Our Core Business. Processed meat products Fresh, chilled and frozen pork products Animal feeds Pigs of quality breeds

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2 U N I T E D F O O D H O L D I N G S L I M I T E D Our Core Business United Food Holdings Limited is a leading producers and suppliers of processed meat products, fresh, chilled and frozen pork products, animal feeds and pigs of quality breeds in China. We are IS09002-Certified and we aspire to become a leading global food conglomerate offering quality products to our customers. At the same time, we aspire to deliver premium returns to our shareholders through innovative management practices and stringent quality assurance standards. One of our competitive advantages over our competitors is that, through the integration of our production processes, we make efficient use of our resources resulting in lower overall production cost and better quality control of our products. Our corporate strengths and reputation lie in our four principal product categories: Processed meat products Fresh, chilled and frozen pork products Animal feeds Pigs of quality breeds

3 Contents Corporate Information 2 Financial Highlights 3-4 Chairman s Statement 5-7 Review of Operations 8-9 Corporate Structure 10 Report of the Directors and Financial Report Shareholders Information Notice of Annual General Meeting Five Year Financial Summary 59 Financial Calendar 60

4 Corporate Information Corporate Information 2 BOARD OF DIRECTORS Executive: David Yip Wai Sun (Chairman) Wang Tingbao (Deputy Chairman) Wang Wenguang Annual Report 2001 United Food Holdings Limited Non-Executive: AUDIT COMMITTEE COMPANY SECRETARY ASSISTANT COMPANY SECRETARY REGISTERED OFFICE Ho Wah Onn (Independent) Sitoh Yih Pin (Independent) Ho Wah Onn (Chairman) David Yip Wai Sun Sitoh Yih Pin Lee Kam Wan Tan Lay Hong Ira Stuart Outerbridge Ill Clarendon House 2 Church Street Hamilton HM 11 Bermuda Tel: [1] (441) BUSINESS OFFICE HONG KONG OFFICE SHARE TRANSFER AGENT SHARE REGISTRAR AUDITORS AUDIT PARTNER-IN-CHARGE Shenquan Village, Luozhuang District Linyi City, Shandong Province The People s Republic of China Postal Code Tel: [86] (539) / Fax: [86] (539) Room 1209, 12/F., Wing On Centre 111 Connaught Road Central Sheung Wan, Hong Kong Tel: (852) / Fax: (852) Lim Associates (Pte) Ltd 10 Collyer Quay #19-08 Ocean Building Singapore Tel: [65] The Bank of Bermuda Limited Bank of Bermuda Building 6 Front Street Hamilton HM 11 Bermuda Tel: [1] (441) Ernst & Young Certified Public Accountants 15/F., Hutchison House 10 Harcourt Road, Central Hong Kong Tel: (852) Kevin Wong, Hong Kong

5 Financial Highlights Change Rmb$million Rmb$million % Turnover 2,162 1, Gross Profit Profit from Operations Profit Before Taxation Profit After Taxation Profit attributable to shareholders Shareholders Fund Total Assets Total Liabilities Dividends Profitability ratios Annual Report 2001 United Food Holdings Limited Financial Highlights 3 Gross Margin 26.0% 26.0% 0.0% Operating Margin 20.5% 20.5% 0.0% Return on Turnover 17.3% 16.7% 0.6% Return on Average Equity 59.7% 83.5% -23.8% Return on Average Assets 51.8% 59.3% -7.5% Per share data (Notes) a. Net Tangible Assets (cents) b. Earnings (cents) c. Gross Dividends (cents) Notes: a. The net tangible assets per ordinary share was calculated based on 966,953,740 shares in issue as at 31 December 2001 (2000: 836,403,740 shares) in issue during the year. b. The calculation of the basic earnings per share for the year ended 31 December 2001 was based on the weighted average of 895,681,775 shares (2000: 836,403,740 shares) in issue during the year. c. The gross dividends per ordinary share was calculated based on 966,953,740 shares in issue as at 31 December 2001 (2000: 836,403,740 shares) in issue during the year.

6 Annual Report 2001 United Food Holdings Limited Financial Highlights 4 Financial Highlights (Rmb$ million) Turnover Profit Before Tax (Rmb$ million) (Rmb cents) Earnings Per Share Net Tangible Assets Per Share Operating Margin and Return on Turnover Return on Average Equity and Return on Average Assets (Rmb cents) ( % ) ( % ) Operating Margin Return on Average Equity Return on Turnover Return on Average Assets

