and Trade (Luo Niushan) Co. Ltd., Deputy General Manager of Hainan Dadonghai Traveling Co. Ltd and Deputy General Manager of Softto Co., Ltd., from Feb. 2007 till now, Secretary of the Board of Tianmao Industry Group Co., Ltd., and he held the position of director of the Company since 2002. 14 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Mr. Li Wei: born in Sep. 1961, Han nationality, Master Degree, CPA, Party member. Mr. Li once held the position of finance director of Yingshan County Silk Making Plant, 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 deputy general manager manager and finance officer. Now, he is the chief accountant in Hainan Medical College; he held the position of director of the Company since 2002. Independent Directors: Mr. Li Guangzhong, was born in Aug. 1946, Han nationality with Bachelor Degree and Professor of Accounting Department of Zhongnan University of Economics and Law. He was once Deputy Office Director of Staff Room, Depyty Director, and Secretary General of Part Branch, Director of Accounting Department and the Party Secretary in Accounting School of Zhongnan University of Economics; Party Secretary and concurrently Deputy Dean of Accounting School of Zhongnan University of Economics from May 2001 to March 2007 and retired since March 2007. Subject expertises: financial accounting, accounting theory, award-winning editor in charge of the publication of books and more 10 teaching materials; published more than 30 academic papers. Now, he is the Independent Director Hainan Pearl River Holdings Co., Ltd. He has been the Independent Director of the Company since May 2008. Mr. Feng Da’an: born in Dec. 1947, Han nationality, Bachelor degeree. He once Worker Leader of Food Bureau in Chengguan District of Lanzhou City, Section Chief and Deputy Governor of Ganshu Construction Bank of China, Deputy Secretary and Deputy Governor of Hainan Provincial Construction Bank of China; Deputy Office Director of Hainan Securities Management Office from July 1995 to July 1998; Deputy Director Genral and Directory General of Hainan Local Tax Bureau from Aug. 1998 to Dec. 2007; he retired in Jan. 2008. Now, he is the Independent Director of Hainan Airlines Co., Ltd., Independent Director of Sundiro Holding Co., Ltd. and the Independent Director of Beijing Hualian Hypermarket Co., Ltd, And he has been the Independent Director of the Company since May 2008. Supervisors: Mr. Huang Wencai: 39 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. Mr. Zhu Wusong, 52 years old, Han nationality. He graduated from Huanggang Industrial School in July 1981; took the post of Project Manager of Non-ferrousYijian Hainan Jinhai Corporation from Oct. 1992 to Nov. 1994; Project Manager of Section 9 of 21 Ye Hainan Corporation from Jan. 1995 to April 2004; worked in Project Department of South China Hotel of the Company since April 2004; and the Employee Supervisor of the Company since year 2008. 15 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Mr. Li Zhi, 29 years old, Han nationality, studied in Hainan University from Feb., 2004 to Jan. 2007. From Oct. 2003 to Dec. 2004, he took the post of financial manager of Hainan Boshitong Investment Management Consultant Co. Ltd.; from Jan., 2005 to Oct. 2006, he took the post of deputy general manager of Haikou Anqiong Pawnshop; now he is deputy manager of financial department and employee supervisor. Other Senior Executives: Mr. Chen Liurong: 44 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 deputy general manager of Hainan Dadonghai Tourism Center (Holding) Co., Ltd. Wang Hongjuan, 32 years old, Undergraduate Degree, she took the post of Office Director and Manager of Securities Department and Representative for Securities Affaris of the Company and took the position of Secretary of the Board of the Company since June 2008. 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) The Company did not implement equity mechanism 5. Elected or leaving position and reason of directors, supervisors and senior executives in the report period On Jan. 28, 2008, the former Deputy General Manager & Secretary of Board of Directors Mr. Wu Congfeng resigned his posts due to personal reason. In order to ensure normal work of the board of directors, the Board of Directors decided that Deputy General Manager Mr. Chen Liurong temporarily acted on behalf of Secretary of Board of Directors before deciding new person to take the post. On Apr. 24, 2008, the former Employee Supervisor Ms. Wang Hongjuan resigned the post as Employee Supervisor of the 5th Supervisory Committee. At the same day, Union Committee of the Company supplemented to select Mr. Li Zhi as Employee Supervisor of the 5th Supervisory Committee. On Apr. 27, 2008, the 10th meeting of the 5th board of directors decided to engage Ms. 16 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Wang Hongjuan as secretary of Board of Directors. On Apr. 27, 2008, due to the expiration of office term of the 5th Board Of Directors, the 10th meeting of the 5th board of directors formed the resolution and passed the examinations of 2007 Annual Shareholders’ General Meeting in which Directors Mr. Li Yuanbin, Mr. Li Wei and Mr. Liu Juntao and Independent Directors Mr. Wu Yuhua, Mr. Li Guangzhong and Mr. Feng Da’an as the members of the 6th Board of Directors of the Company. On Apr. 27, 2008, due to the expiration of office term of the Supervisory Committee, the 10th meeting of the 5th Supervisory Committee formed the resolution and passed the examinations of 2007 Annual Shareholders’ General Meeting in which Mr. Huang Wencai was elected as the Shareholder Superviosr of the 6th Supervisory Committee. On Jun. 5, 2008, whereas the tenure of the 5th Supervisory Committee expired, the Union Committee of the Company selected Mr. Li Zhi and Mr. Zhu Wusong as Employee Supervisors of the 6th Supervisory Committee. On Jun. 10, 2008, the 1st meeting of the 6th Board of Directors formed the resolution in which Mr. Li Yuanbin was elected as Chairman of the Board of the 6th Board of Directors of the Company. On Jun. 10, 2008, the 1st meeting of the 6th Supervisory Committee formed the resolution in which Mr. Huang Wencai was elected as Chairman of Supervisory Committee of the Company. Ended Aug. 2008, the Independent Director of the 6th Board of the Company Mr. Wu Yuhua died due to sudden illness. The Company supplemented one Independent Director in accordance with the relevant regulations. II. Particulars about employees The total number of employees of the Company within the report period was: 268, including: Service people 150, Finance people 27, Technical people 59, Administration people 32, the undergraduate degree occupied 35% of total number of employees and there was no retire employees. 17 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report VI. Administrative Structure I. In accordance with the regulations on the governance of listed companies promulgated by CSRC, the actual management status of the Company remained differences with the requirements of the relevant documents In the report period, according to relevant regulations of the Company Law, Securities Law and Stock Listing Rules of Shenzhen Stock Exchange, combining with the actual conditions of the Company, the Company revised and perfected internal management systems one by one. In the report period, the Company revised Articles of Association, Rules of Procedure of Shareholders’ General Meeting and Rules of Procedure of the Board of Directors, further consummated governance structure of company legal person, and perfected modern enterprise system and regulated operation of the Company. On the basis of starting special governance campaign of listed company in 2007, according to the requirements of document QZJF[2008] No.130 issued by CSRC and relevant document of Shenzhen Stock Exchange, the Company continued to actively promote the work of special governance campaign, made specified self-inspection, and formed Self-estimation Report of Internal Control and Explanation on Reform of Governance, which was respectively approved by the 10th meeting of the 5th board of directors and the 1st extraordinary meeting of the 6th board of directors. Relevant details were published on Securities Times, Wen Wei Po and Juchao Website respectively on April 29, 2008 and July 24, 2008. The standard operation and actual conditions of legal person governance basically accorded with the requirements of Code of Corporate Governance for Listed Company and relevant standard document about listed company issued by CSRC. II. Performance of Independent Directors (I) Board of Directors set up three independent directors, which accorded with the requirements of Opinions on Establishing Rules of Independent Director in Listed Company promulgated by CSRC. Since the independent directors held the posts, they could conform to the requirements of Systems for Independent Directors’ Working, seriously, diligently and responsibly performed their duties, participated in board meetings and shareholders’ general meetings, took part in the compiling of periodic reports, expressed independent opinions on issues such as connected transaction and actively realized all kinds of information of the Company operations, which played a active role in scientific and objective decision-making, and protected interest of the whole company and legal interest of minority shareholders. In the report period, there was no situation of expressing disagreement on relevant affairs. (II) (II) In the report period, the attendances to meeting of Board of Directors by independent directors Names of Times of board meetings to Presented in Presented by Independent Absented present person proxy Director Leng Mingquan 4 4 0 0 He Lanping 4 4 0 0 Zhao Man 4 4 0 0 Li Guangzhong 4 4 0 0 18 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Feng Da’an 4 4 0 0 Wu Yuhua 2 2 0 0 III. Five Separation of the Company and controlling 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 of Directors, 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 perfection of internal control system (I) Summary of internal control In the report period, according to the requirement of CSRC and Hainan Securities Regulatory Bureau, the Company further deeply promoted special governance campaign, and contraposed problems pointed in Reform Report of Special Governance Campaign, the Company made a further reform and implemented. In 2008, the Company established and perfected Articles of Association, Rules of Procedure of Shareholders’ General Meeting and Rules of Procedure of the Board of Directors, further consummated governance structure of company legal person and improved governance level of the Company. In 2008, due to election of a new term of the board of directors and one of independent directors dismissing for accident, which influenced the foundation of new Three Meetings, the Company would found Three Meetings as soon as possible, establish and perfect relevant system according to relevant regulations. Details could be found in Self-estimation Report of Internal Control of Hainan Dadonghai Tourism Center Co., Ltd. in 2008 disclosed at the same time of this report. (II) Self-estimation of internal control by the board of directors The board of directors thought that: through establishing, perfecting and implementing each internal control system, the Company started Special Governance Campaign of Listed Company, and made self-inspection, reform and improvement. The present internal control of the Company basically accorded with relevant laws, regulations and the requirement of supervisory department, which basically accorded with the actual conditions of the Company, and exerted active function in ensuring assets safety, protecting shareholders’ equity and preventing operation risk. 19 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report (III) Independent directors’ opinion on self-estimation of internal control We thought that: the Company could follow laws, regulations and the requirement of relevant department, established or revised relevant internal control system in 2008, perfected and implemented reasonable and comparatively perfect internal control system, ensured the normal operation of the Company’s production and operation in the whole, and reduced management risk in some extent. The self-estimation of internal control in 2008 basically accorded with the actual conditions of internal control. We requested that the Company should found anew term of the board of directors and establish relevant system as soon as possible. (IV) Supervisors’ opinion on self-estimation of internal control The supervisory committee thought that, the form and content of the self-estimation report of internal control in 2008 basically accorded with the requirement of Guidance for Internal Control of Listed Company issued by Shenzhen Stock Exchange and relevant laws, regulation and standard document, which truly and exactly reflected the present conditions of internal control of the company, and the overall estimation of internal control was objective and true. V. Establishment and implementation on evaluation and incentive mechanism of performance of senior executives, and relevant encouragement systems (I) The Company persists with the principal of “Rooted on Human”, hires the persons facing the society, and chooses the best candidates under the premise of publicity, justice and fairness. The qualified candidates, who are nominated by general manager and with the approval of Board of Directors, will be hired officially as senior manager of the Company. (II) The Company implements explicit evaluation, makes relevant evaluation method in accordance with the achievements and duty 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 as well as rewards and penalty of the senior executives. (III) The Company established the effective incentive 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 fast development of the Company. VII. Particulars about Shareholders’ General Meeting 20 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report On the morning of Jan. 25, 2008, the 1st Extraordinary Shareholders’ General Meeting of the Company was held. The public notice of resolutions of the shareholders’ general meeting was published on Securities Times, Hong Kong Wen Wei Po, and Juchao website (www.cninfo.com.cn) dated Jan. 26, 2008. On the morning of Feb. 26, 2008, the 2nd Extraordinary Shareholders’ General Meeting of the Company was held. The public notice of resolutions of the shareholders’ general meeting was published on Securities Times, Hong Kong Wen Wei Po, and Juchao website (www.cninfo.com.cn) dated Feb. 27, 2008. On the morning of June 5, 2008, the 2007 Annual Shareholders’ General Meeting of the Company was held. The public notice of resolutions of the shareholders’ general meeting was published on Securities Times, Hong Kong Wen Wei Po, and Juchao website (www.cninfo.com.cn) dated June 6, 2008. 21 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report VIII. Report of the Board of Directors I. Review on the whole operation of the Company in the report period (I) The overall operation In the report period, the Company realized income from main operation of RMB 34,694,700, with RMB 9,071,000 up over the same period of last year and increase scope of 35.40%; received loss in operation profit of RMB 566,600, with loss of RMB 5,100,200 down over the same period of last year and decrease scope of 90%; RMB 998,000 for net non-operating income and expenditure, with RMB 159,285,000 down over the same period of last year and decrease scope of 99.38%; RMB 431,900 for net profit, with RMB 154,184,300 down over the same period of last year and decrease scope of 99.72%. The main reasons are listed as follows: 1. Oriented by market demand, the Company adopted the following powerful measures effectively and promptly, actively adapted to market change, and effectively prevented from lots of unfavourable influences caused by natural disasters such as freezing disaster in South China, earthquake happened in Sichuan, as well as typhoon, change of national policies such as adjustment on May Day vocation system and cancel of arrival visa for Olympic Games, as well as unceasing spread of international financial crisis. The Company steadily operated with growth. (1) The Company took prevention as the main measure. Hainan Island is mainly located in oceanic climate zone where disaster weather frequently happens, especially in summer. For that, the Company pays attention to weather forecast of Hainan ever and again. Sufficient prevention works are prepared before falling of typhoon, to minimize loss arising from disaster weather. (2) The Company promptly adjusted marketing structure, fully adopted effective marketing strategy and strengthened development of tourism market oriented for middle and top grade. As the national tourism industry has been developed continuously, meanwhile, standard of living has been also continuously improved, going out for tourism has become more and more popular. Taking advantage of the unique climate of Sanya where people could enjoy everyday like spring and the beautiful natural environment there, besides, with assistance from Hainan provincial government which unceasingly and vigorously has publicized Hainan Island as an Island of international reputation, health and fun, the Company adopted the market strategy that “Gradually Abandon Low-grade Market, and Strengthen Development for High-grade Market” and flexible price policy; strengthened development for overseas market such as Russia market, and effectively raised room-booking rate and room price of the hotel. In the report period, customers from Russia market just took for 60% of the room-booking rate of the hotel for a whole year, moreover, the daily average price of room was high to RMB 506.31, respectively with increase rates of 17% over the same period of last year. (3) The Company improved creation in catering and increased market share. According to demand of market, with spirits of new service, new ideal, new kind and 22 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report new figure, the hotel continuously carried out activities for course innovation, to improve innovation ability of the waiters providing catering service. In the report period, the hotel presented innovation courses featuring with various variety, excellent quality, and distinct local characteristics of Hainan as well as modern city breath; taking Green, Nutrition and Health as main theme, the Company improved the Four Famous Courses of Hainan, seafood flavour dinner, barbecue buffet dinner, which greatly improved competition ability of its products. Meanwhile, in consideration of offseason and midseason, structure and price of catering products were adequately adjusted in the right time. Holidays were fully used to carry out promotion activities. With these, the original resources were effectively activated, the original customer source market was stabilized and new customer source was attracted, which made it possible to further improve profit-making ability of the hotel. (4) Marketing promotion was strengthened to build new figure for the old hotel. To effectively improve popularity of the hotel, consolidate the original market and develop new market, the Company not only made complete decoration and reform for the internal and external environment of the Hotel, but also made a series of propaganda and promotion for the hotel by means of network, media, participation in promotion meeting held for overseas and domestic famous hotels, as well as preparation of abundant propaganda brochure and special newspaper of the hotel. In the report period, the hotel not only effectively consolidated domestic market, but also actively developed overseas market. It has successfully cooperated with the biggest tourism agency of Russia-Southern Cross, which brought effective improvement to the hotel’s economic benefit and brand benefit, and also set good social figure for the hotel. (5) Management was strengthened and service quality was improved. The Company strengthened management and skill training of employees, to fully improve employees’ comprehensive character; implemented responsibility system by manager of various department, responsibility was asked from individual personnel; established complete and effective incentive mechanism and effectively implemented the mechanism; to sufficiently dig and activate agency, enthusiasm and innovation of employees has been persistently insisted by the hotel. In 2008, the hotel put many efforts in management, thus the entire service character and quality of the employees got effective improved, and the service quality stepped forward to a new stage. 