2015 Annual Report

Annual Report
2015
2015
Annual report
2015 Annual Report
Annual Report
2015
CONTENTS
OVERVIEW of company
4-21
BUSINESS OPERATIONS
22-38
CORPORATE GOVERNANCE
39-50
SUSTAINABILITY
51-59
FINANCIAL REPORTING
60-68
Our mission and values

Letter from the Chairman of Board of Directors
Letter from the Chief Executive Officer
Summary of Performance
Strategy
Markets and current situation
Operations
New and renewed brands
Corporate Governance
Board of Directors
Share Information
Dividend Policy
Executive Management Team
Awards and Recognitions
Sustainable Policy
Activities
Risk Management
Financial Report

GLOSSARY
69-70
2015 Annual Report
OUR mission
By producing superior products
that celebrate natural richness, APU
contributes to the enhancement of
Mongolias future prosperity, and its
place on the world stage.
Annual Report
2015
OUR
VALUES
Entrepreneurial spirit
We champion teamwork, collaboration
and creativity at all levels, encouraging
and rewarding 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
communities we work with.
Integrity
We uphold the virtues of honesty and
moral discipline in everything we do,
embracing our responsibility to preserve
Mongolias natural richness and drive
higher standards in economic, social
and environmental development.
2015 Annual Report
Annual Report
historical
highlights
What is now called APU

Company, was established as the first alcohol
distillery in Mongolia.
A fully mechanized line

was installed at the
plant, raising production
capacity to 3000 bottles
per hour.
The company ventured into

beer production with guidance from expert brewers
from Czechoslovakia.
To commemorate the
50th anniversary of the
Peoples Revolution, the
factory was awarded
the State Honorary
Certificate, for outstanding management of
production, and service
delivery.
The plant was officially

named Vodka and Beer
Plant of Ulaanbaatar by
the Council of Ministers
of the Peoples Republic
of Mongolia.
New bottling facilities were

installed and the plant
began producing soft drinks
and bottled mineral water
sourced from Janchivlan
Spa.
Construction of the new

integrated vodka and beer
plant was completed. To
celebrate, the Niislel beer
brand was launched, a
refreshing new lager beer.
A major equipment
update program was
completed, raising the
brewerys annual production capacity to 20 million
liters, and placing APU at
the leading edge of beer
production.
Two new premium beer
brands Khar Khorum
and Altan Gobi, and a
new vodka brand Eruul
were launched.
APU Company enters

the dairy business, introducing the Tsever Suu
(Pure Milk) dairy brand to
Mongolian consumers.
The company was partially privatized, and the

name APU was formally
adopted (reflecting the
Mongolian name Spirits
Beer Beverages).
The plant received numerous awards recognising the

quality of both its products
and business conduct.
To commemorate the first
Mongolian in space, APU
Company launched a new
premium vodka Bolor.
The State sold its

remaining shares in APU,
transferring the company
to full private ownership.
Shunkhlai Group became
the majority shareholder.
The installation of
state-of-the-art bottling
equipment at the distillery
raised soft drink and water production capacity to
5 million liters per year.
The construction of a
new automated distillery,
capable of producing
15,000 liters of premium-grade spirit a day, was
completed. In order to
fulfill the growing demand
for juices, APU Company
launched Frutta juice
brand to Mongolian
consumers. Fusion beer
brand was also introduced to the Mongolian
market.
Soyombo super-premium vodka brand was

launched, adding the
first alpha spirit to APU
Companys portfolio.
2015
A dedicated dairy plant

opened at APU Companys premises, setting a
new standard of excellence for the Mongolian
dairy market.
APU celebrated its 90th
Anniversary.
The construction of a
new, leading-edge brewery facility was completed
in just 15 months, and
the fully automated APU
Logistics Center began
operations, setting APU
Companys logistics and
warehousing facilities at
the forefront of global
standards. Orgiluun, the
first carbonated water
to be sourced and produced in Mongolia was
launched, and the Borgio
beer brand was updated
and refreshed.
2015 Annual Report
Annual Report
2015
our
vision
ABSOLUTE.
Fiduciary duties and responsibilities
. .
Absolute. Pure. Unique
Leader in human and social development.
Educating the market and our partners in

our mission.
Financial stability, transparency and

sustainable performance.
The most wanted employer in Mongolia.
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.
2015 Annual Report
Annual Report
2015 was a year that solidified the leading status of our

products as well as our reliability to our customer and
skilled employees who united under the ABSOLUTE,
PURE, AND UNIQUE motto. In the face of continuing
economic challenges faced by the country, our main
goal is to meet our promise to the shareholders, customers, clients, partners and employees alike.
nies listed on the Mongolian Stock Exchange. Furthermore, we hope that you will enthusiastically support our
share split proposal for 10-for-1 ratio in order to meet
the share demand and increase turnover in the stock
market. This proposal will undoubtedly bring an increase
to our market values and boost sales of shares, which
brings positive benefits to our shareholders.
Thanks to our comprehensive brand policy and human-centered sustainable development strategy that
fosters ongoing enhancement of production system to
enable high-efficiency, low-cost and environmentally
friendly approaches, APU company brought positive performance outcomes in our financials in 2015.
The forecast for 2016 indicates persistance of economic

hurdles that may bring several challenges to APU company, so that we will work to find major strategic solutions that bring effective outcomes to ensure socially
responsible and stable business operations.
The decision of Board of Directors to distribute MNT

70 dividend for each share was a continuation of our
long-standing history that demonstrate most stable
and growth-leveraged performance among the compa-
LETTER FROM THE

BOARD OF DIRECTORS,
CHAIRMAN
10
2015
Taking this opportunity, I would like to extend my warmest gratitude toward the esteemed shareholders, loyal
customers and responsible staff who have been continiously supporting the efforts of APU company.
P. BATSAIKHAN
THE BOARD OF DIRECTORS, CHAIRMAN
APU company
11
2015 Annual Report
Annual Report
Greetings to all of our esteemed shareholders, customers, partners and employees!
banking and financial institutions while making MNT 4.5

billion investment into our production.
In 2015, APU company, a pioneer of Mongolian production industry, embarked on another successful year
highlighted with expansion of activities and inspirit of
our success, which solidifies our leading status in the
market and contributes to the overall economy of the
country, thanks to the commitment and endeavors of
our 800 employees.
In line with the rebranding of our image and philosophy

as Absolute Pure Unique, APU company has identified:
In the face of economic slowdown and shrinkage in consumption in Mongolia, APU company was able to maintain its stability and corporate social responsibility by
taking food safety and commitment to our employees as
priority and introducing new innovations and initiatives
to production.
LETTER FROM THE CHIEF

EXECUTIVE OFFICER
2015
As a result, we produced 94 million liters of 116 different

products and made MNT 327 billion in sales and MNT
11.2 billion in net profits while paying MNT 124 billion tax
to the state budget through introduction of new brands
such as Deej, Seruun and Alpha as well as enhancement
and extension of our existing product lines such as Sain,
Bolor, Orgiluun and ARKHI. The price of our single share
at the end of the year was increased by 4% comparing to
the price at the beginning of 2015. Moreover, our company made USD 19.7 million repayment to international
Maintenance of fiduciary duties

Adherence to ethical standards
Assurance of quality and safety in each products as our
guiding vision.
Therefore, array of activities to increase the satisfaction
and productivity of our employees and make positive
outcome in the society has been planned and carried
out.
In 2016, APU company has put forward a goal to produce
more than 150 different products in 104 million liters to
supply the domestic and overseas markets and to generate MNT 351 billion in sales based on the personnel
base of 873 employees.
Furthermore, USD 16 million repayment on loans from
local and international banks and financial institutions is
planned along with maintenance of our business continuity and sustainability through some austerity measures in line with our operational strategy.
TS. ERDENEBILEG
CHIEF EXECUTIVE OFFICER OF APU company
12
13
2015 Annual Report
Annual Report
2015
2015
PERFORMANCE
SUMMARY
14
15
2015 Annual Report
Annual Report
PERFORMANCE
SUMMARY
2015 PERFORMANCE IS INDICATIVE OF OUR EFFECTIVE STRATEGY,

OPERATION AND POLICIES.
INCOME STATEMENT
Net sales income
Operational profit
Net profit
NET SALES INCOME

(Million, liters)
2015
210,111
2014
2012
2011
90,606
169,522
141,345
2011
27,258
11,187
20,412
32,171
2011
29,989
SKU
116
2015
116
2014
107
2013
2012
2011
2015
(14,174)
6,233
2013
2012
27,258
94

83
79
Income tax
VAT
Other
Total
Project investment
Operational investment
Total
2014
4,042
2012
MNT.million
MNT.million
MNT.million
MNT.million
MNT.million
2014
VARIATIONS
210,111
27,258
11,187
198,469
6,233
(14,174)
6%
337%
-179%
307,662
161,545
146,117
307,662
337,424
205,867
131,556
337,424
-9%
-22%
11%
-9%
MNT.million
MNT.million
40,324
(4,486)
(39,022)
(3,184)
17,591
(19,190)
(17,290)
(18,888)
129%
-77%
126%
-83%
MNT.million
MNT.million
MNT.million
MNT.million
90,790
19,274
14,599
124,662
123,023
17,279
9,006
149,308
-26%
12%
62%
-17%
MNT.million
4,160
326
4,486
27,198
752
27,950
-85%
-57%
-84%
INVESTMENT
11,187
2013
MNT.million
2015
TAX PAYMENT
NET PROFIT
(MNT, million)
2014
82,262
72,663
(MNT, million)
2015
Net cash flow of operations

