古井贡Ｂ(200596)2008年年度报告（英文版）

Annual Report 2008 March 2009 Important � The board of directors, the board of supervisors, directors, supervisors and senior officers of the Company confirm that, there are no fictitious presentation, misleading statements or important omissions carried in this report, and shall take responsibilities, individually and/or jointly, for the truth, accuracy and completion of the whole contents. � Reanda Certified Public Accountants issued the audit reports of the standard and clean opinion for the company. � Mr. Wang Feng, chairman of the directors, Mr. Ye Changqing, chief accountant, and Ms. Xia Xueyun, principal of the accounting body, hereby guarantee that the financial report enclosed in this annual report are true and complete. � The report has been prepared in Chinese and English respectively. In case of discrepancy, the Chinese version shall prevail. 1 Contents Chapter I．Company Information........................................................................................................................... 3 Chapter II．Financial and Business Data Summary............................................................................................. 5 Chapter III．Particulars about the Changes of Share Capital & Shareholders................................................. 6 Chapter IV．Particulars about Directors, Supervisors, Senior Executives & Employees of the Company.... 9 Chapter V．Corporate Governance Structure..................................................................................................... 15 Chapter VI．Briefs to the General Meeting of Shareholder............................................................................... 20 Chapter VII．Report of the Board of Directors................................................................................................... 21 Chapter VIII．Report of the Board of Supervisors............................................................................................. 36 Chapter IX．Substantial Matters........................................................................................................................... 39 2 Chapter I． Company Information 1. Legal Name in Chinese: 安徽古井贡酒股份有限公司 Legal Name in English: ANHUI GUJING DISTILLERY COMPANY LIMITED Abbreviate: GUJING 2. Legal Representative: Wang Feng 3. Secretary of the Board: Ye Changqing Add: Gujing Town, Bozhou City, Anhui Province Tel: （0558）5712231 Fax: （0558）5317706 E-mail: ycq@gujing.com.cn Securities Affairs Representative: Ma Junwei Add: Gujing Town, Bozhou City, Anhui Province Tel: （0558）5710057 Fax: （0558）5317706 E-mail: gjzqb@gujing.com.cn 4. Registered Address: Gujing Town, Bozhou City, Anhui Province Office Address: Gujing Town, Bozhou City, Anhui Province Postcode: 236820 Website: http://www.gujing.com 5. Newspaper Designated for Disclosing the Information: China Securities, Shanghai Securities and Wen Wei Daily in Hong Kong Internet Website for Publishing the Annual Report: http://www.cninfo.com.cn Place for filing the Annual Report: Secretary Office of the Board of Directors of the Company 6. Stock Exchange where the company shares are listed: Shenzhen Stock Exchange Short form of the Stock: Gujing Distillery A Securities Code: 000596 Short form of the stock: Gujing Distillery B Securities Code: 200596 7. Other Relevant Information: 3 (1) Date of the initial registration: May 30, 1996 Variation of Registered Date: Dec. 15, 2004 Registration Place: Industrial & Commercial Administration Bureau of Anhui Province (2) Registration No. of Corporate Business License: QGWZ Zi No. 001745 Tax registration number: 341600151940008 (3) Names and addresses of accountants’ offices appointed by the Company: Name: Reanda Certified Public Accountants Address: 2008 Dongqu, Bldg. 1, Zhubang 2000, 100 Balizhuang Xili, ChaoYang District, Beijing, PRC. 4 Chapter II．Financial and Business Data Summary 1. Main business data in 2008 Unit: RMB Yuan Comparing with 2008Y 2007Y previous year（％） 2006Y Revenue from business 1,378,901,587.66 1,201,356,596.91 14.78% 963,702,143.87 Total profit 77,097,496.17 51,978,072.67 48.33% 23,702,424.38 Net profit attributed to shareholders of the 34,576,867.37 33,876,546.32 2.07% 13,329,639.70 listed Company Net profit less non-operating profit and loss attributed to the shareholders of the listed 32,778,049.32 18,244,111.64 79.66% 10,687,743.13 Company Net cash flow arising from operating activities 207,760,669.08 120,107,688.93 72.98% 48,120,654.64 Comparing with End of 2008 End of 2007 end of the previous End of 2006 year（％） Total assets 1,519,528,961.06 1,384,339,218.86 9.77% 1,364,652,962.78 Owners’ equity (or shareholders’ equity) 879,910,755.89 845,504,539.50 4.07% 811,457,342.20 Share capital 235,000,000.00 235,000,000.00 0.00% 235,000,000.00 Recurring profits and losses items 2. Main financial index Unit: RMB Yuan Comparing with 2008Y 2007Y previous year（％） 2006Y Basic earnings per share (Yuan/share) 0.15 0.14 7.14% 0.057 Diluted earnings per share (Yuan/share) 0.15 0.14 7.14% 0.057 Basic earnings per share deducted from recurring profits 0.14 0.08 75.00% 0.045 and losses (Yuan/share) Fully diluted net asset earning ratio （%） 3.93% 4.01% -0.08% 1.64% Weighted average net asset earning ratio（%） 4.01% 4.09% -0.08% 1.65% Diluted net asset earning ratio deducted from recurring 3.73% 2.16% 1.57% 1.32% profits and losses（%） Weighted average net asset earning ratio deducted from 3.80% 2.20% 1.60% 1.33% recurring profits and losses （%） Net cash flow arising from each share of operating 0.884 0.511 72.99% 0.20 activities (Yuan/share) Comparing with end of End of 2008 End of 2007 the previous year（ ％ ） End of 2006 Net asset per share attributed to shareholders of the listed 3.74 3.60 3.89% 3.45 company (Yuan/share) Unit: RMB Yuan 5 Non-recurring gains/losses items and amount deducted. Non-recurringgains/lossesitemsandamountdeducted. Amount Gains/lossesondisposalofnon-currentassets -6,558,015.21 Governmentsubsidyrecordedincurrentprofits&losses 1,700,000.00 Othernon-operatingrevenuesaveforthoseitemsabove 6,796,428.86 TheinfluenceofIncometax -130,002.80 Minorityinterestafterdeductnon-operationprofit -9,592.80 Totalofnon-recurringnetprofitsandlosses 1,798,818.05 6 Chapter III． Particulars about the Changes of Share Capital & Shareholders 1. Change of share capital (1). Change of share capital (In share) Before this Change Increase or decrease of this Changes (+, -) After this Change Capitalizat Newly Bonus ion from Quantity Pct issued Others Subtotal Quantity Pct shares public shares reserve 1. Shares subject to conditional sales 135,250,000 57.55% -11,750,000 -11,750,000 123,500,000 52.55% (1) State-owned shares (2) State-owned corporate shares 135,250,000 57.55% -11,750,000 -11,750,000 123,500,000 52.55% (3) Other domestic shares Including: domestic non-state-owned corporate shares Domestic natural person shares (4)Foreign shares Including: foreign corporate shares Foreign natural person shares (5)Shares of senior managers 2. Shares subject to unconditional-sales 99,750,000 42.45% 11,750,000 11,750,000 111,500,000 47.45% (1) MB-denominated ordinary shares 39,750,000 16.92% 11,750,000 11,750,000 51,500,000 21.92% (2) Foreign capital shares listed locally 60,000,000 25.53% 60,000,000 25.53% (3) Foreign capital shares listed oversea (4) Others 3. Total shares 235,000,000 100.00% 235,000,000 100.00% (2). Change of shares subject to conditional sales (In share) No. of the selling- No. of shares at No. of the selling- Names of limited shares No. of the restricted Reasons for selling- Date for selling the year limited shares shareholders increased this at the year end limited shares shares beginning released this year year Anhui Gujing Group Reform of non- 135,250,000 11,750,000 0 123,500,000 tradable shares June19, 2009 Company Limited Total 135,250,000 11,750,000 0 123,500,000 － － 7 (3) Stock issuing and listing information There is no stock issuance within the previous 3 years by the end of reporting period. 2. Information about the shareholders and the actual controllers (1) Total number of shareholders and particulars about the shares held by shareholders (In share) Total number of Shareholders 30,612 Particulars about the shares held by the top ten shareholders Nature of Names of Nature of Names of shareholders Names of shareholders Nature of shareholders shareholders shareholders shareholders Anhui Gujing Group Company State-owned Limited Corporate 61.15% 143,702,011 123,500,000 0 Overseas non- GSI S/A GOLDEN state-owned 5.10% 11,985,434 0 0 CHINA MASTER FUND corporate GAM ASIA EQUITY Overseas non- HEDGE INVESTMENTS state-owned 0.80% 1,885,403 0 0 INC corporate Overseas natural Chen Bo person 0.39% 920,191 0 0 GSI S/A GOLDEN Overseas non- CHINA PLUS MASTER state-owned 0.35% 823,792 0 0 FUND corporate GAM GREATER CHINA Overseas non- EQUITY HEDGE state-owned 0.34% 793,610 0 0 INVESTMENTS INC corporate Overseas non- China Merchants state-owned 0.32% 751,030 0 0 Securities Co., Ltd. (HK) corporate Overseas natural Chen Fei person 0.32% 745,070 0 0 Overseas non- UOB Kay Hian Co., Ltd (HK) state-owned 0.31% 723,000 0 0 corporate Overseas natural Huang Peiling person 0.19% 441,602 0 0 Particulars about the shares subject to unconditional sales held by the top ten shareholders Names of shareholders Names of shareholders Names of shareholders Anhui Gujing Group Company Limited 20,202,011 RMB-denominated ordinary shares GSI S/A GOLDEN CHINA MASTER 11,985,434 Foreign capital shares listed locally FUND GAM ASIA EQUITY HEDGE 1,885,403 Foreign capital shares listed locally INVESTMENTS INC Chen Bo 920,191 Foreign capital shares listed locally GSI S/A GOLDEN CHINA PLUS 823,792 Foreign capital shares listed locally MASTER FUND GAM GREATER CHINA EQUITY 793,610 Foreign capital shares listed locally HEDGE INVESTMENTS INC China Merchants Securities Co., Ltd. (HK) 751,030 Foreign capital shares listed locally Chen Fei 745,070 Foreign capital shares listed locally UOB Kay Hian Co., Ltd (HK) 723,000 Foreign capital shares listed locally Huang Peiling 441,602 Foreign capital shares listed locally Notes on the associated Among the abovementioned shareholders, Anhui Gujing Group Company Limited, the relations and a group of a state-owned shareholder, has no associated relations with the other shareholders, and is 8 not concluded in the group as a person specified in the Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies. Among the float shareholders, GSI S/A GOLDEN CHINA MASTER FUND and GSI S/A GOLDEN person of the above CHINA PLUS MASTER FUND managed by Jinglin Assets Management Co., Ltd. shareholders concerted actors. The associated relations and whether they are included in the group as a person specified in the Measures for the Administration of Disclosure of Shareholder Equity Changes of Listed Companies or not are not available. (2) Particulars about the controlling shareholder The controlling shareholder is Anhui Gujing Group Company Limited which is a sole state-owned proprietor incepted on January 16, 1995 with a registered capital RMB353, 380,000 and whose legal representative is Mr. Cao Jie. Its business scope covers: operating and agency to do import or export business on goods and technology permitted by the state; dealing with foreign The People’s trades and Government cooperated business; doing domestic trades and developing of Bozhou high technology; information consulting service, processing and distributing agricultural by-products; processing 100％ and distributing package materials, building materials, glass products, craft supplies and wooden products; and goods delivery transportation. Anhui(License or permits Gujing Group may Limited Company be obtained for special businesses) There is no change in controlling shareholders in the report period. 61.15％ Property right relationship and control relationship between the company and actual controller: Company 9 Chapter IV． Particulars about Directors, Supervisors, Senior Executives & Employees of the Company I. Particulars about directors, supervisors, and senior executives 1 Basic information Total payment Whether and or not remunerati draw Shares held on from salary Shares held the Name Title Gender Age Beginning of End of duty at year at year end Reasons for from beginning Company duty term term changes (shares) (shares) in the sharehol report der unit period (ten or other thousand relevant Yuan)(befo units re tax) Wang Feng President Male 44 June 12th, 2008 June 11th, 2011 0 0 22.78 no Cao Jie Director Male 43 June 12th, 2008 June 11th, 2011 0 0 0.00 yes Director , Liu Min General Male 46 June 12th, 2008 June 11th, 2011 0 0 36.38 no Manager Director , Liang 28.00 no Vice General Male 45 June 12th, 2008 June 11th, 2011 0 0 Jinhui Manager Li Bin Director Male 33 June 12th, 2008 June 11th, 2011 0 0 13.34 no Director, General Ye 0.72 no Accountant, Male 35 June 11th, 2011 0 0 Changqing Dec9th, 2008 Secretary of Board Independent 7.50 no Ding Yuan Male 40 June 12th, 2008 June 11th, 2011 0 0 Director Wu Independent Male 47 June 12th, 2008 June 11th, 2011 0 0 7.50 no Cisheng Director Independent 7.50 no Liu Libin Male 65 June 12th, 2008 June 11th, 2011 0 0 Director Zhou Vice General Male 35 June 12th, 2008 June 11th, 2011 0 0 9.29 no Qingwu Manager Chief 9.83 no Xu Peng Male 39 Dec 9th, 2008 June 11th, 2011 0 0 Supervisor Niu Supervisor Male 38 June 12th, 2008 June 11th, 2011 0 0 0.00 yes Haiting Hu 0.00 yes Supervisor Male 43 June 12th, 2008 June 11th, 2011 0 0 Wenchao Wang Li Supervisor Male 31 June 12th, 2008 June 11th, 2011 0 0 0.00 yes Lu 6.02 no Supervisor Male 29 Dec 9th, 2008 June 11th, 2011 0 0 Duicang Total - - - - - - 148.86 - II. Main work experience and sideline information of incumbent directors, supervisors and senior executives 10 1. Particulars about directors, supervisors, and senior executives (1) Mr. Wang Feng, 44 year-old, is Senior Economic Engineer who has educational experience of graduate student, incumbent Board Chairman of the company and Director of ANHUI GUJING GROUP CO., LTD., had ever acted as Secretary of the League Committee of Bozhou Gujing Distillery; Deputy Director of Economy Development Department; Deputy Director of Enterprises Management Department; Manager of Assets Management Department of Gujing Group; Member, Secretary of the board, Vice General Manager, and General Manager of the Second Board of Directors; Member and President of the Third Board of Directors, and Member and President of the Fourth Board of Directors. (2) Mr. Cao Jie, 44 year-old, is Economic Engineer who has educational experience of graduate student, incumbent Chairman and President of ANHUI GUJING GROUP CO., LTD., had ever acted as Chief of First Tax Policy & Administration Department of Tax Bureau of Bozhou City; Member of Party Group, chief of Tax Policy & Administration Department, Deputy Chief of Bureau of Local Tax Bureau of Bozhou City; was transferred to ANHUI GUJING GROUP CO., LTD. in February 1997, and has ever acted as the Vice Financial Manager of ANHUI GUJING GROUP CO., LTD., the Executive Director & General Manager of Hefei Gujing Hotel Company Limited, the Board Chairman of Anhui Gujing Hotel (Group) Company Limited, Vice General Manager of Gujing Group, Member of the Board of Directors of Gujing Group, Deputy President of Gujing Group, concurrently Supervisor of Hotel Business Department and Supervisor of Finance Business Department of Gujing Group. (3) Mr. Liu Min, 46 year-old, has educational experience of undergraduate college, incumbent Director and General Manager of the company; graduated from Northwest University of Light Industry in 1984, had ever acted as Deputy Director of Energy Measurement Department, Director of General Engineers’ Union Office, Deputy Chief Engineer and Chief Engineer of Baoji Grain Factory successively; was transferred to Shaanxi Xifeng Liquor Co., Ltd. to be Director and General Manager in August 1999; General Manager of Wine Business Department of Wanji Group in September 2003; Vice General Manager and General Manager of Kingway Brewery Group Xi’an Company in July 2006; and General Manager of the company in December 2007. (4) Mr. Liang Jinhui, 45 year-old, is Political Engineer who has educational experience of graduate student, incumbent Director and Vice General Manager of the company, General Manager of Bozhou Gujing Sales Company; had ever acted as Editor in Chief of Gujing Newspaper Office, Chief of Propaganda and Education Section, Vice Manager of Market Development Department of the company, Supervisor of the Second, Manager of Market Development Department, Chief of Market Research and Supervision Center, Supervisor of Third Board of Supervisors and Director of the Fourth Board of Directors. (5) Mr. Li Bin, 33 year-old, Accountant and Economist who has educational experience of MBA, incumbent the Director of Board of the Company, President of Anhui Ruifuxiang Food Co., Ltd.; joined in our company in 11 1996 and engaged in finance services, had ever acted as In-charge Accountant, Secretary of Finance Department, Manager of Enterprise Programming and Management Department of the company, the Second Chief Accountant of the Company and Manager and Chief Accountant of Finance Department of the company, and Director and Secretary of the Fourth Board of Directors. (6) Mr. Ye Changqing, 35 year-old, Accountant and International Certified Internal Auditor who has educational experience of graduate student, incumbent Director, Chief Accountant and Secretary of Board of Directors of the company; joined in work in July 1997, had ever acted Chief Auditor of Audit Department, Vice Manager of Audit Department and Vice Supervisor and Supervisor of Auditing& Supervision Department; and Supervisor of the Fourth Board of Supervisors. (7) Mr. Ding Yuan, 40 year-old, with nationality of France, Professor of Accountancy of Central Europe International Business School who has gained Ph.D Accounting in University Montesquieu Bordeaux IV, France and Master in Enterprises Administration, University of Poitiers, France. Prior to joining CEIBS, he was a tenured faculty member of HEC School of Management, Paris, France. He is the Academic Deputy President, Research Centre of Complex Data Analysis of Beijing University of Aeronautics and Astronautics, and member of European Accounting Association, French Accounting Association and American Accounting Association. He is also Board Member of the Global Perspectives on Accounting Education Journal and Editorial Review Board Member of The International Journal of Accounting. And now he is incumbent the Independent Director of the Company. (8) Mr. Wu Cisheng, 47 year-old, who has Ph.D of Management Study, and is Professor of Management School, Dean of Business Administration Department of Hefei University of Technology, Superintendent of Business Administration Research Institute, has gained Master’s Degree of Industry Engineering in 1990, Ph. D of Business Administration in 2004; and had presided three national social science fund projects, project topics of National Ministry of Science & Technology and National Bureau of Statistics successively; had issued more than 60 theses on magazines in domestic and abroad successively, and published 6 works; and had gained provincial and ministerial advance prize of science and technology. He is incumbent independent director of the company. (9) Mr. Liu Libin, is 65 year-old, incumbent Vice Chairman and Chief Secretary of China Advertising Association and President and Chief Editor of International Advertising. He is the Doctor’s Tutor of Communication University of China, Visiting Professor of many universities, Advisor of many brands, Superintendent of IAI International Advertising Institute, Chief Editor of Chinese Advertisement Works Almanac and Chief Editor of Chinese Marketing Creative Works Almanac. And he has acted as member of a review committee of various arts and advertisement exhibitions all around the world. And now he is incumbent the Independent Director of the Company. (10) Mr. Xu Peng, 39 year-old, has educational experience of undergraduate college. He is incumbent Chief 12 Supervisor of the Company, Vice General Manager and Chief Supervisor of Market Supervision Department of Bozhou Gujing Sales Company. And he had ever acted as Deputy Director and Director of Finance Office 2 of Finance Department of the Company, Manager of Finance Department of Anhui Laobada Co., Ltd., and Vice Manager and Manager of Finance Department of the Company. (11) Mr. Niu Haiting, 38 year-old, has educational experience of undergraduate college. He is incumbent Supervisor of the Company, Member of Party Committee, Member of Commission for Disciplinary Inspection and Office Director of Party Committee of Anhui Gujing Group Co., Ltd.. And he had ever acted as Personnel Administrator and Vice Chief Supervisor of Human Resource Department of Anhui Gujing Group Co., Ltd.. (12) Mr. Hu Wenchao, is 463 year-old, Registered Senior Human Resource Specialist who has educational experience of undergraduate college, National Trainer Grade 2 and one of Administrators recommended by China Human Resource Development Association. Now he is incumbent Supervisor of the Company, Vice Chief Supervisor of Human Resource Center of Anhui Gujing Group Co., Ltd.. And he had ever acted as Labor Allocation Secretary and Vice Manager of Personnel Department of Anhui Gujing Group Co., Ltd., Vice Manager of Human Resource Department of Anhui Gujing Distillery Company Limited. (13) Mr. Wang Li, 31 year-old, has educational experience of undergraduate college. And he is incumbent Supervisor of the Company. And he was graduated from Xi'an University of Architecture & Technology in July 2000 and gained Bachelor Degree. From August 2000 when He joined in Anhui Gujing Group Co., Ltd. to now, he have acted as Officer of Law Office of the Company, Secretary of Office of the Company, Director of Law Business Center of the Company, Vice Supervisor of Brand Information Center of the Company, and Arbitrator of Bozhou Arbitration Committee and Councilor of Law Society of Bozhou City concurrently. (14) Mr. Lu Duicang, 29 year-old, has educational experience of undergraduate college. Now, he is incumbent Supervisor of the Company and General Supervisor of Finance Department of Anhui Gujing Group Co., Ltd.. And he had ever acted as Accountant, Vice Director and Director of Finance Department Center 1 of the Company, Factory Manager of Liquor Filling Branch Factory and Manager of Finished Products Department. (15) Mr. Zhou Qingwu, 35 year-old, is Economist who has educational experience of undergraduate college. At present, he is Vice General Manager of the Company. And he had ever acted as Member and Deputy Sector chief of Quality Control Section of Business Administration Department of the Company, Director of Quality Control Center of Assets Management Department, Vice Manager and Manager of Quality Control Department, and Chairman and General Manager of Bozhou Gujing Packing Material Co., Ltd.. 2. Particulars about the annual remuneration (1) The annual remuneration for the director, supervisor, and senior executives is formulated by the 13 company’s board of directors. The annual remuneration is determined according to such factors as one’s position, the performance of company's business, the local income status, consumption level and individual performance appraisals. (2) The annual remuneration The total amount of the annual remuneration for the current director, supervisor, and senior executives is RMB 1,488,600. As for the individual amount, see the basic information. Remuneration for independent directors is the allowance received from the company, excluding the director, Cao Jie, and supervisors, Niu Haiting, Hu Wenchao, Wang Li and Lu Duicang who receive their remunerations from the shareholders holding companies. 3. Particulars about the changes of directors, supervisors, and senior executives during the report period (1) Particulars about the changes of directors and senior management personnel It observed and adopted the proposal on reelection of the chief accountant of the company at the 16th meeting of the fourth board of directors: for the sake of working demand, Mr. Li Bin assumes the chief accountant of the company no longer and it considered that Mr. Lv Jiazhao is appointed as the chief accountant of the company by the board of directors. The proposal for reelection of directors has been approved at the 17th meeting of the 4th Board of Directors of the Company. Wang Feng, Cao Jie, Liu Min, Liang Jinhui, Lv Jiazhao and Li Bin are candidates of the non- independent directors, and Mr. Wu Cisheng and Mr. Liu Libin are candidates of the independent directors of the 5th Board of Directors of the Company. The proposal for nominating Mr. Ding Yuan as the candidate of the independent director of the 5th Board of Directors of the Company has been approved at the 1st temporary meeting of the 4th Board of Directors 2008. The following resolutions are approved at the 1st Meeting of the 5th Board of Directors of the Company: Mr. Wang Feng is elected as the Chairman of the Board of the 5th Board of Correctors of the Company; Mr. Liu Min is engaged as the General Manager of the Company;; Mr. Liang Jinhui and Mr. Zhou Qingwu are engaged as the Deputy General Manager; Mr. Lv Jiazhao is engaged as the General Accountant of the Company. The proposal for that Lv Jiazhao abdicated the duty of Director of the company and Chief Accountant, and nominating Ye Changqing as By-Electing Director have been approved at the 6th Meeting of the 5th Board of Directors of the Company. The proposal for reelecting Chief Accountant has been approved at the 7th Meeting of the 5th Board of Directors of the Company, and engaging Ye Changqing as Chief Accountant of the company has been determined. 14 (2) Particulars about the changes of supervisors The proposal for reelection of supervisors has been approved at the 9th meeting of the 4th Board of Supervisors of the Company. Board of Supervisors of the Company nominated Mr. Bu Lingtong, Mr. Ye Changqing, and Mr. Niu Haiting as the candidates of the Non-staff Supervisors of the Company; additionally, Congress of Workers and Staff elected Mr. Hu Wenchao and Mr. Wang Li as Staff Supervisors of the 5th Board of Supervisors of the Company. The proposal for electing Bu Lingtong as Chief Supervisor of the 5th Board of Supervisors of the Company has been approved at the 1st Meeting of the 5th Board of Supervisors. The proposal for Bu Lingtong’s resignation of Chief Supervisor of the Board of Supervisors and Supervisor of the Company, the proposal for that Ye Changqing abdicated the duty of Supervisor of the Company, and the proposal for nominating Xu Peng and Lu Duicang as By-electing Supervisors of the 5th Board of Supervisors of the Company have been approved at the 4th meeting of the 5th Board of Supervisors. The proposal for electing Mr. Xu Peng as Chief Supervisor of the Board of Supervisors of the Company has been approved as 5th Meeting of the 5th Board of Supervisors. III. Particulars about employees The Company has 3790 employees in the payroll, including 69 managerial persons, 190 technicians, 62 financial persons, 3226 persons engaged in production and sales, and 243 persons engaged in administration and logistics. Particulars about the education of the employees: There are 15 persons with master or above degrees; 180 persons with bachelor degrees; 210 persons graduated from college, and others 3385. At present, 463 persons have been retired or left from the Company. 15 Chapter V． Corporate Governance Structure I. Particulars about actual governance state of the Company Since the inception, the Company constantly perfects corporate governance structure and standardize its management strictly in accordance with the Companies Law, Securities Law, Standard for Governance of Listed Companies, Guardlines on Setting up Independent Directors Systems for Listed Companies as well as principles and requirements of other relevant laws, regulations and normative documents. During the report period, the board of directors, the board of supervisors and the management of the Company make decisions, perform rights and assume obligation strictly according to the standard operation rules and inner control system so as to make sure the standard operation of the Company in the frame of rules and systems. In the reporting period, based on the rectification in 2007, the Company has carried about an activity to further improve the corporate governance according to the spirit the document ZJGS Zi [2007] No. 28 Notice on Carrying out Activity to Improve Corporate Governance and document WZJF Zi [2007] No. 13 Notice on Carrying out Activity to Improve Corporate Governance of the Listed Companies issued by China Securities Regulatory Commission and concrete arrangement of relevant documents of Shenzhen Stock Exchange. And the company has carefully evaluated the implementation condition and rectification results. And the rectification problem of the company has been completed basically, and gained excellent effects. The implementation condition, effect and further rectification plan are described in rectification report of the company. The report has been submitted to the 2nd Meeting of the 5th Board of Directors and has been approved. The full text was published on China Securities, Shanghai Securities and www.cninfo.com.cn. During the report period, the Company, according to the requirements of China Securities Regulatory Commission and Rules Governing Listing of Stocks on Shenzhen Stock Exchange and with the “open, fair and just” principle, performs the information disclosure of the Company, and guarantees that the information disclosed is true, accurate and complete, free from fictitious presentation, misleading statements or important omissions, so that all the shareholders will equally acquaint themselves with all the notices of the Company. In conclusion, the Company has established the corporate governance structure satisfying the requirements of a listed company, and the actual governing particulars have met the requirements of normative documents on listed company governance issued by China Securities Regulatory Commission. Corporate governance structure chart of the company: General Meeting of Shareholders 16 Board of supervisors 17 II. Particulars about independent directors’ performances 1 Meeting-attending information of the independent directors (1) Independent directors of the Fourth Board of Directors Name Required Times of Times of Times of Voting by Absence attendance attending in Voting on communication times times person Commission Zhuo Wenyan 3 3 0 2 0 Liu Youpeng 3 3 0 2 0 Li Hao 3 3 0 2 0 (2) Independent directors of the Fifth Board of Directors Name Required Times of Times of Times of Voting Absence attendance attending in Voting on by times times person Commission communication Ding Yuan 7 7 0 4 0 Wu Cisheng 7 7 0 4 0 Liu Libin 7 7 0 4 0 2 Particulars about independent directors’ performances The three independent directors credibly and diligently performed their duties strictly in accordance with the stipulations and regulations of Guidelines on Setting up Independent Directors System for Listed Company, Stipulations on Emphasizing Public Shareholder’s Interests Protection, and Articles of Association. Since the beginning of their tenancy, they have punctually attended Board Meeting and General Meetings of Shareholders, actively understand the situation of operation of the Company, contribute good advices and schemes to the management of the Company, present their independent suggestions on such significant matters as the exchange of assets between the related parties and affiliated transaction, promote the Board to make scientific and objective decisions, and maintain the interest of the Company and its shareholders. 