张裕Ａ(000869)2004年年度报告摘要（英文版）

Code of Shares: 000869, 200869 Abbreviation of Shares: Changyu A, Changyu B Announcement Number: Ding2005-001 Summary for 2004 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 The directors who were absent from meeting of board of directors Name of Directors Reasons for Their Absence Name of Their Delegates Mr.Sun Li-qiang, participation in the NPC 3rd Conference Mr.. Zhou Hong-jiang,the vice the chairman chairman Mr. Geng Zhao-lin, Participation in activity of keeping Party member’s Mr.Wang Shi-gang, independent the dependent progress organized by the Federation of Chinese Light director director Industry Mr. Fu Ming-zhi, Out of Yantai city for business trip Mr. Leng Bin, director the dependent director 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 2.1 Basic Information Abbreviation of Shares Changyu A, Changyu B Code of Shares 000869 for A share, 200869 for B share Shares Listing Place Shenzhen Stock Exchange Registered Address and 56 Dama Road, Yantai, Shandong Province Office Address Postal Code 264000 for registered address and office address Web Site http://www.changyu.com.cn E-Mail webmaster@changyu.com.cn 2.2 Contact Information Secretary to Board of Directors Representative of Securities Affairs Name Mr. Qu Weimin Mr. Li Tingguo Contact Address 56 Dama Road, Yantai, Shandong Province 56 Dama Road, Yantai, Shandong Province Telephone 0086-535-6633658 0086-535-6633656 Fax 0086-535-6633639 0086-535-6633639 E-mail quwm@changyu.com.cn stock@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 294,859 Net Profit 183,651 Profits on main operations 745,956 Profits on other operations 9,843 Operation profit 294,859 Investment earnings - Net cash flows from operating activities 375,091 Net increase in cash and cash equivalents 305,698 3.2 rincipal Accounting and Financial Information for the Preceding Three Years by the End of Reporting Period Unit：RMB’000 Item 2004.1-12 2003.1-12 2 002.1-12 Income on main operations 1,237,307 1,053,559 859,987 Net Profit 183,651 165,673 115,909 Total assets 2,188,454 1,983,421 1,858,898 Total shareholders’equity (minor shareholders’equity excluded) 1,757,009 1,604,951 1,491,659 Earnings per Share Overall (Overall sharing) 0.45 0.53 0.37 Net assets value per Share 4.33 5.14 5.74 Rate of return of net assets (Overall sharing) 10.45 10.30 7.77 Net cash flows per Share from operating activities 0.92 0.996 0.526 3.3 Differences in Net Profit under the PRC Accounting Standards and International Accounting Standards The net profit of the Company in 2004 was RMB 204,127,784 as audited by Pricewaterhouse Coopers Zhong Tian Certified Accounts Company Limited according to the PRC Accounting Standards and RMB 183,259,058 after adjusted by Pricewaterhouse Coopers Zhong Tian Certified Accounts Company Limited according to the International Accounting Standards. Major differences were as follows: 2 Net profit for the year Net assets as of ended 31 December 31 December 2004 2003 2004 2003 RMB’000 RMB’000 RMB’000 RMB’000 As reported in the Group’ s statutory accounts 204,519 151,635 1,776,897 1,594,966 Impact of adjustments, net - adjustment on administrative expenses using accrual basis (20,857) - - 20,857 - revaluation surplus on property, plant and equipment - - 7,313 7,313 - depreciation of revaluation surplus on property, plant and equipment (626) (626) (1,252) (626) - fair value gain on financial assets at fair value through profit or loss (844) 844 - 844 - deferred taxes 1,459 13,820 10,749 9,291 As restated in accordance with IFRS 183,651 165,673 1,793,707 1,632,645 4. CHANGES IN SHARE CAPITAL AND SUBSTANTIAL SHAREHOLDERS 4.1 Changes in Share Capital Unit: share Amount before Change (+ -) Amount after this change Allot Distribute Transfer other Issue this change Sub new bonus capital to share additional others total share share capital share Non-listed shares 1.Promoter’ s Shares including: 168,000,000 50,400,000 218,400,000 State Shares 168,000,000 50,400,000 218,400,000 Shares held by domestic legal persons Shares held by foreign legal persons others 2.Shares offered to legal persons 3.Shares offered to employees 4.Preferred Shares or others Assigned and rationed Share Total non-listed Shares 168,000,000 50,400,000 218,400,000 Listed Shares １.Shares listed in the