张裕Ａ(000869)张裕Ｂ2003年年度报告摘要（英文版）

Summary for 2003 Annual Report of Yantai Changyu Pioneer Wine Company Limited 1. IMPORTANCE 1.1 The Directors of the Company collectively and individually accept full responsibility for the truthfulness, accuracy and completeness of the information contained in this report and confirm that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading. If investors want to know more details, please read the whole annual report carefully. 1.2 No directors declare to have dissidence or to be unable to guarantee the truthfulness, accuracy and completeness of the information contained in this report. 1.3 All directors attended the Board of Directors. 1.4 Pricewaterhouse Coopers Zhong Tian Certified Accounts Company Limited provides the standard and correct audit opinion and report. 1.5 Mr. Sun Liqiang (the Chairman of the Company), Mr. Zhou Hongjiang (the General Manager of the Company) and Mr. Jiang Jianxun (Chief Accountant) assure the truthfulness and completeness of the financial report in the annual report. The reader is advised that this report has been prepared originally in Chinese. In the event of a conflict between this report and the original Chinese version or difference in interpretation between the versions of the report, the Chinese language report shall prevail. Unless otherwise indicated, the financial data in the Chinese version is cited from Chinese auditor’s report, while the financial data in the English version is cited from the international auditor’s report. 2. KEY COMPANY DATA OF RECORD （1）Legal Name in Chinese: 烟台张裕葡萄酿酒股份有限公司 Legal Name in English: Yantai Changyu Pioneer Wine Company Limited （2）Legal Representative: Sun Liqiang （3）Secretary to the Board of Directors: Qu Weimin Contact Address: 56 Dama Road, Yantai City, Shandong Province, the PRC Telephone: 0086-535-6633658 Facsimile: 0086-535-6633639 E-Mail: quwm@changyu.com.cn （4）Authorized Representative of the Securities Affairs: Li Tingguo Contact Address: 56 Dama Road, Yantai City, Shandong Province, the PRC Telephone: 0086-535-6633656 Facsimile: 0086-535-6633639 E-Mail: stock@changyu.com.cn （5）Registered Address: 56, Dama Road, Yantai City, Shandong Province, the PRC Office Address: 56 Dama Road, Yantai City, Shandong Province, the PRC Postal Code: 264000 Web Site: http://www.changyu.com.cn E-Mail: webmaster@changyu.com.cn 3. SUMMARY OF ACCOUNTING AND FINANCIAL INFORMATION 3.1 Summary of Financial Information for the reporting Period Unit：RMB’000 Item Amount Total Profit 245,740 Net Profit 165,292 Profits on main operations 565,411 Profits on other operations -678 Operation profit 234,480 Investment earnings 0 Subsidy income 0 Net of non-operating income and expenses 0 Net cash flows from operating activities 310,855 Net increase in cash and cash equivalents -7,713 3.2 Differences in Net Profit under the PRC Accounting Standards and International Accounting Standards The net profit of the Company in 2003 was RMB 151,253,825 as audited by Pricewaterhouse Coopers Zhong Tian Certified Accounts Company Limited according to the PRC Accounting Standards and RMB 165,291,935 after adjusted by Pricewaterhouse Coopers Zhong Tian Certified Accounts Company Limited according to the International Accounting Standards. Major differences in using the International Accounting Standards and the PRC Accounting Standards were as follows: Unit：RMB RMB Net profit as stated under the International Accounting Standards 165,291,935 Impact to the net profit as stated under the International Accounting Standards: ―― fixed assets depreciation (626,314) ―― investment benefit in short term 844,000 -- Deferred tax 13,820,424 Net profit as stated under the PRC Accounting Standards 151,253,825 2 3.3 Principal Accounting and Financial Information for the Preceding Three Years of the reporting period Unit：RMB’000 Item 2003.1-12 2002.1-12 2 001.1-12 Income on main operations 1,053,559 859,987 824,849 Net Profit 165,292 115,909 163,849 Total assets 1,983,421 1,858,898 1,669,721 Total shareholders’ equity (minor 1,433,437 shareholders’equity excluded) 1,604,951 1,491,659 Earnings per Share Overall sharing 0.53 0.37 0.63 Weighted average (RMB Yuan) Net assets value per Share (RMB Yuan) 5.14 5.74 5.51 Return on shareholders’equity (%) Overall sharing 10.30 7.77 11.43 Weighted average Net cash flows per Share from 0.996 0.526 0.20 operating activities (RMB Yuan) 4．