2. In the report period, through continuous efforts made by its operation group, the Company has got apply from the state tax affair department that the Company was agreed to deduct property loss of RMB 109,708,600 before taxation, which helped the Company to add value of RMB 0.04 for net asset per share. In sum, under the premises of optimizing market structure, strengthening service management, perfection of company administration, implementing brand strategy and making unceasing innovation and striving for favourable national policies, overcoming influence caused by a series of disadvantages such as natural disaster, 23 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report international financial crisis and furious industry competition, the Company basically finished the working plan for the whole year and kept good developing tendency in its main business in 2008. In 2009, the Company would continue to make positive progress, further strengthen management, commit itself to macro planning, and strive for substantial leap and development with company benefit as centre and innovation as drive. (II) Main business and operation status 1. Main operations classified according to industries and products (Unit: RMB’0000) Main operations classified according to industries Increase/decre Increase/decre ase in revenue Increase/decrea ase in cost of Revenue from Cost of Gross profit from se in profit Industries or products operations operations operations ratio (%) operations ratio over the over the last over the last last year (%) year (%) year (%) Hotel services 3,469.47 460.55 86.73% 35.40% 62.12% 3.98% Main operations classified according to products Guest room 2,708.98 1.51 99.94% 39.82% 4.68% 0.00% Food & beverage 760.49 459.05 39.64% 30.18% 62.28% -23.13% 2. Main operations classified according to areas (Unit: RMB’0000) Increase/decrease in revenue Area Revenue from operations from operations over the last year (%) Sanya 3,469.47 35.40% 3. Major suppliers and customers (Unit: RMB) Portion in the Company’s The total purchase amount from the top 6,397,519.29 whole purchase amount 100% five suppliers (%) The total sales amount to the top five Portion in the Company’s 11,429,877.00 32.94% customers whole sales amount (%) (III) Change in assets constitution of the Company in the report period (Unit: RMB) At the end of 2008 At the end of 2007 Changes on Increase/decease Proportion Proportion in Item proportion in the proportion Amount in the total Amount the total total asset (%) (%) asset (%) asset (%) Account receivable 3,437,875.15 2.60% 2,612,739.71 1.93% 34.72 31.58% 24 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Inventories 583,609.64 0.44% 339,465.89 0.25% 76 71.92% Investment in real 0.00 0.00% 0.00 0.00% 0.00% estate Long-term equity 0.00 0.00% 0.00 0.00% 0.00% investment Fixed assets 80,934,059.16 61.18% 86,088,868.45 63.58% -3.77 -5.99% Construction in 0.00 0.00% 182,939.00 0.14% 0.00% progress Short-term loan 0.00 0.00% 0.00 0.00% 0.00% Long-term loan 0.00 0.00% 0.00 0.00% 0.00% Reasons for change: 1. Increase of account receivable was brought by increase of main business income. 2. Increase of inventory was due to that necessary inventories were increased as income increased. 3. Decrease of fixed assets was caused by withdrawal for fixed asset depreciation. Changes in period expense and income tax in the report period with year-on-year comparison (Unit: RMB) Increase Increase and decrease Item 2008 2007 and decrease proportion (%) amount Operating expense 14,882,827.05 14,475,303.74 407,523.31 2.82% Administrative expense 13,216,143.49 8,854,259.11 4,361,884.38 49.26% Financial expense 592,311.42 4,453,702.43 -3,861,391.01 -86.70% Income tax 0.00 0.00 0.00 0.00 Reasons for change: 1. Operating expense received an increase of 2.82% compared to that of last year, which was mainly due to that expense correspondingly increased as income increased. 2. Administrative expense received an increase of 49.26% compared to that of last year, which was mainly due to withdrawal of bonus of RMB 3,313,300 for excess profit made by South China Hotel, and increased expenditure for increasing salary and welfare of employees. 3. Financial expense received a decrease of 86.7% compared to that of last year, which was mainly due to that interest expenditure decreased as debt was exempted in this year. (IV) Changes in data of cash flow statement (Unit: RMB) Increase/ decrease Item 2008 2007 amount Net cash flow arising from operating 9,315,408.71 6,623,022.91 2,692,385.80 activities 25 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Net cash flow arising from investing -5,730,636.43 -4,979,982.91 -750,653.52 activities Net cash flow arising from financing 0.00 -3,200,000.00 0.00 activities Reasons for change: 1. Increase of net cash flow arising from operating activities was mainly caused by increase of sales income in this report period. 2. Decrease of net cash flow arising from investing activities was mainly caused by expenditure for purchasing fixed assets in this report period. (V) Business operation and achievement of the Company’s main holding subsidiaries and share-holding companies The Company had no subsidiary. There was no such situation that investment income from single share controlling company or share-holding company influenced net profits of the Company over 10%. (VI) Particulars about main body controlled by the Company with special intention There was no main body controlled by the Company with special intention. II. Prospect for the future development of the Company (I) The development tendency of the industry of the Company and the market competition pattern the Company faced In recent years, along with fast development of national economy and great increase of national income, tourism has become an important developing industry. And fast development of tourism to some extents brought the wide development of tourism service. However, as the tourism industry continuously develops across the whole nation, star-standard hotel continuously emerges, and customer source of tourism industry continuously divides, the competition in tourism market is getting furious day by day. Tourism service market in Sanya always presents to be saturated or even over saturated. Vicious competitions on lowering price are quite normal in hotel industry. Competition in this industry is getting furious day by day. External operation environment for tourism industry and tourism service industry still need to be improved. In order to enhance sustainable operation and competition ability of South China Hotel-the only one main business of the Company, though the Company had already devoted capital to the hotel for overall equipments upgrade and reform in recent years, which improved the Hotel’s operation competition ability in some degree, while in order to better adopt to severe survival environment originated from local furious competition, currently and in future, the Company still needs to continuously make improvement and perfection for the software and hardware equipments of the Hotel. (II) The future development strategy of the Company (1) Expanding the brand: on the basis of stable operation, the Company will fully develop the superior resources like geographic and humane environments; further 26 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report strengthen construction of software and hardware equipments to enhance service quality; expand the domestic and international sales network to improve the market share; unceasingly advance brand figure of the Hotel and endlessly enlarge and strengthen the brand of main operation. (2) Attracting merchants or bring in capital to expand the scale of company: the Company will implement the conformity of optimization of assets, hold the favorable cooperation opportunity for long term development, introduce excellent cooperators, properly introduce good assets, develop and expand operation project to endlessly enlarge enterprise scale. (3) Completing systems and standardizing management: the Company will establish modern enterprise management system, perfect legal administration structure; strengthen management control on the Company. According to its development need, the Company will introduce advanced management idea; establish management system adjusting to new system and new requirement to accelerate its development. (III) Operation plan for New Year (1) The Company will grasp favorable opportunity for its capital attraction; find long term and excellent cooperators and operation projects for its long development, to make foundation for its future development and expansion. (2) The Company will take development as the main line, “making money and reducing load” as the target, in strict accordance with the requirements of relevant law, regulations, and Articles of Association, regulate the operation, improve the profit-gaining ability of main operations, reduce expense and increase income, and continue to improve the financial conditions to make sure of the unceasing operation ability of the Company. (3) The Company will fully utilize the advantages of geographic position of hotel, optimize and integrate 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, so as to develop new growth of profit. (IV) Capital needed for future development and application plan of the capital The Company mainly collects capital needed for development with its own fund or through financing, thus to finish development programming of the Company. (V) Risks which would exert adverse effects on the realization of the future development strategy and operation goal of the Company 1. Risks of macro policies The Company’s main business is tourism service. In order to standardize and optimize tourism market environment, relevant department of the country may release related policies. These policies will restrict and affect development of local tourism in short time, thus may influencing its main business income. Countermeasures: While expanding the sales scale, further improve the hotel service quality, win more market share with good quality services and thus guarantee certain 27 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report income of main operations. 2．Risks of natural disaster Hainan Island belongs to the marine climate, which causes catastrophe weather especially in summer. If Sanya becomes the landing place for typhoon, it will possibly bring big destruction to the facilities of the Company and it will possibly influence the normal operation of the Company. Countermeasures: the Company will strengthen the construction and maintenance of infrastructure, continue to purchase insurance, actively take effective preventive measures, and improve ability to resist natural disasters. 3. Risks of main business operation As the tourism industry continuously develops across the whole nation, star-standard hotel continuously emerges, and customer source of tourism industry continuously divides, competition in Sanya among tourism industry becomes more and more furious. However, as for the Company, its main business is only operation of a Hotel, single in main business and limited in operation range. Performance of the Company has a comparatively big dependence on tourism market, especially on visitor quantity. In such situation that threshold for this industry is comparatively low and hotels are expanded without order which makes supply exceed demand, development prospect for the Company is not considerable. Countermeasures: the Company will continue to make active progress, devote itself in macro programming, strengthen sales; on the basis of original sales network, with the advantage of new decoration and reform, the Company unceasingly develops high-grade tourism market, domestic and overseas; and makes efforts to raise room-booking rate, raise room price and improve comprehensive consumption level. III．Investment of the Company in the report period (I) Use of raised fund In the report period, there was no such situation that raised proceeds was used for investment or application of proceeds raised before the report period continue to exist in this report period. (II) Use of non-raised fund In the report period, the Company has no significant projects invested with non-raised proceeds. IV. Alterations on accounting policy and accounting estimation of the Company, and reason and influences of modification for significant errors made in previous periods Explanation on modification to accounting errors: The Board of Directors and Shareholders’ General Meeting of the Company respectively examined and approved the events on cancellation of loss of accounts receivable RMB 240,518,731.31(has withdrawn the provision of bad debts 100%) of the original controlling shareholder Hainan Dadonghai Tourism Center Group Co. Ltd. For that, the Company actively applied to the state tax department on the deduction of income tax of losses of assets on Nov. 13, 2007. On Sep. 17, 2008, the Company received from Sanya Local Tax Bureau, Hainan 28 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Province its Reply. The assets loss eligible for pretax deduction in 2007 was RMB 109,708,566.25 was agreed, in which loss of accounts receivable (account receivable of Hainan Dadonghai Tourism Center (Holdings) Co. Ltd.) was RMB 109,188,357.67, and loss of fixed assets was RMB 520,208.58. Losses of asset deducted and the account taken back in following years, the account retrieved in actual year was reckoned into the current taxable income, and enterprise income tax was calculated. Influenced by the aforementioned events, the total tax payable of the Company decreased RMB 16,456,284.94. RMB 15,457,499.83 is the 2007 income tax payable, accordingly, the tax payable is deducted RMB 15,457,499.83 in year 2007, the remained part would be handed in the relevant tax payable in the following year, meanwhile, the undistributed profit increased RMB 15,457,499.83 in year 2007. On Oct. 26, 2008, the Company held the 3rd meeting of the 6th Board and 3rd meeting of the 6th Supervisory Committee in which approved the aforementioned events. Meanwhile, Independent Director issued independent opinions, the Company made adjustment on relevant data in the financing ended the 3rd quarterly of 2008. The details were published on Securities Times, Hong Kong Wen Wei Po and Juchao Website dated Oct. 28, 2008. In the report period, the Company did not have modification to errors of the accounting policy and accounting estimates. V. Routine work of the Board of Directors (I) In the report period, the Company held 8 Board of Directors’ meetings. 1. The 8th extraordinary meeting of the 5th Board of Directors was held on Jan 8th of 2008, and the relevant resolutions were published on Securities Times, Hong Kong Wen Wei Po and Juchao Website (www.cninfo.com.cn) dated Jan 10th of 2008. 2. The 9th extraordinary meeting of the 5th Board of Directors was held on Jan 31st of 2008, and the relevant resolutions were published on Securities Times, Hong Kong Wen Wei Po and Juchao Website (www.cninfo.com.cn) dated Feb 2nd of 2008. 3. The 10th meeting of the 5th Board of Directors was held on Apr 27th of 2008, and the relevant resolutions were published on Securities Times, Hong Kong Wen Wei Po and Juchao Website (www.cninfo.com.cn) dated Apr 29th of 2008. 4. The 11th meeting of the 5th Board of Directors was held on Apr 28th of 2008. According to relevant regulations, the content of the meeting was free for disclosure. 5. The 1st meeting of the 6th Board of Directors was held on Jun 10th of 2008, and the relevant resolutions were published on Securities Times, Hong Kong Wen Wei Po and Juchao Website (www.cninfo.com.cn) dated Jun 11th of 2008. 6. The 1st extraordinary meeting of the 6th Board of Directors was held on Jul 23rd of 2008, and the relevant resolutions were published on Securities Times, Hong Kong Wen Wei Po and Juchao Website (www.cninfo.com.cn) dated Jul 24th of 2008. 7. The 2nd meeting of the 6th Board of Directors was held on Aug 28th of 2008, and the relevant resolutions were published on Securities Times, Hong Kong Wen Wei Po and Juchao Website (www.cninfo.com.cn) dated Aug 29th of 2008. 