Annual Report 2016 PDF

Mongolia,
Ulaanbaatar 17040,
Khan-Uul district, Chinggis Avenue 48.
Phone: 11-344837
106. APU Company
www.apu.mn
Annual report 2016
2016
ANNUAL REPORT1.
APU Company Annual report 2016
01 02 03 04 05
COMPANY PROFILE BUSINESS ACTIVITIES CORPORATE GOVERNANCE SUSTAINABILITY FINANCIAL REPORTING
Mission and values Strategy Board of Directors Sustainability policy Financial statement
Greetings from the Chairman of the Board of Directors Market and the current state Remuneration and promotion Human resource policy Independent Auditors
Greetings from the CEO Operations Corporate governance code Corporate Social Report
Business in brief New and renewed brands implementation program Responsibility and
Share portfolio Projects DEFINITION OF
Dividend policy TERMINOLOGIES
Executive management team
Risk management
2. APU Company Annual report 2016 APU Company Annual report 2016 3.
01. COMPANY PROFILE 01. COMPANY PROFILE
MISSION OUR VALUES
ENTREPRENEURIAL SPIRIT:

We champion teamwork,
By producing superior products that celebrate natural richness, APU collaboration and creativity at all
contributes to the enhancement of Mongolias future prosperity and its levels, encouraging and rewarding
place on the world stage our people to become and deliver
their very best.
OPENNESS:
We are driven by a commitment to
complete transparency, sharing our
goals to inspire and engage those
we serve
ORIGINALITY:
We bring flair and imagination to
every challenge, always seeking
smarter ways to enrich and
support the partners and commu-
nities we work with.
INTEGRITY:
We uphold the virtues of honesty
and moral discipline in everything
we do, embracing our responsibility
to preserve Mongolias natural rich-
ness and drive higher standards in
economic, social and environmental
development.
BRIEF HISTORY
1972
2003 2009
The Soviet Union
assisted to complete
construction work, Beer factory facilities,
2014
1958 equipment and
network installation
networks and technol-
ogy were completely
A modern distillery
plant Natur Agro A brand new dairy
1924 Brewery cool-
of the Vodka and beer
factory, implemented
the calibration and 1973
renovated; a factory
with packaging capac-
ity of 20.0 million liters
2006 equipped with German
equipment and tech-
nology, with comput-
plant with processing
equipment supplied
Regulations on
ing, pressured
gas equipment
was installed;
test work. The factory
was commissioned by
the MPR Government
1992 of beer per year was
put into operation. The
first Mongolian dark
APU JSC established
a milk and fruit juice
erized control system
was accepted by the
state inspection com-
by the world leading
German GIA (GEA)
Company is put into
Appropriating alcohol By the resolution num- operation. On its 90th
licenses by the state a mechanized Act dated December ber 10 of the Council beer Khar Khorum factory, also intro- mission. Fusion beer
conveyer belt 31, 1972. anniversary, APU
were approved by the of MPR Ministers, dat- Vodka and beer in glass bottle and duced the Pure Milk brand and childrens updates its corporate
V meeting of the Cen- with bottling ed January12, in 1973 factory was premium beer Golden brand along with fully juice beverage Frutta
capacity of identity and redefines
tral Committee of the the Vodka and beer restructured to APU Gobi was launched automated tetra-pack were introduced to the its vision: Absolute,
Mongolian Peoples 3000 bottles of factory was renamed JSC, 51% of total on the market. Also line. Updated success- consumer market
beer per hour Pure, Unique.
Party and VII meeting to Ulaanbaatar Vodka shares remained Eruul vodka brand fully Eruul and Altan
of the Peoples Gov- was put into op- and beer factory. under state control, was introduced. Turuu vodka brands.
ernment. Thus the first eration, made and 49% was
vodka factory with technological traded on the stock
14 employees was progress. exchange.
opened in Ulaanbaatar
city.
With the help Carbonated sweet On the 50th anniver- Since 1976, 5 years In November, 51% of Old building of Super premium A new brewery with The New Wave
of Czech ex- beverage and sary of the Peoples in a row the Vodka state owned shares Water and soft Soyombo vodka advanced new tech- brand program is
perts started Janchivlan mineral revolution, the and beer factory were auctioned and drink factory, lines, was introduced to nologies and stan- launched, introduc-
producing water bottling MPR government was named the transferred fully to equipment and the market. dards was put into ing to the market
beer. station were newly awarded the Vodka National leading private investors, technology were operation bringing brands such as
established and beer factory producer and being the first to fully renovated, a the total capacity to Bliss (fruit flavored
with an Honorary awarded with the open the process plant with a bottling 100 million liters per beer), vodkas
certificate for state highest medal of privatization of capacity of 4.55.0 year; fully automat- including VELVET,
1927 1961
well-organized
production and
of Golden Star.
Celebrating the
Mongolian factories
and enterprises.
million liters of 0.33,
0.5, 1.5, 2 L plastic
2007 ed APU logistics
center with ad-
EDEN, ARKHI
EXPORT /40 years/,
service activities, event of the Mongo- bottles per year was vanced warehouse Taiga /4 types/ and
and successfully lian astronaut flying put into operation. technologies was Okhi.
fulfilling assigned first time to the APU Pure water established. Orgi-
responsibilities. space, the premium brand was delivered luun carbonated
vodka Bolor was to consumers. water is introduced
introduced to the to the Mongolian
1971
customers.
2001 market. Well known
by Mongolians
Borgio beer was
2016
completely updated.
1981 2004
2013
OUR CONCEPT
ABSOLUTE.
Fiduciary duties and
responsibilities
Absolute, Pure, Unique Leader in human and social

development.
Educating the market and our
In the traditional nomadic culture and philosophy of Mongolia sky is the symbol of pure in-
partners in our mission.
finity, the whole world is believed to be a unique combination of wild nature, time and mind.
Together, these 2 exceptional features keep absolute pure qualities for years. By the Mon- Financial stability, transparency
golian tradition to honor The Best we proudly deliver to you the trinity of Absolute, pure, and sustainable performance.
unique. We made this belief our business philosophy and we strive to improve everything One of the most attractive
we do. We will always work to improve the business, products and services designed for our employers in Mongolia.
customers and community.
PURE.
Products, culture and beliefs
Mongolias global brand

ambassador
Open to the world, creating
partnerships with world-class
businesses
UNIQUE.
Ethical conduct and respect
for our environment
Continuous manufacturing
improvement through clean
technologies.
The highest standards in
corporate transparency and
product safety
Unique expertise in community
participation.
GREETINGS FROM THE GREETINGS

CHAIRMAN OF THE BOARD FROM THE CEO
OF DIRECTORS
Chairman of the Board of Directors

CEO OF APU COMPANY
BATSAIKHAN Purev
ERDENEBILEG Tseveenjav
It is the time of the year when we traditionally re- is on saving costs, retaining jobs and helping the The year of 2016 has been a tough one for Mon- Focusing on increasing efficiency and improving
port to our shareholders on the results of our last employees with their social issues, the long-term golian enterprises presenting hard challenges productivity, APU Company is planning to pro-
years work. The year of 2016 was a difficult; the goal to continually increase the value of the com- that came along with socio-political changes, duce 94 million liters of 124 SKUs, and conduct
unfavorable macroeconomic situation of Mon- pany will never lose its priority. continued financial crisis and economic insta- sales of MNT 339 billion in 2017. A total of USD16
Dear shareholders, golia persisted; the national currency continued Dear shareholders, bility. However, it is worth noting that APU Com- million shall be paid to international banking and
its steep devaluation trend and the total con- We believe that hardship is a force that creates customers, partner pany has successfully maintained its leadership financial institutions, efforts will continue to in-
sumer market shrunk. new opportunities. We will be continuing our tra- organizations, and status in the sector, contributing great efforts to crease exports, sustainable business operations
dition to always seek, generate and lead innova- the national development together with the other shall be maintained and goals and objectives
colleagues. I am
APU Company worked with determination to ful- tion, create new products and open new markets. major producers. Specifically, for the purpose of shall be achieved in the framework of the overall
fill its obligations and to overcome the challeng- pleased to extend
increasing profitability through productivity, the corporate and business strategies.
es faced, introducing new vodka and beer brands Dear shareholders, esteemed partners and loy- my warm greetings company introduced new and refreshed brands
to the markets and implementing cost saving al customers, with all the above we would like to to all of you. I would like to express my sincere gratitude to
to the market and invested in the personal growth
initiatives. However, the more than 20% devalua- express our confidence that with your valuable our shareholders, customers and partners for
of its workforce, continuing the Tuguldur proj-
tion of the tugrug to USD currency exchange rate support APU Company will overcome these tem- always supporting our business. We pledge to
ect, complying with international standards and
since the beginning of 2016 led to a significant porary difficulties and advance to a new era of continue our efforts to maintain growth and de-
maintaining stable employment.
decline of the net profit compared to the previous development and prosperity velopment, run eco-friendly operations, invest in
year. Nevertheless, we made a decision to uphold It is my pleasure to inform you that we produced human resources and fulfill our corporate social
our continued tradition to distribute dividends to a total of 92 million liters of 162 SKUs, including responsibilities.
our esteemed shareholders. VELVET, EDEN, ARKHI EXPORT /40 year/, Taiga
/4 flavors/, Okhi, and D vitamin enriched milk,
The Government of Mongolia has announced conducted sales of MNT 327 billion, paid MNT
that in 2017 several taxes will be increased and 127 billion to the state budget and ensured nor-
there will be cuts in certain types of social wel- mal continuity of business operations while im-
fare. Analysts are highlighting that this year the plementing a comprehensive long-term invest-
economic situation will be the most challeng- ment program.
ing; the economic growth is at the lowest point;
we can expect to see revival not earlier than in The year-end share price showed an increase of
2018-2019. We are now faced with a challenge 3 percent as compared to that of the beginning
to tighten our belts and optimize our inter- of the year (after taking into account the effect of
nal resources to overcome the difficulties. APU share split), and we repaid a total of USD 16 mil-
Company, the leading manufacturer, top tax pay- lion to international banking and financial insti-
er and one of the oldest and most valued listed tutions, and 3 billion MNT was invested into our
companies of Mongolia, will continue its efforts production facility upgrade and maintenance.
to grow and develop. While the short-term focus
10. APU Company Annual report 2016 * Gross revenue included VAT and Excise tax APU Company Annual report 2016 11.
2016
OVERVIEW
THE RESULTS OF 2016 ARE THE OUTCOMES OF EFFECTIVE REALIZATION OF OUR STRATEGIC
BUSINESS IN BRIEF POLICIES AND ACCURACY OF OUR OPERATIONS.
2016 2015 Change %
Sales volume thous.liter 92,850 94,533 -2%

Production volume thous.liter 88,445 90,606 -2%
NET SALES REVENUES OPERATIONAL PROFIT NET PROFIT

(Billion tugrug) (Billion tugrug) (Billion tugrug) PROFIT & LOSS
Net sales revenues mln.tug 208,055 210,111 -1%
-1% 6% -73% Operational profit mln.tug 36,152 34,204 6%
Net profit mln.tug 2,883 10,670 -73%
210
208
198
37
36
194
34
24 BALANCE SHEET
23
169
Total assets mln.tug 291,070 305,672 -5%

Total liabilities mln.tug 147,884 160,178 -8%
12
Total owners equity mln.tug 143,185 145,494 -2%
11
Total owners equity and liabilities mln.tug 291,070 305,672 -5%
(10)
5
3
CASH FLOW
12 13 14 15 16 12 13 14 15 16 12 13 14 15 16
Cash flows from operating activities mln.tug 47,757 40,308 18%
Cash flows from investing activities mln.tug (2,965) (4,689) -37%
SALES VOLUMES SKUs WORKFORCE Cash flows from financing activities mln.tug (35,132) (38,862) -10%
(Million liters) (SKU) Net increase/decrease in cash and cash
mln.tug 9,660 (3,243) -398%
equivalents
-2% 19% -7%
162
TAX PAYMENT
136
mln.tug 90,420 90,790 0%

99
107
Excise tax
998
91
95
953
88
94
VAT mln.tug 19,119 19,274 -1%

82
897
883
83
817
Other mln.tug 17,422 14,599 19%

Total 126,961 124,662 2%
CAPEX
Total capex mln.tug 2,977 5,021 -41%
12 13 14 15 16 12 13 14 15 16 12 13 14 15 16
01. COMPANY PROFILE 02. BUSINESS ACTIVITIES
TAX PAYMENT
In 2016, APU Company has contributed 127 billion MNT to the State budget of which 90 billion MNT was excise tax payment
and 19 billion MNT was VAT payment.
127 90 19
BUSINESS
billion
tugrug
billion
tugrug
billion
tugrug
ACTIVITIES
MONGOLIAN STATE EXCISE TAX VALUE ADDED TAX

BUDGET REVENUES REVENUES REVENUES
Yearly electricity Food Annual salary

consumption of consumption of public
households servants
537,607 HOUSEHOLDS 44,188 HOUSEHOLDS 13,342 STAFFS

/62% of total households/ /5% of total households/ /17% of total staff/
WHAT CAN BE DONE WITH TOTAL TAXES PAID BY

APU COMPANY IN 2016?
Providing better Mining Length of

school environment rehabilitation concrete
to students expense roads
74,420 STUDENTS 38,088 HE LAND 248 KM

/13% of total students/ /land for 54 thousand /Road from UB to Darkhan-Uul
households/ aimag/
Source: Government decree number 336, budget benchmark assessments,

National Statistic Office of Mongolia, Ministry of Environment and Tourism
02. BUSINESS ACTIVITIES 02. BUSINESS ACTIVITIES
STRATEGY
In 2016, we prioritized the
following objectives:
INCREASE MAINTAIN
RETURNS ON MARKET
INVESTMENT SHARE
STANDARDIZE IMPROVE
BUSINESS INFORMATION
PROCESSES FLOWS
The following strategies were compiled in order to achieve the above objectives
FINANCIAL CUSTOMER AND

STRATEGY MARKETING STRATEGY
Efficiency at all levels for increased Maintaining sustainability through de-

profitability. termining a comprehensive brand policy
and monitoring the implementation.
Maintaining and expanding market
share for sales revenue growth. Matching brands to consumer needs
through use of marketing techniques
with multiple alternatives in accordance
with the brand policy documents.
BUSINESS PROCESS-ORIENTED HUMAN RESOURCE AND