Changes in Share Capital 4.1The share capital structure is as follows: Unit: share Amount before Change Amount after this this change (+ -) change Allot Distribute Transfer other Issue Sub new bonus capital to share additional others total share share capital share Non-listed shares 1.Promoter’ s Shares 140,000,000 28,000,000 168,000,000 including: State Shares 140,000,000 28,000,000 168,000,000 Shares held by domestic legal persons Shares held by foreign legal persons 2.Shares offered to legal persons 3.Shares offered to employees 4.Preferred Shares or others Assigned and rationed Share Total non-listed 140,000,000 28,000,000 168,000,000 Shares Listed Shares Shares listed in the 32,000,000 6,400,000 38,400,000 PRC (A Shares) Domestic Shares 88,000,000 17,600,000 105,600,000 listed (B Shares) Shares listed Overseas others Total listed shares 120,000,000 24,000,000 144,000,000 Total number of 260,000,000 52,000,000 312,000,000 Share issued 3 4.2 The respective shareholding of the top 10 shareholders of the Company were as follows: Ｎａｍｅ ｏｆ Ｓｈａｒｅｈｏｌｄｅｒｓ Ｉｎｃｒｅａｓｅ ｏｒ Ｎｕｍｂｅｒ ｏｆ Ｐｅｒｃｅｎｔａｇｅ Ｔｙｐｅ ｏｆ Ｌｉｅｎ ｏｒ ｆｒｏｚｅｎ Ｔｈｅ ｃｈａｒａｃｔｅｒ ｏｆ ｒｅｄｕｃｅ ｓｈａｒｅｓ ｈｏｌｄ （％） Ｓｈａｒｅｓ ｓｈａｒｅｓ ｔｈｅ ｓｈａｒｅｈｏｌｄｅｒｓ Ｙａｎｔａｉ Ｃｈａｎｇｙｕ Ｇｒｏｕｐ ２８，０００，０００ Ｎｏｎ－ｌｉｓｔ Ｓｔａｔｅ ｏｗｎｅｄ Ｃｏｍｐａｎｙ Ｌｉｍｉｔｅｄ １６８，０００，０００ ５３．８ ｅｄ ０ Ｓｈａｒｅｓ Ｄｅｕｔｓｃｈｅ ｂａｎｋ ａｇ Ｌｏｎｄｏｎ ３，６６３，３８５ ３，６６３，３８５ １．１７ Ｌｉｓｔｅｄ Ｂ ｓｈａｒｅｓ ０ ｓｈａｒｅｓ ＨＳＢＣ Ｃｈｉｎａ Ｍｏｍｅｎｔｕｍ ２，９９９，８８６ ２，９９９，８８６ ０．９６ Ｌｉｓｔｅｄ Ｂ ｓｈａｒｅｓ ０ Ｆｕｎｄ ｓｈａｒｅｓ Ｓｈａｎｇｈａｉ Ｈｏｎｇｋｏｎｇ ２，６２７，７１３ ２，６２７，７１３ ０．８４ Ｌｉｓｔｅｄ ０ Ｂ ｓｈａｒｅｓ Ｗａｎｇｕｏ Ｓｅｃｕｒｉｔｉｅｓ ｓｈａｒｅｓ ＮＢＰ／ＦＲＵＣＴＩＬＵＸ ＳＩＣＡＶ ２，５８８，３６４ ２，５８８，３６４ ０．８３ Ｌｉｓｔｅｄ Ｂ ｓｈａｒｅｓ ０ ｓｈａｒｅｓ ＧＴ ＰＲＣ ＦＵＮＤ ２，４９９，９８３ ２，４９９，９８３ ０．８０ Ｌｉｓｔｅｄ Ｂ ｓｈａｒｅｓ ０ ｓｈａｒｅｓ ＦＩＲＳＴ ＡＳＩＡ ＩＮＶＥＳＴＭＥＮＴＳ ３５４，５０２ ２，１２７，４９３ ０．６８ Ｌｉｓｔｅｄ Ｂ ｓｈａｒｅｓ ０ ＶＥＮＴＵＲＥＳ ＬＴＤ ｓｈａｒｅｓ ＸＩＡ ＹＵ ４１１，６９１ ２，１２０，１４８ ０．６８ Ｌｉｓｔｅｄ Ｂ ｓｈａｒｅｓ ０ ｓｈａｒｅｓ ＣＨＥＮ ＺＵ ＤＥ ３１６，３７１ １，８９８，２２７ ０．６１ Ｌｉｓｔｅｄ Ｂ ｓｈａｒｅｓ ０ ｓｈａｒｅｓ ＳＫＡＮＤＩＡ ＧＬＯＢＡＬ ＦＵＮＤＳ １，７０５，９２０ １，７０５，９２０ ０．５５ Ｌｉｓｔｅｄ Ｂ ｓｈａｒｅｓ ０ ＰＬＣ ｓｈａｒｅｓ Ｔｈｅ ｅｘｐｌａｎａｔｉｏｎ ｆｏｒ ｔｈｅ ｒｅｌａｔｉｏｎｓｈｉｐ Ｉｎ ｔｈｅ ｔｏｐ １０ ｓｈａｒｅｈｏｌｄｅｒｓ， Ｙａｎｔａｉ Ｃｈａｎｇｙｕ Ｇｒｏｕｐ Ｃｏｍｐａｎｙ Ｌｉｍｉｔｅｄ ａｎｄ ａｃｔｉｏｎ ｏｆ ｔｈｅ ｔｏｐ １０ ｓｈａｒｅｈｏｌｄｅｒｓ ｈａｓ ｎｏ ａｓｓｏｃｉａｔｅｄ ｒｅｌａｔｉｏｎｓｈｉｐ ｗｉｔｈ ｔｈｅ ｏｔｈｅｒ ９ ｌｉｓｔｅｄ ｓｈａｒｅｈｏｌｄｅｒｓ， ａｎｄ ｔｈｅ ｒｅｌａｔｉｏｎｓｈｉｐ ｂｅｔｗｅｅｎ ｔｈｅ ｏｔｈｅｒ ｓｈａｒｅｈｏｌｄｅｒｓ ｉｓ ｕｎｋｎｏｗｎ． 4.3 Brief introduction for the top 10 listed shareholders Name of the shareholders Number of shares hold The character of the shareholders DEUTSCHE BANK AG LONDON ３，６６３，３８５ B shares HSBC CHINA MOMENTUM FUND ２，９９９，８８６ B shares SHANGHAI KONGKONG WANGUO ２，６２７，７１３ B shares SECRUTIES NBP/FRUCTILUX SICAV ２，５８８，３６４ B shares GT PRC FUND ２，４９９，９８３ B shares FIRST ASIA INVESTMENTS VENTURES ２，１２７，４９３ B shares LTD XIA YU ２，１２０，１４８ B shares CHEN ZU DE １，８９８，２２７ B shares SKANDIA GLOBAL FUNDS PLC １，７０５，９２０ B shares CROWNBLE ENTERPRISES LIMITED １，６０２，６１４ B shares The explanation for the relationship and action The relationship between the top 10 listed shareholders is unknown. of the top 10 shareholders During the reporting period, the holding shareholder of the Company has not changed and still is Yantai Changyu Group Company Limited, the only legal person holding more than 5% (including 5%) of the Company’ s Shares, whose shareholder is Yantai State Assets Administrative Bureau. The Company was established in 1994, as a sole state-owned limited company, its registered capital was 50 million Yuan. The legal representative of the Group Company is Mr.Sun Li-qiang, the business scope of the Group Company includes the management and administration of authorized state assets, Chinese medicine, glass products, mineral water Chinese liquor, and canteens serving the Company’s 4 employees. During the reporting period, the number of the Company’ s Shares held by the Group Company increased 28,000,000 shares and reached 168,000,000 shares which is 53.8% of the stock share total and also was not subject to any lien or frozen or under any legal disputes. 5． DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND STAFF 5.1 The basic information of Directors, Supervisors and Senior Management NAME POST SEX AGE Term for Post Shares Shares Reason for hold at the hold at change beginning the of 2002 ends of 2002 Sun Liq-iang Chairman to the M 56 2003.9.24— 2006.09.25 0 0 Board of Directors Zhou Hong-jiang Vice-chairman to M 39 2003.9.24— 2006.09.25 0 0 the Board of Directors and general manager Fu Ming-zhi Director M 50 2003.9.24— 2006.09.25 0 0 Leng Bin Director M 41 2003.9.24— 2006.09.25 0 0 Qu Wei-min Director, M 46 2003.9.24— 2006.09.25 0 0 Vice-general manager and Secretary to the Board of Directors Li Jian-jun Vice general manager M 44 2003.9.24— 2006.09.25 0 0 Geng Zhao-lin Independent M 61 2003.9.24— 2006.09.25 0 0 Director Ju Guo-yu Independent M 57 2003.9.24— 2006.09.25 director Wang Shi-gang Independent M 38 2003.9.24— 2006.09.25 0 0 Director Zhang Hong-xia Chairman for the F 47 2001.5.24-2004.5.23 0 0 Board of supervisors Shi Shi-chun Supervisor M 39 2001.5.24-2004.5.23 0 0 Zhen Wen-ping Supervisor F 35 2003.9.24— 2004.5.23 4100 4920 Transfer other capital to share capital Yang Ming Vice-general M 45 --- 0 0 manager Li Ji-ming General Engineer M 37 --- 0 0 Jiang Hua Vice-general M 40 --- 0 0 manager Jiang Jian-xun Treasurer M 37 --- 0 0 Wang Gong-tang Counselor M 6 --- 0 0 5.2 Information of directors, supervisors who hold posts in shareholder’s company Name Name of shareholder Post in shareholder’s company Term for the post Paid by shareholder’s company or not Sun Li-qiang Yantai Changyu Group Chairman of the Board of 2003.2— 2006.2 No Company LTD Directors and general manager Zhong Hong-jiang Yantai Changyu Group Vice chairman of the Board of 2003.2— 2006.2 No Company LTD Directors Fu Ming-zhi Yantai Changyu Group Director and vice general 2003.2— 2006.2 No Company LTD manager Leng Bin Yantai Changyu Group Director and chief accountant 2003.2— 2006.2 No Company LTD Yang Ming Yantai Changyu Group Directors 2003.5— 2006.2 No Company LTD Zhang Hong-xia Yantai Changyu Group Chief of audit department Without No Company LTD 5 5.3 Annual rewards information Total annual compensation amount RMB1,370,000 Total compensation amount of the top three RMB 320,000 Directors Total compensation amount of the top three RMB 290,000 senior management Allowance for independent director 20,000 for each of 3 independent directors (tax excluded) Other subsidy for independent director No Directors or supervisors who do not get All the directors, supervisors and senior compensation or allowance from the Company management of the Company get compensation from the Company. Range of rewards Number of persons RMB 100,000 to 130,000 2 RMB 80,000 to 100,000 7 RMB 60,000 to 80,000 4 RMB 20,000 to 60,000 4 6． Report of the Board of Directors The Company is a light industrial manufacturer of which the principal business is the distilling, producing and distributing of wine, brandy, tonic wine, sparkling wine and cider using grapes and apples as materials, and its major products include dry red wine, dry white wine, XO brandy, VSOP brandy, VO Brandy, VS brandy, Tzepao Sanpien Jiu, Special Quality Sanpien Jiu, Vermouth and sparkling wine. At present, the Company’ s colligated output of wine is 80,000 tons. The Company’ s sales network covers 29 provinces and municipalities all over the country, and it has nearly one thousand salesmen. For the sales revenue, comprehensive wine sales volume and profit, the statistics from the information office of the General Association of China Light Industry shows that the Company took the first place respectively in the wine field in 2003. 6.1 Sales and Profits of Principal Business Assorted by Products Type Unit：RMB More or less More or less More or less than Principal Principal Gross Profit than last year of than last year of Product last year of the Sales Cost Ratio (%) the principal the gross profit principal sales(%) cost(%) ratio(%) Wine 637,187,381 265,411,072 58.35％ 19.44% 17.57% 1.18% Brandy 262,441,577 125,000,132 52.37% 23.70% 30.31% -4.42% Tonic Wine 80,262,857 34,076,413 57.54% 24.61% -6.11% 31.79% Sparkling Wine 73,667,218 63,660,075 13.58% 47.51% 78.72% -52.63% Total 1,053,559,033 488,147,692 － － － － Related party 无 无 无 无 无 无 transaction ６．