8. The 3rd meeting of the 6th Board of Directors was held on Oct 26th of 2008, and the relevant resolutions were published on Securities Times, Hong Kong Wen Wei Po and 29 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Juchao Website (www.cninfo.com.cn) dated Oct 28th of 2008. (II) Board of directors’ implementation on resolutions of Shareholders’ General Meeting in the report period In the report period, board of directors earnestly carried out resolutions examined and passed by 2007 Annual Shareholders’ General Meeting. In the report period, the Company did not neither distribute profit to shareholders nor convert capital public reserve into share capital. In the report period, the Company also made rights offering and seasoned equity offering. (III)Duty performance of the Audit Committee of the Board In the report period, the Company renewed the Board. Independent directors totaled to 3, among which one director left his post due to accident, which affected foundation of Three Committees of the new Board. In audit procedure for 2008 financial statement of the Company, all members of the Board performed duty as the Audit Committee and carried out the following works according to relevant demands: Before certified public accountants entered for annual audit, members of the board of directors heard report from administration level of the Company on operation of 2008, financial condition and audit work for 2008 financial statement, and negotiated with the accountants in aspects of member constitution of audit working team, audit plan, risk judgment and audit focus for this year; in early March of 2009, members of the board of directors heard working reports of certified public accountants and administration level of the Company during the audit; at end of March, members of the board of directors heard report checked the financial accounting statements which were handed for audit. In early April of 2009, two independent directors and personnel from relevant supervision department of the Company met the certified public accountants, and made communication on initial audit opinion. They held that the 2008 audited financial statement was prepared in strict accordance to requirement of Accounting Standard for Enterprise and accounting system for enterprise; the statement fairly reflected the Company’s situation in terms of assets, debts, equity and operation; no significant errors and omission has been found. Members of the board of directors thought that the external audit institution of the Company-Zonzun Certified Public Accountants Co. Ltd. faithfully performed its audit duty, and suggested to reengage the company to be the audit institution for 2009. (IV)Duty performance of the Remuneration Committee of the Board Due to the aforesaid reasons, all directors of the Company performed their duty as Remuneration Committee in strict accordance to relevant regulations; made and perfected examination standard for directors, supervisors and senior executives and conducted examination; checked remuneration policy and scheme for directors, supervisors and senior executives; and guided the Board to perfect remuneration system of the Company. The Company didn’t implement equity incentive plan. VI. Profit distribution preplan or preplan of converting capital public reserve into 30 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report share capital of 2008 According to auditor’s report issued by Zonzun Certified Public Accountants Co. Ltd., the net profits the Company realized in 2008 amounted to RMB 431,900, and the profit available for distribution to the shareholders at the end of this year amounted to RMB -328,660,800. Examined by the 4th meeting of the 6th Board of Directors, the Profit Distribution Preplan of 2008 was as follows: It would neither conduct profit distribution nor covert capital reserve into share capital in this report period. The aforesaid preplan should be submitted to 2008 Annual Shareholders’ General Meeting for discussion. VII. No cash dividend has happened to the Company for previous 3 years. VIII. Other events In the report period, the newspapers for information disclosure engaged by the Company were Securities Times and Hong Kong Wen Wei Po. IX. Zonzun Certified Public Accountants Co. Ltd. issued the Explanations on the Fund Occupancy of The Controlling Shareholders of the Company and Other Related Parties, Specific Explanations on Guarantee and Opinions of Independent Directors. For details, please refer to Juchao Website (www.cninfo.com.cn) dated on the disclosure day. 31 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report IX. Report of the Supervisory Committee As the supervisory organization of the Company, adhering to the principle of taking responsibility for its entire shareholder, and in accordance with relevant provisions of Company Law, Articles of Association and Rules on Procedures of the Supervisory Committee, the Supervisory Committee seriously performed its duties and completed the following work in 2008: I. Meetings of the Supervisory Committee held in the report period and decisions made In the report period, Supervisory Committee of the Company held 5 meetings, with respective details as follows: (1) The Company held the 10th meeting of the 5th Supervisory Committee dated April 27, 2008. The relevant notice was published on Securities Times, Hong Kong Wen Wei Po and Juchao Website (www.cninfo.com.cn) dated April 29, 2008. (2) The Company held the 11th meeting of the 5th Supervisory Committee dated April 28, 2008. The content of the meeting was free of disclosure according to relevant regulations. (3) The Company held the 1st meeting of the 6th Supervisory Committee dated June 10, 2008. The relevant notice was published on Securities Times, Hong Kong Wen Wei Po and Juchao Website (www.cninfo.com.cn) dated June 11, 2008. (4) The Company held the 2nd meeting of the 6th Supervisory Committee dated Aug. 28, 2008. The content of the meeting was free of disclosure according to the relevant regulations. (5) The Company held the 3rd meeting of the 6th Supervisory Committee dated Oct. 26, 2008. The relevant notice was published on Securities Times, Hong Kong Wen Wei Po and Juchao Website (www.cninfo.com.cn) dated Oct. 28, 2008. II Independent opinions of the Supervisory Committee (1) Operation of the Company according to law According to relevant laws and regulations, the Supervisory Committee 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, duty performance of the senior executives and the various management system of the Company, and believed that, the Board performed its duty honestly, earnestly and responsible for the development of the Company and the shareholders’ sake in long term; its decision-making procedure complied with the regulation of the Company Law and the Article of Association; every meeting of the Shareholders’ General Meeting and the Board of Directors was held in accordance to the regulation of the Company Law and the Article of Association and other state laws and regulations, and so were the relevant resolution and information disclosure; the various internal control system of the Company was wholesome and perfect, the operating and decision-making procedure was scientific and reasonable. The Company could operate with criterion in strict accordance to the Company Law, Securities Law, Listing Rules in Shenzhen Stock Exchange and other relevant stipulations and systems. The directors, senior executives of the Company neither broke laws, regulations and the Article of Association nor harmed interest of the 32 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Company and its shareholders when performing their duties. (2) Inspection of the financial status of the Company In the report period, Supervisory Committee of the Company periodically inspected and supervised the financial statements, operations and other important activities of the Company; and examined the various financial reports, annual settlement plan; meanwhile, it checked the implementation of the financial systems and management rules and discovered no behaviors against the relevant regulations. ZONZUN Accounting Office Ltd. audited the 2007 financial report of the Company and issued the standard unqualified auditor’s report. The Supervisory Committee believed that the financial report truly reflected the financial status, operation achievement and cash flow status of the Company, and the auditor’s report was fair, objective, true and faithful. (3) There is no investment by raised proceeds of the Company during the report period. (4) During the report period, the Company has not sold and purchased assets. (5) During the report period, the price of connected transaction between the Company and others was reasonable, the contact was regulated, both sides strictly implemented the rights and duties of the agreement, and there was no significant inside transaction or behavior hurting the profit of the Company. (6) Opinion on self-estimation of internal control The supervisory committee thought that, the form and content of the Self-Estimation Report of Internal Control in 2008 basically accorded with the requirement of Guidance for Internal Control of Listed Company issued by Shenzhen Stock Exchange and relevant laws, regulation and standard document, which truly and exactly reflected the present conditions of internal control of the company, and the overall estimation of internal control was objective and true. III Implementation of the Shareholders’ General Meeting The members of the Supervisory Committee attend meetings of the Board and the Shareholders’ General Meetings as nonvoting delegates, and they have no objection to the various reports and proposals submitted by the Board to the Shareholders’ General Meeting. The Supervisory Committee supervised the implementation of the resolutions of the Shareholders’ General Meeting and it held that the Board of the Company could earnestly implement relevant resolutions of the Shareholders’ General Meeting. 33 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report X. Significant Events I. During the year, there were no significant lawsuits and arbitrations of the Company. II. In the report period, there were no items of purchases and sales of assets, takeovers and mergers. III. No stock option incentive plan has been carried out by the Company. IV. Significant related transactions happened in the report period. (I) The actual first largest shareholder Haikou Agriculture & Industry & Trade (Luoniushan) Co., Ltd. accumulatedly consumed RMB 162,300 in the hotel of the Company in 2008. Credit and liability intercourse between the Company and related parties: Unit: RMB’0000 Funds the listed company Funds the related party providing providing for the related party for the listed company Related parties Occurring Occurring Balance Balance amount amount Haikou Agriculture & Industry & Trade 0.00 0.00 90.00 90.00 (Luoniushan) Co., Ltd. Haikou Food Co., Ltd. 0.00 0.00 0.00 5.00 Total 0.00 0.00 90.00 95.00 (II) In the report period, the Company had no related transactions on transferring the assets and equity. (III) In the report period, the Company had no related transactions on external investment combined with the related parties. (IV) In the report period, the Company had no guarantee with the related parties. (V) In the report period, the Company had no related transactions on significant purchase and sales, supplying or accepting labor forces. (VI) In the report period, there was no condition of related parties occupying operation and non-operation capital of the Company. V. In the report period, the various business contracts of the Company were implemented normally, and no significant contracts dissension occurred. (I) 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. (II) In the report period, the Company had no significant guarantee. (III) In the report period, the Company did not entrust others to conduct management of cash and assets. (IV) In the report period, the Company had no other significant contracts. 34 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report VI. Commitment and its implementation in the report period or lasting to the report period made by the Company or the shareholders of the Company who hold over 5% shares of the Company. (I) In the report period, the Company has not made commitment. (II) Commitment and its implementation in the report period made by the shareholders of the Company who hold over 5% shares of the Company. 1. Commitment and its implementation made by Haikou Food Co., Ltd. which is the the agent for the controlling shareholder of the Company Haikou Agriculture & Industry & Trade (Luoniushan) Co., Ltd. (1) Since the implementation of the share merger reform, the non-circulating shares held by it could not be transacted in listing market or transferred within 12 months; when the aforesaid regulation expires, the original non-circulating shares could be transacted through hanging out in Stock Exchange, while the amount sold could not exceed 5% of its total shares within 12 months and 10% within 24 months. The commitment is implementing. Since the implementation of the share merger reform, the shares of the Company held by Yangpu Tongrong Investment Management Consultant Co., Ltd. could not be transacted in listing market or transferred within 12 months; when the aforesaid regulation expires, the original non-circulating shares could be transacted through hanging out in Stock Exchange, while the total amount sold out could not exceed 5% of its total shares within 12 months and 10% within 24 months. The amount of shares which could be transacted in listing market was distributed as proportion of held shares. The commitment is being implemented. (2) Seek for restructure party to restructure the assets of the Company in proper time. Till now, the proper restructure party has not been found. 2. Commitment and its implementation made by Shi Yajun: Since the implementation of the share merger reform, the non-circulating shares held by it could not be transacted in listing market or transferred within 12 months; when the aforesaid regulation expires, the original non-circulating shares could be transacted through hanging out in Stock Exchange, while the amount sold could not exceed 5% of its total shares within 12 months and 10% within 24 months. The commitment is being implemented. VII. Engagement and dismission for CPAs of the Company On April 27, 2008, the Company held the 10th meeting of the 5th board of directors, and decided to reengage Zhongzhun Certified Public Accountants as audit institution for 2008, which was approved in the Annual Shareholders’ General Meeting 2007. According to the Operation Promise Book signed by the Company and Zhongzhun Certified Public Accountants, the Company will pay RMB 280,000 for the 2008 annual audit. VIII. In the report period, the Company, directors, supervisors, senior executives, 35 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report shareholders and actual controllers of the Company have not received investigation from authorized departments, force measurement from the justice and supervision department, been removed to justice organization or asked for criminal responsibility, check from CSRC, administrative punishment from CSRC, or been forbidden to access to securities market, been punished by other governance department or received public criticize from Stock Exchange as being recognized as improper person selected. IX. The share merger reform Details could be available in the part(I) of section IX of this report X. Particulars about the Company’s Reception of Investigation and Interview Adhering to the open, fair and just principle, in the report period, the Company, in strict accordance with the Guidance for Fair Information Disclosure for Listed Companies of Shenzhen Stock Exchange, had not privately, in advance, selectively or solely disclosed and revealed non-public and significant information to specific objects, and ensured the fairness of the information disclosure of the company, to practically maintain the legal benefit of investors. In 2008, the Company had never received investors’ investigation and media interview. And the Company had no receptions of any investors’ investigation and media interview. XI. 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. 36 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report XI. Financial report (I) Auditor’s opinion Auditor’s Report ZONZUN Audit (2009) No.5015 To all shareholders of Hainan Dadonghai Tourism Center Co. Ltd., We have audited the accompanying financial statements of Hainan Dadonghai Tourism Center Co., Limited (hereinafter referred to as the "Dadonghai Company") i including balance sheet of 31 December 2008, and profit statement, and cash flow statement, and statement on changes of shareholders’ equity for the year ended, and notes to the financial statements for the year ended. I. Management's responsibility for the financial statements The Company's management is responsible for the preparation and fair presentation of the financial statements in accordance with the Enterprises Accounting Standards and Enterprises Accounting System. The responsibility includes: (1) designing, performing and maintaining internal control related to the preparation and fair presentation of the financial statements, which are free from material misstatements whether due to frauds or errors; (2) choosing and applying right accounting policies; (3) making reasonable accounting estimates. II. Auditor's responsibility Our responsibility is to express an audit opinion on these financial statements based on our audit. We performed our audit in accordance with Chinese Certified Public Accountants' Auditing Standards. Those standards require us to comply with professional ethics, and to plan and perform our audit so as to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures of the financial statements. The selective audit procedures depend on auditor's judgment, including the evaluation of the risk of material misstatement of the consolidated financial statements due to frauds or errors. When evaluating risk, we consider internal control related to financial statements, in order to design auditing procedures, but not for the purpose of expressing an opinion on the internal control's effectiveness. An audit also includes assessing the appropriateness of the accounting policies adopted and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that we have obtained sufficient and appropriate audit evidences to provide a basis for our audit opinion. III. Auditing opinion In our opinion, the Company’s financial statements have been prepared in accordance with the Enterprises Accounting Standards, and they fairly present, in all material respects, the financial position of the Company as of December 31, 2008, and its operation results and cash flows for the year ended. 