STRATEGY DEVELOPMENT STRATEGY
Adopting a unified time saving, low- Increasing productivity through an enabling

cost and high-efficiency production corporate culture and continuous learning
system through process-oriented man- environment.
agement structure with proper staffing
Improving information flows to achieve bet-
and organization.
ter leadership, enhanced lateral and vertical
Encouraging eco-friendly production collaboration, and alignment with corporate
and utilizations cost savings through objectives.
re-use and recycling.
MARKET
OVERVIEW
MARKET FOR MILK AND DAIRY PRODUCTS
MARKET FOR SOFT DRINKS
In terms of health benefits, the trend of consuming liquid
milk daily and constantly is extending at all levels, and fol- The world carbonated water market grows by an average
lowing this trend, production and supply of such products is 1.4 percent annually, reaching 235.6 billion liters, juice
also increasing. market by 2 percent reaching 85.6 billion liters, and water
market by 3.7 percent, reaching 282.7 billion liters. Car-
By 2025, the market capacity for milk and dairy products is bonated drinks account for over 30 percent of beverag-
likely to increase by 25 percent, reaching 208 billion liters and es sold globally, however consumption of bottled water,
average annual milk consumption per person by 12 percent, sports and functional beverages, energy drinks, and fresh
reaching 13 liters as compared to 2016. In recent years, the MARKET FOR BEER natural juice tends to increase in line with the growth
international market for flavored milk with low fat and sup- speed in recent years.
plements is expanding rapidly, while the growth of liquid milk The world beer sales were 188.3 billion liters in 2015
market is declining and tend to stabilize, however it still re- due to socio-economic changes and consumer at- The Mongolian carbonated drinks market reached 157.8
tains the majority share of the overall market. titude, and increased by 0.2 percent reaching 188.6 liters in 2016, increasing by 16.9 percent while the packed
billion liters in 2016. Consumption of beer tends to be juice market declined by 10.4 percent, reaching 59 million
Milk and dairy market in Mongolia declined by 7 percent in stable globally. liters, and the bottled water market went up by 3.9 per-
2015, whereas it went up by 1 percent in 2016 where over- cent, counting to 65.6 million liters as compared to those
all market share reached 43,586 thous.liters. This growth in In 2016, Mongolian beer market reached physically
100.3 million liters, decreasing by 3.0 percent as com- of the previous year.
dairy market is closely related to the changes in consump-
tion structure of Mongolian consumers resulting in transition pared to that of the previous year. Beer consumption Import products account for 9.8 percent of the carbon-
by Mongolian customers from traditional dairy consumption per person was 37.1 liters a year as of 2013, whilst it ated drinks market, 25 percent of the juice market, and
to processed and packed product consumption. In recent dropped down by nearly 13 percent, reaching 32.2 liters about 1 percent of the bottled water market in Mongolia.
years, market share of imported liquid milk has decreased
MARKET FOR VODKA in 2016.
As of 2016, APU Company produced 27 SKUs of 6 brands,
and supply of liquid milk produced domestically has in- The growth of vodka market is still globally stagnant As the domestic beer production capacity, product supplying 2.8 percent of the carbonated drinks market,
creased, supplying liquid milk almost 100 percent domes- due to economic conditions and consumers con- development, marketing and PR, as well as domestic 3.4 percent of the juice market, and 6.2 percent of the
tically. sumption changes. product quality improves significantly, the space for bottled water market.
APU Company introduced Tsever suu brand to the market foreign brands and importers is shrinking. According to
This global change also affects the Mongolian vodka
in 2006, and began to take up growing share in the market the performance of 2016, import products constitute
market. In 2016, Mongolian vodka market reached
upon the launch of its new dairy plant in 2014. By producing 20 percent of the Mongolian beer market, decreasing
24.41 million liters, declining by 1.3 percent as com-
a total of 32 kinds of dairy products, our company covers 24 by 43 percent as compared to that of 2013.
pared to that of the previous year and the percentage
percent of milk market and 19 percent of yoghurt and tarag of market decline is expected to be stable. Due to consumption behavior and purchasing power
market of Mongolia as of 2016. of consumers, the consumption of cheap or expensive
Mongolian consumers are likely to choose cheap or
beer increases whilst the market for mid-priced ones
expensive vodka instead of medium priced ones in
stagnates or shrinks.
connection with the Mongolian economic situation,
purchasing power of consumers and consumption APU Company produced a total of 39 SKUs of 12
behavior. brands as of 2016, taking up 57 percent of the beer
market share.
APU Company produced a total of 64 SKUs of 17
brands as of 2016, taking up 51 percent of the mar-
APU Company introduced Tsever suu brand to the market ket share.
in 2006, and began to take up majority share in the market
upon its launch of new dairy plant in 2014. By producing a
total of 32 kinds of dairy products, our company covers 24
percent of milk market and 19 percent of yoghurt and tarag
market of Mongolia as of 2016.
OPERATIONS
06
COSTUMERS
Due to our company is responsible
for food safety and high quality man-
agement on all processes from plan-
ning and R&D, a product to receiving
raw materials, producing, sales, de-
livering and storing finished products, APU OUTPUTS
we can lead our industry to running IN 2016
01
eco-friendly operation.
03
All factories are equipped with modern Financial
technologies and equipment meeting Net sales income: 208 MNT
05
International standards. We are proud billion
to lead the industry in terms of saving Tax payment: 127 MNT billion
PLANNING energy, water and heat, as well as
AND R&D PRODUCTION reducing waste
Total dividends: 742 MNT million
We aim to use global advanced technologies, SALES Resource consumption

know-how, global trends and innovation prod- Energy efficient Asian model
ucts in our market research and development We deliver our products through over 7000 organization
adapting them to Mongolian conditions by our wholesale and retail stores covering 21 prov- Water saving: 11,544m3
APU INPUTS talented employees and engineers. inces, and export overseas while fully ensur- Steam and heat saving: 14.5%
ing product quality to the end customers. We
Financial promote responsible drinking to consumers
Shareholders equity, assets, and carry out our sales in accordance with Human capital
borrowing and investment international and national laws. Total number of employees: 817
Employee support: 1,5 MNT
Natural resource billion
Water, energy, land and natural Number of foreign trainings: 46
productivity
Number of domestic trainings:
Human capital 346
Employees, health and safety 5 factories and one fully
environment, code of conduct automatic warehouse which
were built in accordance with
Manufactured International standards
02 04
Buildings, properties and equip- SKU: 162
ment
Social initiatives
Social Pure Tuul campaign
Social communities
SUPPLIERS QUALITY MANAGEMENT Traffic safety video campaign
Intellectual Hamag Mongol campaign to
Brands, R&D, innovation, process- We comply with sustainable opera- We follow food safety and quality preserve and promote Mongo-
es and corporate reputation tion standards and are certified for management processes at all levels lian cultural heritage
FSSC 22000:2010, ISO 9001:2008 from planning and R&D, receipt of raw
and 14001. Partnering with over 140 materials, production, sales, delivery Awards
local and International suppliers, we and storage of finished products. We TOP-100 Company
offer safe and high-quality products lead the industrys initiatives to adopt
to our customers. eco-friendly operations. ALUFOIL TROPHY-2016, Award
in the Marketing & Design cate-
gory by closure
WORLD VODKA AWARDS-2016
Arkhi Export Limited Edition
Vodka /Gold Winner/
Chinggis Khan Vodka /Silver
Winner/
THE BEST ANNUAL REPORTING
AWARD OF MONGOLIA
MILK BUSINESS UNIT BEER BUSINESS UNIT
In response to the stable increase in de- Starting April 2016, Maamuu brand is exported The foundation for APUs brewing capaci- Bliss, fruity and low alcohol beer, was intro-
mand for dairy products and juice in Cap- to Hong Kong market and is sold in Wellcome, ty was laid in 1927 with the help of Czech duced newly to the market within the objective
ital city of Mongolia, APU company made Park&shop and Vanguard chain stores. Capacity to produce specialists. of introducing the New Wave to the market in
an investment to build a fully automated
APU Company focuses on health and well-be-
75 million liters of Today, the company operates a state-of-
2016.
dairy plant in 2014. The factory is compli-
ing of consumers and product quality, and is the beer per year the-art, fully automated brewery supplied As the market leader, APU Company brings in
ant with European Union milk processing
first company, which analyzes approved antibi- by leading German manufacturers with a world trend innovations adapted to Mongolian
factory standards with cutting-edge tech-
The annual capacity otics amount in raw milk in its own laboratory. capacity to produce 75 million liters of beer consumers needs.
nology and processing equipment from
per year, all fully in accordance with the
is 45 million liters, GEA, Germany - a leading global producer Our company aims for developing new and in-
600-year old Bavarian Beer Purity Law.
and the plant can of technology in dairy industry, as well as novative products that meet Mongolian con-
process daily 150 Tetra Pak, Ecolean and Elopak filling lines sumers needs fully. For this purpose, brands
from Sweden. such as Maamuu, Deej, Sain and Tsever suu
tons of fresh milk.
were produced and introduced to not only Mon-
The annual capacity is 45 million liters, and
golian consumers but also to the world market.
the plant can process daily 150 tons of
fresh milk.
Certified and meeting fully the ISO 22000
standard of Food Safety Management sys-
tems, the dairy factory purchases fresh cow
milk from over 300 Mongolian farmers.
VODKA BUSINESS UNIT SOFT DRINK BUSINESS UNIT
Fully automated high quality equipment by opment and innovation towards brand products
leading German, Austrian and Italian man- that meet consumers needs, demands and APU soft drinks plant is equipped with au- In collaboration with KRONES Company from
ufacturers enables the plant to produce consumption features. tomated bottling, blowing and capping lines Germany, the PET bottling line project was im-
Total bottling 20 million liters per annum. Total bottling The uniqueness of manufactured by top Austrian, German and plemented in 2012, increasing 4 times the plant
capacity is In 2009, APU company commissioned the NA- Italian producers and is fully compliant with capacity. Our plant has two lines from Sigma
capacity is 9 thousand bottles per hour.
TUR-AGRO spirit plant, which is fully equipped APUs carbonated
9 thousand Pure spirit, the main ingredient in vodka, is European food safety standards. and Krones companies, of which Sigma line has
with advanced German technology and the drinks comes from a capacity of producing 3000 bottled products
bottles per distilled in-house from organic local wheat
plant produces world-leading quality Alpha the extracts of indig- The uniqueness of APUs carbonated drinks
per hour in PET and bottles of 1.5 liter, 0.5 liter,
hour. using a state-of-the-art German technolo-
grade spirit, ensuring APUs sustainable oper- enous berries and comes from the extracts of indigenous ber-
gy. APU Company directs its brand devel- and 0.33 liter. Krones packing line has a capac-
ries and medicinal plants, including Rhodi-
ations. medicinal plants ity of producing 5500-12000 bottled products
ola, Rosaceae, Paeonia anomala and Lico-
per hour depending on bottle volume and packs
rice. Combined with the purity of the water
beer, water, soft drinks and juices in PET and
filtered through 4-layer German Gruenbeck
bottles of 0.5 liter, 1.0 liter, 1.5 liters, 2.0 liters,
technology gives, it provides for an unfor-
and 2.5 liters.
gettable drinking experience.
QUALITY CERTIFIED
POLICY LABORATORY
QUALITY CONTROL
APU company is the first Mongolian company that

introduced the ISO 9001 Quality management sys-
tem, ISO 14001 Environmental management sys-
tem, and FSSC 22000 Food safety management Adhering to standards, procedures, regulations, analy-
system together. Our Quality management and con-
sis methodologies, normative technical documents and
trol department is responsible for conducting tests,
ISO/IEC 17025 standards approved by the international
analyzes, experiments, quality control and verifica-
standardization organization, our certified laboratory is
tion, and monitoring on all processes from designing
in charge of properly and accurately conducting senso-
a product to receiving and inspecting raw materials,
storing, producing and distributing finished prod- ry tests, microbiological, physical and chemical analyses
on primary and secondary raw materials, semi-processed
ucts.
and finished products from all 5 production lines of APU
company in accordance with certifications, and maintain-
ing control over each technological stage to make sure the
quality products meet standard requirements. The certified
laboratory complies with general requirements on capacity
of international laboratories of MNS ISO-17025:2007 stan-
dard, and is equipped with high-sensibility equipment with
to-date nano-technology from leading international labora-
tory equipment suppliers from USA, Germany, Austria, Korea
and Russia.
Besides maintaining internal control over productions, our
laboratory is the major research base that cooperates with
VLB and Weihenstephan Institute from Germany, Interlab
and FGNBU VNIIPBT Institute from Russia, Mongolian re-
search institutes and universities in research areas.
We maintain the following 4
principles in our quality policy:
Internal control laboratory of APU Company adheres to the
following policy:
To comply with IEC/ISO 17025 standards on laborato-
ry quality management systems and ensure constant
1 2 3 4 improvement.
To continually invest into staff development, equipment
To provide customers To develop all stages To become the To verify results by Our distinctive features are: and technology improvement, and ensure consumer
with premium quality of food production in leading beverage conducting internal satisfaction.
products and services line with FSSC22000: producer through in- and external audits Compliant with international ISO standards To maintain independence and autonomy.
that fully comply with 2010 and ISO vestment into human on food safety and
legal requirements, 9001:2008 standard resource develop- quality management Employs food safety and technology expertise teams
consumer expecta- requirements and ment, equipment and systems.
Unified quality management system
tions and food safety maintain constant technology.
standards. improvement. Full compliance with legal requirements
Maintains process-based quality monitoring control.
2016 NEW BRANDS 2016 REFRESHED BRANDS:

D VITAMIN-ENRICHED MILK: KHI TAIGA New SAIN YOGURT SAIN BIFIDO YOGURT SAIN SOUR CREAM
New
New
Vitamin D content: 50 IU per 100 gr Alc: 38%, Packaging: 0.5 l, 0.75 l Summer: Alc: 35%, packaging - 0.5 l, 0.75 l Fat: 2.5%, Packing: 0.45 l Fat: 2.5%, Packing: 0.9 l Fat: 2.5%, Packing: 0.45 l
(intl measuring unit) Fat: 1.5%, Packing: 0.5 l Autumn, Spring Alc: 38%, packaging -0.5 l, 0.75 l
Winter: Alc: 39%, packaging -0.5 l, 0.75 l SAIN STRAWBERRY, BLACK CURRANT AND FOR- SAIN BIFIDO YOGURT Sain bifido yogurt is rich with SAIN SOUR CREAM: Sain sour cream is produced
D VITAMIN-ENRICHED MILK: In 2016 we produced APU Company bringing all the flavors of the Mother
Sain milk with purepack packing of 0.5 l that is nature is delivering Okhi brand to its customers who Gifting to our customers natural vodka Taiga with EST BERRY YOGURT: Strawberry, black currant and Bifidobacterium, L. Acidophilus and Str. thermophiles by fermenting premium fresh cow milk, the product
enriched with vitamin D particularly important for make knowledgeable, informative and smart choic- special ingredients, extracts of fruits grown in Mon- forest berry flavored Sain yogurt brand not only probiotics which support gastrointestinal functions, had already won the customers appreciation.
human immune system and healthy bone structure. es, have their own vision of the world and lifestyle. golian soil and preserving features of 4 seasons. convey the soft taste of berries, but also are enriched and help prevent digestive system diseases. Experts
Enriched with vitamin D that improves calcium di- with Bulgaricus, Str. Thermophilus probiotics. In 2016 recommend consuming it after dinner.
gestion, the heat-processed milk can be consumed when updating the product we reduced the sugar
directly, fat component is 1.5%. content and highlighted the fruit taste.
EDEN VELVET ARKHI NIISLEL ULAANBAATAR BOLOR LIMITED EDITION
New
New
Alc: 36%, Packaging: 0.7 l, 1 l Alc: 38%, Packaging: 0.7 l, 1 l Alc: 39.5%, Packaging: 0.75 l Alc: 5%, Bottle packaging: 0.45 l 0.45 l bottle, 0.5 l Alc: 38%, Packaging: 0.75l, 0.5l, 0,1l Alc: 38%, Packaging: 0.75l, 0,1l
cans and 2.5 l PET bottle packing
APU Company launched EDEN brand, or Taste VELVET brand is the expression of the elegant ARKHI EXPORT 2016 is the 40th anniversary of Niislel brand was first launched in 1972, later in Ulaanbaatar brand label was released to the Bolor limited edition 1l and 0.75 l with silver,
that tunes the senses, for anyone who sees the evening style when young people spend time ARKHI brand launch to the market, celebrating 2010 it was reissued again, and in 2016 it was market with added elements of modern mini- modern, new and colorful label is released.
world with their own sense, who appreciates arts with fun and is dedicated to confident, full of this event an updated ARKHI EXPORT, the pre- delivered to consumers after a complete design malism design.
and culture, stays true to their goals and dreams. energy ladies and gentlemen who desire inno- mium level, unique product is presented to the update. Niislel brand gives you the taste of fresh
vation. customers. beer. The beer is delivered to customers in 0.45
l bottle, 0.5 l cans and 2.5 l PET bottle packing.
PRIME BLISS
Lager Friut beer MAAMUU BRAND
New
New
Fat: 2.5%, Packing: 0.2 l
Alc: 4.6%, Bottle packaging: 0.45 l Alc: 4.6%, Bottle packaging: 0.33 l Childrens Maamuu brand apples and multi-
Cans packing: 0.5 l fruit juices were designed and updated accord-
PRIME lager beer which starts a new page in Bliss fruity beer that was introduced to market ing to kids preferences. Also it was made more
beer industry history of Mongolia is brewed from in 2016 gives you a unique combination of soft, suitable for children to drink by reducing the car-
the PREMIUM MALTS barley malt. Although it delicate and rich fruity taste. Try the perfect com- bohydrate content in the product, specifically the
has soft drinking texture, it provides the authen- bination of Grapefruit Pine apple, Mango, Peach amount of sugar. Our fun and smart Maamuus
tic beer taste. and Lime Lemon fruits. became dressier.
02. BUSINESS ACTIVITIES 03. Corporate governance
MAJOR
PARTNERS
GOVERNANCE
03. Corporate governance 03. Corporate governance
CORPORATE BOARD OF
GOVERNANCE DIRECTORS
Board of Directors (BoD) of PU Company comprises of 9 members representing the Shareholders
ORGANIZATIONAL STRUCTURE
meeting; it is responsible for guiding and supervising the company operations and activities. BoD shall
APU Company has 3,785 shareholders and is a publicly listed company registered in Category I by the respect the interests of the Company, its affiliated bodies and shareholders when implementing its
Mongolian stock exchange. functions.
The highest governing authority of the company is the Shareholders meeting. The Board of Direc- The functions of BoD include determining and enforcing the business strategy of PU Company, en-
tors with 9 members, elected by the Shareholders meeting, exercises the governing authority between suring effective operations of internal audit and risk management systems, making sure the financial
shareholders meetings, and the day-to-day activities of the company are managed by the Chief execu- records and reporting systems comply with legislation, ensuring the company operations adhere to
tive officer, appointed by the Board of Directors. social accountability principles and interests of shareholders are ensured.
APU Company operates in compliance with the Law on Company of Mongolia, Law on Securities mar- BoD reviews and discusses the business strategy, risk management, internal audit, financial recording
ket, other relevant legislations and the Corporate governance code of Mongolia. and reporting system activities of APU Company at least once a year, and makes necessary decisions.
Allocation of functions among the BoD is determined by relevant BoD regulations and procedures and
these documents are uploaded to the companys website.
HIGHLIGHTS OF 2016 The Shareholders meeting makes decisions on electing, re-electing or terminating the term of BoD
members. BoD is elected for a term of 3 years and may be re-elected.
The Board Secretary is in charge of day-to-day activities of the BoD and manages the BoD secretariat
1 2 3 activities. The Board Secretary is the official entitled to manage the issues related to corporate gover-
nance.
The BoD met 4 times in 2016 and the average meeting quorum was 88.6%.
1-to-10 stock split was APU Company shares have 2015 Annual report of APU
effected by the decision of been upgraded to Category Company awarded the first
the Shareholder meeting, I in the Mongolian Stock prize in the First National con-
resulting in 742,877,000 total Exchange registration based test The best annual report,
issued common shares with a on its trading volumes, mar- organized among public and
nominal price per share of 10 ket capitalization and other private stock companies by
mungu; relevant criteria; the Financial Regulatory Com-
mission.
* Detailed survey on securities holders as of March 9, 2017 by MCSD.
COMPOSITION
S. Gromov
BoD has 9 members, of which 3 are independent directors: Batsaikhan Purev (Chairman of BoD),
Batchimeg Purev, Batbayar Burentogtokh, Sergey Gromov, Hugo Barrett, Kharon Khamkhoev, Educational background in Engineering
1992-1994: Manager at Raznoimport LLC of Russia
Alexander Sivaev (Independent), Unenbat Jigjid (Independent), and Erdene Sosorbaram (Independent).
1994-2000: London Branch Manager of Trans-World Aluminum Company
2001-2016: Chairman of Board of Directors of Chingis Khaan Bank
2013-Present: Board Member of APU JSC
BoD members occupation and work experience: 2004-Present: Chairman of Board of Directors of Mongol daatgal LLC
P.Batsaikhan
Educational background in Engineering.
1993-1996: CEO of Shunkhlai LLC
H. Barret
1997-2008: CEO of Shunkhlai Group Educational background in Economy.
2002-2004: Chairman of Board of Directors of APU JSC 1990-1992: Manager at Blue Door Management LLC
2004-2008: CEO of APU JSC 1992-1995: Manager at Trans-World Metals LLC
2008-Present: President of Shunkhlai Group and Chairman of Board of 1995-Present: CEO of Orion Resources LLC
Directors of APU JSC 2013-Present: Board Member of APU JSC
P.Batchimeg
Educational Background in Pedagology.
Lecturer and Senior Lecturer at Russian Language Pedagological Kh. Khamkhoev
University and Police Academy; Officer at Ministry of Education, Educational background in Engineering Economy.
Culture and Sciences. 1990-1992: Deputy Director of Lion LLP
2004-2007: CEO of APU Impex LLC 1992-1994: Manager of Kazakhstan Branch Office of BrAZ factory
2007-Present: CEO of APU Trading LLC 1994-2000: Deputy Manager of Beijing Branch Office of BrAZ factory
2005-Present: Board Member of APU JSC 2000-Present: CEO of Orion International LLC
B.Batbayar
Educational background in Economy.
1994-1996: Lecturer at the School of Economics, NUM A. Sivaev
1999-2001: Commercial Banking Consultant, Economic Policy Support Project Educational background in Law and Economy.
2002-2012: Senior Specialist at European Bank for Reconstruction and Devel- 2001-2005: Department Head and Chief Financial Officer at subsidiaries of
opment Russkii Aluminum company
2012-Present: Chief Financial Officer of Shunkhlai Group 2005-Present: Chief Financial Officer and CEO at Krasnii Yar LLC
2013-Present: Board Member of APU JSC 2015-Present: Board Member of APU JSC
J.Unenbat
Educational background in Economy. S. Erdene
1990-2000: Economist, Department Head and Governor of Bank of Mongolia
Educational background in Law.
1996-2000: Representative of Asian Development Bank to Mongolia
1990-1993: Officer at Selenge Police Department
2000-2006: CEO of Mongolian Bankers Association
1993-2000: Officer and Department Head at Chingeltei District Police Department
2009-2015: CEO of Corporate Governance Development Center
2000-Present: CEO and Chairman of Board of Directors of EDKS LLC
2015-Present: CEO and Secretary of Mongolian Bankers Association
2013-Present: Chairman of Board of Directors of Narta LLC
2014-Present: Chairman of Board of Directors of Narta Construction LLC
CORPORATE
GOVERNANCE
COMMITTEES
BoD has 3 committees: Audit Committee, Remuneration Committee and Nomination Committee. DECISION-MAKING PROCESS
The compositions of the Committees are as follows: Regular meetings of the Board of Directors of APU JSC take place on a quarterly basis and irregular
meetings and ad-hoc voting are held when deemed necessary. The decisions are made on two-third
1. Audit committee: J.Unenbat (Director of Committee), B.Batbayar, S.Erdene
majority basis. Furthermore, principles specified in the Company Law of Mongolia such as unanimous
Function of the Committee: To ensure the companys financial recording and reporting meet interna- agreement on major transactions (decision by shareholders meeting in case of non-consensus) and
tional standards, and to oversee internal audit and risk management activities, financial reporting and abstention by conflict-of-interest directors, apply.
the overall corporate financial-economic state of affairs.
Operational Rules of the Board of Directors specifically lay out the processes to make and present pro-
2. Remuneration Committee: S.Gromov (Director of Committee), S.Erdene, J.Unenbat. posals to the Board of Directors and decision-making thereof.
Function of the Committee: To approve and oversee the policy on remuneration and appointment for
BoD members, executives and staff of the company, determine maximum limit for remuneration of No decisions associated with major transactions were made by the Board in 2016. The list of affiliated
BoD members and executives, and to develop proposals on providing promotion and remuneration persons and persons with conflict of interests are renewed on annual basis and delivered to the Finan-
within determined limits. cial Regulatory Committee and Mongolian Stock Exchange.
3. Nomination Committee: P.Batsaikhan (Director of Committee), S.Erdene, .Sivaev. As of 2016, the following affiliated persons were identified:
Function of the Committee: To determine requirements on nominations to ordinary and independent
Immediate parent and other Shareholders 1. APU Trading LLC
BoD members, to provide evaluation whether or not the requirements are meet, to arrange selection
1. Tuul International Co., Ltd. 2. Depod LLC
and appointment of BoD and executive body, and to assess performance of BoD and executive man-
agement. 2. WIT Alliance Ltd 3. Shunkhlai Trading LLC
3. Zennor International Ltd 4. Shunkhlai LLC
4. Golomt bank LLC 5. Shunkhlai Group LLC
6. Hyundai Motors Mongolia LLC
Subsidiary company 7. Kia Motors Mongolia LLC
REMUNERATION POLICY 1. Grand LLC 8. Media Group LLC
2. Chingis Khan International Limited 9. Public Media LLC
General policy of the Company 10. Amilan.E LLC
11. NTV Broadcasting LLC
APU Company maintains the following principles in its remuneration and promotion system:
12. JSB Mining LLC
To attract highly qualified expertise employees through market competitive remuneration and pro- 13. Power Unit LLC
motion system, and to focus on retention of such employees; 14. Suntrans Mongolia LLC
To promote employees to higher positions and enable conditions for continuous learning, to pro- 15. Suntrans LLC
vide assistance and support for studying abroad or in the country, and to grant study scholarships 16. International Medical Center LLC
in order to ensure proper career management of staff and employees; 17. Capital Group LLC
To evaluate performance of each employee rationally, and to provide promotion as per perfor- 18. Ulaanbaatar Spirit LLC
mance; 19. JSB Capital LLC
20. Skytel LLC
To raise social development fund for the purpose of solving particular social issues of employees, 21. Nature Agro LLC
and to provide benefits and support from the fund;
22. Wan Trade LLC
To conduct annual payroll surveys, and to increase salary amount in harmony with the labor mar- 23. Great Empire LLC
ket conditions, macro-economic status and inflation rate. 24. Skymedia Corporation LLC
25. Mongol Daatgal LLC
26. Chingis Khaan Bank LLC
* Other related parties which had no transactions with the 27. Blue Sky Cashmere LLC
Company are excluded from the related party list.
CORPORATE GOVERNANCE SHARE

CODE IMPLEMENTATION PROGRAM PORTFOLIO
APU Company is implementing a Corporate governance code implementation program, approved by In 1992, 49 percent of Arkhi and Pivo Factory Complex was privatized into APU JSC and in 2001 the
the Board of Directors, in order to gradually align the company operations and activities with principles remaining 51 percent was auctioned into private ownership.
and concepts of the Corporate governance code of Mongolia, ratified by the Decree No.162 of the
APU Company received the renewed State Registration Certificate in 2005 and it was registered as a
Financial Regulatory Commission on the 7th of May 2014.
public company at the State Registration Office. Three years after that in 2008 when the share price
Within the framework of this program, the documents relevant to the internal governance procedures reached MNT 54,000, a decision was made to split the shares. Thus on the 15th of July 2008, the stock
of the company were identified, and the program is to be implemented in 2 phases. The first phase was split one to 100 resulting in a spike of the share price of 15 percent, reaching MNT 621 from MNT
involves policies, regulations and procedures approved previously and which are valid at present, and 540.
in the second phase the schedule for approving policies, regulations and procedures that need to be
On 22nd of April 2016, the decision to split the share one to 10 times was made to improve convertibility,
adopted in the future was determined.
enhance market price, and accelerate stock trading. As a result the share price went up by 12 percent,
reaching MNT 444 from MNT 397.
Documents, approved in the first phase include:
As compared to that of 2015, the weighted average closing price of APU Company shares was 374,
1. Dividend policy increased by 5 percent in 2016.
2. Board of Directors operating regulations
3. Internal regulations on Board Secretary
4. Audit Committee charter
5. Remuneration Committee charter
6. Nomination Committee charter
7. Internal regulation on information disclosure by securities issuer
8. Shareholders meeting regulations
9. CEO operational guidelines.
2/03/16 4/22/16
Legal grounds for approving documents the APU Company Risk management policy and Internal It was decided to allo- It was decided to
audit policy by the Board of Directors have been developed in 2016. cate dividends of MNT divide unit share 10
70 per unit share. times.
Documents to be approved within the second phase in 2017 include:
1. Insider trading regulations

2. Stakeholder grievance procedures
3. Corporate Code of Conduct
4. Remuneration policy
5. Succession policy
The Program is being implemented as scheduled.
/Share split reflected/

Source: Mongolian Stock Exchange
DIVIDEND EXECUTIVE
POLICY MANAGEMENT TEAM
Since its privatization in 2005, APU company has been implementing a consistent dividend policy to
MANAGEMENT BOARD STRUCTURE AND OPERATIONS
ensure proper return on investment by the shareholders.
The decision on allocating dividends is one of the main indicators of the companys financial and op- The Management board, comprising of members in charge of advising and assisting the CEO for mak-
erational results. ing decisions, operates under the CEO. The Board is chaired by the CEO, and comprises of 6 members
including Chief operations officer, Chief financial officer, Administration and HR Director, Project Director
Shares with Dividend Total dividend Dividend and Corporate communications and Innovation Director.
dividend rights declared per /mln.tug/ yield, %
share
2005 742,877 130 97
2006 742,877 60 45
2007 742,877 538 400 2.80%
2008 74,287,700 10 743 2.30%
2009 74,167,019 20 1,483 3.20%
2010 74,167,019 40 2,967 2.00%
2011 74,167,019 60 4,450 1.40%
2012 74,167,019 70 5,192 1.80%
2013 74,167,019 90 6,675 2.20%
2014 74,167,019 0 - ERDENEBILEG TUVSHIN
ARIUNAA
2015 74,167,019 70 5,192 1.80% TSEVEENJAV DANDAROVA BANZRAGCH
Chief Executive Officer Corporate Communications and Chief Financial Officer
2016 741,670,190 1 742 0.25% Innovation Director
Average /dividend yield/ 1.97%
APU company has been continuously paying dividends to shareholders since 2005 to date, pursuant
to its the dividend principles.
For 2016, the company decided to allocate dividend of MNT 1 per unit share, and the decision was
published in February 2017.
The average dividend yield provided by APU company to its shareholders historically is approximately
1.9% percent, which is the average amount provided by global beverage manufacturers.
Dividend Yield %
Anheuser-Busch Inbev SA 3.22%
HEINEKEN (NV) 1.49% ENKHBILEG MENDBAYAR NARANZUN
SABMiller PLC (BRW1.DE) 1.6% GONCHIG AVIRMED BADRUUGAN
Chief Operating Officer Project Director Administration and Human
Carlsberg B 1.46% Resourse Director
Source: Dividend ranking & finance.yahoo.com
RISK
MANAGEMENT
Aligning its operations and activities with the concepts and principles of the Corporate governance to less-volatile currencies for imports which can-
HIGH RISKS IN 2017
code, and carrying out the Program for effectively implementing the Corporate governance code, APU not be replaced by local suppliers. There is a lack
company has been continually working to develop its comprehensive Risk management, Internal audit of currency hedging products on the Mongolian fi-
and Internal control policy systems. Government policy changes /Tax growth/ nancial market, and the company will continue to
Definition: After the Parliamentary elections of work with financial service providers to find suitable
2016, a Parliament dominated by one party has solutions.
Risk profile RISK MAPPING 2016 2017 been established and a new so-called profession-
al Government was formed. The Government in- Economic slowdown
Food industry relates to human health and Currency rate tends to enroll in the Extended Fund Facility pro-
safety directly and every company in this growth Definition: Due to a slowdown in the economic
gram of the International Monetary Fund (IMF). In
industry is required to follow international 1 2 3 4 5
development, nationwide unemployment has in-
Negative social
connection to this program, it is planning to take
and domestic standards. APU company Government pol- creased and household income has declined, re-
attitude several actions to increase budget revenues by in-
is the first Mongolian company that in- icy changes /Tax sulting in less spending on consumer products.
increase/ creasing social insurance premiums and excise tax
troduced ISO 9001 Quality management Statistical data shows that household spending for
on alcoholic beverages.
system, ISO 14001 Environmental man- food and non-food items has gone down by 10 per-
agement system, and FSSC 22000 Food Potential impact: Increasing excise tax rate is likely cent and 11 percent in 2016 y.o.y.
Economic
safety management systems together. slowdown to impact the net sales income of the company and
Potential impact: Economic slowdown is the main
Our Quality management and control de- is a high level risk that affects not only our company
partment is responsible for conducting risk that may result in decline of the companys
but also other companies in the same industry.
tests, analyses, experiments, quality con- sales as household spending for alcoholic and
trol and verification, and monitoring on all non-alcoholic beverages decreases.
processes from designing a product to re-
co2 Mitigation: It would be hard to take responsive ac- Mitigation: APU Company ensures high quality and
gas
ceiving raw materials, storing, producing tions against such external risks. It is problematic standards in its production, goods and services,
and distributing finished products. to pass on the full tax liability increase to the con- and it aims to manage this risk by focusing to pro-
iMPact
sumer. Therefore, in addition to changes in pricing vide high quality products and services to consum-
policy, efforts to optimize costs and introduce new,
Risk mitigation high-margin product categories are required.
ers.
APU Company strives to take a holistic 1 2 3 4 5