Net cash flow of investment activities
Net cash flow of financial activities
Total net cash flow
94,912
2012
MNT.million
CASH FLOW
98,862
2013
OPERATIONAL PROFIT
16
90,606
Total assets
Total liabilities
Total equities
Total equities and liabilities
2014
193,716

BALANCE SHEET
2015
198,469
2013
SALES VOLUME
(Million, liters)
210,111
2015
23,456
MNT.million
MNT.million
MNT.million
613
TOTAL NUMBER OF EMPLOYEES
As of December, the state budget of Mongolia stood at MNT 5.9 trillion, of which MNT 5.1 trillion was tax income. MNT 1.2 trillion of the
total tax income was collected from excise tax. APU JSC provided
2% of the tax income and 15% OF THE EXCISE TAX income to the
state budget.
883
TAX PAYMENT
2011
2011
20,078
2015
883
2014
953
2013
2012
2011
998

897
Corporate Social Responsibility is an obligation by any business to

contribute in a sustainable economy in order to improve the lives
of employee, their families and the communities through positive
changes to the environment and the business. APU JSC has paid
MNT 613 BILLION to the state budget in the LAST 5 YEARS.
BILLION MNT
2012
79
95
2013
165
2014
2015
149
125
Ministry of Finance, Fiscal Summary of December 2015
794
17
2015 Annual Report
Annual Report
PROJECT INVESTMENT
2015
PROJECT INVESTMENT
NEW BREWERY
LOGISTICS CENTER
TOTAL INVESTMENT
MNT 30 BILLION
CAPACITY
AREA 3,000 2
TOTAL INVESTMENT
MNT 48.7 BILLION
CAPACITY
45-50 MILLION LITERS
EQUIPMENT
KRONES AG, GERMANY
TOTAL WORKFORCE:
1000
Our brewery was carried out through the New Brewery project launched in 2012 as 48.7 billion MNT investment. The
project was completed on August, 2013 with a construction
of fully automated brewery with cutting-edge technology and
equipment from KRONES, a leading global producer of technology in beverage and food industry.
As project outcome, capacity and SKU of our company has
increased and production has become more environmentally-friendly: Reduction of energy, water and steam consumption and proper waste management policy
As the economy grows rapidly and consumer capacity rises, APU company has been expanding our business in relation to the market and
consumer demand. To meet the increasing demand for production and
sales that require proper storage facility for each product characteristics, we started a Fully-automated Logistics Center project in 2012. The
project was completed in 2013 and introduced a cutting-edge technology and software that is incorporated into the sales system. This project
brought a new milestone into the food safety practice of Mongolia. This
project was invested 30 billion MNT. As project outcome, the storage
facility customized for the characteristics of each product and ability to
take orders by online.
VOLUME
96,000 3
SHELVES
11 STOREY
CRANES
3
EQUIPMENT
KRONES AG, GERMANY
TOTAL WORKFORCE:
796
18
19
2015 Annual Report
Annual Report
2015
corporate
identity
PROJECT INVESTMENT
NEW DAIRY PLANT

TOTAL INVESTMENT
MNT 45,6 BILLION
TOTAL OF
45 MILLION LITERS PER
YEAR
EQUIPMENT
TETRA PAK, SWEDEN
ECOLEAN 1, SWEDEN
ECOLEAN 4, SWEDEN
ELO PAK
CUPFILLER
GEA, GERMANY
On our 90th year anniversary, we replaced the illustration of our name APU, which stood
for Vodka, Beer and Soft Drinks, with Absolute. Pure. Unique. This rebranding strategy expresses the company values as Absolute represents fudiciary duties and responsibilities,
Pure signifies products, culture and beliefs while Unique demonstrates ethical conduct
and environment. Therefore, Absolute. Pure.Unique is the guiding principle that ensures
APU company is providing new and quality products to our customers.
TOTAL WORKFORCE:
822
In response to the stable increase in demand for dairy

products and juice in Capital city of Mongolia, APU
company made an investment to build a plant in 2014.
The construction of fully automated dairy factory was
established by European Union milk processing factory standards with cutting-edge technology and processing equipment from GEA, Germany, leading global producer of technology in dairy factory, Tetra Pak,
Ecolean filling line, Sweden and Elopak, EHEDG, Japan.
20
Our company produces liquid milk complying fully

with hygienic by a cow milk in Mongolia therefore we
complied ISO 22000 Standard for Food Safety Management. As well as dairy factory engage in multilateral operations according to the global standard for
example purchases milk from local farms as steady
price, supports farms by fodder and equipment and
organizes training for farm.
21
2015 Annual Report
BUSINESS
OPERATION
Annual Report
2015
STRATEGY
In 2015 following areas were identified as priority.
INCREASING THE RETURN

ON INVESTMENT
MAINTAINING AN EFFECTIVE
RATIO OF MARKET SHARE
STANDARDIZATION OF
BUSINESS PROCESS
INFORMATION FLOW
In line with the above goals, the following strategies were adhered.
FINANCIAL STRATEGY
Austerity strategy at all levels of operation to increase profitability.

Sales income increase strategy through
maintenance and/or boosting of the
market share
Identifying comprehensive brand policy

and monitoring the implementation
thereafter to ensure sustainability.
Strategy to effectively promote the
brands to end customers using the
brand policy papers and multi-version
marketing techniques.
BUSINESS PROCESS STRATEGY
HUMAN RESOURCES STRATEGY
Promoting environmentally-friendly
production through reduction of clean
water and electricity consumption. This
water re-use system also reduces the
cost of utilities.
Promoting leadership at all levels of

management strata while improving
active participation and effectiveness of
information flow.
Strategy to introduce cost and time-efficient comprehensive production system

using process-based management
structure.
22
CUSTOMER AND MARKETING

STRATEGY
Creating a positive work environment

that impacts productivity and corporate psychology. Provision of internal
and outside training opportunities to
improve productivity.
23
2015 Annual Report
Markets and current situation

DAIRY PRODUCT
MARKET
Annual Report
BRAND DEVELOPMENT
AND INNOVATION
APU JSC pays special attention to its brand and product development through the partnership network with leading
producers in the world. The company is working to bring innovation that delivers latest technological advancements
and product solutions. Our goal is to develop the product that creates satisfaction to the customers both in terms of
its appearance and taste and loyalty.
SAIN
Sain brand, introduced in 2014, consists of 6 products

with short shelf life including milk, bifido yogurt, apricot yogurt, berry yogurt and sour cream. The products
of Sain brand use ecolean packaging method with the
least ecological footprints, which serves as one of the
companys corporate social responsibility measures. In
2015, we added more varieties such as cherry, multifruit
and black currant, into the yogurt product line while introducing bowl packaging for convenient usage at anytime and anywhere. The yogurt is not only delicious, but
also offers health benefits. Therefore, it is widely used
in western cultures as breakfast or after-meal snack.
Currently, Sain brand has become one of the well-established brands in Mongolia with extensive variety of
products. Mongolian National Chamber of Commerce
and Industry recognised Sain brand as a Product with
the Best Packaging.
MAAMUU
Dairy Product Market
62% of the overall dairy output is produced in countries with larger population such as EU and USA.
EU countries make up 18% of the global dairy output while USA takes up 12%, India 8%, China 5%, Russia and
Brazil respectively making up 4%.
The market for factory-processed dairy products has demonstrated an average growth of 15 percent per
year in years 2009-2014. Sales performance in 2015 has seen no significant changes compared to 2014
performance.
The introduction of Tsever Suu (Pure Milk) brand into the market in 2006 and the opening of a dairy plant in
2014 made APU company as one of the company with major investment, know-how, international practices
and standards into the dairy market. APU company make up 19% of the Mongolian dairy output.
24
2015
Maamuu is the first brand in Mongolia that is specifically designed for children. In 1970s, APU company
was producing carrot juice using Maamuu brand title.
Though the production of Maamuu juice did not last
due to lack of proper transportations and logistics system, APU re-branded the old Maamuu into a new era in
2014, producing milk, juice and yogurt beneficial to the
childrens growth. Since then, Maamuu has become one
of the sought-after brands among parents as the product contains calcium, which is crucial to the childrens
growth as well as bone and teeth health. Whats more,
the product has the least amount of sugar content besides being produced from the best quality milk and jam.
The illustrations on Maamuu products depict traditional designs and have contents with educational benefits.
Thus, our company is disseminating information through
its numerius marketign campigns that can have positive
impact on a childs upbringing and education.
DEEJ
Deej was introduced in October 2015 and has become a

brand known for its taste and convenient packing. Under
the Deej brand, APU Company is producing pasteurized
milk and yogurts. The advantages of the product include
packing of pure cow milk in an easy-to-open packaging
that protects from spillage. The yogurt has no sugar and
low-fat content with rich creamy taste. Therefore, it has
become popular among women and healthy-savvy customers.
TSEVER SUU (PURE MILK)
Tsever Suu, introduced in 2006, is one of the leading

brands with loyal customer base.
For Mongolians,
who prefer whole milk, Tsever Suu is very suitable for
cooking traditional tea and meals. Tsever Suu is produced through processing of high-quality milk at Ultra
High Temperature of 130 degrees before being packed
in world-renown tetrapak packaging. Recently, the consumption of coffee is growing and has become part of
the busy lifestyles of Mongolians. Well-known baristas
choose Tsever Suu as their go-to milk for latte and
cappuccino coffees. Besides its unparalleled quality and
brand positioning, Tsever Suu is distributed in all the 21
provinces, so that it can be purchased at any parts of the
country.
25
2015 Annual Report
BEER
MARKET
Annual Report
BRAND DEVELOPMENT AND

