古井贡酒(000596)古井贡Ｂ2001年年度报告（英文版）

ANHUI GUJING DISTILLERY COMPANY LIMITED 2001 ANNUAL REPORT (Summary) (B-Share) IMPORTANT NOTICES To the best knowledge of the Board of Directors of the Company, there is neither untrue presentation, seriously misleading statements, nor omission of material facts contained in the information herein. The Board of Directors severally and jointly bears responsibility for the correctness, accuracy and completeness of the information contained in this annual report. This report is a summary of the whole annual report, and the investors should refer to the whole annual report for the details. The annual report (B-share) of the Company was made into Chinese versions and rendered into English. The Chinese version shall prevail over the English version should there be any discrepancy between the two. Chapter I The Company Information 1. Statutory name of the Company In Chinese: 安徽古井贡酒股份有限公司 In English: ANHUI GUJING DISTILLERY COMPANY LIMITED 2. Legal representative: Wang Xiaojin 3. Secretary of Board of Directors: Wang Feng Authorized representative for securities: Chen Ping Contact address: Gujing Town, Bozhou City, Anhui Province Tel: (0558) 5710057 5710085 Fax:(0558) 5710006 Secretariat E-mail: wfeng65@sina.com， Authorized securities rep. E-mail: cp01@yeah.net 4. Registered address: Gujing Town, Bozhou City, Anhui Province Office address: Gujing Town, Bozhou City, Anhui Province Post code: 236820 Website: www.gujing.com e-mail：gujing@mail.ahbbptt.net.cn 5. Newspapers for disclosure of annual reports are as follows: China Securities Daily, Shanghai Securities Daily and Hong Kong Wen Wei Pao Website for publishing the Annual Report of the Company: www.cninfo.com.cn Place of the Annual Report Filed: office of Secretary of Board of Directors of the Company 6. Place where the company shares are listed: Shenzhen Stock Exchange Short form of Stock Name: Gujing Distillery A Securities Code: 000596 Short form of Stock Name: Gujing Distillery B Securities Code: 200596 Chapter II. Summary of Operational and Financial Data 1. Main operating data of the Company for the current year Unit: RMB ’,000.00 Items Accounting Data Total profit 106,273 Net profit 68,714 Profit from major business 236,414 Profit from other business 73,197 Operating profit 2,014 Investment gains 23,140 Subsidy Incomes 43,086 Net balance of non-business income 30,851 and expenditure Net cash flow incurred from operations 106,273 Net increase of cash and cash equivalents 68,714 The differences in net profits calculated in accordance with China Accounting Standards and International Accounting Standards，and notes thereof. Profits after deduction of taxes Shareholders’equity and minor shareholders’equity 2001 2001 2000 2000 In RMB In RMB One In RMB One In RMB One One Thousand Thousand Thousand Thousand Amount of statutory accounts of this 67,047 147,148 1,141,017 1,117,215 Group Provisions for bad debts or bad debts - - - - written off Adjusted depreciation of real property 1,667 1,221 - （1,668） and production buildings and equipment Distribution of dividends suggested in - - - - the Balance Sheet afterwards Other - - - - Amount adjusted by the Group as per international accounting standards 68,714 148,369 1,141,017 1,115,547 2. Main accounting data and financial indexes over the last three years Items 2001 2000 1999 Income from major business 807,393 915,757 891,250 Net profit 68,714 148,369 154,129 Total assets 1,521,972 1,584,003 1530,844 Shareholders’ equity (excluding minor 1,137,261 1,115,547 1,105,828 ２ shareholders’equity) Diluted earnings per share 0.29 0.63 0.66 Weighted average earnings per share 0.29 0.63 0.66 Earnings per share after deduction of 0.12 0.63 0.58 incidental incomes and losses Net assets per share 4.84 4.75 4.71 Net assets per share after adjustment 4.83 4.73 4.39 Net cash flows incurred from operating 0.18 0.32 0.50 activities per share Diluted net assets income ratio (%) 5.90 13.30 13.93 Weighted average net assets income ratio (%) 3. Particulars about change of shareholders’equity (Unit: ’0,000 shares, ’,000 yuan) Item Share Capital surplus Statutory Undistribute Total capital reserve reserve public welfare d profits shareholders ’equity At beginning 23,500 521,043 61,001 61,001 237,502 880,547 1,115,547 of the period Increase in - - - - 68,714 68,714 68,714 this period Decrease in - - - - - - - this period Retained - - 7,935 - (7,935) - - surplus Retained - - - 7,935 (7,935) - - reserves. Suggested to 7,935 (7,935) - - distribute divident At end of this - - - - (4,700) (4,700) 4,700 period Reason of 23,500 521,043 68,936 68,936 243,346 902,261 1,137,261 changes Chapter III. Particulars about the Changes of Share Capital and Shareholders 1. Particulars about change of share capital Unit: share Increase or decrease for this change (+,-) Before this After this change change ３ Public Issued Rationed Bonus reserve new Other Subtotal shares shares converted shares into shares A. Nonnegotiable shares 1. Founder’s shares 155,000,000 155,000,000 Among: State-owned shares 155,000,000 155,000,000 Domestic corporate shares Overseas corporate shares Others 2. Raised corporate shares 3. Internal employees’shares 30,500 -6,000 -6,000 24,500 4. Preference shares or others Subtotal of nonnegotiable 155,030,500 155,024,500 shares B. Listed and negotiable shares 1. RMB ordinary shares 19,969,500 +6,00 +6,000 19,975,500 0 2. Foreign capital shares listed 60,000,000 60,000,000 locally， 3. Foreign capital shares listed overseas 4. Others Subtotal of listed and 79,969,500 79,975,500 negotiable shares C. Total shares 235,000,000 235,000,000 Note: the non-negotiable 24,500 internal employees’shares are the shares held by the directors, supervisors and senior executives of the Company. 2. Brief introduction to shareholders (1) Total number of shareholders at the end of the report period Up to December 31st 2001, the Company has 25,838 shareholders, including 1 holder of state-owned corporate share, 10 shareholders who are the directors, supervisors and senior executives of the Company, 13,338 shareholders who hold locally-listed foreign-capital shares and 12,500 social public shareholders. (2) Particulars about the shares held by major shareholders (ten top shareholders by December 31st 2001) Names of shareholders Shares held (shares) Proportion (%) ANHUI GUJING GROUP COMPANY 155，000，000 65.96 LIMITED Baoyong Enterprise Co., Ltd. 1，685，000 0.72 ４ Kangma Company Limited 1，100，600 0.47 Li Anbai 962，600 0.41 Zidong Investment Management Co., Ltd. 688，147 0.29 CHAN KAM TONG 364，400 0.16 CHEN,YUBIN 358，700 0.15 Wisdom House Intelligent System (Hong Kong) 300，000 0.13 Co., Ltd. He Bin 300，000 0.13 Yang Li 295，663 0.13 Notes: a. The shareholder that holds more than 5% of total shares of the Company is ANHUI GUJING GROUP COMPANY LIMITED. The shares it held are state-owned shares, and there is not any change for them during this report period, and no pledge or freezing occurs.. b. The second to ninth top shareholders of the Company are the holders of locally-listed foreign- capital shares, and the tenth shareholder is holder of Renminbi ordinary shares. The ten top shareholders of the Company do not associate with one another. c. Except the holding shareholder, no other corporate shareholders of the Company hold more than 5% shares. (3) Particulars about holding shareholders (1) The holding shareholder of the Company is ANHUI GUJING GROUP COMPANY LIMITED. Its legal representative: Wang Xiaojin; date of incorporation: January 16th 1995; main business and products: beverage, construction materials, plastic goods, shareholding and operation of state-owned assets in the scope authorized by the State; registered capital: Rmb353,380,000; composition of share capital: state-owned and wholly-funded, and independently operating. (2) There is not any change of holding shareholder in the report period. ５ Chapter IV. Particulars about Directors, Supervisors, Senior Executives and Employees of the Company 1. Particulars about directors, supervisors and senior executives (1) General information Name Sex Age Duty Term Position Shares held Shares at year held at beginning year end Wang Xiaojin Male 53 1999.5.14-2002.5.14 Chairman of board 3,500 3,500 Yang Guangyuan Male 57 1999.5.14-2002.5.14 Vice Chairman of 3,000 3,000 board Gan Shaoyu Male 47 1999.5.14-2002.5.14 Director and 2,500 2,500 general manager Zhang Zongyi Male 54 1999.5.14-2002.5.14 Director and vice 2,500 2,500 general-manager Xu Huaiyu Male 48 1999.5.14-2002.5.14 Director 0 0 Wang Feng Male 37 1999.5.14-2002.5.14 Director and 0 0 secretary of BOD Huai Hua Male 36 1999.5.14-2002.5.14 Director 0 0 Yuan Qinghua Femal 54 1999.5.14-2002.5.14 Chief supervisor 1500 1500 e Zhang Jialiang Femal 48 2000.12.4-2002.5.14 Supervisor 0 0 e Liang Jinhui Male 38 2000.12.4-2002.5.14 Supervisor 0 0 Liu Junde Male 39 1999.5.14-2002.5.14 Chief accountant 0 0 Sun Songhua Male 58 1999.5.14-2002.5.14 Vice general- 2,500 2,500 manager and chief engineer Liu Congai Male 63 1999.5.14-2002.5.14 Vice general- 2,500 2,500 manager Li Wanlin Male 52 1999.5.14-2002.5.14 Assistant of 2,000 2,000 general manager Ji Zhijun Male 48 1999.5.14-2002.5.14 Assistant of 2,000 2,000 general manager Notes: l There is no independent director in the company in the year. Independent director will be selected at the general meeting of 2001; l Mr. Wang Xiaojin, Chairman of the Board of the company, concurrently acts as Chairman of the Board in Anhui Gujing (Group) Co., Ltd, the controlling shareholder; l Mr. Yang Guangyuan, Vice Chairman of the Board of the company, concurrently acts as Party Secretary and General Manager in Anhui Gujing (Group) Co., Ltd; ６ l Mr. Huai Hua, Director of the company, concurrently acts as General Manager of Anhui Gujing Jiufang Pharmaceutical Co., Ltd, a subsidiary company of Anhui Gujing (Group) Co., Ltd. (2) Annual remuneration Above-mentioned persons receive total remuneration of Rmb1,111,396.40 from the Company every year. The total amount of the remuneration received by three top directors is Rmb400,398.40, and total amount of the remuneration received by three top senior executives is Rmb251,991.60. Among them, two shareholders receive annual salary of Rmb130,000~180,000 each, 8 shareholders receive annual salary of Rmb60,000~90,000 each, and 4 shareholders receive annual salary of Rmb20,000~50,000 each. The director Mr. Huai Hua takes office at Anhui Gujing Jiufang Pharmaceutical Co., Ltd. and receives remuneration from this company, which is a subsidiary of Gujing Group (holding shareholder). (3) Director, supervisor or senior executives who resigned or were dismissed during the report period During the report period, the Chairman Wang Xiaojin did not take the office of general manager of the Company concurrently. The Company has decided to employ Gan Shaoyu as its general manager. 