Currency devaluation
approach in its risk assessment process likelihood
so that not only the present and explicit Definition: According to main macro-econom-
risks are evaluated, but also their underly- ic indicators, Mongolian economy has shown no
ing causes, future impacts and outcomes. improvements in 2016, the tugrug exchange rate
As a result, proper approaches to mitigate against foreign currencies has continued to decline,
such risks can be formulated. and the average USD rate increased by 9 percent
(the maximum increase was 24 percent).
Potential impact: Continuous tugrug devaluation is
a high level risk that impacts directly on the com-
panys financial results by affecting procurement
costs and causing major non-operational losses
related to the significant foregn currency nominat-
ed debt on the balance sheet.
Mitigation: In order to mitigate the currency risks
related to procurement activities, the company
works to increase its local sourcing as well as shift
04. SUSTAINABILITY 04. SUSTAINABILITY
SUSTAINABLE
DEVELOPMENT
We strive towards effectively maintaining SOCIAL, ECONOMIC and ENVIRONMENTAL
sustainability by creating values across all aspect of our operations.
SUSTAINABILITY FINANCE AND ECONOMY PEOPLE AND SOCIETY
Deliver efficiency to stakeholders Strictly comply with food safety and quality
Increase efficiency and create values by standards
improving productivity Contribute to promoting national culture
National entrepreneur and supporting human development- and
eco-friendly production
Increase efficiency by decreasing expenses
Operate on fair and transparent competition
principles
Encourage responsible consumption
ENVIRONMENT Contribute to improving consumer education
Comply with legislations and ethical stan-
Adhere to national and international dards
standards and Mongolian legislations on Respect equality and fairness
environment.
Conduct eco-friendly manufacturing
Reduce environmental pollution and focus
on recycling waste
Save energy
Improve operations regularly and collaborate
openly with shareholders, consumers, cus-
tomers and employees.
FINANCE AND ECONOMY

In 2016, APU Company paid 127 billion tugrugs in taxes to the Mongolian state budget.
Despite economic slowdown and profit decline in 2016, it was decided to distribute 742 million
MNT in dividends to the shareholders.
On the 22nd of April 2016, the decision to split shares 1-to-10 was announced to improve share
liquidity and accelerate stock trading.
HUMAN RESOURCE AND DEVELOPMENT

ENVIRONMENT
Working for APU Company, a leading beverage manufacturer recognized in Mongolia as well as inter-
nationally, opens many opportunities for self-development and provides competitive salary and other
We aim to conduct production and manufacturing operations in environment friendly way by applying conditions. It is reliable employer and implementer of best technology and solutions from around the
eco-friendly equipment, technology and standards, taking into account possible impacts from our op- world, and all employees are a part of a skilled and creative community thriving in a safe and comfort-
erations on the environment. Minimizing the adverse impact on the environment is a responsibility of able environment. APU Companys HUMAN RESOURCES POLICY stands for being satisfied with the
every employee. success and accomplishments of own work, and working together toward development for all.
ENERGY EFFICIENCY HUMAN RESOURCE POLICY IMPLEMENTATION

APU Company was selected from 7 Mongolian companies that competed for the 2015-2016 Energy
PU company carried out a Good attitude, Good communications, Good people campaign among its
efficient model organization project, organized among its member countries by the Asian productivity
employees in 2016. 392 specialized and on-the-job training sessions were successfully organized to
organization. The project was implemented over the course of 2015-2017, and APU Company has be-
improve professional skills.
come the ASIAN ENERGY EFFICIENT MODEL ORGANIZATION by achieving the objectives of efficient
use and recycling of steam, water, heat and electricity.
Situation-based leadership training for top managers
WATER SAVING: Good attitude, Good communications, Good people training for mid-level managers, including
Waste water resulted from production processes, is re-used for watering the premises, roads, streets technical and engineering staff
and green areas, saving a total of 11,544 m3 clean water per year.
STEAM, HEAT AND COOLING: According to the corporate culture survey among the employees, the following categories have
shown improvement in 2016: new ideas and creative attitude by 5.2%, planning effectiveness by
Water from steam condensation is used for heating plant premises and warehouse buildings, reducing
4.5%, communications and collaboration by 4.1%.
central heat consumption by 14.5% percent.
The company achieved 100 percent performance for its Collective agreement with the Labor Union,
PEOPLE AND SOCIETY providing MNT 1,495,504,662.00 for various employee support:
Human development is the foundation for the nations growth and prosperity. We invest in arts and
sports to promote Mongolia internationally, put our efforts into education of our future the young Pensions and benefits MNT 33,681,159
generation, promote Mongolian traditions and customs, and take active part in social campaigns and Other support MNT 49,297,405
industry initiatives. Award and incentives MNT 72,427,840
Daily meal and health service MNT 1,340,098,258
OCCUPATIONAL HEALTH AND SAFETY

Towards employees: Towards the public:
Education and training programs Various activities and events in collaboration
For convenience and work/life balance of employees, the food canteen has been redecorated, and
Positive mind campaign with government and non-government
the menu updated to improve nutrition and choice of meals provided to employees free of charge
organizations
Financial incentives for productivity and For employees who work in hard conditions, milk, yoghurt and curd (during winter) is provided daily
development initiatives Sponsorship of arts, sports and cultural All employees are provided proper Personal protective equipment to ensure occupational health
events and safety
Promotion of arts, traditional culture and
customs within the framework of Tuguldur Support for young athletes, sponsorship of APU hospital delivers emergency and first aid services, general out-patient diagnostics and treat-
project international competition participation costs. ment, and organizes health education and awareness activities. Regularly, 20-25 employees get
healthcare service a day.

TUGULDUR
PROJECT
TUGULDUR PROJECT
ENVIRONMENT
As a result of the project aiming to improve corporate culture, employee relations and inter-departmental
collaboration have improved markedly. The focus of the next stage of the project is to enhance planning Pure Tuul campaign-2016
efficiency, encourage creativitiy and facilitate mutual learning and knowledge sharing.
Within the objective to promote environmen-
Activities implemented within framework of the projects are: tally-friendly production and to call other
factories and communities to come together
under the slogan to keep Tuul River clean we
organized the Pure Tuul Campaign for the
Family trip: 2nd year. 300 company employees took part
A traditional event being organized since 2015 in cleaning 28 hectares of land along the
to introduce and promote the companys opera- river Tuul. We encouraged group companies
tions to the employees family members. to join the initiative and over 50 employees
of Shunkhlai, Depod LLC worked together
with the Save Tuul River Basin and Queen
Tuul groups.
APU Olympics:
With the goal to support active lifestyle
through sports, to build team spirit and pro- One household-one tree
mote unity, we have organized the annual APU During the National tree planting day under
Olympics. The event theme was special by the slogan Together for green Mongolia
reflecting the features of the RIO 2016 Olym- APU employees were enrolled in a 2-day
pics and honoring the APU company athlete training to implement the One household
D.Otgondalai, Bronze medal winner in the Rio one tree campaign. 250 employees partici-
Olympics 2016. pated and each planted 5-10 trees.
Success and attitude Water to be treasured:

We organized a Success and Attitude training As a result of this initiative, Grey water is
where professional trainers have suggested ready for re-use after being analyzed and
many ways that can be used for enhancing relevant collaborations are extended with
your own success and fostering a positive specialized organizations on its use for city
attitude in the workplace. greening and other purposes.
Campaign for good idea

In order to promote ideas, new solutions and ini-
tiatives, a Good idea campaign was organized
among all workers. Many progressive ideas have
been collected with some under implementation
now.
HUMAN DEVELOPMENT SOCIETY
Mongols with Deel event

APU company employees widely participated
Sponsorship of the Asian champion-
in the nationwide Mongols with Deel event
ship youth chess tournament aiming to give respect to the cultural heritage
With the goal of supporting youth personal devel-
of Mongols and spread awareness and ap-
opment we sponsored the chess tournament in
which 2000 children took part. The official tourna-
preciation of traditional Mongolian clothing.
ment brand was the Maamuu brand. International visitors and over 2,500 citizens at-
tended the parade in which 39 APU employees
demonstrating diverse ethnic fashion choices.
Traffic safety promotion

Within the corporate social responsibility to Together in hardship
prevent accidents and to raise public awareness APU Company supports local industry and puts
on the dangers of drunk driving, APU Company emphasis to assist SMEs. In the winter of 2016,
together with the Traffic Police Department the company purchased lamb wool cloths
prepared 3 video commercials that were broad- from 50 women entrepreneurs from vulnerable
casted through social networks and television groups to deliver to herders in rural areas hit by
channels. harsh weather conditions.
FC ULAANBAATAR Football team World milk day

Since 2016, APU Company signed a cooperation Milk and dairy product manufacturers intro-
agreement with FC Ulaanbaatar football team. duced their products to the public, organized
The purpose is to introduce the youth to sports, activities such as tastings, promotions and a
to motivate them for success in team sports on
parade. A total of 14 milk producers participated
international level.
in this event and more than 1,000 people visited.
POSITIVE MIND International horse-head fiddle festival

Together with the JCI Mongolia organization, APU Promoting the awareness of Mongolian cultural
Company joined the movement to introduce the heritage, APU Company sponsored the Fifth in-
Positive Mind training to students both locally
ternational horse-head fiddle festival. The festival
and overseas.
was a major event attended by more than 200
artists from 18 countries including the United
States, Germany, Russia and China.
Rio medalist D.OTGONDALAI

APU Company has always supported boxing and
shooting sports. The company sponsors boxer
D.Otgondalai, International Sports Master, the
Asian Games champion, and Olympic bronze
medalist from the RIO 2016 XXXI summer
Olympics. At his arrival back to the country APU
Companys management welcomed and honored
him by presenting the keys to a new apartment.
04. SUSTAINABILITY 05. FINANCIAL STATEMENT
AWARDS
FINANCIAL
STATEMENTS
TOP-100 Company ASIAN ENERGY EFFICIENT

Mongolian National Chamber of MODEL ORGANIZATION
Commerce and Industry
Asian Productivity Organization
THE BEST ANNUAL REPORTING

WORLD VODKA AWARDS-2016
AWARD OF MONGOLIA /ARAM/
Soyombo, Arkhi, Ulaanbaatar
Corporate Governance Development Center, Financial Regula-
tory Commission, State Property Committee, and Mongolian
Stock Exchange
CATHAY PACIFIC HONG KONG INTERNATIONAL ALUFOIL TROPHY-2016

WINE & SPIRIT COMPETITION 2016 Award in the Marketing & Design category of the
Arkhi Export Limited Edition Vodka /Gold Winner/ competition: Snap on closure called Sunrise, for
Chinggis Khan Vodka /Silver Winner/ spirits, which combines an aluminum shell and
plastic non-refillable fitments, with a highly visible
tear off, tamper evident band.
05. FINANCIAL STATEMENT 05. FINANCIAL STATEMENT
INDEPENDENT AUDITORS REPORT
Separate Statement of Financial Position Separate Statement of Profit or Loss and Other Comprehensive Income
As at 31 December 2016 For the year ended 31 December 2016
(In thousands of MNT) 13 2016 2015 (In thousands of MNT) Note 2016 2015
Assets
Revenue 208,055,308 210,111,177
Property, plant and equipment 5 189,332,593 208,295,136 Cost of sales (142,012,623) (146,597,508)
Intangible assets 6 553,659 645,072 Gross profit 66,042,685 63,513,669
Biological assets 82,952 102,990
Long-term investment 7 904,836 904,836 Selling and administrative expenses (29,848,656) (27,845,164)
Deferred tax assets 19 10,229,981 6,304,570 Other income 15 1,101,367 1,311,421
Non-current assets 201,104,021 216,252,604 Other expenses 16 (1,143,206) (2,776,265)
Profit from operations 36,152,190 34,203,661
Inventories 8 51,651,066 56,251,093
Prepayments and prepaid expenses 9 5,218,459 5,280,309
Finance income 17 7,652,283 3,648,760
Income tax receivable 19 42,441 1,068,072
Finance costs 18 (40,048,264) (19,805,580)
Trade and other receivables 10 16,383,316 20,023,747
Profit before income tax 3,756,209 18,046,841
Short-term investment 7 33,812 33,812
Cash and cash equivalents 11,21 16,636,672 6,762,570
Current assets 89,965,766 89,419,603 Income tax expense 19 (873,533) (7,376,671)
Total assets 291,069,787 305,672,207 Profit for the year 2,882,676 10,670,170
Other comprehensive income - -
Equity Total comprehensive income for the year 2,882,676 10,670,170
Share capital 12 74,167 74,167 Earnings per share

Revaluation reserve 80,653,246 80,694,981 Basic earnings per share 26 4 14
Retained earnings 62,458,060 64,725,337
Total equity 143,185,473 145,494,485
Liabilities
Long-term loans and borrowings 13,21 70,117,592 88,080,211

Deferred tax liabilities 19 244,268 254,437
Other payables 14 195,434 1,938,258
Non-current liabilities 70,557,294 90,272,906
Short-term loans and borrowings 13,21 39,742,390 31,863,450

Trade and other payables 14 37,584,630 38,041,366
The accompanying notes form an integral part of these separate financial statements.
Current liabilities 77,327,020 69,904,816
Total liabilities 147,884,314 160,177,722
Total equity and liabilities 291,069,787 305,672,207
62. APU Company Annual report 2016 8 APU Company Annual report 2016 63.
Separate Statement of Changes in Equity Separate Statement of Cash Flows

For the year ended 31 December 2016 For the year ended 31 December 2016
Share capital Revaluation reserve (In thousands of MNT) Note 2016 2015
(In thousands of MNT) (Note 12) (Note 5) Retained earnings Total equity
Cash flows from operating activities

Balance at 1 January 2015 74,167 81,032,442 53,717,706 134,824,315 Profit for the year 2,882,676 10,670,170
Total comprehensive income:

Profit for the year - - 10,670,170 10,670,170 Adjustments for:
Transfer to retained earnings - (337,461) 337,461 - Income tax expense 19 873,533 7,376,671
Balance at 31 December 2015 74,167 80,694,981 64,725,337 145,494,485 Interest expense 18 6,079,005 6,758,814
Interest income 17 (170,303) (91,511)
Total comprehensive income:
Unrealised foreign exchange gain (5,697,868) (2,682,167)
Profit for the year - - 2,882,676 2,882,676
Unrealised foreign exchange loss 30,876,545 11,330,843
Transfer to retained earnings - (41,735) 41,735 -
Depreciation 5 20,124,676 20,240,331
Transactions with owners:
Amortisation 6 217,247 238,348
Dividends declared - - (5,191,688) (5,191,688)
Bad debt reversal 15 (31,685) (251,825)
Balance at 31 December 2016 74,167 80,653,246 62,458,060 143,185,473
Write off of inventory 16 1,054,533 2,240,202
Gain on disposal of property, plant and equipment 15 (2,601) (10,230)
Loss on disposal of property, plant and equipment 16 74,099 530,552
56,279,857 56,350,197
Changes in assets and liabilities:

Trade receivables (225,996) (5,513,554)
The accompanying notes form an integral part of these separate financial statements. Other receivables 4,464,865 503,752
Inventory 3,565,532 11,590,429
Prepayments 193,513 (960,854)
Trade payables (5,236,895) (5,501,075)
9 Other payables (1,592,341) (3,634,114)
57,448,538 52,834,781
Interest paid (5,981,202) (6,795,786)

Interest received 170,303 91,511
Income taxes paid (3,880,375) (5,822,696)
Net cash provided by operating activities 47,757,264 40,307,810
Separate Statement of Cash Flows, continued Notes to the Separate Financial Statements*
For the year ended 31 December 2016 For the year ended 31 December 2016
1. Reporting Entity
(In thousands of MNT) Note 2016 2015
APU Joint Stock Company (the Company) was established in 1924. It is registered at Khan-Uul District,
2nd Khoroo, Chinggis Khaan Avenue, APU JSC building and domiciled in Mongolia. The Companys
Cash flows from investing activities immediate parent is Tuul International Co., Ltd. The Company manufactures vodka, other spirits, beer, non-
Acquisition of property, plant and equipment 5 (2,904,414) (5,021,389) alcoholic beverages and dairy products.
Acquisition of intangible assets (72,463) -
Proceeds from disposal of property, plant The main shareholder of the Company and its immediate parent is Tuul International Co.,Ltd.
12,250 355,145
and equipment
Increase in biological assets - net - (22,465)
2. Basis of preparation
Net cash used in investing activities (2,964,627) (4,688,709)
(a) Statement of compliance
Cash flows from financing activities
The separate financial statements have been prepared in accordance with International Financial
Repayment of borrowings (34,755,504) (38,861,301)
Reporting Standards (IFRS).
Dividends paid 12 (376,793) (621)
Net cash used in financing activities (35,132,297) (38,861,922) These financial statements are separate financial statements prepared in accordance with
International Accounting Standard (IAS) 27, Separate Financial Statements, presented by a parent, an
investor in an associate or a venture in a jointly controlled entity, in which the investments are
Net decrease in cash and cash equivalents 9,660,340 (3,242,821)
accounted for on the basis of the direct equity interest rather than on the basis of the reported
Cash and cash equivalents at the beginning of year 11 6,762,570 9,946,981 results and net assets of the investees.
Effect of foreign exchange rate fluctuations on
213,762 58,410
cash held Certain corresponding figures have been reclassified to conform to the current years
Cash and cash equivalents at the end of year 11 16,636,672 6,762,570
presentation. The separate financial statements were authorised for issue by the Directors on
14 April 2017.
(b) Basis of measurement
The separate financial statements have been prepared on the historical cost basis, except for
property, plant and equipment carried at revalued amounts.
(c) Functional and presentation currency
The separate financial statements are presented in Mongolian tugrik (MNT) which is also the functional
currency of the Company and the currency of the primary economic environments in which the Company
operates. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
(d) Use of judgments and estimates
The preparation of financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of the accounting policies and the
reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates
are recognised prospectively.
(i) Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have the most significant
risk of resulting in a material adjustment within the next financial year are included in the following
notes:
66. APU Company Annual report 2016 *The disclosure notes are extracts from the audited financial statements APU Company Annual report 2016 67.
Notes 3 (q), 19 recognition of deferred tax assets
Notes 3 (d), 5 change of useful lives of property, plant and equipment
Notes 3 (d), 5 revaluation of property, plant and equipment
2. Basis of preparation, continued 3. Significant accounting policies, continued
(d) Use of judgments and estimates, continued

(c) Financial instruments
In December 2014, a fair value measurement of the property, plant and equipment was performed by
an independent third party valuation company. As a result, the management determined that the useful (i) Non-derivative financial assets recognition and derecognition
lives of certain items of property, plant and equipment should be changed.
The Company initially recognises loans and receivables on the date that they are originated. All other
The estimated financial effect of the change in useful lives, assuming the assets are held until the end financial assets are recognised initially on the trade date when the Company becomes a party to
of their estimated useful lives, is to increase (decrease) the depreciation expense in the current financial the contractual provisions of the instrument.
year and for the next three years, by the following amounts:
The Company derecognises a financial asset when the contractual rights from the asset expire,
or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all
In thousands of MNT
2016 2017 2018 2019 Later the risks and rewards of ownership of financial asset are transferred, or it neither transfers nor retains
substantially all of the risks and rewards of ownership and does not retail control over the transferred
Increase (decrease)
asset. Any interest in transferred financial assets that is created or retained by the Company is
in depreciation 4,643,397 4,057,249 3,315,611 (1,417,693) (9,644,670)
recognised as a separate asset or liability.
expense
(ii) Going concern
The Company recognises and measures non-derivative financial assets by the following categories:
trade and other receivables and cash and cash equivalents:
The separate financial statements have been prepared on a going concern basis, which management
has assessed as being appropriate.
Trade and other receivables
Trade and other receivables are financial assets with fixed or determinable payment that are not quoted
3. Significant accounting policies
in an active market. Such assets recognised initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, receivables are measured at amortised cost
The accounting policies set out below have been applied consistently to all periods presented in
using the effective interest method, less any impairment losses.
these financial statements, unless otherwise indicated.
Cash and cash equivalents
(a) Subsidiary
Cash and cash equivalents comprise cash on hand and bank balances that are subject to an
A subsidiary is an entity controlled by the Company. The Company controls an entity when it is exposed
insignificant risk of changes in their fair value.
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. In the financial statements, investment in subsidiary is
(ii) Nonderivative financial liabilities recognition and derecognition
recorded at cost and income is recognized when dividends from the subsidiary is receivable.
(b) Foreign currency transactions The Company initially recognises financial liabilities on the trade date when the Company becomes a
party to the contractual provisions of the instrument.
Transactions in foreign currencies are translated to the functional currency of the Company at the
exchange rates at the dates of the transactions. The Company derecognises financial liabilities when their contractual obligations are discharged
or cancelled, or expired.
Monetary assets and liabilities denominated in foreign currencies are translated to functional currency
at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in The Company classifies non-derivative financial liabilities into the other financial liabilities category. Such
foreign currencies that are measured at fair value are retranslated to the functional currency at the financial liabilities are recognised initially at fair value less any directly attributable transaction
exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost
that are measured based on historical cost are translated at the exchange rate at the date of the using the effective interest method.
transaction. Foreign currency differences are generally recognized in profit or loss.
The Company has the following non-derivative financial liabilities: loans and borrowings and trade and other
payables.
(iii) Offsetting between financial assets and liabilities
Financial assets and liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the Company has a legal right to offset the amount and intends either to
settle to a net basis or to realise the asset and settle the liability simultaneously.
3. Significant accounting policies, continued 3. Significant accounting policies, continued
(d) Property, plant and equipment (d) Property, plant and equipment, continued
(i) Recognition and measurement (iv) Depreciation, continued
Items of property, plant and equipment that qualify for recognition as assets are measured upon Items of property, plant and equipment are depreciated from the date that they are installed and are
initial recognition at their cost. Cost includes expenditure that is directly attributable to the acquisition ready for use or in respect of internally constructed assets, from the date asset is completed and
of the asset. The cost of self-constructed assets includes the following: ready for use.
The cost of materials and direct labor; The estimated economic useful lives for the current and comparative years of significant items of
Any other cost directly attributable to bringing the assets to a working condition for their property, plant and equipment are as follows:
intended use; and
Borrowing costs associated with constructed assets. Buildings 24 - 60 years
Equipment 5 - 30 years
(ii) Measurement after initial recognition Vehicles 5 - 15 years
Furniture and fixtures 3 - 19 years
After initial recognition as an asset, an item of property, plant and equipment whose fair value can Other (electronic equipment, etc.) 6 - 9 years
be measured reliably is carried at its revalued amount, being its fair value at the date of revaluation
less subsequent accumulated depreciation and subsequent accumulated impairment losses. The fair Depreciation method, useful lives and residual values are reviewed at each reporting date and adjusted
values are estimated by an independent third party in Mongolia. if appropriate. The change is accounted for as a change in an accounting estimate.
When an item of property, plant and equipment is revalued, any accumulated depreciation at the date (e) Intangible assets
of the revaluation is restated proportionately with the change in the gross carrying amount of the
asset so that the carrying amount of the asset after revaluation equals its revalued amount. Intangible assets that are acquired by the Company and have finite useful lives are measured at cost
less accumulated amortisation and accumulated impairment losses.
Any revaluation increase arising on the revaluation of such property, plant and equipment is charged
to other comprehensive income and accumulated in equity, except to the extent that it reverses a Subsequent expenditure is capitalised only when it increases the future economic benefits embodied
revaluation decrease for the same asset previously recognized as an expense, in which case the in the specified asset to which it relates. All other expenditure is recognised in profit or loss as incurred.
increase is charged to profit or loss to the extent of the decrease previously charged. A decrease in
carrying amount arising on the revaluation of such property, plant and equipment is charged as an Intangible assets are amortised on a straight-line basis in profit or loss over the estimated useful life
expense to the extent that it exceeds the balance, if any, held in the properties revaluation surplus of 3 years, from the date that they are available for use.
relating to a previous revaluation of that asset.
Amortisation method, useful lives and residual values are reviewed at each reporting date and adjusted
The gain or loss on disposal of an item of property, plant and equipment is determined by comparing if appropriate.
the proceeds from disposal with the carrying amount of property, plant and equipment. When revalued
assets are sold or retired, any related amount included in the revaluation reserve is transferred (f) Biological assets
to retained earnings.
Biological assets are measured at fair value less costs to sell, with any change therein recognized in
(iii) Subsequent costs profit or loss.
Subsequent expenditure is capitalised only when it is probable that the future economic (g) Borrowing costs
benefits associated with expenditure will flow to the Company. Ongoing repairs and maintenance is
expensed as incurred. The Company capitalizes borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized
(iv) Depreciation in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get
ready for its intended use or sale.
Items of property, plant and equipment are depreciated on a straight-line basis in profit or loss over
the estimated useful lives of each component. Leased assets are depreciated over the shorter of
the lease term and their useful lives unless it is reasonably certain that the Company will obtain
ownership by the end of the lease term.
(g) Borrowing costs, continued (j) Impairment, continued
To the extent that the Company borrows funds specifically for the purpose of obtaining a qualifying (i) Non-derivative financial assets, continued
asset, the Company determines the amount of borrowing costs eligible for capitalization as the actual
borrowing costs incurred on that borrowing during the period less any investment income on In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below
the temporary investment of those borrowings. The Company immediately recognizes other its cost is objective evidence of impairment.
borrowing costs as an expense. To the extent that the Company borrows funds generally and uses
them for the purpose of obtaining a qualifying asset, the Company determines the amount of Financial assets measured at amortised cost
borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that
asset. The capitalization rate is the weighted average of the borrowing costs applicable to the The Company considers evidence of impairment for these assets at both an individual asset and a
borrowings of the Company that are outstanding during the period, other than borrowings made collective level. All individually significant assets are individually assessed for impairment. Those found
specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the not to be impaired are then collectively assessed for any impairment that has been incurred but not
Company capitalizes during a period shall not exceed the amount of borrowing costs incurred during yet individually identified. Assets that are not individually significant are collectively assessed for
that period. impairment. Collective assessment is carried out by grouping together assets with similar risk
characteristics.
(h) Leased assets
In assessing collective impairment, the Company uses historical information on the timing of
Leases in terms of which the Company assumes substantially all the risks and rewards of ownership recoveries and the amount of loss incurred, and makes adjustment if current economic and credit
are classified as finance leases. On initial recognition, a leased asset is measured at an amount equal conditions are such that the actual losses are likely to be greater or lesser than suggested by historical
to the lower of its fair value and the present value of the minimum lease payments. Subsequent trends.
to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to
that asset. An impairment loss is calculated as the difference between its carrying amount and the present value
of the estimated future cash flows discounted at the assets original effective interest rate. Losses
Other leases are operating leases and are not recognised in the Companys separate statement of are recognised in profit or loss and reflected in an allowance account. When the Company considers that
financial position. there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the
amount of impairment loss subsequently decreases and the decrease can be related objectively to an
(i) Inventories event occurring after the impairment was recognised, then the previously recognised impairment loss
is reversed thorough profit or loss.
Inventories are measured at the lower of cost and net realisable value. The cost of inventories
is determined on a weighted-average cost principle and includes expenditure incurred in acquiring the (ii) Non-financial assets
inventories, production or conversion costs, and other costs incurred in bringing them to their existing
location and condition. In the case of production inventories and work-in-progress, cost includes The carrying amounts of the Companys non-financial assets, other than inventories and deferred
an appropriate share of overhead costs based on normal operating capacity. tax assets are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the assets recoverable amount is estimated.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated
costs related to completion. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its
fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted
(j) Impairment to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of impairment testing, assets
(i) Non-derivative financial assets that cannot be tested individually are grouped together into the smallest group of assets that generates
cash inflows from continuing use that are largely independent of the cash inflows of other assets or
A financial asset not carried at fair value through profit or loss is assessed at each reporting date groups of assets (the cash-generating unit).
to determine whether there is objective evidence that it is impaired.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating units
Objective evidence that financial assets (including equity securities) are impaired can exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of
include: profit or loss and other comprehensive income. Impairment losses recognised in respect of cash-
generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units,
default or delinquency by a debtor; and then to reduce the carrying amounts of the other assets in the unit (group of units) on a pro rata
restructuring of an amount due to the Company on terms that the Company would basis. Impairment losses recognised in prior periods are assessed at each reporting date for any
not consider otherwise; indications that the loss has decreased or no longer exists. An impairment loss is reversed if there
indications that a debtor or issuer will enter bankruptcy; has been a change in the estimates used to determine the recoverable amount. An impairment loss
adverse changes in the payment status of borrowers or issuers; is reversed only to the extent that the assets carrying amount does not exceed the carrying amount
the disappearance of an active market for a security because of financial difficulties; or
that would have been determined, net of depreciation or amortisation, if no impairment loss had been
observable data indicating that there is measurable decrease in expected cash flows from a
recognised.
group of financial assets.
(k) Employee benefits (n) Revenue
(i) Short-term employee benefits Revenue is measured at the fair value of the consideration received or receivable, provided it is probable
that the economic benefits will flow to the Company and the revenue and costs, if applicable, can be
Short-term employee benefits are expensed as the related service is provided. A liability is recognised measured reliably.
for the amount expected to be paid if the Company has a present or constructive obligation to pay this
amount as a result of past services provided by the employee and the obligation can be estimated (i) Sale of goods
reliably.
Revenue is recognised when goods are delivered at the customers premises, which is taken to be
(ii) Defined contribution plans the point in time when the customer has accepted the goods and the related risks and rewards of
ownership. Revenue excludes value added tax or other sales taxes and is after deduction of any trade
Employee benefits include statutory social insurance payments to the State Social Insurance Scheme discounts.
of Mongolia. Obligations for contributions to defined contribution plans are recognised as an
employee benefit expense as incurred. (ii) Rental income from operating leases
(l) Provisions and contingencies Rental income receivable under operating leases is recognised in profit or loss in equal installments
over the periods covered by the lease term, except where an alternative basis is more representative
A provision is recognised in the statement of financial position when the Company has a legal of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are
or constructive obligation as a result of a past event, and it is probable that an outflow of economic recognised in profit or loss as an integral part of the aggregate net lease payments receivable.
benefits will be required to settle the obligation. Where the effect of the time value of money is material, Contingent rentals are recognised as income in the accounting period in which they are earned.
provisions are determined by discounting expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate, the risks specific (iii) Other income
to the liability. The unwinding of the discount is recognised as finance cost.
Other income is income generated outside the normal course of business and is recognized when
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot it is probable that the economic benefits will flow to the Company and it can be measured reliably.
be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of
outflow of economic benefits is remote. Possible obligations, whose existence will only be (o) Lease payments
confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as
contingent liabilities unless the probability of outflow of economic benefits is remote. Payments made under operating leases are recognised in the statement of profit or loss and
other comprehensive income on a straight-line basis over the term of the lease. Lease incentives
(m) Share capital received are recognised as an integral part of the total lease expense, over the term of the lease.
(i) Ordinary shares Minimum lease payments made under finance leases are apportioned between the finance expense
and the reduction of the outstanding liability. The finance expense is allocated to each period during the
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
ordinary share are recognised as a deduction from equity, net of any tax effects.
(p) Finance income and finance costs
(ii) Repurchase of share capital (treasury shares)
Finance income comprises interest income on funds invested. Interest income is recognised as it
When share capital recognised as equity is repurchased, the amount of the consideration paid, which accrues in profit or loss, using the effective interest method.
includes directly attributable costs, net of any tax effects, is recognised as deduction from equity.
Finance costs comprise interest expense on borrowings. Borrowing costs that are directly attributable
Repurchased shares are classified as treasury shares and are presented in the statement of to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost
changes in equity as treasury shares. When treasury shares are sold or reissued subsequently, the of the respective assets. All other borrowing costs are recognised in profit or loss using the effective
amount received is recognised as an increase in equity, and the resulting surplus or deficit on the interest method.
transaction is presented in share premium.
(q) Income taxes (s) Related parties
Income tax expense comprises current tax and deferred tax. Current tax and deferred tax is recognised (i) A person, or a close member of that persons family, is related to the Company if that person:
in profit or loss except to the extent that it relates to items recognised directly in equity or in
other comprehensive income. has control or joint control over the Company;
has significant influence over the Company; or
(i) Current tax is a member of the key management personnel of the Company or the Companys
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the parent. (ii) An entity is related to the Company if any of the following conditions applies:
year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to
tax payable in respect of previous years. the entity and the Company are members of the same group (which means that each
parent, subsidiary and fellow subsidiary is related to the others);
(ii) Deferred tax one entity is an associate or joint venture of the other entity (or an associate or joint venture
of a member of a group of which the other entity is a member);
Deferred tax is recognised in respect of temporary differences between the carrying amounts of both entities are joint ventures of the same third party;
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
the entity is a post-employment benefit plan for the benefit of employees of either the
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences Company or an entity related to the Company;
when they reverse, using tax rates enacted or substantively enacted by the reporting date. the entity is controlled or jointly controlled by a person identified in (i);
a person identified in (i) has significant influence over the entity or is a member of the
In determining the amount of current and deferred tax, the Company takes into account the impact key management personnel of the entity (or of a parent of the entity); and
of uncertain tax positions and whether additional taxes and interest may be due. The Company believes the entity, or any member of a group of which it is a part, provides key management
that its accruals for tax liabilities are adequate for open tax years based on its assessment of many personnel services to the Company or the Companys parent.
factors, including interpretations of tax law and prior experience. This assessment relies on
estimates and assumptions and may involve a series of judgments about future events. New Close members of the family of a person are those family members who may be expected to influence,
information may become available that causes the Company to change its judgment regarding the or be influenced by, that person in their dealings with the entity.
adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period
that such a determination is made.
4. New and revised IFRSs not yet adopted
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current
tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same A number of new standards, amendments to standards and interpretations are effective for annual
taxable entity. periods beginning 1 January 2017, and have not yet been applied in preparing these financial
statements. Those which may be relevant to the Company are set out below. The Company does
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary not plan to adopt these standards early.
differences to the extent that it is probable that future taxable profits will be available against which they
can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent (1) IFRS 9 Financial Instruments
that it is no longer probable that the related tax benefit will be realised.
IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition
(r) Earnings per share and Measurement. IFRS 9 includes revised guidance on the classification and measurement of
financial instruments, including a new expected credit loss model for calculating impairment of financial
The Company presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is assets, and the new general hedge accounting requirements. It also carries forward the guidance on
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the recognition and derecognition of financial instruments from IAS 39.
weighted average number of ordinary shares outstanding during the period, adjusted for own shares
held. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption
permitted. The Company is assessing the potential impact on its financial statements resulting from
If the number of ordinary or potential ordinary shares outstanding increases as a result of a
the application of IFRS 9.
capitalization, bonus issue or share split, or decreases as a result of a reverse share split, the
calculation of basic and diluted earnings per share for all periods presented is adjusted retrospectively.
4. New and revised IFRSs not yet adopted, continued