7 Chairman s Statement I am pleased to report that year 2001 was another year of growth for us on many different levels. RESULTS Our turnover climbed 39.1% from Rmb1.55 billion in FY2000 to Rmb2.16 billion in FY2001, with net profit reaching Rmb375 million. We delivered an earnings per share of Rmb42 cents, and an average return on equity of 59.7%. The Board of Directors proposed a final dividend of Rmb11.5 cents per share for the year ended 31 December 2001, which when combined with the interim dividend of Rmb8 cents per share, reached a total dividend of Rmb19.5 cents per share for the year. BUSINESS REVIEW We made several key moves during the year to ensure our Group s continued growth and progress in line with our strategic plans. Annual Report 2001 United Food Holdings Limited Chairman s Statement 5 PROCESSED MEAT PRODUCTS A new production line for low temperature meat products, with annual output of 20,000 tonnes, commenced commercial production in April Currently, our Group offers approximately 10 different low temperature meat products to the market and we are currently developing another 10 new low temperature meat products. We successfully launched a new processed meat product, the King of Fresh Meat sausage ( ), in April This new product caters to consumers who prefer the taste and quality of fresh, chilled meat. We intend to introduce more new and innovative processed meat products in year 2002 to meet consumer and market demands. FRESH, CHILLED AND FROZEN PORK In April 2001, we subcontracted an abattoir in Dezhou with the capacity to slaughter 720,000 pigs per year. In order to meet the growing demand for fresh, chilled pork and to ensure a steady supply of high quality lean pork to our meat processing lines, we plan to subcontract three more abattoirs in the future. Efforts will also be made in exploring export opportunities for frozen pork products to other markets.

8 Annual Report 2001 United Food Holdings Limited Chairman s Statement 6 Chairman s Statement NEW PRODUCTS In order to further develop and diversify our business, our Group has undertaken the development of high value-added pig by-products for pharmaceutical use. New production lines for pig byproducts based biochemical pharmaceutical products, such as Chondroitin Sulfate, are expected to commence commercial production in ANIMAL FEED We have expanded our production capacity of animal feed from 100,000 tonnes to 150,000 tonnes. During the year, we successfully launched a wide range of animal feeds with improved nutrition formulas for rabbits, fish, chickens and pigs. The ongoing development of the agriculture and livestock industry in the PRC provides us with ample growth opportunities and, as such, we aim to achieve high margins by further diversifying our product base and by penetrating the higher-value feeds segment. To cope with the increasing sales volume, we have plans to further expand our production facility for animal feeds. QUALITY BREEDS We have successfully completed a two-stage study to assess the quality of our breeding stock and to upgrade its quality and production efficiency. We have further improved the weaning process of suckling pigs to improve the breeding ability of parent pigs and to reduce the feeding cost. With the upgrade of the artificial insemination department, the genetics of our stock has significantly improved. During the year, stocks of the famous local breed Yimeng Black Pig (!) were transferred to our pig farm for preservation and development. This was a recognition of our achievements in the development of quality breeds by the Shandong Linyi Husbandry Bureau. In addition, based on prevailing consumer tastes and consumption habits, this species holds tremendous market potential for our Company. Based on production requirements and market needs, we will continuously introduce quality breeds to improve our breeding stock. RETAIL SHOPS During the year, we ventured into the retail sector by establishing 100 franchised Jiangquan retail shops in the PRC. This paves the way for future retail expansion. With the establishment of these retail shops, our Group is making progress on its intention to develop into a food conglomerate, encompassing the major business activities of animal feed production, pig rearing and slaughtering, meat processing, wholesaling, retailing and international trading.

9 Chairman s Statement AWARDS Our processed meat product, the King of Kings sausage, was awarded China Well-known Brand by the China International Agricultural Exposition 2001 (!"#$%) and our pig farm was admitted as a member of the Committee of Shandong High Quality Breeds (!"#$%!"#$%). These awards and recognition were granted for the quality of our products as well as for the effective business practices which have contributed to the success of our Group. PROSPECTS China s entry into the WTO and flourishing international trade under free trade agreements will offer valuable opportunities to our Group. Looking ahead, our Group will continue our plans to broaden our sales and distribution network, increase production capacity, introduce new premium products as well as to intensify brand-building and other promotional activities to increase our market share. With solid strategic planning in place, complemented by our management expertise, stringent quality assurance standards, financial strength and a vast sales and distribution network, our Group is poised for rapid expansion. Annual Report 2001 United Food Holdings Limited Chairman s Statement 7 APPRECIATION On behalf of the Board of Directors, I would like to take this opportunity to express my gratitude to our fellow directors and the staff for their contributions and to all business partners and shareholders for their continuing support. David Yip Wai Sun Chairman Hong Kong, 10 April 2002

10 Annual Report 2001 United Food Holdings Limited Review of Operations 8 Review of Operations Urumqi Xining Chengdu Lanzhou Yinchuan Xian Qiqihar Harbin Changchun Dandong Jinzhou Shenyang Hohhot Dalian Beijing Tianjin Datong Taiyuan Shijiazhuang Zhengzhou Jinan Jining Xuzhou Hefei Yantai Shanghai Nanjing Hangzhou Wuhan Chongqing Wenzhou Nanchang Guiyang Changsha Fuzhou Xiamen Kunming Guangzhou Nanning Haikou