37 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report ZONZUN Accounting Office Ltd. Certified Public Accountant: Tan Daoyi Beijing·P.R.China Certified Public Accountant: Lin Jun April 27, 2008 (II) Financial statement (see the attachment I) (III) Notes to the financial statement (see the attachment II) 38 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Attachment I. Balance Sheet Prepared by Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. December 31, 2008 Unit: RMB Balance at period-end Balance at year-begin Items Notes Merger Parent Company Merger Parent Company Current assets: Monetary funds 5.1 6,009,603.45 6,009,603.45 2,424,831.17 2,424,831.17 Settlement provisions Capital lent Transaction finance asset Notes receivable Accounts receivable 5.2 3,437,875.15 3,437,875.15 2,612,739.71 2,612,739.71 Accounts paid in advance 5.3 66,120.00 66,120.00 39,263.00 39,263.00 Insurance receivable Reinsurance receivables Contract reserve of reinsurance receivable Interest receivable Dividend receivable Other receivables 5.4 147,351.88 147,351.88 1,746,964.94 1,746,964.94 Purchase restituted finance asset Inventories 5.5 583,609.64 583,609.64 339,465.89 339,465.89 Non-current asset due within one year Other current assets 5.6 8,669,919.00 8,669,919.00 8,669,919.00 8,669,919.00 Total current assets 18,914,479.12 18,914,479.12 15,833,183.71 15,833,183.71 Non-current assets: Granted loans and advances Finance asset available for sales Held-to-maturity securities Long-term account receivable Long-term equity 5.7 investment Investment property Fixed assets 5.8 80,934,059.16 80,934,059.16 86,088,868.45 86,088,868.45 Construction in progress 5.9 182,939.00 182,939.00 Engineering material Disposal of fixed asset Productive biological asset 39 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Oil and gas asset Intangible assets 5.10 32,432,480.64 32,432,480.64 33,301,207.80 33,301,207.80 Expense on Research and Development Goodwill Long-term expenses to be apportioned Deferred income tax asset Other non-current asset Total non-current asset 113,366,539.80 113,366,539.80 119,573,015.25 119,573,015.25 Total assets 132,281,018.92 132,281,018.92 135,406,198.96 135,406,198.96 Current liabilities: Short-term loans Loan from central bank Absorbing deposit and interbank deposit Capital borrowed Transaction financial liabilities Notes payable Accounts payable 5.12 1,919,594.13 1,919,594.13 2,300,798.98 2,300,798.98 Accounts received in 5.13 2,316,405.01 2,316,405.01 2,180,295.18 2,180,295.18 advance Selling financial asset of repurchase Commission charge and commission payable Wage payable 5.14 5,042,221.88 5,042,221.88 1,545,624.22 1,545,624.22 Taxes payable 5.15 153,001.02 153,001.02 -361,987.42 -361,987.42 Interest payable Dividend payable Other accounts payable 5.16 33,267,756.64 33,267,756.64 40,591,283.13 40,591,283.13 Reinsurance payables Insurance contract reserve Security trading of agency Security sales of agency Noncurrent liabilities due within 1 year Other current liabilities Total current liabilities 42,698,978.68 42,698,978.68 46,256,014.09 46,256,014.09 Non-current liabilities: Long-term loans Bonds payable 40 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Long-term account payable Special accounts payable Projected liabilities Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities 42,698,978.68 42,698,978.68 46,256,014.09 46,256,014.09 Owner’s equity (or shareholders’ equity): Paid-in capital (or share 5.17 364,100,000.00 364,100,000.00 364,100,000.00 364,100,000.00 capital) Capital public reserve 5.18 54,142,850.01 54,142,850.01 54,142,850.01 54,142,850.01 Less: Inventory shares Surplus public reserve Provision of general risk Retained profit 5.19 -328,660,809.77 -328,660,809.77 -329,092,665.14 -329,092,665.14 Balance difference of foreign currency translation Total owner’s equity attributable 89,582,040.24 89,582,040.24 89,150,184.87 89,150,184.87 to parent company Minority interests Total owner’s equity 89,582,040.24 89,582,040.24 89,150,184.87 89,150,184.87 Total liabilities and owner’s 132,281,018.92 132,281,018.92 135,406,198.96 135,406,198.96 equity Legal representative: Li Yuanbin Executive officer in charge of accounting: Chen Liurong Principal with the accounting agency: Li Zhi 41 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Profit Statement and Profit Distribution Statement Prepared by Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. January-December, 2008 Unit: RMB Amount in this period Amount in last period Items Notes Merger Parent Company Merger Parent Company I. Total operating income 5.20 34,694,727.08 34,694,727.08 25,623,653.21 25,623,653.21 Including: Operating income 34,694,727.08 34,694,727.08 25,623,653.21 25,623,653.21 Interest income Insurance gained Commission charge and commission income II. Total operating cost 35,261,313.23 35,261,313.23 31,290,407.20 31,290,407.20 Including: Operating cost 5.20 4,605,522.46 4,605,522.46 2,840,886.28 2,840,886.28 Interest expense Commission charge and commission expense Cash surrender value Net amount of expense of compensation Net amount of withdrawal of insurance contract reserve Bonus expense of guarantee slip Reinsurance expense Operating tax and extras 5.21 1,898,719.70 1,898,719.70 1,409,795.94 1,409,795.94 Sales expenses 14,882,827.05 14,882,827.05 14,475,303.74 14,475,303.74 Administration expenses 5.22 13,216,143.49 13,216,143.49 8,854,259.11 8,854,259.11 Financial expenses 5.23 592,311.42 592,311.42 4,453,702.43 4,453,702.43 Losses of devaluation of asset 5.24 65,789.11 65,789.11 -743,540.30 -743,540.30 Add: Changing income of fair value(Loss is listed with “-”) Investment income (Loss is listed with “-”) Including: Investment income on affiliated company and joint venture Exchange income (Loss is listed with “-”) III. Operating profit (Loss is -566,586.15 -566,586.15 -5,666,753.99 -5,666,753.99 listed with “-”) Add: Non-operating income 5.25 1,158,512.90 1,158,512.90 160,959,193.50 160,959,193.50 Less: Non-operating expense 5.26 160,071.38 160,071.38 676,195.48 676,195.48 42 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Including: Disposal loss of non-current asset IV. Total Profit (Loss is listed 431,855.37 431,855.37 154,616,244.03 154,616,244.03 with “-”) Less: Income tax V. Net profit (Net loss is listed 431,855.37 431,855.37 154,616,244.03 154,616,244.03 with “-”) Net profit attributable to 431,855.37 431,855.37 154,616,244.03 154,616,244.03 owner’s equity of parent company Minority shareholders’ gains and losses VI. Earnings per share i. Basic earnings per share 0.0012 0.0012 0.42 0.42 ii. Diluted earnings per share 0.0012 0.0012 0.42 0.42 Legal representative: Li Yuanbin Executive officer in charge of accounting: Chen Liurong Principal with the accounting agency: Li Zhi 43 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Cash Flow Statement Prepared by Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. January-December, 2008 Unit: RMB Amount in this period Amount in last period Items Notes Merger Parent Company Merger Parent Company I. Cash flows arising from operating activities: Cash received from selling commodities and providing labor 33,147,793.27 33,147,793.27 24,572,206.84 24,572,206.84 services Net increase of customer deposit and interbank deposit Net increase of loan from central bank Net increase of capital borrowed from other financial institution Cash received from original insurance contract fee Net cash received from reinsurance business Insured savings and net increase of investment Net increase of disposal of transaction financial asset Cash received from interest, commission charge and commission Net increase of capital borrowed Net increase of returned business capital Write-back of tax received Other cash received 5.27 2,277,007.07 2,277,007.07 4,878,016.17 4,878,016.17 concerning operating activities Subtotal of cash inflow 35,424,800.34 35,424,800.34 29,450,223.01 29,450,223.01 arising from operating activities Cash paid for purchasing commodities and receiving labor 9,642,192.84 9,642,192.84 7,846,424.44 7,846,424.44 service Net increase of customer loans and advances Net increase of deposits in central bank and interbank 44 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Cash paid for original insurance contract compensation Cash paid for interest, commission charge and commission Cash paid for bonus of guarantee slip Cash paid to/for staff and 7,246,373.81 7,246,373.81 5,381,505.04 5,381,505.04 workers Taxes paid 1,946,208.46 1,946,208.46 159,241.41 159,241.41 Other cash paid concerning 5.28 7,274,616.52 7,274,616.52 9,440,029.21 9,440,029.21 operating activities Subtotal of cash outflow 26,109,391.63 26,109,391.63 22,827,200.10 22,827,200.10 arising from operating activities Net cash flows arising from 9,315,408.71 9,315,408.71 6,623,022.91 6,623,022.91 operating activities II. Cash flows arising from investing activities: Cash received from recovering investment Cash received from investment income Net cash received from disposal of fixed, intangible and 4,500.00 4,500.00 18,180.79 18,180.79 other long-term assets Net cash received from disposal of subsidiaries and other units Other cash received concerning investing activities Subtotal of cash inflow 4,500.00 4,500.00 18,180.79 18,180.79 from investing activities Cash paid for purchasing fixed, intangible and other 5,735,136.43 5,735,136.43 4,998,163.70 4,998,163.70 long-term assets Cash paid for investment Net increase of mortgaged loans Net cash received from subsidiaries and other units Other cash paid concerning investing activities Subtotal of cash outflow 5,735,136.43 5,735,136.43 4,998,163.70 4,998,163.70 from investing activities 45 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Net cash flows arising from -5,730,636.43 -5,730,636.43 -4,979,982.91 -4,979,982.91 investing activities III. Cash flows arising from financing activities Cash received from absorbing investment Including: Cash received from absorbing minority shareholders’ investment by subsidiaries Cash received from loans Cash received from issuing bonds Other cash received concerning financing activities Subtotal of cash inflow from financing activities Cash paid for settling debts 3,200,000.00 3,200,000.00 Cash paid for dividend and profit distributing or interest paying Including: Dividend and profit of minority shareholder paid by subsidiaries Other cash paid concerning financing activities Subtotal of cash outflow 3,200,000.00 3,200,000.00 from financing activities Net cash flows arising from -3,200,000.00 -3,200,000.00 financing activities IV. Influence on cash due to fluctuation in exchange rate V. Net increase of cash and cash 3,584,772.28 3,584,772.28 -1,556,960.00 -1,556,960.00 equivalents Add: Balance of cash and cash equivalents at the period 2,424,831.17 2,424,831.17 3,981,791.17 3,981,791.17 -begin VI. Balance of cash and cash 6,009,603.45 6,009,603.45 2,424,831.17 2,424,831.17 equivalents at the period -end Legal representative: Li Yuanbin Executive officer in charge of accounting: Chen Liurong Principal with the accounting agency: Li Zhi 46 Statement on Changes of Owners' Equity Prepared by Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. Dec. 31, 2008 Amount in this report period Owners' equity attributable to the parent company Owners' equity attrib L Min Paid-up Less: Surplu Gener Total Items Ot ority Paid-up capital Capital Treas s al risk Retained owners’ Capital T he inter capital (Share (Share reserves ury reserv provis profit equity reserves s rs est capital) capital) Stock es ion S 364,100,000. 54,142,850. -329,092,665. 89,150,184. 364,100,000. 54,142,850. I. Balance at the end of the last year 00 01 14 87 00 01 Add: Changes of accounting policy Error correction of the last period Others 364,100,000. 54,142,850. -329,092,665. 89,150,184. 364,100,000. 54,142,850. II. Balance at the beginning of this year 00 01 14 87 00 01 III. Increase/ Decrease in this year 431,855.37 431,855.37 (Decrease is listed with'"-") (I) Net profit 431,855.37 431,855.37 (II) Profits and losses calculating into owners' equity 1. Net changing amount of fair value of financial assets available for sale 2. Effect of changes of other owners' equity of invested units under equity method 3. Effect of income tax related to owners' equity Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report 4. Others Total of (I)and (II) 431,855.37 431,855.37 (III) Owners' devoted and decreased capital 1. Owners' devoted capital 2. Amount calculated into owners' equity paid in shares 3. Others (IV) Profit distribution 1. Withdrawal of surplus reserves 2. Withdrawal of general risk provisions 3. Distribution for owners (shareholders) 4. Others (V) Carrying forward internal owners' equity 1. Capital reserves conversed to capital (share capital) 2. Surplus reserves conversed to capital (share capital) 3. Remedying loss with profit surplus 4. Others IV. Balance at the end of the report 364,100,000. 54,142,850. -328,660,809. 89,582,040. 364,100,000. 54,142,850. period 00 01 77 24 00 01 Legal representative: Li Yuanbin Executive officer in charge of accounting: Chen Liurong Principal w 34 Attachmen II. Independent Auditor’s Report 2008 Hainan Dadonghai Tourism Center (Holdings) Co., Limited TEL: (010)88354836, (0898)66518585 FAX: (010)88354837 POSTCODE: 100044 ADDRESS: 4/F Guoxing Bldg. 22 Shouti South Road, Haidian Dist. Beijing Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Independent Auditor’s Report on Hainan Dadonghai Tourism Center (Holdings) Co., Limited Contents I. Independent Auditor’s Report……………………………………………1 II. Attached Materials 1． Balance sheet…………………………………………………………2 2． Statement of profit ……………………………………………………3 3． Statement of cash flow ………………………………………………4 4． Statement of Change in Stockholder Equity ……………………………5 5． Notes to the financial statements ………………………………………6 III. A Copy of the Business License of ZONZUN Accounting Office Ltd. 35 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Independent Auditor’s Report ZONZUN Audit （2009）No.5015 To all shareholders of Hainan Dadonghai Tourism Center (Holdings) Co. Ltd., We have audited the accompanying financial statements of Hainan Dadonghai Tourism Center (Holdings) Co., Limited (hereinafter referred to as the "Dadonghai Company") which comprise the balance sheet as at 31 December 2008, the 2008 income statement, the statement of cash flow, the statement of changes in stockholder equity and the notes to the financial statements. 1. Responsibilities of the Management for the Financial Statements It is the responsibility for the management of the Dadonghai Company to prepare financial statements according to the stipulations of the business accounting rules. This responsibility includes: (1) devising, implementing and maintaining internal control related to the preparation of the financial statements so as to ensure that the financial statements do not contain major errors caused by fraudulence or mistake; (2) choosing and adopting appropriate accounting policies; and (3) making reasonable accounting estimations. 2. Responsibilities of the Certified Accountants Our responsibility is to express an auditor’s opinion based on our auditing on these finacial statements. We have carried out the auditing according to the stipulations of China’s auditing rules for certified accountants, which require us to abide by the relevant ethics, plan and practice auditing and thereby provide a reasonably guarantee that the financial statements are free of significant errors. Auditing concerns implementation of relevant auditing procedures to procure the related amount of the financial statements and auditing proofs disclosed. The choice of auditing procedure depends on judgment of the certified accountants, including a risk assessment of significant errors possibly occuring due to fraudulence or mistakes. In the assessment we have taken into consideration the internal control related to the financial statements, but the purpose had not been to deliver an opinion on the effectiveness of the internal control. The 36 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report auditing has also assessed the appropriateness of the accounting policies the management adopted, the rationality of the accounting estimations concerned, and the overall presentation of the financial statements. We believe that the proofs we procured have been sufficient and appropriate, and thus provided a good foundation for us to express the auditing opinion. 3. Auditing Opinion In our opinion, Dadonghai Conpany’s financial statements have been prepared according to the stipulations of the business accounting rules and have given a true and fair view of the state of affairs of the Company as of 31 December 2008, and of its operating results and cash flows for the year then ended. ZONZUN Accounting Office Ltd. Certified Public Accountant: Certified Public Accountant: Beijing, China April 26, 2009 37 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Hainan Dadonghai Tourism Center (Holdings) Co. Ltd. Notes to the Financial Statement of Hainan Dadonghai Tourism Center (Holdings) Co., Ltd. 2008 Currency Unit: RMB yuan Note 1 Basic Facts of the Company 1.1Historical evolution of the company Hainan Dadonghai Tourism Center (Holdings) Co., Ltd. (hereinafter referred to as the Company), was founded as a standardized holdings company limited on April 26, 1993, incorporated on the basis of the former Hainan Sanya Dadonghai Tourism Center Development Company limited and approved by the Hainan Provincial Stock System Experimentation Leading Group with its document No. [1993]11. On May 6, 1996, The Company underwent a restructuring and a corresponding division with the approval of the Hainan Provincial Securities Administration Office by its document No. [1996]58. On October 8, 1996 and January 28, 1997, The Company, with duly approval, went public by issuing 80 million shares of B stock and 14 million shares of A stock respectively at Shenzhen Security Exchange. The Company mainly engages in tourism and the catering industry. On June 20, 2007, the Company experienced non-tradable shares reform, through which non-tradable share holders of the Company got circulating right of their shares by exempting liability of the Company or paying shares to tradable share holders, and tradable share holders got paid three shares for every ten of their shares. After the above consideration of stock ration, the Company maintained an unchanged total shares with a corresponding equity structural change. Up till December 31, 2008, the Company’s total capital stock is 364.1 million shares, in which the restricted tradable stock is 96,599,084 shares, accounting for 26.53% of the total, and the unrestricted tradable stock is 267.500916 million shares, accounting for 73.47% of the total. Up to December 31, 2008, the Company’s registered capital is RMB 364.1 million. The registering code is 4600001003983. The Legal Representative is Li Yuanbin. And the residence: Dadonghai, Hedong District, Sanya. 