5. Property, plant and equipment
(2) IFRS 15 Revenue from Contracts with Customers Changes in property, plant and equipment for the year ended 31 December 2016 are as follows:
IFRS 15 establishes a comprehensive framework for determining whether, how much and when (1) Cost
revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue,
IAS 11 Furniture and Construction
Construction Contracts and IFRIC 13 Customer Loyalty (In thousands of MNT) Buildings Equipment Vehicles fixtures in-progress Total
Programmes.
Balance at 1 January 2015 93,528,219 233,249,377 8,648,652 3,964,567 - 339,390,815
The core principle of the new standard is that an entity recognises revenue to depict the transfer
Additions 20,261 2,115,094 1,226,183 162,356 - 3,523,894
of promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. The new standard results in Disposals - (1,466,969) (237,024) (164,664) - (1,868,657)
enhanced disclosures about revenue, provides guidance for transactions that were not previously Balance at 31 December 2015 93,548,480 233,897,502 9,637,811 3,962,259 - 341,046,052
addressed comprehensively and improves guidance for multiple-element arrangements.
IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption Balance at 1 January 2016 93,548,480 233,897,502 9,637,811 3,962,259 - 341,046,052
permitted. The Company is assessing the potential impact on its financial statements resulting from Additions - 1,204,464 277,081 101,223 11,277 1,594,045
the application of IFRS 15. Disposals (39,659) (501,082) (864,966) (93,729) - (1,499,436)
Balance at 31 December 2016 93,508,821 234,600,884 9,049,926 3,969,753 11,277 341,140,661
(3) IFRS 16 Leases
IFRS 16 introduces a single, on-balance lease sheet accounting model for lessees. A lessee
recognises a right-of-use asset representing its right to use the underlying asset and a lease liability
representing its obligation to make lease payments. There are optional exemptions for short-term
leases and leases of low value items. Lessor accounting remains similar to the current standard - i.e.
lessors continue to classify leases as finance or operating leases.
IFRS 16 replaces existing leases guidance including IAS 17 Leases, IFRIC 4 Determining whether
an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the
Substance of Transactions Involving the Legal Form of a Lease.
The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption
is permitted for entities that apply IFRS 15 Revenue from Contracts with Customers at or before the
date of initial application of IFRS 16. The Company is assessing the potential impact on its financial 24
statements resulting from the application of IFRS 16.
(4) Disclosure Initiative (Amendments to IAS 7)
The amendments require disclosures that enable users of financial statements to evaluate changes
in liabilities arising from financing activities, including both changes arising from cash flow and non-
cash changes.
The amendments are effective for annual periods beginning on or after 1 January 2017, with early
adoption permitted.
(5) Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
The amendments clarify the accounting for deferred tax assets for unrealised losses on debt
instruments measured at fair value.
The amendments are effective for annual periods beginning on or after 1 January 2017, with early
adoption permitted.
5. Property, plant and equipment, continued 5. Property, plant and equipment, continued
(2) Accumulated depreciation In 2014, the fair value measurement of the Companys property, plant and equipment was performed
by an independent third party valuation company.
Furniture and Construction
(In thousands of MNT) Buildings Equipment Vehicles fixtures in-progress Total In 2016 the Company set off certain receivables arising from proceeds on disposal of property, plant
and equipment against payables with the same counterparties.
Balance at 1 January 2015 13,834,351 93,196,010 4,104,104 2,369,310 - 113,503,775
The Company has pledged buildings and equipment having carrying amounts of MNT 73,115,357
Depreciation for the year 2,096,106 16,399,879 1,286,989 457,357 - 20,240,331
thousand and MNT 100,680,580 thousand as at 31 December 2016, respectively, and MNT 74,998,989
Disposals - (828,876) (24,030) (140,284) - (993,190) thousand and MNT 117,195,597 thousand as at 31 December 2015, after revaluation, to secure loan
Balance at 31 December 2015 15,930,457 108,767,013 5,367,063 2,686,383 - 132,750,916 facilities granted to the Company, as disclosed in Note 13.
Balance at 1 January 2016 15,930,457 108,767,013 5,367,063 2,686,383 - 132,750,916 6. Intangible assets
Depreciation for the year 2,041,185 16,462,619 1,198,975 421,897 - 20,124,676
Disposals (24,729) (397,071) (557,140) (88,584) - (1,067,524) Changes in intangible assets for the year ended 31 December 2016 are as follows:
Balance at 31 December 2016 17,946,913 124,832,561 6,008,898 3,019,696 - 151,808,068
(1) Cost
(3) Net book value (In thousands of MNT)

Software Land use rights Total
Balance at 31 December 2015 77,618,023 125,130,489 4,270,748 1,275,876 - 208,295,136 158,377 1,039,750 1,198,127
Balance at 1 January 2015
Balance at 31 December 2016 75,561,908 109,768,323 3,041,028 950,057 11,277 189,332,593 Additions - - -
Balance at 31 December 2015 158,377 1,039,750 1,198,127
Balance at 1 January 2016 158,377 1,039,750 1,198,127

Additions 125,834 - 125,834
Balance at 31 December 2016 284,211 1,039,750 1,323,961
(2) Accumulated amortisation
(In thousands of MNT)

25
Balance at 1 January 2015 108,082 206,625 314,707
Amortisation for the year 35,698 202,650 238,348
Balance at 31 December 2015 143,780 409,275 553,055
Balance at 1 January 2016 143,780 409,275 553,055

Amortisation for the year 14,597 202,650 217,247
(3) Net book value

80. APU Company Annual report 2016

26 APU Company Annual report 2016 81.
7. Long-term and short-term investments 9. Prepayments and prepaid expenses
Long term and short term investments as at 31 December are summarised as follows: Prepayments and prepaid expenses as at 31 December are as follows:
(In thousands of MNT) 2016 2015 (In thousands of MNT) 2016 2015
Long-term investment in subsidiary (a) 904,836 904,836 New projects 20,225 208,848
Short-term investment security (b) 33,812 33,812 Prepayments for raw materials 3,780,772 3,512,705
Others 1,417,462 1,558,756
938,648 938,648
5,218,459 5,280,309
(a) Long-term investment consists of investment in Grand LLC, a 100% owned subsidiary.
(In thousands of MNT) 2016 2015 10. Trade and other receivables
Owner- Owner-
Name of Principal Main Carrying Carrying (1) Trade and other receivables as at 31 December are summarised as follows:
ship ship
investee location operation amount amount
portion portion
(In thousands of MNT) 2016 2015
Grand LLC Russia Trading 100% 904,836 100% 904,836
(b) Short-term investment consists of investment security in Erdenes Tavan Tolgoi JSC. Trade receivables due from third parties 737,367 508,353
Trade receivables due from related parties (Note 25) 9,247,376 8,929,146
Allowance for doubtful accounts on trade receivables (321,248) (321,248)
8. Inventories Trade receivables, net 9,663,495 9,116,251
Inventories as at 31 December are as follows:

Other receivables due from related parties (Note 25) 5,595,758 9,321,165
(In thousands of MNT) 2016 2015 Other taxes receivable 1,227,312 1,635,350
Merchandise 10,277,203 Other receivables due from third parties 418,816 504,731
11,342,904
Finished goods, net of allowance for net realizable Allowance for doubtful accounts on other receivables (522,065) (553,750)
value 15,963,857 18,265,182 Other receivables, net 6,719,821 10,907,496
Work-in-progress 1,995,752 1,950,344 16,383,316 20,023,747
Raw materials and consumables 16,583,962 21,104,053
Supplies inventory 3,902,576 4,136,124 (2) The aging of trade and other receivables is summarised as follows:
Goods in transit 1,862,015 518,187
51,651,066 56,251,093 (In thousands of MNT) 2016 2015
Receivable Allowance Receivable Allowance
The cost of inventories recognised as a write down in expenses in profit or loss is MNT 1,054,533 before for doubtful before for doubtful
thousand in 2016 (2015: MNT 2,240,202 thousand). This includes MNT 1,054,533 thousand and MNT allowance accounts allowance accounts
1,963,272 thousand loss on the write off of inventory in 2016 and 2015, respectively, and nil and
MNT 276,930 thousand loss on the write-downs of inventory to net realisable value in 2016 and 2015 Not past due 15,296,653 - 18,415,089 -
respectively, as disclosed in Note 19. Past due 3-6 months 291,331 - 306,437 -
Past due 6-12 months 527,304 - 60,399 -
Past due more than one year 1,111,341 (843,313) 2,116,820 (874,998)
17,226,629 (843,313) 20,898,745 (874,998)
82. APU Company Annual report 2016 27 28 APU Company Annual report 2016 83.
10. Trade and other receivables, continued 13. Loans and borrowings
(3) Changes in allowance for doubtful accounts as at 31 December are summarised as follows: This note provides information about the contractual terms of the Companys interest-bearing loans
and borrowings, which are measured at amortised cost. Information about the Companys exposure to
(In thousands of MNT) 2016 2015 interest rate, foreign currency and liquidity risk is disclosed in Note 24.
Balance at 1 January 874,998 1,126,823
Reversal of allowance for doubtful accounts (31,685) (251,825) (In thousands of MNT) 2016 2015
Balance at 31 December 874,998 Long-term loans and borrowings 70,117,592 88,080,211
843,313
Short-term loans and borrowings 39,742,390 31,863,450
The Company believes that the outstanding amounts that are past due by more than 30 days are 109,859,982 119,943,661
collectible based on analysis of the customers. Based on historic default rates, the Company believes
that, apart from the above, no impairment allowance is necessary in respect of trade receivables past Terms and conditions of outstanding loans are as follows:
due or past due by up to 30 days.
(1) Long-term loans and borrowings are summarised as follows:
The Companys exposure to credit risk is disclosed in Note 24.
(i) As at 31 December 2016
Original Carrying
amount in amount in Carrying
11. Cash and cash equivalents foreign foreign amount in
Maturity Annual currency currency thousands of
Cash and cash equivalents as at 31 December are summarised as follows: Bank Currency date interest rate (thousand) (thousand) MNT
5.5%+6 month
EBRD USD 2019 47,000 17,091 42,548,331
USD libor
Credit 2%+6 month
USD 2019 37,092 11,074 27,569,261
Cash on hand 6,960,790 2,072,690 Suisse USD libor
Bank balances 9,675,882 4,689,880 70,117,592
16,636,672 6,762,570
(ii) As at 31 December 2015
Original Carrying
12. Share capital foreign foreign amount in
Share capital and treasury shares as at 31 December are summarised as follows: Bank Currency date interest rate (thousand) (thousand) MNT
5.5%+6 month
EBRD USD 2019 47,000 25,636 51,169,670
USD libor
(In thousands) 2016 2015
Credit 2%+6 month
Number of MNT Number of MNT USD 2019 37,092 18,492 36,910,541
Suisse USD libor
shares Amount shares Amount 88,080,211
(2) Short-term loans and borrowings are summarised as follows:

Authorised shares 742,877 74,288 74,288 74,288
(i) As at 31 December 2016
Ordinary shares, issued and fully paid 742,877 74,288 74,288 74,288 Original Carrying
Treasury shares (1,207) (121) (121) (121) foreign foreign amount in
Ordinary shares, outstanding 741,670 74,167 74,167 74,167 (thousand) (thousand) MNT
Bank Currency date interest rate
5.5%+6 month
EBRD USD 2019 (a) 47,000 8,545 21,274,166
On 22 April 2016, the Company split its ordinary shares. One ordinary share of the Company became USD libor
ten new ordinary shares. Share capital as at 31 December 2016 consists of 741,670 thousand shares Credit 2%+6 month
USD 2019 (b) 37,092 7,418 18,468,224
with par value of MNT 0.1. Earnings per share information of financial year 2015 has been retrospectively Suisse USD libor
adjusted to reflect the share split, see Note 29. 39,742,390
On 3 February 2016, the Company declared dividends of MNT 70 per share, totaling MNT 5,191,688
thousand. The Company paid dividends amounting to MNT 376,793 thousand to its shareholders in
2016.
No dividends were declared in 2015. The Company paid dividends amounting to MNT 621 thousand to
its shareholders in 2015.
13. Loans and borrowings, continued 14. Trade and other payables
(2) Short-term loans and borrowings, continued: Trade and other payables as at 31 December are summarised as follows:
(ii) As at 31 December 2015 (In thousands of MNT) 2016 2015