INNOVATION
APU JSC, as a leader in the market, always makes sure that it is keeping pace with the world trends and works
in partnership with the leading producers in the world to lead the way for consumption and introduction of the
latest innovations into the Mongolian soil. Our goal is to make sure that our products are the best in quality and
appearance that meets customer taste.
BORGIO
The pioneer of Mongolian beer history, Borgio was
first produced in 1927 and found its current name
Borgio in 1940s. This brand, being produced using
German brewery technology, is a representation of
classic lager beers and provides delicate yet crispy
refreshing taste of hops and malt. Not only favored
among Mongolian consumer, Borgio was awarded as
the Best Lager Beer at World Beer Awards in 2011.
Borgio 5.5%
SERUUN
Seruun Light Meeting the demands of the new

generation of light beer lovers, incorporating the essence of TRUE LIGHT beer, Seruun has been produced since May 2015. Seruun brand is produced
using the state-of-the-art cold filtration technology
made available by New Brewery Expansion project, a
major investment of 2013. As a result, Seruun offers a
refreshing smooth taste. The brand was developed
in response to the customer expectations and offers
array of packaging. It has become one of the favorites
of light beer lovers Seruun 4.8%
Beer Market
The beer market saw 2% increase in 2015 due to socio-economic changes and consumer trends. In 2014,
188.81 billion liters of beer was sold in 2014 while this was increased by 2% to reach 192.6 billion liters in
2015 .
The consumption in Asia and Pacific grew significantly and makes up 34.8% of the overall market followed
by Europe 27%, Latin America 16.2%, North America 13.9%, Africa 6.4% and other regions 1.8% .
The rapid growth in the capacity, product development, maketing and PR of domestic beer breweries are
creating intense competition year after year. The trend in early 2000, which saw imported beers playing
major roles in the domestic market, is reversed as of 2015.
As the competition intensifies among the domestic breweries that brings increased quality in the products,
the room for overseas brands and importers are continiously shrinking. The market share for imported beers
are decreasing for over 10 years and takes up only 16% in 2015. This is expected to go even lower. The
launch of new brewery by APU company in 2013 that has a capacity to produce 90 million liters per year
has brought the domestic production capacity above the market capacity. In other words, the capacity of
domestic brewery production is able to supply the market demand in full. Today APU company make up 55%
of domestic beer market.
26
2015
GOLDEN GOBI
This iconic beer, named after the largest desert region

in the country, has been produced since 2003 as the
first premium beer in Mongolia. The brand was first
introduced with an intention to supply premium quality beer that was brewed in accordance with the Beer
Purity Law with no additives to increase its shelf life
since imported beers took majority stance at the Mongolian beer market at that time. Representing classic
Pilsner beers, Golden Gobi has established itself as a
first premium beer in Mongolia. Golden Gobi 5.1%
NIISLEL
Representing the metropolitan culture since 1972,

Niislel was originally named as Niisleliin Pivo or
Capital City Beer. The brand was renewed in 2010
to continue its long-standing tradition with modern
taste. Brewed in combination with modern and classic
German technology, Niislel delivers a fresh metropolitan taste to not only the urban population, but also
Mongolians throughout the country. Niislel 5.0%
KHAR KHORUM
KALTENBERG
Kaltenberg brand, brewed by an ancient Bavarian secret recipe, was introduced to the market in 2013. It
is the first-ever locally bootled beer made from wheat.
All the other beers have been produced using barley. Therefore, Kaltenberg provides distinct aroma of
cloves and banana with soft and sparkling taste. The
beer is brewed in accordance with German Purity Law
and has already become the favorite of our customers. Kaltenberg 5.5%
Named after the ancient capital city, Khar Khorum

was introduced in 2003 as the first dark beer in Mongolia. Brewed in Dunkel style, the beer carries a powerful aroma of roasted malt and rich bread-like malt
flavor. This beer is a true representation of classic
dark beers. Khar Khorum 5.3%
Hops & Malt

Bringing reforms to the draft beer market of Mongolia,
Hops & Malt is offered at major local restaurants and
pubs. This brand has redefined the standards for draft
beer. Hops & Malt 5.0%
27
2015 Annual Report
VODKA
MARKET
Annual Report
2015
BRAND DEVELOPMENT
AND INNOVATION
Our brand development and innovation strategy focuses on creating brands that customize
the world standards, equipment and technology into the Mongolian soil to meet demands and
consumption characteristics of
local customers. We take measures in response to the consumer demands such as reducing the alcohol content while purchasing the raw
materials such as wheat and various plants grown on Mongolian soil
exclusively from local farmers.
Bolor, Arkhi, Ulaanbaatar and Altanturuu brands have been developed
in relation to the customer characteristics and consumption trend.
Not only those brands are supplied to the local consumers, but also
exported to more than 10 countries including Great Britain, USA, Russia and China.
In 2015, the company made an investment to upgrade the closure
systems of the vodka bottles in order to bring cutting-edge technology with tamper-evident technology to ensure food safety and quality
assurance. As a result, APU company concluded an exclusive supply
agreement with Guala Closures Group, a global market leader in aluminum and non-refillable closures , for 3 years.
Vodka Market
Due to economic and political instability and shift in consumption, the world vodka market is facing a sluggish outlook. In 2015, 4,480 million liters of vodka was sold, which is 0.1% increase against 2014 performance. The largest increase occured in Asia and Pacific region with 3.6% followed by North and South
America at 1.5%, Africa and Middle East 0.8% and Europe with -0.7% decrease. The decrease in Europe was
caused by consumtion drop in Eastern Europe, especially Russia.
Mongolian market was not an exception to the international market trend. In 2015, the consumption of vodka dropped by 9% compared against the 2014 statistics. During the past 3 years (2013-2015), the decrease
was 10.5% on average.
28
29
2015 Annual Report
SOFT
DRINKS
MARKET
Annual Report
BRAND
DEVELOMENT
AND INNOVATION
2015
Terelj and Selenge brands are wellknown to the customers for its rejuvenating and stimulating effects. The drinks
are unique for their infusion of all natural
ingredients and natural artesian water.
The ingredients include wild thyme, eglantine and rhodia roots.
SOFT DRINKS
MARKET
The global soft drinks market is
expanding by 4.7% per year and
expected to reach 706,9 billion
liters by 2018. Although, 34.7 of
the soft drinks market is composed of carbonated drinks, the
biggest growth is occuring in
the sales of bottled water, sports
and functional drinks and energy
drinks.
ORGILUUN
The consumption of soft drinks

drastically changes in relation to
the seasonal changes in Mongolia, a country with extreme
climate pendulum.
Terelj carbonated drink is beneficial to the

functions of digestive system and the kidneys. Produced since 1981, Terelj is known
as Mongolian Coke among our loyal customers.
APU company supplies 17 different products into the soft drinks

market including Terelj, Selenge,
Orgiluun, Frutta and APU Pure
Water.
SELENGE
30
Orgiluun is a mineral rich brand as it contains compounds such as calcium ions, sulfate ions, potassium ions, and magnesium
ions that supply daily needs of minerals.
Made from natural pure water, this sparkling
drink that has a strong thirst quenching effect.
TERELJ
With natural ingredients such as rosehip, thyme, sweet grass and pine needles,
Selenge also prvides health benefits including improvement of respiratory system and
blood circulation. This natural drink with no
chemical ingredients was first introduced in
1981.
31
2015 Annual Report
Annual Report
NEW AND RENEWED