２ Ｓales and Profits of Principal Business Assorted by Territory Distribution Unit: Unit：RMB’000 District Principal Sales More or less than last year of the principal sales(%) The coastal region 819,570 28.27% The middle region 148,120 24.94% The western region 85,870 -16.22% Total 1,053,560 22.51% 6 6.3 Major Suppliers and Clients Unit：RMB’000 Total purchases from the top 5 suppliers 84,330 Proportion of all purchases 18.3% Total products sold to the top 5 clients 157,550 Proportion of all products sold 13.9% Influences of significant changes of production and marketing environment as well as macro-policies, laws and regulations on the company Impact due to reduction of customs tariff on wine. According to the stipulations of “Section One: Table of the People’ s Republic of China for Year-on-Year Reduction of Customs Tariff (Agricultural Products)”, a law document of China’ s entry into WTO, since January 1, 2002 the import duties for wine and brandy should be lowered to 44.6% and 46.7% respectively, and to 34.4% and 37.5% in 2003 respectively, and further down to 14% (wine) and 10% (brandy) in 2005. That would be advantageous to foreign producers to export their wine and brandy to Chinese markets and in the medium and long run, make the company face sharper market competition. The company will alleviate the impact on profitability of the company due to the competition by means of the countermeasures of perfecting marketing network, trimming product structure, extending market coverage, reducing operating cost and so forth to strengthen its core competitiveness. 6.4 Investment of the Company Unit: RMB’0000 Total capital collected 61,346 Funds operation this year 3,165 All funds operation 50,943 Promissory Investment Projects Formulated Any Changes Actual Production Comply with the Investment or not Invested profit Amount plan and estimated Amount Amount amount or not ①New projects of 30,000T’s for 27,050 No 16,034 386 Middle and High grade wine Program Included: 3,650 No 2,562 unsettled Yes A.Grape growing base of 30,000 Mu B.Program for original wine 2,950 No 3,446 unsettled Yes fermentation of 10,000T’s C.Program for reforming the oak 8,300 No 3,980 unsettled No barrels and celars D.Program for producing 3,850 No 4,028 386 Yes Low-Alcohol wine with capacity of 20,000T’s E.Program for middle & high 8,300 No 2,018 0 Yes grade wine with capacity of 10,000T’s in the Western area ②The reform and enlargement for 9,125 No 9,176 4,053 Yes sales system Projects Included: 4,525 No 3,947 4,053 No A.The construction of distribution branches B.Establishment of computerized 4,600 No 5,229 unsettled Yes information managing ③Construction of technical center 1,000 No 1,015 unsettled Yes at an national level ④Establishment of wine Chateau 3,770 No 4,211 1,005 Yes ⑤distribution branches in district 4,000 No 2,100 3,834 No city coastal ⑥ Environment protection in 450 No 456 unsettled Yes Fermentation Center ⑦ Shareholder of Tiantong Fund 2,000 2,000 0 Yes Management Company Limited ⑧ Shareholder of Shenzhen 200 No 200 0 Yes Jiadeyu Information Company ⑨ Implementation of operating 15,751 No 15,751 unsettled Yes funds Total 61,346 50,943 9,278 7 6.5 Investment Situations of Non-collected Capital in the Reporting Period Name Amount Schedule Income Sino-French joint venture, Langfang USD3,000,000 Put into production RMB3,400,000 Castel-Changyu Wine Co., LTD. 6.6 Business Plan of 2004 In the new year 2004, the company will continue to concentrate on developing the Company’ s core business and maintain market share, meanwhile it will continue the investment projects outside the main business that will bring stable returns to the Company’ s long-term development. The present goal of the Company is still to continuously improve the shareholders’value through increasing the profit of each share and capital return rate. Barring unexpected situations, the Board of Directors anticipates that, with the increase of China’ s economy and average personal income level, the future wine market of China will keep in stable development. But on the other side, with the decreased customs tariffs level of imported wine, the barrier of foreign wine entering China market is reduced, leading to the fiercer competition in the domestic wine market. In order to fit in this situation and to ensure stable increase in sales