1.2 Trade nature, business scope, major products and labor service of the Company 38 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report The Company mainly engages in accommodation, catering industry, photography, miniature garden and bonsai, grains and oil products, knitwear and textiles, department stores, chemical products (excluding those needing specialized licenses), daily goods, industrial production means (excluding those needing specialized licenses), metal materials, machinery and equipment, and tour ticket service (on an item-license basis). Note 2 Principal Accounting Policies, Accounting Estimation and Errors of the Previous Year 2.1 Statement of Abiding by the Business Accounting Rules All the financial statements prepared by the Company conform to the Business Accounting Rules, and reflect truthfully and completely the relevant information concerning the financial status, operational results and cash flow of the Company. 2.2 Basis of the financial statement preparation The preparation of the Company’s financial statement is based on continual operation, in which actual transactions or events are confirmed and measured according to “Basic Rules of Business Accounting Standards” and provisions of other related accounting standards.. 2.3 The accounting period The accounting period covers the accounting year beginning on January 1 and ending on December 31. 2.4 The standard accounting currency The standard accounting currency is RMB. 2.5 The statement items with measurement attribute changed in the accounting period and their attribute as adopted in the current accounting period When measuring the accounting elements, historical cost is adopted. In cases the amount of defined accounting element can be obtained and reliably measured, individual accounting elements are measured by replacement cost, net realizable value, current value or fair value. 2.5.1 Measurement attributes of current value and fair value (1) Current Value 39 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Under current value measurement, assets are measured at their discounted amount of the future net cash inflow as occurring in the expected continual use and ultimate disposal. Liabilities are measured at the future net cash outflow amount expected to be paid in the expected period. (2) Fair Value In fair value measurement, assets and liabilities are measured at amounts with which both parties informed of the trading situation voluntarily exchange their assets or liquidate their liabilities in fair trading activities. 2.5.2 The statement items with measurement attribute changed in the accounting period There are no measurement attribute changes of the statement items this year. 2.6 Definition of cash equivalent In the statement of cash flow, investment with short cycle (expiring within three months since the buying date) or strong liquidity, easily converted to definite cash amount, or with small risk of value variation, is defined as cash equivalent. 2.7 Converting method of foreign currency The amount of foreign currency transaction is converted into the Company’s accounting currency standard RMB as per the spot exchange rate of the transaction date. Monetary items of foreign currency are converted at the spot exchange rate as of the date of the balance sheet. Non-monetary items of foreign currency measured in historical cost is still converted at the spot exchange rate of the transaction date, without changing the accounting currency standard amount. Non-monetary items of foreign currency measured in fair value is converted at the spot exchange rate of the confirmation date of the fair value, with the difference treated as variation of the fair value. The year-end converted difference of the special foreign currency loan account is capitalized and accounted as related capital cost as long as it can be directly used in assets acquisition or production. The other converted differences of foreign currency are accounted as financial expenses. The converted difference occurred among different currencies is accounted as financial expenses. 2.8 Converting method of foreign currency financial statement The asset and liability items of the balance sheet are converted at the spot exchange rate of 40 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report the balance sheet date. The owner’s equity item, except undivided profit, is converted at the spot exchange rate as of the date of occurrence. Revenue and expenses in the income statement are converted at the average exchange rate of the current period. The balance in the foreign currency financial statement arising from conversion as mentioned above is separately listed as “balance in the foreign currency financial statement” under the owner’s equity item in the balance sheet. 2.9 Accounting Method of Monetary Assets and Liabilities 2.9.1 Classification of monetary assets and liabilities (1) Monetary assets are divided into the following four kinds in initial confirmation: a. Monetary assets measured in fair value and with the variations counted in profit and loss in the current period, including transaction monetary assets and monetary assets specified as measured in fair value and the variation of which is counted in the current profit and loss; b. Investment held until due; c. Loan and account receivable; d. salable monetary assets. (2) Monetary liabilities are divided into the following two kinds in initial confirmation: a. Monetary liabilities measured in fair value and with the variations counted in profit and loss in the current period, including transaction monetary liabilities and monetary liabilities specified as measured in fair value and the variation of which is counted in the current profit and loss; b. Other monetary liabilities. 2.9.2 Validating basis and measurement of financial instrument (1) Monetary assets and liabilities measured in fair value with the variation counted in the profit and loss of the current period. Fair value when acquired is accounted as the initial amount, and related transaction fee is accounted in t he profit and loss of the current period. Interest or cash dividend is affirmed as investment yield, the value variation is accounted in the profit and loss of the current period at the year end. In disposal, the difference between the fair value and the initially booked amount is affirmed as investment yield, meanwhile the profit and loss of the fair value variation is adjusted. 41 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report (2) investment held until expiration The sum of fair value when acquired (deducting the bond interest due but not actually drawn) and related transaction fee is affirmed as the initial amount. During holding the interest revenue is accounted as investment yield in line with the amortized cost and actual interest (when the difference between the actual interest rate and the par interest rate is small, accounted on the latter). The actual interest rate is set upon acquisition and remains stable in the expected holding period or shorter period. When disposing, the difference between acquired price and the book value of the investment is accounted in the investment yield. (3) Account receivable and loan The company’s credits receivable from commodity sales and labor provision and other creditor rights on other firms without explicit price offer on the active market, including accounts receivable, notes receivable, other amounts receivable, are accounted with the contractual or agreed price as the initial confirmed amount. As for those of financing nature, the current value is confirmed as initial. When recovering or disposing, the difference between the acquired price and the book value of the concerned account receivable is accounted in the profit and loss of the current period. (4) Salable monetary assets The sum of the fair value when acquired (deducting cash dividend announced but undistributed or bond interest due but not collected yet) and related transaction fee is confirmed as the initial amount. Interest or cash dividend acquired when holding is confirmed as investment yield and measured at the year end at fair value, and the value variation accounted in capital reserve (other capital reserve). When disposing, the difference between the acquired price and the book value of the monetary asset is accounted in profit and loss, meanwhile the amount corresponding to the disposal whose fair value variation was originally accounted as owner’s rights and interests is 42 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report transferred into investment yield. (5) Other monetary liabilities The sum of the fair value and related transaction fee is affirmed as the initial amount and further measured taking account of amortized cost. 2.9.3 Confirmation basis and measurement method of monetary assets transfer The Company terminates confirmation of monetary assets which satisfies one of the following conditions: (1)The right to receive cash flow of monetary assets has been transferred to another party; (2)Almost all risks and rewards under the ownership of the monetary assets have been transferred to the transferee; (3)Control over the monetary assets has been abandoned though risks and rewards under the ownership of the monetary assets have not been transferred. As for monetary assets satisfying conditions to terminate confirmation, the difference between the following amounts is counted as profit or loss of current period: (1) Book value of the monetary assets transferred; (2) Consideration received due to the transfer, plus the accumulated fair value (salable monetary assets) originally counted into owner’s interest. 2.9.4 Confirmation of the fair value of major monetary assets and liabilities: The fair value of monetary assets or liabilities with a thick market is determined according to their quotations in the thick market, including prices quoted regularly by bourses, brokers, trade associations and pricing institutions which usually represent prices actually occurring in fair transactions of the market. As for monetary assets or liabilities without a thick market, the fair value is determined through estimation techniques, which includes considering recent actual prices adopted parties familiar to the relevant situation and transacting on a volunteer basis, referring to current fair values of other similar or homogeneous monetary assets or liabilities, discounted cash flow, and option pricing model, etc. 2.9.5 Methods of monetary assets impairment test and withdrawal of provisions for 43 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report devaluation (1)At the year end, if the fair value of salable monetary assets fall substantially, or the falling is expectedly non-temporary after various factors taken into account, devaluation is confirmed. The accumulated loss incurred in fair value falling of originally counted owner’s equity is changed over, and devaluation thus confirmed. (2) Depreciation provision for investment held until expiration Depreciation provision for investment held until expiration is dealt with similar method as of loss of devaluation in accounts receivable. 2.10 Confirmation standard and withdrawal method of bad debts of accounts receivable At year-end, if objective evidence indicates devaluation occurs for accounts receivable, the book value will be reduced to collectible amount. The difference is confirmed as loss of devaluation and accounted in the current profit and loss. The collectible amount is the future cash flow discounted at the original actual interest rate, with consideration of the related collateral value (deducting expected disposal fee). The original actual interest rate is the rate set when the accounts receivable confirmed. Since difference between the expected future cash flow and the current value, no discount is made in confirming the related loss of devaluation. At the year end, devaluation test is conducted on individual account receivable of significant amount (including debt receivable, notes receivable, accounts paid in advance, other accounts receivable and long-term accounts receivable, etc.) If objective evidence indicates occurrence of devaluation, the loss is thus confirmed and bad debt provision is accounted. Individual account receivable of significant amount refers to the top five accounts receivable in amount. Other accounts receivable of no individual significance in amount are divided into groups according to debt aging as the similar trust risk features and the devaluation loss is confirmed at certain proportion of these groups at the year end, and bad debt provision is thus prepared. Except for those accounts receivable with individual devaluation provision, withdrawal percentage for bad debt provision is as follows, based on the group actual loss rate estimated at 44 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report similar loss rate in previous years: Debt aging Rate (%) Within one year 0 1-2 years 5 2-3 years 15 3-4 years 25 4-5 years 50 Above 5 years 100 2.11 Inventory method 2.11.1 Inventory classification Inventory is classified as: raw material, commodity in stock, low-value consumables, trusted supply for processing, foodstuffs, etc. 2.11.2 Pricing of distributed goods from stock Inventory is counted on a sales price basis and apportioned on a monthly basis. Purchase and storage are accounted at actual cost. Consumption and delivery are accounted with first-in, first-out method. Low-value consumables are amortized with one-off write-off method upon delivery. 2.11.3 Inventory accounting system The perpetual inventory system in accounting is adopted here. 2.11.4 Withdrawal method for inventory devaluation provisions At the end of the accounting period the Company conducts a general check on the inventory stock, an inventory falling price reserve is provided in line with the difference between individual inventory item cost and realizable net value. The price falling reserve for large-number low-value goods is provided on an inventory category basis. 2.12 Kinds and measurement modes of investment real estate Investment real estate means buildings leased out or property held for appreciation purpose or both, including leases-out land, land-use rights held for expected appreciation and sale, and leased-out properties. Subsequent measurement is conducted with cost mode, with the depreciation and withdrawal 45 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report of provisions for devaluation similar to that of fixed assets. Property investment accounted in the mode of cost, a similar depreciation as for fixed assets is adopted. Lease of land use, an amortized method is adopted. If depreciation is possible, the estimated depreciation loss is accounted. 2.13 Accounting and Depreciation Method of Fixed Assets 2.13.1 Confirmation of Fixed Assets The Company defines those tangible assets, held for commodity production, labor provision, leasing, operating or managing, which have the following features and their economic benefits probably flow into business and the cost can be reliably measured, as fixed assets: (1) Held for the purpose of producing commodities, offering labor service, leasing or operating; (2) The durability exceeding an accounting period. 2.13.2 Classification of Fixed Assets Fixed assets are classified as: property and buildings, machinery and equipment, electronic entertainment equipment, and other equipment. 2.13.3 Initial Measurement of fixed assets Cost of fixed assets procurement refers to purchase price, related taxes and fee, and related transport fee, charge and discharge fee, installation fee and service charge of the related professional personnel. Cost of fixed assets procurement is accounted on the current value if the price is paid with sight draft, hence, actually on a credit basis. Cost of self-built fixed assets is accounted on all the expenses paid before they can be used for production. For fixed assets acquired from the debtor through debt restructuring, the value is accounted on a fair value basis, and the difference between the book value in the restructuring and the fair value of the assets is accounted into profit and loss of the current period. When non-monetary assets exchange has a commercial nature and the fair value of the assets traded in and out can be reliably measured, the book value of the traded-in assets is based 46 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report on the fair value of the traded-out, unless there is definite evidence indicating that fair value of the traded-in is more reliable. For other non-monetary assets exchange not satisfying the above conditions, cost of the traded-in fixed assets is accounted on the book value of the traded-out assets plus related tax and fee, without accounting into profit and loss. Fixed assets acquired through merger of an enterprise under same control as the Company are accounted on the book value as recorded with the acquired party. For those of an enterprise not under same control, on fair value of the acquired assets. Fixed assets leased in are accounted on the lower of the fair value of the beginning date and minimum current leasing price. 2.13.4 Drawing of fixed assets depreciation Depreciation of fixed assets is based on average life years with regard to their classification, estimated life years and expected residual value (5% of the original), as follows: Assets classification Years of use Expected residual value Annual depreciation (%) Buildings & tenement 20—40 5% 4.75—2.37 Machinery 8—20 5% 11.87—4.75 Electronic entertainment 5—16 5% 19—5.93 appliances Transportation vehicles 7—12 5% 13.57—7.91 Other equipment 8 5% 11.87 Remodeling & fitment 5 5% 19 2.14 Accounting Method of Projects under Construction 2.14.1 Classification of projects under construction Projects under construction are accounted in line with project classification. 