PRC 38,400,00 11,520,000 49,920,000 (A Shares) ２.Domestic Shares listed 105,600,000 31,680,000 137,280,000 (B Shares) ３.Shares listed Overseas 4.Others Total listed shares 144,000,000 43,200,000 187,200,000 Total number of Share issued 312,000,000 93,600,000 405,600,000 4.2 The respective shareholding of the top 10 shareholders of the Company were as follows: Name of Shareholders Increase or Shares held by Percentage Type of Lien or frozen The character of reduce in 2004 end of 2004 (%) Shares shares the shareholders Yantai Changyu Group ５０，４００，０００ 218,400,000 53.85 Non-listed ０ State owned Company Limited Shares Guotai Junan Securies ７，９４０，０４０ ７，９４０，０４０ 1.96 Listed shares ０ B shares Hong kong Limited HTHK-VALUE ６，１７７，９５３ ６，１７７，９５３ 1.52 Listed shares ０ B shares PARTNERS INTELLIGENT FD-CHINA B SHS FD 3 FD-CHINA B SHS FD QIAO XIAOHUI ４，８８９，３２３ 4,889,323 1.21 Listed shares ０ B shares HSBC CHINA ８９９，９６６ 3,899,852 0.96 Listed shares ０ B shares MOMENTUM FUND NBP/FRUCTILUX ９８１，６５６ 3,570,020 0.88 Listed shares ０ B shares SICAV SKANDIA GLOBAL １，６２５，７７６ 3,331,696 0.82 Listed shares ０ B shares FUNDS PLC ZHONGRONG ３，３１３，３６５ ３，３１３，３６５ 0.82 Listed shares ０ A shares JINGQI SECRUTIES INVESTMENT FUND GT PRC FUND ７４９，９９５ 3,249,978 0.80 Listed shares ０ B shares FIRST ASIA ６３９，７６８ ２，７６７，２６１ 0.68 Listed shares ０ B shares INVESTMENTS VENTURES LTD Name of the shareholders Number of shares hold The character of the shareholders GUOTAI JUNAN SECURIES HONGKONG B shares LIMITED ７，９４０，０４０ HTHK-VALUE PARTNERS INTELLIGENT B shares FD-CHINA B SHS FD ６，１７７，９５３ QIAO XIAOHUI ４，８８９，３２３ B shares HSBC CHINA MOMENTUM FUND ３，８９９，８５２ B shares NBP/FRUCTILUX SICAV ３，５７０，０２０ B shares SKANDIA GLOBAL FUNDS PLC ３，３３１，６９６ B shares ZHONGRONG JINGQI SECRUTIES ３，３１３，３６５ A shares INVESTMENT FUND GT PRC FUND ３，２４９，９７８ B shares FIRST ASIA INVESTMENTS VENTURES LTD ２，７６７，２６１ B shares JIASHI INCREASING & OPENNING SECURITES A shares INVESTMENT FUNDS ２，７２８，６５９ The explanation for the relationship and accordant The relationship between the top 10 listed shareholders is unknown. action of the top 10 shareholders 4.3 Holding shareholders introduction 4.3.1 Holding shareholders and actual holders introduction During the reporting period, the holding shareholder of the Company has not changed and still is Yantai Changyu Group Company Limited （ hereinafter called Changyu Group ） , the only shareholder holding more than 5% (including 5%) of the Company’s Shares. The shareholder of Changyu Group is Yantai State-owned Assets Supervison and Administration Commission (hereafter called YSASAC). Changyu Company was established in 1994, as a sole state-owned limited company with registered capital of 50 million Yuan. The legal representative is Mr.Sun Li-qiang, and the business scope includes the production and distribution of wine, distilled liquor, tonic wine, drinks, planting of farm products, and export business within permission scope. In accordance with the approval of Yantai Municipal People’s Government, YSASAC, in August 2004, assigned its 45% of the state property rights of Changyu Group to Yantai Yuhua Investment & Development Co., Ltd., which was established with the capital of Changyu Group and from its employees, and completed the alteration procedures on industry and commerce registration on October 29, 2004. After the completion of the above transfer, YSASAC still holds 55% of stock equity of Changyu Group, and is the holding shareholder of the Company. The relevant information concerning this transfer on property right was disclosed by the Company in “China Securities”, Securities Times”and “Hongkong Business News”on November 2nd , 2004. During the reporting period, after conversion of public capital fund to equivalent shares, the number of the Company’s Shares held by the Changyu Group increased by 50，400，000 shares and reached 218，400，000 shares, which covered 53.85% of the total stock share and also was not subject to any lien or frozen or under any legal disputes. 