11 Review of Operations United Food made a profit before tax of Rmb443 million, a 39.3% increase over FY2000. Our Group s turnover increased by Rmb608 million in FY2001, or 39.1% from Rmb1.55 billion to Rmb2.16 billion. This significant increase in turnover was mainly achieved by an increase in production capacity, the establishment of 100 franchised retail shops, the addition of new retailers and authorised dealers, and the successful launch of new products supported by competitive brand building activities. We achieved sales volume increases in our different business activities, and this has effectively increased the utilization rate of our fixed assets. Gross margins remained stable at 26%. Our Group s profit before tax increased by Rmb125 million or 39.3% from Rmb318 million in FY2000 to Rmb443 million in FY2001. The increase in profit before tax was in line with the increase in turnover. Selling and administrative expenses increased by Rmb36 million over the last financial year and this was attributed to the increase in advertising and promotion expenses, sales taxes and salesmen bonus, and higher operating costs as a result of business expansion. Other revenue increased from Rmb2 million in FY2000 to Rmb7 million in FY2001, mainly as a result of interest income from the proceeds of the initial public offering of shares in March Annual Report 2001 United Food Holdings Limited Review of Operations 9 Our Group s effective tax rate was lower in 2001 due to a tax benefit of 18% enjoyed by the Group which was granted by the relevant government authority. USE OF PROCEEDS As at 31 December 2001, the net proceeds of approximately Rmb160 million raised from the initial public offer in March 2001 were applied as follows: Approximately Rmb48.8 million for the construction of new production facilities for processed meat products; Approximately Rmb15 million for the funding of marketing and promotion activities; Approximately Rmb20.7 million for working capital purpose; Approximately Rmb10 million for the expansion of our range of processed meat products; and Approximately Rmb4.8 million for the expansion of our research and development department. The net proceeds, which have not yet been fully utilized, will be used for the intended applications as set out in prospectus of the Company dated 12 March LIQUIDITY AND FINANCIAL RESOURCES We continue to maintain a debt-free capital structure and strong liquidity position. Cash inflow from operating activities amounted to Rmb214 million with net cash reaching Rmb359 million.

12 Annual Report 2001 United Food Holdings Limited Corporate Structure 10 Corporate Structure United Food Holdings Limited (Bermuda)* Post-Ante Trading Limited (British Virgin Islands)* Publicly listed on The Singapore Exchange Securities Trading Limited Linyi Jiangquan Meat Products Co., Ltd. (PRC)* Linyi Shengquan Meat Products Co., Ltd. (PRC)* Globe Bright Limited (Hong Kong)* * Place of Incorporation/Establishment

13 Report of the Directors and Financial Report For the year ended 31 December 2001 Report of the Directors Statement by the Directors 20 Report of the Auditors 21 Audited Financial Statements Group and Company: Profit and Loss Accounts 22 Balance Sheets 23 Group: Consolidated Cash Flow Statement 24 Notes to Financial Statements 25-50

14 Annual Report 2001 United Food Holdings Limited Report of the Directors 12 Report of the Directors The directors herein present their report and the audited financial statements of the Company and of the Group for the year ended 31 December Directors The directors of the Company in office at the date of this report are: Executive directors: David Yip Wai Sun (Chairman) Wang Tingbao Wang Wenguang Independent non-executive directors: Ho Wah Onn Sitoh Yih Pin In accordance with bye-law 86 of the Company s bye-laws, the directors of the Company, including the nonexecutive directors, are subject to retirement by rotation and re-election at the forthcoming annual general meeting. Restructuring exercise The Company was incorporated in Bermuda as an exempted company with limited liability under the Companies Act 1981 of Bermuda on 14 August Pursuant to a restructuring exercise (the Restructuring Exercise ) to rationalise the Group structure in preparation for the listing of the Company s shares on the Singapore Exchange Securities Trading Limited (the SGX-ST ), the Company became the holding company of the Group on 15 January Further details of the Restructuring Exercise, together with details of the subsidiaries acquired pursuant thereto, as well as the basis of presentation of the financial statements, are set out in notes 1, 3, 12 and 19 to the financial statements. The shares of the Company were listed on the SGX-ST on 26 March Principal activities The principal activity of the Company is investment holding. Details of the principal activities of the subsidiaries are set out in note 12 to the financial statements. There were no changes in the nature of the subsidiaries principal activities during the year.