income and total profit, the Company will take the following actions: (1) Greater efforts were made to win a bigger share of markets and in internal management in the principle of focusing on markets. In the new year, the company will further carry out the work of “One Layout, Four Adjustments” to optimize the market setup and rational configuration of resources. It will speed up localization of operators and distributors, perfect incentive and disciplinary mechanisms, reinforce the operational effectiveness of salesmen, accelerate the construction of network of outlets, actively explore communication and cooperation with booming sales channels such as supermarket chains franchised airport shops and so on. It will seek to increase sales in locations like hotels. It will continue tapping markets for choice wines such as “Cabernet”, “Chateau”, etc., especially making market breakthroughs for brandy, champagne and health wine. It will strive for the fast development of various kinds of alcoholic beverages in harmony with each other, and endeavor to fulfill each and every sales target preset by the company. (2) Financial supervision shall be further strengthened and various expenses shall be further rationalized for the benefits of the company. In 2004, the company shall further trim its supervisory system of budget, thoroughly practice the procedures of invitation for bid to reduce the purchasing cost of raw materials, strictly carry out the sales policy of “Cash for Spot Goods”, strengthen measures to maintain and safeguard its creditability and in managing the warehouses besides the local ones, reduce inventories and accounts receivable, enhance the efficiency of capital use, beef up control of advertisement budget, examine the outcome resulting from between investments and returns, and ensure to obtain good results. (3) Deeper reform shall be done in the labor systems, personnel and pay to vitalize the company and beef up its competitiveness. The company shall make a final touch on the scheme of “Fixed Persons for Fixed Positions and Fixed Salaries” for all of its employees in 2004, unreservedly follow the income-based distribution system of “Position-related Pay and Achievement-based Bonus”, further arouse workers’initiative and creativity, make out stricter requirements for training and appraisal of sales representatives, technicians and managerial staff, offer the important and key positions to the competent persons who stands out of other competitors to make them feel sense of responsibility and urgency, reform the appointment mechanism to managerial staff, promote the reform to fill the vacancies for medium-level and high-ranking seats by open invitations to the society in order to find exact roles, effectively set up new systems of personnel arrangement and pay, or the systems of free in and out, free up and down, floating salaries depending on individual achievements. 8 6.7 Company’s Profit Distribution Plan The net profit of 2003 was respectively RMB 165,291,935 and RMB 151,253,825 based on the audit performed by Pricewaterhouse Coopers Zhong Tian Certified Public Accountants Company Limited according to the International Financial Reporting Standards and the PRC Financial Reporting Standards. According to “Detailed Implementations Rules Concerning Domestic-listed Foreign Investment Shares of Joint Stock Limited Companies” and “the Articles of the Association of the Company”, appropriation of dividend is based on the lower of the Company’ s retained earnings as reported in the financial statement audited by certified public accountants and drawn up according to the PRC Financial Reporting Standards and that prepared under the International Financial Reporting Standards. On the basis of the net profit of RMB 151,253,825 in 2004, after allocating 10% of such amount, i.e. RMB 15,125,382 to the statutory public reserve, and 10% of such amount, i.e. RMB 15,125,383 to the statutory public welfare fund, and plus RMB 265,510,131 of the profit undistributed at the beginning of the reporting period, the amount available for distribution in 2003 was RMB 386,513,191. After deducting RMB 52,000,000 of already implemented distribution, the left undistributed profit