4 4.3.2 Introduction for property right and control relations between the Company and its actual controllers 14 senior managerial staff of 12 department managers of Changyu Group changyu group 64％ 36％ Zhongcheng Entrust & Investment Yantai Yusheng Investment & 46 common employees of Changyu Co., Ltd Development Co., Ltd group 45％ 17.22％ 37.78％ Yantai Yuhua Investment & Development Co., Ltd YSASAC ４５％ 55％ Shareholders of listed Shareholders of listed A share Changyu group B share 12.30％ 53.85％ 33.85％ The Company 5 DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND STAFF 5.1 The Basic Information of Directors, Supervisors and Senior Management (1) Basic information of Directors NAME POST SEX AGE Term for Post Shares Shares Reason for hold at the hold at the change beginning ends of of 2004 2004 Sun Liq-iang Chairman to the M 57 2003.09.24— 2006.09.25 0 0 Board of Directors Zhou Hong-jiang Vice-chairman to M 40 2003.09.24— 2006.09.25 0 0 the Board of Directors and general manager Fu Ming-zhi Director M 51 2003.09.24— 2006.09.25 0 0 Leng Bin Director M 42 2003.09.24— 2006.09.25 0 0 Qu Wei-min Director, M 47 2003.09.24— 2006.09.25 0 0 Vice-general manager and Secretary to the Board of Directors Li Jian-jun Director M 45 2003.09.24— 2006.09.25 0 0 Vice general manager Geng Zhao-lin Independent M 62 2003.09.24— 2006.09.25 0 0 Director Ju Guo-yu Independent M 58 2003.09.24— 2006.09.25 director Wang Shi-gang Independent M 39 2003.09.24— 2006.09.25 0 0 Director Zhang Hong-xia Chairman for the F 48 2004.05.21— 2007.05.20 0 0 Board of supervisors 5 Shi Shi-chun Supervisor from M 40 2004.05.21— 2007.05.20 0 0 staff Zheng Wen-ping Supervisor F 36 2004.05.21— 2007.05.20 4920 6396 Transfer other capital to share capital Zhou Hong-jiang Vice-chairman to M 40 2003.09.24— 2006.09.25 0 0 the Board of Directors and general manager Qu Wei-min Director, M 47 2003.09.24— 2006.09.25 0 0 Vice-general manager and Secretary to the Board of Directors Li Jian-jun Director M 45 2003.09.24— 2006.09.25 0 0 Vice general manager Yang Ming Vice-general M 46 --- 0 0 manager Li Ji-ming General Engineer M 38 --- 0 0 Jiang Hua Vice-general M 41 --- 0 0 manager Jiang Jian-xun Treasurer M 38 --- 0 0 Wang Gong-tang Counselor M 65 --- 0 0 5.2 Information of directors and 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 Changyu Group Chairman of the Board of 2003.2— 2006.2 No Directors and general manager Zhong Hong-jiang Changyu Group Vice chairman of the Board of 2003.2— 2006.2 No Directors Fu Ming-zhi Changyu Group Director and vice general 2003.2— 2006.2 No manager Leng Bin Changyu Group Director and chief accountant 2003.2— 2006.2 No Yang Ming Changyu Group Directors 2003.5— 2006.2 No Zhang Hong-xia Changyu Group Chief of audit department Without No 5.3 Annual Rewards Information for Directors, Supervisors and Senior Management Total annual reward RMB1,840,000 Total annual reward of the top three Directors RMB 540,000 Total annual reward of the top three senior RMB 510,000 management Allowance to independent director RMB20,000 for every independent (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 except three independent directors. Range of rewards Number of persons RMB 200,000 to 300,000 2 RMB 120,000 to 200,000 7 RMB 60,000 to 11,000 3 RMB 30,000 to 60,000 2 6 BOARD OF DIRECTIOR’ S REPORT 6.1 Business Condition During Reporting Period The Company is a light industrial manufacturer of which the principal business is the distilling, producing and distributing of wine, brandy, sparkling wine tonic wine using grapes as materials, and its major products include dry red wine, dry white wine, XO brandy, VSOP brandy, VO 6 Brandy, VS brandy, Tzepao Sanpien Jiu, Special Quality Sanpien Jiu, Vermouth and sparkling wine. At present, the colligated output of wine, brandy, tonic wine and sparkling wine of the Company is 80,000 tons. The sales network covers 29 provinces and municipalities all over the country, and the Company has more than 1,500 salesmen and 1,600 franchisers. 6.2 Sales and Profits of Principal Business Assorted by Products Type Unit：RMB More or less More or less More or less Gross Principal Principal than last year of than last year of than last year of Product Profit Ratio Sales Cost the principal the principal the gross profit (%) sales(%) cost(%) ratio(%) Wine 854,162,031 316,361,205 62.96 34.05 19.20 7.90 Brandy 278,166,793 121,260,470 56.41 5.99 -2.99 7.71 Tonic Wine 90,674,287 42,423,648 53.21 12.97 24.50 -7.53 Sparkling Wine 14,303,438 11,305,988 20.96 -80.58 -82.24 54.34 Total 1,237,306,549 471,351,311 - - - - Related party None None None None None None transaction ６．