3 Particulars about dissidences from the independent directors In the report period, the independent directors did not put forward any dissidence to the relevant events. III. Particulars about five independences in business, personnel, assets, organizations and financial affairs between this company and controlling shareholders The company and the controlling shareholder, Anhui Gujing Group Co., Ltd., realized five independences in 18 terms of business, personnel, assets, organizations and financial affairs, with separate independent calculation, independent and complete business, independent operation ability, and independent responsibilities and risks. Majority shareholders can not surpass the shareholders’ general meeting to directly or indirectly interfere with the company’s decisions and legal production and operation activities, and there is no same trade competition state of the same products between the company and majority shareholders. IV. Self evaluation of internal control According to the regulations of Basic Specifications of Enterprise Internal Control issued by Ministry of Finance together with China Securities Regulatory Commission and other departments and Guideline on Internal Control of Listed Companies of Shenzhen Stock Exchange, the company has counseled and evaluated the effectiveness of the internal control, and formed Report of Self evaluation of internal control of the Company. The report has been approved by the Board of Directors of the Company, and Board of Supervisors and Independent Directors have expressed following opinions: 1. The opinions on Report of Self evaluation of internal control of the Company expressed by the Board of Supervisors of the Company （1）The Company earnestly comprehends the spirit of Basic Specifications of Enterprise Internal Control issued by Ministry of Finance together with China Securities Regulatory Commission and other departments and Guideline on Internal Control of Listed Companies of Shenzhen Stock Exchange, and follows the basic principle of internal control. Combining the practical conditions of itself, the company has established and perfected the internal control system of all links of the Company, and ensured the normal development of business activities of the Company, making sure the safety, completion, value preserving and increasing of the prosperities of the Company. （ 2 ） The complete organization and effective running of internal control of the Company ensure implementation and supervision of key activities conducted for perfect internal control. （3）In 2008, the Company has not violated Basic Specifications of Enterprise Internal Control issued by Ministry of Finance together with China Securities Regulatory Commission and other departments, Guideline on Internal Control of Listed Companies of Shenzhen Stock Exchange, and other relevant internal control system of the Company. In conclusion, the Board of Supervisors thought, the self evaluation of internal control of the Company is comprehensive, authentic and accurate, and objectively reflects the practical condition of the internal control of the Company. 2. The opinions on Report of Self evaluation of internal control of the Company expressed by independent directors of the company 19 In the report period, the Board of Directors of the Company has constituted a series of management system of the Company, and the internal control system of the Company has been further perfected. At present, the internal control system of the Company has covered all business links of operation of the Company, and all business activities of the Company are conducted strictly according to the regulations of relevant systems. We thought, the internal control on company management, affiliated transactions, external guarantee, use of raised funds, significant investment, information disclosure and other aspects is strict, sufficient and effective, and in accordance with the practical conditions of the Company, ensuring the normal development of operation and management of the Company. The Report of Self evaluation of internal control of the Company is in accordance with the practical conditions of internal control of the Company. V. Particulars about assessment and incentive mechanism to senior executives during the report period The remuneration system for the senior executives of the company closely linked with performance assessment and incentive mechanism has been established in the Company. The decision-making management adopts the assessment and incentive measures in combination with the yearly remuneration and economic indexes and management achievement. To advance the standard, healthy and orderly development of the company as well as attract more talents and keep the stability of the senior executives, the company annually establishes the assessment index at the beginning of the year and sign a written responsibility of business objective, decides the remuneration proportion at the year-end according to personal work performance of the senior executives and completion of benefit target of the Company. 20 Chapter VI． Briefs to the General Meeting of Shareholder During the report period, the company convened two shareholders’ General Meetings. The particulars are as below: Newspapers for Publishing Meeting description Convening Date Publishing Date Meeting Resolution The first interim China Securities, Shanghai General Meeting of January 22nd, 2008 Securities and Securities January 23rd, 2008 Shareholders in 2008 Times China Securities, Shanghai 2007 General Meeting June 12th, 2008 Securities and Wenhui June 13th, 2008 of Shareholders Daily in Hong Kong The second interim China Securities, Shanghai December 10th, General Meeting of December 9th, 2008 Securities and Securities 2008 Shareholders in 2008 Times 21 Chapter VII． Report of the Board of Directors I. Discussion and analysis of the general operation of the Company in the report period 1 .General operation of the Company in the report period After experiencing the baptism of wind and rain, led by the concept of “return and revival”, the company went through the year 2008, during which, the product structure was inclined to be optimized, and all the business indicators were improved stably after the company deepened the reformation and the adjustment. Under the leading of the Board of Directors and the support of the broad masses of shareholders, the company displayed excellent development trend with the effort of the staff, and the liquor industry, as the main business of the company, showed obvious signs of recovery. In the report period, the company accomplished the operation objectives and assignments defined by the Board of Directors, and the staff realized the main business income RMB 1.379 billion Yuan, which increased by 14.78% compared to the same period last year; the company realized the total amount of profits RMB 77,097,500 Yuan, which increased by 48.33% compare to the same period last year, and the net profit RMB 34,474,400 Yuan, which increased by 1.93% compare to the same period last year. To realize the above objectives, the Board of Directors mainly took the following measures: (1) Persisted in the strategic direction of “return and revival”, and made efforts to realize the promotion of brand value. Developed the new strategies of Gujing brand, and put the brand assets of the company in order comprehensively; re-established the brand system that is based on medium and high price; strengthened the market supervision and intensified the brand management. Push the Year Protoplasmic Liquor into market successfully. Led by the concept of “re-shaping the spirit of mellow liquor” and “limit process”, the company refined the following five core concepts: peach blossom yeast, Wuji water, Ming fermentation pit, Nine brewing methods and high technique, and preliminarily completed the brand orientation in consumers’ heart by holding various activities. In October, 2008, Gujing Wine Culture Exposition gained the First AAAA Class Industry tourism scenic spots in liquid industry in China awarded by National Tourist Bureau. (2) Persisted in the adjustment of product structure and market optimization, and collected the resources to realize breakthrough. Largely reduce the number of the products, and the varieties of products are largely reduced compared to the past two years. Disposed the non-prevailing and low grade products, and realized the updating and upgrading of the goods. The core products of the company came into being. Through the adjustment of product structure, exploited high grade clients with full strength, and realized the optimized adjustment of the client structure and market structure. (3) Paid highly attention to the food safety; optimized the quality management system to ensure the quality of 22 the products. Paid highly attention to the food safety, and further perfect the food safety management system; Continued to strengthen the construction of the quality, environment and safety “three-standard-in-one” quality safety management system; organized the internal auditor of the company and invited the relevant Certification Organization to conduct the internal auditing and external reviewing to ensure the zero defect of the quality. With the concept of “leading quality”, continued to maintain the flavor and the distinctive quality of the basic liquor stored in cellar. By means of optimizing purchasing management, strengthened the management of suppliers, and controlled the quality of raw materials; improved the supplying quality of the packing materials, and ensured the further improvement of the finished liquor of the company by the investment of hardware and strengthening the management. Gujinggong brand Gujinggong liquor passed the review of national renowned liquor with the efforts of the staff. In the first ten days of August, Chinese renowned liquor Gujinggong liquor was listed as “Food for Olympics” in Shenyang venue of Beijing Olympic Games; National Quality Testing Bureau conducted quality supervision on the Gujinggu series products randomly, and it showed that the qualification rate of the random tested products is 100%, which fully indicated that the quality of the products of our company had been improved greatly. The Gujinggong Elegant Mellow Liquor developed and designed by the company was awarded the nationally advanced products in liquor body design, and the 42°elegant Gujing Liquor was awarded the nationally advanced products in quality benefit. In January, 2009, Year Protoplasmic Gujinggong Liquor and the Elegant Mellow Gujinggong Liquor passed the appraisal of “new product and new technique”, and won the unanimous appraisal from liquor experts. (4) Adjusted organizational structure of the enterprise and implemented incentive system to inspire the enthusiasm of the staff fully. Taking clients and service as guiding, the Company preliminary adjusted the internal organizational structure of the enterprise, including production structure of brewing and organizational structure of marketing, and replaced some personnel on important positions, starting to transit the vertical organizational structure into front and rear systems which are interlinked mutually, strengthening the internal cooperation, and improving the overall service level. (5) Strengthened the carding and optimization of internal business process and built the excellent background service system Integrated and rebuilt filling process comprehensively, and developed the optimization of procedures and personnel. The production efficiency and the pack quality were improved greatly. Through developing the internal business process carding, the Company decreased the procedures and realized the aim of conducting operation with low cost. (6) Adequately solved the issues left over from the past, and made efforts to improve basic management capability of the enterprise In order to activate operating system of the Company further, change the inherent ideology of staff of state- owned enterprise, lighten personnel burden, according to Overall Reformation Plan of Controlling Shareholders, the Company bought out the state-owned identities of the staff based on putting labor relations in order, and the 23 measure inspires the vigor of the staff and establishes excellent staffing system for long-term development of the company. (7) Further improved the working conditions and gradually increased welfare of the staff The income level of the staff was improved greatly in 2008. The Company developed activity of “Golden Autumn Education Assistance” and set foundation of offspring education of the staff of the Company and serious illness assistance, fully inspiring the working enthusiasm of the staff. 2. Operation condition of the main business (1) Scope of main business of the Company The Company mainly engaged in production and sales of Gujingong, Gujing and their series wine. The products are divided into three main odor types: pure fragrant type, faint scent type and concurrently odor type, have the complete product system which covers alcohol content from 60°to 30°and covers price of high grade, medium grade and low grade. And the main products are Elegant Mellow Liquor Gujinggong 946, Year Protoplasmic Series of Gujinggong Liquor, Fine and Elegant Gujinggong Liquor, Hongyun Gujinggong Liquor, Golden Prize Gujinggong Liquor, and other Gujinggong Liquor Series, and Gujing Liquor Series led by elegant mellow Gujing Liquor. (2). Main business by industries and types of products In RMB By industries By Revenue from Profit from main Rate of Increase or Increase or Increase industries main businesses businesses gross Decrease of Decrease of or or profit Main Business Main business Decrease products Income over profits over the of Rate of the previous previous year gross year (%) (%) profit over the previous year (%) Wine and 107,694.00 58,777.00 45.42% 20.80% 5.05% 8.18% Alcohol Deep processing 13,915.00 11,756.00 15.52% 4.77% 12.64% -5.90% of farm products Others 14,555.00 12,705.00 12.71% -12.27% -5.26% -6.46% Subtotal 136,164.00 83,238.00 38.87% 14.40% 4.31% 5.91% By products （wine） Medium grade 78,436.00 39,684.00 49.41% 27.33% 12.46% 6.69% wine/liquor Medium grade 27,594.00 17,355.00 37.11% 8.99% -7.43% 11.16% wine/liquor 24 Low grade 1,664.00 1,738.00 -4.45% -25.39% -9.23% -18.60% wine/liquor Total 107,694.00 58,777.00 45.42% 20.80% 5.05% 8.18% (3) Main business by regions In RMB Districts Revenue from main businesses Increase or Decrease of Main Business Income over the previous year North 11,263.00 -29.60% China South 116,416.00 43.39% China Central 2,880.00 -82.41% China Southeast 5,605.00 2.55% Total 136,164.00 14.40% (4) Main suppliers and customers During the report period, the total purchase of the top five suppliers of the company is RMB73,590 thousand Yuan, accounting for 22.99% of the total purchase amount; During the report period, the total sales income of the top five customers of the company is RMB 168,555thousand Yuan, accounting for 12.22% of the total main business income of the company; (III)Company’s assets particular during the report period and major accounting data analysis 1. Assets particular In RMB 2008Y 2007 Y The Reasons Amount Pct (%) Amount Pct (%) changes for Items of changes percentag e (%) Monetary 273,657,327.23 18.01 154,708,705.75 11.18 6.83 Funds Notes 110,369,921.69 7.26 121,849,788.26 8.80 -1.54 receivables Inventories 471,441,845.77 31.03 492,813,407.60 35.60 -4.57 Fixed assets 404,411,417.89 26.61 446,083,791.68 32.22 -5.61 Intangible assets 89,411,527.01 5.88 54,497,679.05 3.94 1.94 Note: There is no significant change of the composition of the company’s assets in the report period. 2. Measurement attributes adopted for assets during the report period The Company carried out the new accounting standards for enterprises as of the January 1, 2007. There is no significant change in measurement attributes adopted for main assets during the report period, and for the specific measurement attributes, see the notes attached to the financial statements. 25 3. Particulars about the operation expenses, management expenses, financial expenses, and income tax In RMB Items 2008 Y 2007 Y The changes of Amount (Rmb Pct to the total Amount (Rmb Pct to the percentage (%) 10,000) profits 10,000) total profits (%) (%) Operation expenses 144,406,242.05 187.30 114,547,532.40 220.38 -33.08 Administra tion 184.22 23.38 142,032,175.46 83,599,350.80 160.84 expenses Financial expenses 4,773,441.57 6.19 6,792,777.31 13.07 -6.88 Income tax 42,623,088.26 55.28 18,157,333.04 34.93 20.35 4. Particulars about the variation of the cash flow In RMB Items 2008 Y 2007 Y The changes of percentage (%) Net cash flow arising from 72.98 207,760,669.08 operating activities 120,107,688.93 Net cash flow arising from -50.90 -87,612,121.34 -58,060,947.61 investing activities Net cash flow arising from fund 96.44 -1,199,926.26 -33,661,304.35 raising activities (IV) Operation and Performance Analysis of Major Controlling Companies and Equity Participating Companies (1) Bozhou Gujing Sales Company Bozhou Gujing Sales Company has the registered capital RMB84, 864,400 and holds 100% of total shares, which is mainly engaged in the sales of liquor and trade service. At the end of the report period, Bozhou Gujing Sales Company has total assets RMB305,657,380.03， and main business income RMB584,541,376.57 and realizes net profits RMB78,169,090.38 (2) Bozhou Gujing Motor Transport Company Bozhou Gujing Motor Transport Company has registered capital RMB6, 945,000 holds 100% of total shares, which mainly provides transport service. At the end of the report period, Bozhou Gujing Motor Transport Company has total assets RMB5,357,836.36and main business income RMB511,340.20 and realizes net profits RMB-3,322,831.85 during the report period. (3) Bozhou Gujing Glass Product Co., Ltd. Bozhou Gujing Glass Product Co., Ltd. has registered capital RMB66, 460,000 and holds 100% of total shares, which is mainly engaged in production and sales of glass products. At the end of the report period, Bozhou Gujing Glass Product Co., Ltd. has total assets RMB106,084,320.45 and main business income RMB88,927,068.05 and realizes net profits RMB-122,258.19 during the report period. (4) Anhui Laobada Distillery Co., Ltd 26 Anhui Laobada Distillery Co., Ltd. has registered capital RMB30,000,000.00 and holds 93.33% of total shares, which is mainly engaged in sales of Laobada series alcoholic products. At the end of the report period, Anhui Laobada Distillery Co., Ltd. has total assets RMB 31,051,614.64 and main business income RMB 2,866,940.00 and realizes net profits RMB73,885.89 during the report period. (5) Shanghai Gujing Trading Company Shanghai Gujing Trading Company has registered capital RMB10,000,000.00 and holds 100% of total shares, which is mainly engaged in the sales of liquor. At the end of the report period, Shanghai Gujing Trading Company has total assets RMB17,971,616.18and main business income RMB10,045,290.72 and realizes net profits RMB80,811.30 during the report period. (6) Bozhou Gujing Hotel Co., Ltd. Bozhou Gujing Hotel Co., Ltd., with registered capital RMB 14,144,200, holds 92.77% of total shares and mainly deals with catering and accommodation. At the end of the report period, Bozhou Gujing Hotel Co., Ltd. has total assets RMB26,025,627.66and main business income RMB10,330,965.37d realizes net profits RMB-1,485,306.3during the report period. (7) Anhui Ruifuxiang Food Co., Ltd. Anhui Ruifuxiang Food Co., Ltd., has registered capital RMB265,000,000.00 and holds 100% of total shares, which is mainly engaged in production and sales of powder and gluten powder. At the end of the report period, Anhui Ruifuxiang Food Co., Ltd. has total assets RMB365,879,902.59 and main business income RMB329,738,107.64 and realizes net profits RMB-2,453,750.59during the report period. (8) Hefei Gujing Trade Co., Ltd. Hefei Gujing Trade Co., Ltd., with registered capital 10,000,000.00, holds 100% of total shares and mainly deals with the sales of liquor. At the end of the report period, Hefei Gujing Trade Co., Ltd., has total assets RMB32,761,773.59 and main business income RMB222,120,857.35 and realizes net profits RMB37,034,020.58 during the report period. (9) Bozhou Pairuite Packaging Co., Ltd Bozhou Pairuite Packaging Co., Ltd has registered capital RMB1,000,000and holds 100% of total shares, which is mainly dealing with the production and sales of package material, At the end of the report period, Bozhou Pairuite Packaging Co., Ltdhas total assets RMB1,644,902.82 and main business income RMB1,109,980.66and realizes net profits RMB–63,744.03 during the report period. (10)Bozhou Gujing Printing Co., Ltd Bozhou Gujing Glass Product Co., Ltd. has registered capital RMB50,000,000and holds 100% of total shares, which is mainly engaged in in printing and sales of packing products. At the end of the report period, Bozhou Gujing Printing Co., Ltd has total assets RMB85,629,383.34 and main business income RMB89,500,088.51and realizes net profits RMB496,744.04 during the report period. II. The prospect to the Company’s development in the future and operation plan of the new year 1. The prospect of the Company 27 In 2008, global financial crisis spread all over the world, and international economic situation is not bright. The liquor-making industry has incurred certain impact, especially the market expressing of sales suffocating of high-end product becomes more and more distinct. With the constant expanding and deepening of negative of the financial crisis, the liquor-making industry situation will be full of uncertainties in 2009. In the view of that the global financial crisis has impacted the entity economy deeply, our country has brought a series of policies and measures in force to decelerate downslide of economy, improve the confidence and simulate domestic demand. These macro-control measures will impact the liquor-making industry directly or indirectly in 2009. （1）Facing with domestic economy predicament, the speeding-up of liquor-making industry will slide down distinctively in 2009, but the long time trend will not be reversed. Influenced by international financial crisis and other factors, it is predicted that the rate of economic growth of our country will be distinct. The liquor-making industry will face the test of keeping the price and increasing the sales volume. In the view of that the liquor belongs to fast moving consumption goods with inherent particularities and the necessary goods of consumption of government affairs and business affairs, the liquor consumption pursuits brand and high performance-price-ratio constantly. The analysis and prediction of liquor sales volume of the whole industry, and speeding-up of business income and net profits of the listed company show that, it is still at a higher level although it shows fallback state. The industry growth is hopeful of maintaining prosperity. In 2009, our company will find the opportunity in the crisis, and realize updating and upgrading of the product structure through improving the brand and building the marketing capability. And the company will extend the marketing of group purchasing and key consuming community, and increase the market share of medium and high grade liquor constantly, making efforts to realize “share-keeping and breakthrough” of marketing. （2）Strong is always will become the outstanding point of liquor-making industry As the industry which is strictly limited by the policy, takes grain as materials, has powerful consumption base and complete marketing operation, outstanding achievements and risks are basically mastered by the enterprise. Enterprise brand, product quality, marketing system and market share the basis of achievement in the competence. The powerful enterprise which has advantages in popularity, influence, praising, market system, strategy, allocation and other aspects will gain the prior opportunity and realize the fast growth of outstanding achievements. In 2009, the Company will constantly improve the praising and faithfulness of Gujinggong Brand based on keeping the popularity of Gujinggong Brand, and will extend the marketing and public propagation, giving the brand the exclusive value, and building key competence advantage of the differentiation and individuation of the brand. The Company will improve first choice ratio of brand and self-choice ratio of the drink practically, and give full play to drawing effect of Gujingong Brand, and consequently propel the constant and fast breakthrough and development of the Company. （3） The policy has both advantages and disadvantages. The forward trend of the industry entity will not be changed Influenced by financial crisis, from 2008 to 2009, our country has brought series of plan into force to simulate the economic development. For example, improving the price of grain which brings about increasing of production cost of wine products; tax changing causes increasing of transportation cost of the enterprise; Circulating Economy Law promotes technology innovation and development of the enterprise; value-added tax reformation promotes the improvement of level of technology and equipments of the enterprise etc.. Although series of policies have both 28 advantages and disadvantages, after the comprehensive analysis, we found that advantages out-weigh disadvantages. In 2009, under this environment, liquor-making industry will improve the level of technologies and equipments, and improve the product quality, promoting product sales and the entity development of the industry. In 2008, the Company’s all indexes realized substantial increasing in the same ratio, however, the increasing still belongs to increasing in extrusion mode, and the Company is accumulating fast increasing energy in intension mode. Therefore, the Company will further lower purchasing cost, control expenses, optimize process, improve the efficiency, build up the performance evaluating system which takes the outstanding achievements as guiding comprehensively, improve the entire operation capability of the Company, and settle the cost basis for improving the market competence of the products produced by our company. 