15 Results for the year Group Company RMB 000 RMB 000 Net profit from ordinary activities attributable to shareholders 375, ,850 Retained profits as at 1 January , , ,850 Dividends paid and proposed (188,556) (188,556) Retained profits as at 31 December ,021 1,294 Material movements in reserves and provisions Annual Report 2001 United Food Holdings Limited Report of the Directors 13 The following net transfers have been made to reserves: Group RMB 000 Company RMB 000 Share premium 124, ,713 There were no other material transfers to or from provisions during the year except for normal amounts recognised as an expense for such items as depreciation of fixed assets and provisions for trade debtors, inventories and income tax as disclosed in the financial statements. Acquisition and disposal of subsidiaries The subsidiaries acquired pursuant to the Restructuring Exercise during the year are set out in note 12 to the financial statements. In addition, during the year, the Group established Linyi Shengquen Meat Products Co., Ltd., and details of which are also set out in note 12 to the financial statements. No subsidiary was disposed of during the year.

16 Annual Report 2001 United Food Holdings Limited Report of the Directors 14 Report of the Directors Issue of shares and debentures On 19 January 2001, the Company issued 418,001,870 ordinary shares of HK$0.50 each at par in consideration of and in exchange for the acquisition of the entire issued share capital of Post-Ante Trading Limited, the then holding company of the subsidiaries now comprising the Group pursuant to the Restructuring Exercise. Further details are set out in notes 1, 12 and 19 to the financial statements. On 26 March 2001, 130,550,000 shares of HK$0.25 each were issued to the public at S$0.315 each. No subsidiary issued any shares during the year. The Company and its subsidiaries did not issue any debentures during the year. Arrangements to enable directors to acquire shares and debentures Neither at the end of the year, nor at any time during the year, was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures of Company or any other body corporate. Directors interests in shares and debentures According to the register of director s shareholdings, the following directors, who held office at the end of the year, had an interest in shares of the Company and related corporations as stated below: Ordinary shares of HK$0.10 each of the Company at date of appointment and 31 December 2000 (before consolidation and sub-division). Direct Deemed Name of director interest interest David Yip Wai Sun 210, ,000 Wang Tingbao 60, ,000 Wang Wenguang 30,000 Ho Wah Onn Sitoh Yih Pin Ordinary shares of HK$0.50 each of the Company at 15 January 2001 (after consolidation and the Restructuring Exercise but before sub-division and listing of the Company shares in SGX-ST). Direct Deemed Name of director interest interest David Yip Wai Sun 87,822, ,741,310 Wang Tingbao 25,092, ,741,310 Wang Wenguang 12,546,056 Ho Wah Onn Sitoh Yih Pin

17 Directors interests in shares and debentures (continued) Ordinary shares of HK$0.25 each of the Company at 18 April 2001 (after consolidation, the Restructuring Exercise, sub-division and listing of the Company shares in SGX-ST). Direct Deemed Name of director interest interest David Yip Wai Sun 175,644, ,482,620 Wang Tingbao 50,184, ,482,620 Wang Wenguang 25,092,112 Ho Wah Onn Sitoh Yih Pin Ordinary shares of HK$0.25 each of the Company at 31 December Direct Deemed Name of director interest interest Annual Report 2001 United Food Holdings Limited Report of the Directors 15 David Yip Wai Sun 130,644, ,482,620 Wang Tingbao 50,184, ,482,620 Wang Wenguang 25,092,112 Ho Wah Onn Sitoh Yih Pin There was no change in any of the above mentioned interests between the balance sheet date and 21 January Subsequent to the balance sheet date on 6 February 2002, David Yip Wai Sun disposed of part of his direct interest, amounting to 42,822,000 ordinary shares with par value of HK$0.25 each in the Company, in the open market. Save for the foregoing, there was no change in any of the above mentioned interests between the end of the year and 10 April 2002, the date of approval of the financial statements. Dividends A special dividend of RMB85,000,000 was paid by a subsidiary of the Company to its then shareholders prior to the Restructuring Exercise, in respect of the year ended 31 December 2000, as shown in the report of the directors for that year. An interim dividend of RMB0.08 per ordinary share, amounting to RMB77,356,000, was paid during the year. The directors propose that a final dividend of RMB0.115 per ordinary share, amounting to RMB111,200,000, be paid for the year ended 31 December 2001.