1.14.2 Classification of projects under construction and standard and time point for their transferring to fixed assets Projects under construction of the Company are divided into building and tenement projects, machinery installation, machinery maintenance and other projects. All such projects are counted according to actual cost. All loan interest and exchange rate difference directly related to the 47 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report projects are counted into cost before the projects are put into use. Projects under construction are turned into fixed assets on the date of being available to use. 2.15 Accounting of Intangible Assets 2.15.1 Pricing of intangible assets Intangible assets are usually accounted on the actual cost when acquired. Cost of purchased intangible assets includes the purchasing price, related tax and fee, and other disbursement made for putting the assets into use. Cost of fixed assets procurement is accounted on the current value if the price is paid with sight draft, hence, actually on a credit basis. For intangible assets acquired from the debtor through debt restructuring, the value is accounted on a fair value basis, and the difference between the book value in the restructuring and the fair value of the assets is accounted into profit and loss of the current period. When non-monetary assets exchange has a commercial nature and the fair value of the assets traded in and out can be reliably measured, the book value of the traded-in assets is based on the fair value of the traded-out, unless there is definite evidence indicating that fair value of the traded-in is more reliable. For other non-monetary assets exchange not satisfying the above conditions, cost of the traded-in intangible assets is accounted on the book value of the traded-out assets plus related tax and fee, without accounting into profit and loss. Intangible assets acquired through merger of an enterprise under same control as the Company are accounted on the book value as recorded with the acquired party. For those of an enterprise not under same control, on fair value of the acquired assets. 2.15.2 Service life and amortization of intangible assets Intangible assets with uncertain service life are not amortized. Intangible assets with limited service life are amortized within their durability in straight-line method with the following amortization standards: (1) Those within law regulations are amortized according to law; within contract stipulations, according to contract; without relevant regulations or stipulations, within 10 years of durability. (2) Land use right is averagely amortized according to years of use as stipulated in the certificate of land use right. 48 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report At the end of each year, the Company checks on the service life and amortization method of the intangible assets with limited service life. Check of this year indicates no difference from the previous estimation. 2.16 Amortization Method and Years of Life of long-term deferred expenses Long-term deferred expenses are averagely amortized in the expected years of use, in which: (1) Rent paid in advance for fixed assets is amortized averagely or otherwise rationally in the contracted period. (2) Expenses paid for improvement of rented fixed assets are amortized averagely in the shorter period of left-over leasing period and service life of the fixed assets. 2.17 Depreciation of Major Assets Other than Inventory Stock, Property of Investment Nature and Monetary Assets 2.17.1 Long-term Equity Investment Depreciation of long-term equity investment, accounted on a cost basis, without price bid in active market and unable to be reliably measured, is affirmed according to the difference between the book value and the current value as determined on the basis of the current yield of similar monetary assets on the market. For other long-term equity investment, if the measurement of its amount recoverable is lower than the book value, the difference is affirmed as depreciation. Depreciation loss of long term equity investment shall not be returned upon confirmation. 2.17.2 Long-term Non-monetary Assets such as Fixed Assets, Projects under Construction, Intangible Assets and Goodwill For long-term non-monetary assets as fixed assets, projects under construction and intangible assets, the Company confirms whether or not possible depreciation exists at the end of each year. For goodwill gained from merger and intangible assets without definite service life, a test of depreciation is conducted each year regardless of whether depreciation exists at the end of each year. 49 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report If there is a sign for assets devaluation, an estimation is made on the amount recoverable, which is the higher of net value (fair value deducting disposal fee) and expected value in future cash flow. If the amount recoverable is lower than the book value, it will be recorded as the new book value. The difference is confirmed as devaluation of the assets and hence accounted in the current profit and loss and a depreciation reserve is drawn accordingly. Upon confirmation of the assets loss, the corresponding depreciation and amortization are adjusted accordingly, so as to systematically amortize the adjusted book value (deducting expected residual value). Once the depreciation loss of long-term non-monetary assets such as fixed assets, projects under construction and intangible assets is confirmed, it will not be returned in future accounting period. When there is a sign indicating devaluation of a certain assets, the Company estimates its amount recoverable on an individual asset basis. When impossible on individual items, the estimation will be based on the assets group the item belongs to. 2.18 Accounting of Long-term Equity Investment 2.18.1 Initial Measurement (1) Long-term equity investment formed in enterprise combination Merger under same control with cash payment, non-cash assets transfer or liability assumption as consideration, the book value share of shareholder equity obtained through combination is counted as the initial cost of the long-term equity investment on the date of combination. Capital reserve is based on the difference between the initial cost and the consideration. All direct fees related to the merger, including auditing fee, assessment fee and legal charges, are accounted in the profit and loss of the current profit and loss. For merger not under same control, the initial investment cost is determined as the purchase cost as paid on the purchase date according to the provisions in “Business Accounting Rules No. 20, Business merger. 50 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report (2) Long-term equity investment gained through other modes For long-term equity investment gained by cash payment, the purchase price is accounted as the initial cost. For long-term equity investment gained by issuing equity securities, the fair value is accounted as the initial cost. Long-term equity investment invested by investors, the value as agreed in contract or agreement (deducting the announced but undistributed dividend or profit) is accounted as the initial cost, unless the agreed value is evidently unfair. When fair value of traded-in or traded-out assets on a non-monetary basis can be measured reliably, the fair value of traded-out assets is accounted as the initial cost of the traded-in assets, unless the fair value of traded-in assets is evidently more reliable. For other non-monetary assets exchange not satisfying the above description, the book value of the traded-out assets and related tax and fees are accounted as the initial cost. For long-term equity investment gained through debt restructuring, the initial cost is accounted on the basis of fair value. 2.18.2 Evidence of Common Control and Significant Influence of the Invested Institution A common control refers to that according to a certain contract, a company has the power on major financial and operating decisions unanimously agreed by all other power-sharing cooperators. Significant influence refers to that a company has its shared power in operating and financial decisions but not in formulation of such major policies. 2.18.3 Subsequent measurement and profit confirmation of long-term equity investment When the Company has a significant influence or common control on the invested institution, and the initial investment cost is larger the fair value share admitted by the investee, the difference is not adjusted. Otherwise, the initial cost is accounted in the profit and loss of the current period. The long-term equity investment of subsidiaries of the Company is accounted with cost method and adjusted with equity method when preparing combined statement. For long-term equity investment with no common control or significant influence from the 51 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Company, without price bid in active market, and with the fair value unable to be reliably measured, cost method is adopted. For long-term equity investment with common control or significant influence from the Company, equity method is adopted. Under cost method, the investment yield is confirmed only as the accumulated net profit distribution from the investee, exceeding amount will be accounted as return of the initial investment cost. Under equity method, sharable loss occurred with the investee is accounted as follows: firstly, offset the book value of the long-term equity investment; secondly, when the book value is insufficient, investment loss is confirmed with the limit of the long-term equity book value of all other actual net investment with the investee; finally, liability outstanding even after the above procedures will be accounted as investment loss in the current accounting period. When profit occurs in the investee, after deducting the outstanding previous loss share, the Company will proceed with accounting in reversed procedures as above and confirm investment yield. For changes other than gain or loss, when the shareholding proportion is unchanged, the Company will count its portion of share and readjust the book value of the long-term equity investment, and increase or decrease capital reserve (other capital reserve) accordingly. 2.19 Capitalization of Borrowing Expenses 2.19.1 Confirmation Principles of Capitalization of Borrowing Expenses Borrowing expenses incurred are capitalized and accounted in related production cost if they can be directly attributed to capitalizable assets purchase or production. Other borrowing expenses are accounted in profit and loss in the current accounting period. Capitalizable assets refer to fixed assets, real estate of investment nature and inventory stock which need fairly long period of time of construction or production activities to be put into use or sale. Capitalization occurs when the borrowing expenses satisfy the following conditions: 52 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report (1) Assets disbursement, including cash payment, non-cash assets transfer and debt assumption with interest paid for purchase, construction or production of capitalizable assets, has occurred; (2) The borrowing expenses have been incurred; (3) The purchase or production activity necessary to put the assets into use or sale has begun. Capitalization will be suspended when the purchase or production of capitalizable assets is interrupted abnormally and the consecutive interval extends more than three months. Capitalization will be stopped when capitalizable assets have reached the expected usable or salable status. Capitalization will be stopped on certain individual items of the capitalizable assets when the related items have reached the expected usable or salable status. 2.19.2 Period of Capitalization of Borrowing Expenses Period of capitalization of borrowing expenses refers to the period between the time points of beginning and ending of the capitalization, excluding suspensions. 2.19.3 Amount Calculation of Capitalization of Borrowing Expenses Capitalization includes the interest (deducting the interest gain of the yet unused proportion temporarily deposited in banks and yield of the proportion used in other temporary investment) and auxiliary expenses before the capitalizable assets reach the expected usable or salable status. The capitalizable interest amount is the weighted average sum of accumulated assets disbursement exceeding special loans (whether averaged on year-end amount or on a monthly basis shall be specifically stated) times the capitalization rate, which is determined by the average weighted interest rate of general loans. For loans with discount or premium, interest amount is adjusted on a term basis according to the amortizable discount or premium in each accounting period. 2.20 Revenue determination 2.20.1 Commodity sales revenue: commodity sales are determined as revenue when 53 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report satisfying simultaneously the following conditions: (1) The Company has transferred the main risk and reward related to ownership of the commodity to the purchaser; (2) The Company retains neither right of management usually related to ownership nor effective control over the sold commodity; (3) The received amount can be reliably measured; (4) Relevant economic benefit probably flows into the Company; (5) The related occurred or occurring cost can be reliably measured. 2.20.2 Upon the date of balance sheet if the result of labor service can be reliably measured, the labor service earnings are confirmed with the percentage method on a work completed basis. If the result of labor service can not be reliably measured upon the date, it will be processed as follows: (1) If the labor cost can be expected a compensation, the labor service cost already incurred is confirmed as labor service earnings, and the same amount is carried forward as labor cost. (2) If the labor cost can not be expected a compensation, the labor service cost already incurred is accounted in profit and loss of the current accounting period, and not confirmed as labor service earnings. 2.20.3 Revenue from release of assets use right: is confirmed when related economic benefits probably flow into the Company and those benefits can be reliably measured. Among them, interest earnings is determined with the actual term and interest rate when the Company’s capital is used by another enterprise, and the earning amount is calculated according to related contract or agreement. 2.21 Determination of Assets of Deferred Income Tax Assets of deferred income tax is confirmed when income tax can probably be offset. 2.22 Alteration of the Scope of Statements Combination There is no alteration of the scope of statement combination. 2.23 Correction of Errors in the Previous Period On August 29, 2008, the Company received from Sanya Local Tax Bureau, Hainan Province 54 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report its document SLTB No. (2008) 49, “an Official Reply for the Application of Pretax Deduction of Assets Loss to Hainan Dadonghai Tourism Center (Holdings) Co. Ltd.” which states that through duly review on the Company’s application filed on November 13, 2007, the assets loss eligible for pretax deduction in 2007 was RMB 109,708,566.25, in which cancellation of loss of accounts receivable was RMB 109,188,357.67, and loss of fixed assets, RMB 520,208.58. According to this approval, the Company conducted a retroactive adjustment on the 2007 payable income tax amount. After the adjustment, RMB 15,457,499.83 is deducted in the 2007 income tax payable, accordingly, the year-beginning tax payable is deducted RMB 15,457,499.83 and the year-beginning undistributed profit becomes RMB 15,457,499.83. Note 3 Taxes 3.1 Major Tax Items and Tax Rates Tax Item Tax Bases Tax Rate VAT Commodity sales revenue 4% Business tax Operating revenue 5% Consumption tax Sales revenue of jewelry 5% Tax for urban construction & maintenance Business tax & paid VAT 7% Extra fee for education Business tax & paid VAT 3% Business income tax Income tax payable 18% 3.2 Tax Reduction and Exemption According to related provisions of the State Council’s “Notification of Preferential Policy on Business Income Tax in Transitional Period” [2007] No 39, the Company’s business in Hainan enjoys a 18% income tax preference. Note 4 Business Merger and Combination of Financial Statements 4.1 Scope of Combination of Financial Statements The scope of combination of financial statements includes the Company headquarter and South China Grand Hotel with Independent accountability. 4.2 Preparation Method of Combined Financial Statements The combination of financial statements of the Company is according to the provisions as of 55 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report “Business Accounting Rules No. 33, Combination of Financial Statements” promulgated by the state Ministry of Finance in February, 2006. The fund transfer and other exchange items are offset between the Company headquarter and South China Grand Hotel. Note 5 Notes on Major Items of Financial Statements 5.1 Monetary Capital Year-end amount Year-beginning amount Item Original Exchang Converted to Original Exchange Converted to Currency currency erate RMB currency rate RMB Cash RMB 1,873,842.70 1,873,842.70 1,201,545.47 1,201,545.47 USD Yen HK$ Subtotal 1,873,842.70 1,873,842.70 1,201,545.47 1,201,545.47 Bank Deposit RMB 4,135,760.75 4,135,760.75 1,185,666.70 1,185,666.70 Subtotal 4,135,760.75 4,135,760.75 1,185,666.70 1,185,666.70 Other Currency RMB 37,619.00 Subtotal 37,619.00 Total 6,009,603.45 2,424,831.17 5.1.1 The year-end amount of monetary funds increased 1.48 times, mainly due to the increase of operational cash flow caused by the increased revenue from the main business in 2008. 5.1.2 There are no monetary assets with collection risks such as without collateral, frozen assets, or deposits abroad. 