Principal Carrying
amount in amount in Carrying Trade payables due to third parties 3,467,935 8,704,830
foreign foreign amount in
Trade payables 3,467,935 8,704,830
Bank Currency date interest rate (thousand) (thousand) MNT Other payables to related parties (Note 25) 95,346 119,087
5.5%+6 month Other payables to third parties 4,371,633 6,015,267
EBRD USD 2019 (a) 47,000 8,545 17,056,556
USD libor
Taxes payable 9,963,269 10,073,458
Credit 2%+6 month
USD 2019 (b) 37,092 7,418 14,806,894 Dividends payable 19,881,881 15,066,982
Suisse USD libor
31,863,450 Other payables 34,312,129 31,274,794
37,780,064 39,979,624
(a) This represents the part of the EBRD loan which is due within 12 months after the reporting period Non-current 195,434 1,938,258
in accordance with the loan agreement dated 14 December 2012. The loan was received in March Current 37,584,630 38,041,366
2013.
37,780,064 39,979,624
(b) This represents the part of the Credit Suisse loan which is due within 12 months after the
reporting period in accordance with the loan agreement dated 25 February 2013. The loan was
15. Other income
received in May
2013.
Details of other income for the year ended 31 December 2016 are as follows:
(3) Loan covenants
The EBRD loan has certain restrictive covenants. The following restrictive covenants are related to Rental 527,423 559,924
the separate financial statements: Reversal of bad debts 31,685 251,825
Gain on disposal of property, plant and equipment 2,601 10,230
(i) Until the construction projects financed by the EBRD loan are completed, the Company may Other 539,658 489,442
declare and pay annual dividends up to USD 0.05 per share; however, the total dividends declared 1,101,367 1,311,421
for minority shareholders shall not exceed USD 300 thousand per annum.
(ii) After completion of the projects, the Company may declare and pay annual dividends up to 20% 16. Other expenses
of its net profit after tax unless the Company is in default. However, the Company shall remain
in compliance with all financial ratios set forth in the loan agreement immediately after the Details of other expenses for the year ended 31 December 2016 are as follows:
dividend payments.
(4) Breach of loan covenants Loss on write off of inventory (Note 8) 1,054,533 2,240,202
Loss on disposal of property, plant and equipment 74,099 530,552
The EBRD and the Credit Suisse loans have financial covenants related to the combined financial
Penalties and fees 12,094 1,000
statements of the Company and APU Trading LLC, as disclosed in Note 23.
Other 2,480 4,511
The required thresholds of the EBRD and Credit Suisse loans for combined debt service coverage 1,143,206 2,776,265
ratio were not met during 2015 and 2016.
Both the EBRD and Credit Suisse issued waivers to not exercise or enforce their rights to require
compliance by the Company and APU Trading LLC for the related financial years in which covenants were
broken. Based on the contractual terms of the loans, the definition of an event of default in these
contracts, and the ability of the borrowers to rectify non-compliance with the breached financial
covenant, the loans are classified as non-current.
Income taxes, continued

17. Finance income 19. Income taxes, continued
Details of finance income for the year ended 31 December 2016 are as follows: (ii) Reconciliation of the effective tax rate is as follows:
(In thousands of MNT) 2016 2015 (In thousands of MNT) 2016 2015
Interest income 170,303 91,511 Profit before tax 3,756,209 18,046,841
Foreign exchange gains 7,481,980 3,557,249
7,652,283 3,648,760 Tax at statutory income tax rate of 25% 939,052 4,511,710
Tax effect of non-deductible expenses 403,888 1,873,075
Tax effect of non-taxable income (42,576) (185,993)
18. Finance costs Tax effect of progressive tax rate of 10% on the
portion of taxable profits up to MNT 3 billion (450,000) (450,000)
Details of finance costs for the year ended 31 December 2016 are as follows: Impact of change in effective tax rate 6,138 583,785
Change in tax estimate related to prior year - 1,034,943
(In thousands of MNT) 2016 2015 Income taxed at special tax rate of 10% 9,151
17,031
Interest expense 6,079,005 6,758,814
Income tax for the year 873,533 7,376,671
Foreign exchange losses 33,969,259 13,046,766
40,048,264 19,805,580 (iii) Deferred tax expenses by origination and reversal of deferred assets and liabilities and
temporary differences for the year ended 31 December 2016 are as follows:
19. Income taxes (In thousands of MNT) 2016 2015

Deferred tax assets (liabilities) as of the beginning of the period 6,050,133 7,754,561
(i) Income taxes recognised for the year ended 31 December 2016 are as follows:
Deferred tax assets (liabilities) as of the end of the period 9,985,713 6,050,133
(In thousands of MNT) 2016 2015 Change in temporary differences (3,935,580) (1,704,428)
Current tax expense 4,809,113 4,637,300
Under-estimated from prior year 1,034,943 (iv) Changes in deferred tax assets (liabilities) for the year ended 31 December 2016 are as follows:
-
Deferred tax (benefit) expense (3,935,580) 1,704,428
Beginning Ending
873,533 7,376,671 (In thousands of MNT) balance Profit or loss balance
31 December 2016
According to Mongolian Tax Laws, the Company has an obligation to pay the Government Corporate
Unrealized foreign exchange losses, net 6,304,570 3,925,411 10,229,981
Income Tax of 10% (2015: 10%) on the portion of taxable profits up to MNT 3 billion and 25% (2015: 25%)
on the portion of taxable profits above MNT 3 billion, if the Company earns revenue from operating Prepayments (254,437) 10,169 (244,268)
activities. 6,050,133 3,935,580 9,985,713
In 2014, the Company underestimated its income tax expense due to management expecting to claim 31 December 2015
a tax deduction for realised foreign exchange losses which were not included as tax deductible in the
initial income tax return. However, due to a filing under the new Economic Transparency Law enacted in Unrealized foreign exchange losses, net 8,103,296 (1,798,726) 6,304,570
August Prepayments (348,735) 94,298 (254,437)
2015, the Company was not able to submit this claim for the tax deduction of these realized foreign 7,754,561 (1,704,428) 6,050,133
exchange losses. As a result, in 2015 this underestimation of the 2014 income tax expense was
adjusted.
88. APU Company Annual report 2016

33 34 APU Company Annual report 2016 89.
19. Income taxes, continued 21. Financial instruments
(v) The aggregate amounts of deferred tax assets and liabilities, and current tax assets and liabilities Financial risk management
before offsetting are as follows:
Overview
Deferred tax assets 10,229,981 6,304,570 The Company has exposure to the following risks arising from financial instruments:
Deferred tax liabilities (244,268) (254,437)
Credit risk
Current tax assets 42,441 1,068,072
Liquidity risk
Market risk
The Government of Mongolia continues to reform the business and commercial infrastructure in
its transition to a market economy. As a result the laws and regulations affecting businesses
This note presents information about the Companys exposure to each of the above risks, the
continue to change rapidly.
Companys objectives, policies and processes for measuring risk, and the Companys management of
capital. Further quantitative disclosures are included throughout these separate financial statements.
These changes are sometimes characterized by poor drafting, varying interpretations and
inconsistent application by the tax authorities. In particular, taxes are subject to review and
22. Financial instruments, continued
investigation by a number of authorities who are enabled by law to impose fines and penalties. While
the Company believes it has provided adequately for all tax liabilities based on its understanding of the Risk management framework
tax legislation and status at the period-end, the above facts may create tax risks for the Company which
are not possible to quantify at this stage. The Board of directors has overall responsibility for the establishment and oversight of the Companys
risk management framework.
20. Capital management The Companys risk management policies are established to identify and analyse the risks faced by
the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.
The Companys primary objective when managing capital is to safeguard the Companys ability to Risk management policies and systems are reviewed regularly to reflect changes in market conditions
continue as a going concern, so that it can continue to provide returns for shareholders and benefits and the Companys activities. The Company, through its training and management Standards and
for the other stakeholders. The Company actively and regularly reviews and manages its capital procedures, aims to develop a disciplined and constructive control environment in which all employees
structure to maintain a balance between the higher shareholder returns and the advantages and understand their roles and obligations.
security afforded by a sound capital position.
(1) Credit risk
Apart from covenants stipulated in the EBRD and Credit Suisse loans, the Company is not subject
to externally imposed capital requirements. Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Companys
The significant EBRD and Credit Suisse covenants relate to the combined financial statements of receivables from customers.
the Company and APU Trading LLC. They are as follows:
Exposure to credit risk
Debt service coverage ratio;
Current ratio; The carrying amount of financial assets represents the maximum credit exposure. The maximum
Financial debt to EBITDA ratio; and exposure to credit risk at the reporting date was as follows:
Combined financial debt to EBITDA ratio.
(In thousands of MNT) Carrying amount
Current: 2016 2015
Trade and other receivables 15,156,004 18,388,397
Bank balances 9,675,882 4,689,880
24,831,886 23,078,277
36
35
21. Financial instruments, continued 21. Financial instruments, continued
Risk management framework, continued Risk management framework, continued
(1) Credit risk, continued (2) Liquidity risk, continued
Exposure to credit risk, continued The following are the contractual maturities of financial liabilities, including estimated interest
payments and excluding the impact of netting agreements:
Trade and other receivables
As at 31 December 2016
The Companys exposure to credit risk is influenced mainly by the individual characteristics of
each customer. 99.1% (2015: 98.9%) of the Companys revenue is attributable to sales transactions Carrying Contractual 6 months 6-12 More than
1-2 years
(In thousands of MNT) amount cash flows or less months 2 years
with APU Trading LLC, a related party. The default risk of the industry and country in which customers
operate also may have an influence on credit risk but to a lesser extent. Loans and borrowings 109,859,98 119,135,38 22,611,79 22,144,25 42,834,76 31,544,55
Trade and other 2 7,934,91 0 7,934,91 74,437,20 83,302,27 7 195,43 8 -
The Company establishes an allowance for impairment that represents its estimate of incurred Dividends
payables payable - 4 4 5 5 4
losses in respect of trade and other receivables. undefined 19,881,88 19,881,88 - - - -
1
137,676,77 1
146,952,17 27,049,00 25,446,53 43,030,20 31,544,55
The maximum exposure to credit risk for trade and other receivables at the reporting date by 7 5 2 3 1 8
geographic region was as follows: As at 31 December 2015
(In thousands of MNT) Carrying amount Carrying Contractual 6 months 6-12 More than
1-2 years
(In thousands of MNT) amount cash flows or less months 2 years
2016 2015
Loans and borrowings 119,943,66 131,884,92 18,652,88 18,310,22 35,553,32 59,368,48
Domestic 14,347,608 18,278,229 114,839,18 514,839,18 4 7 887,27 51,774,55 9 163,70
Trade and other 12,013,64
Foreign 808,396 110,168 Dividends
payables payable - 4 4 9 7 5 3
15,156,004 18,388,397 undefined 15,066,98 15,066,98 - - - -
2
149,849,82 2
161,791,09 30,666,53 19,197,50 37,327,88 59,532,19
The maximum exposure to credit risk for trade and other receivables at the reporting date by type 7 1 3 4 0 2
of counterparty was: (3) Market risk
(In thousands of MNT) Carrying amount Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates
will affect the Companys income or the value of its holdings of financial instruments. The objective of
2016 2015
market risk management is to manage and control market risk exposures within acceptable
Wholesale customers 9,281,805 8,975,390 parameters, while optimizing the return.
Retail customers 223,638 137,563
Other customers 3,696 3,298 Currency risk
Other receivables 5,646,865 9,272,146
The Company is exposed to currency risk on sales, purchases and borrowings that are denominated
15,156,004 18,388,397
in a currency other than the functional currency of the Company, MNT. The currencies in which
these transactions are primarily denominated are US Dollars (USD), Euro (EUR), British Pound (GBP),
(2) Liquidity risk
Chinese Yuan (CNY), Russian Ruble (RUB), Japanese Yen (JPY) and Korean Won (KRW).
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated
with its financial liabilities that are settled by delivering cash or another financial asset. The Companys
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions, without incurring
unacceptable losses or risking damage to the Companys reputation.
(3) Market risk, continued (3) Market risk, continued
(i) Exposure to currency risk (ii) Sensitivity analysis (before tax)
As at 31 December 2016 A strengthening (weakening) of the MNT against the USD, EUR, CNY and RUB at 31 December, would
have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is
(In thousands of MNT) USD EUR CNY RUB Other based on foreign currency exchange rate variances that the Company considered to be reasonably
Trade and other possible at the reporting date. The analysis assumes that all other variables, in particular interest rates,
378,706 143,374 - 514,413 3,330
receivables remain constant and ignores any impact of forecasted sales and purchases.
Cash and cash 465,252 92,144 311,165 199,350 473
equivalents
Secured bank loans (109,859,982 - - - - (In thousands of MNT) Profit (Loss) and Equity
Trade and other ) (4,010,655) (2,096,380) (326,244) - (3,087) Strengthening Weakening
payables (113,026,679 (1,860,862) (15,079) 713,763 716
31 December 2016
)
USD (5% movement) 5,651,334 (5,651,334)
As at 31 December 2015
EUR (5% movement) 93,043 (93,043)
(In thousands of MNT) USD EUR CNY RUB GBP CNY (5% movement) 754 (754)
Trade and other 182,237 104,583 - 263,190 - RUB (5% movement) (35,688) 35,688
Cash and cash
receivables 136,161 20,881 5,772 99,557
equivalents
Secured bank loans (119,943,661 - - - - 31 December 2015
Trade and other ) (8,254,627) (2,005,760) (1,982,391) - (660) USD (5% movement) 6,393,995 (6,393,995)
payables (127,879,890 (1,880,296) (1,976,619) 362,747 (660) EUR (5% movement) 94,015 (94,015)
) GBP (5% movement) 33 (33)
The following significant exchange rates were applied during the year. CNY (5% movement) 98,831 (98,831)
RUB (5% movement) (18,137) 18,137
Average rate Reporting date spot rate
(In MNT) 2016 2015 2016 2015 (4) Interest rate risk
USD 2,144 1,970 2,490 1,996 (i) Profile