18 Annual Report 2001 United Food Holdings Limited Report of the Directors 16 Report of the Directors Bad and doubtful debts Before the profit and loss accounts and the balance sheets of the Company and of the Group were made out, the directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts, and have satisfied themselves that all known bad debts, if any, have been written off and that where necessary, adequate provision has been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances which would render any amount written off or provided for bad and doubtful debts in the Group inadequate to any substantial extent. Current assets Before the profit and loss accounts and balance sheets of the Company and of the Group were made out, the directors took reasonable steps to ascertain that any current assets which were unlikely to realise their book values in the ordinary course of business have been written down to their estimated realisable values or adequate provision has been made for the impairment in the value of such current assets. At the date of this report, the directors are not aware of any circumstances which would render the values attributed to current assets in the consolidated financial statements misleading. Charges on assets and contingent liabilities Since the end of the year, and up to the date of this report, no charge on the assets of the Company or any companies in the Group has arisen which secures the liabilities of any other person and no contingent liability has arisen. Ability to meet obligations No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the year which, in the opinion of the directors, will or may substantially affect the ability of the Company and of the Group to meet their obligations as and when they fall due. Other circumstances affecting the financial statements At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or in the financial statements which would render any amount stated in the financial statements of the Company and of the Group misleading.

19 Unusual items In the opinion of the directors, the results of the operations of the Company and of the Group during the year have not been substantially affected by any item, transaction or event of a material and unusual nature. Unusual items after the financial year In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the year and the date of this report which would affect substantially the results of the operations of the Company and of the Group for the year in which this report is made. Directors service contracts The Company entered into separate service agreements ( Service Agreements ) with David Yip Wai Sun, Wang Tingbao and Wang Wenguang for an initial period of three years commencing from 1 February The Service Agreements shall be renewable automatically for successive terms of one year each unless terminated by not less than three months notice in writing, served by either party, following the expiration of the end of the initial term or at any time thereafter. Annual Report 2001 United Food Holdings Limited Report of the Directors 17 Apart from the foregoing, no director proposed for re-election at the forthcoming annual general meeting has a service contract with the Company which is not determinable by the Company within one year without payment other than statutory compensation. Directors interests in contracts Except for the service contracts detailed above and the transactions disclosed in note 5 to the financial statements, no director received or became entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest. Options There is presently no option schemes on unissue shares of the Company.

20 Annual Report 2001 United Food Holdings Limited Report of the Directors 18 Report of the Directors Corporate governance 1. Audit Committee The Audit Committee was established on 15 January The Audit Committee comprises three members, two of whom are non-executive directors and are independent of management. The members of the Audit Committee at the date of this report are: Non-executive directors: Ho Wah Onn (Chairman) Sitoh Yih Pin Executive director: David Yip Wai Sun The Audit Committee meets periodically with management and the auditors of the Company to discuss and review the following: (a) the financial and operating results and accounting policies of the Group; (b) the financial statements of the Company and of the Group before their submission to the full board of directors, and the external auditors report on those financial statements; (c) the interim and annual announcement of results of the Group before their submission to the full board of directors for approval; (d) the assistance given by the management of the Group to the auditors; (e) the external audit plans and the results of the external auditors examination and evaluation of the Group s internal accounting control system; (f) the re-appointment of the external auditors; and (g) the Group s transactions with related parties. The Audit Committee also generally undertakes such other functions and duties as may be required by statute or the Listing Manual of the SGX-ST, and by such amendments made thereto from time to time. In performing its functions, the Audit Committee: (a) has had full access to and cooperation by the management and has full discretion to invite any director and executive officer to attend its meetings; and (b) has been given reasonable resources to enable it to discharge its functions properly.

21 Corporate governance (continued) 1. Audit Committee (continued) The Company adopted the Best Practices Guide issued by the SGX-ST in relation to the roles and responsibilities of the Audit Committee. In the opinion of the Directors, the Company complies with the Best Practices Guide issued by the SGX-ST with respect to audit committees. The Audit Committee has recommended to the board of directors the nomination of Ernst & Young, Hong Kong for re-appointment as auditors of the Company at the forthcoming annual general meeting. 2. Securities transactions The Company has issued a policy on dealing in the Company s shares to employees of the Company pursuant to the Best Practices Guide issued by the SGX-ST. The policy sets out the implications of insider dealing in the Company s shares, and includes guidance to employees on dealing in the Company s shares, which is modelled on the Best Practices Guide with some modifications. Annual Report 2001 United Food Holdings Limited Report of the Directors 19 Auditors The auditors, Ernst & Young, Certified Public Accountants, have expressed their willingness to accept re-appointment. Other information required by the SGX-ST Save as disclosed in note 5 to the financial statements, no material contracts to which the Company, its holding company, or any of its subsidiaries are a party and which involved directors interests subsisted at the end of the financial year or have been entered into since the end of the previous financial year. On behalf of the board of directors David Yip Wai Sun Chairman Wang Tingbao Director Hong Kong 10 April 2002