BRANDS IN 2015
NEW AND RENEWED

BRANDS IN 2015
NEW BRANDS
LINE EXTENSIONs
DEEJ
Combining the cutting-edge technology with traditional dairy-making

methods, Deej brand was offers
unique quality and taste.
Package: 1 l
Varieties: Milk 3.5%, yogurt 1.5%
SERUUN
Meeting the demands of new

generation light beer lovers and
using state-of-the-art cold filtration
technology, Seruun delivers a clean
smooth taste.
Alcohol content: 4.8%
Package: 0.5 bottle, 0.33, 0.45 can,
2.5 l PET
2015
ALPHA
Silver and diamond filtration was

used in addition to the standard
filtration to make this product even
more finer in taste.
Alcohol content: 38%
Package: 0.75l, 0.5 l
BOLOR ICE, BOLOR MINT
ORGILUUN
SAIN YOGURT
SOUR CREAM
Bolor ICE with fine taste and Bolor Mint with

refreshing mint taste was launched to the
market under new and unique packaging.
Inaddition, Bolor is offered in 1-liter bottles.
Alcohol content: 39.5%
Package: 1l, 0.75l
Orgiluun, the first Mongolian carbonated

water, added more varieties and is offered
in 5 different tastes.
Package: 0.33 can, 0.5 PET bottles
Varieties: Classic, lemon, forest berries,
grapefruit and watermelon
RENEWED BRANDS
ARKHI SILVER
New version of the ARKHI brand with

lower alcohol content (35%) was
offered to the market with 0.75 l and 0.5
l packaging.
Alcohol content: 35%
Package: 0.5l, 0.75l
32
GOLDEN GOBI
Named after the largest desert region in

Mongolia, Golden Gobi is the first premium
pilsner beer in the country. The label and
packaging of the beer was renewed in
2015.
Alcohol content: 5,1%
Package: 0.45 bottle, 0.45 can
Sain Fruit Yogurt, a nutritious product with

health benefits, was offered in 6 different fruit
tastes and two different packaging forms.
Package: 150gr
Varieties: Strawberry, apricot, forest berries,
multi-fruit, cherry and balck currant)
Sain Sour Cream, rich in , , E, PP, B2, and

B12 vitamins, are offered in 150 gr and 350
gr bowl packages with 20% fat.
Package: 150gr, 350gr
Fat: 20%
33
2015 Annual Report
ISO 22000
ISO 14001
Annual Report
2015
Quality
Assurance
We include testing, sampling and assurance on our products at all stages of the manufacturing and distribution
process, starting from the design stage. Our accredited
laboratory operates in compliance with all applicable international standards, regulations and norms as well as
ISO/IEC 17025 standard. Thus, various tests including
microbiological and physical-chemical analysis and sensory testing is performed on the main and supplemental
raw materials and end products to ensure quality at each
stages of production.
Each of our 3 main laboratories are fully equipped with
cutting-edge and nano technologies, which comply with
ISO/IEC 17025:2007 Standard for general requirements
for the competence of testing and calibration laboratories,
from leading producers in USA, Germany, Austria, Korea
and Russia.
APU company became the first domestic producer to be certified under ISO 9001 Quality Management Systems, ISO 14001 Standard for Environmental Management and ISO 22000, FSSC
22000 Standard for Food Safety Management Systems at once.
Pursuant to the Mongolian Law on Food Safety, the term FOOD is defined as raw materials,
intermediate products, foodstuff, beverages and drinking water that provide necessary nourishment to a persons body, growth and development. Since food is the primary and most
important need for people, it is the utmost responsibility and honor for us, the food producers,
to ensure safety in all parts of the food value chain. Recently, the competitive edge is gained
not through the numbers but the quality and reliability of the products. The main benchmark for
food producers to assure such quality is the ISO 22000, and ISO 14001 group standards. APU
company ensures environmentally-friendly production and food safety in all of its processes,
starting from the procurement of raw materials to manufacturing, transportation, storage and
delivery to retails outlets. The process is further certified by SGS, a globally renowned assurance company, on annual basis.
34
APU Company follows the policy of quality

and food safety in our operation
Our company prefers to
provide laws and customers demand as complying
fully with Food safety by
100 percent and its high
quality and standard
Our company adheres

to FSSC 22000:2010,
ISO 9001:2008, and ISO
14001:2004 standards
at all levels of production
processes and makes
ongoing improvements.
Our company aims to be

leading Beverage Company as improving investment for human resource
and its development and
technology.
Our company assurances

the result that monitoring
Food safety and guilty
assurance by internal and
external audit.
35
2015 Annual Report
Annual Report
2015
OPERATIONS
21 provinces
283 soums in Mongolia
Export- 8 countries
Local 109
International 37
SUPPLIERS
R&D
We aim to meet market demand
research and development as
research global high technology,
know-how, global trends and
innovation then apply it for our
company by Mongolian talented
employees and engineers.
36
Our operation is covering not only

Mongolia but also international as
increasing day by day. We comply
with sustainable operation
meanwhile implementing
international standards such as
FSSC 22000:2010, ISO 9001:2008.
Partnering with over 140 local and
international suppliers, we offer
safe and high-quality products to
our customers. We aspire toward
renovation and product quality in
ongoing basis while selecting the
most environmentally-concious
packing solutions, which is incorporated into our procurement
policies.
SKU 116
Production
Our company keeps food safety
control with high quality for every
stage of companys process such
as raw materials, production
processes, storage of end products,
and services. We produce 116 SKU
for our customers with high quality
products by meeting consumers
demand.
DISTRIBUTION
NETWORK
The storage introduced a
cutting-edge technology and
software that customized for the
characteristics of each product. It
is a fully-automated Logistics
Center with 11 shelves and 96000
meter squire capacity. Using this
construction we export our
products to 8 countries such as
United States, Canada, Korea and
Hong Kong. We deliver our
products through the extensive
distribution network that covers 21
provinces and 283 soums while
ensuring product quality to the end
customers.
CUSTOMERS
Wholesalers and
retailers 7000
SALES
We prefer to promote responsible
drinking to consumers. We carry
out our sales in accordance with
international and national law
through more than 7000 wholesale
and retail stores. Our priority is to
ensure responsible consumption
and socially responsible entrepreneurship.
37
2015 Annual Report
Partnesrs
38
Annual Report
2015
CORPORATE
GOVERNANCE
39
2015 Annual Report
Annual Report
CORPORATE
GOVERNANCE
BOARD OF DIRECTORS
STRUCTURE AND IMPLEMENTATION
ETHICS PRINCIPLES
GENERAL OVERVIEW
APU company is an open, joint-stock company registered at the Mongolian Stock Exchange. The company is one of the TOP-20 companies at the stock
exchange.
The ethics principles of APU company includes ethics

of the company, ethics of the management and ethics
of the producers, which are defined in policy papers
such as the Environmental Policy, Food Safety Policy
and Internal Labour Procedure. Those policies are developed to ensure compliance with local regulations
as well as best international practices.
The Board of Directors (BoD) of APU company comprises of 9 members, who are responsible to provide control
and oversight on the company on behalf of the shareholders. Upon carrying out its function, BoD takes the interests of the Company, its stakeholders and shareholders, as a guiding principle.
The management of the company comprises of 9

members including the Board of Directors and Executive Management Team, headed by the Chief
Executive Officer. The Board of Directors represents
the governing body of the Company, the Shareholders Meeting, and provides oversight on the Executive
Management while reporting to the Shareholders
Meeting.
APU company, is subject to Company Law of Mongolia and other relevant legislations as well as Corporate
Governance Codes (revised version dated May 2014)
and is working to ensure the compliance thereunder.
40
2015
The following matters serve as the foundation to the

ethical principles of APU company:
1.
Compliance with laws and regulations: Abidance

to law is the fundamental principle.
2.
Conflict of interest: Identification of conflict of

interest on the management or employees, enabling open disclosures, and ensuring proper
and effective operation of the company.
3.
Confidentiality: Information integrity shall be

properly ensured in accordance with law.
4.
Fair competition: Aspiring toward fair competition.
BoD has a function to identify and ensure compliance of the business strategy of the Company, while ensuring
effectiveness of internal audit and risk management structure as well as corporate social responsibility measures, compliance of financial and accounting structure with relevant laws, and protection of interests of the
shareholders.
The Board of Directors review and discuss the business strategy as well as risk management, internal audit, and
accounting operations at least once a year and makes relevant decisions.
The delegation of authorities within the BoD was defined in the relevant operational guidelines and placed on the
corporate website of the Company.
Decisions such as appointment, re-appointment and dismissal of the board members are made by the Shareholders Meeting. Board of Directors are appointed for 3-year tenor with potential re-appointment.
The day-to-day operations of the Board of Directors are handled by the Board Secretary who oversees the activities of Board Secretariat. Board Secretary is an official who has powers to directly deal with corporate governance realted matters.
41
2015 Annual Report
Annual Report
2015
MEMBERS
The Board of Directors consist of 9 members, 3 of which are independent
Batsaikhan Purev (Chairman of the Board)
Batchimeg Purev
Batbayar Burentogtokh
Sergey Gromov
Hugo Barrett
Kharon Khamkhoev
Alexander Sivaev (Independent Member)
Unenbat Jigjid (Independent Member)
Erdene Sosorbaram (Independent Member)
S. Gromov
Educational background in Engineering
1992-1994: Manager at Raznoimport LLC of Russia
1994-2000: London Branch Manager of Trans-World Aluminum Company
2001-Present: Chairman of Board of Directors of Chingis Khaan Bank
2013-Present: Board Member of APU company
Bakcgrounds of the Board of Directors
42
P.Batsaikhan
H. Barret
Educational background in Engineering.