2. Particulars about employees Up to December 31st 2001, the Company has 5,743 employees in the payroll, including 4,512 production persons, 330 salespersons, 465 technical persons, 104 financial persons, and 332 administrative management persons. Among the employees, there are 159 retirees (the retirement pension is paid by social security institution) and 772 graduates of technical secondary schools or higher (of which 302 are graduates of universities), accounting for 13.4% of total employees. Chapter V. Corporate Governance Structure 1． Actual governance state of the Company The Company constantly perfect corporate governance structure and standardize its operation and management strictly in accordance with the Company Law, Securities Law, as well as related laws and regulations by China Securities Regulatory Commission and Shenzhen Stock Exchange. At present, the governance status of the Company basically complies with the requirements of Standards for Governance of Listed Companies. (1) The Company prepared or modified the Rules of Procedures of Board of Directors, Rules of Procedures of Supervisory Committee, and Rules of Procedures of General Meetings of Shareholders, further specify the duties and responsibilities of general meeting, board of directors, and Supervisory Committee of the Company, and further normalize the operation of Board of Directors, Supervisory Committee and General Meetings. (2) The Company has not set up independent director and Strategy, Audit, Nomination, Salary and Assessment Commission, and it will implement and perfect related systems according to related requirements of securities regulatory departments and laws and regulations. ７ (3) The Company will, strictly according to related laws and regulations and articles of association, further perfect its information disclosure system, disclose related information in true, correct, complete and timely manner, voluntarily accept supervision by regulatory authority and shareholders, and obtain trust and supports of shareholders, and make legal-person governance structure and complete operation of the Company more mature and standardized 2． Particulars about “Five Separations” of the Company (1) Personnel independence The directors, supervisors and senior executives of the Company are elected strictly according to the Company Law and Articles of Association through legal procedures. All its senior executives and financial personnel work full time and receive salary in the Company, and do not assume other offices concurrently in associated enterprises. The Company is completely separated from its shareholder companies in respects of labor, personnel and wage management. The Company has prepared strict personnel management system, and personnel management has been systemized. (2) Particulars about asset completeness The main assets of the Company include production equipment necessary for main business, land, production buildings, traffic facility and industrial property right, and auxiliary production system and related facilities. Gujing trademarks, Gujing Tribute trademarks, other related industrial property right and non-patented technology, and other intangible assets are owned wholly by the Company. Its assets have clear and express property right and are completely independent from shareholder companies. The Company does not occupy assets of others, and its assets are not occupied by others. (3) Particulars about independent accounting The Company and shareholder companies all have independent financial departments, special financial personnel and independent accounting systems and financial management systems. It has prepared its own Financial Settlement System and the Implementing Rules for Capital Management. It executes strict financial supervision and management system on its branches and subsidiaries. It has opened independent accounts in the banks, and independently operates the funds and pays the taxes. The Company does not provide guarantee for debts of shareholder companies against its assets, equity or credits. It has complete control right over the assets owned by it, and its assets are not occupied by its holding shareholder, which thus prevents its benefits from damage. (4) Particulars about business independence The Company mainly engages in the production and sales of distilled spirit, and does not compete in business with its holding shareholder. The Company owns completely independent production, procurement, supply and sales system, personnel and customers, and its sales and purchase business is not controlled by major shareholders. It is completely independent of shareholder companies in business. Besides, the Company establishes its own product development department and has its own R & D team in order to ensure its own technological innovations and leadership. (5) Particulars about organizational independence The Company and its holding shareholder own respective independent production and operation place and facilities, as well as independent offices and labor, personnel and wage management ８ departments. All the departments operate as per the Articles of Association and are not limited by the holding shareholder. The Company sets up general meeting of shareholders, board of directors, Supervisory Committee and the management level of which general manager is in charge, so it has complete corporate governance structure. The Company sets up independent organizational departments, and there is not such a case that the Company and its major shareholder have the “same group of senior executives but two different names”. 3. Selection, assessment, responsibility and incentive mechanism of senior executives The Company establishes scientific talent selection, assessment, responsibility and incentive mechanism, and prepares talent selection system based on the criterions “being young and professional”. It has formed the senior executive assessment system of comprehensively assessing both morals and intelligence, and has prepared the annual salary system for senior executives that relates salaries with performances, and formed incentive and awarding mechanism that is characterized by officer’s positions depending on his work performance and officer accepting a higher or lower post The company did not employ any independent director in the report period, and independent directors will be elected at the general meeting 2001 in line with the relevant regulations. Chapter VI Highlights of General Meeting The Company held two shareholder’s general meetings during this year, including 2000 Shareholders’General Meeting and 2001 Provisional Shareholders’General Meeting. 1. 2000 General Meetings On March 19, 2001, Annual General Meeting 2000 of ANHUI GUJING DISTILLERY COMPANY LIMITED was held at the meeting room on the second floor of Gujing Hotel in Bozhou City, Anhui Province. 16 shareholders (or shareholder representatives) attended the meeting, representing 157,635,836 shares which accounted for 67.08% of total shares of the Company. Of these present shareholders (or shareholder representatives), 14 persons are A-share shareholders (or shareholder representatives), representing 155,030,500 shares which accounted for 65.97% of total shares of the Company; 2 persons are B-share shareholders (or shareholder representatives), representing 2,605,336 shares which accounted for 1.11% of total shares of the Company. 2000 Annual Report, Summary of the Annual Report and other related matters were considered at the meeting and adopted with 157,635,836 pro votes (please see SECURITIES TIMES，Shanghai Securities Daily and Hong Kong TA KUNG PAO dated March 20, 2001 for details). 2. 2001 Provisional General Meeting On June 6, 2001, 1st Annual General Meeting 2001 of ANHUI GUJING DISTILLERY COMPANY LIMITED was held at Gujing Hotel in Gujing Town, Bozhou City, Anhui Province. 22 shareholders (or shareholder representatives) were present at the meeting, representing 156, 584,477 shares which accounted for 66.63% of total shares of the Company. Of these present shareholders (or shareholder representatives), 19 persons are A-share shareholders (or shareholder representatives), representing 155,620, 277 shares which accounted for 66.22% of total shares of the Company; 3 persons are B- share shareholders (or shareholder representatives), representing 964,200 shares which accounted for ９ 0.41% of total shares of the Company. The meeting considered and adopted the Proposal on the Review over the Preconditions of Issuing New Shares (please see SECURITIES TIMES，Shanghai Securities Daily and Hong Kong TA KUNG PAO dated June 7, 2001 for details). Chapter VII Working Report of Board of Directors I. Business Status of the Company 1. Scope of major business and operation status (1) The business scope of the Company: production of distilled spirit, beer, wine, brewing equipment, packaging materials and glass bottles, and sales of the products manufactured by itself. Its major business is the production and sales of distilled spirit. (2). The industry in which the Company operates is light industry (brewery industry). Its leading product is Gujing Tribute Wine that is one of eight most famous spirits in China, which creates about 50% of major business income and creates two thirds of total profits or so. The following is the product composition that represents 10% of total income from major business or total profits from major business: Unit: Rmb’,000.00 Income from Profits from Products Sales income Sales cost Gross profit rate major business major business High-grade 397,667 181,987 397,667 154,409 45.76 liquor Medium- 65,363 13,802 65,363 40,314 21.11 grade liquor Low-grade 257,381 29,401 257,381 187,914 11.42 liquor (3). During the report period, there were no substantial changes in major business and its composition of the Company. Its holding subsidiary --Anhui Laobada Distillery Co., Ltd. and Anhui Wild Sun Winery Co., Ltd. successfully developed Laobada and Fragrant series of liquors and Wild Sun series of liquors. The Wild Sun super-low liquor (carbonic acid type) was evaluated as new product of Anhui Province by experts, and Laobada brand 46% (V/V) liquor was granted with the title of Chinese famous liquor creation brand after inspection by State food quality authority and quality evaluation by China Liquor Creative Brand Evaluation Committee. Above- mentioned products are in the stage of market development, and have a good prospect in the market. 2. Operating status and performance of key holding companies and participating companies of the Company Unit :Rmb’,000.00 Company name Business Registered Assets scale Net profits capital Bozhou Gujing Sales Providing sales and trade service for 4,364.60 10,214.56 18,066.06 １０ Company the products of the Company Bozhou Gujing Car Providing transportation service for 694.5 679.23 27.76 Transportation Company products of the Company Bozhou Gujing Glassware Production and sales of glassware 1,600 6,955.49 227.89 Co., Ltd. Anhui Gujing Shuangxi Production and sales of grape wine, 4,720 2,575.34 -134.68 Wine Co., Ltd. fruit wine and non-liquor products Beijing Jinshengyi Development and sales of computer Technology Co., Ltd. software and hardware as well as 5,000 6,429.44 12.22 peripheral devices and electronic components Anhui Laobada Distillery Wholesale and retail of wine 3,000 3,003.00 3.00 Co., Ltd. products 3. Main suppliers and customers During the report period, the amount of goods the Company purchased from the five top suppliers accounted for 34.64% of total amount of its annual purchase, and the amount of products the Company sold to the five top customers accounted for 14 % of total amount of sold products in the whole year. The main associated parties of the Company or its shareholders holding 5% of shares of issuer do not have equity in above-mentioned suppliers or customers. 4. Problems and difficulties in operation of the Company and solutions thereof a. Difficulty and problems Since the new policy on liquor consumption tax issued by the State Taxation Bureau after May 1st 2001, consumption tax rate of grain liquors and potato liquors was adjusted to fixed rate and proportional rate, which has exercised significant influence on the production and sales of its major business. The annual consumption tax and related taxes of the Company was increased substantially, which directly caused substantial decrease of distilled liquors in the report period. To reduce the influence of tax burden increase, on one hand the Company reduced output and sales volume of low-grade liquors and adjusted marketing strategy; and on the other hand, considering the decrease of sales volume of previous medium- and high-grade liquors, it implemented brand strategy, and strengthened market expansion of new brands of high-grade liquor. Considering that the new brand was put on market only a short time and is in the stage of market expansion at present, sales performance will be realized with progress and efforts of market expansion. During the report period, in general, supply still exceeds demand on the liquor market, and market competition will become fiercer. The main characteristic of industrial competition is that market shares occupied by liquors are not highly concentrated. According to consumption trend in recent years, high-quality low liquor wine will be development trend of distilled liquor sector of our country. Potable liquor, nutrition liquor, and fruit liquor will occupy a certain shares in the market. After China’s accession to the WTO, foreign liquors will enter domestic market at a large quantity, which also will exercise impact on the products of this Company. b. Countermeasures Under the new situations, the Company set forth the guideline of “four words”--“adjustment, upgrading, reforming and transforming”, and lays great emphasis on “adjustment” and １１ “transforming”, in order to push the upgrading of major business and re-structuring of the industry. The particular measures are as follows: (a) Adhering to the main principle of reforming and developing, positively facing the difficulties brought about due to adjustment of consumption tax for distilled liquors and sluggish market, and effectively dissolving the contradictions and difficulties accumulated in the high-speed growth process of the enterprise. These measures have suppressed the decrease of operating performance to the greatest extent. (b) Continuing to deepen adjustment and reforms, intensifying merchant view, further perfecting the system of quality management and cost management, and increasing the comprehensive competitiveness and risk-preventing capability of the enterprise, which suited to the demands of the new market competition situations. (c) Strengthening sales management, implementing the strategy of “promoting sales by quality” in an overall way, laying great emphasis on structuring correction work, and accelerating the adjustment of sales structure. The Company established and perfected market monitoring system and its marketing work started to step into a sound cycle. (d) Continuing to uphold the guideline of quality being central task of production and tastes being criterion of quality, push the propaganda and execution of ISO9002 standards, take technological innovation as core and stress the research of flavour-development substance for Gujing Liquor and increasing technological content and added-values of products. (e) Adhering to the personnel promotion principle of judging by working performance and taking office according to morals and ability, deepening the reforms of personnel system, and carrying out active approaching and brave experimenting on manifestation form of property-right reforms in distribution. II. Investment of the Company (1) Utilization of raised funds The funds raised by the Company last time all have been used up by the end of 2000, and there was not any use of raised funds during this report year. The utilization of raised funds raised last time has been audited by domestic auditor Anderson- Huaqiang Certified Public Accountants appointed by the Company, and the auditor issued the Special Audit Report for Utilization of Funds Raised by ANHUI GUJING DISTILLERY COMPANY LIMITED. Please see SECURITIES TIMES，Shanghai Securities Daily and Hong Kong TA KUNG PAO dated April 3, 2001 for details. (2) Investment of non-raised funds during the report period The Company invested RMB60,600,000, together with six shareholders including Shenzhen Beida Capital Investment Management Co., Ltd. to set up Beida Capital Investment (Funds) Co., Ltd. by means of private placing at the unit price of RMB1.01. The registered capital of this company was RMB 300,000,000. The Company subscribed 60,000,000 shares with its own fund of RMB 60,600,000, which accounted for 20% of the total share capital. Jinshengyi Technology Co., Ltd., controlled by the Company, invested Rmb250,000, 50% of the total shares, along with other shareholders to found Beijing Gaosheng Electrocom Technology Co., Ltd., １２ During report period, the investment of the company fell 57.59 % against the previous year. III. Financial status of the Company During the report period, the Anderson-Huaqiang Certified Public Accountants appointed by the Company issued a standard audit report without reservation opinions. The main financial status of the Company is shown in the following table: Unit: RMB,’000.00 Item 2001 2000 Increase or decrease Reasons for compared with the changes same period of previous year（ %） Total assets 152,197.08 158,801.95 -4.16 Liabilities decreased. Long-term 13.28 248.28 -94.65 （See the Notes） liabilities Shareholders’ 113,726.13 111,721.45 1.79 Net profit increased equity Profit from major 23,239.73 35,185.10 -33.95 （See the Notes） business Net profit 6,704.67 14,714.84 -54.44 （See the Notes） Notes: 1. The change of long-term liabilities reaches 94.65%, because the environmental protection department offered a special loan of Rmb2.35 mil to support the company in environmental improvement. According to the company accounting system and relevant accounting standards, the certified account will write off the amount considering the actual situations. 2. The reasons for the decrease of the main business profit and net profit: a. the state adjusted the consumption tax of liquors to charge additional Rmb0.5 per every 500g liquors for sales; b. under the fierce competition, the company needs some provisions for restructuring, and also the sales fall causes the decrease of the main business profit. IV. Changes of production and business environment of the Company and macro policies and regulations l In 2001, China entered the World Trade Organization (WTO), and the production and business environment of the industry in which the Company is engaged will face profound changes, with both opportunities and challenges. During the report period, great changes took place in the production and business environment. In general, the supply still exceeded demand on the liquor market, and market competition became increasingly fiercer. The main characteristic of industrial competition is that market shares occupied by liquors are not highly concentrated. According to consumption trend in recent years, high-quality low liquor wine will be development trend of distilled liquor sector of our country. Potable liquor, nutrition liquor, and fruit liquor will occupy a certain shares in the market. After China’s accession to the WTO, foreign liquors will enter domestic market at a large quantity, which also will exercise some impacts on the products of this Company. １３ l There were substantial changes in policies of the State on taxation. From May 1st 2001, consumption tax rate of grain liquors and potato liquors was adjusted to fixed rate and proportional rate, which has exercised significant influence on the production and sales of its major business. l During this year, due to the impact caused by tax-rate adjustment of the State as well as the beer and wine, market competition became fiercer. The Company deeply implemented all the policies of “Sales Management Year”, and set forth the guideline of “adjustment, upgrading, reforming and transforming”and strategic target of “creating another new Gujing”. It stressed strict management and merchant view, strengthened corporate management and deepened its reforms, pushed market construction and suppressed the decrease of distilled liquors to the greatest extent. l The company produced 9, 253.34 tons of 65%(V/V) daqu liquor, sold 53,035.01 tons, generated a sales return of RMB 67.0467 million and a profit of RMB. V. Business plan of the Company in the new year 1. Directions and guidelines for work in 2002 The directions for work in 2002: under the principles determined by the Central Economic Work Meeting, to further emancipate ideology, deepen the structure adjustment, strengthen various reforms, stress strict management, make every effort to improve product quality, push marketing innovation, increase income sources and reduce expenditure, increase economic effects, reinforce crisis views, adapt to the new situation of economic globalization, lay emphasis on technological and management innovation, upgrade core competitiveness of enterprises, positively meet the challenges after China’s accession to the WTO, and work hard for the third escalation of Gujing. The Company will determine the year 2000 as “Deepening Structure Adjustment Year”, and its work guidelines are to deepen structure adjustment, greatly stress product quality, push marketing innovation and increase economic efficiency. 2. Working objectives of the Company in 2002 (a) Total production output of 65% (V/V) liquors: 36,209 tons, including high-quality daqu liquor of 5,817 tons, ordinary daqu liquor of 2,322 tons and new-type liquor of 28,070 tons; (b) Total sales volume of various liquors: 58,711 tons, including high-grade liquors 9,771 tons, medium-grade 4,427 tons, and low-grade 44,513 tons. 3. To ensure complete fulfillment of all the guidelines and objectives of the Company in 2002, we plan to take the following measures: a. To launch brand marketing, deepen marketing adjustment, strengthen marketing management, and apply reformed ideology and new marketing mode to suit to situation changes and the new rules after China’s accession to the WTO. b. To take positive strategies, and increase sales operation level, to complete good sales combination of new and old products, continue to execute the customer strategy of “developing in optimization and optimizing in development”, and stress the ideology of making profits on single products in respect of product pricing. c. To strengthen marketing research, stress introduction of advanced marketing concepts and models, and further increase marketing level. d. By taking the chance of organizational structure adjustment and personnel re-appointment, to further harmonize job relationships, re-establish business flow process, and ensure to have a １４ flat, light and high-efficiency organizational structure. To push the reforms of salary and remuneration system in an overall way, perfect the method for performance assessment, and fully play the incentive role of benefit lever “distribution”in management. e. To make more efforts to carry out personnel system reforms and push labor system reforms, and form the mechanism of “management personnel ready to accept higher or lower posts and employees ready to be employed or dismissed depending on their performances”. To strengthen employee training, an train more talents that are proficient in one profession and capable in several professions. f. To further strengthen quality management, and constantly push the construction of quality system of the Company, in order to ensure improvement of product quality through improvement of work quality. g. To further strengthen the control and management of costs and expenses and reduce costs and expenses as possible, providing greater space for marketing work and increase of economic efficiency of the Company. h. According to the work method of “managing today on one hand and planning tomorrow on the other hand”, to make active and careful investment in external projects, and search for new profit generating points. i. To continue to strengthen strict management, push management innovation at suitable time; reinforce spiritual civilization construction of the Company, increase its whole quality and comprehensive competitiveness to cope with challenges of economic globalization. VI. Routine work of Board of Directors (1) Board meetings and resolutions The Board of Directors of the Company held 12 meetings during the report year. a. The Company held 16th meeting of 2nd Board of Directors on January 1st 2001, and the meeting examined and adopted the 2000 Asset Checkup Work Report and 2001 Plans Assembly Report. b. The Company held 17th meeting of 2nd Board of Directors on January 6th 2001, and the meeting discussed about and adopted the 2000 Work Summing-up Report and 2001 Work Comments. c. The Company held 18th meeting of 2nd Board of Directors on January 31st 2001, and the meeting examined and adopted the Reform Plan of Medical Security System of the Company, Normalizing System for Labor Service Employment of the Company and other matters. d. The Company held 19th meeting of 2nd Board of Directors on February 12th 2001, and the meeting examined and adopted the 2000 Annual Report and the Summary of the Annual Report and related mattes, and decided to hold 2000 Annual Shareholders’General Meeting on March 19th 2001 to examine above-mentioned matters. Please refer to SECURITIES TIMES, Shanghai Securities Daily and Hong Kong TA KUNG PAO dated February 15th 2001 for details. e. The Company held 20th meeting of 2nd Board of Directors on April 2nd 2001, and the meeting examined and adopted the Proposal on Reviewing Over the Preconditions of Issuing New Shares and other related matters, and decided to hold 1st Provisional Shareholders’General Meeting for 2001 on May 8th 2001 to examine above-mentioned matters. Please refer to SECURITIES TIMES>, Shanghai Securities Daily and Hong Kong TA KUNG PAO dated April 3rd 2001 for details. f. The Company held 21st meeting of 2nd Board of Directors on April 23rd 2001, and the meeting examined and adopted the Proposal on Postponing Holding 1st Provisional Shareholders’General Meeting for 2001, and decided to postpone this Provisional Shareholders’General Meeting until １５ June 6th 2001. The meeting also discussed about other matters related with the operation of the Company, and published