2. The operation plan of the Company in the new year In 2009, the guiding ideology of the Company is: taking the spirit of the 17th National Congress of the Communist Party and view of science development as guiding, circling around the theme of “marketing and transition”, improving the organizing capability and competence of the Company comprehensively, taking efforts to overcome the adverse effect of the financial crisis, rousing our spirit, changing the crisis into chance, realizing increasing which reveres the market trend, propelling Gujing to walk out of trouble and walk up to new life. In order to well implement above guiding ideology of work and realize the striving aim, the Company plans to adopt following measures: （1） Continually increases value of Gujinggong Brand energetically; insists on product focus, market focus, and propagation; propels the operation of differentiation; and transits the economic growth mode practically. Circling around major products, the Company pays attention to market building, and accelerates the transition of marketing mode, improving reactibility and reaction speed of the market and searching for marketing mode and marketing method which are proper for Gujing. （ 2 ） Strengthens management and deepens the reformation; strengthens the organizing capability of the enterprise improve the status and competence of the Company in the industry comprehensively. Especially under the current severe economic situation, around the implementation of the strategic aim, the Company shall further adjust and optimize the organization structure of the enterprise, and transit the thinking mode of the staff, improving the capability of the staff and strengthening the organizing capability of the enterprise practically. （3）Further develops work of process putting in order and program optimizing, and integrates and optimizes the product design, and consequently improves working efficiency. （ 4 ） The Company shall continually increase income and welfare of the staff, improve the working environment and make efforts to build enterprise in friendly mode. Facing with the current economic situation and combining practical situation of the Company, the year 2009 is a key year for the Company to realize “increasing which reveres the market trend, breaking the bottle-neck, and accelerating the development”. The Board of Directors of the Company will put pressure on itself and counter troubles, promoting the constant, stable, fast and healthy development of the Company. III. Particulars about the investment of the Company in the report period (1) Investment with raised funds 29 No raised fund has been put into investment in this report period. (2) Investment not with raised funds Please refer to Accounting Statement Footnote. IV. Reanda CPA showed the standard and clean opinion auditing report for the company in 2008. No change occurs to the accounting policy and accounting estimation. There is no substantial correction of accounting error. V. Routine work of the board of directors （I）Meetings of the Board of Directors In the report period, the Board of Directors of the company held 10 meetings totally, and the specific details are as follows: 1. 16th Meeting of the Fourth Board of Directors Date of Meeting: January 22nd, 2008 Resolutions: Observed and passed the proposal for re-employing the chief accountant. Resolution disclosing: the resolutions were published in China Securities, Shanghai Securities and Wen Hui Daily in Hong Kong. 2. 17th Meeting of the Fourth Board of Directors Date of Meeting: April 28th, 2008 Resolutions: 1) Observed and passed the Proposal on Working Report of the Board of Directors in 2007. 2) Observed and passed the Proposal on Final Financial Accounts Report in 2007; 3) Observed and passed the Proposal on the adjustment of the relevant projects and amounts of the disclosed balance sheet in the beginning of 2007. 4) Observed and passed the Draft on 2007 profit distribution and capitalization public reserves; 5）Observed and passed the Proposals on Annual Report of 2007 and the Summary of Annual Report of 2007; 6）Observed and passed the Proposal on engaging auditor in 2008； 7）Observed and passed the Proposal on routine affiliated transactions between the company and the affiliated party in 2008; 8）Observed and passed the Proposal on the First Quarter Report of 2008； 9）Observed and passed the Proposal on internal self-evaluation report in 2007; 10) Observed and passed the Proposal on the reelection of the Board of Directors of the company; 11) Observed and passed the Proposal of the General Meeting of Shareholders in 2007; 3. The First Interim Meeting of the Fourth Board of Directors in 2008 30 Date of Meeting: May, 13th, 2008 Resolutions: (1) Observed and passed the proposal for nominating Mr. Ding Yuan as the candidate of the independent director of the 5th Board of Directors of the Company has been approved; (2)Observed and passed the Proposal for the General Meeting of Shareholders in 2007; 5. The First Meeting of the Fifth Board of Directors Date of Meeting: June 23th, 2008 Resolutions: (1) Observed and passed the Proposal for electing the president of the Fifth Board of Directors of the company; (2) Observed and passed the Proposal for electing the members of Special Committee of Board of Directors of the company; (3) Observed and passed the Proposal for employing the general manager and the secretary of Board of Directors; (4) Observed and passed the Proposal for employing deputy general manager, chief accountant, assistant of general manager; (5) Observed and passed the Proposal for the business integration of Haozhou Gujing Printing Co., Ltd. and Bozhou Gujing Packing Material Co., Ltd. 6. The Second Meeting of the Fifth Board of Directors Date of Meeting: July 21, 2008 Resolutions: Observed and passed the Report on the Rectification Condition of the Special Governing Activities of Anhui Gujing Distillery Co., Ltd. 7. The Third Meeting of the Fifth Board of Directors Date of Meeting: August 18, 2008 Resolutions: Observed and passed the Proposal on the Semiannual Report of 2008 and the Summary of Semiannual Report of 2008 8. The Fourth Meeting of the Fifth Board of Directors Date of Meeting: October 17, 2008 Resolutions: Observed and passed the Proposal on the Third Quarter Report of 2008. 9. The Fifth Meeting of the Fifth Board of Directors Date of Meeting: October 28, 2008 Resolutions: Discuss the matters concerning the asset replacement between Anhui Gujing Group Co., Ltd. 10. The Sixth Meeting of the Fifth Board of Directors Date of Meeting: November 19, 2008 Resolutions: 31 (1) Observed and passed the Proposal for Mr. Lv Jiazhao’s resignation of director and chief accountant. (2) Observed and passed the Proposal for nominating Mr. Ye Changqing as the by-election director of the Fifth Board of Directors. 10. The Seventh Meeting of the Fifth Board of Directors Date of Meeting: December 9, 2008 Resolutions: (1) Observed and passed the Proposal for reelecting the chief accountant; (2) Observed and passed the Proposal for the investment on the project relating to the technical innovation and auxiliary facilities in the Subsidiary Anhui Ruifuxiang Food Co., Ltd.. （II）Execution of Resolutions of Shareholders’ General Meetings by the Board of Directors During the report period, the Board of Directors of the Company passed the following resolutions strictly in accordance with the Companies Law, Securities Law, and the Articles of Association of the Company and in accordance with the resolutions and authorization: 1. Carefully carried out the matters concerning change of members of the Board of Directors; 2. Dealt with the matters concerning the resign and employment of Auditor. （III）Duty performance report of the Audit Committee 1. Work of the Audit Committee of the Board of Directors The Audit Committee of the Board of Directors of the company is composed of three independent directors and two other directors, among which Mr. Ding Yuan, an independent director with professional accounting background, is the convener. According to the regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange, the implementation rules of the Audit Committee of the Board of Directors of the company, the measures for the work of the independent directors of the company with regard to annual reports, and the working procedures of the Audit Committee of the Board of Directors, the Audit Committee of the Board of Directors of the company has mainly performed the following duties based on the principle of due diligence: (1) Audit the plan and relevant data of 2008 of the company, determine the time for auditing the financial report of 2008 of the company with Reanda Certified Public Accountants in charge of the annual accounting work of the company; (2) Audit the financial statement initially prepared by the company prior to participation of the certified public accountant, as well as issue written audit opinion; (3) With the participation of the certified public accountant of the company, the Audit Committee of the Board of Directors and the certified public accountant communicate with each other for the problems discovered during the auditing and for the time for submitting the audit report; (4) After the initial audit opinion is expressed by the certified public accountant of the company, the Audit Committee of the Board of Directors will audit the financial statement of 2008 of the company again and form written audit opinion; (5) After Reanda Certified Public Accountants has issued the annual audit report of 2007, the Audit 32 Committee of the Board of Directors will convene a meeting to sum up the auditing work of Reanda Certified Public Accountants for the company. 2. Audit opinion, annual auditing work summary report and relevant decisions of the Audit Committee of the Board of Directors (1) Audit opinion of the Audit Committee on the financial statement of the company prior to the participation of the certified public accountant: We have audited the financial statement submitted on Feburary 9, 2009 by the Finance Department of the company, including the balance sheet as of December 31, 2008, and the income and profit appropriation statement, statement of changes in stockholders' equity, cash flow statement and accounting notes for the 2008 then ended. We have focused on the authenticity and completeness of the accounting information in accordance with the relevant accounting standards and the relevant financial regulations of the company, focus is also put on whether the financial statement is prepared strictly in accordance with the new corporate accounting standards and the relevant financial regulations of the company. Through inquiring the financial personnel and management personnel of the company, reviewing the meeting minutes, account books and vouchers of the stockholders' conference, supervisory committee and relevant committee, and through analyzing significant financial date, we conclude that: All transactions of the company, which have been recorded, are true with complete information, proper accounting policies, and reasonable accounting estimates, while without any material misstatement and declaration failure; no major stockholder occupies the capital of the company; the company has no illegal guarantees and abnormal related transactions. Audit Committee of the Board of Directors February 9, 2009 (2) Audit opinion of the Audit Committee on the accounting statements of the company after the certified public accountant has issued the initial audit opinion: To Board of Directors of the company: We have audited the financial statement submitted on March 10, 2009 by the Financial Department of the company, which, through the issue of the initial audit opinion by the certified public accountant, is issued by the company, including the balance sheet as of December 31, 2008, and the income and profit appropriation statement, statement of changes in shareholders' equity, cash flow statement and the notes for the accounting statements for the fiscal year of 2008. We have focused on the authenticity and completeness of the above information in accordance with the relevant accounting standards and the relevant financial regulations of the company, whether the financial statement is prepared strictly in accordance with the new corporate accounting standards and the relevant financial regulations of the company, .and the succeeding events after balance sheet date. Through communicating with the certified public accountant on the initial audit opinion and reviewing account books and vouchers, we conclude that: All audit opinion should be maintained, the company has dealt with the succeeding events after balance sheet date strictly in accordance with the new corporate accounting standards, the financial statement of the company has 33 been prepared in accordance with the new corporate accounting standards and the relevant financial regulations of the company, and all significant aspects have reflected the financial position of the company as of December 31, 2007 and its financial performance and cash flow for the fiscal year of 2007. Audit Committee March 14, 2009 (3) Summary report of the Audit Committee on the auditing work of this year of Reamda Certified Public Accountants To Board of Directors of the company: We have audited the Auditing Plan of 2008submitted on November 22, 2008 by the Finance Department of the company, and have fully communicated and reached an agreement with the project leader of Reamda Certified Public Accountants on the above auditing plan on November 23, 2008. We consider the plan is made in detail and the responsibilities are well performed, which greatly ensures the smooth completion of the auditing work of 2008. Reamda Certified Public Accountants has assigned 8 auditors (including the project leader), to participate respectively on the last ten-day of November, 2008. On March 7, 2009, the on-site audit work of each company in the scope of the consolidated statement was completed. The project leader had a continuous and thorough communication with each of our audit committee members on the consolidation of statements, the issues on accounting adjustment, and the audit work discovered during auditing to be perfected. During the on-site auditing of the certified public accountant, our audit committee paid close attention for the problems discovered during the auditing. They always communicated with the certified public accountant by phone or meeting. They mainly communicated on the following points: � Whether financial statements are prepared in accordance with the new corporate accounting standards, the requirements of the securities supervision department and the relevant financial regulations of the company; � The observation of laws, regulations, the requirements of other department, the policies, instructions and other requirements of the management by the Finance Department; � Where the internal accounting control regulations of the company have been established self-contained; � If each department of the company cooperates with the certified public accountant to obtain is adequate and proper materials and data for auditing. The certified public accountant approved the above problems and issued the standard audit report of standard clean opinion on March 26, 2009. In our opinion, the certified public accountant has conducted the audit work strictly in accordance with the standards on auditing for certified public accountants. The audit time is sufficient, the auditors are reasonably allocated with competent practicing capacities, the audit report issued can fully reflect the financial status of the company as of December 31, 2008 and its financial performance and cash flow for the fiscal year of 2008, and the audit conclusion issued is in compliance with the actual situation of the company. 34 Audit Committee March 26, 2009 4. Resolution of the Audit Committee on engaging an accounting firm The Audit Committee of the Board of Directors of Anhui Gujing Distillery Co., Ltd. convened a meeting on March 26, 2008. There should be five participants, actually four present at the meeting. All members of the Audit Committee observed and passed the following proposals by signature: (1) Financial report of 2008 of the company; (2) Summary report on the auditing work of this fiscal year of Reamda Certified Public Accountants; (3) For Reamda Certified Public Accountants was the auditor of the company from 2006 to 2008 and for its good audit performance and integrity in 2008, Reamda Certified Public Accountants is proposed to be the auditor of the company in 2009. The aforesaid proposals shall be submitted to the Board of Director of the company for review. Audit Committee of the Board of Directors March 26, 2009 4. Report on the fulfillment of duties by Remuneration Committee The Remuneration and Appraisal Committee of the Board of the Directors is composed by five directors, including three independent directors, and Mr. Wu Cisheng, the independent director, acts the role of convener. During the report period, The Remuneration and Appraisal Committee of the Board of the Directors, according to the main financial indexes and the completion of operational objectives in 2008, the working scope and responsibilities of directors, supervisors and senior executives, and the completion of indexes concerning the performance appraisal system of directors, supervisors and senior executives, and in the light of the standard and procedure of performance appraisal, appraises the performance of directors, supervisors and senior executives, and puts forth their remuneration amounts and bonus in accordance with the appraisal result and remuneration policy, and finally reports to the board of directors to review. In accordance with the related laws and regulations of China Securities Regulatory Commission and Shenzhen Stock Exchange and the Company’s internal control system and Implementation Rules of the Remuneration and Appraisal Committee of the Board of the Directors, the Remuneration and Appraisal Committee hereby audits and presents its audit opinions on the disclosed remuneration of the directors, supervisors and senior executives in 2008: The Remuneration and Appraisal Committee of the Board of the Directors, according to the main governing scope, duty, significance of the directors, supervisors and senior executives and the remuneration level of related positions in the industry, prepares and checks the Company’s remuneration scheme, mainly including the standard and procedure of performance appraisal, main appraisal system, award and punishment system, and prepares the appraisal standards for directors (excluding independent directors), supervisors and senior executives, checks the performance of directors supervisors and senior executives, and conducts annual performance assessment in the 35 light of appraisal standard and remuneration policy. The Board of Directors has decided the remuneration standards for the paid directors, supervisors and senior executives according to the unified remuneration system and the annual performance appraisal results by the Remuneration and Appraisal Committee of the Board of the Directors. The disclosed remuneration of the directors, supervisors and senior executives in 2008 is conforming to the Company’s administration system for remuneration, and there is no violation to and discrepancy with the Company’s administration system for remuneration. VI. Distribution plan Audited by Reanda CPA, the net profits of the company in 2008 is RMB 33, 87.65 thousand Yuan. The distribution plan shall be submitted for the review and approval by 2008 General Meeting of Shareholders. 36 Chapter VIII． Report of the Board of Supervisors I. Meetings and resolutions of the Board of Supervisors All members of the Board of Supervisors of Anhui Gujing Distillery strictly followed the Company Law of the People’s Republic of China, the regulations on IPO, the Articles of Association, the Rules of Procedures of the Board of Supervisors, and executed its responsibilities as stated in the Articles of Association based on the principle of integrity to actively protect the interests of the company and all the shareholders. During the report period, the Board held meetings six times, and the meeting notices, procedures of convening and resolutions comply with the legal procedures. The details are shown as below: （I）The 9th Meeting of the Fourth Board of Supervisors Resolutions: 1. Observed and passed the Proposal on Working Report of the Board of Supervisors in 2007. 2. Observed and passed the Proposal on Final Financial Accounts Report in 2007. 3. Observed and passed the Proposal on the adjustment of the relevant projects and amounts of the disclosed balance sheet in the beginning of 2007. 4. Observed and passed the Draft on 2007 profit distribution and capitalization public reserves; 5. Observed and passed the proposals on Annual Report of 2007 and the Summary of Annual Report of 2007; 6. Observed and passed the Proposal on the employment of auditor in 2008 7. Observed and passed the Proposal on the First Quarter Report of 2008. 8. The proposal for reelection of the Fifth Board of Supervisors. (II) The 1st Meeting of the Fifth Board of Supervisors Resolutions: Observed and passed the proposal on reelecting Mr. Bu Lingtong as the chief supervisor of the Fifth Board of Supervisors. (III) The 2nd Meeting of the Fifth Board of Supervisors Resolutions: Observed and passed the Proposal on the Semiannual Report of 2008 and the Summary of Semiannual Report of 2008 (IV) The 3rd Meeting of the Fifth Board of Supervisors Resolutions: Observed and passed the Proposal on the Third Quarter Report of 2008 (V) The 4th Meeting of the Fifth Board of Supervisors Resolutions: 1. Observed and passed the proposal for Mr. Bu Lingtong’s resignation of the supervisor of the Board of Supervisors. 37 2. Observed and passed the proposal for that Ye Changqing abdicated the duty of Supervisor of the Company 3. Observed and passed the proposal for nominating Xu Peng and Lu Duicang as By-electing Supervisors of the 5th Board of Supervisors of the Company have been approved at the 4th meeting of the 5th Board of Supervisors. (V) The 4th Meeting of the Fifth Board of Supervisors Resolutions: The proposal for electing Mr. Xu Peng as Chief Supervisor of the Board of Supervisors of the Company has been approved as 5th Meeting of the 5th Board of Supervisors. II.Independent Opinions Expressed by the Board of Supervisors on Related Matters 1. Legal operation of the Company In the report period, the whole staff of the Board of Supervisors of the Company attended all Board Meetings of 2008 and the General Meetings of Shareholders of 2007. The Board of Supervisors, with the policy of “Legal administration, supervision, self-discipline, and standardization”, duly fulfills its supervision functions and carries out the effective supervision over the convening procedures, proposals, and resolutions of the general meetings of shareholders and Board Meetings, to protect the interests of all shareholders. In the opinion of the Board of Supervisors, the management of the Company strictly observes the provisions and regulations of the Company Law of the People’s Republic of China, the Securities Law of the People’s Republic of China, and Articles of Association. Each management system of the Company has been improved, ensuring the standard operation of the Company. In the report period, the directors, General Manager and senior managers of the Company earnestly performed their duties and neither did damage to the interests of the Company and shareholders nor breached the national laws and regulations and the Articles of Association. The Company has established better internal management system and the appropriation of the reserves for the depreciation of relevant assets and the related procedure are conducted in accordance with laws. 2. Audit of Financial Status of the Company In 2007, the standard Financial Audit Report 2008 of ANHUI GUJING DISTILLERY COMPANY LIMITED with clean opinions issued by Reanda Certified Public Accountants and BDO Reanda Certified Public Accountants Gold truly reflected the Company’s financial status as of Dec. 31, 2008 and business results of 2008, and the financial receipts and expenditure accounts are clear, and the accounting and accounts management is in accordance with the relevant regulations. 3. Audit of Utilization of Raised Fund The Company did not raise any fund, and no raised fund has been put into investment during the report period. All of the funds previously raised have been used up in the previous fiscal year and there is no raised fund left over to this period. 4. The acquisition and sales of assets During the report period, the pricing for acquisition and sales of assets is reasonable, no inside transaction or acts are found impairing the interests of the shareholders or causing the assets loss 38 5. Affiliated transactions The affiliated transactions incurred in the Company are mostly the routine affiliated transactions between the Company and controlling shareholders and their subsidiaries; the pricing was fair and reasonable and is in conformity with related laws, regulations and Articles of Association of the Company. The company performed the obligations in information disclosure according to the requirements of Shenzhen Stock Exchange and the Articles of Association of the Company. 39 Chapter IX． Substantial Matters 1. There are no substantial lawsuits or arbitration matters during the report period. 2. There is no bankruptcy or reforming matters during the report period. 3. The Company did not hold the stock equity of other listed companies or participate any investment activities on the stock equity of financial enterprises such as Commercial Bank, Security Company, Insurance Company, Trust Company or Futures Company during the report period. 4. Particulars about the assets purchase and sale and the progress of enterprises combination of the company during the report period. 5. There is no stock award plan and commitments during the report period. 6. Significant affiliated transactions (1) Routine affiliated transactions Details about the important routine affiliated transactions of the Company during the report period: In RMB (10,000) Purchasing products and services from the affiliated party Trade price Proportion accounting for Affiliated party Trade amount the amount of similar Payment transactions Anhui Gujing Comprehensive Market price 1.54 0.00% cash Service Co., Ltd. Bozhou Gujing Market price 3,397.70 8.23% cash Thermoelectricity Anhui JinYang Media Ltd Market price 4,484.80 10.86% cash Total - 7,884.04 19.09% The above affiliated transactions are submitted to the review at the 17th meeting of the 4th Board and are passed without the attendance of affiliated directors, and implemented upon the review and approval by 2007 General Meeting of Shareholders. All independent directors of the Company consent that the purpose of affiliated transactions is to ensure the normal production and operation of the Company, the operating procedures conforming to relevant standards, the parties involved observing fair market price and the trade price is reasonable. This transaction is beneficial to the Company and all shareholders thereof, without infringing upon the interest of shareholders holding few shares. The voting procedures on the affiliated transaction by the Board are conducted in accordance with the provisions of relevant laws and conform to the provisions of the PRC Companies Law, PRC Securities Law and the Articles of Association. (II) Except for the abovementioned routine affiliated transactions, the Company had no other substantial 40 affiliated transactions. 7. Commitments made by the Company and shareholders holding more than 5% of the shares of the Company Anhui Gujing Group Co., Ltd., a shareholder of the Company holding non-tradable shares, hereby promises that it will list or transfer its shares within 12 months upon the acquirement of right to float and that the proportion of sold numbers within 12 months shall not exceed 5% of the total shares of the Company, and shall not exceed 10 ％ within 24 months, upon the expiry of the period of sales limitation. 8. Particulars about resignation and employment of accountant firms As decided at 2008 General Meeting of Shareholders, the Company will renew the employment of Reanda Certified Public Accountants as the domestic and foreign auditors of the Company in 2009. During the report period, the Company paid a total amount of RMB700, 000 as audit fee to Reanda Certified Public Accountants. 9. Particulars about surveys and interviews accepted by the Company Observing the Guidelines of Shenzhen Stock Exchange for the Fair Information Disclosure of Listed Companies, the Company did not accept any survey from related institutions like Fund Company or from investors during the report period. When being interviewed or required by the investors, the Company did not disclose, reveal or leak any non-disclosed substantial information selectively, in private or previously to the special objective singly so that ensures the fairness of the information disclosure of the Company. The Company will, in the light of Guidelines of Shenzhen Stock Exchange for the Fair Information Disclosure of Listed Companies, establish and perfect the internal control system and procedure of information disclosure to ensure the fairness of information disclosure; set up the strict confidentiality system, formulate reception and promotion system, prepare registration system of information disclosure and publish the internal control system of information disclosure to do well in fair information disclosure. XI. Survey, communication and interview in the reporting period Information discussed and Date Place Method Object provided Get the information about the May 31, GF In the Company On-site survey production, operation and 2008 SECURITIES other aspects of the Company Get the information about the May 21, Guoyuan In the Company On-site survey production, operation and 2008 Securities other aspects of the Company Get the information about the July 9, 2008 Guoyuan In the Company On-site survey production, operation and Securities other aspects of the Company Get the information about the Guoyuan August 13, In the Company On-site survey production, operation and Securities 2008 other aspects of the Company October 8, Get the information about the Dongxing 2008 In the Company On-site survey production, operation and Securities other aspects of the Company 41 10. Substantial matters after the report period The 9th Meeting of the 5th Board of Directors was held on Feburary 25th, 2009, and observed and passed the proposal for replacing the 100% stock ownership of Anhui Ruifuxiang Food Co., Ltd. held by our company with 100% stock ownership of Shanghai Gujing Jinhao Hotel Management Co., Ltd. (former Shanghai Gujing Jinhao Real Estate Development Co., Ltd.) held by Anhui Gujing Distillery Co., Ltd.. The 9th Meeting of the 5th Board of Directors was held on March 27th, 2009, observed and passed the proposal for reelecting president of the company, Mr. Wang Feng’s resignation of President, and Mr. Cao Jie being elected as the president of the company. 