is RMB 334,513,191. RMB 31,200,000 was proposed to be appropriated by cash dividend to shareholders of all 312,000,000 Shares on 31st December, 2003 in the ratio of RMB 1.00 for every 10 Shares (For A Share, income tax included). And at the same time, the company transferred capital reserve to 93,600,000 shares in the ratio of 3 shares for every 10 Shares, and then the total shares of the company increased to 405,600,000. The cash dividend distributed to the foreign shareholders will be paid in HK Dollars converted from RMB by the middle ratio announced by the People’ s Bank of China on the first working day after the resolution date of the General Shareholders’Meeting. The above expected plan of company’ s profit distribution and the transfer capital reserve to share capital is subject to be considered and approved by the 2003 Shareholders’Meeting. 7．Major issues On August 15, 2003, the company signed an agreement of “Agreement of Assets Transference” to transfer all the assets except for the properties such as the land-use right and workshops of its affiliated Carton Packaging Materials Company to Yantai Changyu Paper Products Co., Ltd.. As evaluated on the benchmark day of June 30, 2003 by Shandong Zhengyuan Hexin Certified Public Accountants Firm who was accredited to engage in stock business, the value of the evaluated objects of the deal was RMB3,954,500 and the transference price mutually accepted and confirmed by both parties concerned was RMB3,624,300. The duty of the independent Directors：According to the requirements of Guidance to Set Up Independent Directors System in Listed Company issued by China Securities Regulatory Commission, the Company appointed three independent directors Mr. Geng Zhaolin, Mr. Ju Guoyu and Mr. Wang Shigang during the report period, which makes the number of independent directors increased to 1/3 of the total number of directors. In this period, the two independent directors strictly carried out their own duty, attended all previous board of directors and shareholders’ meetings, provided valuable professional suggestions to the making of the great decision of the company and improved the science of the decision. At the same time, they supervised effectively the activities of the company’ s finance, production and management and showed their function on perfecting the supervise system of the company. 8．BOARD OF SUPERVISORS’REPORT 8.1 Information on meetings of the board of supervisors Four meetings of the board of supervisors were convened during the report period. The 8th meeting of the 2nd-term board of supervisors was held on March 26, 2003, on which day the five resolutions were passed, they were “2002 Year Report and Its Excerpts”, “Report on ’02 Fiscal Year Final Financial Accounts and ’03 Fiscal Year Budget”, “2002 Preliminary Plan of Profit Distribution and Preliminary Plan of Increasing Capital Stock with Public Fund of Capital Report” and “2002 Working Report of the Board of Supervisors”. 9 The 9th meeting of the 2nd-term board of supervisors was held on April 17, 2003, on which day the passed resolutions were “Proposal on Report for the 1st Quarter of 2003”, “Proposal on Mr. Wang Shiliang’ s Resignation as Supervisor of the 2nd-term Board of Supervisors”and “Proposal on Adding New Supervisor”. The 10th meeting of the 2nd-term board of supervisors was held on May 21, 2003, on which day the “Proposal on Election of Chairman of the Board of Supervisors”was passed. The 11 th meeting of the 2nd-term board of supervisors was held on August 16, 2003, on which day the passed resolutions were “Proposal on Report for Half Year of 2003 and Its Excerpts”, “Proposal on Half-year Profit Distribution of 2003”, “Proposal on Selling Partial Assets of Carton Packaging Materials Company” and “Proposal on Temporary Buying Huaxia Return Fund with Partial Idle Self-owned Capital”. 