1993-1996: CEO of Shunkhlai LLC
1997-2008: CEO of Shunkhlai Group
2002-2004: Chairman of Board of Directors of APU company
2004-2008: CEO of APU company
2008-Present: President of Shunkhlai Group and Chairman of Board of Directors of APU company
2010-Present: Chairman of Board of Directors of Skytel LLC
Educational background in Economy.

1990-1992: Manager at Blue Door Management LLC
1992-1995: Manager at Trans-World Metals LLC
1995-Present: CEO of Orion Resources LLC
P.Batchimeg
Kh. Khamkhoev
Educational Background in Pedagology.

Lecturer and Senior Lecturer at Russian Language Pedagological University and Police
Academy; Officer at Ministry of Education, Culture and Sciences.
2004-2007: CEO of APU Impex LLC
2007-Present: CEO of APU Trading LLC
2008-Present: Representative of Municipal Representative Meeting
Educational background in Engineering Economy.

1990-1992: Deputy Director of Lion LLP
1992-1994: Manager of Kazakhstan Branch Office of BrAZ factory
1994-2000: Deputy Manager of Beijing Branch Office of BrAZ factory
2000-Present: CEO of Orion International LLC
B.Batbayar
A. Sivaev

1994-1996: Lecturer at the School of Economics, NUM
1999-2001: Commercial Banking Consultant, Economic Policy Support Project
2002-2012: Senior Specialist at European Bank for Reconstruction and Development
2012-Present: Chief Financial Officer of Shunkhlai Group
Educational background in Law and Economy.

2001-2005: Department Head and Chief Financial Officer at subsidiaries of
Russkii Aluminum company
2005-Present: Chief Financial Officer and CEO at Krasnii Yar JSC
J.Unenbat
S. Erdene

1990-2000: Economist, Department Head and Governor of Mongolbank
1996-2000: Representative of Asian Development Bank to Mongolia
2000-2006: CEO of Mongolian Bankers Association
2009-2015: CEO of Corporate Governance Development Center
2015-Present: CEO and Secretary of Mongolian Bankers Association
Educational background in Law.

1990-1993: Officer at Selenge Police Department
1993-2000: Officer and Department Head at Chingeltei District Police Department
2000-Present: CEO and Chairman of Board of Directors of EDKS LLC
2013-Present: Chairman of Board of Directors of Narta LLC
2014-Present: Chairman of Board of Directors of Narta Construction LLC
43
2015 Annual Report
BOARD COMMITTEES
DECISION-MAKING
PROCESS
The Board of Directors have Audit, Remuneration, and Nomination committees. The membership of the respective committees are as follows:
The regular meeting of Board of Directors of APU

company takes place on quarterly basis and irregular
meeting and ad-hoc voting can be held when deemed
necessary. The decision are made on majority basis.
Furthermore, principles specified in Company Law of
Mongolia such as unanimous agreement on major
transations (decision by shareholders meeting in case
of non-consensus) and withdrawal of member who has
conflict of interest, apply.
1.
Audit Committee: J.Unenbat (Chairman), B.Batbayar and S. Erdene.

Functions of the Committee: Ensuring the complaince of accounting policies and practices with international standards, and oversight on internal audit and risk functions, financial reporting as well as financial
and economic state.
2.
Remuneration Committee: S.Gromov (Chairman), S. Erdene and J.Unenbat.

Functions of the Committee: Approval and oversight of salary and remuneration policies of the Board
members, officials of the executive management and employee; establishent of ceiling for salary and
bonuses granted to the board members and executive management; and proposals on the remuneration
within the established ceiling.
3.
Nomination Committee: P.Batsaikhan (Chairman), S.Erdene and A.Sivaev.

Functions of the Committee: Defining the requirements for regular and independent board members;
providing opinions on the fulfillment of those requirements; organizing the selection and appointment
of Board of Directors and Executive Management; and assessing the performance of Board of Directors
and Executive Management.
BOARD REMUNERATION
Board members receive salary on monthly basis and there is
no bonus structure tied to the performance.
44
Annual Report
Operational Rules of the Board of Directors specifically

lay out the processes to make and present proposals
to the Board of Directors and decision-making thereoff.
No decisions associated with major transactions were
made by the Board in 2015. The list of affiliated persons
and persons with conflict of interests are renewed on
annual basis and delivered to the Financial Regulatory
Committee and Mongolian Stock Exchange.
2015
As of 2015, the following affiliated persons were identified:

1. APU Trading LLC
2.
Depod LLC
3.
Shunkhlai Trading LLC
4.
Shunkhlai LLC
5.
Hyundai Motors Mongolia LLC
6. Media Group LLC
7. Amilan. E LLC
8. NTV Broadcasting LLC
9.
GSB Mining LLC
10. Power Unit LLC
11.
Suntrans Mongolia LLC
12.
Suntrans LLC
13.
International Medical Center LLC
14. Capital Group LLC
15.
UB Spirit LLC
16.
GSB Capital LLC
17.
Skytel LLC
18. Natur Agro LLC
19.
Wan Trade LLC
20.
Great Empire LLC
21.
Skymedia Corporation LLC
22. Mongol Daatgal LLC
23. Chinggis Khaan Bank LLC
24.
Blue Sky Cashmere LLC
25.
Grand LLC
45
2015 Annual Report
Annual Report
REMUNERATION
SHARE
INFORMATION
The following principles are adhered in the remuneration policy of APU company:
In 1992, the state vodka and beer factory was partially (49%) privatized and formally adopted the name
APU. In 2001, the remaining 51% was offered in a
bid, making the company to be fully privatized.
Attracting professional and highly-skilled employees through a competitive salary system and
ensure retainment thereafter;
Providing proper career management to the employees by offering promotions and ongoing educational opportunities, supporting attendance to local and international trainings and granting
scholarships;
Accurately assessing the performance and granting bonuses in relation thereto;
Creating social development funds to provide certain supports to the employees;
Increasing the salaries in relation to the labor market condition, macroeconomic outlook and
inflation, based on annual salary surveys.
The Remuneration Committee of the Board of Directors is in charge of defining the requirements
for regular and independent board members; providing opinions on the fulfillment of those requirements; and organizing the selection and appointment of Board of Directors and Executive
Managementin accordance with relevant procedures.
APU company received its renewed State Registration

Certificate in 2005 to engage in production of vodka,
beer and soft drinks; foreign trade; retail and wholesale of food products, as well as restaurant and pub
TRADING INFORMATION
APU
Rank in the
overall trade
Number of shares
traded
numbers
266,301
11
Value
MNT
thousand
952,920
Rate of Top-20 index vs the APU shares
2015
businesses. The company was registered as an

open, joint-stick company under the improved legal
environment.
APU company (Symbol APU) is one of the TOP-20
joint stock companies and currently holds more
than 4000 shareholders and 742,877,000 common
stocks that are being traded at the Mongolian Stock
Exhchange.
-top 20 index -APU
APU company stocks made up 23% of the overall

trading being held at the Mongolian Stick Exchange
in terms of their value at the end of 2015, which is an
increase from 19%.
HOW TO PURCHASE SHARES?

In order to be part of the stock trading, you need to
receive services of the professional legal entities licensed to carry out such services. Therefore, you
must participate the trading through a BROKER AND
DEALER companies. Since this is designed to mitigate
potential risks, you can receive variety of information
from the broker and dealer companies such as share
prices, operations and financial reports of the companies whose stocks are being traded, distribution of
dividends, management and market positioning etc.
If you NEVER OWNED ANY SHARE of entities and have
no account at the Securities Clearign House and Central Depository, you can choose one of the licensed
broker & dealer companies and have them OPEN AN
ACCOUNT for you based on your ID.
46
Currently, there are more than 40 broker and dealer

comapnies in Mongolia, whose information can be
iobtained from the Securities Clearing House and
Central Depository or the following web page: WWW.
MSE.MN.
After opening an account at the Securities Clearing
House and Central Depository, you will be able to
take part in the stock trading activities through your
broker & dealer company once you PLACE MONEY IN
THE ACCOUNT. Once you place the comission payable to the broker & dealer company, you can make
orders after the conclusion of THE SALES AND ORDER AGREEMENT.
47
2015 Annual Report
Annual Report
DIVIDEND
POLICY
MANAGEMENT
TEAM
Since its privatisation in 2005, APU JSC has been pursuing a divident policy.
Decision to pay dividend is an indication of companys

financial standing and operational outcome.
APU JSC has been working to ensure that the investors

capital are maintained at an appropriate level.
Since 2005, APU JSC has been announcing dividends

to its shareholders on continual basis and has been
pursuing Constant Dividend per Share policy.
Shares subject to dividend payout
2015
Dividend per share
Total dividends
(MNT Million)
2005
742,877
130
97
2006
742,877
60
45
Dividend yield %
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%
2.20%
2013
74,167,019
90
6,675
2014
74,167,019
2015
74,167,019
70
5,192
Six-member management team, with the function of providing consultancy and guidance, works under the auspices of the Chief Executive Officer (CEO). The Management Team is chaired by the CEO and includes the Chief
Operating Officer, Chief Financial Officer, Administrative and HR Director, Project Director and Corporate Communications and Innovation Director.
ERDENEBILEG TSEVEENJAV
Chief Executive Officer
ENKHBILEG GONSHIG
Chief Operating Officer
TUVSHIN BANZRAGCH
Chief Financial Officer
MENDBAYAR AVIRMED
Project Director
ARIUNA DANDAROVA
Corporate Communications and
Innovation Director
BATTSEREN MIJID
Administrative and HR Director
1.80%
Notes: Financial statements from Audit report 2015
The amount of dividends paid out to the shareholders in the past are at the average level (2.6%) of dividends
paid by international liquid food companies.
Dividend
Yield %
Beverage industry /brewing/ average
HEINEKEN (HEIA.AS)
2.64
1.68
Source: finance.yahoo.com
48
49
2015 Annual Report
AWARDS AND
RECOGNITIONS
Annual Report
2015
SUSTAINABILITY
TOP-100 Company
Mongolian national chamber of commerce and industry
AN ENTITY WITH THE BEST MAINTENANCE AND