11. There is no director, supervisor, or senior executive punished by Supervision Department in the report period 12. Particulars about the punishment and inspection &rectification by CSRC During the report period, there is no audit, administrative penalty, criticism with public notice, public censure or any other punishment on the Company, the Board of Directors or director by China Security Regulatory Commission. The Company was not inspected and rectified by China Security Regulatory Commission during the report period. 13. Other Substantial Events 1. The Company has no other substantial events undisclosed during the report period. 42 Auditors' Report REANDA SHEN ZI [2009] No.1107 To the Shareholders of Anhui Gujing Distillery Co., Ltd. We have audited the accompanying financial statements of Anhui Gujing Distillery Co., Ltd. (“the Company”) and its subsidiaries (“the Group”), which comprise the consolidated balance sheet as at December 31, 2008, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements The Company’s management is responsible for the preparation of these financial statements in accordance with the Enterprises Accounting Standards of China. This responsibility includes: (1) designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error; (2) selecting and applying appropriate accounting policies; (3) making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Chinese Certified Public Accountants' Auditing Standards. These standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amount and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been prepared in accordance with the requirements of the Enterprises Accounting Standards promulgated by the People’s Republic of China, and present fairly, in all material respects, the financial position of the Group as at December 31, 2008, and the results of its operations and its cash flows for the year then ended. Reanda Certified Public Accountants Co., Ltd. Certified Public Accountant Beijing, China Certified Public Accountant 27 March 2009 43 Consolidated Balance Sheet December 31, 2008 Name of the company: Anhui Gujing Distillery Company Limited Monetary unit : ( RMB) Yuan Assets Notes 2008/12/31 2007/12/31 Liabilities and Shareholders' equity Note 2008/12/31 2007/12/31 Current Assets: Current liabilities: Monetary Funds IX1 273,657,327.23 154,708,705.75 Short-term loans IX17 75,000,000.00 55,000,000.00 Tradable financial assets Tradable financial liabilities Notes receivables IX2 110,369,921.69 121,849,788.26 Notes payables Account receivables IX3 38,011,629.75 33,654,098.71 Account payables IX18 103,808,683.11 66,183,289.49 Advances to suppliers IX4 8,505,832.02 10,923,981.33 Advances from customers IX19 57,827,722.77 50,444,893.44 Interest receivables Payroll payables IX20 107,402,663.10 91,820,122.72 Dividends receivable Tax payable IX21 161,248,886.85 175,854,383.23 Other receivables IX5 13,159,669.93 16,432,963.49 Interest payables Inventories IX6 471,441,845.77 492,813,407.60 Dividend payables 22,452.59 20,119.51 Non-current assets due within one year Other account payables IX22 85,249,359.60 39,748,641.28 Other current assets Non-current liabilities due within one year IX23 11,000,000.00 13,000,000.00 Total current assets 915,146,226.39 830,382,945.14 Other current liabilities Non-current assets: Total current liabilities 601,559,768.02 492,071,449.67 Available-for-sale financial assets Non-current liabilities: Held-to-maturity investments Long-term borrowings IX24 25,000,000.00 36,000,000.00 Long-term account receivables Bond payable Long-term equity investments IX7 Long-term account payable Investment properties IX8 30,070,920.49 10,984,358.51 Special payable Fixed assets IX9 404,411,417.89 446,083,791.68 Deferred incomes IX25 9,930,000.00 7,530,000.00 Construction in progress IX10 75,221,939.28 37,234,859.66 Accrued liabilities Construction materials IX11 1,294,344.98 1,468,571.51 Deferred income tax liabilities Liquidation of fixed assets Other non-current liabilities Production biology assets Total non-current liabilities 34,930,000.00 43,530,000.00 Oil and gas assets Total liabilities 636,489,768.02 535,601,449.67 Intangible assets IX12 89,411,527.01 54,497,679.05 Shareholders' equity: Development expenses Share capital IX26 235,000,000.00 235,000,000.00 Goodwill Capital reserve IX27 532,491,668.70 532,662,319.68 Long-term deferred assets IX13 2,372,932.77 2,379,391.63 Less: inventory shares Deferred income tax assets IX14 1,599,652.25 1,307,621.68 Surplus reserve IX28 52,283,759.34 52,283,759.34 Other non-current assets Retained earnings IX29 60,135,327.85 25,558,460.48 Total non-current assets 604,382,734.67 553,956,273.72 Exchange difference of foreign currency financial statements translationto the holders of parent Equity attributable 879,910,755.89 845,504,539.50 company 3,128,437.15 3,233,229.69 Minority interests IX30 Total shareholders’ equity 883,039,193.04 848,737,769.19 Total assets 1,519,528,961.06 1,384,339,218.86 Total liabilities and shareholders’ equity 1,519,528,961.06 1,384,339,218.86 44 Consolidated Cash Flow Statement Consolidated Income Statement For the year end 2008 Name of the company: Anhui Gujing Distillery Company Limited Monetary unit : ( RMB) Yuan Item Notes 2008 2007 1. Total operating income IX31 1,378,901,587.66 1,201,356,596.91 Less: Operating cost IX31 848,484,078.60 813,099,107.00 Business taxes and surtax IX32 157,042,855.78 129,726,421.52 Selling expenses 144,406,242.05 114,547,532.40 Administrative expenses IX33 142,032,175.46 83,599,350.80 Financial costs IX34 4,773,441.57 6,792,777.31 Impairment loss of assets IX35 7,003,711.68 6,684,363.53 Add: gains from the fair value changes (The loss is listed beginning with “-“) Investment income (The loss is listed beginning with “-“) IX36 97,297.83 Including: the investment income from associated and joint ventures enterprises II. Operating profit 75,256,380.35 46,907,044.35 Add: non-operating income IX37 10,111,494.29 7,653,569.15 Less: non-operating expense IX38 8,270,378.47 2,582,540.83 Including: loss from disposal of non-current assets 7,734,963.08 1,915,328.31 III. Total profits (The loss is listed beginning with “-“) 77,097,496.17 51,978,072.67 Less: income tax expense IX39 42,623,088.26 18,157,333.04 IV. Net profits (the net loss is listed beginning with “-”) 34,474,407.91 33,820,739.63 Net profits attributable to equity holders of the parent company 34,576,867.37 33,876,546.32 Minority interests -102,459.46 -55,806.69 V. Earnings per share 1. Basic earnings per share 0.15 0.14 2. Diluted earnings per share 0.15 0.14 45 For the year end 2008 Name of the company: Anhui Gujing Distillery Company Limited Monetary unit : ( RMB) Items Notes 2008 Yuan 2007 I.Cashflowsfromoperatingactivities: Cashreceivedfromsalesofgoodsorrenderingofservices 1,549,138,274.46 1,348,030,210.12 Taxrefund 3,237,876.40 Cashreceivedrelatedtootheroperatingactivities IX41 56,046,393.31 33,261,474.79 Subtotalofcashinflowfromoperatingactivities 1,608,422,544.17 1,381,291,684.91 Cashpaidforpurchaseofgoodsandreceivedservices 746,164,622.71 758,357,764.70 Cashpaidtoandonbehalfofemployees 155,178,070.29 112,358,592.33 Taxpayments 334,121,369.61 248,594,397.16 Cashpaidtootheroperatingactivities IX42 165,197,812.48 141,873,241.79 SubtotalofCashoutflowfromoperatingactivities 1,400,661,875.09 1,261,183,995.98 Netcashflowarisingfromoperatingactivities 207,760,669.08 120,107,688.93 II.Cashflowfrominvestmentactivities: Cashreceivedfrominvestments Cashdividendsreceivedfrominvestment Netcashreceivedfromdisposaloffixedassets,intangibleassetsandotherlong-termassets 2,539,112.14 2,101,654.15 Netcashreceivedfromdisposalofsubsidiariesanotherbusinessunits Cashreceivedrelatedtootherinvestingactivities 2,400,000.00 7,530,000.00 Subtotalofcashinflowfrominvestingactivities 4,939,112.14 9,631,654.15 Cashpaidtoacquireandconstructfixedassets,intangibleassetsandotherlong-termassets 92,551,233.48 67,692,601.76 Cashpaidtoacquireinvestments Netcashpaidtoacquiresubsidiariesandotherbusinessunits Cashpaidrelatedtootherinvestingactivities SubtotalofCashoutflowfrominvestingactivities 92,551,233.48 67,692,601.76 Netcashflowarisingfrominvestingactivities -87,612,121.34 -58,060,947.61 III.Cashflowfromfinancingactivities: Cashreceivedfrominvestments Cashreceivedfromloans 75,000,000.00 95,000,000.00 Cashreceivedrelatedtootherfinancingactivities Subtotalofcashinflowfromfinancingactivities 75,000,000.00 95,000,000.00 Repaymentofloansordebts 68,000,000.00 119,100,000.00 Cashpaidfordividends,profits,orinterests 8,199,926.26 9,561,304.35 Cashpaidrelatedtootherfinancingactivities Subtotalofcashoutflowfromfinancingactivities 76,199,926.26 128,661,304.35 Netcashflowarisingfromfinacingactivities -1,199,926.26 -33,661,304.35 IV.Effectsoncashandcashequivalentsforthechangeofforeignexchangerates V.Netincreaseincashandcashequivalents IX44 118,948,621.48 28,385,436.97 Add:beginningbalanceofcashandcashequivalents IX44 154,708,705.75 126,323,268.78 VI.Endingbalanceofcashandcashequivalents IX44 273,657,327.23 154,708,705.75 46 ConsolidatedStatementofChangesinEquity Fortheyearend2008 Nameofthecompany:AnhuiGujingDistilleryCompanyLimited Monetaryunit:(RMB)Yuan ForYear2008 Items Equityattributabletotheholdersofparentcompany minorityinterests Totalequity Sharecapital Capitalreserve minus:Inventoryshares Capitalsurplus Retainedearnings others I.Balanceattheendofpreviousyear 235,000,000.00 532,662,319.68 52,283,759.34 25,558,460.48 3,233,229.69 848,737,769.19 plus(I)Changesofaccountingpolicies (II)Correctionoferrorsinprioryears II.Balanceatthebeginningoftheyear 235,000,000.00 532,662,319.68 52,283,759.34 25,558,460.48 3,233,229.69 848,737,769.19 III.Changesinequityintheyear -170,650.98 34,576,867.37 -104,792.54 34,301,423.85 (I)Netprofitfortheyear 34,576,867.37 -102,459.46 34,474,407.91 (II)Gainandlossdirectlyaccruedtoequity -170,650.98 -170,650.98 1.Netamountoffairvaluechangesofavailable-for-salefinancialassets 2.Netamountoffairvaluechangesincashflowarbitragetools 3.Incometaxeffectaccruedtoequityitems 4.Others -170,650.98 -170,650.98 Sub-totalofabove(I)and(II) -170,650.98 34,576,867.37 -102,459.46 34,303,756.93 (III)Capitalinvestmentbytheshareholders 1.Capitalinvestmentbyshareholdersintheyear 2.Amountcalculatedintoequitypaidinshares 3.Others (IV)Profitdistributionintheyear -2,333.08 -2,333.08 1.Withdrawalofsurplusreserve 2.Withdrawalofnormalriskprovisions 3.Distributiontoshareholders -2,333.08 -2,333.08 4.Others (V)Internalsettlementandtransferofshareholders'equity 1.Transferofcapitalreservetocapital 2.Transferofsurplusreservetocapital 3.Surplusreservemakesupfortheloss 4.Others IV.Balanceattheendofthisperiod 235,000,000.00 532,491,668.70 52,283,759.34 60,135,327.85 3,128,437.15 883,039,193.04 47 ConsolidatedStatementofChangesinEquity(continue) Fortheyearend2008 Nameofthecompany:AnhuiGujingDistilleryCompanyLimited Monetaryunit:(RMB)Yua n Previousyearamount Equityattributabletotheholdersofparentcompany Items Retainedearnin minorityinterests Totalequity Sharecapital Capitalreserve minus:Inventoryshares Capitalsurplus others gs I.Balanceattheendofpreviousyear 235,000,000.0 532,491,668.70 140,940,771.04 -96,975,097.54 3,479,806.87 814,937,149.07 0 plus(I)Changesofaccountingpolicies (II)Correctionoferrorsinprioryears II.Balanceatthebeginningoftheyear 235,000,000.0 532,491,668.70 140,940,771.04 -96,975,097.54 3,479,806.87 814,937,149.07 0 III.Changesinequityintheyear 170,650.98 -88,657,011.70 122,533,558.02 -246,577.18 33,800,620.12 (I)Netprofitfortheyear 33,876,546.32 -55,806.69 33,820,739.63 (II)Gainandlossdirectlyaccruedtoequity 170,650.98 -170,650.98 1.Netamountoffairvaluechangesofavailable -for-salefinancialassets 2.Netamountoffairvaluechangesincashflow arbitragetools 3.Incometaxeffectaccruedtoequityitems 4.Others 170,650.98 -170,650.98 Sub-totalofabove(I)and(II) 170,650.98 33,876,546.32 -226,457.67 33,820,739.63 (III)Capitalinvestmentbytheshareholders 1.Capitalinvestmentbyshareholdersintheye ar 2.Amountcalculatedintoequitypaidinshares 3.Others (IV)Profitdistributionintheyear 3,387,654.63 -3,387,654.63 -20,119.51 -20,119.51 1.Withdrawalofsurplusreserve 3,387,654.63 -3,387,654.63 2.Withdrawalofnormalriskprovisions 3.Distributiontoshareholders -20,119.51 -20,119.51 4.Others (V)Internalsettlementandtransferofshareho -92,044,666.33 92,044,666.33 lders'equity 1.Transferofcapitalreservetocapital 2.Transferofsurplusreservetocapital 3.Surplusreservemakesupfortheloss -92,044,666.33 92,044,666.33 4.Others IV.Balanceattheendofthisperiod 235,000,000.0 532,662,319.68 52,283,759.34 25,558,460.48 3,233,229.69 848,737,769.19 0 48 BalanceSheet December31,2008 Nameofthecompany:AnhuiGujingDistilleryCompanyLimited Monetaryunit:(RMB)Yuan Assets Notes 2008/12/31 2007/12/31 LiabilitiesandShareholders'equity Note 2008/12/31 2007/12/31 CurrentAssets: Currentliabilities: MonetaryFunds 160,876,265.53 52,029,679.84 Short-termloans 50,000,000.00 30,000,000.00 Tradablefinancialassets - - Tradablefinancialliabilities Notesreceivables 14,209,422.07 89,195,381.45 Notespayables Accountreceivables X1 150,378.38 2,100,162.56 Accountpayables 71,718,570.18 45,628,505.47 Advancestosuppliers 550,715.08 28,003,826.07 Advancesfromcustomers 189,710,231.69 283,209,087.22 Interestreceivables - - Payrollpayables 73,293,195.95 78,230,698.89 Dividendsreceivable - - Taxpayable 92,281,905.21 76,432,395.31 Otherreceivables X2 41,052,295.68 35,231,333.09 Interestpayables Inventories 376,484,276.87 427,642,345.12 Dividendpayables Non-currentassetsduewithinoneyear Otheraccountpayables 31,444,577.50 10,937,759.50 Othercurrentassets Non-currentliabilitiesduewithinoneyear 5,000,000.00 9,000,000.00 Totalcurrentassets 593,323,353.61 634,202,728.13 Othercurrentliabilities Non-currentassets: Totalcurrentliabilities 513,448,480.53 533,438,446.39 Available-for-salefinancialassets Non-currentliabilities: Held-to-maturityinvestments Long-termborrowings 5,000,000.00 10,000,000.00 Long-termaccountreceivables Bondpayable Long-termequityinvestments X3 536,185,003.12 375,501,927.38 Long-termaccountpayable Investmentproperties 20,750,561.30 Specialpayable Fixedassets 127,312,151.56 225,795,815.65 Deferredincomes 1,530,000.00 1,530,000.00 Constructioninprogress 10,997,676.98 35,201,316.15 Accruedliabilities Constructionmaterials 115,261.62 1,330,574.14 Deferredincometaxliabilities Liquidationoffixedassets Othernon-currentliabilities Productionbiologyassets Totalnon-currentliabilities 6,530,000.00 11,530,000.00 Oilandgasassets Totalliabilities 519,978,480.53 544,968,446.39 Intangibleassets 27,634,199.23 28,605,281.57 Totalliabilities Developmentexpenses Shareholders'equity: 235,000,000.00 235,000,000.00 Goodwill Sharecapital 518,090,990.16 518,090,990.16 Long-termdeferredassets Capitalreserve Deferredincometaxassets Less:inventoryshares 47,244,617.51 47,244,617.51 Othernon-currentassets Surplusreserve -3,995,880.78 -44,666,411.04 Totalnon-currentassets 722,994,853.81 666,434,914.89 Retainedearnings 796339,726.89 755,669,196.63 Totalassets 1,316,318,207.42 1,300,637,643.02 Totalliabilitiesandshareholders’equity 1,316,318,207.42 1,300,637,643.02 49 IncomeStatement Fortheyearend2008 Nameofthecompany:AnhuiGujingDistilleryCompanyLimited Monetaryunit:(RMB)Yuan Item Notes 2008 2007 1.Totaloperatingincome X4 612,287,698.18 490,805,264.51 Less:Operatingcost X4 458,720,889.08 433,934,614.45 Businesstaxesandsurtax 142,123,647.70 115,381,773.00 Sellingexpenses 15,150,345.76 8,247,230.18 Administrativeexpenses 67,691,325.03 43,854,469.25 Financialcosts 3,551,462.56 4,941,475.69 Impairmentlossofassets 1,975,286.38 4,886,938.32 Add:gainsfromthefairvaluechanges(Thelossislistedbeginningwith“-“) Investmentincome(Thelossislistedbeginningwith“-“) X5 113,734,331.84 129,134,548.89 Including:theinvestmentincomefromassociatedandjointventuresenterprises II.Operatingprofit 36,809,073.51 8,693,312.51 Add:non-operatingincome 5,895,183.77 3,091,566.10 Less:non-operatingexpense 2,033,727.02 1,807,780.72 Including:lossfromdisposalofnon-currentassets 1,884,551.03 1,542,234.60 III.Totalprofits(Thelossislistedbeginningwith“-“) 40,670,530.26 9,977,097.89 Less:incometaxexpense IV.Netprofits(thenetlossislistedbeginningwith“-”) 40,670,530.26 9,977,097.89 V.Earningspershare 1.Basicearningspershare 2.Dilutedearningspershare 50 CashFlowStatement Fortheyearend2008 Nameofthecompany:AnhuiGujingDistilleryCompanyLimited Monetaryunit:(RMB)Yuan Items Notes 2008 2007 I.Cashflowsfromoperatingactivities: Cashreceivedfromsalesofgoodsorrenderingofservices 622,689,134.70 547,986,014.34 Taxrefund Cashreceivedrelatedtootheroperatingactivities 22,941,563.68 1,439,627.61 Subtotalofcashinflowfromoperatingactivities 645,630,698.38 549,425,641.95 Cashpaidforpurchaseofgoodsandreceivedservices 301,929,951.51 374,891,939.16 Cashpaidtoandonbehalfofemployees 87,646,301.59 76,583,839.27 Taxpayments 179,568,549.73 154,416,017.61 Cashpaidtootheroperatingactivities 16,219,211.03 14,334,210.57 SubtotalofCashoutflowfromoperatingactivities 585,364,013.86 620,226,006.61 Netcashflowarisingfromoperatingactivities 60,266,684.52 -70,800,364.66 II.Cashflowfrominvestmentactivities: Cashreceivedfrominvestments Cashdividendsreceivedfrominvestment 112,305,752.38 129,134,548.89 Netcashreceivedfromdisposaloffixedassets,intangibleassetsandotherlong-termassets 51,756.00 1,804,763.98 Netcashreceivedfromdisposalofsubsidiariesanotherbusinessunits Cashreceivedrelatedtootherinvestingactivities 1,530,000.00 Subtotalofcashinflowfrominvestingactivities 112,357,508.38 132,469,312.87 Cashpaidtoacquireandconstructfixedassets,intangibleassetsandotherlong-termassets 21,336,624.09 7,956,434.86 Cashpaidtoacquireinvestments 48,917,498.12 Netcashpaidtoacquiresubsidiariesandotherbusinessunits Cashpaidrelatedtootherinvestingactivities SubtotalofCashoutflowfrominvestingactivities 70,254,122.21 7,956,434.86 Netcashflowarisingfrominvestingactivities 42,103,386.17 124,512,878.01 III.Cashflowfromfinancingactivities: Cashreceivedfrominvestments Cashreceivedfromloans 50,000,000.00 40,000,000.00 Cashreceivedrelatedtootherfinancingactivities Subtotalofcashinflowfromfinancingactivities 50,000,000.00 40,000,000.00 Repaymentofloansordebts 39,000,000.00 92,100,000.00 Cashpaidfordividends,profits,orinterests 4,523,485.00 5,212,372.92 Cashpaidrelatedtootherfinancingactivities Subtotalofcashoutflowfromfinancingactivities 43,523,485.00 97,312,372.92 Netcashflowarisingfromfinacingactivities 6,476,515.00 -57,312,372.92 IV.Effectsoncashandcashequivalentsforthechangeofforeignexchangerates V.Netincreaseincashandcashequivalents 108,846,585.69 -3,599,859.57 Add:beginningbalanceofcashandcashequivalents 52,029,679.84 55,629,539.41 VI.Endingbalanceofcashandcashequivalents 160,876,265.53 52,029,679.84 51 StatementofChangesinEquity Fortheyearend2008 Nameofthecompany:AnhuiGujingDistilleryCompanyLimited Monetaryunit:(RMB)Yuan ForYear2008 Items Notes Sharecapital Capitalreserve minus:Inventoryshares Capitalsurplus Retainedearnings Totalequity I.Balanceattheendofpreviousyear 235,000,000.00 518,090,990.16 47,244,617.51 -44,666,411.04 755,669,196.63 plus(I)Changesofaccountingpolicies (II)Correctionoferrorsinprioryears II.Balanceatthebeginningoftheyear 235,000,000.00 518,090,990.16 47,244,617.51 -44,666,411.04 755,669,196.63 III.Changesinequityintheyear 40,670,530.26 40,670,530.26 (I)Netprofitfortheyear 40,670,530.26 40,670,530.26 (II)Gainandlossdirectlyaccruedtoequity 1.Netamountoffairvaluechangesofavailable-for-salefinancialassets 2.Netamountoffairvaluechangesincashflowarbitragetools 3.Incometaxeffectaccruedtoequityitems 4.Others Sub-totalofabove(I)and(II) 40,670,530.26 40,670,530.26 (III)Capitalinvestmentbytheshareholders 1.Capitalinvestmentbyshareholdersintheyear 2.Amountcalculatedintoequitypaidinshares 3.Others (IV)Profitdistributionintheyear 1.Withdrawalofsurplusreserve 3.Distributiontoshareholders 4.Others (V)Internalsettlementandtransferofshareholders'equity 1.Transferofcapitalreservetocapital 2.Transferofsurplusreservetocapital 3.Surplusreservemakesupfortheloss 4.Others IV.Balanceattheendofthisperiod 235,000,000.00 518,090,990.16 47,244,617.51 -3,995,880.78 796,339,726.89 StatementofChangesinEquity 52 Fortheyearend2008 Nameofthecompany:AnhuiGujingDistilleryCompanyLimited Monetaryunit:(RMB)Yuan ForYear2007 Items Notes Sharecapital Capitalreserve minus:Inventoryshares Capitalsurplus Retainedearnings Totalequity I.Balanceattheendofpreviousyear 235,000,000.00 518,090,990.16 139,289,283.84 -146,688,175.26 745,692,098.74 plus(I)Changesofaccountingpolicies (II)Correctionoferrorsinprioryears II.Balanceatthebeginningoftheyear 235,000,000.00 518,090,990.16 139,289,283.84 -146,688,175.26 745,692,098.74 III.Changesinequityintheyear -92,044,666.33 102,021,764.22 9,977,097.89 (I)Netprofitfortheyear 9,977,097.89 9,977,097.89 (II)Gainandlossdirectlyaccruedtoequity 1.Netamountoffairvaluechangesofavailable-for-salefinancialassets 2.Netamountoffairvaluechangesincashflowarbitragetools 3.Incometaxeffectaccruedtoequityitems 4.Others Sub-totalofabove(I)and(II) 9,977,097.89 9,977,097.89 (III)Capitalinvestmentbytheshareholders 1.Capitalinvestmentbyshareholdersintheyear 2.Amountcalculatedintoequitypaidinshares 3.Others (IV)Profitdistributionintheyear 1.Withdrawalofsurplusreserve 3.Distributiontoshareholders 4.Others (V)Internalsettlementandtransferofshareholders'equity -92,044,666.33 92,044,666.33 1.Transferofcapitalreservetocapital 2.Transferofsurplusreservetocapital 3.Surplusreservemakesupfortheloss -92,044,666.33 92,044,666.33 4.Others IV.Balanceattheendofthisperiod 235,000,000.00 518,090,990.16 47,244,617.51 -44,666,411.04 755,669,196.63 53 Anhui Gujing Distillery Company Limited Notes to Financial Statements For the year of 2008 （All amounts are expressed in RMB Yuan unless otherwise stated） I General 1.1 Company’s history Anhui Gujing Distillery Company Limited(“the Company”) was registered in the People Republic of China on 30 May 1996. The company issue 60,000,000 domestic listed foreign shares (“B” shares) in June 1996 and 20,000,000 ordinary shares (“A shares) on September 1996, ordinary shares are listed in national and par value is one yuan per share. A share and B share are listed in Shenzhen Stock exchange. On 29 May 2006, a shareholder meeting was held to discuss and approval a program of equity division of A share, the program was implement in June 2006. After implementation, all shares are outstanding share, which include 147,030,800 shares with restrict condition on disposal, represent 62.57% of total equity, and 87,969,200 shares without restrict condition on disposal, represent 37.43% of total equity. The Company issued on 27 June 2007, 11,773,800 outstanding shares with restrict condition on disposal are listed in stock market on 29 June 2007. Up to 31 December 2007, outstanding shares with restrict condition on disposal are 135,257,000, representing 57.76% of total equity, the share without restrict condition are 99,743,000, representing 42.44% of total equity. On 18 July 2008, 11,750,000 ordinary shares with restrict condition on disposal held by the major shareholder Anhui Gujing Group Limited are release and listed in the stock market. Up to 31 December 2008, shares with restrict condition are 123,507,000, representing 52.56% of total equity, shares without restrict condition are 111,493,000, representing 47.44% of total equity. Legal representative of the Company: Wang Feng Registration address of the Company: Anhui Province Bozhou City Gujing Town Parent company of the company: Anhui Gujing Group Limited 1.2 The industry The Company is in the food manufacturing industry. 1.3 Scope of business The principal activities of the Company and its subsidiaries (“the Group”) are the manufacture and sale of distilled spirits, beer, red wine, fruit wine distilling facilities, packaging material, alcohol, bottles, feeds, carbon dioxide, foods, grease, and research and development of high-tech, biotechnology, agricultural and sideline products deep processing. 1.4 Main Change The company has no major changes within reporting period. II. Basis for preparation 54 The company and its subsidiaries maintain their accounting record and prepare their statutory financial statement based on the assumption of going concern, according to transaction and item’s substance and economic reality, and record follow the New Enterprise Accounting Standard which was issued by the Ministry of Finance on 15 February 2006, and Accounting policy and Accounting estimate that described in part four of this FS notes. III Declaration of Compliance with the Enterprise Accounting Standards The Company’s financial statements were prepared following the requirements of the Enterprise Accounting Standards promulgated by the Ministry of Finance; fairly and completely present the financial position, operation result and cash flows, and other relevant information of the company. IV Summary of Significant accounting policies and accounting estimates and methods of consolidation 4.1 Accounting Year The company employs a period of calendar days from January 1 to December 31 each year as accounting year. 4.2 Presentation currency The Company’s presentation currency is Renminbi (“RMB”). 4.3 Record-keeping basis and measurement characters The company is to use accrual basis as record-keeping basis for accounting recognition, measurement and reporting. The Company commonly measures accounting factors by historical cost method; if the determined accounting factor amount can be obtained and reliably measured, then replacement cost, net realizable value, net value and fair value method may be employed for some individual accounting factors. During the reporting period, with the fair value measurement and the changes are included in the current profits and losses of the financial assets and financial liabilities, available for sale financial assets and financial derivatives in the fair value measurement; Those inventories and fixed assets that payment is delayed beyond the normal credit conditions are measured by present value of purchase price; The inventory with impairment loss is measured by net realizable value, and other assets with impairment loss are measured by recoverable amount(which is higher of fair value or present value); any overage are measure by replacement cost. Other financial statements items are measured by historical cost. By using historical cost method, assets are measured on the basis of cash or cash equivalents paid, or the fair value of other consideration given to acquire an asset at the time of its acquisition.The liabilities are measured on the basis of amount actually received or asset amount for performing current obligations, or contract amount for performing the current obligations, or expected cash or cash equivalent amount paid to repay the debts in daily activities. There is no change in measure characters of financial statement items during the reporting period. 4.4 Standard of cash equivalents The cash equivalents is that cash equivalents of the company include investment with short term (it usually expires within three months from the purchase date), highly liquidity, easy to convert into known amount of cash, and low-risk of changes in value. 4.5 Foreign currency transactions 4.5.1 The company’s foreign currency transactions are translated into presentation currency at spot 55 exchange rates (Usually refers to the middle rate of the exchange price quotation that announced by The People's Bank of China) prevailing on the day in which the transactions take place. On balance sheet date, those foreign currency items to use in such currencies are converted at the rates prevailing on the balance sheet date. The exchange gains and losses arising on the exchange are included in profit and loss for the year. With historical cost measurement of foreign currency non-monetary items, the transaction is converted at the spot exchange rate, without changing its presentation currency amount. In the fair value measurement of foreign currency non-monetary items, converted at the spot exchange rate at that day when the fair value can be determined, the difference between amount after convert into presentation currency and the original presentation currency amount, as the changes in the fair value, in the current profits and losses. 4.5.2 Conversion of foreign currency financial statement 4.5.2.1 Assets and liability items in balance sheet are converted at the rates prevailing on the balance sheet date; items in shareholder’s equity are converted at the rates prevailing on date of transaction except retain earning. 4.5.2.2 Revenue and expense in income statement are converted at the rates prevailing on the transaction date The exchange differences caused by above method are disclosure in shareholder equity individually. 4.5.2.3 Cash flow statement is converted at the rates prevailing on the cash flow date. The exchange differences are disclosure individually in cash flow statement. 4.6 Financial Instruments: Recognition and Measurement 4.6.1 Confirmation of financial instruments When the Company became party of a contract of financial instruments, related financial assets or financial liabilities are recognized. 4.6.2 Classification of financial assets and financial liabilities Accordance with the investment purpose and economic substance of the ownership of financial assets , the company divided financial assets into four category, which including financial asset is measured in fair value that any change is through to profit or loss; Held-to-maturity investments; Loans and receivables; Available-for-sale financial assets. According to the economic substance those financial liabilities are divided into financial liability is measured in fair value that any change is through profit or loss and others. 