5.2 Accounts Receivable 5.2.1 Account aging analysis and percentage Year-end amount Year-beginning amount Aging of Proportion in Bad debt Proportion in Bad debt account Amount Amount total (%) provision total (%) provision Within 1 year 3,394,810.13 63.85 2,501,200.64 55.08 1-2 years 21,152.60 0.40 1,057.63 67,413.66 1.48 46,437.16 2-3 years 56,907.41 1.07 47,068.83 247,141.12 5.44 189,989.28 56 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report 3-4 years 194,951.62 3.67 183,665.65 218,412.84 4.81 215,644.59 4-5 years 218,412.84 4.10 216,567.34 276,230.86 6.09 245,588.38 5years above 1,430,561.16 26.91 1,430,561.16 1,230,415.45 27.10 1,230,415.45 Total 5,316,795.76 100.00 1,878,920.61 4,540,814.57 100.00 1,928,074.86 5.2.2 Classified presentation Year-end amount Year-beginning amount Classification Proportion Bad debt Proportion in Bad debt Amount Amount in total (%) provision total (%) provision Single significant sum of 4,188,743.29 78.78 1,237,973.19 3,236,472.63 71.28 773,409.98 account receivable Single insignificant but risky sum of account 651,285.04 12.25 638,153.57 951,649.17 20.96 918,238.44 receivable Other insignificant 476,767.43 8.97 2,793.85 352,692.77 7.76 236,426.44 accounts receivable Total 5,316,795.76 100.00 1,878,920.61 4,540,814.57 100.00 1,928,074.86 5.2.3 Composition of Accounts Receivable Year-end amount Year-beginning amount Proportion of Proportion of Item Account Proportion Bad debt Account Proportion in Bad debt Bad Debt Bad Debt balance in total (%) provision balance total (%) provision Provision Provision 1. Single significant sum of account 1,237,973.19 23.28 100% 1,237,973.19 773,409.98 17.03 100% 773,409.98 receivable 2. Single insignificant but risky sum of 632,546.08 11.90 100% 632,546.08 1,111,909.48 24.49 100% 1,111,909.48 account receivable 3. Other insignificant 3,446,276.49 64.82 5%-50% 8,401.34 2,655,495.11 58.48 5%-50% 42,755.40 accounts receivable In which：Within one 3,394,810.13 63.85 2,501,200.64 55.08 57 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report year 1－2 years 21,152.60 0.40 5% 1,057.63 22,081.05 0.49 5% 1,104.55 2－3 years 11,574.80 0.22 15% 1,736.22 67,237.46 1.48 15% 10,085.62 3—4 years 15,047.96 0.28 25% 3,761.99 3,691.00 0.08 25% 922.75 4—5 years 3,691.00 0.07 50% 1,845.50 61,284.96 1.35 50% 30,642.48 Total 5,316,795.76 100.00 1,878,920.61 4,540,814.57 100.00 1,928,074.86 5.2.4 Accounts Receivable of Single Significant Amount Significance Ranking Debtor Amount Ratio of Provision Reason No. 1 Sanya Haiyuan Hotel Management Co. Ltd. 1,680,627.73 unsettled No. 2 Sanya Power Supply Co. 773,409.98 100% unsettled Shenzhen Wuzhizhou Merchants Co. Ltd. No. 3 701,169.00 unsettled Chengdu Branch No 4 Sun Hongjie 568,973.37 unsettled Hong Kong % Macao International Travel No. 5 464,563.21 100% unsettled Agency 5.2.5 Accounts receivable of no individual significance but major risks refer to amounts below RMB 200,000 and moderately long aging (above three years). 5.2.6 Accounts receivable at the year end do not include accounts with the Company’s shareholders with 5% or above voting rights. 5.2.7 Total of the top five accounts receivable at the year end is RMB 4,188,743.29, accounting for 78.78% of the total accounts receivable. 5.2.8 The top five accounts receivable Debtor Ranking Name Year-end Balance Aging Proportion in Total Receivable No. 1 Sanya Haiyuan Hotel Management Co. Ltd. 1,680,627.73 Within one year 31.61% No. 2 Sanya Power Supply Co. 773,409.98 14.55% In which: 45,332.61 2-3 years 179,903.66 3-4 years 214,721.84 4-5 years 333,451.87 Above 5years Shenzhen Wuzhizhou Merchants Co. Ltd. No. 3 701,169.00 13.19% Chengdu Branch Within one year 58 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report No 4 Sun Hongjie 568,973.37 Within one year 10.70% Hong Kong % Macao International Travel No. 5 464,563.21 8.73% Agency Above 5 years Total 4,188,743.29 78.78% 5.2.9 Accounts receivable actually written off this year Debtor Amount Nature Reason Whether or not an written-off associate Hainan Wuzhishan Travel 3,932.02 Hotel room fees uncollectible no Agency Hainan Feida Travel Agency 18,110.73 Hotel room fees uncollectible no Hand-in-hand Travel Agency 28,598.00 Hotel room fees uncollectible no Huamin Tourism Co. Ltd 17,414.20 Hotel room fees uncollectible no Haikou（Luoniushan） Co. Ltd. 53,791.40 Hotel room fees uncollectible yes The Provincial Bank of Construction Trust & Investment 4,644.20 Hotel room fees uncollectible no Co. Ltd. Total 126,490.55 5.3 Accounts Paid in Advance 5.3.1 Aging Analysis Year-beginning Amount Year-end Amount Account aging Amount Proportion Amount Proportion Within one year 66,120.00 100% 39,263.00 100% 1-2 years 2-3 years 3-4 years 4-5 years Total 66,120.00 100% 39,263.00 100% 5.3.2 Accounts payable at the year end do not include accounts with the Company’s shareholders with 5% or above voting rights. 5.4 Other Accounts Receivable 59 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report 5.4.1 Aging analysis and percentage Year-end amount Year-beginning amount Account aging Proportion in Bad debt Proportion in Bad debt Amount Amount total (%) provision total (%) provision Within 1 year 85,142.44 0.11 1,705,241.04 2.14 1-2 years 64,845.73 0.08 3,242.29 43,000.00 0.05 2,185.10 2-3 years 3-4 years 1,212.00 303.00 4-5 years 1,212.00 606.00 5years above 78,071,464.30 99.81 78,071,464.30 78,071,464.30 97.81 78,071,464.30 Total 78,222,664.47 100.00 78,075,312.59 79,820,917.34 100.00 78,073,952.40 5.4.2 Classified presentation Year-end amount Year-beginning amount Item Account Proportion Bad debt Proportion in Bad debt Account balance balance in total (%) provision total (%) provision Single significant sum of account 77,363,143.31 98.90 77,363,143.31 78,606,392.71 98.48 77,013,143.31 receivable Single insignificant but risky sum 709,532.99 0.91 708,926.99 1,059,532.99 1.33 1,058,623.99 of account receivable Other insignificant accounts 149,988.17 0.19 3,242.29 154,991.64 0.19 2,185.10 receivable Total 78,222,664.47 100.00 78,075,312.59 79,820,917.34 100.00 78,073,952.40 5.4.3 Composition of Other Accounts Receivable Year-end amount Year-beginning amount Proportion of Proportion Item Account Proportion in Bad debt Account Proportion in Bad debt Bad Debt of Bad Debt balance total (%) provision balance total (%) provision Provision Provision 1. Single significant sum of account 77,363,143.31 98.90 100% 77,363,143.31 77,013,143.31 96.48 100% 77,013,143.31 receivable 2. Single insignificant but risky sum 708,320.99 0.91 100% 708,320.99 1,058,320.99 1.33 100% 1,058,320.99 of account receivable 3. Other insignificant accounts 151,200.17 0.19 5%-50%% 3,848.29 1,749,453.04 2.19 5%-50%% 2,488.10 receivable 60 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report In which：Within one year 85,142.44 0.11 1,705,241.04 2.14 1－2 years 64,845.73 0.08 5% 3,242.29 43,000.00 0.05 5% 2,185.10 2－3 years 15% 15% 3—4 years 25% 1,212.00 25% 303.00 4—5 years 1,212.00 50% 606.00 50% Total 78,222,664.47 100.00 78,075,312.59 79,820,917.34 100.00 78,073,952.40 5.4.4 Other Accounts Receivable of Single Item Significance Significance Ranking Debtor Amount Ratio of Provision No 1 Hainan Dadonghai Hotel Co. Ltd. 54,767,945.15 100% No 2 Cash Dividends delivered in 1994-1996 16,899,000.00 100% No 3 Hainan Hong Kong & Macao 4,145,704.16 100% International Travel Agency No 4 Guangdong Jinma Tourism Co. Ltd. 1,200,494.00 100% No 5 Stock custody fee 350,000.00 100% 5.4.5 Accounts receivable of no individual significance but major risks refer to amounts below RMB 1,000,000 and moderately long aging (above three years). 5.4.6 Accounts receivable at the year end do not include accounts with the Company’s shareholders with 5% or above voting rights. 5.4.7 Top five debtors as per amount at the year end Debtor Ranking Name Year-end Balance Aging Proportion in Total Receivable No 1 Hainan Dadonghai Hotel Co. Ltd. 54,767,945.15 Above 5 years 70.02% No 2 Cash Dividends delivered in 1994-1996 16,899,000.00 Above 5 years 21.60% Hainan Hong Kong & Macao International No 3 4,145,704.16 Above 5 years 5.30% Travel Agency No 4 Guangdong Jinma Tourism Co. Ltd. 1,200,494.00 Above 5 years 1.53% No 5 Stock custody fee 350,000.00 Above 5 years 0.45% Total 77,363,143.31 98.90% 5.4.8 Total of the top five other accounts receivable at the year end is RMB 77,363,143.31, accounting for 98.90% of the total other accounts receivable. 5.5 Inventory & Inventory Devaluation Provision 61 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report 5.5.1 Classified presentation: Year-end Amount Year-beginning Amount Item Amount Depreciation provision Net value Amount Depreciation provision Net value Materials in stock 1,081,539.86 777,500.00 304,039.86 942,828.59 790,407.38 152,421.21 Commodities in 22,771.38 11,668.97 79,010.91 11,668.97 11,102.41 67,341.94 stock Foodstuff & 261,211.60 174,778.82 12,265.30 248,946.30 12,265.30 162,513.52 beverage Fuels 18,954.51 18,954.51 12,862.19 12,862.19 Total 1,384,477.35 800,867.71 583,609.64 1,209,480.51 870,014.62 339,465.89 5.5.2 Inventory Devaluation Provision Year-beginning Amount drawn in Reduction in current period Item Year-end amount amount current period Return Write-off Materials in stock 790,407.38 12,907.38 777,500.00 Commodities in stock 67,341.94 56,239.53 11,102.41 Foodstuff & beverage 12,265.30 12,265.30 Total 870,014.62 12,907.38 56,239.53 800,867.71 Note: Net realizable value is determined on the market value voluntarily agreed by parties on the fair market, deducting possible processing or sales cost before transaction actually concluded. 5.6 Other Floating Assets Year-beginning amount Year-end amount Increase Decrease Item Depreciation Depreciation Book balance Book value this year this year Book balance Book value provision provision Land Exchange Book 10,837,399.26 2,167,480.26 8,669,919.00 10,837,399.26 2,167,480.26 8,669,919.00 Total 10,837,399.26 2,167,480.26 8,669,919.00 10,837,399.26 2,167,480.26 8,669,919.00 5.6.1 Other floating assets refer to the land exchange book (No. 00000514, issuing No. 460200011217001) issued by Sanya Municipal People’s Government for requisitioning the Company’s land in Dadonghai area. 5.6.2 Depreciation provision for other floating assets (land exchange book) is withdrawn on the difference between the book value and the current realizable value, the latter is determined by the asset assessment report HNZLX AAR (2006) No 24 issued by Hainan Zhonglixin Assets 62 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Assessment Firm. 5.7 Long-term Equity Investment Year-end amount Year-beginning amount Investee Book balance Depreciation provision Book balance Depreciation provision Shenzhen Difu Investment & 5,000,000.00 5,000,000.00 5,000,000.00 5,000,000.00 Development Co. Ltd. Hubei Jingsha Dadonghai Club Co. Ltd. 4,566,207.42 4,566,207.42 4,566,207.42 4,566,207.42 Sanya Shun’an Casino 5,150,166.84 5,150,166.84 5,150,166.84 5,150,166.84 Total 14,716,374.26 14,716,374.26 14,716,374.26 14,716,374.26 5.7.1 Long-term equity investment accounted with cost method Equity Initial invested Profit & loss Initial invested Investee Year-beginning Cash dividend Year-end amount share amount adjustment amount Shenzhen Difu Investment & 14.28% 5,000,000.00 5,000,000.00 5,000,000.00 Development Co. Ltd. Hubei Jingsha Dadonghai Club Co.Ltd. 91% 4,566,207.42 4,566,207.42 4,566,207.42 Sanya Shun’an Casino 70% 5,150,166.84 5,150,166.84 5,150,166.84 Total 14,716,374.26 14,716,374.26 14,716,374.26 5.7.2 Depreciation provision for long-term investment Year-beginning Year-end Investee Increase this year Decrease this year Reason for provision amount amount Shenzhen Difu Investment & 5,000,000.00 5,000,000.00 No signs of collectibility Development Co. Ltd. Project terminated, no possibility to Hubei Jingsha Dadonghai Club Co. Ltd. 4,566,207.42 4,566,207.42 return investment Not in conformity with state law, hence Sanya Shun’an Casino 5,150,166.84 5,150,166.84 closed Total 14,716,374.26 14,716,374.26 5.8 Fixed Assets 5.8.1 Original value of fixed assets and accumulated depreciation Classification Year-beginning amount Increase of current period Decrease of current period Year-end amount 63 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Original value of fixed assets Buildings & tenement 156,278,345.03 156,278,345.03 Machinery 18,560,086.78 18,560,086.78 Electronic equipment 2,477,156.91 293,142.87 44,400.00 2,725,899.78 Transportation vehicle 1,055,438.77 402,170.00 1,457,608.77 Other equipment 1,287,419.21 245,726.88 1,533,146.09 Remodeling & fitment 9,461,241.03 63,665.00 9,524,906.03 Total 189,119,687.73 1,004,704.75 44,400.00 190,079,992.48 Cumulated depreciation Buildings & tenement 52,284,444.84 3,058,473.83 55,342,918.67 Machinery 11,196,586.73 747,239.64 11,943,826.37 Electronic equipment 1,163,364.20 260,627.09 22,847.74 1,401,143.55 Transportation vehicle 92,985.29 107,703.08 200,688.37 Other equipment 554,846.92 166,282.37 721,129.29 Remodeling & fitment 1,479,973.30 1,797,635.77 3,277,609.07 Total 66,772,201.28 6,137,961.78 22,847.74 72,887,315.32 Net value 122,347,486.45 117,192,677.16 5.8.2 Provisions for fixed assets devaluation Year-beginning Increase of current Decrease of current Classification Year-end amount amount period period Buildings & tenement 32,449,653.81 32,449,653.81 Machinery 3,496,190.52 3,496,190.52 Electronic equipment 99,137.16 99,137.16 Other equipment 213,636.51 213,636.51 Total 36,258,618.00 36,258,618.00 Note: The original value of fixed assets transferred from projects under construction this year is RMB 215,467.00. 5.8.3 Book value of fixed assets Increase of current Decrease of current Classification Year-beginning amount Year-end amount period period Buildings & tenement 71,544,246.38 3,058,473.83 68,485,772.55 64 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Machinery 3,867,309.53 747,239.64 3,120,069.89 Electronic equipment 1,214,655.55 32,515.78 21,552.26 1,225,619.07 Transport equipment 962,453.48 294,466.92 1,256,920.40 Other equipment 518,935.78 79,444.51 598,380.29 Remodeling & fitment 7,981,267.73 1,733,970.77 6,247,296.96 Total 86,088,868.45 406,427.21 5,561,236.50 80,934,059.16 5.9 Projects under Construction Actually paid Transferred Proportion of Year-beginning Increase of into fixed investment in budget Other decrease Year-end amount Capital source amount current year assets in Increase of current Important Year-beginning amount Budget current year year projects In which amount of In which In which In which amount of In which amount In which amount of In which amount of Capitalization of interests amount of amount of Capitalization of of Capitalization Capitalization of Capitalization of Capitalization Capitalization interests of interests interests interests of interests of interests Transformation of 32,528.00 32,528.00 Self-raised the tennis court Remodeling of fire control 182,939.00 182,939.00 Self-raised engineering of Building B Total 182,939.00 32,528.00 215,467.00 Note: there is no amount of interest capitalization. 5.10 Intangible Assets 5.10.1 Original value of intangible assets Original value on Original value on Item Increase this year Decrease this year year-beginning year-end Land-use right 87,315,277.74 87,315,277.74 Total 87,315,277.74 87,315,277.74 5.10.2 Accumulated amortization Year-beginning Amortization this Item Decrease this year Year-end amount amount year Land-use right 24,670,178.96 868,727.16 25,538,906.12 Total 24,670,178.96 868,727.16 25,538,906.12 65 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report 5.10.3 Depreciation provision of intangible assets Year-beginning Item Increase this year Decrease this year Year-end amount amount Land-use right 29,343,890.98 29,343,890.98 Total 29,343,890.98 29,343,890.98 Note (1): Depreciation provision of intangible assets is withdrawn on the increase of land use price (book value higher than current market price) caused by the local government’s restriction on beach land use. Note (2): Because a balance owed to Sanya Municipal Land & Environment Bureau for certificate handling fees, the originals of the Company’s land use right and property certificates are temporarily held by the Bureau. 5.10.4 Book value of intangible assets Remaining Year-beginning Increase this Decrease this Item Year-end amount amortization amount year year months Land-use right 33,301,207.80 868,727.16 32,432,480.64 448 months Total 33,301,207.80 868,727.16 32,432,480.64 5.11 Provision for Assets Depreciation Item Year-beginning Withdrawal of current Decrease of current period Year-end amount amount period Writing off Reversing 1. Provision for bad debts 80,002,027.26 78,696.49 126,490.55 79,954,233.20 2. Provision for inventory depreciation 870,014.62 56,239.53 12,907.38 800,867.71 3. Provision for salable monetary assets devaluation 4. Provision for other current assets depreciation 2,167,480.26 2,167,480.26 5. Provision for long-term investment devaluation 14,716,374.26 14,716,374.26 6. Provision for investment real estate devaluation 7. Provision for fixed assets devaluation 36,258,618.00 36,258,618.00 8. Provision for project materials devaluation 9. Provision for devaluation of projects under construction 10. Provision for devaluation of productive biological assets 66 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report In which: Provision for devaluation of mature productive biological assets 11. Provision for devaluation of oil & gas 12. Provision for intangible assets devaluation 29,343,890.98 29,343,890.98 13. Provision for corporate reputation devaluation 14. Miscellaneous Total 163,358,405.38 78,696.49 182,730.08 12,907.38 163,241,464.41 5.12 Accounts Payable Aging Year-end amount Year-beginning amount Within one year 1,200,042.78 1,715,061.64 1-2 years 133,814.01 44,999.00 2-3 years 42,995.00 1,746.00 3-4 years 490.00 13,603.52 4-5 years 558.98 6,908.40 Above 5years 541,693.36 518,480.42 Total 1,919,594.13 2,300,798.98 5.12.1 No accounts are payable to the Company’s shareholders with 5% or above voting rights. 5.12.2 There is no significant accounts payable aging more than one year. 5.13 Accounts received in advance Aging Year-end amount Year-beginning amount Within one year 2,181,556.25 2,090,267.53 1-2 years 45,701.11 14,955.89 2-3 years 14,955.89 75,071.76 3-4 years 74,191.76 Total 2,316,405.01 2,180,295.18 5.13.1 No accounts are collected from the Company’s shareholders with 5% or above voting rights. 5.13.2 There is no account received in advance of significant amount with debt aging over one year. 5.14 Staff salary payable 5.14.1 Staff salary payable 67 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Year-beginning Increase of current Item Paid in current period Year-end amount amount period 1. Salary, bonus, allowance & subsidy 781,591.10 8,832,951.53 5,370,287.70 4,244,254.93 2. Staff welfares 1,045,152.02 1,045,152.02 3. Social security 123.00 615,659.05 553,548.29 62,233.76 In which: 1.Healthcare insurance 139,834.17 126,871.61 12,962.56 2.Basic pension insurance 123.00 405,135.02 362,725.10 42,532.92 3.Pension premium 4.Unimployment insurance 45,333.78 40,472.82 4,860.96 5.Compo 14,091.28 13,024.12 1,067.16 6.Bearing insurance 10,784.80 9,974.64 810.16 7.Comprehensive insurance for temporary 480.00 480.00 labor 4. Accumulation fund for housing 5.Outlay for trade union and staff training 763,910.12 259,749.74 287,926.67 735,733.19 6. Non-monetary welfare 7. Compensation due to determination of labor relations 8. Miscellaneous Total 1,545,624.22 10,753,512.34 7,256,914.68 5,042,221.88 Note: The year-end staff salary amount increase by 2.26 times than the previous year is mainly because of withdrawing a bonus of RMB 331.33 million for exceeding the yearly profit target of South China Grand Hotel. 