LANDSCAPING-APU JSC
Department of the Governor, Capital city of Mongolia
CONSUMER-FRIENDLY PRODUCTION-SAIN PRODUCTION LINE

Department of Inspection, Capital city of Mongolia
LOCAL PRODUCT WITH THE BEST PACKAGING-SAIN BRAND

Ministry of Industry and Ministry of foreign affairs Mongolia
PRODUCT WITH LEADING TECHNOLOGY

-SAIN BRAND PRODUCTS
Mongolian national chamber of commerce and industry
World Vodka Awards-2016

Arkhi, Soyombo, Ulaanbaatar
50
51
2015 Annual Report
Annual Report
2015
Sustainable
Policy
ECONOMY
APU Company works for stakeholders benefit
and inclusiveness in profit.
Operating environmentally friendly production
National leading producer
Reduction in waste and Reuse
Creating value and increasing profits by improving productivity
Increasing profits by reducing cost
Complaince with Mongolian environmental

laws as well as national and international
standards
SOCIETY
Our company has been following the core principles of sustainable development: balancing of
ECONOMY, SOCIETY AND ENVIRONMENT.
ENVIRONMENT
Complying fully with Food safety; its quality and

standard
Contributing in indication national heritage

and culture, human development and promote
environmentally friendly production
Following underlying principles of fair and

transparency competition
Promoting responsible drinking
Contributing in development of consumer

education
Operating in compliance with ethics and legal
Preferring non-discrimination and integrity
Electricity saving
As part of the program to Reduce electricity consumption and waste, we are able to reduce the
electricity consumption by 500000 kW in 2015.
Water saving
We implemented Water Recycling program to
find solutions to reduce water consumption and
recycling at all stages of the production. As a
result, we were able to save 53 thousand cubic
meters of water in 2015 and restored 6 thousand
cubic meters of water.
Steam, Heat and Cooling system
We installed technology to produce thermal
energy by industrial cooling system and used
restored heat for industrial heating systems
It enabled to produce the new products by CO2,
used to fire poison for domestic demand of
company.
52
53
2015 Annual Report
Annual Report
HUMAN
RESOURCES POLICY
2015
TUGULDUR
PROJECT
As part of the Tuguldur project, we started interest clubs in 9 areas, so that emloyees can get together to share common interests
and build strong teams. This work-life balance project not only
promotes healthy lifestyles but also enables exchange of ideas
among employees and improves departmental coordinations.
The interest clubs established among the employees include:

APU cooking club

APU music club

APU Xtreme club

APU hiking club

APU dancing club

APU photoshooting club

APU flower enthusiasts club

APU creative plus club

APU tennis club

APU productivity club
Moreover, we organized campaigns under the scope of the project
such as Tungalag Tuul (Pure Tuul River), Mongolian Tsuur (Traditional musical instrument), Summer camp 2015, and Summer
camp kids.
The survey among the employees revealed that the employee satusfaction index in 2015 was relatively higher than those of 2014
with ESI at 7 and Leadership index at 5.9.
Moreover, we have fully complied with our contractual obligations
with our Trade Union and spent MNT 1 billion for the benefit of our
employees. This includes:
In 2015, the training and development strategy focused on the

improvement of individual skills. To that end, the the following professional and workplace trainings were organized:
54
For top managers How to manage your business training

organized by Harvard Business School as part of the Global Education in Mongolia Initiative.
For Engineering and technical staff Young Leaders Program as

well as 612 professional trainings.
Tuguldur project was launched to support individual development and leadership that leads to increased value of the
company.
MNT 110 million for pensions and benefits

MNT 125 million for allowance
MNT 25 million for rewards
MNT 729 for food and health services.
LABOR HEALTH AND SAFETY ACTIVITIES:

The staff cafeteria was renovated and services nutritious meal.
Milk and yogurts are supplied to employees working in certain production area.
APU clinic exclusively serves the employees and renders array of medical services such as emergency first response, atwork therapy, and social health services such as preventative health advices and promotion of healthy lifestyles. The clinic
provides services to 20-25 staff per day. Cases of sickness among the staff was reduced by 4% in 2015 compared to the
previous year.
55
2015 Annual Report
Annual Report
2015
RISK
MANAGEMENT
APU company considers Effective Risk Management as an integral part of the business achieving its operational and strategic objectives while mitigating uncertainties in the future and creating opportunities for new
frontiers.
Furnished Badamlynhua childrens
center
Banquet for Foods employees day
Mongolian Fife /Traditional Musical

Instrument/ project
Health promoting company
I. MAIN RISKS
The risks are classified as follows:

RISK DESCRIPTION
RISK MANAGEMENT
Deterioration of political and economic environment

Summer camp 2015
Faith, Hope, Opportunity marathon
Signing memorandum of Understanding

with Khan-Uul district
1000 children festival
Deterioration and uncertainty of political and economic environment

have major impact in the business.

Key risks:

Increased political instability

Increased cost due to currency revaluation
Changes in legislation and regulatory

Production of liquid food, especially alcohol products, are under strict
oversight and limitation.
Key risks:

Restriction of sales freedom

Increased taxes and duties
CORPORATE SOCIAL
RESPONSIBILITY MEASURES
Changes in social environment
Unification of consumers to demand decrease of price and favorable

trade environment may affect the profitability.

Key risks:

Change in consumer choices

Decreased market value
Open door of APU Company for family
members of employees
Tungalag TUUL /Pure

Tuul/ campaign
Eco environment campaign
Promoting Positive mind
Top Trade Union
56
Sample of dairy products handed over to municipal company employees, Khan-Uul district
Assistance for extinguishers
Sample of dairy products handed over to

disabled people
Participating in Capital day,

second year
Partnership with childrens

sport Champaign V
According to the Global commitments by alcohol producers

to support reduction in abusive
consumption
Ensuring compliance with laws
Being proactive to social
changes
Improving innovation that
quickly responds to change
Natural majeure force

We have always to inferior to natural disasters and climate changes.
Key risks:

Earthquake, storms, floods, fire and ecosystem disasters

Farming disasters, road destructions, communication failures
caused by drastic climate change
Homeland 36 program
Developing contingency plans

Currency rate forecasts
Technological changes
Improvement in new technology and research development results in

increased competition

Key risks:

Increased threat of new entrances

Increased in consumer demand
Conducting emergency response trainings

Developing road maps for
emergency situations
Quick adapting to the high

technological life style
Conducting professional research and development
Providing 6 year consumption of

dairy products to 3 millions citizen
57
2015 Annual Report
Annual Report
II. RISK PROFILE
OPERATIONAL RISKS
RISK DESCRIPTION
Healthy and safe environment
Key risks:

Accidents and loss of lives

Disease
Product safety
Key risks:

Low quility end products

Customers health risk
Information technology risks
Key risks:

Cyber attack

Misappropriation of data
Financial risks
Key risks:

Liquidity risks

Decreased financial sources
RISK MANAGEMENT

APU company works to ensure that its employees are provided with healthy and safe environment through various efforts such as interest
clubs, health checkups and nutritious lunch
serving.
APU company supplies high-quality products

and services to its customers in accordance
with ISO 9001 and ISO 22000 standrads.
APU company tries to take holistic approach in its risk assessment process so that not only the risks present
are evaluated, but also their underlying causes, future impacts and outcomes are identified. As a result, proper
appcoaches to mitigate such risks can be formulated for occurences.
HIGH RISKS IN 2016
Very
High
Mitigate(protect)
prevent
APU company Implements information technology policies and protects from cyber attacks
through effective management of data, information dissemination and information security
Proper distribution of resources
Searching new funding solutions
Mitigate / reduce
Accept
Mitigate/protect
/prevent
Very
Low
COMPLIANCE RISK
RISK DESCRIPTION
RISK MANAGEMENT
Compliance
Key risks:

Non-compliance
Improving compliance awareness at all levels

through training
Introducing complaince into the operations

Note: This section did not cover all the potential risks in full.
Rare
CURRENCY RISK
Definition: It was so recent that Mongolia saw
appreciation of its local currency, tugrik, due
to the increase of its foreign currency reserve
thanks to the windfall of direct foreign investments to the mining sector. However, the
Mongolian economy faced challenges since
2013 due to its dependency on mining sector
as the foreign investment dwindled and price
of commodities dropped at the global market.
Thus, the USD and CNY have been appreciating on continual basis.
Potential impact: Increasing appreciation of
foreign currency is causing increase of raw
materials cost. Therefore, currency risk has
become one of the major risks due to its increased probability and impact.
Mitigation: In those instances, combination of
mitigation and avoidance measures are taken. We are working to increase our currency
reserve while the rate is low based on upon
currency rate trends in order to maintain the
relevant cost low.
58
Avoid
Transfer /
mitigate
Impact

2015
likelihood
NEGATIVE SOCIAL ATTACKS AGAINST

ALCOHOL
Definition: Since APU company operates in the
food market and produces products with alcohol content, we are responsible to uphold the
highest social integrity.
Potential impact: Although the need for liquid food exists throughout the society, excessive consumption creates negative health
outcome and increases social resentment.
Therefore, the risk of trade limitations and tax
burdens can be present and may impact the
operation of the company.
Mitigation: APU company works to manage
this type of risks through production and supply of high-quality permium products that
comply with relevant standards while promoting responsible drinking consumption in the
society.
High
CO2-GAS
Definition: During the production, especially during the wheat fermentation, significant
amont of carbon dioxide (CO2 ) is produced.
The amount is 590 tons per year on average.
Potential impact: Although CO2 has no direct
impact on health, its dissolution in air creates
climate change. Therefore, we are globally
working to reduce the emission of carbon dioxide. APU company is no exception to these
efforts and this risk must be managed.
Mitigation: As an environmentally-friendly
producer that complies with ISO 14001 standards, APU company has taken several measures to reduce CO2 emission and re-use after
filtration. The reusable carbon dioxide stored
in specific tanks are later transferred as a
raw material to companies that produce soft
drinks and also enabled to produce the new
products by CO2, used to fire poison for domestic demand of company.
59
2015 Annual Report
FINANCIAL
REPORTING
Annual Report
2015
STATEMENT OF
FINANCIAL POSITION
2015
2014
Assets
Property, plant and equipment Mln.MNT
208,574.34
225,363.24
Intangible assets Mln.MNT 645.07 883.42
Biological assets Mln.MNT 102.99 80.53
Long-Term Investment
Mln.MNT 904.84 904.84
Deferred tax assets Mln.MNT 8,449.75 5,538.93
Non-current Assets Mln.MNT
218,667.0
232,770.95
Inventories Mln.MNT
56,009.83
73,714.19
Prepayments and prepaid expenses
Mln.MNT 5,280.31 5,078.27
Tax, Social Insurance receivable
Mln.MNT 1,635.35 1,854.51
Accounts receivable Mln.MNT 9,437.50 4,221.75
Other receivable Mln.MNT
9,825.90
9,803.70
Short-Term Investment
Mln.MNT 33.81 33.81
Cash and Cash Equivalents Mln.MNT 6,762.57 9,946.98
Current Assets
Mln.MNT
Total Assets Mln.MNT
88,985.27
307,662.26
104,653.22
337,424.17
Equity
Share capital Mln.MNT 74.17 74.17
Revaluation reserve
Mln.MNT
80,694.98
80,494.96
Retained Earnings Mln.MNT
65,348.03
50,987.60
Total equity
Mln.MNT
146,117.18
131,556.73
Liabilities
Long-Term Loans and Borrowings
Mln.MNT
88,080.21
120,405.46
Deferred tax liabilities
Mln.MNT 648.90 476.04
Other payables Mln.MNT 1,938.26 0
60
Non-Current Liabilities Mln.MNT

Short-Term Loans and Borrowings
Mln.MNT
Tax payables Mln.MNT
Other payables Mln.MNT
90,667.37
31,863.45
11,564.55
27,449.72
120,881.50
30,101.36
12,495.04
42,389.54
Current liabilities
Mln.MNT
Total liabilities Mln.MNT
Total equity and liabilities
Mln.MNT
70,877.72
161,545.09
307,662.26
84,985.95
205,867.44
337,424.17
61
2015 Annual Report
Annual Report
OTHER COMPREHENSIVE
INCOME STATEMENT

Mln.MNT
Mln.MNT
Cost of goods
Gross profit
210,111.18
198,468.87
146,597.51
154,521.13
63,513.67
43,947.75
Selling and Administrative expenses
Mln.MNT
26,709.54
29,78.41
Other income
Mln.MNT
1,301.19
Mln.MNT
(3,280.66)
Mln.MNT
91.51
Mln.MNT
6,758.81
Finance income
Finance costs
2014
Mln.MNT
Other expenses
Loss on foreign exchange
Mln.MNT
739.34
(2,452.97)

135.70
5,334.33
Share
capital
Pocket
share
Retained
earnings
Other
Total
equity
2013
Mln.MNT
74.29
(0.12)
70,502.62
14,349.19
84,925.98
Other comprehensive income
Mln.MNT
1,334.05
66,145.77
67,479.82
Changes in equity
Mln.MNT
Dividends declared
Mln.MNT
(6,675.03)
(6,675.03)
Profit for the year
Mln.MNT
(14,174.03)
(14,174.03)
2014
Mln.MNT
74.29
(0.12)
50,987.60
80,494.96
131,556.73
Other comprehensive income
Mln.MNT
3,373.13
Changes in equity
Mln.MNT
(200.02)
200.02
(21,518.50)
Dividends declared
Mln.MNT
Mln.MNT
10.20
159.14.73
Profit for the year
Mln.MNT
11,187.32
Profit (loss) before income tax
Mln.MNT
18,735.88
(14,251.67)
2015
Mln.MNT
74.29
(0.12)
65,348.03
Income tax
Mln.MNT
7,608.56
(77.64)
Profit (loss) after income tax
Mln.MNT
11,187.32
(14,174.03)
Revaluation of assets and other
Mln.MNT
3,373.13
67,479.82
14,560.45
53,305.78
Profit (loss) for the year
Mln.MNT
3,373.13
(9,489.52)
Gain (loss) on fixed asset write off
62
CHANGES IN EQUITY
STATEMENT
2015
Revenue
2015
80,694.98
11,187.32
146,117.18
63
2015 Annual Report
Annual Report
CASH FLOW
STATEMENT
1.REPORTING
PRINCIPLES
2015 2014
STATEMENT OF COMPLIANCE
The separate financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS), Mongolian laws and other legal acts issued its conformity.
These financial statements have been prepared in accordance with International Accounting Standards (IAS)
27 or standards is named Separate Financial Statements.
Cash flows from operating

activities
Mln MNT
Income from sales of goods and services
Mln MNT
Payments to suppliers

Mln MNT
40,323.56
318,099.59
(118,218.93)
17,591.31
353,910.52
(145,136.26)
Payments to Tax, Social Insurance
(121,085.37)
(144,436.70)
Mln MNT
Payments to employees
Mln MNT
(8,743.44)
(9,561.68)
Payments for operating expenses
Mln MNT
(5,352.44)
(4,700.52)
Payments for fuel, lubricants,
transportation and spare parts Mln MNT
(4,320.42)
(4,546.97)
Interest payments Mln MNT
(6,865.80)
(7,689.10)
Other cash income Mln MNT
1,688.36
2,989.77
Other cash payments Mln MNT
(14,877.99)
(23,237.75)

Cash Flows from
investing activities

Mln MNT
(4,486.44)
(19,189.55)
Cash inflow Mln MNT 251.50
Cash outflow

Mln MNT
(4,486.44)
(19,441.05)

Cash Flows from
financing activities
Mln MNT
(39,021.53)
(17,290.03)
Cash inflow Mln MNT 209.04 10,292.48
Cash outflow
Mln MNT
(39,230.58)
(27,582.51)

TOTAL NET CASH
Mln MNT
(3,184.41)
(18,888.27)

CASH AT THE BEGINNING PERIOD

Mln MNT
9,946.98
28,835.25
CASH AT THE ENDING PERIOD Mln MNT
6,762.57
9,946.98
64
2015
BASIS OF MEASUREMENT
The separate financial statements have been prepared on the historical cost basis, except for the items described
otherwise in the related notes.
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.
USE OF ASSUMPTION, ESTIMATES AND JUDGMENTS
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.
65
2015 Annual Report
Annual Report
2015
2. ACCOUNTING
POLICIES
FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are translated to the
functional currency of the Company at exchange rates
at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the reporting date are translated to functional currency at the
exchange rate ruling at that date.
PROPERTY, PLANT AND EQUIPMENT

INITIAL RECOGNITION
Recognition and measurement Items of property,
plant and equipment that qualify for recognition as
assets are measured upon initial recognition at their
cost. Cost includes expenditure that is directly attributable to the acquisition of the asset.
LEASED ASSETS
Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are
classified as finance leases. On initial recognition, a
leased asset is measured at an amount equal to the
lower of its fair value and the present value of the minimum lease payments.
Non-monetary assets and liabilities denominated in

foreign currencies that are measured at fair value are
retranslated to the functional currency at the exchange
rate at the date that the fair value was determined.
Non-monetary items in a foreign currency that are
measured based on historical cost are translated using
the exchange rate at the date of the transactions.
MEASUREMENT AFTER INITIAL RECOGNITION

After initial recognition as an asset, an item of property, plant and equipment whose fair value can be measured reliably is carried at revalued amount, being its
fair value at the date of revaluation less subsequent
accumulated depreciation and subsequent accumulated impairment losses. The fair values are estimated
by an independent third party in Mongolia.
INVENTORIES
Inventories are measured at the lower of cost and net
realizable value. The cost of inventories is determined
on a weighted-average cost principle and includes expenditure incurred in acquiring the 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 an appropriate share of overhead
costs based on normal operating capacity.
FINANCIAL INSTRUMENTS
NON-DERIVATIVE FINANCIAL ASSETS
The Company initially recognizes loans and receivables on the date that they are originated. All other
financial assets (including assets designated at fair
value through profit or loss) are recognized initially on
the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument.
RECEIVABLES
Such assets recognized initially at fair value plus any
directly attributable transaction costs.
NONDERIVATIVE FINANCIAL LIABILITIES
The Company initially recognizes debt securities issued on the date that they are originated. All other financial liabilities (including liabilities designated at fair
value through profit or loss) are recognized initially on
the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument.
OFFSETTING BETWEEN FINANCIAL ASSETS AND LIABILITIES
Financial assets and liability 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 realize the asset and settle the liability simultaneously.
66
SUBSEQUENT COSTS
Subsequent expenditure is capitalized only when it is
probable that the future economic benefits associated with expenditure will flow to the Company. Ongoing
repairs and maintenance is expensed as incurred.
DEPRECIATION
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. Items of
property, plant and equipment are depreciated from
the date that they are installed and are ready for use
or in respect of internally constructed assets, from the
date asset is completed and ready for use.
INTANGIBLE ASSETS
Intangible assets that are acquired by the Company
and have finite useful lives are measured at cost less
accumulated amortization and accumulated impairment losses.
BIOLOGICAL ASSETS
Biological assets are measured at fair value less costs
to sell, with any change therein recognized in profit or
loss.
BORROWING COSTS
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 in expense
as incurred.
IMPAIRMENT
NON-DERIVATIVE FINANCIAL ASSETS
A financial asset not carried at fair value through profit
or loss is assessed at each reporting date to determine
whether there is objective evidence that it is impaired.
FINANCIAL ASSETS MEASURED AT AMORTISED COST
The Company considers evidence of impairment for
these assets at both a specific asset and collective level. All individually significant assets are assessed for
specific impairment.
NON-FINANCIAL ASSETS
The carrying amounts of the Companys non-financial
assets, other than inventories and deferred 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.
EMPLOYEE BENEFITS
SHORT-TERM EMPLOYEE BENEFITS
Short-term employee benefits are expensed as the related service is provided. A liability is recognized 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 reliably.
DEFINED CONTRIBUTION PLANS

Employee benefits include statutory social insurance
payments to the State Social Insurance Scheme of
Mongolia. Obligations for contributions to defined
contribution plans are recognized as an employee
benefit expense as incurred.
PROVISIONS AND CONTINGENCIES
/Recourse and contingencies liabilities /
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be
estimated reliably, the obligation is disclosed as a
contingent liability, unless the probability of outflow of
economic benefits is remote.
SHARE CAPITAL
ORDINARY SHARES
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
share are recognized as a deduction from equity, net
of any tax effects.
REPURCHASE OF SHARE CAPITAL (TREASURY
SHARES)
When share capital recognized as equity is repurchased, the amount of the consideration paid, which
includes directly attributable costs, net of any tax effects, is recognized as deduction from equity. Repurchased shares are classified as treasury shares and
are presented in the statement of changes in equity
as treasury shares. When treasury shares are sold or
reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is presented in share
premium.
REVENUE
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 measured reliably.
SALE OF GOODS
Revenue is recognized when goods are delivered at
the customers premises, which is taken to be 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 discounts.
67
2015 Annual Report
Annual Report
2015
GLOSSARY
RENTAL INCOME FROM OPERATING LEASES
Rental income receivable under operating leases is
recognized in profit or loss in equal installments over
the periods covered by the lease term, except where an
alternative basis is more representative of the pattern
of benefits to be derived from the use of the leased asset. Lease incentives granted are recognized in profit or
loss as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognized
as income in the accounting period in which they are
earned.
OTHER INCOME
Other income is income generated outside the normal
course of business and is recognized when it is probable that the economic benefits will flow to the Company
and it can be measured reliably.
LEASE PAYMENTS
Payments made under operating leases are recognized
in the statement of profit or loss and other comprehensive income on a straight-line basis over the term of
the lease. Lease incentives received are recognized as
an integral part of the total lease expense, over the term
of the lease.
FINANCE INCOME AND FINANCE COSTS
Finance income comprises interest income on funds
invested. Interest income is recognized as it accrues in
profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings. All borrowing costs are recognized as it accrues
in profit or loss, using the effective interest method.
INCOME TAXES EXPENSE
Income tax expense comprises current tax and deferred tax. Current tax and deferred tax are recognized
in profit or loss except to the extent that it relates to
items recognized directly in equity or in other comprehensive income.
EARNINGS PER SHARE
The Company presents basic earnings per share (EPS)
data for its ordinary shares. Basic EPS is calculated
by dividing the profit or loss attributable to ordinary
shareholders of the Company by the weighted average number of ordinary shares outstanding during the
period, adjusted for own shares held.
RELATED PARTIES
A person, or a close member of that persons family, is
related to the Company if that person:

has control or joint control over the Company

has significant influence over the Company

s a member of the key management personnel of
the Company or the Companys parent
A close member of the persons family, is influenced
to that person in during the business relationship with
company or any family members may be affected by
his/her impact.
Accounting period
The period on which the profit and loss of an entity is
being calculated. Generally, this refers to a year or a
quarter.
Financial statement
Comprehensive financial statement includes balance
sheet, comprehensive income statement, statement on
changes in equity, cash flow statement and notes to the
financial statements.
Asset
Asset is something valuable that an entity owns, benefits from, or has use of, in generating income.
Intangible assets
Intangible assets are long-term assets of an entity that
have no physical presese, but creates advantage to its
owner such as patents, licenses, intellectual properties,
trademarks, copyrights and goodwill.
Fixed assets
Fixed assets refer to assets that are expected to last
with the owner for more than 1 year and is designed to
be used in the business operation for a long-term such
as buildings, equipment and furniture. Fixed assets are
not intended for sales.
Noncurrent asset
Refers to the fixed assets.
Current assets, Working capital
Current assets are assets intended to be converted into
cash within a year. Current assets are designed to be
used in ensuring the business continuity of an entity.
Prepaid expenses, Deferred charges
Payments made prior to the receipt of services
68
Accounts receivable
Amount expected from the buyers or other stakeholders in exchange of provision of servcies or sales of
products.
Other Financial assets
This refers to savings with a 3-month to 1-year term
as well as short-term investments.
Cash equivalent assets
1-3 month investments that can be convertible into
cash and has minimal risks in terms f its value change.
Cash method
An accounting method that makes entries upon cash
receipt or payments.
Accrual basis, system, or method
An accounting method that makes entries in relation
to the service performance and realises payments regardless of whether the actual payment is made.
Shareholders Equity
Capital invested by the shareholders.
Revaluation reserve
An increase in the account value of fixed assets and
tangible assets of an entity due to revaluation.
Liabilities
Payments due to others (individuals, comapnies or
government).
Long term Liabilities
Refers to loans received from local or overseas sources and stakeholders that has a tenor of more than a
year.
69
2015 Annual Report
Short term Liabilities

Refers to payments due within 12-month period.
Social security tax
A tax imposed on the employers and employees in order to finance the pensions and welfares granted from
the Social Insurance Fund.
Income statement
A report that shows the income and expenses of the
company during certain intervals ( quarter, year)
Sales revenue
An income generated from the sales of goods and services during the reporting period.
COGS
Cost of goods sold during the reporting period.
Profit
The monetary expression of an entitys operation
during certain period. A return on conducting a business and being imposed to certain risks. This is calculated by deducting all monetary and abstract expenses
70
Annual Report
2015
from the total revenue.

Operating costs
Expenses incurred during the course of the business.
EBIT
Profit before tax and interest payments
Net profit
An amount left from the revenue after the payment of
all expenses and taxes.
Effective tax rate
A tax rate imposed in relation to the profit of the company before tax
Income tax
A tax imposed by the government on entities and individuals
Cash flow statement
A statement that shows the changes in cash of an entity during the reporting period
Free operating cash flow
Cash generated from main activities of an entity.
71
2015 Annual Report
Mongolia, Ulaanbaatar 17040,

Khan-Uul district, Chinggis Avenue 48.
Phone: 11-344837
www.apu.mn
72

2015 Annual Report

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2015 Annual Report

Uploaded by

Copyright:

Available Formats

Annual Report