EUR 2,370 2,188 2,606 2,183
At the reporting date the interest rate profile of the Companys interest-bearing financial instruments
CNY 322 314 358 308
was as follows.
RUB 32 33 41 27
(In thousands of MNT) Carrying amount
2016 2015
Variable rate instruments
- Financial liabilities 109,859,982 119,943,661
109,859,982 119,943,661
(4) Interest rate risk, continued (5) Fair values, continued
(ii) Sensitivity analysis Fair values versus carrying amounts
Fair values sensitivity analysis for fixed rate instruments The fair values of financial assets and liabilities, together with the carrying amounts shown in the
statement of financial position, are as follows:
The Company does not account for any fixed rate financial assets and liabilities at fair value through
profit or loss, and loss has not entered into any fixed rate borrowings. (In thousands of MNT) 2016 2015
Carrying Carrying
Fair value Fair value
Cash flow sensitivity analysis for variable rate instruments amount amount
Assets carried at fair value
At 31 December 2016 and 2015, it is estimated that a general increase or decrease of 100 basis points
in the interest rate, with all other variables held constant, would have decreased or increased equity and Short-term investment 33,812 33,812 33,812 33,812
profit or loss by approximately MNT 1,098,600 thousand and MNT 1,199,437 thousand before tax, 33,812 33,812 33,812 33,812
respectively. This assumes that all other variables, in particular foreign currency rates, remain constant.
Assets carried at amortised cost
(5) Fair values
Trade and other receivables 15,156,004 15,156,004 18,388,397 18,388,397
Financial instruments comprise financial assets and financial liabilities. The fair value of a financial Cash and cash equivalents 16,636,672 16,636,672 6,762,570 6,762,570
instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly 31,792,676 31,792,676 25,150,967 25,150,967
transaction between market participants at the measurement date.
Liabilities carried at amortised cost
All assets and liabilities for which fair value is measured or disclosed in the financial statements Loans and borrowings 109,859,982 109,859,982 119,943,661 119,943,661
are categorized within the fair value hierarchy, described as follows, based on the lowest level input
Trade and other payables 27,816,795 27,816,795 29,906,166 29,906,166
that is significant to the fair value measurement as a whole:
137,676,777 137,676,777 149,849,827 149,849,827
Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities; The fair value measurement is based on the presumption that the transaction to sell the asset or
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability; transfer the liability takes place either:
either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable In the principal market for the asset or liability, or
inputs). In the absence of a principal market, in the most advantageous market for the asset or liability
The following describes the methodologies and assumptions used to determine fair values for For assets and liabilities that are recognised in the financial statements on a recurring basis, the
those financial instruments which are not already recorded at fair value in the financial statements: Company determines whether transfers have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest level input that is significant to the fair value
Assets for which fair value approximates carrying value measurement as a whole) at the end of each reporting period.
For financial assets and financial liabilities that are liquid or having short term maturity (less than one Transfers between levels
year), it is assumed that the carrying amounts approximate to their fair value due to their short term to
maturity. There were no transfers between levels 1 to 3 of the fair value hierarchy for the assets and liabilities
which are recorded at fair value.
Financial instruments
The fair value of fixed rate financial assets and liabilities carried at amortized cost are estimated
by comparing market interest rates when they were first recognized with current market rates offered
for similar financial instruments.
22. Related parties 22. Related parties, continued
(1) As at 31 December 2016, the main related parties with which the Company transacted in the (3) Related party outstanding balances
year were as follows:
(1) As at 31 December 2016, the main related parties with which the Company transacted in the
Name of party Relationships year were as follows:
a. Immediate parent and other shareholders
Tuul International Co., Ltd. Immediate parent company (In thousands of MNT) Transaction value
WIT Alliance Ltd (BVI) Shareholder 2016 2015
Zennor International Ltd (BVI) Shareholder Sales
Golomt Bank LLC Shareholder (under REPO) Associated companies and others 205,021,623 207,813,935
b. Subsidiary Subsidiary 322,986 162,193
Grand LLC Subsidiary
Chinggis Khan International Limited Subsidiary Purchase of goods and services
c. Associated companies and others (*) Associated companies and others 19,219,946 18,570,123
APU Trading LLC Associated company and Exclusive distributor of APU brand
products Income
Depod LLC Associated company Rental
Shunkhlai Group LLC Associated company Associated companies and others 416,800 432,646
Shunkhlai Trading LLC Associated company
Shunkhlai Petroleum LLC Associated company Security services
Shunkhlai LLC Associated company Associated companies and others 230,727 176,232
Hyundai Motors Mongolia LLC Associated company
Kia Motors Mongolia LLC Associated company Interest and other income
Media Group LLC Associated company Associated companies and others 256,741 23,491
Public Media LLC Associated company
Amilan. E LLC Associated company Expenses
NTV Broadcasting LLC Associated company Insurance expense
Associated companies and others 778,906 802,922
GSB Mining LLC Associated company
Power Unit LLC Associated company
Selling and distribution expense
Suntrans Logistics LLC** Associated company
Associated companies and others 4,280,471 2,425,149
Suntrans LLC Associated company Subsidiary 45,482 -
International Medical Center LLC Associated company
Capital Group LLC Associated company Sale of property, plant and equipment
UB Spirit LLC Associated company Associated companies and others 150,000 -
GSB Capital LLC Associated company
Skytel LLC Associated company
Natur Agro LLC Associated company Other transactions
Dividend declared 5,191,688 -
Wan Trade LLC Associated company
Great Empire LLC Associated company
Skymedia Corporation LLC Associated company
S Development LLC Associated company
Mongol Daatgal LLC Associated company
Chinggis Khan Bank LLC Associated company
Blue Sky Cashmere LLC* Associated company
(*) Other related parties which had no transactions with the Company are excluded from the related
party list.
(**) Suntrans LLC 64% owned subsidiary of Suntrans Logistics LLC was disposed by its parent in April
2016.
98. APU Company Annual report 2016 43

44 APU Company Annual report 2016 99.
Annual report
APU Joint Stock Company
Notes to the Separate Financial Statements
For the year ended 31 December 2016
22. Related parties, continued 23. Nature of expenses
26. Nature of expenses
(3) Related party outstanding balances Details of nature of expenses for the year ended 31 December 2016 are as follows:
Details of nature of expenses for the year ended 31 December 2016 are as follows:
(In thousands of MNT) Selling and
Changes in Cost Selling and
Changes in Cost administrative Nature of expenses
(In thousands of MNT) Balance outstanding inventories of sales administrative Nature of expenses
inventories of sales expenses
2016 2015 expenses
Receivables 2016
2016 2015
2015 2016
2016 2015
2015 2016
2016 2015
2015 2016
2016 2015
2015
Associated companies and others 14,328,721 17,987,121
Changes
Changes in in 4,600,027 13,830,631 - - - - 4,600,027
Subsidiary 514,413 263,190 4,600,027 13,830,631 - - - - 4,600,027 13,830,631
inventories
inventories 13,830,631
Employee
Employee
Prepayments benefits -- -- 7,321,633 6,784,018
7,321,633 6,784,018 4,298,052
4,298,052 4,382,858
4,382,85811,619,685
11,619,68511,166,876
benefits 11,166,876
expense
Associated companies and others 117,310 249,878 expense
Depreciation
Depreciatio
and amorti- - - 16,146,346 16,155,784 4,195,577 4,322,895 20,341,923 20,478,679
Other payables n and
sation - - 16,146,346 16,155,784 4,195,577 4,322,895 20,341,923
Associated companies and others 95,346 119,087 amorti-
Inventory 20,478,679
- - 113,944,617 109,827,075 21,355,027 19,139,411 135,299,644 128,966,486
sation
and others
Inventory 4,600,027 13,830,631 137,412,596 132,766,877 29,848,656 27,845,164 171,861,279 174,442,672
Dividend payables
Immediate parent company 11,142,699 8,453,082 - 113,944,617 109,827,075 21,355,027 19,139,411
and others
Other 5,408,231 4,348,207 135,299,644 128,966,486
27. Finance income and costs by categories
4,600,027 13,830,631 137,412,596 132,766,877 29,848,656 27,845,164
171,861,279 174,442,672
Finance income and costs by categories for the year ended 31 December are as follows:
(4) Guarantees (In thousands of MNT) Carrying amount

24. Finance income and costs by categories
2016 2015
(i) The entire EBRD loan is guaranteed by Capital Group under the Financing Agreement dated 14
Loans and
Finance receivables
income and costs by categories for the year ended 31 December are as follows:
- Interest income (Note 20) 170,303 91,511
- (In thousands
Foreign of MNT)gains (losses), net
exchange Carrying amount (1,480,040)
(2,798,492)
December 2012 while the Credit Suisse loan is guaranteed by APU Trading LLC under the Facility 2016 2015
Agreement dated 25 February 2013. Loans and receivables
- Interest income (Note21)
- Interest expense (Note 20) 170,303
6,079,005 91,511
6,758,814
(ii) APU JSC and APU Trading LLC are referred to as Co - Borrowers in the EBRD loan agreement.
However, APU JSC and APU Trading LLC have agreed that APU JSC is responsible for this loan. - Foreign exchange gains
- Foreign exchange losses, net (losses), net (2,798,492)
23,688,787 (1,480,040)
8,009,477

- Interest expense (Note 21) 6,079,005 6,758,814
- Foreign exchange losses, net 23,688,787 8,009,477
100. APU Company Annual report 2016 45 46

48
APU Company Annual report 2016 101.
05. FINANCIAL STATEMENT 05. GLOSSARY
DEFINITION OF
25. Operating Segments
TERMINOLOGIES
Operating segment Key brands
Vodka Arkhi, Bolor, Eruul, Ulaanbaatar, Soyombo, Black Pearl, Altan Turuu, Chinggis
Khan, Alpha, Velvet, Eden, Taiga, Okhi Accounting period Other Financial assets
Beer Niislel, Borgio, Seruun, Altan Gobi, Fusion, Khar Khorin, Chinggis Khaan, The period on which the profit and loss of an entity This refers to savings with a 3-month to 1-year
Kaltenberg is being calculated. Generally, this refers to a year term as well as short-term investments.
Others Tsever Suu, Terelj, Selenge, Frutta, Orgiluun, Sain, Maamuu, Deej or a quarter.
Cash equivalent assets
Financial statement 1-3 month investments that can be convertible
26. Earnings per share Comprehensive financial statement includes bal- into cash and has minimal risks in terms f its val-
ance sheet, comprehensive income statement, ue change.
Basic earnings per share for the year ended 31 December 2016 are statement on changes in equity, cash flow state-
ment and notes to the financial statements. Cash method
calculated as follows: (i) Profit attributable to ordinary shareholders An accounting method that makes entries upon
Asset cash receipt or payments.
(In thousands) 2016 2015 Asset is something valuable that an entity owns,
Profit for the year 2,882,676 10,670,170 benefits from, or has use of, in generating income. Accrual basis, system, or method
Weighted-average number of ordinary shares outstanding 741,670 741,670 An accounting method that makes entries in rela-
Basic earnings per share 4 14 Intangible assets tion to the service performance and realises pay-
Intangible assets are long-term assets of an en- ments regardless of whether the actual payment
(ii) Weighted average number of ordinary shares tity that have no physical presese, but creates is made.
advantage to its owner such as patents, licenses,
(In thousands) 2016 2015 intellectual properties, trademarks, copyrights and Shareholders Equity
After share Before share
goodwill. Capital invested by the shareholders.
split split
Issued ordinary shares at January 1 742,877 74,288 Fixed assets Revaluation reserve
Effect of treasury shares held (1,207) (121) Fixed assets refer to assets that are expected to An increase in the account value of fixed assets
last with the owner for more than 1 year and is and tangible assets of an entity due to revaluation.
Weighted average number of ordinary shares 741,670 74,167
designed to be used in the business operation for
a long-term such as buildings, equipment and fur- Liabilities
On 22 April 2016 the Company split its ordinary shares, and one ordinary share became ten
niture. Fixed assets are not intended for sales. Payments due to others (individuals, comapnies
new ordinary shares. Earnings per share information of financial year 2015 has been
or government).
retrospectively adjusted to reflect the share split in 2016.
Noncurrent asset
Refers to the fixed assets. Long term Liabilities
27. Events after the reporting period
Refers to loans received from local or overseas
Current assets, Working capital sources and stakeholders that has a tenor of more
On 17 February 2017 the Board of Directors of the Company declared a dividend of MNT 1 per
Current assets are assets intended to be convert- than a year.
share which in total equals MNT 741,670 thousand.
ed into cash within a year. Current assets are de-
signed to be used in ensuring the business conti- Short term Liabilities
28. Translation into Mongolian language nuity of an entity. Refers to payments due within 12-month period.
These separate financial statements have been prepared in both English and Mongolian. In Prepaid expenses, Deferred charges Social security tax
the case of misunderstanding between versions, the report in English will prevail. Payments made prior to the receipt of services A tax imposed on the employers and employees in
order to finance the pensions and welfares grant-
Accounts receivable ed from the Social Insurance Fund.
Amount expected from the buyers or other stake-
holders in exchange of provision of servcies or Income statement
sales of products. A report that shows the income and expenses of
the company during certain intervals ( quarter,
year)
47
05. GLOSSARY
DEFINITION OF
TERMINOLOGIES
Sales revenue Net profit

An income generated from the sales of goods and An amount left from the revenue after the pay-
services during the reporting period. ment of all expenses and taxes.
COGS Effective tax rate

Cost of goods sold during the reporting period. A tax rate imposed in relation to the profit of the
company before tax
Profit
The monetary expression of an entitys operation Income tax
during certain period. A return on conducting a A tax imposed by the government on entities and
business and being imposed to certain risks. This individuals
is calculated by deducting all monetary and ab-
stract expenses from the total revenue. Cash flow statement
A statement that shows the changes in cash of an
Operating costs entity during the reporting period
Expenses incurred during the course of the busi-
ness. Free operating cash flow
Cash generated from main activities of an entity.
EBIT
Profit before tax and interest payments

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Mongolia,

MISSION OUR VALUES

Absolute, Pure, Unique Leader in human and social

Mongolias global brand

GREETINGS FROM THE GREETINGS

Chairman of the Board of Directors

BUSINESS IN BRIEF POLICIES AND ACCURACY OF OUR OPERATIONS.

2016 2015 Change %

Sales volume thous.liter 92,850 94,533 -2%

NET SALES REVENUES OPERATIONAL PROFIT NET PROFIT

Total assets mln.tug 291,070 305,672 -5%

Total owners equity mln.tug 143,185 145,494 -2%

mln.tug 90,420 90,790 0%

VAT mln.tug 19,119 19,274 -1%

Other mln.tug 17,422 14,599 19%

MONGOLIAN STATE EXCISE TAX VALUE ADDED TAX

Yearly electricity Food Annual salary

537,607 HOUSEHOLDS 44,188 HOUSEHOLDS 13,342 STAFFS

WHAT CAN BE DONE WITH TOTAL TAXES PAID BY

Providing better Mining Length of

74,420 STUDENTS 38,088 HE LAND 248 KM

Source: Government decree number 336, budget benchmark assessments,

FINANCIAL CUSTOMER AND

Efficiency at all levels for increased Maintaining sustainability through de-

BUSINESS PROCESS-ORIENTED HUMAN RESOURCE AND

Adopting a unified time saving, low- Increasing productivity through an enabling

We aim to use global advanced technologies, SALES Resource consumption

MILK BUSINESS UNIT BEER BUSINESS UNIT

VODKA BUSINESS UNIT SOFT DRINK BUSINESS UNIT

APU company is the first Mongolian company that

2016 NEW BRANDS 2016 REFRESHED BRANDS:

EDEN VELVET ARKHI NIISLEL ULAANBAATAR BOLOR LIMITED EDITION

Fat: 2.5%, Packing: 0.2 l

* Detailed survey on securities holders as of March 9, 2017 by MCSD.

CORPORATE GOVERNANCE SHARE

1. Insider trading regulations

The Program is being implemented as scheduled.

/Share split reflected/

APU Company strives to take a holistic 1 2 3 4 5

SUSTAINABILITY FINANCE AND ECONOMY PEOPLE AND SOCIETY

FINANCE AND ECONOMY

HUMAN RESOURCE AND DEVELOPMENT

ENERGY EFFICIENCY HUMAN RESOURCE POLICY IMPLEMENTATION

OCCUPATIONAL HEALTH AND SAFETY

Success and attitude Water to be treasured:

Campaign for good idea

HUMAN DEVELOPMENT SOCIETY

Mongols with Deel event

Traffic safety promotion

FC ULAANBAATAR Football team World milk day

POSITIVE MIND International horse-head fiddle festival

Rio medalist D.OTGONDALAI

TOP-100 Company ASIAN ENERGY EFFICIENT

THE BEST ANNUAL REPORTING

CATHAY PACIFIC HONG KONG INTERNATIONAL ALUFOIL TROPHY-2016

INDEPENDENT AUDITORS REPORT

Share capital 12 74,167 74,167 Earnings per share

Long-term loans and borrowings 13,21 70,117,592 88,080,211

Short-term loans and borrowings 13,21 39,742,390 31,863,450

Separate Statement of Changes in Equity Separate Statement of Cash Flows

Cash flows from operating activities

Total comprehensive income:

Changes in assets and liabilities: