REPORT BY THE BOARD OF DIRECTORS YEAR OF 2001

1. INTRODUCTION

In accordance with the provisions of the law and the company ordinance, we hereby submit, for debate and vote, the Annual Report and Accounts for the year ended 31 December 2001. During the period from 01 January to 31 December 2001, the activities were conducted throughout the organization of the Company and on the definition of the internal performance rules.

The directors have pleasure in presenting their Annual Report together with the Supervisory Council and audited accounts of the Company for the year ended 31 December 2001.

2. PRINCIPAL ACTIVITIES

The company was incorporated on 13th September 1994 in the form of a private limited liability company and its principal activity is to operate as Macau's international airline, under the concession agreement signed on 8th March 1995 with the Macau's Territory. The company commenced operations on 9th November 1995..

3. ACCOUNTS

In the opinion of the Directors, the operating results of the Company during the financial year have not been affected by any item, transaction or event of material and of unusual nature.

- PROPOSAL FOR NET PROFIT APPLICATION

By article twenty-eight of the Articles of Association, the Board of Directors hereby submits for discussion and approval in the General Meeting the following proposals on the application of the MOP76,032,031.68 net profit.

Legal Reserve Fund

10% (Profit for the year) by the terms of

Article 432 of Commercial Code ¡K¡K¡K¡K¡K¡K¡K¡KMOP $7,603,203.17

Net Profit

To carry forward to 2002¡K¡K¡K¡K¡K¡K¡K¡K¡K¡K¡KMOP $68,428,828.51

- FINAL NOTE

We would like to thank Air Macau staff for their dedication to effectively and efficiently discharge their duties in a professional manner.

The Board of Directors would like to express their sincere appreciation to the Shareholders, Supervisory Committee and Government Representative for their cooperation and their confidence they bestowed upon them.

Macau on the 28 of March, 2002

Gu Tiefei

Chairman , Board of Directors