4.6.2.1 Financial assets or financial liabilities at fair value through profit or loss: including held for trading financial assets or financial liabilities and designated by the company as at fair value through profit or loss. A financial asset or financial liability is classified as held for trading if it is: A. Acquired or incurred principally for the purpose of selling or repurchasing it in the near term; B. Part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; C. A derivative (except for a derivative that is a designated and effective hedging instrument, a derivative of financial guarantee contract, a derivative that settle by equity instrument, which the price of instrument could not be quoted in active market and the fair value could not measure reasonably) A financial asset or financial liability is classified as designated if it is: (i) The designation can be eliminated or significantly reduced the inconsistent situation or relate profit and loss cause by different measurement basis of financial assets and financial liabilities; 56 (ii) Company risk management or investment strategy has been enshrined in a formal written document that the financial assets portfolio, the financial liabilities portfolio, or the financial assets and financial liabilities portfolio are management in fair value-based and evaluation and report to key management person. 4.6.2.2 Held-to-maturity investments: are non-derivative financial assets with fixed or determinable payments and fixed maturity that company has the positive intention and ability to hold to maturity. Mainly include the company's management has a clear intention and ability to hold to maturity of fixed-rate bonds, floating-rate corporate bonds. 4.6.2.3 Receivables: are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Receivables of the Company mainly refer to the Company's sales of goods or rendering of services to form the accounts receivable and other receivables. 4.6.2.4 Available-for-sale financial assets: are those non-derivative financial assets that are designated as available for sale at initial recognized, or those asset are not measured in fair value based and through to profit and loss (a) loans and receivables, (b) held-to-maturity investments ,(c) financial assets. 4.6.2.5 Other financial liabilities: financial liabilities not divided into measurement in fair value base and through into profit and loss account. 4.6.3 Measurement of financial assets and financial liabilities When a financial asset or financial liability is recognized initially, the company shall measure it at its fair value. For financial assets or financial liabilities at fair value through profit or loss, transaction costs that are directly attributable to current profit and loss; for other types of financial assets or financial liabilities, transaction costs related to the amount included in the initial confirmation. Subsequent measurement of financial assets and financial liabilities: a. Financial assets or financial liabilities at fair value through profit or loss measured at its fair value, at balance sheet date, the changes of fair value are accounted for profit and loss in current period. b. Held-to-maturity investments, which shall be measured at amortized cost using the effective interest method, its termination confirmation, impairment or amortization profit or loss included in the profit and loss account. c. Loans and receivables, which shall be measured at amortized cost using the effective interest method, its termination confirmation, impairment or amortization profit or loss included in the profit and loss account. d. Available-for-sale financial assets, are measured with fair value, any changes of fair value of available- for-sale financial assets at the end of period are accounted for capital reserve (other capital reserve). Disposal of available-for-sale financial assets, the difference between consideration received and the book value of financial assets including into investment income; at the same time, turn out the original cumulative amount of corresponding part within the equity, included into investment profit. The impairment losses and Exchange differences of foreign monetary financial assets including into current profit and loss. Interest received and cash dividends received during the period held are recognized as investment income. e. Other financial liabilities, measured at amortized cost using the effective interest method. Its termination confirmation, impairment or amortization profit or loss included in the profit and loss account. f. The financial guarantee contract is not belong to financial liabilities designated by the company as at fair value through profit or loss, as well as the loan commitment is not belong to financial liabilities designated by the company as at fair value through profit or loss and below-market rate, After initial recognition, measured higher of：1、amount confirmed by ； Initial recognition amount minus the balance of the accumulated amortization refer to 57 . g. Fair value ： It’s the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. In a fair deal, the transaction should the two sides are continuing operations enterprises, do not intend to carry out the liquidation, a major reduction in scale of operation, or under adverse conditions is still trading. The existence of an active market of financial assets or financial liabilities, the quotation within the active market should be used to determine its fair value. If there is no active market, company should adopt valuation techniques to determine the fair value. h. The amortized cost of a financial asset or financial liability： it’s the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or unrecoverable. i. The effective interest method: It’s a method of using effective interest calculating the amortized cost of a financial asset or a financial liability (or group of financial assets or financial liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. Then calculating the effective interest rate, company shall estimate cash flows considering all contractual terms of the financial instrument (for example, prepayment, call and similar options) but shall not consider future credit losses. 4.6.4 Transfers and derecognize of financial assets 4.6.4.1 Derecognize financial asset if, and only if, meets one of the following three conditions: 1) the contractual rights to the cash flows from the financial basset expire; 2) the financial assets have been transferred, and the ownership of financial assets of almost all the risks and rewards transfer to other party; 3) The financial assets have been transferred, but the company neither retains the ownership of financial assets of almost all the risks and rewards, nor gives up control of the financial assets. 4.6.4.2 When derecognize condition of entire transferred assets has been satisfied, the differences between the amounts of following two items shall be accounted for profits and losses of current period. 1) The book value of transferred financial assets; 2) The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the shareholders’ equities (in the event that the financial asset involved in the transfer is a financial asset available-for-sale) 4.6.4.3 If the transfer of partial financial assets satisfies the conditions of derecognize the entire book value of the transferred financial asset shall, between the portion whose derecognize and the recognized portion (under such circumstance, the service asset retained shall be deemed as a portion of financial asset whose derecognize), be apportioned according to their respective relative fair value, and the difference between the amounts of the following two items shall be accounted for the profits and losses of the current period . 1) The portion book value derecognized; 2) The sum of consideration of the portion whose derecognize and the portion of accumulative amount of the changes in the fair value originally recorded in the shareholders’ equity which is corresponding to the portion whose derecognized ( in the event that the financial assets involved in the transfer is a financial assets available- 58 for-sale). 4.6.4.4 If the Company fails to satisfy the conditions of derecognize for transferred financial assets, it shall continue to recognize the entire financial assets to be transferred and shall recognize the consideration it receives as a financial liability. 4.6.5 Impairment of financial assets The Company assesses its financial assets at fair value, and those financial assets which changes of fair value are recognized in profit and loss accounts at the balance sheet date. If there is objective evidence that the one or several financial assets are impaired, the Company shall determine the amount of any impairment loss. 4.6.5.1 Accounts receivable At the end of the period, those accounts receivable and individual other receivable with amount more than 2,000,000 yuan is considered as individual significant amounts, One by one to carry out impairment test, if there is objective evidence that the accounts receivable have been impaired, the impairment loss shall be recognized based on the difference of the book values higher than the present value of future cash flows. At the end of the period, for those individual accounts receivable with not significant amounts, if there is objective evidence that the accounts receivable have been impaired, recognize impairment loss alone. For other individual the amount of non-significant receivables, classification primarily on the basis of account age, and those accounts receivable’s account age more than three year will be classified as non- significant in amount but in accordance with the characteristics of credit risk portfolio, the risk of the portfolio is high, others classified as other non-significant receivables. For those account receivables classified as non- significant in amount but in accordance with the characteristics of credit risk portfolio, the risk of the portfolio is high, as well as other individual non-significant receivable accounts that not impaired after impairment test, these account receivables will carry out age analysis by the company and consider the debtor’s actual business situation and cash flow to determine the recoverable amount of receivables, a reasonable estimate of bad debts. On the basis of the actual loss rate of receivable accounts, with same or similar credit risk characteristics of accounts receivable package in previous year, the Company also considers current situation and determine the percentage of bad debt provision. Age Percentage% Within 6 months 1 0.5 to1 year 5 1-2 years 10 2-3 years 50 Above 3 years 100 Subsidiaries within consolidation scope do not calculate bad debt provision. 4.6.5.2 Held-to-maturity investment At the balance sheet date, if there is objective evidence that the investment have been impaired calculate and recognize the impairment loss, based on the difference between the asset’s carrying amount and the present value of future cash flows. The measurement of impairment loss of held-to-maturity investment, please refer to impairment loss treatment of accounts receivable. 4.6.5.3 Available-for-sale financial assets At the balance sheet date, the Company will test and analyze the impairment situation of the available-for- sale financial assets, and analyze whether the fair value of the financial assets continued to decline. If there is objective evidence that available-for-sale financial assets have significant depreciated, or after considering 59 various relevant factors, this downward tendency is deemed as not temporary, the impairment loss shall be recognized, record into current profit and loss. When recognize the impairment loss, the previously recognized impairment loss within the fair value of equity shall be reversed, record into current profit and loss. In a subsequent period, objective evidence that fair value has increased to exist, and relevant the matters that after original impairment loss recognized, the previously recognized impairment loss shall be reversed. However, for those investments that no active market as well as whose fair value cannot be measured accurately, or those derivative financial assets that should be linked with the equity instruments and settlement must through pay the equity instruments, as well as does not have control, joint control or significant influence, there is no active market and fair value measurement is not reliable , all of those type of long-term equity investment, whose impairment loss occurred, cannot be reversed. 4.7 Inventory: Recognition and Measurement 4.7.1 Inventory of the Company refers to enterprises in the day-to-day activities of the holder for the sale of finished goods or merchandise, product that in the production process, and materials consumed in the production process or provision of services. Inventories category: raw materials, wrappage, work-in-process, finished goods. 4.7.2 Inventories stock physical count system：Perpetual inventory method. 4.7.3Valuation methods of inventories input and output： Inventories are calculated at actual costs when acquired. Inventories costs include purchasing costs, processing costs and other costs. The issue of inventories is calculated by the weighted average method. The company's inventories costs adopt planned cost in the day-to- day accounting, over carrying the cost differences at the ending period, and adjust planned cost to actual cost 4.7.4 Low-value consumable products and wrappage amortization method ： The low–value consumable supplies and wrappage are amortized at once. 4.7.5 Impairment loss of inventories At the balance sheet date, the evaluation criteria should base on the lower value between costs and net realizable value. When net realizable values are lower than costs, provision for impairment loss of inventories shall be made. Under normal circumstances, the Company provision impairment loss in according to individual inventory items, for large quantity and low-unit-price inventories, provision for impairment loss of inventories shall be made based on the category of inventories; for those inventories that relating to the same product line that have similar purposes or end uses, are produced and marketed in the same geographical area, and cannot be practicably evaluated separately from other items in that product line, their impairment loss provision shall be consolidated. When the circumstances that previously caused inventories to be written down below cost no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write-down is reversed (i.e. the reversal is limited to the amount of the original write-down) so that the new carrying amount is the lower of the cost and the revised net realizable value. The amount reversed recording into current profit and loss. Estimates of net realizable value: Those stocks used for directly sale, for example: finished goods 、 merchandise and materials used for sale etc., the net realizable value is referred to the estimated selling price minus the estimated selling expenses and related tax and fees in normal operating process. Those stocks need to process; the net realizable value is referred to the estimated selling price minus the estimated finished cost and estimated selling expenses and related tax and fees in normal operating process; the net realizable value of the quantity of inventory held to satisfy firm sales or service contracts is based on the contract price. If the sales contracts are for less than the inventory quantities held, the net realizable value of the excess is based on general 60 selling prices. 4.8 Long-term Equity Investment Long-term equity investment including the equity investments held by the company, who can able to exercise control, joint control or significant influence to the invested entity, or the company do not have control, joint control or significant influence on the invested entity, and there is no active market quotation, the fair value measurement should not reliable. 4.8.1 Initial measurement The Company separates the following two cases of long-term equity investment in the initial measurement: 4.8.1.1 Long-term equity investment obtained through business combinations: 1) For obtaining subsidiary under common control, the consideration cost can be cash payment, non- monetary assets transfer or taking over the subsidiary’s liability. Under this situation, the initial investment cost is carrying amount of shareholder’s equity of the subsidiary on the merger date. The difference between the carrying amount of the net assets obtained and initial investment cost of long-term equity investment shall be adjusted to capital reserve. If the capital reserve is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings. In the case of company issues equity securities as the consideration, the initial investment cost is carrying amount of shareholder’s equity of the subsidiary on the merger date. If the book value amount of the issued shares is deemed as the capital, the difference between the carrying amount of the issued shares and initial investment cost of long-term equity investment shall be adjusted to capital reserve. If the capital reserve is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings All direct expenses related to the merger, including the auditor fee, evaluation expense, legal service expense, etc will be accrued to the current profit and loss. 2) For obtaining subsidiary not under common control, the cost of long-term equity investment is fair value of assets paid or liabilities undertaken by the Company. Where the cost of a business combination exceeds the acquirer’s interest in the fair value of the bargainor’s identifiable net assets, the difference shall be recognized as goodwill, Where the cost of combination is less than the acquirer’s interest in the fair value of the bargainor’s identifiable net assets, after reassessment, the difference shall be recognized in profit or loss for the current period (non-operating income). The costs directly related to business combinations shall be included in the cost of business combinations (except issuing expenses of bonds and equity instruments). 4.8.1.2 Other types of long-term equity investment, accordance with the following principles to determine their initial investment costs: 1) Long-term equity investment, which is acquired by cash consideration, the actual cash payment amount will be deemed as the initial investment cost. The initial investment cost includes the direct expenses related to the long-term equity investment, taxes and other necessary expenses. But if the actual payment contains cash dividend that has not been received but has been announced, that should be accounted separately. 2) Long-term equity investment, which is acquired by issuing equity securities, the fair value of the issued equity will be deemed as the initial investment cost. 3) For the long-term equity investment made by the investors, the values agreed in the investment contracts or agreements will be deemed as the initial investment cost, except that the contracts or agreements provide that the values are not fair. 4) Long-term equity investment is acquired by exchange of non-monetary assets, if this transaction has commercial substance or the fair values of exchange assets can be reliably measured, the fair values of these assets and relevant taxes will be deemed as the initial investment cost; the difference between the fair values of the assets and book values will be record into the current profit and loss; if the non-currency asset exchange does 61 not satisfy these two conditions mention above, the book values of the assets and relevant taxes will be deemed as the initial investment cost. 5) Long-term equity investment, which is acquired by the debt restructuring, the fair values of the obtained equities will be deemed as the initial investment cost; the difference between the initial investment cost and book values of credit will be record into the current profit and loss. 4.8.2 Subsequent Measurement The cost method is employed to calculate the long-term equity investment of subsidiaries and will be adjusted in accordance with the equity method in the preparation of the consolidated financial statements. The company uses cost method for the following conditions: a long-term equity investment where the investing enterprise does not have joint control or significant influence over the investee, the investment is not quoted in an active market and its fair value can’t be reliably measured. When an investing enterprise can exercise joint control or significant influence over the investee, a long-term equity investment cost shall be treated as a recovery of initial investment cost. 4.8.2.1 When using cost method, cash dividends or profit distributions declared by the investee shall be recognized as investment income in the current period. However, investment income recognized by the investing enterprise shall be limited to the amount distributed to it out of accumulated net profits of the investee arising after the investment was made. Any cash dividends or distributions received in excess of this amount shall be treated as a recovery of initial investment cost. 4.8.2.2 When using equity method, after the investing enterprise has acquired a long-term equity investment, it shall recognize its share of net profits or losses made by the investee as investment income or losses, and adjust the carrying amount of the investment accordingly. Base on the investee’s book value of net profit, if the investee used inconsistent accounting policies with the company, the company shall adjust the net profits by the balances of the depreciation or amortization of the investee’s fixed assets and intangible assets measured by fair value on the investment acquired date, as well as adjust the net profits by the balance of the impairment losses of investee’s assets measured by fair value on the investment acquired date. Set off the internal transaction profit and loss between the company and the joint enterprises or the jointly-run enterprises, and then recognize the investment profit or loss on this basis. The internal transaction profit and loss between the company and the joint enterprises or the jointly-run enterprises, refer to the , belong to asset impairment loss is recognized in full. If an investor’s share of losses of an associate equals or exceeds its interest in the associate, the investor discontinues recognizing its share of further losses, after the investor’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the investor has incurred legal or constructive obligations or made payments on behalf of the associate; If the associate subsequently reports profits, the investor resumes recognizing its share of those profits only after its share of the profits equals the share of losses not recognized, restore long-term investment interests, and in the book value of the long-term equity investment. 4.9 Recognition and measurement of investment property: Investment property is held to earn rentals or for capital appreciation or for both. Investment property includes leased or ready to transfer after capital appreciation land use rights and leased buildings. Property investment is measured by cost model, according to its expected useful life and net residual rate on buildings and land-use right to calculate depreciation or amortization. The company’s expected useful life, net residual rate and annual depreciation rate of investment property as follow: The balance sheet date, there are indications that the investment property has impairment, refer to 14 of Notes IV Impairment of Asset. 62 Categories Expected residual rate% Expected useful life(years) Annual depreciation (amortization) rate % Building 3-5 8-35 2.7-12.1 Land 0 50 2 4.10 Recognize and Measurement of FixedAsset 4.10.1 Fixed asset are tangible asset that have characteristic simultaneity a. Are held for use in production or supply of goods or services, for rental to others, or for administrative purpose; b. Have useful lives more than one accounting year. 4.10.2 Fixed assets shall be recognized if they meet the following conditions: (a) The economic benefits related to fixed asset probably flows to the enterprise; (b) The cost of fixed asset may be reliably measured. The expenses relate meet above condition to fixed asset would be capitalized in the cost of asset, if not, it would be recognized expense in profit and loss account of that period. 4.10.3 Fixed assets shall be initially measured at cost. Asset acquire through financial lease would be measured in the lower of its fair value at the date of lease begin or the present value of the minimum lease payment, and depreciate according to the depreciation accounting policy. 4.10.4 The category and depreciation method of fixed assets Straight-line method is in used to calculate the depreciation of fixed assets (including finance leased fixed assets). The estimated useful lives, expected residual value and annual depreciation rate of various types fixed assets are listed as follows: Categories Expected residual rate% Expected useful life(years) Annual depreciation (amortization) rate % Building 3-5 8-35 2.7-12.1 Machinery and equipment 3-5 8-10 9.7-12.1 Transport equipment 3 8 12.1 Office equipment and others 3 8 12.1 4.10.5. Fixed asset would be treats as idle asset because of lack of working hours (except season reason) or nature disaster cause the asset unused for 6 months. The idle asset is depreciated as the same with other fixed asset that in the similar characteristic. 4.10.6. If there is evidence provide that the value of fixed asset are decreased on each balance sheet date, the method of provision for the decrease value would according the method of this notes in No.14 impairment of assets. 4.11 Construction in progress 4.11.1. The construction project should meet the condition of inflow of future economic benefit, the cost could be measured reliable simultaneity. The cost would be measured in the project is substantially ready for its intended use 4.11.2. Construction in progress is transferred to fixed assets when the project is substantially ready for its intended use. The project is in condition of ready for used but not performed the final account would be transferred to fixed assets in its estimate value, and adjust the value after performed the final account, but would not adjust depreciation value that have been depreciated. 4.11.3. If there is evidence provide that the value of construction project has impaired on each balance sheet 63 date, the method of provision for the impairment loss would according the method of this notes in No.14 impairment of assets. 4.12 Recognize and measurement of intangible asset 4.12.1 Intangible asset are recognized initially at cost. 4.12.2 Period of intangible asset that could bring future economic benefit inflow to company could determined reasonably according to the judgment according to reason of contract right or other legal right, condition in same industry, history experience, and demonstrate of expert would be recognize as finite useful years asset. Otherwise, the asset would be recognizing as infinite useful years asset. 4.12.3 To estimate the life of finite useful year asset would consider factor of: 1) The life cycle of the asset to produce product, and the information of similar asset; 2) The development of craftwork and technology, and the estimate of future development trend 3) The demand condition in market of the product produced by the asset; 4) The estimate action would be taken by competitor or potential competitor; 5) The expense expects to maintain the asset to bring future economic benefit and the ability of the company to pay for it. 6) The relate law restriction on control period of the asset or other similar restriction such as franchise, lease period. 7) Relation with other asset holds by company. 4.12.4 The intangible asset with finite useful years should be amortization on a systematic and rational basic according its economic benefit achievement plan. A straight line method would be used if the plan could not define. Intangible asset with infinite useful years would not amortize, but would conduct impairment test every year. 4.12.5 Conduct test to ability of the asset to bring future economic benefit on balance sheet date, and make provision for impairment of intangible asset according to method describe in Notes 14. 4.12.6 Internal organizational research expenses are accounted through profit and loss in current period; development costs which are recognized as intangible assets shall satisfy the following conditions: It is technical feasible for use or sales upon the completion of the intangible assets; it is intended for use or sales upon the completion of the intangible assets; the manner to provide that expect future economic benefits that are attributable the intangible assets including a market is exist for the asset or product of the asset or provide evidence of serviceable if asset are inside used; the entity should have enough technology, financial and other resources to support the completion of development, and have ability to use or sale the intangible assets; the cost of intangible asset can be measured reliably. 4.13 Long-term deferred expenses The Long-term deferred expenses are defined as those expenses in this year but should be allocated in flowing years. The amount transfer to the account are the amount actual paid, and allocate equally in project period. 4.14 Impairment of Asset 4.14.1 An impairment test should be implemented to the Goodwill whether impairment evidence has been provided. The entity should implement impairment test on fixed assets, construction in process, intangible assets, those investment properties and long term equity investment that measured in cost model, if any indication of impairment loss for those assets exists. If there is objective indication that the asset has impaired, recoverable amount of the asset shall be estimated base on the higher of fair value less disposal expense or present value of estimated future cash flow. When the recoverable amount of the asset is less than its carrying amount, the differences are recognized as impairment loss. Impairment loss should be calculated and recognized for the asset 64 individually. If it is not possible to estimate the recoverable amount of the individual asset, the entity shall determine the recoverable amount of the cash-generating unit to which the individual asset belongs. A cash- generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. 4.14.2 Assets may be impaired when the following indication exists a) During the period, an asset’s market valve has declined significantly more than would be expected as a result of the passage of time or normal use. b) Significant changes with adverse effect on the entity have taken place during the period, or will take place in near future, in the technology, market, economic or legal environment in which the entity operates or in the market to which an asset is dedicated. c) Market interest rate or other market rates on investment return have been increased during the period, and those increases are likely to affect the discount rate that are used in calculation of present value of future cash flows, resulting material decrease of recoverable amount of assets. d) There is indication that an asset is obsolete, outdated or physically damaged. e) There is indication that an asset is idle, and the entity plans to discontinue the usage of an asset, or plans to disposal of an asset before the previous expected date. f) Information of internal report of the entity indicates that the economic performance of an asset is lower than expectation, net cash flow the asset created or realized operating profits (or losses) are far below (or higher) than expected amount. 4.14.3 Recognize of cash-generating unit The entity determines cash-generating unit based on whether the identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Meanwhile, the entity should consider the method of administration, production and operation activities, and held-for-use assets or disposal decision. Once the cash-generating unit is determined, it shall keep consistence in each accounting period. Several assets would be recognize as a cash-generating unit accord with condition mention above if product (or other output) produce by those assets have an activity market whether part or all of the products (or other out) are provide interior. If cash flow of the cash-generating unit is affected by internal transaction price, the cash flow should be estimated in the best estimate amount in the light of a fair shake. The goodwill reflected in the consolidated financial statement shall not include the goodwill of subsidiary attributable to minority interests; However, for relative group asset, the goodwill attributable to minority interests shall be included, and the entity shall adjust the book values of the cash-generating unit, and compare the adjusted value with its receivable amounts, then to determine whether the cash-generating unit (including the goodwill) is impaired. If aforesaid cash-generating unit has impaired, the entity will deduct the share of minority interests proportionately from the loss, and then determine the impaired loss of goodwill attributable to parent company. 4.14.4 Impairment loss will not reverse once determined whether the value of asset increase in future period. 4.15 Employment Benefit 4.15.1Employment benefit Mainly include salary, bonus, allowance, employee welfares, society insurance, housing accumulation fund, employee education fee and other payment to acquire service provide by employee. The companies recognizes employment benefit as liability when employee is providing service during account period, and capitalize it in the cost of asset or treat as expense according to beneficiary. Amount of compensation arise from release employee from labor contract would transfer to current profit and loss account. 65 4.15.2 Dismiss compensation Dismiss compensation means compensate to employee because of release labor relation by the company. Compensation includes release before the end of contract and without agreement with employee; encourage employee unconstraint accept cut down; the internal retirement plan implement by the company. (1) The principal to recognize dismiss compensation i. The company has establish a formal release plan or announce a proposal to unconstraint accept cut down, and is going to conduct. ii. The plan or proposal could not withdraw by the company unilateral. (2) Measurement method of compensation i. To the plan that employee could not refused, accrued payroll according to the plan. ii. To the proposal of unconstraint accept cut down, accrued payroll according to the proposal on a predict number of employee would accept the proposal. (3) Measurement standard of compensation i. To the plan or proposal implement by stages, recognize accrued liability that produced by the plan or proposal in that stage and reckon in administration fee of the period. ii. For the internal retirement plan, recognize accrued liability equal to amount that the company would pay salary and society insurance to employee from the date of stop provide service to the date of normal retirement date according to the plan, and reckon in administration fee of current period. 4.16 Recognize and measurement of shares-based payment The types of shares-based payment of the company are: cash-settle, equity-settle. 4.16.1Cash-settle The measurement of cash-settle is according with the fair value of liability undertake by the company, which is calculated base on the company’s share or other equity instrument. The value of cash-settle shares-based payment that could exercise immediately after award would be reckoned to relate cost or expense, and increase liability corresponds to it. On each balance sheet date, a best estimated of situation of exercise cash-settle right that with waiting-period should be undertaken, and reckon cost or expense and increase liability which is on the base of service award by the company, according to the fair value of company’s liability. 4.16.2Equity-settle The measurement is base on the fair value of the equity instrument. The value of equity-settle payment that could be exercised immediately after award would be reckoned in relates cost and expense and capital reserves. On each balance sheet date, a best estimated of amount of exercise equity-settle should be undertaken, and reckon in cost or expense and capital reserves which is on the base of service award by the company, according to the fair value of company’s liability. 4.17 Accrued liabilities 4.17.1 Recognize of accrued liabilities: Obligation with contingency factor such as external hypothecate, lawsuit or arbitrage in dispute, guarantee on quality of product, cut-down plan, loss of contract, recombine obligation, obligation on abandon fixed asset, and meet the follow condition simultaneously would determine as liabilities: A. This obligation is current obligation of the company; and, B. The performance of this obligation will probably cause economic benefits outflow of the company; and, 66 C. The amount of this obligation can be reliably measured. Loss contracts and restructuring obligations of the company meet the above conditions shall be recognized as accrued liabilities. 4.17.2 Measurement of accrued liabilities Accrued liabilities would be measured initial according to the optimum evaluation of outflow of economic benefit if the company perform relate obligation that consider risk, incertitude, time value of currency of contingency factor. Discount future cash flow to present value to determine the optimum evaluation if the time value of currency has great impact. On balance sheet date, check the carry amount of accrued liabilities, and make adjustment to carry amount to reflect the optimum evaluation. The increase amount in carry amount of accrued liabilities cause by time process would be determined as interest fee. 4.17.3 Optimum evaluation of accrued liabilities If the necessary payments have scopes, the optimum evaluation shall be determined based on the average amount between the upper and lower limit amount of scope ; if the necessary payments do not have such scopes, then the optimum evaluation shall be determined in the following method: (a) If the contingent event is involved in an individual project, the optimum evaluation amount will be determined base on the most possible amount; (b)If the contingent event is involved more than one project, the optimum evaluation amount shall be determined base on possible amount and occurrence probability. In case of all or part of payments about the confirmed liquidation liabilities are expected to be compensated by the third parties or other parties, and the compensation amounts are surely received, then such amounts shall be separately recognized. The confirmed compensation amounts shall not exceed book values of confirmed liabilities. 4.18 Revenue recognition 4.18.1 Sale of goods Revenue from the sale of goods shall be recognized when all of the following conditions are satisfied: a. the entity has transferred the significant risks and reward ownership of goods to the buyer; b. the entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over goods sold c. the amount of revenue can be measured reliably; d. relate economic benefit is probably inflow to the enterprise; e. The associated costs incurred or to be incurred can be measured reliably. 4.18.2Rendering of services 4.18.2.1 The entity recognize revenue from rendering of service when outcome of rendering of service can be measured reliably at balance sheet date, and adopt percentage of completion method in recognition of revenue. The method depends on schedule of complete to determined revenue and expense. The outcome of service could be measure reliably must meet flow condition; a) the amount of revenue can be measured reliably; b) relate economic benefit is probably inflow to the enterprise; c) the complete of schedule could be determined reliably; d) the associated costs incurred or to be incurred can be measured reliably; 4.18.2.2 When the outcome of rendering of service cannot be measured reliably at balance sheet date: If compensation that relate to cost incurred are predicted to be received, recognize revenue extend to cost incurred and carry forward the cost in same amount; otherwise, through those cost incurred that without compensation in 67 predict to profit and loss account and without recognize revenue. 4.18.3 Transfer of asset use right When the economic benefits related to the transaction are probably flow into enterprise and the amounts can be reliably measured, the entity shall recognize them as income from the transfer of asset use right under following situations: (a) The amount of interest income is determined by the capital usage period and actual interest rate. (b) The amount of royalties is determined by the period and method of charging as stipulated in the relevant contract or agreement. 4.19 Recognize and Measurement of Government grants Government grants shall be recognized at fair value on the conditions that the entity can receive the grant and comply with the condition attached to the grant. Government grant will initial measure in amount received if the grant is currency-asset, if not, the grant will measure either in its fair value when the fair value could be obtained or nominal amount. A government grant related to an asset shall be recognized as deferred income, and evenly amortized to profit and loss over the useful lives of the related asset. Unamortized amount would be recognized in profit and loss account when the asset is sale, convey, scrap, derogation before its employee life. For government grant related to income, if the grant is a compensation for related expenses or losses to be incurred in subsequent periods, the grant shall be recognized as deferred income, and recognized in profit and loss over the periods in which the related cost are recognized. 4.20 Capitalization of borrowing costs 4.20.1 Recognition of capitalization of borrowing costs Borrowing costs that are direct attributable to construction, purchase and production of assets and comply with capitalization conditions, shall be capitalized and accounted to costs of relate assets; otherwise, borrowing costs shall be recognized as expenses when incurred and accounted through in profit and loss in current period. Assets which comply with the capitalization conditions refer those assets such as fixed assets, investment properties and inventories etc that require a long time of construction and production activities before being intended for use or for sales 4.20.2 Capitalization period The capitalization of borrowing costs shall satisfy the following conditions: 1. The capital expenditures have been incurred; and, 2. The borrowing costs have been incurred; and, 3. Activities relating to acquisition, construction or production that are necessary to make the assets being intended for use or sales have been launched. 4. Capitalization of borrowing costs shall be suspended during periods in which acquisition, construction or production of assets is interrupted abnormally, and is interrupted for a continuous period of three months. Capitalization of borrowing costs also shall be suspended when the acquisition, construction or production of assets are prepared for intended use or sales. 4.20.3 Measurement of capitalized borrowing costs During the capitalization period, the amount of interest to be capitalized for each accounting period shall be determined as following: a) for a specific purpose borrowing, the amount of interest to be capitalized shall be the actual interest expenses incurred for the period less temporary deposit interests or investment income; the amount of assistant 68 expense for a specific purpose would be capitalized that before the acquisition, construction or production of asset are prepared for intended use or sales, the amount after would be reckoned in current profit and loss account; b) Where funds are borrowed under general purpose, the entity shall determine the amount of interest to be capitalized by applying capitalization rate to weighted average of the excess amount between cumulative expenditures on the asset and the amount of specific-purpose borrowings. The capitalization rate shall be weighted average of the interest rates applicable to the general-purpose borrowings; the assistant expense for the general purpose borrowing would be reckoned in current profit and loss account; c) During the capitalization period, interest to capitalized would not exceed total amount of interest of relate borrowing in every financial year; exchange margin of foreign currency borrowing and interest would capitalized in capitalization period. 4.21 Income taxes 4.21.1The Company uses deferred income tax liability method in calculation of income taxes. 4.21.2According the deductible temporary differences between carry amount of asset and liability and its tax base, apply tax rate to determine deferred income tax asset or liability according the predict period of recover asset or discharge liability. 4.21.3 Deferred income tax assets Deferred income tax assets shall be recognized according to deductible temporary differences to the extent that is probable that tax profits will be available against which the deductible temporary differences can be utilized, but deferred income tax asset arise from initial recognize of asset and liabilities in transaction that have character listed below would not recognized: 1) The transaction is not business combination; 2) at the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible loss) For deductable temporary differences associated with investment in subsidiaries, associates, and interests in jointly controlled enterprises, recognize as deferred income tax asset if the temporary difference could be reverse in the foreseeable future and it is probably award the tax profit to again the difference. 4.21.4 Deferred income tax liabilities Deferred tax liabilities shall be recognized for all taxable temporary differences, except to the extent that the deferred tax liabilities arise from: a) the initial recognition of goodwill; b) the transaction is not a business combination, at the time of the transaction, it affects neither accounting profit nor taxable profit (or deductible loss) For temporary differences associated with investment in subsidiaries, associates, and interests in jointly controlled enterprises, the investing enterprise is able to control the timing of the reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the foreseeable future. On balance sheet date, check the carry amount of deferred tax asset; decrease the carry amount if it is not probably to obtain enough tax profit to again the difference in the foreseeable future, and set-of the decrease amount when probably to obtain enough tax profit. 4.22 Basis of Consolidation 4.22.1 Consolidation Scope The consolidated financial statements prepared are in accordance with the No. 33 Enterprise Accounting Standards – Consolidated Financial Statement issued in February, 2006. The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (“its 69 subsidiaries”). Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. If there is evidence provide that the invested company is not control by invest company, the invested company would not in consolidation scope. 4.22.2 Bought and sale the share of subsidiaries The date of acquire or disposal the right of share of subsidiaries is recognized at the effect date of transfer material risk or reward. The consolidation profit and loss statement and cash flow statement has include the result of management and cash flow of subsidiaries(not in the same control) before disposal or after acquire the share; for the subsidiaries in the same control from business combination, the management result and cash flow has been included in consolidation profit and loss account and cash flow statement from begin of current period to consolidation date and disclose in statement individual, the compare amount in consolidation statement has been adjust correspond to it. If parent company acquires new equity of subsidiaries, on the date of work out consolidation statement, adjust shareholder reserve according to margin between the values of long-term equity investment and proportion of net asset of subsidiaries, adjust retain earning if the reserve is not enough to offset. 4.22.3 Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group. 4.22.4 Consolidation method All significant intercompany transaction and balances between group enterprises are eliminated on consolidation. The interest of minority shareholder in consolidated subsidiary’s net asset would disclose in consolidation statement individually. Decrease minority interest if minorities liable to the loss of the subsidiaries that allocate to minorities, otherwise, the company would bear the loss of exceeds. V Change in accounting policies, accounting estimates and correct previous accounting period errors: There are no changes in accounting policies estimates and no accounting errors in accounting period of 2008. VI Taxation The type of tax and tax rate for the company are list below: Tax type Tax base Rate% VAT Sale of product and raw material 17 Business Tax Business turnover 3、5 from 20 based on price or 1rmb/kg based on Consumption tax sales amount and quantity of taxable product quantity City maintenance VAT payable, business tax, consumer tax, Tax that shall 5 construction tax not be exempt from tax allowance and deduction VAT payable, business tax, consumer tax, Tax that shall Education Surcharge 3 not be exempt from tax allowance and deduction 70 Local education VAT payable, business tax, consumer tax, Tax that shall 1 surcharge not be exempt from tax allowance and deduction Corporation Tax Taxable profit 25 According to Wan Guo Shui Han [2007] No.265 approval issued by State Tax Administration of Anhui province, the Company’s subsidiary Hefei Gujing Trade Co., Ltd is belong to newly establish enterprise in undeveloped area which is defined by government, and its income tax is exempt from January 1, 2007 to December 31, 2009. According to Ministry of Finance and State Tax Administration’s ,[2008] No.1, subsidiary Hefei Gujing Trade Co would not enjoy those policies, the corporation tax rate are 25%. VII Enterprise consolidation and consolation statement scope 7.1 Information of subsidiaries in consolidation scope Registration Nature of Registered Actual investment Holding Voting rights Business scope NO Company name location business capital(0,000) amount(0,000) proportion% proportion% Wholesales of distilled spirit, construction 1 Bozhou Gujing Sales Co., Ltd Bozhou, Anhui Business trading 8,486 8,486 100 100 materials, feeds and assistant materials sale of distilled spirit, general merchandise, 2 Shanghai Gujing Trade Co., Ltd Shanghai Business trading 1,000 1,000 100 100 construction material foods Department stores, wine, hardware, and 3 Hefei Gujing Trade Co., Ltd Hefei, Anhui Business trading 1,000 1,000 100 100 wholesale of construction materials 4 Anhui Old Big Eight Distillery Co., Ltd Bozhou,Anhui Business trading 3,000 2,800 93.33 93.33 Wholesale or retail of wine products Production and sale of flour and farina, self- 5 Anhui Ruifuxiang Food Co., Ltd Bozhou,Anhui Manufacture 26,500 26,500 100 100 operation or agency of permit merchandise and technology export business Provision of transportation services to the 6 Bozhou Gujing Transportation Co., Ltd Bozhou,Anhui transportation 695 695 100 100 Company 7 Bozhou Gujing Glass Co., Ltd Bozhou,Anhui Manufacture 6,646 6,646 100 100 Manufacture and sale of glass products 8 Bozhou Gujing Waste Reclamation Co., Ltd Bozhou,Anhui Recycled 100 100 100 100 Collect and sale of recycled glass bottle Diet, accommodation, parking, wholesale and retail 9 Gujing Hotel Bozhou Ltd Bozhou,Anhui Hotel business 1,414 1,312 92.77 92.77 of merchandise, Production and sale of printing and packaging 10 Bozhou Gujing Pairuite Packaging Co., Ltd Bozhou,Anhui Manufacture 5,000 5,000 100 100 material 7.2 Change in consolidation scope The company’s subsidiaries Bozhou Gujing Printing Co Ltd and Bozhou Gujing Packaging Co., Ltd was withdraw from consolidation scope in this year, and a new subsidiaries of Bozhou Gujing Pairuite Packaging Co., Ltd(Pairuite) are included in the scope; Subsidiary Anhui Gujing Wild Sun Sales Co(Wild Sun)., Ltd has completed company liquidation, the net assets of Wild Sun after liquidation that allow to be allocated to shareholders are RMB 919,138.23, the Company has received RMB 919,138.23.procedure of withdrew of industrial and commercial registration, and tax registration has completed during the reporting period, Wild Sun are not included in the financial statements consolidation scope, however, the incomes and expenses, and profits are included in consolidated income statement before liquidation. 7.3 Subsidiary obtained by consolidation There is no subsidiary obtained by under same control consolidation enterprise. 71 VIII Joint-venture enterprise or associate enterprise There is no joint-venture enterprise or associate enterprise IX Main item in Consolidation Statement 9.1 Monetary fund Balance on 2008-12-31 Balance on 2007-12-31 Items Original currency Exchange rate Original currency Exchange rate Original currency Exchange rate Cash on hand CNY 280,988.07 1.0000 280,988.07 56,208.10 1.0000 56,208.10 Subtotal 280,988.07 56,208.10 Cash in bank 款 CNY 273,376,339.16 1.0000 273,376,339.16 154,651,732.20 1.0000 154,651,732.20 USD 0.00 6.8346 0.00 104.79 7.3046 765.45 Subtotal 273,376,339.16 154,652,497.65 Total 273,657,327.23 154,708,705.75 The ending balance is increased 76.89% compare to the beginning balance because of increase in sales. 9.2 Notes receivable 9.2.1 Notes receivable Items Carry amount on 2008-12-31 Carry amount on 2007-12-31 bank acceptance notes-no pledge 110,369,921.69 121,849,788.26 Total 110,369,921.69 121,849,788.26 9.2.2 Notes endorse to other parties but nor reach convert date up to 31 December 2008: Type of notes Period of convert amount bank acceptance notes-no pledge 2009.1.16—2009.6.20 75,908,647.92 Total 75,908,647.92 9.3 Account receivable 9.3.1 Account receivable Balance on 2008-12-31 Balance on 2007-12-31 Item Balance Proportion% Bad debit Net value Balance Proportion% Bad debit Net value provision provision Individual transaction with 10,566,286.59 26.41 105,662.87 10,460,623.72 0.00 0.00 0.00 0.00 significant amount Individual transaction with not so significant amount but 1,026,183.82 2.56 1,026,183.82 0.00 1,441,579.76 4.01 1,441,579.76 0.00 significant recoverable risk Other transaction with no 28,415,944.46 71.03 864,938.43 27,551,006.03 34,507,574.52 95.99 853,475.81 33,654,098.71 significant amount Total 40,008,414.87 100.00 1,996,785.12 38,011,629.75 35,949,154.28 100.00 2,295,055.57 33,654,098.71 72 The standard of divide individual transaction with significant amount and individual transaction with not so significant amount but significant recoverable risk are detail in 5 of No 6 of Notes IV 9.3.2 Provision for individual transaction with significant amount Name amount Proportion for provision% Reason Anhui Shuanglun Wine Ltd 5,979,420.36 1.00 According to Provision Police of Company JiangSu Shuanggou Wine Co., 2,533,080.99 1.00 According to Provision Police of Company Anhui FengYuan Firm Wuwei pharmaceutical factory 2,053,785.24 1.00 According to Provision Police of Company Total 10,566,286.59 9.3.3 Age analysis Balance on 2008-12-31 Balance on 2007-12-31 Age Balance proportion% Bad debit Net value Balance Proportion% Bad debit Net value provision provision Within 1 year 36,622,978.43 91.54 541,175.47 36,081,802.96 31,081,307.10 86.46 412,471.93 30,668,835.17 1-2 years 1,875,501.21 4.69 187,550.12 1,687,951.09 3,178,839.60 8.84 317,289.96 2,861,549.64 2-3 years 483,751.41 1.21 241,875.71 241,875.70 247,427.82 0.69 123,713.92 123,713.90 Above 3 years 1,026,183.82 2.56 1,026,183.82 0.00 1,441,579.76 4.01 1,441,579.76 0.00 Total 40,008,414.87 100.00 1,996,785.12 38,011,629.75 35,949,154.28 100.00 2,295,055.57 33,654,098.71 9.3.4 The write-off accountable receivable this year is 989,386.25, the large amount is detail as: Name Write-off amount Nature Reason Relate party(Y/N) Unrecoverable because of the company Sihuasantaizi Food Ltd 794,229.19 Sales liquidation N Total 794,229.19 9.3.5The amount due from shareholder who own 5% or more than 5% of voting right are Name Carrying amount on 2008-12-31 Carrying amount on 2007-12-31 Gujing Group 55,835.00 80,328.00 9.3.6 Top five account receivable Balance on 2008-12-31 Balance on 2007-12-31 Items Amount proportion% Amount proportion% Within 1 year 14,301,232.07 35.75 7,962,594.62 22.15 Proportion of top fve 14,301,232.07 35.75 7,962,594.62 22.15 9.4 Advance to suppliers 9.4.1 Age analysis Aged Balance on 2008-12-31 Proportion % Balance on 2007-12-31 Proportion % Within 1 year 8,505,832.02 100.00 10,923,981.33 100.00 Total 8,505,832.02 100.00 10,923,981.33 100.00 9.4.2 Advance with larger amount in year end Name Amount Nature 73 Hangzhou Turbine Ltd 2,850,000.00 Prepaid amount of equipment Wuxi Ruipu Machinery and Equipment Ltd 1,836,000.00 Prepaid amount of equipment Shandong Jinan Generators Equipment Factory 624,000.00 Prepaid amount of equipment Total 5,310,000.00 9.4.3 There is no amount due from shareholder who own 5% or more than 5% of voting right up to 31 December 2008 9.5 Other Receivable 9.5.1 Other Receivable Balance on 2008-12-31 Balance on 2007-12-31 Items Amount Proportion% Bad debit Net value Amount Proportion% Bad debit Net value provision provision Individual transaction 78,260,384.09 83.82 75,125,019.20 3,135,364.89 79,993,800.00 85.53 74,989,938.00 5,003,862.00 with significant amount Individual transaction with not so significant 2,364,868.65 2.53 2,364,868.65 0.00 245,190.73 0.26 245,190.73 0.00 amount but significant recoverable risk Other transaction with 12,745,451.92 13.65 2,721,146.88 10,024,305.04 13,283,975.71 14.21 1,854,874.22 11,429,101.49 no significant amount Total 93,370,704.66 100.00 80,211,034.73 13,159,669.93 93,522,966.44 100.00 77,090,002.95 16,432,963.49 The standard of divide Individual transaction with significant amount and individual transaction with not so significant amount but significant recoverable risk are detail in 4 of no 6 of Notes IV On 10 Oct 2008, the Company’s subsidiary Bozhou Gujing Transportation Co., Ltd (“BGT”) signed agreement that to disposal of other receivable that linked to 161 vehicles in price of 1.2 million with Bozhou Jieyun Transportation Co Ltd, and the amount of the receivable is 3,855,367.84. According to the agreement, BGT has received the first phase amount 600 thousands in this year, and will receive the rest before 10 April 2009. Bad debit provision is providing at the year end because amount to be collected is lower than carry amount. 