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Monday, July 18, 2005

Yi Wan Group (YIWA) 10-K

Incorporated in Florida, May 1999. 16,861,250 shares issued.

Agriculture subsid ceased in Dec 2001, sold off in Dec 2002. Always in Dec? Last minute thing?

Jiaozuo Yi Wan Hotel Co, Ltd. (Henan province) 90% acquired Jan 1, 2000 (the rest owned by Shun'ao Industry and Commerce Co. in China, and formerly owned by them and Marco Wan Da Contruction of Macao had 30%). President owns 41.7% of Shun'ao. Everyone is now a shareholder of the Company. There are all sorts of complicated capital investment requirements which are resolved by the deal already done.

Originally formed in 1996 by purchasing the Tengfei Hotel from the city government. The purchaser did extensive renovation, added a 150K sq ft lobby. Added a 17th floor restaurant in 2002. Added a sauna etc. Added a 16th floor restaurant. Hotel has the usual features. 158 rooms, 22 floors. 27 suites. Typical Western stye layout. Usual conference room stuff with an additional 460 seat auditorium. Two full restaurants, buffet coffee shop, lobby bar. Traditional Chinese decor and food service. Largest single food and beverage facilities in Jiaozuo. Also VIP restaurant with 24 private suites (enclosed, 10-30 people, plus karaoke and private bathroom). They're looking into outside expansion. They give some interesting examples of conferences and stuff they've hosted: good mix. They are the only 4-star (no 5-stars), two 3-stars (like Holiday Inn express). Only 3-star and above can host foreign tourists. The two 3-stars are state owned and need lots of renovation to upgrade.

License expires 2027. Currently and permanently taxed at 33%. 612 full time employees, 95 management people.

Qinyang Yi Wa Hotel Co, Ltd. (Henan province) [80%] acquired on Mar 20, 2001? Joint venture set up with Quinyang Hotel (OLD QINYANG). They have an official license now after audit by the Jiaozuo Foreign Trade and Economy Cooperative Bureau.

Shun de Yi Wan Communication Equipment Plant Co. Ltd. (Guangdong province) acquired 100% on Jan 1, 2000. Mfg exchange distribution equipment. Classified as Wholely Foreign Owned Enterprise. Previous owner was Shun De Zhiyuan Developing Co. Same complicated capital requirement structure which was met by the investment made by the Company, except apparently for an additional $500K. They keep getting extensions to delay it.

Yi Wan Beijing Hotel Mgmt Co Ltd, established July 2004 to be in compliance with Chinese law for expansion. Two PRC citizens own 50% of Yi Wan Beijing (Trustees). The Trustees signed agreement not to sell, pledge, hypothecate, encumber or dispose of the equity, any breach causes transfer of ownership back to the Company. They will forward any capital distributions to the Company. Irrevokable proxy transfered to two directors of the Company for voting rights (which can be transferred to a different member of the Company). This is truly bypassing the intent of the law. The Chinese citizens have absolutely no ownership whatsoever.

15 year business license for Wholely Foreign Owned Enterprise. [This part of the business is crap, anyway]. It seems like Chinese authorities could get weird at the end of the term if they wanted to. It would make sense to limit China exposure in my portfolio.

UPDATE: I'm going to put a hold on looking at YIWA for now. Maybe they'll throw out their telecom business and the stock will tank some more and it'll be a lot easier. Maybe I'm spoiled by YaSheng.

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