<PAGE>
 
               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM  10-K



[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the fiscal year ended December 31, 1996
                               -----------------
 
[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from __________________ to __________________.

                       Commission File Number: 33-26617A
                                               ---------

                          CBR BREWING COMPANY, INC.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

              Florida                                       65-0145422
-------------------------------------                  ----------------------
(State or other jurisdiction                            (I.R.S. Employer
of incorporation or organization)                       Identification Number)

                          433 North Camden, Suite 1200
                        Beverly Hills, California 90210
          ------------------------------------------------------------
          (Address of principal executive offices, including zip code)

       Registrant's telephone number, including area code: (310) 274-5172
                                                           --------------

        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]     No [  ]

                                       1
<PAGE>
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     As of July 31,1997, the Company had 5,000,013 shares of Class A Common
Stock and 3,000,000 shares of Class B Common Stock issued and outstanding.

     The aggregate market value of the outstanding voting common stock held by
non-affiliates of the registrant on July 31,1997 was $0, as there was no trading
market in the Company's common stock.

     Documents incorporated by reference:   None.

     The total number of sequential pages in this report is 168.

     The exhibit index is located on pages 65 through 68.

                                       2
<PAGE>
 
                                    PART I.

ITEM 1.   BUSINESS

          CBR Brewing Company, Inc., a Florida corporation (the "Company", which
term shall include, when the context so requires, its subsidiaries and
affiliates), is the parent of High Worth Holdings, Ltd., a British Virgin
Islands corporation ("Holdings").  Since November 1994, Holdings has owned a 60%
interest in Zhaoqing Blue Ribbon High Worth Brewery Ltd., a Sino-foreign joint
venture ("High Worth JV"), which, through its subsidiaries and affiliates, is
engaged in the production and sale of Pabst Blue Ribbon beer in the People's
Republic of China ("China" or the "PRC").  The other 40% interest in High Worth
JV is owned by Guangdong Blue Ribbon Group Co. Ltd. ("Guangdong Blue Ribbon").
See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".  Substantially all of the
beer currently sold by the Company is marketed under the Pabst Blue Ribbon
label, and is brewed under a sublicense agreement with Guangdong Blue Ribbon,
which obtained its license from Pabst Brewing Company ("Pabst US").


DESCRIPTION OF BUSINESS

          The Company is engaged in the business of brewing, distributing and
marketing Pabst Blue Ribbon beer in China.  Currently, the Company owns
effective interests of 60% and 24% in the two brewing facilities currently
producing Pabst Blue Ribbon beer in China, both of which are managed by the
Company.  The Company is also presently responsible for the marketing and sale
in China of the Pabst Blue Ribbon beer produced by the two brewing facilities.

          China is currently ranked as the second largest beer producer in the
world behind the United States.  The management of the Company believes that
Pabst Blue Ribbon beer is currently the leading foreign label sold in China,
both in number of units sold and total sales.  Pabst Blue Ribbon is considered a
premium brand in China, along with such other labels as Tsingtao, Carlsberg,
Miller, Budweiser, Coors and Heileman.

          The Company produces Pabst Blue Ribbon beer in China to avoid import
tariffs that range as high as 120%.  Presently, all production is centered in
Zhaoqing City, which is approximately 100 miles from Hong Kong in the Guangdong
Province of China.  Pabst US provides quality control assistance and oversight
to the Company on a regular basis.  The Company markets Pabst Blue Ribbon beer
in every province in China.  The Company currently maintains offices in Beverly
Hills, California, Hong Kong and Zhaoqing City.

                                       3
<PAGE>
 
          Holdings is a British Virgin Islands corporation and a wholly owned
subsidiary of CBR Brewing Company, Inc.  Holdings owns a 60% interest in High
Worth JV, a Sino-foreign joint venture.  High Worth JV holds certain licensing
rights for Pabst Blue Ribbon beer (See "PABST LICENSING ARRANGEMENTS AND
TRADEMARKS") and also directly owns 100% of a Pabst Blue Ribbon brewing complex
("Zhaoqing Brewery").  High Worth JV also owns 100% of a PRC holding company
("Zhaoqing Brewery HC").  Zhaoqing Brewery HC owns a 40% interest in Zhaoqing
Blue Ribbon Brewery Noble Ltd., a Sino-foreign joint venture ("Noble Brewery"),
which in turn owns a second Pabst Blue Ribbon brewing complex that is also
managed by Zhaoqing Brewery.  Goldjinsheng Holdings Ltd., a wholly owned
subsidiary of Noble China Inc., an unaffiliated company, owns the other 60%
interest in Noble Brewery.  See "THE JOINT VENTURE COMPANIES".  In addition,
Zhaoqing Brewery HC owns a 70% interest in Zhaoqing Blue Ribbon Beer Marketing
Company Limited, a PRC company (the "Marketing Company"), which presently
conducts the sales, advertising and promotional efforts for the Company's
production of Pabst Blue Ribbon beer in China.  The remaining 30% interest in
the Marketing Company is directly owned by Guangdong Blue Ribbon.  Through its
ownership in High Worth JV, Guangdong Blue Ribbon also has a 28% indirect
interest in the Marketing Company (See "MARKETING AND OPERATIONS - Summary of
Operations"), resulting in the Company owning a 42% net interest in the
Marketing Company.

          In January 1996, Zhaoqing Brewery HC transferred all of its operating
assets and liabilities to High Worth JV pursuant to the original Joint Venture
Agreement, the Asset Transfer Agreement signed in May 1994, and the relevant
government regulations.  Subject to the completion of certain legal procedures
and documentation, the investments in Noble Brewery and the Marketing Company
currently held by Zhaoqing Brewery HC will be transferred to High Worth JV.
Zhaoqing Brewery HC is currently acting as the nominee for High Worth JV with
respect to the investments in Noble Brewery and the Marketing Company.  In the
following text, "Zhaoqing Brewery" refers to  the brewing complex, which was
transferred to High Worth JV in January 1996, and "Zhaoqing Brewery HC" refers
to the PRC entity that previously owned the brewing complex from November 1994
through December 1995.

          The Company conducts a substantial portion of its purchases through
related parties, and has additional significant continuing transactions with
such parties (See "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").

                                       4
<PAGE>
 
PROPERTY AND PRODUCTION FACILITIES

Zhaoqing Brewery
----------------

          Zhaoqing Brewery is situated on a site containing approximately
1,421,492 square feet and is three miles from Zhaoqing City, Guangdong Province.
Zhaoqing Brewery occupies the site pursuant to certificates of land use rights
issued by the local government.  The certificates do not specify a period for
the use of the land, but normally it does not exceed 70 years.

          The original facilities of Zhaoqing Brewery were constructed between
1978 and 1980 with annual production capacity based on old brewing technology of
approximately 50,000 metric tons or 425,000 barrels of beer.  Prior to 1995,
Zhaoqing Brewery had produced exclusively domestic brands under the names
Zhaoqing beer, Dinghu beer and Xile beer.  In the middle of 1994, with the
assistance of Pabst US, Zhaoqing Brewery commenced the conversion and refinement
of its original facilities and adopted a new brewing technology in order to
produce beer under the Pabst Blue Ribbon label.  In early 1995, the production
of all domestic brands ceased, and Zhaoqing Brewery is now only producing beer
under the Pabst Blue Ribbon label.  With the implementation of the new brewing
technology and the purchase of additional equipment, Zhaoqing Brewery reached an
annual production capacity of 100,000 metric tons or 850,000 barrels by the end
of 1995.

          Zhaoqing Brewery annually shuts down portions of the facility for a
short period of time during the low season, normally in December, to provide
regular and scheduled maintenance.  Zhaoqing Brewery has access to replacement
parts that can be manufactured by several local toolmakers in Zhaoqing city.

Noble Brewery
-------------

          Noble Brewery is situated on a site adjacent to Zhaoqing Brewery
containing approximately 1,453,000 square feet and is three miles from Zhaoqing
City.  Noble Brewery has land use rights of 50 years ending in the year 2043.

          Noble Brewery consists of the original facilities constructed between
1988 and 1990 by Pabst Blue Ribbon Brewery (Zhaoqing) Co. Ltd. ("Pabst
Zhaoqing"), the operator of the facilities prior to the establishment of Noble
Brewery.  These facilities had an annual production capacity of approximately
80,000 metric tons or 680,000 barrels of beer per year.  The second phase of
brewing facilities, which was completed in July 1994, has a production capacity
of approximately 120,000 metric tons or 1,020,000 barrels of beer per year.
Pabst US supplied the majority of the equipment in both the first and second
phase of the brewing facilities, in addition of offering technical assistance in
its installation and maintenance.  The brewing equipment is in good condition
and there is no specific limitation to its life

                                       5
<PAGE>
 
span when properly maintained.  On an annual basis, Noble Brewery shuts down
portions of the facility for a short period of time during the low season,
normally in December, to provide regular and scheduled maintenance.  Noble
Brewery has access to replacement parts that can be manufactured by several
local toolmakers in Zhaoqing.

          Noble Brewery conducted and completed trial production runs of beer
for the second phase of  brewing facilities in July 1994, and production of beer
for commercial sale started with full quantities in late 1994.


MARKETING AND OPERATIONS

Summary of Operations
---------------------

          The Marketing Company was incorporated in February 1995 as a limited
liability company under the laws of the PRC, in which Zhaoqing Brewery HC owns a
70% interest and Guangdong Blue Ribbon directly owns a 30% interest and
indirectly owns a 28% interest.  As a result, the Company owns a 42% net
interest in the Marketing Company.

          The Company's distribution and marketing operations are being
conducted by the Marketing Company.  The Marketing Company began purchasing the
output of beer from Noble Brewery in July 1995, Zhaoqing Brewery in April 1995
and the Sichuan Brewery in April 1997 (See "PABST LICENSING ARRANGEMENTS AND
TRADEMARKS - Production by Guangdong Blue Ribbon"), and is responsible for its
distribution throughout China.  The Marketing Company is also responsible for
the promotion and advertising of the Company's production of Pabst Blue Ribbon
beer in China.

          Pursuant to the long term purchase contracts signed between the
Marketing Company, Zhaoqing Brewery and Noble Brewery in April 1995 and July
1995, respectively, the Marketing Company is required to purchase all the Pabst
Blue Ribbon beer produced by Zhaoqing Brewery and Noble Brewery at mutually
agreed ex-factory prices.  The Marketing Company is allowed to mark-up the
prices of the Pabst Blue Ribbon beer purchased in order to adequately cover the
selling, advertising, promotional, distribution and administrative expenses
incurred in selling these beer products to the ultimate distributors or
customers.

Pabst Blue Ribbon Beer
----------------------

          Both Noble Brewery and Zhaoqing Brewery now produce only Pabst Blue
Ribbon Beer.  There are two products in Pabst Blue Ribbon brand breweries'
portfolio:  11-degree light processed beer and draught beer.  The 11-degree
light

                                       6
<PAGE>
 
processed beer is packaged in 946 ml., 640 ml. and 355 ml. bottles and 500 ml.
and 355 ml. cans and is the breweries'  primary product.  The draught beer is
sold only in kegs.

          The 946 ml. glass bottle and 500 ml. can packages for Pabst Blue
Ribbon beer were newly introduced by Zhaoqing Brewery in 1996, and are expected
to be newly introduced by Noble Brewery in 1997.

          Sales of the 11-degree processed beer in 946 ml., 640 ml. and 355 ml.
bottles and 500 ml. and 355 ml. cans accounted for approximately 7.1%, 60.0%,
1.8%, 0.1% and 28.7%, respectively, of the sales volume of the Company in 1996.

          Sales of the 11-degree processed beer in 640 ml. and 355 ml. bottles
and 355 ml. cans accounted for approximately 68.1%, 4.5% and 24.8%,
respectively, of the sales volume of the Company in 1995.

          Pabst Blue Ribbon beer is marketed and sold as a premium beer in
higher-priced establishments such as restaurants, bars alcohol and tobacco
companies and retail stores, primarily in urban centers all over China.
Management anticipates that the breweries will continue to expand the
distribution of these products in new China markets, subject to the limitations
of the transportation network and the Company's ability to expand its market
share in these markets.

          The specifications and characteristics of the beers produced by the
breweries are set out below :
<TABLE>
<CAPTION>
 
TYPE OF BEER                                 PACKAGE               GENERAL DESCRIPTION
----------------------------------   ------------------------   --------------------------
<S>                                  <C>                        <C>
 
      11-degree light processed      Can (500 ml. & 355 ml.)    11-degree malt content,
      beer                           Bottle (946 ml.,           alcohol content 3.3% (w/w)
                                     640 ml. & 355 ml.)
 
      Draught beer                   Keg (30 liter)             11-degree malt content,
                                                                alcohol content 3.4% (w/w)
</TABLE>


Note :  w/w refers to weight by weight (i.e., measurement of alcoholic content
of beer by weight of beer).

          Brand Performance: The 11-degree light processed beer is the biggest
          -----------------                                                   
selling beer in the Company's Pabst Blue Ribbon beer portfolio, accounting for
approximately 97.7% of the Company's production in 1996 and 97.4% of the
Company's production in 1995.

                                       7
<PAGE>
 
          The 11-degree light processed beer is a beverage that offers Chinese
consumers an attractive alternative to their traditional malt-based beverage.
Sales of this product were expanded to 32 provinces and cities in China in 1995
and 1996.

          Sales:  The Company's highest volume sales for Pabst Blue Ribbon beer
          -----                                                                
have been in the provinces of Guangdong, Fujian and Zhejiang.  The Company
utilizes a network of non-exclusive regional distributors whose field sales
force maintains customer contact and satisfaction.  Sales of Pabst Blue Ribbon
beer were 229,540 metric tons or approximately 1,951,090 barrels in 1996, a 22%
increase over 1995.  Sales of Pabst Blue Ribbon beer were 187,662 metric tons or
approximately 1,595,127 barrels in 1995, a 56% increase over 1994.

Domestic Brand Name Beer
------------------------

          Prior to the end of 1994, Zhaoqing Brewery produced beer exclusively
under domestic brand names, namely Zhaoqing beer, Dinghu beer and Xile beer, all
of which were non-premium beers which targeted customers in the low to middle
economic range.  Sales of domestic brand beer were approximately 33,000 metric
tons or 280,500 barrels in 1994, almost the same as in 1993.  Production of
these local brand beers was completely discontinued in  March 1995 when Zhaoqing
Brewery commenced producing Pabst Blue Ribbon beer on an exclusive basis.
However, beer that does not meet Pabst Blue Ribbon quality standards is
generally packaged and distributed as local brand beer.

          Pabst Blue Ribbon beer is targeted to the premium beer market in China
while the domestic brand beer previously produced by Zhaoqing Brewery was
targeted to the non-premium market.

          The following tables present information with respect to the sales and
volume of beer sold by  Noble Brewery (which produces Pabst Blue Ribbon beer
exclusively) and by Zhaoqing Brewery in 1995 and 1996.  In February 1995, the
Marketing Company was established to conduct the distribution, marketing and
promotion of the Company's production of Pabst Blue Ribbon beer throughout
China.  The Marketing Company also sells mineral water and non-carbonated soft
drinks produced by Guangdong Blue Ribbon under the Blue Ribbon brand name.
Zhaoqing Brewery HC owns a 70% interest and Guangdong Blue Ribbon directly owns
a 30% interest and indirectly owns a 28% interest in the Marketing Company.  As
a result, the Company owns a 42% net interest in the Marketing Company.
Zhaoqing Brewery and Noble Brewery commenced selling  their production of Pabst
Blue Ribbon beer through the Marketing Company in April 1995  and July 1995,
respectively.  Accordingly, such sales by each brewery are reflected as either
sales or inventory on the books of the Marketing Company.

                                       8
<PAGE>
 
<TABLE>
<CAPTION> 

                                                                      Net Sales
                 1995                    Net Sales     Volume Sold     per Ton
         ----------------               ----------   -------------   ----------
                                         (RMB'000)    (metric tons)   (RMB'000)
     <S>                               <C>             <C>              <C>
 
         Noble Brewery                 681,724         161,200          4.2
 
         Zhaoqing Brewery
 
         Local Brands                   27,735          11,388          2.4
 
         Pabst Blue Ribbon             149,664          34,320          4.4
 
         Marketing Company
 
         Pabst Blue Ribbon             486,212          95,627          5.1
 
         Non-alcoholic drinks           62,286          26,300          2.4
<CAPTION>  
                                                                  Net Sales
               1996                  Net Sales    Volume Sold     per Ton
         ---------------             ---------    ------------    ---------
                                     (RMB'000)    (metric tons)   (RMB'000)
 
     <S>                               <C>             <C>              <C>
         Noble Brewery                 655,317         154,435          4.2
 
         Zhaoqing Brewery
 
         Local Brands                    5,666           2,526          2.2
 
         Pabst Blue Ribbon             367,213          80,913          4.5
 
         Marketing Company
 
         Pabst Blue Ribbon           1,173,060         229,540          5.1
 
         Non-alcoholic drinks           75,186          30,687          2.5

</TABLE>

Seasonality
-----------

          The beer industry in China is seasonal.  The Company's sales are
usually at their lowest in the months of October and November and highest in the
months of March through September.

LOCATION
--------

          The breweries are located adjacent to each other in the City of
Zhaoqing.  The municipality of Zhaoqing is one of the major municipal areas of

                                       9
<PAGE>
 
Guangdong Province.  It is strategically located at the lower and middle reaches
of the Zijiang River, 62 miles from Guangzhou, the provincial capital, by road
and 142 sea miles from Hong Kong by water.  The area enjoys a mild, sunny
climate with adequate amount of rainfall.  The climate and soil conditions
provide an important base of agriculture and forestry for Guangdong Province.

          Guangdong Province is the fifth most populous province in China with a
population of approximately 65,000,000, of whom over 7,000,000 are located in
the metropolitan Guangdong area.  The Municipality of Zhaoqing covers a total
area of 8,500 square miles and has a population of approximately 5,700,000.
The metropolitan City of Zhaoqing has an population of approximately 400,000 and
covers an area of 254 square miles.  Zhaoqing enjoys a well-developed
infrastructure, including transportation facilities, reliable power,
communication and service infrastructure.  The area contains extensive
agricultural activity and a large population base.  Due to the quality of the
local infrastructure, Company management believes that the breweries are ideally
positioned to compete within the fast growing beer industry in China.

QUALITY CONTROL
---------------

          Rigorously applied quality control is critical to ensure a
consistently high quality standard for the products produced by the breweries.
In 1990, quality control experts were sent by Pabst US to Zhaoqing to teach
brewery personnel appropriate inspection, quality control measures and
production procedures.  In addition, Pabst US experts trained the brewery's
personnel in the specific brewing techniques required in order to meet the
standards set by Pabst US.  An engineer from Pabst US is stationed in Zhaoqing
to test random production samples and perform quality control on a continuing
basis.  In addition, the breweries send samples of their beer on a monthly basis
to Pabst US in the United States for content examination and testing to ensure
that quality standards are adhered to on a consistent basis.  Pabst US
participated in the conversion of the brewery facilities of Zhaoqing Brewery to
Pabst Blue Ribbon beer and provided technical assistance and training.

RAW MATERIALS
-------------

          The breweries use all-natural ingredients in their brewing process.
The primary raw materials utilized are mainly malt, husked rice, hops and water.
The aggregate cost of the primary raw materials represents approximately 19% of
the direct cost of production, excluding depreciation, of Pabst Blue Ribbon beer
and 20% of the domestic brand beers.   Cost of packaging represents
approximately 50% of the total direct cost of production, excluding
depreciation, of Pabst Blue Ribbon beer and 52% of the domestic brand beers.

                                       10
<PAGE>
 
          Malt:  Virtually all of the malt utilized for producing Pabst Blue
          ----                                                              
Ribbon beer is purchased from regional malt manufacturers, primarily Guangzhou
Malting Company, an unaffiliated company.  Guangdong Malting Company imports the
barley used in producing the malt from suppliers in Australia, Canada and
Europe.  Malt for domestic brand beer was sourced from other domestic suppliers.
The cost of malt represented approximately 70% of the primary raw material cost
in the direct cost of production, excluding depreciation and packaging, of Pabst
Blue Ribbon beer and 68% for the domestic brand beers.