22 Annual Report 2001 United Food Holdings Limited Statement by the Directors 20 Statement by the Directors We, David Yip Wai Sun and Wang Tingbao, being two of the directors of United Food Holdings Limited, do hereby state that, in the opinion of the directors, (i) the accompanying balance sheets, profit and loss accounts and consolidated cash flow statement together with the notes, thereto, as set out on pages 22 to 50, are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2001 and of the profit of the business of the Company and of the Group and cash flows of the Group for the year then ended; and (ii) at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. The board of directors authorised these financial statements for issue on 10 April On behalf of the Board David Yip Wai Sun Chairman Wang Tingbao Director Hong Kong 10 April 2002

23 Report of the Auditors To the members United Food Holdings Limited (Incorporated in Bermuda with limited liability) We have audited the financial statements on pages 22 to 50 which have been prepared in accordance with International Accounting Standards issued by the International Accounting Standards Committee. These financial statements are the responsibility of the Company s directors whose opinion thereon is set out on page 20. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing issued by the International Auditing Practices Committee. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Company s directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Annual Report 2001 United Food Holdings Limited Report of the Auditors 21 In our opinion the financial statements give a true and fair view of the financial position of the Company and of the Group as at 31 December 2001 and of the profit of the Company and of the Group and the cash flows of the Group for the year then ended and have been prepared in accordance with International Accounting Standards. Ernst & Young Certified Public Accountants Hong Kong 10 April 2002

24 Annual Report 2001 United Food Holdings Limited Profit and Loss Accounts 22 Profit and Loss Accounts Year ended 31 December 2001 Group Company Period from 14 August 2000 (date of Year ended Year ended Year ended incorporation) 31 December 31 December 31 December to 31 December Notes RMB 000 RMB 000 RMB 000 RMB 000 TURNOVER 6 2,161,767 1,554, ,000 Cost of sales (1,599,193) (1,149,433) Gross profit 562, , ,000 Other revenue 6,556 2,168 Selling and distribution costs (103,934) (72,596) Administrative expenses (15,557) (11,397) (2,150) Other operating expenses (6,451) (3,831) PROFIT FROM OPERATING ACTIVITIES 7 443, , ,850 Finance costs 8 (775) PROFIT BEFORE TAX 443, , ,850 Tax 9 (67,990) (57,934) NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS 375, , ,850 EARNINGS PER SHARE Basic 11 RMB0.42 RMB0.31 N/A N/A Other than the net profit for the year, the Group and the Company had no recognised gains or losses. Accordingly, a supplementary statement of recognised gains and losses of the Group and of the Company is not presented in the financial statements.

25 Balance Sheets 31 December 2001 Group Company Notes RMB 000 RMB 000 RMB 000 RMB 000 NON-CURRENT ASSETS Investments in subsidiaries ,738 Fixed assets ,311 69, ,311 69, ,738 CURRENT ASSETS Inventories , ,442 Trade debtors , ,328 Due from subsidiaries ,489 Prepayments, deposits and other debtors 16 38,693 3,448 Cash and bank balances , ,548 Annual Report 2001 United Food Holdings Limited Balance Sheets , , ,489 CURRENT LIABILITIES Trade creditors 22,976 17,172 Other creditors, deposits received and accruals 18 39,034 52, Tax payable 46,446 13, ,456 83, NET CURRENT ASSETS 732, , , , , ,867 CAPITAL AND RESERVES Issued capital , , ,660 Reserves , , ,007 Proposed final dividend , , , , ,867

26 Annual Report 2001 United Food Holdings Limited Consolidated Cash Flow Statement 24 Consolidated Cash Flow Statement Year ended 31 December RMB 000 RMB 000 CASH FLOWS FROM OPERATING ACTIVITIES Profit from operating activities 443, ,088 Adjustments for: Depreciation 19,283 21,534 Provision for doubtful debts 3,533 3,341 Bad debts written off Interest paid (775) Interest income (4,905) (1,011) Tax paid (net) (60,771) (54,156) Operating profit before working capital changes 400, ,378 Work capital adjustments: Decrease/(increase) in inventories (82,229) 29,293 Increase in trade debtors (88,142) (48,513) Increase in prepayments, deposits and other debtors (8,791) (1,259) Increase/(decrease) in trade creditors 5,804 (1,081) Increase/(decrease) in other creditors, deposits received and accruals (13,036) 5,716 Net cash generated from operating activities 214, ,534 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of fixed assets (74,108) (1,047) Interest received 3,785 1,011 Net cash used in investing activities (70,323) (36) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (77,356) (135,000) Repayment to a shareholder (46,800) Issue of shares 191,122 Share issue expenses (31,487) Net cash generated from/(used in) financing activities 82,279 (181,800) NET INCREASE IN CASH AND CASH EQUIVALENTS 226,292 90,698 Cash and cash equivalents at beginning of year 132,548 41,850 CASH AND CASH EQUIVALENTS AT END OF YEAR 358, ,548 ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 358, ,548