5.14.2 There is no delayed salary payment in the balance of staff salary payable. 5.15 Tax Payable Tax Year-end amount Year-beginning amount Tax rate this year VAT 135,982.62 135,982.62 4% Business tax 1,144,201.97 169,576.61 5% Tax for urban construction & maintenance 76,510.93 -40,816.43 7% Real estate tax 381,847.71 1,051,931.30 1.2% of 70% of the original value Business income tax -1,702,702.80 -1,702,702.80 18% Individual income tax 5,694.59 797.44 Extra fee for education 32,790.40 -16,096.36 3% Land use tax 78,675.60 39,340.20 RMB12/㎡ Total 153,001.02 -361,987.42 Note: According to the official approval from Sanya Local Tax Bureau, Hainan Province its 68 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report document SLTB No. (2008) 49, “an Official Reply for the Application of Pretax Deduction of Assets Loss to Hainan Dadonghai Tourism Center (Holdings) Co. Ltd.”, the year-beginning tax payable of the Company is retrospectively adjusted, hence, a decrease of tax payable at the year beginning of RMB 15,457,499.83 (refer to Note 2.23). 5.16 Other Accounts Payable Aging Year-end amount Year-beginning amount Within one year 1,448,549.97 9,237,401.21 1-2 years 6,956,085.09 7,131,180.55 2-3 years 2,450,984.92 14,600.00 3-4 years 14,600.00 41,143.03 4-5 years 22,030.60 20,934,515.67 Above 5years 22,375,506.06 3,232,442.67 Total 33,267,756.64 40,591,283.13 (1) The decrease of RMB 7,323,526.49 in year-end amount than year-beginning amount is mainly due to the payment for the remodeling of the hotel and some debt exemption. (2) Accounts payable do not include accounts with the Company’s shareholders with 5% or above voting rights. (3) Accounts with significant amount and debt aging over one year: Creditor Amount Reason for pending China Securities Regulatory Commission 19,810,000.00 Capital shortage Hainan Chengxin Agri. Science & Tech. Co. Ltd 6,588,596.50 Capital shortage Affiche fee to Security Times 1,121,704.69 Capital shortage Sun Hongjie 1,000,000.00 Deposit Total 28,520,301.19 (4) Other accounts payable of significant amount: Creditor Amount Reason for pending China Securities Regulatory Commission 19,810,000.00 Capital shortage Hainan Chengxin Agri. Science & Tech. Co. Ltd 6,588,596.50 Capital shortage Affiche fee to Security Times 1,121,704.69 Capital shortage Sun Hongjie 1,000,000.00 Deposit Total 28,520,301.19 69 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report 5.17 Equity (Unit: share) Prior to this change Increase or decrease in this change(＋，－) After this change Shares Proportion New issue Shares Proportion New issue Shares Proportion New issue I. Restricted circulating shares 217,514,659 59.74% -120,915,575 -120,915,575 96,599,084 26.53% 1.State-owned shares 2.State corporate shares 37,450,200 10.29% -22,288,200 -22,288,200 15,162,000 4.16% 3.Other domestic shares 180,064,459 49.45% -98,627,375 -98,627,375 81,437,084 22.37% In which: Domestic corporate shares 180,019,800 49.44% -100,563,900 -100,563,900 79,455,900 21.82% Domestic natural person shares 44,659 0.01% 1,936,525 1,936,525 1,981,184 0.55% 4.Foreign shares In which: Foreign corporate shares Foreign natural person shares II. Non-restricted circulating shares 146,585,341 40.26% 120,915,575 120,915,575 267,500,916 73.47% 1.A shares 58,585,341 16.09% 120,915,575 120,915,575 179,500,916 49.30% 2.Domestically salable foreign shares 88,000,000 24.17% 88,000,000 24.17% 3.Overseas salable foreign shares 4.Others IV. Total shares 364,100,000 100.00% 364,100,000 100.00% 5.18 Capital Reserves Year-beginning Current period Current period Item Year-end amount Cause of change amount increase decrease Equity premium 33,336,215.58 33,336,215.58 Other capital reserve 20,806,634.43 20,806,634.43 Total 54,142,850.01 54,142,850.01 5.19 Undistributed profit Item Amount Drawing or Distribution Ratio Profit undistributed at year beginning before adjustment -344,550,164.97 Adjusted profit undistributed at year beginning 15,457,499.83 Profit undistributed at year beginning after adjustment -329,092,665.14 Plus: net profit this year 431,855.37 Other transfer-in 70 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Minus: Surplus reserve Staff bonus & welfare fund Reserve fund Business development fund Profit returned for investment Dividend payable of priority Other common accumulation fund Common share dividend Dividend turned to share Profit undistributed at year end -328,660,809.77 Note: Adjusted profit undistributed of RMB 15,457,499.83 at year beginning is a correction of accounting errors (refer to Note 2.23). 5.20 Operation Revenue & Cost Item Current year Previous Year Other Other Main business Subtotal Main business Subtotal business business Business revenue 34,694,727.08 34,694,727.08 25,623,653.21 25,623,653.21 Operation cost 4,605,522.46 4,605,522.46 2,840,886.28 2,840,886.28 Operation profit -566,586.15 -566,586.15 -5,666,753.99 -5,666,753.99 5.20.1 Revenue & Cost of Main Businesses presented according to categories Main business revenue Main business cost Item This year Previous year This year Previous year Tourism & catering 34,694,727.08 25,623,653.21 4,605,522.46 2,840,886.28 Subtotal 34,694,727.08 25,623,653.21 4,605,522.46 2,840,886.28 5.20.2 Revenue & Cost of Main Businesses presented according to areas Main business revenue Main business cost Main business gross profit % Category This year Previous year This year Previous year This year Previous year In Hainan 34,694,727.08 25,623,653.21 4,605,522.46 2,840,886.28 86.73% 88.91% Subtotal 34,694,727.08 25,623,653.21 4,605,522.46 2,840,886.28 86.73% 88.91% Offsets among branches within the Company in other areas 71 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Total 34,694,727.08 25,623,653.21 4,605,522.46 2,840,886.28 86.73% 88.91% 5.20.3 Sales revenue of top five customers is RMB 11,429,877.00, accounting for 32.94% of the total sales revenue. 5.20.4 Increase of 35.40% of this year over last year is mainly due to sales increase of the hotels after remodeling. 5.21 Business tax & extra Item Rate This year Previous year Operation tax 5% 1,726,108.82 1,281,632.69 Urban construction tax 7% 120,827.61 89,714.28 Education tax & extra 3% 51,783.27 38,448.97 Total 1,898,719.70 1,409,795.94 Note: Increase of 34.68% is mainly due to revenue increase. 5.22 Overheads This year Previous year 13,216,143.49 8,854,259.11 Note: Increase of 49.26% of this year over last year is mainly due to withdrawing a bonus of RMB 331.33 million for exceeding the yearly profit target of South China Grand Hotel. 5.23 Financial Expenses Item This year Previous year Interest paid 424,603.44 4,643,323.21 Minus: interest received 23,910.40 20,235.07 Exchange loss Minus: exchange gain Procedure fees of financial institutions 191,618.38 125,553.89 Other -294,939.60 Total 592,311.42 4,453,702.43 Note: Decrease of 86.70% of this year over last year is mainly due to interest payment decrease after debt exemption this year. 5.24 Loss of Assets Depreciation Item This year Previous year Bad debt loss 78,696.49 -321,434.08 72 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Provision of inventory depreciation loss -12,907.38 -422,106.22 Total 65,789.11 -743,540.30 5.25 Revenue from beyond operation Item This year Previous year Compensation 241,212.50 274,186.00 Net gain from disposal of fixed assets 4,500.00 18,042.40 Debt exemption 857,449.73 160,585,773.05 Other 55,350.67 81,192.05 Total 1,158,512.90 160,959,193.50 Note: Decrease of 99.28% this year over last year is mainly due to revenue decrease after exempting debts. 5.26 Expenses beyond Operation Item This year Previous year Loss from fixed assets disposal 21,552.26 538,489.98 Non-public-interest donation 52,000.00 fine 15,519.12 85,705.50 public-interest donation 123,000.00 Total 160,071.38 676,195.48 Note: Decrease of 76.33% of this year over last year is mainly due to decrease of loss in fixed assets disposal. 5.27 Cash received from other operation-related activities is RMB 2,277,007.07, including the following major items: Item Amount Collected from Haikou Foodstuff Co. Ltd. 1,643,249.40 Deposit collected 288,210.61 Debt collected 107,876.90 Other odd collections (for staff insurance premium) 203,049.65 Interest gain collected 20,120.51 Other gain collected 14,500.00 Total 2,277,007.07 5.28 Cash paid for other operation-related activities is RMB 7,274,616.52, including the following major items: Paid to Sanya Wuzhizhou Holiday Resort 19,554.00 Donation paid 123,000.00 73 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Paid for low-value consuming materials 50,227.55 Travel fare 348,883.59 Reception expenses paid 1,397,892.06 Repairing and maintenance 960,811.78 Publicity 140,300.00 Promotion campaign 173,074.50 Intermediary fee 682,000.00 Board meeting expenses 473,787.30 Uniform expenses 48,586.00 Meeting expenses 182,399.20 Newspaper & magazine subscription 15,840.00 Commission 189,702.77 Affiche fee 1,602,854.22 Staff borrowings 149,319.85 Assets insurance 75,739.21 Fuels 50,780.50 Office maintenance 31,033.56 Telecommunication 160,233.02 Environmental protection 48,869.80 Other expenses 349,727.61 Total 7,274,616.52 5.29 Complementary Data of Cash Flow Statement: 1. Information of cash flow in operating activities Supplementary data Current year Previous year 1.Operating cash flow as adjusted from net profit: Net profit 431,855.37 154,616,244.03 Plus: provision for assets devaluation 65,789.11 -743,540.30 Depreciation of fixed assets and productive biological assets, oil & 6,137,961.78 5,929,343.23 gas consumption Amortization of intangible assets 868,727.16 868,727.16 Amortization of long-term deferred expenses Loss in disposal of fixed, intangible & other long-term assets (gain 520,447.58 marked with “-”) Loss on scrapping of fixed assets (gain marked with “-”) 17,052.26 Loss on fair value variation (gain marked with “-”) Financial cost (gain marked with “-”) 424,603.44 4,643,323.21 74 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Investment loss (gain marked with “-”) Gain from liability restructuring -857,449.73 -160,585,773.05 Decrease of deferred income tax assets (gain marked with “-”) Increase of deferred income tax liabilities (gain marked with “-”) Decrease of inventory (gain marked with “-”) -174,996.84 1,192,985.78 Decrease of operating accounts receivable (gain marked with “-”) 795,414.68 2,119,227.55 Increase of operating accounts payable (gain marked with “-”) 1,606,451.48 -1,937,962.28 Others Net cash flow in operating activities 9,315,408.71 6,623,022.91 2. Major investment & fund raising activities not involving cash flow: Capital transferred from liabilities Convertible bonds due within one year Fixed assets by finance leased 3.Net changes of cash and cash equivalents: Cash balance as of the period end 6,009,603.45 2,424,831.17 Minus: Cash balance as of the period beginning 2,424,831.17 3,981,791.17 Plus: Balance of cash equivalents as of the period end Minus: Balance of cash equivalents as of the period beginning Net increase of cash and can equivalents 3,584,772.28 -1,556,960.00 2. Cash and Cash Equivalents Item Year-end amount Year-beginning amount 1. Cash 6,009,603.45 2,424,831.17 In which: cash on hand 1,873,842.70 1,201,545.47 Deposit in bank 4,135,760.75 1,185,666.70 Other monetary capital 37,619.00 2.Cash equivalents In which: bond investment due in 3 months 3.balance of cash and cash equivalents as of period end 6,009,603.45 2,424,831.17 In which: restricted cash and cash equivalents within parent company or subsidiaries Total 6,009,603.45 2,424,831.17 Note 6 Relations and transaction with related parties I Basic background information of related party 1. The Company’s biggest shareholder and the final controller 75 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Registered Shareholding Voting rights Biggest shareholder Registered capital Business nature Institutional code domicile proportion proportion Haikou Agriculture & Agriculture & Industry & Trade Haikou City RMB880.132 million 16.48% 16.48% 28408974-7 Husbandry (Luoniushan) Co., Ltd. 2. Registered capital and capital change of the Company’s biggest shareholder Increase/decrease Biggest shareholder Year-beginning amount Year-end amount this year Haikou Agriculture & Industry & RMB880.132 million RMB880.132 million Trade (Luoniushan) Co., Ltd. 3. Equity share and change of the Company’s biggest shareholder Year-beginnin Proportio Increase/decrease Year-end Proporti Biggest shareholder g amount n this year amount on Haikou Agriculture & Industry & RMB 60 RMB 60 16.48% 16.48% Trade (Luoniushan) Co., Ltd. million million Note: (I) As notified by Haikou Foodstuff Co. Ltd. On April 24, 2008, the biggest shareholder of the Company is de facto Haikou Agriculture Industry & Trade (Luoniushan) Co. Ltd. The original biggest shareholder, Haikou Foodstuff Co. Ltd., was in fact a proxy holder of Haikou Agriculture Industry & Trade (Luoniushan) Co. Ltd. (II) Relations and transaction with related parties (Currency: RMB) Transaction parties Transaction This year Precious year Pricing policy Haikou Agriculture & Industry & Accommodation 163,230.44 193,372.36 Market price Trade (Luoniushan) Co., Ltd. Haikou Foodstuff Co. Ltd. Exemption of Debt & Interest 158,974,468.35 (III) Balance of accounts of the related party receivable and payable Amount Withdrawal of bad debts provision Related party Year-end amount Year-end amount Accounts receivable: 74,399.65 7,828.43 Haikou Agri. Ind. & Trading (Luoniushan) Co. Ltd. Other accounts receivable: Haikou Foodstuff Co. Ltd. 1,593,249.40 Other accounts payable Haikou Foodstuff Co. Ltd. 50,000.00 76 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Haikou Agriculture & Industry & Trade (Luoniushan) Co., Ltd. 900,000.00 (IV) Other related transactions for disclosure Salary payment to key executives: remuneration paid to key executives, directors and supervisors this year is RMB 466,921.00, including salary, welfare, bonus, perks and securities paid in cash, in kind and other forms. Note 7 Contingencies The Company does not have any contingencies for disclosure in this statement. Note 8 Commitments The Company does not have any significant commitments for disclosure in this statement. Note 9 Assets mortgage There is no assets mortgage with the Company. Note 10 Subsequent Events No subsequent events should be disclosed in this accounting period. Note 11 Supplementary data 11.1 Non-current profit and loss According to the requirements of questions and answers No1 on the Rules of Information Disclosure for Publicly Listed Companies by China Securities Regulatory Commission as promulgated in its affiche No 43, 2008, the Company discloses its non-current profit and loss as follows: Item This year Previous year Profit & loss on disposal of non-current assets -17,052.26 -520,447.58 Counted into government subsidy in current period, but with the exception of those subsidies closely related to company business and enjoyed as per the unified state quota or standard Return of Depreciation provision under individual depreciation test Gains on stock investment Gains on liability restructuring 857,449.73 160,585,773.05 77 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Other non-business net income & expenses except the above 158,044.05 217,672.55 Other non-operational profit and loss Minus: Income tax influence Minor shareholder influence Total 998,441.52 160,282,998.02 11.2 According to the requirements of No. 9 of the Rules of Information Disclosure for Publicly Listed Companies by China Securities Regulatory Commission, the Company discloses its net assets yield and earnings per share as follows: 1. Year 2008 Rate of return on net assets % Gain per share Profit in current period Fully diluted gain per Basic gain per Diluted gain per Weighted average share share share Net profit attributed to common shareholders 0.48 0.48 0.0012 0.0012 Net profit attributed to common shareholders deducting -0.63 -0.63 -0.0016 -0.0016 non-current profit and loss 2. Year 2007 Rate of return on net assets % Gain per share Profit in current period Fully diluted gain Weighted Basic gain per Fully diluted per share average share gain per share Net profit attributed to common shareholders 173.43 1,305.65 0.42 0.42 Net profit attributed to common shareholders -6.36 -47.85 -0.0016 -0.0016 deducting non-current profit and loss Note (1) Calculation of earnings per share of ordinary share: net profit attributed to the Company’s ordinary shareholders in all accounting periods divided by weighted average issued ordinary shares. (2) Calculation of dilution of earnings per share: The Company does not have diluted potential ordinary shares, so the diluted earnings per share are the same as the basic earnings per share. (3) Calculation of fully diluted net assets returning rate: net profit attributed to the Company’s ordinary shareholders in all accounting periods divided by owner’s equity attributed to the 78 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report Company; (4) Calculation of weighted average net assets returning rate: net profit attributed to the Company’s ordinary shareholders in all accounting periods divided by the year-beginning, year-end weighted average of the owner’s equity attributed to the Company; Note 12 Approval of disclosure of the financial statements These financial statements are disclosed under approval of the board of directors of the Company on April 26, 2009. Hainan Dadonghai Tourism Center (Holdings) Co. Ltd. April 26, 2009 Person in charge of the Company: Financial executive officer: Date of Signature: Date of Signature: 79 Hainan Dadonghai Tourism Centre (Holdings) Co., Ltd. 2008 Annual Report XII. Documents for Reference The Securities Department of the Company prepares the originals of the following documents. When CSRC and the Stock Exchange demand to provide the documents, or the shareholders demand to check the documents according to laws and the Article of Association, the Company is expected to provide the documents in time: 1. Financial 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 designated newspapers by CSRC. Chairman of the Board of Directors: Li Yuanbin The Board of Directors Hainan Dadonghai Tourism Centre (Holding) Co., Ltd. April 26, 2009 80