9.5.2 Bad debit provision for individual transaction with significant amount Name amount Proportion for provision% reason Henxin Securities 30,000,000.00 100.00 According to Provision Police of Company Minfa Securities 30,000,000.00 100.00 According to Provision Police of Company JiangQiao Securities 14,960,000.00 100.00 According to Provision Police of Company Aanhui Jinyang Media Ltd 3,300,384.09 5.00 According to Provision Police of Company Total 78,260,384.09 9.5.3 Age analysis Balance on 2008-12-31 Balance on 2007-12-31 Age Balance proportion% Bad debit Net value Balance proportion% Bad debit Net value provision provision Within 1 year 7,067,881.09 7.57 1,699,518.23 5,368,362.86 12,319,218.52 13.17 776,790.85 11,542,427.67 1-2 years 8,255,824.02 8.84 825,582.40 7,430,241.62 3,303,143.09 3.53 780,314.31 2,522,828.78 2-3 years 722,130.90 0.77 361,065.45 361,065.45 655,414.10 0.70 327,707.06 327,707.04 74 Above 3 years 77,324,868.65 82.82 77,324,868.65 0.00 77,245,190.73 82.60 75,205,190.73 2,040,000.00 Total 93,370,704.66 100.00 80,211,034.73 13,159,669.93 93,522,966.44 100.00 77,090,002.95 16,432,963.49 9.5.4 In April 2006, Jianqqiao Securities Ltd entered into administration clearance phase, as the uncertainty of the unrecoverable amount, the company made full provision 16 million for national bonds and 1 million for litigation cost. According to the first liquidation asset of allocation proposal in 28 December 2007, the company could recover 2,040 thousands therefore, the company reversal the provision by this amount. Up to 31 December 2008, the Company has received 2,040 thousands, and the rest amount 14,960 thousands is predicted to unrecoverable. 9.5.5 there is no amount due to shareholder who own 5％ or more than 5% of voting right of the company. 9.5.6 The top five of other receivable are 78,760,483.09, which representing 84.35% of total other receivable Name Aamount Nature Age Proportion% Henxin Securities 30,000,000.00 Investment in national bonds above 3 years 32.13 Minfa Securities 30,000,000.00 Investment in national bonds above 3 years 32.13 JiangQiao Securities 14,960,000.00 Investment in national bonds above 3 years 16.02 Aanhui Jinyang Media Ltd 3,300,384.09 advertisement fee Within 1 year 3.53 Daqin Meiying Trading lTD 500,000.00 Current account Within 1 year 0.54 Total 78,760,384.09 84.35 9.6 Inventory 9.6.1 Inventories Balance on 2008-12-31 Balance on 2007-12-31 Items Provision for Net Value Provision for Net Value Amount Amount impairment impairment Material 106,592,759.02 11,007,706.20 95,585,052.82 122,758,911.07 28,507,735.27 94,251,175.80 Product in process 302,628,477.80 20,492.31 302,607,985.49 347,978,563.41 883,261.49 347,095,301.92 Product 74,959,710.54 1,710,903.08 73,248,807.46 54,792,969.37 3,326,039.49 51,466,929.88 Total 484,180,947.36 12,739,101.59 471,441,845.77 525,530,443.85 32,717,036.25 492,813,407.60 9.6.2 Provision for Impairment Balance on 2007-12- Balance on 2008- Proportion of reversal in its ending Items provision Reversal Write off 31 12-31 balance of similar item % Material and package 28,507,735.27 1,065,168.64 0.00 18,565,197.71 11,007,706.20 0.00 Product in process 883,261.49 0.00 0.00 862,769.18 20,492.31 0.00 Product 3,326,039.49 2,098,615.88 0.00 3,713,752.29 1,710,903.08 0.00 Total 32,717,036.25 3,163,784.52 0.00 23,141,719.18 12,739,101.59 9.6.3 The provision is made according to the difference of carry amount and net realizable value on 31 Dec 2008. Net realizable value means during normal operating, the amount of predict to disposal less sale expense and relate tax. The write-off provision in this year is cause by send out of inventory. 9.7 Long-term equity investment Balance on 2008-12-31 Balance on 2007-12-31 Item Impairment loss Carrying Impairment loss Investment cost provision value Investment cost provision Investment cost 75 n cost method 0.00 0.00 0.00 0.00 0.00 0.00 equity method 0.00 0.00 0.00 0.00 0.00 0.00 Total 0.00 0.00 0.00 0.00 0.00 0.00 9.8 Investment Property 9.8.1 Subsequent measurement by cost model Balance on 2007-12- Increment Decrement Balance on 2008-12- Items 31 31 （1）Total costs 15,987,077.80 35,239,053.73 2,358,789.08 48,867,342.45 ①Buildings and structures 14,772,277.80 35,239,053.73 2,358,789.08 47,652,542.45 ②Land use right 1,214,800.00 0.00 0.00 1,214,800.00 （ 2 ） Total accumulated depreciation and 5,002,719.29 15,220,186.56 1,426,483.89 18,796,421.96 accumulated amortization: ①Buildings and structures 4,917,683.25 15,195,904.76 1,426,483.89 18,687,104.12 ②Land use right 85,036.04 24,281.80 0.00 109,317.84 （3）Total accumulated impairment loss provision: 0.00 0.00 0.00 0.00 ①Buildings and structures 0.00 0.00 0.00 0.00 ②Land use right 0.00 0.00 0.00 0.00 （4）Total carrying value 10,984,358.51 0.00 0.00 30,070,920.49 ①Buildings and structures 9,854,594.55 0.00 0.00 28,965,438.33 ②Land use right 1,129,763.96 0.00 0.00 1,105,482.16 9.8.2 The increase of 173.76% investment property at yearend balance compare with year begins is caused by leasing part of fixed asset to Gujing liquor industrial park, the value of leasing fixed assets are: Original Amount Accumulate Provision Net value on items depreciation 2008-12-31 Building 35,239,053.73 14,488,492.43 0.00 20,750,561.30 Total 35,239,053.73 14,488,492.43 0.00 20,750,561.30 The company has signed a lease agreement with the Government of Gujing, the company leasing packaging production line, stock, office and relate blending equipment of second workshop and third workshop of liquor filling factory to the government to support local economic development and maintain employment opportunity. The original value of the leasing assets is: Building in 35,239,053.73, the leasing periods are set in 3 years, which from receive date in 2008 to 2011 that fulfill 36 months. The company received rental 2,750 thousands for 11 months of this year. 9.8.3 Up to 31 December 2008, investment property with restriction on the ownership is: items Original amount Accumulated depreciation(amortization) Net Value Reason Building 14,278,711.84 4,983,379.04 9,295,332.80 Mortgage loan Land 1,214,800.00 109,317.84 1,105,482.16 Mortgage loan Total 15,493,511.84 5,092,696.88 10,400,814.96 9,.8.4 No material impairment loss in investment property in the year end is based on review of management of company. 76 9.9 Fixed assets and accumulated depreciation 9.9.1 Balance of fixed assets and accumulated depreciation Items Balance on 2007-12- Increment Decrement Balance on 2008- （1）Total costs 31 12-31 860,845,263.41 52,299,999.92 72,208,855.71 840,936,407.62 Buildings and structures 435,343,448.39 10,050,244.41 45,673,498.90 399,720,193.90 Machineries 329,195,039.26 33,773,474.49 16,653,359.16 346,315,154.59 Vehicles 22,287,265.88 4,436,499.51 3,036,310.12 23,687,455.27 Electronic equipment and others 74,019,509.88 4,039,781.51 6,845,687.53 71,213,603.86 （2）Total Accumulated depreciation: 414,761,471.73 63,999,607.65 42,263,869.23 436,497,210.15 Buildings and structures 229,708,984.16 18,336,761.12 24,202,696.79 223,843,048.49 Machineries 141,417,524.77 34,567,360.03 12,996,251.62 162,988,633.18 Vehicles 11,498,109.20 2,594,629.33 2,440,036.68 11,652,701.85 Electronic equipment and others 32,136,853.60 8,500,857.17 2,624,884.14 38,012,826.63 （ 3 ） Total accumulated impairment loss 0.00 27,779.58 0.00 27,779.58 provision: Buildings and structures 0.00 0.00 0.00 0.00 Machineries 0.00 27,779.58 0.00 27,779.58 Vehicles 0.00 0.00 0.00 0.00 Electronic equipment and others 0.00 0.00 0.00 0.00 （4）Total carrying value 446,083,791.68 0.00 0.00 404,411,417.89 Buildings and structures 205,634,464.23 0.00 0.00 175,877,145.41 Machineries 187,777,514.49 0.00 0.00 183,298,741.83 Vehicles 10,789,156.68 0.00 0.00 12,034,753.42 Electronic equipment and others 41,882,656.28 0.00 0.00 33,200,777.23 9.9.2 A provision of 63,999,607.65for this year is including in increment amount of accumulated deprecations of fixed assets. 9.9.3 Amount of 37,267,383.81 construction process transfer to fixed assets this year. 9.9.4 Details of idle assets： Impairment Estimated Accumulated Reason for not Items Cost loss Net value date for depreciation making provision Provision usage Fixed assets： Building 37,912,191.28 29,418,757.74 0.00 8,493,433.54 No impairment loss 2009 exist Machine equipment 10,605,373.78 8,671,676.27 0.00 1,933,697.51 No impairment loss 2009 exist Total 48,517,565.06 38,090,434.01 0.00 10,427,131.05 77 9.9.5 Details of purpose to dispose fixed assets: Accumulate depreciation and Expect expense to Time expect to Items Original amount Carrying amount amortization disposal disposal Building 1,382,424.15 399,838.98 982,585.17 uncertainty 2009 Total 1,382,424.15 399,838.98 982,585.17 According to , , and the sprit comment by Government of Bozhou City, and consultation between State-owned land reserves center(“center”) of Bozhou and the ex-subsidiary Bozhou Gujing Printing Ltd, and sign an agreement of retake state-owned land for construction with compensation on July 2008, the center retake the right of state-owned construction land, building, and attachment of East Bozhou Weiwu Avenue with compensation to the Bozhou Gujing Printing Ltd, that the land area are 27,611.6 square meter, the area of building and attachment are 15,157.45 square meter. The compensation paid by the centre are 14,207,842.23, which include compensation fee 1,863,783.00 for land and 12,344,059.23 for building and attachment ,the price is according to the estimated report which is issued by Anhui Jiandi Real Estate land evaluation Ltd on 30 April 2008 and 12 May 2008. The payable time is on the date of transfer the land by the centre completely, and the fee would be paid to Bozhou Gujing Printing Ltd once the transfer fees are collected. Due to the reason of deregistration of Bozhou Gujing Printing Ltd, Bozhou Pairuite Package Ltd will decent this right, and up to the reporting date, the company have not received the amount yet. The risk and reward to above asset is not transfer yet. 9.9.6 The company does not have financial lease asset 9.9.7 Fixed assets leasing out are Item Original amount Accumulated deprecation Net Value Machine Equipment 6,289,517.39 3,871,054.13 2,418,463.26 Transportation Equipment 624,520.00 525,943.28 98,576.72 Electric Equipment and 5,456,387.01 2,052,082.58 3,404,304.44 others Total 12,370,424.40 6,449,079.99 5,921,344.41 9.9.8 Fixed assets which have not completed the process of property right certificate. Items Original amount Accumulated deprecation Net amount Building 54,908,246.95 21,250,140.87 33,658,106.08 Total 54,908,246.95 21,250,140.87 33,658,106.08 9.9.9 Details of pledged fixed assets： Items Original amount Accumulated deprecation Net amount Building 13,201,711.04 7,336,010.39 5,865,700.65 Total 13,201,711.04 7,336,010.39 5,865,700.65 9.10 Construction in progress 9.10.1 Detail of construction in progress Project name Balance on 2007-12-31 Increment Transfer to Fixed assets Other decrement Balance on 2008-12-31 78 Project name Balance on 2007-12-31 Increment Transfer to Fixed assets Other decrement Balance on 2008-12-31 Technology improvementproject for farina 2,004,543.51 23,656,177.68 25,660,721.19 0.00 0.00 Extract filtering wine pot project 194,000.00 532,929.48 666,929.48 0.00 60,000.00 Alcohol company project 35,007,316.15 8,542,727.49 6,752,887.18 36,797,156.46 0.00 Ruifuxiang flour project 0.00 40,251,482.32 0.00 0.00 40,251,482.32 Ruifuxiang thermoelectricity project 0.00 23,949,529.98 0.00 0.00 23,949,529.98 35T boiler transform project 0.00 6,998,527.61 0.00 0.00 6,998,527.61 Breweries Industrial Park 0.00 3,746,357.87 1,040,000.00 0.00 2,706,357.87 ERPsystem 0.00 1,232,791.50 0.00 0.00 1,232,791.50 Other projects 29,000.00 3,141,095.96 3,146,845.96 0.00 23,250.00 Total 37,234,859.66 112,051,619.89 37,267,383.81 36,797,156.46 75,221,939.28 Construction in process (Continue) interest capitalization in Project input Sources of funding Project name construction in progress at Budget over its budget the ending period % Technology improvement project for farina 0.00 25,660,721.19 Self-owned capital 100.00 Extract filtering wine pot project 0.00 726,929.48 Self-owned capital 100.00 Alcohol company project 0.00 7,117,990.64. Self-owned capital 100.00 Ruifuxiang flour project 926,304.30 74,410,000.00 loan from bank and Self-owned capital 54.09 Ruifuxiang thermoelectricity project 617,853 88,490,000.00 loan from bank and Self-owned capital 27.06 35T boiler transform project 0.00 7,550,000.00 Self-owned capital 92.70 Breweries Industrial Park 0.00 5,500,000.00 Self-owned capital 68.12 ERPsystem 0.00 4,100,000.00 Self-owned capital 30.07 Other projects 0.00 3,170,095.96 Self-owned capital 100.00 Total 1,544,157.30 209,607,746.63 9.10.2 The other projects of alcohol company decrease is due to transfer land right to intangible asset after paid up the land fee and complete process certificate. 9.10.3 Standard to determine capitalization rate are detail in 20 of Notes IV 9.10.4 There is increase 102.02% in the year ending amount compare to year begin balance due to subsidiary Anhui Ruixiangfu food Ltd have increase projects of flour project and thermoelectric project 9.10.5 No material impairment loss on construction project after check by the management at the end of reporting date. 9.11 Project Material Name Carrying amount on 2008-12-31 Carrying amount on 2007-12-31 dedicated material 8,000.00 0.00 dedicated equipment 1,286,344.98 1,468,571.51 79 Total 1,294,344.98 1,468,571.51 9.12 Intangible assets and accumulated amortization 9.12.1 Balance of intangible assets Items Balance on 2007-12-31 Increment Decrement Balance on 200812-31 （1）Total cost 103,205,418.45 36,797,156.46 0.00 140,002,574.91 Land use right 65,055,418.45 36,797,156.46 0.00 101,852,574.91 trade mark privileges 38,150,000.00 0.00 0.00 38,150,000.00 （2）Total Accumulated depreciation 48,707,739.40 1,883,308.50 0.00 50,591,047.90 Land use right 11,037,739.40 1,833,308.50 0.00 12,871,047.90 trade mark privileges 37,670,000.00 50,000.00 0.00 37,720,000.00 （3）Total accumulated impairment loss 0.00 0.00 0.00 0.00 provision Land use right 0.00 0.00 0.00 0.00 trade mark privileges 0.00 0.00 0.00 0.00 （4）Total carrying value 54,497,679.05 0.00 0.00 89,411,527.01 Land use right 54,017,679.05 0.00 0.00 88,981,527.01 trade mark privileges 480,000.00 0.00 0.00 430,000.00 9.12.2 Intangible asset increase 64.06% in yearend compare to beginning balance is caused by the increase in right to use land that transfer from construction progress. 9.12.3 Intangible assets which have restriction on right of ownership Item Original Right Accumulate Deprecation Net Value Land 49,410,251.40 9,011,030.27 40,399,221.13 Total 49,410,251.40 9,011,030.27 40,399,221.13 9.12.4 Intangible assets that plan to disposal are detail in: Accumulated Expect Expense to Expect time to Item Original amount Carrying amount depreciation(amortization) disposal disposal Land 7,678,872.00 528,121.79 7,150,750.21 Uncertainly 2009 Total 7,678,872.00 528,121.79 7,150,750.21 9.12.5 No impairment loss for intangible assets in the report period under the review of company’s management. 9.13 Long-term deferred expense Items Balance on 2008-12-31 Balance on 2007-12-31 Decoration Fee 2,372,932.77 2,379,391.63 Total 2,372,932.77 2,379,391.63 80 9.14 Deferred income tax assets 9.14.1 Recognition of deferred income tax assets Items Deductible temporary difference Deferred income tax Balance on 2008- Carrying amount on Carrying amount on Balance on 2007-12-31 12-31 2008-12-31 2007-12-31 Bad debit provision 5,061,354.28 4,789,249.39 1,265,338.57 1,197,312.35 Provision of impairment loss for 1,309,475.14 441,237.33 327,368.78 110,309.33 inventory Provision of impairment loss for 27,779.58 0.00 6,944.90 0.00 fixed asset Total 6,398,609.00 5,230,486.72 1,599,652.25 1,307,621.68 9.14.2 Deferred income tax assets are determined by future taxable amount that the company could gain by the company to deduct temporary deductable difference. 9.15 Impairment provision for assets Balance on 2007- Decrement Balance on Items Increment 12-31 Reversal Wirtten-off 2008-12-31 Bad debts provision 79,385,058.52 3,812,147.58 0.00 989,386.25 82,207,819.85 Inventories impairment loss provision 32,717,036.25 3,163,784.52 0.00 23,141,719.18 12,739,101.59 Fixed asset impairment loss provision 0.00 27,779.58 0.00 0.00 27,779.58 Total 112,102,094.77 7,003,711.68 0.00 24,131,105.43 94,974,701.02 9.16 Restricted assets 9.16.1 Restricted assets Items Balance on 2007-12-31 Increment Decrement Balance on 2008-12-31 Asset use in pledge Building 16,003,507.37 0.00 842,473.92 15,161,033.45 Land 41,601,499.91 0.00 96,810.86 41,504,689.05 Subtotal 57,605,007.28 0.00 939,284.78 56,665,722.50 0ther restricted asset Building 0.00 982,585.17 0.00 982,585.17 Land 0.00 7,150,750.21 0.00 7,150,750.21 Subtotal 0.00 8,133,335.38 0.00 8,133,335.38 Total 57,605,007.28 8,133,335.38 939,284.78 64,799,057.88 9.16.2 The restricted assets are detail in 5 of No 9 of Notes IX; 81 9.17 Short-term loan 9.17.1 Category of Short-term loan Category Balance on 2008-12-31 Balance on 2007-12-31 Pledge bank loan 45,000,000.00 10,000,000.00 Guaranteed bank loan 30,000,000.00 45,000,000.00 Total 75,000,000.00 55,000,000.00 9.17.2 No overdue loan in year end 9.17.3 The guarantee of the loan is Gujing Group. Pledged assets are detail in 16 of Note IX. 9.18 Accounts payable 9.18.1 Age analysis Age Balance on 2008-12-31 Balance on 2007-12-31 Within one year 103,201,378.57 65,820,213.65 Above one year 607,304.54 363,075.84 Total 103,808,683.11 66,183,289.49 9.18.2 Up to December 31st, 2008, there is no accounts payable balance due from shareholders who own 5% or over 5% voting right shares. 9.18.3 There is increase 56.85% in yearend balance compare to year begin balance is caused by increase of purchase material. 9.18.4 Please refer to Notes Ⅺ 3. (3) for the details of related party transaction. 9.19 Advance from customers 9.19.1 Age analysis Age Balance on 2008-12-31 Balance on 2007-12-31 Within one year 51,557,268.88 47,557,139.44 Above one year 6,270,453.89 2,887,754.00 Total 57,827,722.77 50,444,893.44 9.19.2 Up to December 31, 2008, there is no advance from customers balance due from shareholders who own 5% or over 5% voting right shares. 9.20 Employee Benefits Items Balance on 2007-12-31 Increment Paid out Balance on 2008-12-31 (1) Salary, bonus and allowance 66,450,690.23 95,212,849.24 96,944,013.78 64,719,525.69 (2) Employee welfare 0.00 11,720,781.66 11,720,781.66 0.00 82 (3) Social insurance 19,377,985.88 50,673,368.58 37,977,832.86 32,073,521.60 Including：① Medical insurance 1,386,556.67 12,415,135.71 6,746,444.29 7,055,248.09 ②Basic retirement insurance 17,834,033.65 32,358,117.84 26,102,959.49 24,089,192.00 ③Annuity fee 0.00 0.00 0.00 0.00 ④Unemployment insurance 118,116.29 2,013,581.79 1,865,283.44 266,414.64 ⑤Injury insurance 39,279.27 3,582,330.16 3,004,785.41 616,824.02 ⑥Pregnancy insurance 0.00 304,203.08 258,360.23 45,842.85 (4) Housing accumulation fund 1,709,086.54 4,470,493.40 4,866,404.41 1,313,175.53 (5) Labour union fee and employee education fee 4,282,360.07 3,648,282.62 2,913,736.76 5,016,905.93 (6) Non-monetary fund welfare 0.00 2,288,717.01 2,288,717.01 0.00 (7) Redemption for termination of labor contract 0.00 4,703,136.13 423,601.78 4,279,534.35 (8) Others 0.00 543,848.00 543,848.00 0.00 Including：share payment by cash 0.00 0.00 0.00 0.00 Total 91,820,122.72 173,261,476.64 157,678,936.26 107,402,663.10 9.21 Tax payable Types Balance on 2008-12-31 Balance on 2007-12-31 VAT 20,692,904.98 24,062,797.47 Consumption tax 77,985,456.85 65,985,447.77 Business Tax 302,933.22 92,198.85 City construction tax 1,870,715.85 1,973,512.42 Income Tax 58,138,169.78 82,072,487.29 Property tax 29,140.12 -149,559.03 Personal income tax 126,879.24 339,028.20 Stamp duty tax 207,126.28 1,953.40 Education fee 1,356,342.55 1,343,456.17 Others 539,217.98 133,060.69 Total 161,248,886.85 175,854,383.23 9.22 Other payable 9.22.1 Age analysis Age Balance on 2008-12-31 Balance on 2007-12-31 Within one year 67,194,763.30 26,214,036.49 Above one year 18,054,596.30 13,534,604.79 Total 85,249,359.60 39,748,641.28 The balance of other payable in this year increased 114.47% is mainly because received related parties’ funds.. 9.22.2 The balance of other account payables, which is significant and age is more than one year: amount in Repayment after the Company name Age Reasons arrear balance sheet date Unable to contact the Anhui Anzhen investment Let co. 5,000,000.00 Above 3 years 0.00 creditor Total 5,000,000.00 83 9.22.3 The amount due to shareholders who own 5% or more than 5% voting right is as followed: Name of Shareholders amount in arrear Age Proportion% Reasons Gujing Group 33,500,000.00 Within 1 year 39.30 The balance of current account 9.23 Non-current liabilities due within one year 9.23.1 Type Items Balance on 2008-12-31 Balance on 2007-12-31 Long-term borrowings due within one year 11,000,000.00 13,000,000.00 Total 11,000,000.00 13,000,000.00 9.23.2 By the end of 31st December 2008, the company has no overdue loan. 9.24 Long-term Loans Currency Loan conditions Balance on Balance on Annual Creditors Loan period 2008-12-31 2007-12-31 interest rate The China construction bank, Bozhou branch RMB Pledged loan 5,000,000.00 10,000,000.00 5.85% 2005.3.31—2010.3.30 The China construction bank, Bozhou branch RMB Pledged loan 20,000,000.00 26,000,000.00 6.93% 2007.5.29—2012.5.28 Total 25,000,000.00 36,000,000.00 9.24.1 By the end of 31st December 2008, there is no overdue long-term loan. 9.24.2 Please refer to Notes IX.16 and 2 of 3 of Notes XI for the details of mortgaged property and guarantee conditions of those Long-term loans. 9.25 Deferred income Approval document Balance on Year Items Total grants Increment Written-off Balance on Year End number Begin Subsidy for improvement Fagaihuanzi 2,550,000.00 1,530,000.00 0.00 0.00 1,530,000.00 of resource use project 【2007】No.2500 Subsidy for environment Caijian 【2007】 6,000,000.00 6,000,000.00 0.00 0.00 6,000,000.00 protection No.1476 Sewage control renovation Caijian 【2008】 2,400,000.00 0.00 2,400,000.00 0.00 2,400,000.00 project No.925 Total 10,950,000.00 7,530,000.00 2,400,000.00 0.00 9,930,000.00 9.26 Share capital Chang in the year（Increase+,Decrease－） Unit：share Balance on 2007- Allotment of Bonus Transfer Release of Others Subtotal Balance on 2008- Items 12-31 shares shares reserve into restriction 12-31 shares 1、Unlisted shares （1）Sponsor shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Including： 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 84 shares held by states 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Shares held by state-owned legal 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 persons Shares held by overseas legal persons 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 （2）Raising shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 （3）staff shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 （4）preference shares or others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Including：Allotment of shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total Unlisted shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2、Listed shares Domestically listed RMB normal shares 39,743,000.00 0.00 0.00 0.00 11,750,000.00 0.00 11,750,000.00 51,493,000.00 Including：Executives shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Domestically listed foreign shares 60,000,000.00 0.00 0.00 0.00 0.00 0.00 0.00 60,000,000.00 Total Listed shares 99,743,000.00 0.00 0.00 0.00 11,750,000.00 0.00 11,750,000.00 111,493,000.00 3、restricted Listed shares 135,257,000.00 0.00 0.00 0.00 -11,750,000.00 0.00 -11,750,000.00 123,507,000.00 4、Total shares 235,000,000.00 0.00 0.00 0.00 0.00 0.00 0.00 235,000,000.00 9.26.1 The aforesaid listed shares are listed with face value RMB each. There is no change of total shares during the report period. 9.26.2 The company issued a notice on 17th July 2008, issued 11.75 million shares that belong to restricted listed shares, are able to transact on market on 18th July 2008. 9.27 Capital Reserves Balance on 2007-12- Increment Decrement Balance on 2008-12- Items 31 31 Share premium 510,021,915.56 0.00 0.00 510,021,915.56 Other capital reserve 22,640,404.12 0.00 170,650.98 22,469,753.14 Total 532,662,319.68 0.00 170,650.98 532,491,668.70 The decrease in capital reserve is caused by write-off Anhui Gujing Wild Sun Sales Co., Ltd, and the reserves were raised by abandon equity by minority shareholders. 9.28 Surplus reserve Type Balance on 2007-12-31 Increment Decrement Balance on 2008-12-31 Statutory surplus reserve 52,283,759.34 0.00 0.00 52,283,759.34 Total 52,283,759.34 0.00 0.00 52,283,759.34 9.29 Retained earnings Items For Year 2008 For Year 2007 Balance at the beginning of the year of 2008 25,558,460.48 -96,975,097.54 85 Add：This year transfer-in net profit 34,576,867.37 33,876,546.32 Other transfer-in 0.00 92,044,666.33 Less：Withdrawal of statuary surplus reserve 0.00 3,387,654.63 Withdrawal of employees’ reward and welfare fund 0.00 0.00 Withdrawal of reserve fund 0.00 0.00 Withdrawal of Enterprise development fund 0.00 0.00 Reimbursement of investment 0.00 0.00 Less: dividends payable for preference shares 0.00 0.00 Withdrawal of surplus reserves 0.00 0.00 Dividends payable for ordinary shares 0.00 0.00 Dividends for ordinary shares transfer into capital 0.00 0.00 Balance at the end of the year of 2008 60,135,327.85 25,558,460.48 9.30 Minority interests Balance on 2007-12- Increment Decrement Balance on 2008-12- Name of minority shareholder 31 31 Anhui Ruijing Shanglv(Group) Limited 1,192,216.08 -107,387.65 0.00 1,084,828.43 Gujing Group 2,041,013.61 4,928.19 2,333.08 2,043,608.72 Total 3,233,229.69 -102,459.46 2,333.08 3,128,437.15 9.31 Operating Revenues and Operating Costs 9.31.1 Operating Revenues: Items For Year 2008 For Year 2007 Income from main operation 1,361,641,701.36 1,190,202,238.91 Other operating incomes 17,259,886.30 11,154,358.00 Total 1,378,901,587.66 1,201,356,596.91 9.31.2 Operating Costs: Items For Year 2008 For Year 2007 Operating Costs 832,385,450.04 797,955,628.05 Other operating Costs 16,098,628.56 15,143,478.95 Total 848,484,078.60 813,099,107.00 9.31.3 Segment report from main operation incomes, main operation costs and gross profits: For Year 2008 For Year 2007 Segment Operating Income Operating Cost Gross profit Operating Income Operating Cost Gross profit Main business Wine and Alcohol 1,076,944,060.48 587,766,157.50 489,177,902.98 891,478,836.72 559,487,224.98 331,991,611.74 Deep processing of farm 139,149,690.80 117,563,446.66 21,586,244.14 132,818,658.19 104,370,850.00 28,447,808.19 products 86 Others 145,547,950.08 127,055,845.88 18,492,104.20 165,904,744.00 134,097,553.07 31,807,190.93 Subtotal 1,361,641,701.36 832,385,450.04 529,256,251.32 1,190,202,238.91 797,955,628.05 392,246,610.86 Other business Sales of Materials 10,162,830.92 9,856,868.74 305,962.18 4,453,128.58 3,980,186.32 472,942.26 Lease 3,089,400.00 2,642,953.02 446,446.98 554,410.00 711,385.85 -156,975.85 Sales of waste materials 1,624,869.53 1,579,716.13 45,153.40 1,238,417.19 96,173.17 1,142,244.02 Sales of water, 905,823.71 681,289.60 224,534.11 437,759.78 357,619.68 80,140.10 electricity and gas Processing fee 0.00 0.00 0.00 4,011,955.56 9,561,656.73 -5,549,701.17 Others 1,476,962.14 1,337,801.07 139,161.07 458,686.89 436,457.20 22,229.69 Subtotal 17,259,886.30 16,098,628.56 1,161,257.74 11,154,358.00 15,143,478.95 -3,989,120.95 Total 1,378,901,587.66 848,484,078.60 530,417,509.06 1,201,356,596.91 813,099,107.00 388,257,489.91 9.31.4 Listed by segments or area: For Year 2008 For Year 2007 Items Operating income Operating cost Gross profit Operating income Operating cost Gross profit Northern of mainland 112,629,038.46 69,522,618.11 43,106,420.35 159,989,331.96 100,408,426.62 59,580,905.34 Middle of mainland 1,138,910,678.29 686,186,178.42 452,724,499.87 811,864,508.20 552,509,974.72 259,354,533.48 Southern of mainland 28,800,219.92 17,777,535.16 11,022,684.76 163,689,238.50 102,730,467.66 60,958,770.84 Southeast 56,051,764.69 34,599,118.35 21,452,646.34 54,659,160.25 42,306,759.05 12,352,401.20 Total 1,336,391,701.36 808,085,450.04 528,306,251.32 1,190,202,238.91 797,955,628.05 392,246,610.86 9.31.5 Operating revenues from top five clients: For Year 2008 For Year 2007 Client name Sales Proportion to total sales% Sales Proportion to total sales% Total sales from top five clients 168,554,834.10 12.22 132,031,606.29 10.99 9.32 Business tax and surtax Items Tax rate For Year 2008 For Year 2007 Consumption tax 134,127,229.03 110,240,349.77 Business tax 766,287.66 375,260.83 City construction tax and education fee 22,149,339.09 19,110,810.92 Total 157,042,855.78 129,726,421.52 9.32.1 Please refer to Notes Ⅵ for the tax rate and scale. 9.33Administration expense The expense has increase 69.9% compare to previous year, the main reason is increase salary,bonus and society insurance in this year, reversal worker welfare at previous year according to accounting standard, treasury consumption of Daqu wine, depreciation of idle fixed asset of alcohol company. 9.34 Financial costs Items For Year 2008 For Year 2007 Interest expense 6,655,768.96 7,807,466.85 87 Less: Interest Income 1,966,426.34 1,035,885.95 Exchange gain (or loss) 22,200.48 9,711.97 Bank charges 61,898.47 11,484.44 Total 4,773,441.57 6,792,777.31 9.35 Impairment loss for assets Items For Year 2008 For Year 2007 Bad debts 3,812,147.58 -597,104.70 Inventories impairment loss 3,163,784.52 7,281,468.23 Fixed assets impairment loss 27,779.58 0.00 Total 7,003,711.68 6,684,363.53 9.36 Investment income Source of investment income For Year 2008 For Year 2007 Gains from disposal of investment in subsidiaries 97,297.83 0.00 Total 97,297.83 0.00 9.37 Non-operating income 9.37.1 Details of non-operating income: Items For Year 2008 For Year 2007 Gains from disposal of non-current assets 1,079,650.04 1,069,605.77 Including: Gains from disposal of fixed assets 1,079,650.04 1,069,605.77 Government grants 1,700,000.00 4,044,600.00 Income from fine 4,982,513.91 1,388,232.73 Others 2,349,330.34 1,151,130.65 Total 10,111,494.29 7,653,569.15 9.37.2 The income of this year increase of 32.11% compare to previous year is caused by fine for breach of contract increase. 9.37.3 Government Grants Items For Year 2008 For Year 2007 Source Approval Documents Approval organ period of validity Fagainongjing【2007】No.280《关 Comprehensive project for deep Financial bureau Financial bureau of 于下达2006年度省加快皖北及沿 processing of 15 million wheat 0.00 600,000.00 of Anhui Year 2007 Anhui province 淮地区经济发展重点建设项目贴 annual production province 息资金计划的通知》 Subdistrict Subdistrict office of Government grants for Putuo Agreement, and co-operation office of Putuo 0.00 721,600.00 Putuo district, shiquan Year 2007 district memorandum district, shiquan road road New technology development Caijian【2007】No.1089《关于拨 Technology Technology Bureau of research on wheat powder for 0.00 1,000,000.00 付粮食加工企业财政贴息资金的 Bureau of Anhui Year 2007 Anhui Province deep transition processing 通知》 Province 88 Items For Year 2008 For Year 2007 Source Approval Documents Approval organ period of validity project Caiqi【2007】No.446《关于拨付 Financial bureau Encouragement for increment Financial bureau of 0.00 123,000.00 2006年度外贸租金政策资金的通 of Anhui Year 2007 quantity of farm products Anhui province 知》 province Fagaidiqu【2006】No.1091《关于 Comprehensive project for deep Financial bureau Financial bureau of 下达2005年度加快皖北及沿淮地 processing of 15 million wheat 0.00 350,000.00 of Anhui Year 2007 Anhui province 区经济发展重点建设项目贷款贴 annual production province 息资金的通知》 Environment protection special Financial bureau of Caijian【2006】No.1311《关于下 Financial bureau 0.00 200,000.00 Year 2007 fund city 达2006年环境保护资金的通知》 of city Caiqi【2006】No.1625《关于下达 Enterprise development special Financial bureau of Financial bureau 0.00 350,000.00 2006年省企业发展专项基金的通 Year 2007 fund city of city 知》 Bojing【2007】No.200《关于下达 Technology improvement Financial bureau of Financial bureau 0.00 300,000.00 2007年企业技术改造贴息等省财 Year 2007 discounts city of city 政专项补助资金的通知》 New technology development Technology research on wheat powder for Technology Bureau of Agreement of technology research 0.00 400,000.00 Bureau of Anhui Year 2007 deep transition processing Anhui Province project of Anhui province Province project New technology development 【2007】No.35, Agreement of Technology research on wheat powder for Technology Bureau of 400,000.00 0.00 technology research project of Bureau of Anhui 2007.4—2009.6 deep transition processing Anhui Province Anhui province，No.07010301018 Province project Commerce The international market Financial bureau of 40,000.00 0.00 【2008】No.598 bureau of Anhui 2008.6.24 development funds Anhui province province Starch finishing the production of 50,000 tons Diols technology Technology Technology Bureau of Plan of technology project. development and 500,000.00 0.00 Bureau of Anhui 2008.1—2010.12 Anhui Province No.08010201241 industrialization of application Province project Financial bureau of Financial bureau Foreign trade policy funds 60,000.00 0.00 Financial budget deposit by city Non-regularly. city of city Development and Reform Development special funds of Financial bureau of 400,000.00 0.00 Caiqi【2008】No.1055 Commission、 Year 2008 wanbei for year 2008 Anhui province Financial bureau of Anhui 89 Items For Year 2008 For Year 2007 Source Approval Documents Approval organ period of validity province Provincial Food processing enterprise Financial bureau of agriculture 300,000.00 0.00 Caiqi【2008】No.1387 Year 2008 financial discount for year 2008 Anhui province industrialization committee Total 1,700,000.00 4,044,600.00 9.38 Non-operating expenses Items For Year 2008 For Year 2007 Loss on disposal of non-current assets 7,734,963.08 1,915,328.31 Include: Loss on disposal of fixed assets 7,734,963.08 1,915,328.31 Donation 274,075.00 0.00 Losses on scraped fixed assets 0.00 409,926.05 Fines 5,980.00 69,954.40 Others 255,360.39 187,332.07 Total 8,270,378.47 2,582,540.83 9.38.1 The increase of non-operating expense of 220.24% is mainly due to losses from technical renovation project remove civil engineering by the subsidiary Anhui Ruifuxiang Food Ltd. 9.39 Income Tax Expense Items Amount for year 2008 Amount for year 2007 Income Tax for current year 42,915,118.83 18,400,122.88 Deferred Income Tax Expense -292,030.57 -242,789.84 Total 42,623,088.26 18,157,333.04 Because the subsidiary Hefei Gujing trade Co., LTD. enjoys the tax preferential in last year, but according to the new tax law, from January 1, 2008 will no longer enjoy the tax preferential policies, therefore the company’s corporate income tax expenses growth. 9.40 Net Profit after deduction of the non-operating profit and loss Items Amount for year 2008 Amount for year 2007 Net profit 34,474,407.91 33,820,739.63 add:(1) Gain from disposal of non-current asset, including the partial of 6,558,015.21 845,722.54 provision (2)Tax return or allowance that approval by ultra-vires department or 0.00 0.00 without official document, or contingency. 90 Items Amount for year 2008 Amount for year 2007 (3)The government grant reckon in current profit and loss account except grant relate to the business of company closely and grant with fixed -1,700,000.00 -4,044,600.00 standard rate or quantity that consistent with national policies and regulation (4) Fee from fund that occupier by non-financial corporation 0.00 0.00 (5) Investment gain when the cost of investment to obtain subsidiaries, joint venture is lower than the fair value of subsidiaries, joint venture’s net 0.00 0.00 asset that should belong to the company’s proportion. (6)Profit or loss on exchange of non-monetary asset 0.00 0.00 (7)Profit or loss from investment commission or asset management 0.00 0.00 commission (8) Provision for asset because force majeure such as nature disaster 0.00 0.00 (9)Profit or loss from debit restructure. 0.00 0.00 (10) Enterprise reorganization fee, such as employee arrangement, 0.00 0.00 integrate fee. (11) Profit or loss from trading that unfair trading price exceed fair value 0.00 0.00 (12) Net profit or loss from consolidate subsidiaries that under same 0.00 0.00 control from year beginning to consolidation date (13) Profit or loss from contingency items that not relate to trading 0.00 0.00 business of the company. (14) Profit or loss from change in fair value of transaction financial asset or liabilities and gain from disposal of transaction financial asset or 0.00 0.00 liabilities and available-for-sale financial asset, except hedge that relate to trading business of the company (15)Reversal of bad debit provision for receivable 0.00 0.00 (16) Profit or loss from commission of external loan 0.00 0.00 (17) Gain from change in fair value of investment property 0.00 0.00 (18) Affection caused by adjustment to current profit and loss account 0.00 0.00 according request by law or regulation of tax or accountant. (19) Custodian fee 0.00 0.00 (20) Other income or expense except item mention above -6,796,428.86 -1,872,150.96 (21) According to the new accounting standards write off employee 0.00 -11,776,478.89 welfare at the year end. (22) Other item correspond to non-operating profit and loss 0.00 0.00 Subtotal 32,535,994.26 16,973,232.32 minus： Amount of tax of non-operation profit and loss -130,002.80 -1,204,056.30 Net Profit after deduct non-operating profit 32,665,997.06 18,177,288.62 minus： Minority interest after deduct non-operation profit -112,052.26 -66,823.02 Retaining Earning for shareholders of parent company 32,778,049.32 18,244,111.64 91 9.41 Cash received relate to other operating activities Items Amount for year 2008 Amount for year 2007 Security Deposit of Notes 15,831,368.80 16,487,117.26 Government Grant 1,700,000.00 4,044,600.00 Others 38,515,024.51 12,729,757.53 Total 56,046,393.31 33,261,474.79 9.41.1 The reason for increase in other items is caused by collect current account balance 33,000,000.00 from Gujing Group. 9.42 Cash paid relate to other operating activities Items Amount for year 2008 Amount for year 2007 Advertisement fee 50,677,394.10 44,775,865.59 Business trip fee 17,229,479.31 15,906,865.45 Security Deposit for notes 25,584,046.45 13,355,353.51 Transportation fee 15,302,394.25 18,188,130.97 Others 56,404,498.37 49,647,026.27 Total 165,197,812.48 141,873,241.79 9.43 Supplement information for cash flow statement Adjusting net profit to cash flow from operating activities： Amount for year 2008 Amount for year 2007 Net profit 34,474,407.91 33,820,739.63 Add：Impairment loss provision of assets 7,003,711.68 6,684,363.53 Depreciation of fixed assets、oil and gas assets and production biological assets 64,731,301.78 54,575,620.16 Amortization of intangible assets 1,899,558.50 1,584,755.52 Amortization of Long-term deferred expenses 372,730.64 24,330.02 Loss on disposal of fixed assets、intangible assets and other long-term deferred assets 6,655,313.04 845,722.54 （Loss/Gain +/－） Loss from written off assets（Loss/Gain +/－） 0.00 0.00 Loss of fair value fluctuation on assets（Loss/Gain +/－） 0.00 0.00 Financial cost（Loss/Gain +/－） 6,677,969.44 7,817,178.82 Loss on investment（Loss/Gain +/－） -97,297.83 0.00 Decrease of deferred income tax assets（Decrease/Increase +/-） -292,030.57 -242,789.84 Decrease of deferred income tax liabilities (Increase/Decrease +/-) 0.00 0.00 Decrease of inventories（Decrease/Increase +/-） 21,371,561.83 74,426,857.50 Decrease of operating receivables (Decrease/Increase +/-) 15,301,017.07 -56,497,680.60 Increase of operating payables(Increase/Decrease +/-) 49,662,425.59 -3,341,334.40 Others 0.00 409,926.05 Net cash flows arising from operating activities 207,760,669.08 120,107,688.93 2.Significant investment and financing activities that without cash flows Debts transfer to capital 0.00 0.00 Convertible corporate bond due within 1 year 0.00 0.00 92 Finance leased fixed assets 0.00 0.00 3.Net increase (decrease) of cash and cash equivalents： Amount for year 2008 Amount for year 2007 Ending balance of cash 273,657,327.23 154,708,705.75 Less: Beginning balance of cash 154,708,705.75 126,323,268.78 Add : Ending balance of cash equivalents 0.00 0.00 Less: Beginning balance of cash equivalents 0.00 0.00 Net increase of cash and cash equivalents 118,948,621.48 28,385,436.97 9.44 Cash and cash equivalent Items Amount for year 2008 Amount for year 2007 1 Cash 273,657,327.23 154,708,705.75 Including: Cash on hand 280,988.07 56,208.10 unrestricted bank saving 273,376,339.16 154,652,497.65 2 Cash equivalents 0.00 0.00 Including： Bond investment within three month 0.00 0.00 3 Ending balance of cash and cash equivalents 273,657,327.23 154,708,705.75 X Notes to financial statements for parent company 10.1 Account Receivable 10.1.1 Account receivable Balance on 2008-12-31 Balance on 2007-12-31 Items Amount proportion% Provision for Net value Amount proportion% Provision Net value bad debit for bad debit Individual transaction with 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 significant amount Individual transaction with not so significant amount but significant 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 recoverable risk Other transaction with no 153,831.00 100.00 3,452.62 150,378.38 2,195,426.62 100.00 95,264.06 2,100,162.56 significant amount Total 153,831.00 100.00 3,452.62 150,378.38 2,195,426.62 100.00 95,264.06 2,100,162.56 10.1.2 Age analysis Balance on 2008-12-31 Balance on 2007-12-31 Age Amount proportion% Provision for Net value Amount proportion% Provision for Net value bad debit bad debit Within 1 year 149,131.00 96.94 2,982.62 146,148.38 1,733,792.22 78.97 34,148.72 1,699,643.50 1 to 2 years 4,700.00 3.06 470.00 4,230.00 424,254.67 19.32 42,425.47 381,829.20 2 to 3 years 0.00 0.00 0.00 0.00 37,379.73 1.71 18,689.87 18,689.86 Total 153,831.00 100.00 3,452.62 150,378.38 2,195,426.62 100.00 95,264.06 2,100,162.56 10.1.3 Up to 31 Dec 2008, no amount due from shareholder who own 5% or more than 5% of voting right. 10.1.4 There is decrease of 92.99% compare to beginning balance due to collect receivable. 93 10.1.5 Top five account receivable Balance on 2008-12-31 Balance on 2007-12-31 Age Amount Proportion% Amount Proportion% Within 1 year 149,131.00 96.94 1,618,664.56 73.73 1-2 years 4,700.00 3.06 118,740.90 5.41 Proportion of top five to total amount 153,831.00 100.00 1,737,405.46 79.14 10.2 Other account receivable 10.2.1 Other account receivable Balance on 2008-12-31 Balance on 2007-12-31 Age Amount proportion% Provision for Net value Amount proportion% Provision for Net value bad debit bad debit Individual transaction with 74,960,000.00 64.21 74,960,000.00 0.00 77,000,000.00 69.86 74,960,000.00 2,040,000.00 significant amount Individual transaction with not so significant amount 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 but significant recoverable risk Other transaction with no 41,789,129.73 35.79 736,834.05 41,052,295.68 33,224,647.36 30.14 33,314.27 33,191,333.09 significant amount Total 116,749,129.73 100.00 75,696,834.05 41,052,295.68 110,224,647.36 100.00 74,993,314.27 35,231,333.09 10.2.2 Bad debit provision for significant amount Name amount Proportion for provision% reason Henxin Securities 30,000,000.00 100.00 According to provision police of the company Minfa Securities 30,000,000.00 100.00 According to provision police of the company JiangQiao Securities 14,960,000.00 100.00 According to provision police of the company Total 74,960,000.00 10.2.3 Age analysis Balance on 2008-12-31 Balance on 2007-12-31 Age Amount proportion% Provision for Net value Amount proportion% Provision for Net value bad debit bad debit Within 1 year 41,785,869.73 35.79 735,708.05 41,050,161.68 33,066,347.36 30.00 16,684.27 33,049,663.09 1-2 years 1,260.00 0.00 126.00 1,134.00 156,300.00 0.14 15,630.00 140,670.00 2-3 years 2,000.00 0.00 1,000.00 1,000.00 2,000.00 0.00 1,000.00 1,000.00 Above 3 years 74,960,000.00 64.21 74,960,000.00 0.00 77,000,000.00 69.86 74,960,000.00 2,040,000.00 Total 116,749,129.73 100.00 75,696,834.05 41,052,295.68 110,224,647.36 100.00 74,993,314.27 35,231,333.09 10.2.4 Full bad debit provision were made to Jianqiao Securities, and reversal 2,040 thousands this year, please refer to 9.5.4 0f Note IX. 10.2.5 Up to Dec 31 2008, no amount due from shareholder who own 5% or more than 5%voting right. 10.2.6 The total amount of top five other account receivable is 80,761,667.37, represent 69.18% of other 94 account receivable. 10.3 Long-term Equity Investment 10.3.1 Long-term equity investment and provision for impairment loss Balance on 2008-12-31 Balance on 2007-12-31 Items Carry amount provision Net amount Carry amount provision Net amount Long-term equity investment 536,185,003.12 0.00 536,185,003.12 375,501,927.38 0.00 375,501,927.38 Including：investment in subsidiaries 536,185,003.12 0.00 536,185,003.12 375,501,927.38 0.00 375,501,927.38 10.3.2 Long-term equity investment measured by cost method Investees Initial investment Beginning carry amount Increment Decrement Ending Carry amount 1 subsidiaries Bozhou Gujing Sales Co., Ltd 84,428,042.21 84,428,042.21 0.00 0.00 84,428,042.21 Bozhou Gujing Transportation Co., Ltd 6,875,743.00 6,875,743.00 0.00 0.00 6,875,743.00 Bozhou Gujing Glass Co., Ltd 65,795,666.00 65,795,666.00 0.00 0.00 65,795,666.00 Anhui Old Big Eight Distillery Co., Ltd 28,000,000.00 28,000,000.00 0.00 0.00 28,000,000.00 Anhui Gujing Wild Sun Sales Co., Ltd 3,300,000.00 3,300,000.00 0.00 3,300,000.00 0.00 Bozhou Gujing Packaging Co., Ltd 19,068,805.14 19,068,805.14 0.00 19,068,805.14 0.00 Bozhou Gujing Printing Co., Ltd 27,021,753.63 27,021,753.63 0.00 27,021,753.63 0.00 Bozhou Pairuite Packaging Co., Ltd 49,900,000.00 0.00 49,900,000.00 0.00 49,900,000.00 Shanghai Gujing Trade Co., Ltd 9,900,000.00 9,900,000.00 0.00 0.00 9,900,000.00 Anhui Ruifuxiang Food Co., Ltd 265,113,634.51 104,940,000.00 160,173,634.51 0.00 265,113,634.51 Hefei Gujing Trade Co., Ltd 9,900,000.00 9,900,000.00 0.00 0.00 9,900,000.00 Bozhou Gujing Hotel Co., Ltd 16,271,917.40 16,271,917.40 0.00 0.00 16,271,917.40 Total 585,575,561.89 375,501,927.38 210,073,634.51 49,390,558.77 536,185,003.12 10.3.3 No material impairment loss in long-term equity investment in yearend based on review of management of the company at the end of reporting period. 10.3.4 The company increases its investment in subsidiary Anhui Ruifuxiang Food Co., Ltd, the investment is net assets of a branch of Alcohol Company and one workshop of feed factory, the net assets include building and land (Bojiao Guoyong[2008] No.025, original amount 36,776,734.00, accumulate deprecation 310,090.51; trade mark original amount 150,000.00, accumulate deprecation 22,500.00). Up to the reporting date, the company does not transfer the ownership of the building, land and transportation equipment. 10.4 Operating income and operating cost 10.4.1 Operating income Items Amount fort year 2008 Amount for year 2007 Operating income 564,516,475.71 469,051,155.55 Other operating income 47,771,222.47 21,754,108.96 Total 612,287,698.18 490,805,264.51 95 10.4.2 Operating cost Items Amount fort year 2008 Amount for year 2007 Operating cost 405,746,865.60 404,536,971.95 Other operating cost 52,974,023.48 29,397,642.50 Total 458,720,889.08 433,934,614.45 10.4.3 List according to product category or business Amount fort year 2008 Amount for year 2007 Category operating income operating cost operating profit operating income operating cost operating profit White Sprit and alcohol 564,516,475.71 405,746,865.60 158,769,610.11 439,595,705.32 383,096,076.36 56,499,628.96 Disposal material 9,816,559.02 9,323,593.65 492,965.37 9,970,314.93 9,085,925.12 884,389.81 Sale of water, electric, gas 6,834,036.09 9,603,835.42 -2,769,799.33 7,745,999.39 10,721,844.63 -2,975,845.24 Revenue of process 0.00 0.00 0.00 4,011,955.56 9,561,656.73 -5,549,701.17 Others 31,120,627.36 34,046,594.41 -2,925,967.05 29,481,289.31 21,469,111.61 8,012,177.70 Total 612,287,698.18 458,720,889.08 153,566,809.10 490,805,264.51 433,934,614.45 56,870,650.06 10.4.4 Sales from top five clients 2008 year 2007 year Client Sales Proportion % Sales Proportion % Total sales from top five clients 515,087,996.24 84.13 400,610,261.42 81.62 10.5 Investment income 10.5.1 List by source of investment income Source of investment income Amount fort year 2008 Amount for year 2007 Profit allocate from subsidiaries 112,305,752.38 129,134,548.89 Deal with profit and loss arise from subsidiaries 1,428,579.46 0.00 Total 113,734,331.84 129,134,548.89 XI Related party and related party transactions 11.1 Confirmation related parties The Company has control, jointly control or significant influence on the other party, or is under same party’s control, jointly control or significant influence with other company, is deemed as related parties. 11.2 The relationship of related parties 11.2.1Related party with controllable relationship Registration Registration Share Voting right Name Operating business Register capital number address proportion% proportion% Anhui Beverage, Construction materials, and Gujing Group 151947437 353,800,000.00 61.15 61.15 Baozhou plastic productions manufacture The ultimate controller is Government of Anhui Province Bozhou City. Details of subsidiaries are listed in No1 of Notes VII. 11.2.2 The related party with uncontrollable relationship 96 Name of Company Registration number Relationship with the Company Anhui Gujing Comprehensive Service Co., Ltd 151940040 The subsidiary of same direct controlling shareholder Bozhou Zhenli Hengbao Co., Ltd 71395940-6 The subsidiary of same direct controlling shareholder Gujing Tianshi Printing Co., Ltd 71395908-6 The subsidiary of same direct controlling shareholder Gujing Jiufang Medicine Manufacture Co., Ltd 15194598-4 The subsidiary of same direct controlling shareholder Anhui Ruijing Shanlv Group Ltd 14912443-1 The subsidiary of same direct controlling shareholder Shanghai Gujing Jinhao Real Estate Development Co., Ltd 134565998 The subsidiary of same direct controlling shareholder Bozhou Gujing Thermoelectricity Co., Ltd 15194236-1 The subsidiary of same direct controlling shareholder Anhui Ruijing Famous Wine Sales Co., Ltd 667916375 The subsidiary of same direct controlling shareholder Anhui Gujing Hotel (Group) Co., Ltd 15194483-4 The subsidiary of same direct controlling shareholder Anhui JinYang Media Ltd 705048960 The subsidiary of same direct controlling shareholder Anhui Bozhou Gujing Employee Hospital 777376154 The subsidiary of same direct controlling shareholder 11.3. Related party transaction 11.3.1 The price of transaction between the Company and related parties is based on the price in contract signed by both parties 11.3.2 Relate party transaction 11.3.2.1 Sale of product Amount fort year 2008 Amount for year 2007 Relate Parties Proportion to Proportion to similar amount amount similar transaction% transaction% Gujing Group 478,078.18 0.03 616,735.40 0.05 Anhui Gujing Comprehensive Service Co., Ltd 622,611.09 0.05 942,669.49 0.08 Bozhou Zhenli Hengbao Co., Ltd 0.00 0.00 9,939.00 0.00 Bozhou Gujing Thermoelectricity Co., Ltd 126,579.48 0.01 36,962.70 0.00 Gujing Jiufang Medicine Manufacture Co., Ltd 958,066.67 0.07 783,860.49 0.07 Gujing Hotel 360,258.56 0.03 129,505.50 0.01 Anhui Ruijing Famous Wine Sales Co., Ltd 769.23 0.00 315,897.44 0.03 Anhui Bozhou Gujing Employee Hospital 16,690.76 0.00 0.00 0.00 Total 2,563,053.97 0.19 2,835,570.02 0.24 11.3.2.2 Purchase Product Amount fort year 2008 Amount for year 2007 Relate Parties Proportion to similar Proportion to similar amount amount transaction% transaction% Anhui Gujing Comprehensive Serv 15,422.40 0.00 20,761,252.27 6.37 Bozhou Gujing Thermoelectricity Co., 33,977,052.14 9.28 36,648,958.05 11.24 Ltd Total 33,992,474.54 9.28 57,410,210.32 17.61 97 11.3.2.3 Receive service Amount fort year 2008 Amount for year 2007 Relate Parties Proportion to similar Proportion to similar amount amount transaction% transaction% Anhui JinYang Media Ltd 公司 44,848,023.50 95.65 0.00 0.00 Total 44,848,023.50 95.65 0.00 0.00 11.3.2.4 Guarantees Up to 31 December 2008, Gujing Group provided securities guarantees for the Company’s short-term loan 30 million, and hypothecated its asset to guarantee the non-current liability which is a loan 5 million within one year, long-term loan 5 million. 11.3.3 Balance of account receivable or account payable among related parties Balance on 2008-12-31 Balance on 2007-12-31 Name of company Amount Proportion% Amount Proportion% Account receivable: Gujing Group 55,835.00 0.14 80,328.00 0.22 Bozhou Zhenli Hengbao Co., Ltd 4,925.00 0.01 1,776.00 0.00 Bozhou Gujing Thermoelectricity Co., Ltd 1,453.00 0.00 1,673.00 0.00 Gujing Jiufang Medicine Manufacture Co., Ltd 85,277.20 0.21 105,199.59 0.29 Anhui Ruijing Shanlv Group Ltd 44,377.05 0.11 51,677.20 0.14 Total 191,867.25 0.47 240,653.79 0.65 Other account receivable： Anhui JinYang Media Ltd 3,300,384.09 3.53 2,993,800.00 3.20 Total 3,300,384.09 3.53 2,993,800.00 3.20 Advanced to suppliers: Bozhou Gujing Thermoelectricity Co., Ltd 0.00 0.00 287,031.12 2.63 Total 0.00 0.00 287,031.12 2.63 Account payables: Anhui Gujing Comprehensive Service Co., Ltd 29,760.00 0.03 481,033.26 0.73 Bozhou Zhenli Hengbao Co., Ltd 0.00 0.00 69.34 0.00 Bozhou Gujing Thermoelectricity Co., Ltd 151,063.05 0.15 0.00 0.00 Anhui Ruijing Shanlv Group Ltd 5,843.20 0.01 0.00 0.00 Total 186,666.25 0.19 481,102.60 0.73 Other payables: Gujing Group 33,500,000.00 39.30 500,000.00 1.26 Anhui Gujing Comprehensive Service Co., Ltd 0.00 0.00 261,061.21 0.66 Bozhou Gujing Thermoelectricity Co., Ltd 31,591.70 0.04 49,792.55 0.13 Anhui Ruijing Shanlv Group Ltd 7,296,446.16 8.56 4,999,809.80 12.58 Total 40,828,037.86 47.90 5,810,663.56 14.63 98 XII Contingency Up to 31 December 2008, there is no significant contingency event that needs to be disclosed XIII Commitment Up to 31 December 2008, there is no significant commitment event that needs to be disclosed XIV Non-adjusting events after balance sheet date 14.1 Event of replacement of material asset According to the deliberation of , which is pass through in the ninth meeting by the Fifth Board of Director in 25 February 2009, the company plan to replace net assets that the net value in 31st December 2008 of wholly-owned subsidiary Anhui Ruifuxiang Food Ltd with Gujing Group’s hotel assets(Shanghai Gujing Jinhao Real Estate development Ltd) According to the agreement with Gujing Group, the date of 31 August 2008 was set as benchmark date; the price of asset replaced out by the company is 286,308,100.00 that the value is determined according to No 004 of Kaiyuan(Jing)PingBaoZi[2008] , which is issued by Kaiyuan Asset Evaluation Ltd in 6 October 2008; the price of replace in asset is 301,008,300.00 estimated according to No 003 of Kaiyuan(Jing)PingBaoZi[2008] Value assessment report of Shanghai Gujing Jinhao Hotel Administration Ltd’s Shareholder’s equity>. The difference of 14,700,200.00 would be paid to Gujing Group in cash by the company. Up to reporting date, the plan is waiting for deliberation of shareholders meeting. 14.2 Event of equity pledged by control shareholder Gujing Group whic is the control shareholder of the company pledge 57million shares (representing 24.26% of total equity) of the company out of 143,702,011 shares (representing 61.15% of total equity) that hole by Gujing Group to China Construction Bank Bozhou Branch as loan pledge, amount of the loan is 120 million. Gujing Group completed statutory procedures of pledge equity in 16 March 2009. Up to report date, the company’s share pledged by Gujing Group is 57 million, representing 24.26% of company’s share, representing 39.67% of shares hold by Gujing Group. XV Other significant events 15.1 Gujing Group has apply proposal to Government of Bozhou about restructuring employee identity of the Group(including the company) by issue document of [2008]145 in 22 December 2008, which is approval by deliberation of interim meeting of Fifth Board of Director, second Congress of Seventh trade union, the proposal is approval by Government of Bozhou in 26 December 2008 by No 116 of Bozhengmi[2008]. According to document approval by government and relate 99 restructuring proposal, laborer who does not renew contract with the company and its subsidiaries Bozhou Feed Factory, Bozhou Gujing Sales Co., Ltd, Bozhou Gujing Transportation Co., Ltd Anhui Old Big Eight Distillery Co., Ltd, Hefei Gujing Trade Co., Ltd, Shanghai Gujing Trade Co., Ltd would compensate by the company; laborer renew contract with the company would award compensation fund which 30% is paid the company and 70% is paid by Gujing Group; deputy manager of department and important technique staff would award compensation fund from Gujing Group; for laborer from other subsidiaries, subsidiaries paid compensation fund in one time to those who do not renew contract, for those laborer who renew contract, subsidiaries respond to 30% of compensation fund that Gujing Group respond to the insufficient part of compensation fund belong to 2007, 2008 and salary relate to efficient of work, 70% of compensation fund is paid by Gujing Group. The number of employee involves to compensation fund of the company and subsidiaries are 5,508, and compensation fund is expect in 143 million, and will be paid according to the fact. Except formulate mention above, other settlement allowance (including but not limited to social insurance of previous) because of restructuring will respond by Gujing Group. Up to the reporting date, total amount of compensation fund 57,428,680.26 has been paid to employee who release contract in one time or employee who did not release from contract, the company and subsidiaries respond for 42,104,777.85, and Gujing Group respond for 15,323,902.41. XVI Supplement Information 16.1 Yield Rate of Net Assets and Earnings per Share Yield Rate of Net Assets% 报 Earnings Per Share(Yuan per share) 告 期 Diluted 利 Weighted Basic earning earnings per Full dilution 润 average per share share Profit in the report period 34,474,407.91 Net profit attributable to 34,576,867.37 3.93 4.01 0.15 0.15 ordinary shareholders Net profit attributable to the ordinary shareholders 32,778,049.32 3.73 3.80 0.14 0.14 after deduction of non- operating profit and loss Net asset 883,039,193.04 Net asset attributable to the 879,910,755.89 ordinary shareholders 16.2 Calculation： 16.2.1 Basic Earnings Per Share 100 Current year amount Previous year amount After deduction of After deduction of Items Calculation amount non-operating profit amount non-operating profit and loss and loss Net current year’s profit attributable to (1) 34,576,867.37 32,778,049.32 33,876,546.32 18,244,111.64 ordinary shareholders outstanding capital stock in year begin (2) 235,000,000.00 235,000,000.00 235,000,000.00 235,000,000.00 Incremental weighting average number (3) 0.00 0.00 0.00 0.00 for the year Decrement weighting average number for (4) 0.00 0.00 0.00 0.00 the year weighted average ordinary shares issued (5)=(2)+(3)-(4) 235,000,000.00 235,000,000.00 235,000,000.00 235,000,000.00 out Basic Earning Per Shares (6)=(1)÷(5) 0.15 0.14 0.14 0.08 16.2.2 Diluted Earnings per Shares Current year amount Previous year amount After deduction of After deduction of Items Calculation amount non-operating profit amount non-operating profit and loss and loss Net current year’s profit attributable to (1) 34,576,867.37 32,778,049.32 33,876,546.32 18,244,111.64 ordinary shareholders potential dilution in Dividend and interest (2) 0.00 0.00 0.00 0.00 that recognized as expense convert expense for potential dilution (3) 0.00 0.00 0.00 0.00 ordinary share Tax rate (4) 25% 25% 33% 33% adjusted net current profit attributed (5)=(1)+[(2)- 34,576,867.37 32,778,049.32 33,876,546.32 18,244,111.64 ordinary shareholder (3)]×[1-(4)] weighted average number to calculate EPS (6) 235,000,000.00 235,000,000.00 235,000,000.00 235,000,000.00 weight average number of potential (7) 0.00 0.00 0.00 0.00 dilution share convert into ordinary share Weight average number to calculate (8)=(6)+(7) 235,000,000.00 235,000,000.00 235,000,000.00 235,000,000.00 dilution EPs Dilution EPS (9)=(5)÷(8) 0.15 0.14 0.14 0.08 XVII Approval of financial statements This financial statement are approved and authorized for issuance by the Board of Directors on 27 March 2009. 101 Anhui Gujing Distillery Company Limited Financial statement and the Notes is signature by： Legal representative： Chief accountant of accounting department： Manager of accounting department ： 102