the Announcement on Postponing 1st Provisional Shareholders’General Meeting for 2001 on SECURITIES TIMES, Shanghai Securities Daily and Hong Kong TA KUNG PAO dated April 24th . g. The Company held 22nd meeting of 2nd Board of Directors on May 21st 2001. The meeting examined and adopted the Proposal on the Shareholder Shanghai Kaisai Biotech Co., Ltd. Changing its Capital Contribution Method, and agreed that the Company issued new A-shares to raise funds for investment in one of its shareholder-- Shanghai Kaisai Biotech Co., Ltd., so that this company could change its capital contribution in the form of intangible assets to subscription in cash. The meeting also examined and adopted the Proposal on Eliminating the Investment in Shanghai Kaisai Biotech Research and Development Center Co., Ltd., and published the Announcement on SECURITIES TIMES, Shanghai Securities Daily and Hong Kong TA KUNG PAO dated May 22nd . h. The Company held 23rd meeting of 2nd Board of Directors on April 23rd 2001, and the meeting examined and adopted the Proposal on Participation in Founding Beida Capital Investment (Funds) Co., Ltd., and decided, by investing RMB60,600,000 owned by the Company, together with six shareholders including Shenzhen Beida Capital Investment Management Co., Ltd., to found Beida Capital Investment (Funds) Co., Ltd., which accounted for 20% of the total share capital. The Company published the Announcement on SECURITIES TIMES, Shanghai Securities Daily and Hong Kong TA KUNG PAO on May 30th 2001. i. The Company held 24th meeting of 2nd Board of Directors on July 28th 2001, and the meeting examined and adopted the 2001 Interim Report of the Company and other related matters. Please refer to SECURITIES TIMES, Shanghai Securities Daily and Hong Kong TA KUNG PAO dated July 20th 2001. j. The Company held 25th meeting of 2nd Board of Directors on October 20th 2001, and the meeting communicated the minutes of National Symposium on Supervision and Regulatory Work on Listed Companies relayed by China Securities Regulatory Commission Special Office in Hefei. The meeting discussed about the matters concerning the Company to set up independent director. k. The Company held 26th meeting of 2nd Board of Directors on November 30th 2001, and the meeting discussed about organizational structure, staff adjustment and salary stimulation system. The meeting decided to combine related departments to avoid repeated settings, and execute the new system for employees to rest in busy season and low season. l. The Company held 27th meeting of 2nd Board of Directors on December 31st 2001, and the meeting examined and adopted the 2000 Asset Checkup Work Report and 2001 Plans Assembly Report. (2) Implementation by Board of Directors of the resolutions of Shareholders’General Meeting a. During this report year, the Board of Directors of the Company implemented all the resolutions of Shareholders’General Meeting. The Board of Directors published Announcement on Dividend Distribution for 2000 on SECURITIES TIMES, Shanghai Securities Daily and Hong Kong TA KUNG PAO dated April 12th 2001, and distributed dividends to the shareholders of GUJING DISTILLERY A-Share and B-Share through Shenzhen Securities Registration Co., Ltd. on April 19th and 23rd 2001. b. During the report period, the Board of Directors executed the Proposal on Modification of Articles of Association of the Company that was adopted at 2000 Annual Shareholders’General Meeting, １６ and modified the Articles of Association as per legal procedures. c. During the report year, the Company did not convert public reserve fund into additional share capital. The plan that the Company issues 35,000,000 new A-shares is in progress, and related documents have been submitted to China Securities Regulatory Commission for review. VII. Profit distribution preplan of the Company in the report year and forecast policies on profit distribution for 2002 1. Profit distribution preplan of the Company in the report year As audited by the domestic Andersen-Huaqiang Certified Accountants, in 2001, the company achieved RMB 67,046,748 of net profit, the sum of the drawn accumulation fund and public welfare fund is RMB15,870,598, plus the profit of RMB 239,169,873 retained in the beginning of the year, the total distributable profit for the year of 2001 is RMB290,346,023. As audited by the international Andersen Certified Accountants, in 2001, the company achieved RMB 68,714,000 of net profit, after retaining accumulation fund and public welfare fund of RMB 15,870,000, plus the profit of RMB 237,502,000 in the beginning of the year, the total distributable profit for the year of 2001 is RMB 290,346,000. In the light of the Articles of Association of the company as well as the relevant regulations, when the two audit reports are not consistent, the lower figure for the distributable profit shall prevail; therefore, the distributable profit for the fiscal year of 2001 is RMB 290,346,000. Upon the consideration, the Board of Directors Board advises the preplan of profit distribution of the Company as follows: based on total share capital ended December 31st 2001, the dividend is RMB 2.0 per ten shares (including tax), and for B shares, the equivalent amount will be paid in Hong Kong dollar. In total, RMB 47 million will be divided and the balance will be retained for the next year. No public reserve fund is converted to share capital in the report year. This dividend distribution preplan will be submitted to 2001 Annual Shareholders’ General Meeting for review, and will be executed after being adopted at the meeting. (2) Forecast policies on profit distribution for 2002 The Company plans to carry out one profit distribution in 2002. It is estimated that in 2002, the Company will carry out profit distribution on the basis of 20% of realized net profit. It is estimated that 10% of the undistributed profit of the Company in the report year will be used for dividend distribution in next year; it is estimated that the dividend distribution will be carried out in cash and cash dividend will account for 100% of dividend distribution. 8. Other disclosed matters The Company chooses China Securities Daily, Shanghai Securities Daily and Hong Kong Wen Wei Po as the media on which it discloses its information in 2002. VIII. Working Report of Supervisory Committee 1. During the report period, the Company held two meetings of Supervisory Committee: (1) The Company held 6th meeting of 2nd Supervisory Committee on February 12th 2001, and the meeting examined and adopted the 2001 Annual Report of the Company and Summary of the Report, 2000 Work Report of Supervisory Committee, 2000 Financial Settlement Report and the １７ Proposal on Modification of Articles of Association of the Company, and published Announcement of Supervisory Committee on SECURITIES TIMES, Shanghai Securities Daily and Hong Kong TA KUNG PAO dated February 15th 2001. (2) The Company held 7th meeting of 2nd Supervisory Committee on July 18th 2001, and the meeting examined and adopted the 2001 Interim Report of the Company and published Announcement of Supervisory Committee on SECURITIES TIMES, Shanghai Securities Daily and Hong Kong TA KUNG PAO dated July 20th 2001. 2. During the report period, the Supervisory Committee of the Company loyally performed its supervision functions and duties, and protected rights and interests of shareholders by exercising the powers granted in related laws, regulations and the Articles of Association. The Supervisory Committee attended 2000 Annual Shareholders’General Meeting and Provisional Shareholders’ General Meeting in 2001, and attended all the meetings of Board of Directors in 2001 without voting powers. In addition, it performed strict supervision and checked on the accounting of the Company, implementation by the Board of Directors of resolutions of Shareholders’ General Meetings, operation and decisions of management level, legal operation of the Company, operating activities of directors, managers and senior executives, utilization of funds of the Company, and the transactions associated with holding shareholders. The Supervisory Committee holds its opinions as follows: (1) During the report period, the Board of Directors worked diligently, the Company made scientific and reasonable operating decisions, all the management systems of the Company are sound and are strictly executed; the Board of Directors, management level and officers of the Company do not violate state’s laws and regulations and Articles of Association when they perform their duties, and there are no cases that damaged the interests of the Company and shareholders. (2) 2001 Financial Audit Report of ANHUI GUJING DISTILLERY COMPANY LIMITED issued by Anderson-Huaqiang Certified Public Accountants gives a fair view of financial status of the Company ended December 31st 2001 and its operating results for January to December in 2001. (3) There are not such cases that the Company utilized the raised funds in the report period. The funds raised last time was used up before December 31st 2000, and legal procedures were executed for that. The Company published the notes given by Board of Directors on utilization of previously-raised funds on SECURITIES TIMES, Shanghai Securities Daily and Hong Kong TA KUNG PAO dated April 3rd 2001. In the opinions of the Supervisory Committee, the utilization of previously-raised funds by the Company conformed to the long-term interests of the Company and shareholders’interests. The notes given by the Board of Directors reflected actual status of the investment of the Company, and such investment was carried out strictly according to Company Law, Securities Law, Opinions on Normalizing Shareholders’ Meeting of Listed Companies, and Rules for Shares Listing of Shenzhen Stock Exchange as well as the Articles of Association of the Company. (4) In the report period, there are not significant acquisition or sales of assets in the Company, or insider trading or the cases that damaged shareholders’interests and caused loss of assets. The Company planned to issue not more than 35,000,000 new A-shares in the report period, and all the acts in this issuing of shares that related with asset purchase went through legal procedures, and was handled by the Board of Directors upon authorization after the issuing was adopted at 1st Provisional Shareholders’Meeting in 2001. (5) During the report period, the associated trading between the Company and its holding １８ shareholders as well as affiliated enterprises is necessary for normal operation of the Company, and is fair and just business activities. These transactions are fair and reasonable at fair prices, and did not damage the interests of the Company and non-affiliated shareholders. The Board of Directors, in the process of handling the associated transactions, duly performed the obligations of good faith and due diligence, and did not violate any laws and regulations as well as the Articles of Association. Chapter IX Substantial Events 1. In the report period, the Company has not been involved in any substantial lawsuit or arbitration events. 2. In the report period, the Company did not have the events of acquisition or selling assets. 3. Substantial associated transactions Associated transactions generated from purchase/sales of commodities (please see Notes to the accounting statements) In the report period, there were not associated transactions generated from assets or share transfer between the Company and affiliated enterprises. In the report period, there were not creditor’s rights or debts or guarantees between the Company and affiliated enterprises. The Company and its holding shareholder GUJING GROUP signed an agreement on October 20th 2000. According to this agreement, GUJING GROUP provides the children of employees of the Company the primary school, staff hospital, kindergarten, hotel, office building of trade union, entertainment and cultural activity building, employees dormitory and other service facilities on the paid basis from January 1st 2000. Therefore, the Company must pay c service fee of RMB 6 million every year. In the report period, there were not any other associated transactions except aforesaid transactions between the Company and affiliated enterprises. 4. Major contracts and their performance (1) In the report period, the Company did not have such events as asset trusteeship, contracting, leasing and substantial guarantee. (2) In the report period, the holding subsidiary under the Company--Beijing Jinshengyi Technology Co., Ltd. entrusted the Great Wall Securities Company on December 28th 2000 to manage its funds of RMB30 million, and received the principal and earnings of RMB3,165,000 on June 28th 2001. (3) Other important contracts In order to obtain short-term turnover funds, the Company signed Loan Contract with the Bank of China Bozhou Branch on January 18th 2001, and borrowed a sum of RMB 20 million for a term of 6 months. Now the loan has been repaid. The Company signed Loan Contracts with the Industrial and Commercial Bank of China Bozhou Branch respectively on February 19th 2001 and February 26th 2001, borrowing loans of RMB 7.6 million and RMB 10 million respectively for a term of 6 months. Now the loans have been repaid. The Company signed the Agreement on Capital Contribution of Founders of Beida Capital Investment Co., Ltd. with Shenzhen Beida Capital Investment Management Co., Ltd. and other １９ companies on May 26th 2001, and invested RMB 60.6 million in this company, which accounted for 20% of registered capital of the founded Beida Capital Investment Co., Ltd. and has been paid up now. 5. Promises made by the Company or the shareholders holding 5% or more of the shares See the Note 24 in the Notes to the Accounting Statements. VI. Certified public accountants appointed by the Company In the report period, the Company still appointed Anderson-Huaqiang Certified Public Accountants and Arthur Anderson Certified Accountants as auditors of the Company and paid auditor fee of Rmb600,000 to Anderson-Huaqiang Certified Public Accountants. The Company did not pay any other fees. 1. Other major events In the report period, the Company, its Board of Directors and directors were not investigated or punished administratively or criticized in the form of circular notice by China Securities Regulatory Commission, neither were condemned publicly by any stock exchanges. In the report period, the holding shareholders of the Company were not changed; Board of Directors was not re-elected; the Chairman of the Company Mr. Wang Xiaojin did not act as General Manager of the Company concurrently, and the Board of Directors appointed Mr. Gan Shaoyu as General Manager of the Company. In the report year, the Company did not change its corporate name and short forms of stocks. Because Shenzhen Stock Exchange upgraded its system, the codes of A-share and B-share of the Company were changed to respectively 000596 and 200596. Chapter X. Financial Statements Section I. Audit Report 1. Auditor’s opinions The financial statements of the Company have been audited by international certified accountants Arthur Anderson Certified Accountants, which issued without reservation opinions (attached hereinafter). 2. Accounting statements (attached hereinafter) 3. Notes to the accounting statements (attached hereinafter) In the report year, the consolidated items and accounting estimates of the Company were not changed; The original accounting system executed by the Company was the Accounting System for Joint- stock Limited Company. The Company executes Enterprise Accounting System and related stipulations since January 1st 2001, and related accounting policies are changed as follows: ２０ Chapter XI Contents of Documents for Further Reference 1. Accounting Statements carrying the signatures and seals of the legal representative, chief accountant and responsible persons of accounting institution; 2. The Audit Report (in original) carrying the seal of the certified public accountants as well as the signatures and seals of certified accountants 3. All the original documents and announcements published on SECURITIES TIMES, Shanghai Securities Daily and Hong Kong TA KUNG PAO during the report period; ANHUI GUJING DISTILLERY COMPANY LIMITED Board of Directors March 8th 2002 ANHUI GUJING DISTILLERY COMPANY LIMITED AND SUBSIDIARIES (Incorporated in the People’s Republic of China) (i) (ii) CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001 ＴＯＧＥＴＨＥＲ ＷＩＴＨ ＡＵＤＩＴＯＲＳ’ ＲＥＰＯＲＴ ２１ AUDITORS’REPORT TO THE SHAREHOLDERS OF ANHUI GUJING DISTILLERY COMPANY LIMITED: We have audited the accompanying consolidated balance sheet of Anhui Gujing Distillery Company Limited (hereinafter referred to as the “Company”) and its subsidiaries (hereinafter together with the Company referred to as the “Group”) as of December 31, 2001, and the related consolidated statements of income, changes in equity and cash flows for the year then ended. These consolidated financial statements set out on pages 2 to 29 are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as of December 31, 2001, and of the results of its operations and its cash flows for the year then ended, in accordance with International Financial Reporting Standards, as published by the International Accounting Standards Board. Certified Public Accountants Hong Kong, the People’s Republic of China February 9, 2002 ANHUI GUJING DISTILLERY COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2001 (Amounts expressed in thousands of Renminbi) Note 2001 2000 ASSETS Non-current assets Leasehold land 3 37,692 38,913 Property, plant and equipment 4 399,036 418,082 Intangible assets, net 5 20,257 24,852 Investment in associates 7 ６０，８５０ - Long-term investments 6 １００，０００ 100,000 Total non-current assets ６１７，８３５ 581,847 Current assets Current portion of long-term investments 6 - 1,695 Inventories 8 481,942 529,289 Trade and other receivables 9 289,996 275,882 Due from related parties 22 - 53,942 Short-term investments 10 - 40,000 Cash and cash equivalents 21 132,199 101,348 Total current assets 904,137 1,002,156 TOTAL ASSETS 1,521,972 1,584,003 EQUITY AND LIABILITIES Shareholders’equity Share capital 11 235,000 235,000 Reserves 12 902,261 880,547 Total shareholders’equity 1,137,261 1,115,547 Minority interests 26,441 26,672 Current liabilities Trade and other payables 13 201,756 310,053 Taxes payable 18 85,030 60,882 Due to related parties 22 484 - Dividend payable 19 47,000 70,849 Short-term borrowings 14 24,000 - ２ Total current liabilities 358,270 441,784 TOTAL EQUITY AND LIABILITIES 1,521,972 1,584,003 The accompanying notes are an integral part of these consolidated financial statements. ANHUI GUJING DISTILLERY COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT FOR THE YEARS ENDED DECEMBER 31, 2001 (Amounts expressed in thousands of Renminbi (“RMB”), except for earnings per share) Note 2001 2000 Revenue 807,393 915,757 Sales taxes 18 (118,612) (90,485) Cost of sales (452,367) (472,199) Gross profit 236,414 353,073 Other operating income 2,928 2,542 Distribution costs (88,235) (82,594) Administrative expenses (75,146) (73,447) Other operating expenses (2,764) (2,603) Profit from operations 73,197 196,971 Finance income 15 7,922 7,603 Investment income 6,10 2,014 4,168 Subsidy income 16 23,140 13,168 Profit before taxation and minority interests 17 106,273 221,910 Income tax expense 18 (37,790) (73,877) Profit after taxation but before minority interests 68,483 148,033 ３ Minority interests 231 336 Net profit for the year 68,714 148,369 Earnings per share 20 - Basic RMB 0.29 RMB 0.63 - Diluted Not applicable Not applicable The accompanying notes are an integral part of these consolidated financial statements. ４ ANHUI GUJING DISTILLERY COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2001 (Amounts expressed in thousands of Renminbi) Reserves Statutory Statutory public Share Capital surplus welfare Retained Total capital reserve reserve fund fund earnings reserves Total Note 11 Note 12(a) Note 12(b) Note 12(c) Note 19 Balance at January 1, 2000 235,000 521,043 54,964 54,964 239,857 870,828 1,105,828 Dividends declared after January 1, 2000 from net profit of 1999 (Note 19) - - - - (68,150) (68,150) (68,150) Net profit for 2000 - - - - 148,369 148,369 148,369 Profit appropriations from net profit of 2000 - statutory surplus reserve fund - - 6,037 - (6,037) - - - statutory public welfare fund - - - 6,037 (6,037) - - - proposed dividends (Note 19) - - - - (70,500) (70,500) (70,500) Balance at December 31, 2000 235,000 521,043 61,001 61,001 237,502 880,547 1,115,547 Net profit for 2001 - - - - 68,714 68,714 68,714 Profit appropriations from net profit of 2001 - statutory surplus reserve fund - - 7,935 - (7,935) - - - statutory public welfare fund - - - 7,935 (7,935) - - - proposed dividends (Note 19) - - - - (47,000) (47,000) (47,000) Balance at December 31, 2001 235,000 521,043 68,936 68,936 243,346 902,261 1,137,261 ５ The accompanying notes are an integral part of these consolidated financial statements. ６ ANHUI GUJING DISTILLERY COMPANY LIMITED AND SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENT FOR THE YEARS ENDED DECEMBER 31, 2001 (Amounts expressed in thousands of Renminbi) Note 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES: Cash generated from operations 21 93,933 １６２，０９３ Interest paid (5,080) (7,542) Income taxes paid (45,767) (79,226) Net cash generated from operating activities 43,086 75,325 CASH FLOWS FROM INVESTING ACTIVITIES Decrease in short-term investments 40,000 90,000 Decrease in due from related parties 53,942 １２６，１４５ Acquisition of long-term investments (60,850) (100,000) Proceeds from sale of long-term investments 1,696 5,895 Purchase of property, plant and equipment (17,795) (119,080) Proceeds from disposal of property, plant and equipment 4,135 1,454 Increase in intangible assets - (4,200) Interest received 13,002 15,145 Net cash generated from investing activities 34,130 15,359 CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in short-term borrowings 24,000 (55,200) Dividends paid (70,849) (68,191) Increase in due to related parties 484 - Net cash used in financing activities (46,365) (123,391) Net increase (decrease) in cash and cash equivalents 30,851 (32,707) Cash and cash equivalents, beginning of year 21 101,348 134,055 Cash and cash equivalents, end of year 21 132,199 101,348 ７ The accompanying notes are an integral part of these consolidated financial statements. ８ ANHUI GUJING DISTILLERY COMPANY LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2001 (Amounts expressed in Renminbi (“RMB”) unless otherwise stated) 1. ORGANIZATION AND PRINCIPAL OPERATIONS Anhui Gujing Distillery Company Limited (the “Company”) was incorporated in the People’s Republic of China (the “PRC”) on May 30, 1996 as a joint stock limited company. The principal activities of the Company are the manufacture and sale of baiju (distilled spirit), wine, distilling facilities, packaging material, feeds and bottles. The address of the Company’s registered office is Gujin Town, Bozhou City, Anhui Province. As of December 31, 2001, there are 5,248 employees in the Group (2000: 5758). In March 1996 and August 1996, the Company was approved to issue 60,000,000 domestically listed foreign investment ordinary shares (“B share”) and 20,000,000 domestic investment ordinary shares (“A share”) respectively. Both A shares and B shares are with par value of RMB 1 each, and have been listed on the Shenzhen Stock Exchange. The immediate parent company and ultimate parent company of the Company is Anhui Gujin Group Limited (“AGGL”). 