27 Notes to Financial Statements 1. RESTRUCTURING EXERCISE The Company was incorporated in Bermuda as an exempted company with limited liability under the Companies Act 1981 of Bermuda on 14 August On incorporation, the Company had an authorised share capital of HK$100,000 divided into 1,000,000 ordinary shares of HK$0.10 each. On 30 August 2001, 1,000,000 ordinary shares of HK$0.10 each were issued nil paid. Pursuant to a restructuring exercise (the Restructuring Exercise ) to rationalise the structure of the Group in preparation for the listing of the Company s shares on the Singapore Exchange Securities Trading Limited ( SGX-ST ) in March 2001, the Company became the holding company of the subsidiaries now comprising the Group on 15 January 2001, with the exception of Linyi Shengquen Meat Products Co., Ltd ( Shengquen ), which was established after that date. The Restructuring Exercise was accomplished by the Company acquiring the entire issued share capital of Post-Ante Trading Limited ( Post-Ante ), the then holding company of the subsidiaries now comprising the Group as set out in note 12 (except Shengquen), for a consideration of RMB223,738,000 which was satisfied by (a) the allotment and issue of 418,001,870 ordinary shares of HK$0.50 each in the Company, credited as fully paid and (b) the credit as fully paid of 200,000 ordinary shares of HK$0.50 each in the Company (which were consolidated from the above-mentioned 1,000,000 ordinary shares of HK$0.10 each allotted and issued nil paid on 30 August 2000) to the former shareholder of Post-Ante. Further details of the Restructuring Exercise are set out in note 19 to the financial statements and in the Company s prospectus dated 12 March Annual Report 2001 United Food Holdings Limited Notes to Financial Statements CORPORATE INFORMATION The consolidated financial statements of the Company for the year ended 31 December 2001 were authorised for issue in accordance with a resolution of the directors on 10 April The Company is a limited liability company incorporated in Bermuda. The Company is a subsidiary of Chinese Glory Investments Limited, a company incorporated in the British Virgin Islands, which is considered by the directors to be the Company s ultimate holding company as at the balance sheet date. The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. The principal activity of the Company is investment holding. The principal activities of the Company s subsidiaries are set out in note 12. There were no changes in the nature of the subsidiaries principal activities during the year. The Group mainly operates in the People s Republic of China (the PRC ) and employed 1,977 employees as at 31 December 2001 (31 December 2000: 1,729 employees).

28 Annual Report 2001 United Food Holdings Limited Notes to Financial Statements 26 Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of preparation The financial statements have been prepared under the historical cost convention and in accordance with International Accounting Standards ( IAS ) issued by the International Accounting Standards Committee. The Group s operations are principally conducted in the PRC. Accordingly, the consolidated financial statements have been prepared in Renminbi ( RMB ), being the functional currency of all of the principal companies in the Group. The Group has adopted IAS 39, Financial Instruments: Recognition and Measurement, for the first time in preparing the current year s financial statements. IAS 39 prescribes the principles for recognising, measuring, and disclosing information about financial assets and financial liabilities. The IAS is required to be applied prospectively and therefore, has had no effect on amounts previously reported in prior year financial statements. The adoption of IAS 39 has no major impact on these financial statements. Basis of presentation and consolidation The consolidated financial statements have been prepared using the pooling of interests method of accounting as a result of the Group Restructuring Exercise completed on 15 January 2001 involving the entities under common control. Under this method, the Company has been treated as the holding company of its subsidiaries for the financial years presented rather than from the date of its acquisition of the subsidiaries, except for Shengquen which was established by the Group subsequent to the completion of the Restructuring Exercise and is therefore consolidated from its effective date of establishment. Accordingly, the consolidated results of the Group for the two years ended 31 December 2001 and 2000 include the results of the Company and its subsidiaries with effect from 1 January 2000 or since their respective dates of incorporation/establishment, where this is a shorter period. The comparative consolidated balance sheet as at 31 December 2000 has been prepared on the basis that the existing Group had been in place at that date. In the opinion of the directors, the consolidated financial statements prepared on the above basis, present more fairly the results, cash flows and the state of affairs of the Group as a whole. All significant intra-group transactions and balances are eliminated on consolidation. Subsidiaries A subsidiary is a company whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities. Investments in subsidiaries are stated at cost less any impairment losses.

29 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fixed assets and depreciation Fixed assets, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after fixed assets have been put into operation, such as repairs and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of that asset. Depreciation is calculated on the straight-line basis to write off the cost of each asset over the following estimated useful lives: Leasehold buildings 10 years or over the lease terms, whichever is shorter Leasehold improvements 10 years or over the lease terms, whichever is shorter Plant and machinery 5 years Furniture, fixtures and office equipment 5 years Motor vehicles 5 years Annual Report 2001 United Food Holdings Limited Notes to Financial Statements 27 The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account is the difference between the net sales proceeds and the carrying amount of the relevant asset. Construction in progress, which represents buildings under construction, and plant and machinery pending installation, is stated at cost less any impairment losses. Cost comprises direct costs incurred during the periods of construction, installation and testing. No depreciation is provided on construction in progress. Construction in progress is reclassified to the appropriate category of fixed assets when completed and ready for use.

