2009 ANNUAL REPORT Contents 2 Corporate Information 5 Financial Summary 6 Chairman’s Statement 8 Corporate Structure of the Group 10 Management Discussion and Analysis 23 Corporate Governance Report 32 Profi le of Directors, Supervisors and Senior Management 43 Report of the Directors 59 Report of the Supervisory Committee 61 Independent Auditors’ Report 63 Consolidated Income Statement 64 Consolidated Statement of Comprehensive Income 65 Consolidated Statement of Financial Position 67 Consolidated Statement of Changes in Equity 68 Consolidated Statement of Cash Flows 70 Statement of Financial Position 72 Notes to Financial Statements 2 Sichuan Xinhua Winshare Chainstore Co., Ltd Corporate Information LEGAL NAME OF THE COMPANY Editorial and Publication Committee Mr. Zhang Bangkai (Chairman) 四川新華文軒連鎖股份有限公司 Ms. Wang Jianping Mr. Yu Changjiu Mr. Zhang Chengxing COMPANY NAME IN ENGLISH Mr. Zhao Miao SICHUAN XINHUA WINSHARE CHAINSTORE CO., LTD.* Audit Committee Mr. Chan Yuk Tong (Chairman) LEGAL REPRESENTATIVE Mr. Han Xiaoming Ms. Wang Jianping Mr. Gong Cimin Remuneration and Review Committee Mr. Han Xiaoming (Chairman) BOARD OF DIRECTORS Mr. Chan Yuk Tong Mr. Zhang Bangkai Executive Directors Nomination Committee Mr. Gong Cimin (Chairman) Mr. Zhang Bangkai (Vice Chairman) Mr. Han Xiaoming (Chairman) Mr. Cheng Sanguo Non-Executive Directors Mr. Luo Jun Ms. Wang Jianping Mr. Yu Changjiu SUPERVISORY COMMITTEE Mr. Li Jiawei Mr. Luo Jun Mr. Wu Qiang Supervisors Mr. Zhang Chengxing Mr. Xiao Changjiu (Chairman) Mr. Zhao Junhuai Mr. Xu Yuzheng Mr. Zhao Miao Mr. Peng Xianyi Ms. Dai Wen Independent Non-Executive Directors Ms. Lan Hong Mr. Han Xiaoming Ms. Liu Nan Mr. Cheng Sanguo Mr. Li Qiang Mr. Chan Yuk Tong Independent Supervisors Mr. Li Guangwei BOARD COMMITTEES Mr. Fu Daiguo Strategy and Investment Planning Committee JOINT COMPANY SECRETARIES Mr. Cheng Sanguo (Chairman) Mr. Han Xiaoming Mr. You Zugang Mr. Zhang Bangkai Mr. Ngai Wai Fung Mr. Yu Changjiu Mr. Zhao Junhuai * For identification purposes only 2009 Annual Report 3 Corporate Information (Continued) QUALIFIED ACCOUNTANT REGISTERED OFFICE IN THE PRC Mr. Mak Ming Fai 12th Floor, No. 86 Section One People’s South Road, Qingyang District Chengdu, Sichuan AUTHORISED REPRESENTATIVES China Mr. Luo Jun Mr. You Zugang PRINCIPAL PLACE OF BUSINESS IN HONG KONG ALTERNATE AUTHORISED 8th Floor, Gloucester Tower REPRESENTATIVE The Landmark 15 Queen’s Road Central Mr. Ngai Wai Fung Central Hong Kong INTERNATIONAL AUDITORS PRINCIPAL BANKERS Ernst & Young 18th Floor The Industrial and Commercial Bank of China Two International Finance Centre China Construction Bank 8 Finance Street Central Hong Kong HONG KONG H SHARE REGISTRAR Computershare Hong Kong Investor Services Limited PRC AUDITORS Shops 1712–1716, 17th Floor Hopewell Centre ShineWing Certified Public Accountants 183 Queen’s Road East 9th Floor, Block A Wanchai Fu Hua Mansion Hong Kong No. 8 Chao Yang Men Bei Da Jie Dong Cheng District Beijing COMPANY WEBSITE China http://www.winshare.com.cn HONG KONG LEGAL ADVISER STOCK CODE Mallesons Stephen Jaques 13th Floor, Gloucester Tower 811 The Landmark 15 Queen’s Road Central Central Hong Kong 4 Sichuan Xinhua Winshare Chainstore Co., Ltd Financial Summary 2009 Annual Report 5 Financial Summary RESULTS For the years ended 31 December 2005 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Income 2,262,599 2,217,625 2,309,481 2,736,936 3,208,988 Profit before tax 345,108 305,860 388,759 341,214 366,654 Income tax (71,142) (3,422) (1,765) (3,058) (2,922) Profit for the year 273,966 302,438 386,994 338,156 363,732 Minority interests (217) 363 1,802 (168) (5,074) Profit attributable to equity holders of the Company 273,749 302,801 388,796 337,988 358,658 ASSETS AND LIABILITIES As at 31 December 2005 2006 2007 2008 2009 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Total assets 2,144,992 2,406,660 4,935,265 5,387,558 5,798,025 Total liabilities (1,114,638) (1,093,611) (1,211,269) (1,652,032) (1,901,311) 1,030,354 1,313,049 3,723,996 3,735,526 3,896,714 Equity attributable to equity holders of the Company 1,023,298 1,265,889 3,678,638 3,673,905 3,810,079 Minority interests 7,056 47,160 45,358 61,621 86,635 1,030,354 1,313,049 3,723,996 3,735,526 3,896,714 6 Sichuan Xinhua Winshare Chainstore Co., Ltd Chairman’s Statement Gong Cimin Chairman and Executive Director Dear Shareholders, On behalf of the board of directors (the “Board”) of Sichuan Xinhua Winshare Chainstore Co., Ltd. (the “Company”), I am pleased to present to the shareholders the annual results of the Company and its subsidiaries (collectively referred to as the “Group”) for the year ended 31 December 2009 (the “Year”). In the past year, the Group stood on the mission of expanding and strengthening our principal operating