３ Ｓales and Profits of Principal Business Assorted by Territory Distribution Unit：RMB’0000 District Principal Sales More or less than last year of the principal sales(%) coastal regions 101,673 24.83 middle regions 15,014 1.97 western regions 7,044 -17.44 Total 123,731 18.17 6.4 Major Suppliers and Clients Unit：RMB’000 Total purchases from the top 5 suppliers 65,450 Proportion of all purchases 20.50% Total products sold to the top 5 clients 147,980 Proportion of all products sold 11.06% 6.5 The Major Holding and Sharing Company Registered Sharing Business Major Products Assets Net Profit Company Name Capital Ratio Scope or Services (RMB’000) (RMB’000) (USD’000) To research, Yantai Dry red wine, dry produce and Changyu-Castle white wine and 70% sell wine and 5000 98,037.8 25,157,9 Wine Chateau Co., sparking wine of sparkling LTD. Changyu-Castle wine Longfang Castel-ChangyuWine To produce Dry red wine, 49% 3000 39,320,4 5,743.6 Company, and sell wine Dry white wine LTD. To produce Yantai Kylin Cork, aluminum and sell Packaging Co., 50% cap, PVC capsule 1000 27,745,7 801.8 packaging LTD. and so on. material 6.6 Influence by production enviroment and policy, regulations to 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, the import tariff for wine and brandy in 2005 has been reduced to the bottom as 14% and 10% respectively. That would be advantageous for foreign wine and brandy to launch into Chinese markets, and in the medium and long run, make the Company face sharper market competition. The Company will strengthen its core competitive ability so as to alleviate the impact on profitability due to the competition by 7 means of countermeasures of perfecting marketing network, trimming product structure, extending market coverage, reducing operating cost . 6.7 Investment of the Company (1)The Uses of the Proceeds Collected in the Reporting Period The Company made a public offering of 32 million A Shares for capital increase in October of 2000, and received net proceeds of RMB 613.46 million. The Company invested in those projects as disclosed in the Prospectus, and put all projects undertaken into production by the end of 2002(refer to Investment in Report of Board of Directors in 2002 and 2003 Annual Report). To the end of reporting period, RMB 551,550,000 had been invested, including RMB 40,810,000 invested in the current reporting period, RMB 9,160,000 or 28.9% more than that of the last year. And the un-invested fund of RMB 63,310,000 is on deposit in the Company’s bank. Among the undertaken projects, except those for perfecting the middle process of production and sales could not confirm the proceeds rationally, other projects on production had received good proceeds already. During the reporting period, the additional investment in the underkaen projects and the progress of the unfinished projects went as follows: ①Establishment of distribution companies. During the reporting period, to adapt itself to market conditions, the Company invested additional RMB 14.38 million in acquiring office buildings and fixed facilities in 12 cities including Beijing, Tianjin, Shanghai, Guangzhou etc. Offices and facilities have already been put into use in all the said cities except in Shanghai and Hangzhou. The promised investment in this project was RMB 45.25 million and the accumulated investment up to now is RMB 53.85 million. ②Establishment of distribution companies in coastal cities. During the reporting period, the Company invested additional RMB 26.43 million in acquiring office buildings and fixed facilities in 24 coastal cities including Langfang, Dalian and all the offices and facilities were put into use during the reporting period. The promised investment in this project was RMB 40 million and the accumulated investment up to now is RMB 47.43 million. ③The project of investment in Tiantong Funds Management Co., Ltd. to become a shareholder. It was a new investment project with the capital raised from additional issuance of Stock A, which was approved by 2002 Shareholders’Meeting. By the end of the reporting period, the Company had invested all RMB 20 million in Tiantong Funds Management Co., Ltd., accounting for about 20% of the stock equity of Tiantong Co. and presently, the investment is undergoing the necessary formalities. (2) Investment with Non-collected Capital Investment to Huaxia Return Fund. According to the resolution of 17th meeting of 2nd –term board of directors held on August 16th ,2003 , the Company purchased 20,000,000 shares of Huaxia Return Fund by idle capital (RMB1.00 per share). The Company has redeemed all 20,000,000 shares on November 1st ,2004 gaining total investment return of RMB2,376,000 with the investment return rate as 11.2%, among which RMB1,980,000 was counted as income during the reporting period. 