30 Annual Report 2001 United Food Holdings Limited Notes to Financial Statements 28 Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of assets An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset s recoverable amount is estimated. An asset s recoverable amount is calculated as the higher of the asset s value in use or its net selling price. An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation), had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises. Trade and other debtors Trade debtors, which generally have day credit terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when the collection of the full amount is no longer probable. Bad debts are written-off as incurred. Inventories Inventories are stated at the lower of cost and net realisable value after making due allowances for obsolete or slow-moving items. Cost is determined on the first-in, first-out basis and, in the case of work in progress and finished goods, comprises direct materials, direct labour and an appropriate proportion of manufacturing overheads and/or where appropriate, subcontracting charges. Net realisable value is based on estimated selling prices less any estimated costs expected to be incurred to completion and disposal. Trade and other creditors Liabilities for trade and other creditors which are normally settled on 30 day credit terms, are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the Group. The amount payable to a shareholder during the year ended 31 December 2000 was carried at cost.

31 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Provisions and contingencies A provision is recognised when there is a present obligation, legal or constructive, as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the profit and loss account. Contingent liabilities are not recognised in the financial statements. They are disclosed unless the possibility of an outflow of resources embodying economic benefits is remote. A contingent asset is not recognised in the financial statements but disclosed when an inflow of economic benefits is probable. Borrowing costs Annual Report 2001 United Food Holdings Limited Notes to Financial Statements 29 Borrowing costs are expensed in the period in which they are incurred. Revenue recognition Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases: (a) from the sale of goods, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold; and (b) interest income, on a time proportion basis, taking into account the principal outstanding and the effective interest rate applicable. Operating leases Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rentals applicable to such operating leases are charged to the profit and loss account on the straight-line basis over the lease terms.

32 Annual Report 2001 United Food Holdings Limited Notes to Financial Statements 30 Notes to Financial Statements 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Tax PRC corporate income tax is provided at rates applicable to an enterprise in the PRC on the income for financial reporting purposes, adjusted for income and expense items which are not assessable or deductible for income tax purposes. Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary difference and carry-forwards of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carry-forwards of unused tax assets and unused tax losses can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted at the balance sheet date or subsequently enacted. Dividends Final dividends proposed by the directors are classified as a separate allocation of retained earnings within capital and reserves in the balance sheet, until they have been approved by the shareholders in a general meeting. When these dividends are approved by the shareholders and declared, they are recognised as a liability. Interim dividends are simultaneously proposed and declared, because the Company s bye-laws grant the directors authority to declare interim dividends. Consequently, interim dividends are recognised directly as a liability when they are proposed and declared. Retirement benefits Pursuant to the relevant regulations of the PRC government, the subsidiary operating in the PRC participates in a local municipal government retirement benefits scheme (the Scheme ), whereby the PRC subsidiary is required to contribute a certain percentage of the basic salaries of its employees to the Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees of the PRC subsidiary. The only obligation of the Group with respect to the Scheme is to pay the ongoing required contributions under the Scheme mentioned above. Contributions under the Scheme are charged to the profit and loss account as incurred. There are no provisions under the Scheme whereby forfeited contributions may be used to reduce future contributions.

33 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign currencies The Group maintains its accounting records in RMB and transactions arising in foreign currencies, including Singapore dollars, during the year are translated into RMB at the applicable rates of exchange ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable rates of exchange ruling at that date. Exchange differences are dealt with in the profit and loss account. On consolidation, the operating results of non-prc companies in the Group are translated into RMB at the applicable rate of exchange ruling at the dates of the transactions and the assets and liabilities of non-prc companies in the Group are translated into RMB at the applicable rates of exchange ruling at the balance sheet date. The resulting translation differences, if any, are included in the exchange fluctuation reserve. Research and development costs All research costs are charged to the profit and loss account as incurred. Annual Report 2001 United Food Holdings Limited Notes to Financial Statements 31 Expenditure incurred on projects to develop new products is capitalised and deferred only when the projects are clearly defined; the expenditure is separately identifiable and can be measured reliably; there is reasonable certainty that the projects are technically feasible; and the products have commercial value. Product development expenditure which does not meet these criteria is expensed when incurred. Deferred development costs are amortised using the straight-line basis over the commercial lives of the underlying products of not exceeding five years, commencing from the date when the products are put into commercial production. During the year ended 31 December 2001, the research and development costs incurred were not significant to the Group and were charged to the profit and loss account. Related parties Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.