8.2 Independent comments of the board of supervisors on relevant issues 2003 During the report period, the board of supervisors of the company conscientiously performed its duties, was active in its work, attended several meetings of the board of directors as non-voter, carried out a series of supervisory and checking activities in the company’ s operations, financial condition, interrelated transactions, use of raised capital, etc.. The following comments are hereto written out after careful studies: (A) Information of legal operation: During the report period, the directors and senior managerial staff of the company were honest and dedicated to their work, abided by laws and rules, could conscientiously execute the resolutions of the shareholders’meetings and the decisions of the board of directors, followed the national laws, rules and the company-made regulations while performing their duties, safeguarded the interests of both the company and all shareholders, and were found no conducts and behaviors against laws, rules, the company-made regulations or of infringements upon the interests of the company. (B) Information of examination of financial activities: During the report period, various expenses were generally reasonable and acceptable, the special funds withdrawn for future use were in accordance with the relevant laws, rules and the in-house regulations, the financial structure was good and the quality of assets was excellent. Pricewaterhouse Coopers Zhong Tian Certified Public Accountants Company Limited audited the financial statements ’03 fiscal year according to International Accounting Criteria and Chinese Accounting Regulations respectively. (C) During the report period, the company had no conduct of raising capital except the one occurred in October 2000 when the company issued 32,000,000 shares of RMB-denominated common stock and the capital raised thereof was actually invested in the promised projects which were in conformity with those as written in the “Booklet of Directions on Stock Issuance”, and the said capital was not used for any other projects. The projects that have been put into operation have generated satisfactory investment cost recovery. (D) No conducts of underground deals and infringements upon shareholders’interests or of making the losses of corporate assets were found. (4) Impartiality of interrelated transactions: The interrelated transactions occurred during the report period were carried out strictly in the light of the relevant State stipulations and with complete formalities and on the basis of impartial transaction, which were all for the good of the company and shareholders. The board of supervisors thinks that during the report period, the board of directors and managerial circle were closely united together and in smooth coordination to do the initiative and efficient work and made greater successes. And meanwhile, the board of supervisors hereby suggests that in the new year, the company should stick to the concept of focusing on markets, make more efforts to exploit markets, increasingly reinforce the core competitiveness, try its best to fulfill the yearly targets preset by the board of directors, and push the company ahead in a sustainable, steady and healthy way. 10 9. Financial report We have audited the accompanying consolidated balance sheet of Yantai Changyu Pioneer Wine Company Limited (the “Company”) and its subsidiaries (the “Group”) as of 31 December 2003 and the related consolidated income statement and cash flow statement for the year then ended. These consolidated financial statements set out on pages 2 to 35 are the responsibility of the Company’ 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 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 present fairly in all material respects the consolidated financial position of the Group as of 31 December 2003 and of the results of its consolidated operations and cash flows of the Group for the year then ended in accordance with International Financial Reporting Standards. 