6.8 Business Plan of 2005 In the year 2005, the Company will insist on concentration of development for 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. In the year 2005, the Board of Directors anticipates that, with the continued and fast development of China’s economy, increase for average personal income level and change for consuming idea, the future market of wine, brandy and tonic wine in China will keep in stable and fast development. Especially for the enlarging of market capability, increasing of competition level, the quality of Chinese wine market will be improved, and the Company will benefit from that situation. But on the other side, while the customs tariffs of wine and brandy decreased to the bottom, the industry yield of Chinese wine market is rather considerable, more foreign wines and domestic enterprises will enter into Chinese market, and lead to the fiercer competition in the future. In order to fit in this situation and to ensure stable increase in sales income and total profit, 8 the Company will take the following actions: （1）Continuation of the policy of centering around the market and making greater efforts to exploit more markets and keeping those markets occupied firmly. More work shall be done of construction of two forces or sales force and distribution force and of strengthening their teamwork. An appraisal system of “putting profit-making first” shall be set up to effectively balance the relation of investment and return in order to make profits to the maximum. The market expansion in 11 key cities like Beijing, Shanghai, Shenzhen shall be listed on top agenda and the existing market size shall be further extended. Efforts shall emphasize product restructuring to have a rational setup of production and sales of different wine. Especially to increase the market share of choice wine and top-class wine, to increase the market sales of brandy, tonic wine and sparkling wine, and to spread the influence of the proprietary brands like “Linqiu”and “Vermouth”in order to meet the needs of different consumers. （2）Deeper reform shall be done of the systems of labor, personnel and pay, and a responsibility-bound mechanism shall be implemented to the management at all levels. The laid-off training program shall be continuously used to enrich the employees’knowledge in operation and vocational skills and to strengthen their sense of responsibility and devotion and consequently to vitalize the Company and beef up its competitive edge. （3）The internal controlling rules and regulations shall be further amended and more pragmatic, the internal governance with the emphasis laid on the financial supervision shall be strengthened. Automation and information system shall be upgraded to a new level, the consumption quotas shall be set in all procedures throughout production lines, the rational pricing system shall be set up, the modernization of financial management means shall be directed to a faster track, the auditing supervision shall be strengthened, the regulations on bidding procedures shall be perfected, and the supervision of purchasing program shall be strictly carried out to achieve maximum reductions to expenses and cost. （4）Optimizing the grape varieties and enlarging the production capability of medium-class and high-quality wine. In 2005, the Company shall improve vineyard management, adhere to the development mode of growing base or combination of self-owned base and suppliers’bases, continue optimizing the structure of grape varieties and in supplying sufficient raw materials for expanded production of “choice wine”and “choice brandy”to generate more of the Company’s higher profit products. 6.9 2004 Preliminary Plan on Profit Distribution of the Company In accordance with the regulation that the lower net profit from PRC Accounting Standards and International Accounting Standards shall be the upper limit for distribution, the profits available to distribute to the shareholders in this year is RMB538,640,975 based on RMB204,127,784 as net profit achieved in the reporting period, plus RMB334,513,191 as the retained earnings at the beginning of 2004. Deduct 10% or RMB20,412,779 and 10% or RMB20,412,778 of the total net profits as statutory accumulation fund and statutory commonweal fund respectively, also deduct RMB31,200,000 as cash dividends distributed for 2003, the retained earnings so far for the reporting period is RMB 466,615,778. The board of directors suggested to have distribution plan for 2004 as that RMB 202,800,000 as cash dividend is proposed to distribute to all shareholders of all 405,600,000 Shares on 31st December, 2004 in the ratio of RMB 5.00 to every 10 Shares (For A Share, income tax included). The cas h dividend distributed to the foreign shareholders(B share) 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 2004 Shareholders’Meeting. The above preliminary plan of Company’s profit distribution is subject to be deliberated and approved by the 2004 Shareholders’Meeting. 7 Major Issues 7.1 The Company had no major lawsuit and arbitration during the reporting period. 7.2 The Company had no acquisition and sales of assets, or any merger during the 9 reporting period. 7.3 Material Interrelated Transactions 7.3.1 During the reporting period, there were no trust, contract, or lease the assets between the Company and other companies. 7.3.2 Major Guarantees During the reporting period, the Company impawned RMB45,000,000 of fixed deposit to bank and offered guarantee for its holding shareholder to get RMB40,000,000 of short-term bank borrowing, while the holding shareholder offered anti-guarantee for the Company with equivalent assets. The holding shareholder repaid RMB40,000,000 as short-term bank borrowing under guarantee from RMB450,000,000 of fixes deposit by the Company in January 2005. The Company’s responsibility on this guarantee has been released, and there is no any loss to the Company. During the reporting period, there was no guarantee by the Company to its subsidiaries. By the end of reporting period, the balance for guarantee to its subsidiaries by the Company is RMB zero. During the reporting period, RMB46,580,000 of the Company was used by its holding shareholder and that fund will be prepaid by the end of March, 2005. The Company did not supply directly or indirectly any funds to other interrelated parties for usage. 7.4 Commitment on capital During the reporting period, the Company entrusted Guohai Securities Co., Ltd. to buy government bonds with its own money RMB 50 million for the period between April 20th and November 25th , 2004. By the end of reporting period, the Company had received RMB 34,920,000 of the entrusted principle of fund in cash. The remaining amount of RMB15,080,000was received on February 1st, 2005. Currently the principal of RMB 50,000,000 has been retained, and the two parties concerned are discussing the distribution of earnings yielded set by agreement. 7.5 Events Undertook by the Company The Company and its shareholders with 5% or more shares of the total had made no any promises during the reporting period, and no previous promises had been extended to the reporting period. 7.6 During the reporting period, the Company, the board of directors and all directors themselves had got no any administrative punishments, circulating criticism of the related supervisory departments, and public condemnation. 8 BOARD OF SUPERVISORS’REPORT 8.1 Independent Comments of the Board of Supervisors on Relevant Issues in 2004 During the reporting 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 independent comments are hereto written out after careful studies: （1）Information of legal operation: During the reporting 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. （2）Information of examination of financial activities: During the reporting 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 10 Accountants Company Limited audited the 2004 financial statements according to International Accounting Criteria and Chinese Accounting Regulations respectively. （3）During the reporting 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. （4）No conducts of underground deals and infringements upon shareholders’interests or of making the losses of corporate assets were found. （5）Impartiality of interrelated transactions: The interrelated transactions occurred during the reporting 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 reporting 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. 9 Financial Report 9.1 Audit opinion Unqualified opinion 11 9.2 CONSOLIDATED BALANCE SHEET (All amounts in Renminbi (“RMB”)) As of 31 December Note 2004 2003 RMB’ 000 RMB’ 000 ASSETS Non-current assets Leasehold land, net 5 14,882 15,314 Property, plant and equipment 6 483,525 486,754 Investment in associate 8 - - Held-to-maturity investment 9 15,000 - Available-for-sale financial assets 10 2,000 2,000 Deferred tax assets 19 13,271 21,291 Other non-current assets 11 20,000 20,000 548,678 545,359 Current assets Inventories 12 419,520 340,925 Trade receivables 13 58,972 105,326 Prepayments and other receivables 14 37,829 27,542 Due from related party 28 46,579 35,800 Financial assets at fair value through profit or loss 15 15,089 20,844 Held-to-maturity investment with maturity within 12 months - 15,000 Bank deposits with maturity over 3 months and restricted cash 347,107 483,643 Cash and cash equivalents 16 714,680 408,982 1,639,776 1,438,062 Total assets 2,188,454 1,983,421 EQUITY Capital and reserves attributable to the Company’ s equity holders Share capital 17 405,600 312,000 Other reserves 867,964 920,739 Retained earnings 483,445 372,212 I. II. 1,757,009 1,604,951 Minority interests 36,698 27,694 III. IV. Total equity 1,793,707 1,632,645 LIABILITIES Non-current liabilities Deferred tax liabilities 19 6,124 15,603 Current liabilities Short-term bank borrowings - 2,652 Trade payables 100,308 109,612 Other payables and accrued liabilities 20 139,671 114,535 Salaries payable 77,413 51,992 Taxes payable 71,231 56,382 388,623 335,173 Total liabilities 394,747 350,776 Total equity and liabilities 2,188,454 1,983,421 12 9.2 CONSOLIDATED INCOME STATEMENT (All amounts in RMB) Note 2004 2003 RMB’ 000 RMB’ 000 Revenue - net 1,237,307 1,053,559 Cost of goods sold (491,351) (488,148) Gross profit 745,956 565,411 Selling and marketing costs (334,921) (235,768) Administrative expenses (126,019) (94,485) Other gains - net 21 9,843 11,285 Operating profit 294,859 246,443 Share of loss of associate - (703) Profit before income tax 294,859 245,740 Income tax expense 24 (111,208) (80,067) Profit for the year 183,651 165,673 Attributable to: Equity holders of the Company 183,258 165,292 Minority interest 393 381 183,651 165,673 Earnings per share for profit attributable to the equity holders of the Company during the year - Basic and diluted 25 RMB0.45 RMB0.41 13 9.3 CONSOLIDATED CASH FLOW STATEMENT (All amounts in RMB) Note 2004 2003 RMB’ 000 RMB’ 000 CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations 27 454,115 149,170 Interest received 12,498 8,803 Income tax paid (91,522) (73,602) Net cash generated from operating activities 375,091 84,371 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of leasehold land - (35) Purchase of property, plant and equipment (64,511) (19,085) Proceeds from disposals of property, plant and equipment 27 15,866 19,246 Purchase of held-to-maturity investment (15,000) (15,000) Proceeds from sale of held-to-maturity investment 15,722 - Purchase of other non-current assets - (20,000) Purchase of financial assets at fair value through profit or loss (80,000) (70,000) Proceeds of sale of financial assets at fair value through profit or loss 87,906 53,066 Disposal of a production unit - 3,624 Net cash used in investing activities (40,017) (48,184) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term bank borrowings - 2,650 Repayments of short-term bank (2,652) - borrowings Capital injection of minority interest 4,476 - Dividends paid (31,200) (52,000) Net cash used in financing activities (29,376) (49,350) Net increase (decrease) in cash and cash equivalents 305,698 (13,163) Cash and cash equivalents at beginning of year 408,982 422,145 Cash and cash equivalents at end of year 714,680 408,982 Yantai Changyu Pioneer Wine Company Limited Board of Directors Dated 15th, March, 2005 14