business and strived to explore its market potential. We responded actively to the aggressive emergence of domestic publishing media groups and the impact of intensified market competition brought by emerging business forms. With our continuous innovative drive, we achieved encouraging results in enriching the setting up of modern corporate system, enhancing the core competitiveness of our enterprise, rationalizing our principal operating business model and expanding the associated businesses relevant to our principal operating business. Sales income and profit of the Group in 2009 had both achieved stable growth over the year 2008. In 2009, the Group recorded a turnover of RMB3,209 million, representing an increase of 17.2% over 2008; with net profit of RMB364 million and basic earnings per share of RMB0.32. In 2009, by leveraging on the changing market environment and the intensity of cultural system reform on domestic news and press industry, our Group was able to adjust the business strategies of the Company in achieving our goal of becoming a major cultural media group in the PRC. We actively and stably consolidated and developed our principal operating business and had further strengthened the core competitiveness of our traditional principal operating business. With regard to retail business, through the adjustment and rationalization of our operating model, satisfactory sales results were seen. For subscription business, by leveraging on our premier professional market services capabilities, we achieved “in-time pre-semester textbook delivery” in 32 consecutive years and had laid a sound corporate social image in the industry. In coping with the adverse situation like the natural reduction in the number of students, reuse of textbooks, market saturation of textbook subscription, we had actively sought and tried to have an organic integration between education contents product publication and digitalized publishing technology in exploring new business 2009 Annual Report 7 Chairman’s Statement (Continued) potential. In respect on-line sales of publication business, the influence of “Xinhua On-line”, our e-commerce platform, on the society keeps on increasing while the sales increased rapidly during 2009. For Zhongpan business, after a year of adjustment, the effectiveness and market value of Zhongpan sales network had gradually improved. In 2009, through the introduction of advanced marketing concepts and our exploration and innovativeness towards the operating model of our principal operating business, the Group had further paved a new path in improving the core competitiveness of our principal operating business. As the Company had sound operating results and good social creditability, we have been awarded as Advanced Enterprise in the National Cultural System Reform by the Propaganda Department, Ministry of Culture, The General Administration of Radio Film and Television, and the General Administration of Press and Publication, and “Xinhua On-line” was awarded as Top 20 E-commerce of the Top 100 Publishing Industry Website in 2009 by The Publishers Association of China and the Chinese Institute of Publishing Science. In 2009, with capital as a bonding, the Group continued to move forward and achieved its industry integration with initial results seen in our cross-regional development. We established Hainan Publisher Company Limited together with The People’s Government of Hainan Province which had further achieved the cross-regional co-operation of the industry and facilitated the comprehensive business integration of the industry chain of the Company. We acquired partial interests of Sichuan Xinhua Colour Printing Company Limited and succeeded in becoming its controlling shareholder, by which we were able to obtain the front-end resources for our principal operating business chain. We also acquired and subscribed the equity interests of Chengdu Institute of Sichuan International Studies University, bathing our participation in premier cultural education resources. We jointly established Sichuan Periodical Media (Group) Co., Ltd. with Sichuan Periodical Press Group, leaping a big step in our cross-industry business integration. In early 2010, Anhui Xinhua Media Co. Ltd (“Wan Xin Media”), in which we have an interest, was successfully listed on Shanghai Stock Exchange. Through a series of projects participation, the Group achieved its cross-regional and cross-industry chain expansion under the lead of our principal operating business, and thereby enhanced the equity value of the Group. From the Group’s perspective, 2010 will be a year synchronized by opportunities and challenges. On one hand, with intensifying cultural system reform by the state, the implemented industry policies will undergo adjustments.