2. PRINCIPAL ACCOUNTING POLICIES The principal accounting policies adopted in preparing the financial statements of the Company and its subsidiaries (collectively referred to as the “Group”) are as follows: (a) Basis of Presentation The financial statements are prepared under the historical cost convention and are also prepared in accordance with International Financial Reporting Standards (“IAS”), as published by the International Accounting Standards Board, effective as of December 31, 2001. This basis of accounting differs from that used in the statutory accounts of the Group, prepared in accordance with accounting principles and accounting standards applicable to joint stock limited companies in the PRC. The principal adjustments made to conform the statutory accounts of the Company and its subsidiaries to IAS are shown in Note 23. ９ (b) Principles of consolidation As of December 31, 2001, the consolidated financial statements included the financial statements of the Company and its subsidiaries as follows: Place of Date of Registered Percentage of Equity Name of subsidiary registration incorporation Capital interest Principal activities RMB’000 Direct Indirect - Bozhou Gujing Sales Bozhou, January 24, 43,646 100% Provision of trading Company Anhui 1994 services to the Company Province Bozhou Gujing Bozhou, May 30, 1994 6,945 100% - Provision of transportation Transport Company Anhui services to the Company Province - Bozhou Gujing Glass Bozhou, January 8, 1996 16,000 100% Manufacture and sale of Co., Ltd. Anhui glass products Province - Anhui Gujing Double Xiaoxian, August 2, 1996 47,200 80% Manufacture and sale of Happiness Wine Co., Anhui wine and other beverages Ltd. Province Xiaoxian Gujing Xiaoxian, September 29, 500 - 80% Sale of wine and other Double Happiness Anhui 1997 beverages Wine Sales Company Province Anhui Gujing Waste Bozhou, September 2, 300 - 100% Colled and sale of recycled Recycle Co., Ltd. Anhui 1996 bottle glasses Province - Anhui Old Big Eight Bozhou, December 14, 30,000 93.33% Sale of wire and other Distillery Co., Ltd. Anhui 2000 products Province - Beijing Winward Beijing January 23, 50,000 70% Sales and development of Technology Co., Ltd. 1999 computer hardware, software and assessors. All significant intercompany balances and transactions, including intercompany profits and losses and resulting unrealized profits and losses are eliminated on consolidation. The equity and net income １０ attributable to minority shareholders ’interests are shown separately in the consolidated balance sheet and consolidated income statement, respectively. The purchase method of accounting is used for acquired businesses. Results of subsidiaries and associates acquired or disposed of during the year are included in the consolidated financial statements from the date of acquisition or to the date of disposal. In July 2000, Anhui Gujing Meigong Glass Co., Ltd. was dissolved and the related loss was included in profit before taxationand minority interest (Note 17). (c) Leasehold land Leasehold land represented land use fees paid for long leasehold land and is classified as operating leases. The pre-paid lease payments are amortized over the lease period (fifteen to fifty years) on a straight-line basis. (d) Property, plant and equipment and depreciation Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment loss. The initial cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after the property, plant and equipment have become ready for its intended use, such as repairs and maintenance and overhaul costs, are recognized as expense in the year in which they are incurred. In situations where it is probable that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of the asset beyond its originally assessed standard or performance, the expenditures are capitalized as an additional cost of the assets. Depreciation is calculated using the straight-line method to write off the cost, after taken into account the estimated residual value, of each asset over its expected useful life. The expected useful lives are as follows: Buildings 14 - 18 years Machinery and equipment 8 - 10 years Motor vehicles 8 years Furniture, fixtures and office equipment 8 years The useful life and depreciation method are reviewed periodically to ensure that the method and period of depreciation are consisted with the expected pattern of economic benefits from items of property, plant and equipment. When property, plant and equipment are sold or retired, their cost and accumulated depreciation and accumulated impairment loss are eliminated from the accounts and any gain or loss resulting from their disposal is included in the statement of income. １１ (e) Operating Leases Leases of assets under which substantially all the risks and rewards of ownership are effectively retained by the lessor are recognized as operating leases. Lease payments under an operating lease are recognized as an expense on a straight-line basis over the lease term. (f) Construction-in-progress Construction-in-progress represents plant and properties under construction or equipment under installation and is stated at cost. This includes costs of construction, acquisition and other direct costs, plus borrowing costs which include interest charges and exchange differences arising from foreign currency borrowings (to the extent that they are regarded as an adjustment to the interest costs) used to finance these projects during the construction period. Construction-in-progress is not depreciated until such time as property, plant and equipment are completed and ready for use. (g) Subsidiaries A subsidiary company is a company in which the Company controls. Control exists when the Company has the power to govern the financial and operating policies of the subsidiary so as to obtain benefits from its activities. (h) Associates An associate is a company, not being a subsidiary or a joint venture, in which the Group has significant influence. Significant influence exists when the Group has the power to participate in, but not control, the financial and operating decisions of the associate. Investments in associates are accounted for using the equity method. An assessment of investments in associates is performed when there is an indication that the asset has been impaired or the impairment losses recognised in prior years no longer exist. (i) Investments (i) Long-term investments Long-term investments of the Group are investments in equity instrument without an active market. They are classified as available-for-sale financial assets and stated at cost less any impairment in value. An assessment of long-term investments is performed when there is an indication that the asset has been impaired or the impairment losses recognized in the prior year no longer exist. Income from investments is accounted for to the extent of dividends (interests) received and receivable. １２ Upon disposal of a long-term investment, the difference between net disposal proceeds and the carrying amount is charged or credited to the income statement. (ii) Short-term investments Short-term investments of the Group are treasury bonds and trust investments with fixed maturity that the Company has the positive intent and ability to hold to maturity. They are classified as held-to-maturity financial assets and are stated at amortized cost less any impairment in value. (j) Intangible assets Intangible assets are measured initially at cost. Intangible assets are recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the enterprise; and the cost of the asset can be measured reliably. After initial recognition, intangible assets are measured at cost less accumulated amortization and any accumulated impairment losses . Intangible assets are amortized on a straight-line basis over the best estimate of their useful lives. The amortization period and the amortization method are reviewed annually at each financial year-end. (i) Trademarks Trademarks are measured at cost less accumulated amortization and accumulated impairment losses. Trademarks are recognized if it is probable that the future economic benefits that are attributable to the asset will flow to the Company; and the cost of asset can be measured reliably. Cost is amortized on a straight-line basis over the expected useful lives of 10 years. (ii) Goodwill Goodwill is the excess of the cost of an acquisition over the Company’s interest in the fair value of the identifiable assets and liabilities acquired as at the date of the exchange transaction. Goodwill is carried at cost less accumulated amortization and accumulated impairment losses. Goodwill is amortized on a straight line basis over its useful life of 5 years. (k) Inventories Inventories are stated at the lower of cost and net realizable value. Cost, calculated on the weighted average basis, comprises all costs of purchase, costs of conversion and other costs incurred to bring the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (l) Receivables Receivables are stated at fair value of the consideration given and are carried at cost, after provision for １３ impairment. (m) Cash and cash equivalents Cash represents cash in hand and deposits with banks (or other financial institutions) which are repayable on demand. Cash equivalents represent short-term, highly liquid investments which are readily convertible into known amounts of cash with originally maturity of three months or less and that are subject to an insignificant risk of change in value. (n) Provisions A provision is recognized when, and only when: (i) The Company has a present obligation (legal or constructive) as a result of a past event; (ii) It is probable (i.e. more likely than not) that an outflow of resources embodying economic benefits will be required to settle the obligation; and (iii) A reliable estimate can be made of the amount of the obligation. At balance sheet date, if it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision should be reversed. (o) Liabilities and equity Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement on initial recognition. Interest, dividends, gains, and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distribution to holders of financial instruments classified as equity are charged directly to equity. (p) Minority interests Minority interests include their proportion of the fair values of identifiable assets and liabilities recognized upon acquisition of a subsidiary. (q) Revenue recognition Provided it is probable that the economic benefits associated with a transaction will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized on the following bases: １４ (i) Sale of goods Revenue is recognized when the significant risks and rewards of ownership of goods have been transferred to the buyer. (ii) Interest income Interest income is recognized on a time proportion basis that takes into account the effective yield on the assets. (iii) Dividend income Dividend income is recognized when the right to receive payment is established. (r) Taxation The Company and its subsidiaries provides for taxation on the basis of its statutory profit for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes and after considering all available tax benefits. Other taxes are provided in accordance with the prevailing PRC tax regulations. Deferred taxes are calculated using the balance sheet liability method. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled based on tax rates enacted or substantially enacted at the balance sheet date. Deferred tax assets are recognized when it is probable that sufficient taxable profits will be available against which the deferred tax assets can be utilized. Deferred tax assets and liabilities are recognized regardless of when the timing difference is likely to reverse. Deferred tax assets and liabilities are not discounted and are classified as non-current assets or liabilities in the balance sheet.” (s) Measurement currency Based on the economic substance of the underlying events and circumstances relevant to the Company, the measurement currency of the Company and its subsidiaries has been determined to be RMB. Transactions in other currencies are translated into the measurement currency at exchange rates prevailing at the time of the transactions. Monetary assets and liabilities denominated in other currencies at the balance sheet date are translated into the measurement currency at exchange rate prevailing at that date. Non-monetary assets and liabilities in other currencies are translated at historical rates. Exchange differences, other than those capitalized as a component of borrowing costs, １５ are recognized in the income statement in the year in which they arise. (t) Borrowings and borrowing costs Borrowings are initially recognized at the proceeds received, net of transaction cost. They are subsequently carried at amortized costs using the effective interest rate method, the difference between net proceeds and redemption value being recognized in the net profit or loss for the year over the life of the borrowings. Borrowing costs include interest charges and other costs incurred in connection with the borrowing of funds. Borrowing costs are expensed as incurred, except when they are directly attributable to the acquisition, construction of property, plant and equipment that necessarily takes a substantial period of time to get ready for its intended use in which case they are capitalized as part of the cost of that asset. Capitalization of borrowing costs commences when expenditures for the asset and borrowing costs are being incurred and the activities to prepare the asset for its intended use are in progress. Borrowing costs are capitalized at the weighted average cost of the related borrowings until the asset is ready for its intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded. １６ (u) Government grant Government grant are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to them, if any, and that the grants will be received. (v) Statutory pension scheme Pursuant to the PRC laws and regulations, contributions to the basic old age insurance for the Group’s local staff are to be made monthly to a government agency based on 24 % of the standard salary set by the provincial government, of which 21% is borne by the Group and the remainder is borne by the staff. The government agency is responsible for the pension liabilities relating to such staff on their retirement. The Group accounts for these contributions on an accrual basis. (w) Financial instruments (i) Definition A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liabilities or equity instrument of another enterprise. A financial asset is any asset that is: (a) cash; (b) a contractual right to receive cash or another financial asset from another enterprise; (c) a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable; or (d) an equity instrument of another enterprise. A financial liabilities is any liability that is a contractual obligation: （ａ） ｔｏ ｄｅｌｉｖｅｒ ｃａｓｈ ｏｒ ａｎｏｔｈｅｒ ｆｉｎａｎｃｉａｌ ａｓｓｅｔ ｔｏ ａｎｏｔｈｅｒ ｅｎｔｅｒｐｒｉｓｅ； ｏｒ (b) to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. The financial assets and financial liabilities of the Group include cash and cash equivalents, receivables, investments, payables and borrowings. (ii) Recognition and measurement Financial assets are initially recognised at cost which is the fair value of the consideration given. They are subsequently carried at either fair value, cost or amortized cost (using the effective interest rate method) according to IAS 39. A “regular way” purchase or sale of financial assets is １７ recognized using trade date accounting. Gains and losses arising from changes in the fair value of those available-for-sale financial assets that are measured at fair value subsequent to initial recognition are included in net profit or loss for the period. The accounting policies on recognition and measurement of the major items are disclosed in the respective accounting policies found in this Note. (iii) Presentation Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realize the asset and settle the liability simultaneously. (x) Financial risk management The Group’s operation gives rise to exposure to credit risk, liquidity risk, interest rate risk and foreign exchange rate risk. (i) Credit risk The Group has no significant concentration of credit risk with any single counterparty or group of counterparties having similar characteristics. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including cash and cash equivalents, receivables and investments. (ii) Liquidity risk The Group’s policy is to maintain sufficient cash and cash equivalents to meet its commitments over the next year in accordance with its strategic plan. (iii) Interest rate risk The interest rate and terms of repayments of short-term bank borrowings are disclosed in Note 14. As of December 31, 2001, change in interest rates would not have material impact on the Group’s operating results and operating cash flows. (iv) Foreign exchange risk The Group does not have material foreign exchange risk and it does not have material transactions in foreign currency. (y) Estimation of fair value (i) Cash and cash equivalent １８ The carrying amount of cash and cash equivalents approximates their fair value due to the short- term maturity of these financial instruments. (ii) Trade and other receivables and payables, taxes and dividends payable The carrying amount of trade and other receivables and payables, taxes and dividends payables, which are all subject to normal trade credit terms, approximates their fair value. (iii) Due from and due to related parties The fair value of amounts due from and due to related parties cannot be reliably estimated and disclosed because these amounts are with no fixed repayment terms. (iv) Short-term borrowings The carrying amount of short-term borrowings approximates their fair value as these borrowings bearing interest rates quoted at market. (v) Long-term investment The carrying amount of long-term investment cannot be reliably estimated and disclosed because these investment does not have quoted market price in an active market and other methods reasonably estimating fair value for these investments are clearly inappropriate or unworkable. (z) Impairment of Assets (i) Financial instrument Financial instruments are reviewed for impairment at each balance sheet date. For financial assets carried at cost or amortised cost, whenever it is probable that the Group will not collect all amounts due according to the contractual terms of receivables or held-to-maturity investments, an impairment or bad debt loss is recognised in the income statement. Reversal of impairment losses previously recognised is recorded when the decrease in impairment loss can be objectively related to an event occurring after the write-down. Such reversal is recorded in income. However, the increased carrying amount is only recognised to the extent it does not exceed what amortised cost would have been had the impairment not be recognised. １９ (ii) Other assets Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. At the balance sheet date, whenever the carrying amount of an asset exceeds its recoverable amount, the carrying amount will be written down to recoverable amount, and an impairment loss is recognized in income statement. The recoverable amount is the higher of an asset’s net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction while value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Reversal of impairment losses recognized in prior years is recorded when the impairment losses recognized for the asset no longer exist or has decreased. The reversal is recorded in income. (aa) Contingencies Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognized in the financial statements but disclosed when an inflow of economic benefits is probable. (bb) Subsequent events Post-year-end events that provide additional information about the Group’s position at the balance sheet date (“adjusting events”) are reflected in the financial statements. Post-year-end events that are not adjusting events are disclosed in the notes when material. （ｃｃ）Ｃｈａｎｇｅｓ ｉｎ ａｃｃｏｕｎｔｉｎｇ ｐｏｌｉｃｙ Ａ ｃｈａｎｇｅ ｉｎ ａｃｃｏｕｎｔｉｎｇ ｐｏｌｉｃｙ ｓｈｏｕｌｄ ｂｅ ｍａｄｅ ｏｎｌｙ ｉｆ ｒｅｑｕｉｒｅｄ ｂｙ ｓｔａｔｕｔｅ， ｏｒ ｂｙ ａｎ ａｃｃｏｕｎｔｉｎｇ ｓｔａｎｄａｒｄ ｓｅｔｔｉｎｇ ｂｏｄｙ， ｏｒ ｉｆ ｔｈｅ ｃｈａｎｇｅ ｗｉｌｌ ｒｅｓｕｌｔ ｉｎ ａ ｍｏｒｅ ａｐｐｒｏｐｒｉａｔｅ ｐｒｅｓｅｎｔａｔｉｏｎ ｏｆ ｅｖｅｎｔｓ ｏｒ ｔｒａｎｓａｃｔｉｏｎｓ ｉｎ ｔｈｅ ｆｉｎａｎｃｉａｌ ｓｔａｔｅｍｅｎｔｓ ｏｆ ｔｈｅ Ｇｒｏｕｐ． Ａ ｃｈａｎｇｅ ｉｎ ａｃｃｏｕｎｔｉｎｇ ｐｏｌｉｃｙ ｓｈｏｕｌｄ ｂｅ ａｐｐｌｉｅｄ ｒｅｔｒｏｓｐｅｃｔｉｖｅｌｙ ｕｎｌｅｓｓ ｔｈｅ ａｍｏｕｎｔ ｏｆ ａｎｙ ｒｅｓｕｌｔｉｎｇ ａｄｊｕｓｔｍｅｎｔ ｔｈａｔ ｒｅｌａｔｅｓ ｔｏ ｐｒｉｏｒ ｐｅｒｉｏｄｓ ｉｓ ｎｏｔ ｒｅａｓｏｎａｂｌｙ ｄｅｔｅｒｍｉｎａｂｌｅ， ｉｎ ｗｈｉｃｈ ｃａｓｅ， ｔｈｅ ｃｈａｎｇｅ ｉｎ ａｃｃｏｕｎｔｉｎｇ ｐｏｌｉｃｙ ｓｈｏｕｌｄ ｂｅ ａｐｐｌｉｅｄ ｐｒｏｓｐｅｃｔｉｖｅｌｙ． ２０ 3. LEASEHOLD LAND 2001 2000 RMB’000 RMB’000 Cost 43,864 ４３，８６４ Accumulated amortization (6,172) (4,951) Net 37,692 38,913 Leasehold land represented land use fees paid for the right to use the parcel of land where the Group’s factory buildings in Bozhou City are located. Since all land in the PRC is owned by the state or is subject to collective ownership, the risks and rewards of the parcel of land remain with the state. As a result, such lease payment is accounted for under operating lease and is charged to the income statement on a straight-line basis over the lease term of fifteen to fifty years.” 4. PROPERTY, PLANT AND EQUIPMENT Movements in property, plant and equipment for the years ended December 31, 2001 were as follows: 2001 Furniture, Machinery fixtures and Construction- and Motor office in-progress Buildings equipment vehicles equipment Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Cost Beginning of year 70,155 353,240 134,088 15,911 12,416 585,810 Additions 4,409 - - 6,884 6,502 17,795 Reclassification (63,185) 18,866 29,032 - 15,287 - Disposals - (64) (5,859) (7,003) (284) (13,210) End of year 11,379 372,042 157,261 15,792 33,921 590,395 Accumulated depreciation and impairment losses Beginning of year - 104,192 47,333 7,911 8,292 167,728 ２１ Additions - 17,393 11,878 2,393 160 31,824 Disposals - (58) (5,456) (2,456) (223) (8,193) End of year - 121,527 53,755 7,848 8,229 191,359 Net book value End of year 11,379 250,515 103,506 7,944 25,692 399,036 Beginning of year 70,155 249,048 86,755 8,000 4,124 418,082 As of December 31, 2001, property, plant and equipment with an aggregate net book value of approximately to RMB 26 million (2000: nil) have been pledged as collaterals for short-term bank loans (see Note 14). 5. INTANGIBLE ASSETS 2001 2000 RMB’000 RMB’000 Cost Trademarks 37,550 37,550 Goodwill 4,200 4,200 41,750 41,750 Accumulated amortization Trademarks 20,653 16,898 Goodwill 840 - 21,493 16,898 Net 20,257 24,852 6. LONG-TERM INVESTMENTS 2001 2000 RMB’000 RMB’000 Hua An Securities Co., Ltd. (a) 100,000 100,000 Treasury bonds - 1,695 100,000 101,695 Add: Government bonds, current portion - (1,695) 100,000 100,000 (a) The Company and other 10 investors established Hua An Securities Co., Ltd., in which the Company ２２ contributed RMB 100,000,000 for an equity interest of 5.87%. The business scope of Hua An Security Co., Ltd. includes brokerage and trading of securities. 7. INVESTMENT IN ASSOCIATES 2001 2000 RMB’000 RMB’000 Peking University & China Merchants Venture Capital Investment Co., Ltd. (a) 60,600 - Others 250 - 60,850 - (a) The Company and other 5 investors established Peking University & China Merchants Venture Capital Investment Co., Ltd. (“Peking University Venture Capital”), in which the Company contributed RMB 60,600,000 for an equity interest of 20%. The principal activities of Peking University Venture Capital are investments in high-tech industries. As of December 2001, Peking University Venture Capital has not yet commenced operation. 8. INVENTORIES 2001 2000 RMB’000 RMB’000 Raw materials & packaging materials 95,453 81,022 Work-in-process & semi-finished goods 299,290 285,833 Finished goods 85,710 161,671 Low value consumables 1,690 1,835 482,143 530,361 Less: provision for obsolescence (201) (1,072) 481,942 529,289 Ｆｏｒ ｔｈｅ ｙｅａｒ ｅｎｄｅｄ Ｄｅｃｅｍｂｅｒ ３１， ２００１， ｉｎｖｅｎｔｏｒｉｅｓ ｅｘｐｅｎｓｅｄ ｉｎ ｔｈｅ ｉｎｃｏｍｅ ｓｔａｔｅｍｅｎｔ ａｍｏｕｎｔｅｄ ｔｏ ａｐｐｒｏｘｉｍａｔｅｌｙ ＲＭＢ ４５２ ｍｉｌｌｉｏｎ （２０００： ａｐｐｒｏｘｉｍａｔｅｌｙ ＲＭＢ ４７２ ｍｉｌｌｉｏｎ）． Ｉｎｃｌｕｄｅｄ ｉｎ ｔｈｅ ｉｎｖｅｎｔｏｒｉｅｓ， ａｎ ａｍｏｕｎｔ ｏｆ ＲＭＢ １７，７００，０００ （２０００： １１，６００，０００） ｗａｓ ｓｔａｔｅｄ ａｔ ｎｅｔ ｒｅａｌｉｓａｂｌｅ ｖａｌｕｅ． 9. TRADE AND OTHER RECEIVABLES ２３ 2001 2000 RMB’000 RMB’000 Accounts receivable 141,289 136,440 Notes receivable 41,254 6,925 182,543 143,365 Less: Provision for doubtful accounts (4,219) (4,691) Trade receivables, net 178,324 138,674 Add: Other receivables, net 111,672 137,208 Trade and other receivables, net 289,996 275,882 10. SHORT-TERM INVESTMENTS 2001 2000 RMB’000 RMB’000 Treasury bonds (a) - 10,000 Trust investment (b) - 30,000 - 40,000 (a) As of December 31, 2000, the treasury bonds are registered under the name of AGGL and was held by AGGL on behalf of the Company, and bear interest at approximately 4.2% per annum. As of December 31, 2001, the cost of investment and related investment income amounting to RMB 420,000 have been received. (b) As of December 31, 2000, Beijing Winward Technology Co., Ltd., a subsidiary of the Company, entrusted funds amounting to RMB 30,000,000 to a security company (the “Trustee”) for investment purpose. The Trustee received commissions according to the performance of the investments. As of December 31, 2001, the cost of investment and related investment income amounting to RMB 1,650,000 have been received. 11. SHARE CAPITAL As of December 31, 2001, the details of share capital (par value of RMB 1 each) are as follows: 2001 2000 2001 2000 Number of Number of Amount Amount ２４ shares (‘000) shares (‘000) (RMB‘000) (RMB‘000) State-owned A shares 155,000 155,000 155,000 155,000 Publicly-owned A shares 20,000 20,000 20,000 20,000 B shares 60,000 60,000 60,000 60,000 235,000 235,000 235,000 235,000 12. RESERVES (a) Capital reserve In accordance with the articles of association, the Company shall record the following as capital reserve: (i) share premium; (ii) donations; (iii) appreciation arising from revaluation of assets; and (iv) other items in accordance with the articles of association and relevant regulations in the PRC. Capital reserve may be utilized to offset prior years’losses or for the issuance of bonus shares. As of December 31, 2001 and 2000, the capital reserve of the Company represents share premium, that is, net assets acquired from AGGL in excess of par value of state shares issued and proceeds from the issuance of A shares and B shares in excess of their par value, net of expenses relating to the listing of the shares such as underwriting commissions, organisation expenses, fees for professional advisors and promotional expenses. ２５ (b) Statutory surplus reserve fund In accordance with the Company Law of the PRC, the Company shall appropriate 10% of its annual statutory net profit (after offsetting any prior years’losses) to the statutory surplus reserve fund. When the balance of such reserve reaches 50% of the Company’s share capital, any further appropriation is optional. The statutory surplus reserve fund can be utilized to offset prior years’losses or to issue bonus shares. However, such statutory surplus reserve fund must be maintained at a minimum of 25% of share capital after such issuance. (c) Statutory public welfare fund In accordance with the articles of association, the Company is also required to allocate 5% to 10% of its annual statutory net profit to the statutory public welfare fund, which can only be used for the collective welfare of the employees of the Company. 13. TRADE AND OTHER PAYABLES 2001 2000 RMB’000 RMB’000 Accounts payable 41,021 115,103 Notes payable 660 6,108 Advances from customers 28,024 32,301 Salaries payable 48,929 62,255 Staff welfare payable (Note 17) 32,584 33,641 Accrual and other current liabilities 50,538 60,645 201,756 310,053 Movement of staff welfare benefit in 2001 is as follows: 2001 2000 RMB’000 RMB’000 Balance as of January 1, 2001 33,641 29,053 Accrual 8,751 10,846 Payment (9,808) (6,258) Balance as of December 31, 2001 32,584 33,641 14. SHORT-TERM BORROWINGS ２６ As of December 31, 2001, the Group had short-term bank loans amounting to RMB 24 million, which was secured by property, plant and equipment of the Group (see Note 4). These loans bear interest at 5.85% per annum. The duration of the loan is from November 21, 2001 to November 21, 2002. 15. FINANCE INCOME 2001 2000 RMB’000 RMB’000 Interest income from bank deposits 1,858 2,645 Interest income on balance due from AGGL (Note (22(b)) 11,144 １２，５００ Interest expense on bank loans (5,080) (7,542) 7,922 7,603 16. SUBSIDY INCOME The subsidy income in 2001 represents financial subsidy received from Bozhou Municipal Government in order to compensate the Company’s shortfall in operating results due to imposition of additional consumption tax calculated according to quantity of distilled spirit sales (Note 18(b)). The subsidy income in 2000 represents financial subsidy received from Bozhou Municipal Government in order to compensate the Company’s shortfall in operating results due to intensified competitions. 17. PROFIT BEFORE TAXATION AND MINORITY INTERESTS Profit before taxation and minority interests was determined after crediting and charging the following items: 2001 2000 RMB’000 RMB’000 Crediting: Investment income (loss) - from treasury bonds (Note 6,10) 1,204 6,833 - from disposal of a subsidiary (Note 2(c)) - (2,665) Charging: Staff costs - salaries and wages ６０，５３４ 74,567 - provision for staff welfare 8,751 10,846 ２７ - contribution to statutory pension scheme (Note 2(v)) 12,712 15,659 Amortization of intangible assets (included in administrative expenses) 4,595 ３，７５５ Depreciation of property, plant and equipment 33,045 31,997 Operating leases of plant and machinery - 104 Provision for doubtful debts 405 304 Reversal of inventory obsolescence (871) (685) Management fee (Note 22) 6,000 6,000 Interest expense 5,080 7,542 The Group provide for certain staff welfare and contributions to the statutory pension fund based on a certain percentage of gross salaries. Staff welfare consists of staff welfare benefit, housing fund, labour union fund, unemployment insurance, etc. Provisions for staff welfare are made based on the following percentages of employees’gross salaries: Percentage Staff welfare benefit 14% Housing fund 10% Labour union fund 2% Unemployment insurance 1% 18. TAXATION (a) Value-Added Tax (“VAT”) The Group is subject to VAT, which is a tax charged on top of the selling price at a general rate of 17%. An input credit is available whereby VAT previously paid on purchases of semi-finished products, raw materials, etc. can be used to offset the VAT on sales to determine the net VAT payable. (b) Sales tax The Group is subject to Consumption Tax (“CT”). CT of distilled spirit is levied on the gross turnover of products at rates of 15% or 25%. Effective May 1, 2001, distilled spirit is also subject to an additional CT at the rate of RMB 1 per kilogram of products sold. CT of wine is levied on the gross turnover of products at rate of 10%. The Group is subject to business tax (“BT”) at 3% of its transportation service revenue. In addition to the above, the Group is subject to the following types of sales tax: - City Development Tax, a tax levied at 7% of CT, BT and net VAT payable. - Education Supplementary Tax, a tax levied at 3% of CT, BT and net VAT payable. ２８ (c) Enterprise income tax (“EIT”) Except for Anhui Gujing Double Happiness Wine Co., Ltd. the Group is subject to EIT at 33% of its assessable profits. Based on the relevant authority obtained from Anhui Xiao Xian Government, Anhui Gujing Double Happiness Wine Co., Ltd. is entitled to full exemption from EIT for the first two years and a 50% reduction for the next three years, commencing from the first profitable year after offsetting all tax losses carried forward from the previous five years. As of December 31, 2001, Anhui Gujing Double Happiness Wine Co., Ltd. has accumulated loss of approximately RMB 21,447,000, for which no deferred tax assets is recognized on the balance sheet as it is not probable that sufficient taxable profits will be available against which the deferred tax assets can be utilized. Details of taxation charged during the years are as follows: 2001 2000 RMB’000 RMB’000 Current income tax 37,790 73,877 Deferred tax expense - - 37,790 73,877 Reconciliation of the effective tax rate to the applicable tax rate is as follows: ２００１ ２０００ RMB’000 RMB’000 Accounting profit before taxation and minority interests 106,273 100% 221,910 100% Tax at the tax rate of 33% 35,070 33% 73,230 33% Tax effect of income that are not taxable in determining taxable profit １０，７５４ 10% 7,247 3% Tax effect of income that are not taxable in determining taxable profit （８，０３４） (8%) (6,600) (3%) 37,790 35% 73,877 33% ２９ 19. DIVIDENDS In accordance with the articles of association, provisions of Statutory Surplus Reserve Fund and Statutory Public Welfare Fund should be based on profit after taxation determined in accordance with PRC accounting standards and financial regulations. Dividend declaration shall be determined based on the lower of the unappropriated profit determined under the accounting principles and financial regulations applicable in the PRC and that determined under IAS. Pursuant to a resolution of board of directors dated December 28, 2001, the board of directors of the Company proposed to appropriate 10% and 10% of net profit for the year ended December 31, 2001 to Statutory Surplus Reserve Fund and Statutory Public Welfare Fund, respectively, and to distribute a cash dividend of RMB 0.20 per share , which are subject to the approval by shareholders at the shareholders’meeting. Pursuant to a resolution of board of directors dated December 28, 2000, the board of directors of the Company proposed to appropriate 10% and 10% of net profit for the year ended December 31, 2000 to Statutory Surplus Reserve Fund and Statutory Public Welfare Fund, respectively, and to distribute a cash dividend of RMB 0.30 per share, which have been approved by shareholders at the shareholders’meeting. Pursuant to a resolution of board of directors dated March 28, 2000, the board of directors of the Company proposed to distribute a cash dividend of RMB 0.29 per share from net profit for the year ended December 31, 1999, which have been approved by shareholders at the shareholders’meeting. 20. EARNINGS PER SHARE The calculation of basic earnings per share was based on the profit after taxation and minority interest of approximately RMB 53,398,000 (2000: 148,369,000) divided by the number of shares outstanding during the year of 235,000,000 shares (2000: 235,000,000 shares). The diluted earnings per share was not presented because no dilutive potential ordinary shares existed during the year. 21. SUPPLEMENTARY INFORMATION TO CONSOLIDATED CASH FLOW STATEMENTS (a) Reconciliation from profit before taxation and minority interests to cash generated from operations: 2001 2000 ＲＭＢ’０００ RMB’000 CASH FLOWS FROM OPERATING ACTIVITIES: Profit before taxation and minority interests 106,273 ２２１，９１０ ３０ Adjustments for: Provision for doubtful debts 405 304 Reversal of provision for inventories obsolescence (871) (685) Depreciation of property, plant and equipment 33,045 31,997 Amortization of intangible assets 4,595 3,755 Loss on disposal of property, plant and equipment 882 603 Interest income (13,002) (15,145) Interest expenses 5,080 7,542 Operating profit before working capital changes 136,407 250,281 Increase in trade and other receivables (14,518) (93,955) Decrease (increase) in inventories 48,218 (8,919) Decrease (increase) in trade and other payables (76,174) 14,686 Cash generated from operations 93,933 162,093 (b) Analysis of the balance of cash and cash equivalents 2001 2000 RMB’000 RMB’000 Cash on hand 112 272 Bank current deposits 131,087 70,276 Bank time deposits 1,000 30,800 Total 132,199 101,348 22. RELATED PARTY TRANSACTIONS Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. (a) Name of related party and relationship Name Relationship AGGL Parent company ３１ Anhui Gujing Trading Company Subsidiary of AGGL Gujing Snow Land Brewery Co., Ltd. Subsidiary of AGGL Anhui Gujing Holiday Hotel Subsidiary of AGGL (b) Significant transactions with related parties Except as disclosed in Note 9, significant related party transactions are as follows: 2001 2000 RMB’000 RMB’000 - Interest income received from AGGL 11,144 12,500 - Payment of management fees to AGGL 6,000 6,000 The average balances of due from AGGL for the year ended December 31, 2001 was approximately RMB 173,178,000. Pursuant to an agreement, the Company charged AGGL an interest of 6.435% per annum on the above balances and has received interest income amounting to RMB 11,144,000 for the year ended December 31, 2001 (2000: RMB 12,500,000). Pursuant to an agreement, the Group should pay management fee amounting to RMB 6,000,000 annually to AGGL from January 1, 2000. As of December 31, 2001: 2001 2000 RMB’000 RMB’000 Due from related parties - AGGL - 53,942 Due to related parties - AGGL 484 - The amount due to AGGL is unsecured and have no fixed repayment date. ３２ 23. IMPACT OF IAS ADJUSTMENTS ON PROFIT AFTER TAXATION AND MINORITY INTERESTS AND NET ASSETS Profit after taxation and Minority interests Net assets 2001 2000 2001 2000 RMB’000 RMB’000 RMB’000 RMB’000 As reported in the statutory accounts of the Group 67,047 147,148 1,141,017 1,117,215 Adjustment for fixed assets depreciation 1,667 1,221 - (1,668) As restated for the Group to IAS 68,714 148,369 1,141,017 1,115,547 24. SEGMENT INFORMATION The Group conducts the majority of its business activities in one geographic and one business segment. 25. CONTINGENT LIABILITIES As of December 31, 2001, the Group had no material contingent liabilities. 26. COMMITMENTS As of December 31, 2001, the Group had the following commitments, all to be paid within 2002: (a) Management fee to AGGL amounting to RMB 6,000,000 (2000: RMB 6,000,000). (b) Advertisement fee amounting to about RMB 27,000,000 (2000: nil). (c) Lease of land amounting to about RMB 1,400,000 (2000: nil). (d) Rental of office building amounting to about RMB 900,000 (2000: nil). 27. SUBSEQUENT EVENTS There has been no significant subsequent event up to the date of this report. ３３ 28. CHANGE IN ACCOUNTING POLICY From January 1, 2001, the Group is subject to newly effective IAS 39 “Financial Instruments – Recognition and Measurement”and revised IAS 12 “Income Taxes” (Note 2). There is no significant financial impact caused from adopting these standards on the opening balances of consolidated financial statements. 29. APPROVAL OF THE FINANCIAL STATEMENTS The financial statements were approved by the board of directors on February 9, 2002. ３４