7 April 2004 11 YANTAI CHANGYU PIONEER WINE COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in Renminbi (“RMB”) thousands, except for earnings per share) Note 2003 2002 RMB’ 000 RMB’ 000 Sales, net 1,053,559 859,987 Cost of sales (488,148) (393,577) Gross profit 565,411 466,410 Distribution costs (235,768) (206,620) Administrative expenses (94,485) (78,576) Other operating expenses, net 3 (678) (3,818) Profit from operations 234,480 177,396 Finance income, net 4 11,260 7,455 Profit before tax and minority interest 6 245,740 184,851 Income tax expense 7 (80,067) (68,099) Profit before minority interest 165,673 116,752 Minority interest (381) (843) Net profit 165,292 115,909 Earnings per share - Basic and diluted 8 RMB0.53 RMB0.37 12 YANTAI CHANGYU PIONEER WINE COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF 31 DECEMBER 2003 (All amounts in RMB thousands) Note 2003 2002 RMB’ 000 RMB’ 000 ASSETS Non-current assets Leasehold land, net 9 15,314 15,792 Property, plant and equipment 10 486,754 535,520 Investment in associate 12 - 703 Available-for-sale investment 13 2,000 2,000 Other non-current assets 14 20,000 - Deferred tax assets 15 21,291 9,097 545,359 563,112 Current assets Inventories 16 340,925 380,027 Trade receivables, net 17 105,326 128,073 Prepayments and other receivables, net 18 27,542 60,739 Due from related party 30 35,800 56,446 Trading investment 19 20,844 - Held-to-maturity investment with maturity within 12 months 20 15,000 - Bank deposits with maturity over 3 months 478,193 248,356 Cash and cash equivalents 21 414,432 422,145 1,438,062 1,295,786 Total assets 1,983,421 1,858,898 EQUITY AND LIABILITIES Shareholders’equity Share capital 22 312,000 260,000 Reserves 23 1,292,951 1,231,659 I. II. 1,604,951 1,491,659 Minority interests 27,694 27,313 Non-current liabilities Deferred tax liabilities 15 15,603 17,229 Current liabilities Short-term bank borrowings 24 2,652 - Trade payables 109,612 146,216 Other payables and accrued liabilities 25 114,535 123,439 Salaries payable 51,992 46,047 Taxes payable 56,382 6,995 335,173 322,697 Total equity and liabilities 1,983,421 1,858,898 13 YANTAI CHANGYU PIONEER WINE COMPANY LIMITED AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’EQUITY FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands) Reserves Statutory Statutory Share Capital Fair value surplus public Retained Note capital reserve reserve reserve fund welfare fund earnings Total Total RMB’ 000 RMB’ 000 RMB’ 000 RMB’ 000 RMB’ 000 RMB’ 000 RMB’ 000 RMB’ 000 Balance at 1 January 2002 260,000 817,169 - 47,880 47,879 260,509 1,173,437 1,433,437 Dividend relating to 2001 27 - - - - - (65,000) (65,000) (65,000) Revaluation reserve 10 - - 7,313 - - - 7,313 7,313 Net profit for the year - - - - - 115,909 115,909 115,909 Appropriation from retained profits 23 - - - 11,124 11,124 (22,248) - - Balance at 31 December 2002 260,000 817,169 7,313 59,004 59,003 289,170 1,231,659 1,491,659 Dividend relating to 2002 27 - - - - - (52,000) (52,000) (52,000) Net profit for the year - - - - - 165,292 165,292 165,292 Appropriation from capital reserve 22 52,000 (52,000) - - - - (52,000) - Appropriation from retained profits 23 - - - 15,125 15,125 (30,250) - - Balance at 31 December 2003 312,000 765,169 7,313 74,129 74,128 372,212 1,292,951 1,604,951 14 YANTAI CHANGYU PIONEER WINE COMPANY LIMITED AND ITS SUBSIDARIES CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2003 (All amounts in RMB thousands) Note 2003 2002 RMB’ 000 RMB’ 000 CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations 28 384,457 216,928 Income tax paid (73,602) (80,292) Net cash generated from operating activities 310,855 136,636 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of leasehold land (35) (9,538) Purchase of property, plant and equipment (19,085) (204,009) Increase in bank deposits with maturity over 3 months (229,837) (14,545) Increase in investments and other non-current assets (55,000) - Dividends received 396 - Proceeds from sale of current held-to-maturity investment 2,670 - Proceeds from disposals of property, plant and equipment 19,246 19,862 Disposal of a production unit 29 3,624 - Interest received 8,803 7,681 Net cash used in investing activities (269,218) (200,549) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term bank 2,650 - borrowings Capital injections of minority interests - 24,815 Dividends paid (52,000) (65,000) Net cash used in financing activities (49,350) (40,185) Net decrease in cash and cash equivalents (7,713) (104,098) Cash and cash equivalents at beginning of year 422,145 526,243 Cash and cash equivalents at end of year 414,432 422,145 Yantai Changyu Pioneer Wine Company Limited Board of Directors Dated 13th, April, 2004 15