          Husked Rice:  Husked rice is grown on irrigated farmland under
          -----------                                                   
contractual agreements with a variety of local farmers in the Zhaoqing region.
Given the extensive agricultural activity in the region, management believes
that there is an abundant and reliable supply of rice to meet ongoing production
needs.  The cost of husked rice represents approximately 20% of the primary raw
material cost in the direct cost of production, excluding depreciation and
packaging, of Pabst Blue Ribbon beer and 19% of the domestic brand beers.

          Hops:  The hops utilized for producing Pabst Blue Ribbon beer are
          ----                                                             
acquired primarily from one supplier in the United States and through a local
importer.  The cost of hops represents approximately 6% of the primary raw
material cost in the direct cost of production, excluding depreciation and
packaging, of Pabst Blue Ribbon beer and 6% of the domestic brand beers.

          Water:  The breweries utilize naturally filtered water from deep
          -----                                                           
underground wells adjacent to the brewery facilities that tap the Beriling Shan
water source.  The pristine water quality and composition were primary factors
in choosing this particular water source.  Specifically, the Beriling Shan water
source contains a relatively low mineral content making  it very suitable for
brewing the breweries' particular types of beers, The breweries intensively
monitor the quality of the water used in the brewing processes for compliance
with the Company's own stringent quality standards.  The breweries have recently
expanded their water system to ensure an adequate supply so as to meet all of
the breweries' present requirements.  However, the breweries continue to add
water reservoir capacity to provide for long-term strategic growth plans and to
sustain brewing operations in the event of a prolonged drought.

CONTAINERS
----------

          Zhaoqing Brewery used six types of containers for its beer in 1996:
946 ml. bottles, 640 ml. bottles, 355 ml. bottles, 500 ml. and 355 ml. aluminum
cans and, for its draught beer, beer kegs.  In 1996, approximately 28.8% of
Zhaoqing Brewery's products were packaged in aluminum cans and 68.9% were
packaged in glass bottles.  The remainder of the malt beverages sold in 1996
representing 2.3% of production were packaged in stainless steel kegs.  In 1996,
Zhaoqing Brewery's

                                       11
<PAGE>
 
domestic brand beers were primarily packaged in 640 ml. bottles.   The cost of
aluminum and glass containers represents the single largest cost element in the
production and packaging of Zhaoqing Brewery's beer.

          Noble Brewery used four types of containers for its beer in 1996: 640
ml. bottles, 355 ml. bottles and 355 ml. aluminum cans and, for its draught
beer, beer kegs.  In 1996, approximately 30.5% of Noble Brewery's products were
packaged in aluminum cans and 67.0% were packaged in glass bottles.  The
remainder of the malt beverages sold in 1996 representing 2.5% of production
were packaged in stainless steel kegs.  The cost of aluminum and glass
containers represents the single largest cost element in the production and
packaging of Noble Brewery's beer.

          To date, all of the beer bottles required by the Company have been
supplied by four unaffiliated regional glass manufacturers.  Currently, there is
a recycling bottle program in place and the Company uses both new and recycled
bottles, and new cans in packaging its beer.  The primary supplier of glass
bottles to the Company is Guangdong Glass Factory in Guangzhou, with the balance
of the bottle requirements being sourced from Zhaoqing Glass Factory, Shenzhen
Hua Jing Glass Ltd. and Zhanjiang Glass Factory, which are located in an
adjacent province. In addition, a variety of other bottle manufacturers are
located in the Guangdong Province and neighboring provinces, and represent an
easily available alternative source of supply of bottles.  As a result of both
Zhaoqing Brewery and Noble Brewery maintaining a bottle recycling program in
1996, the containers represented a much smaller proportion of the overall cost.

          American National Can (Zhaoqing) Company Limited ("American National
Can"), an unaffiliated company, supplies approximately 90% of the aluminum cans
used by the breweries.  American National Can utilizes an automatic easy-open
production line from Italy and current annual output is 185 million cans.  Plans
are currently underway to increase annual output to 360 million cans.  American
National Can produces cans of high quality that meet the ISO standard.  The
manufacturing facility for American National Can is located within the same
industrial  complex as the breweries.  American National Can supplies cans
pursuant to supply contracts with each of the breweries that have no fixed
expiration date.  American National Can has agreed to meet the breweries' can
supply requirements at a pre-negotiated price.

TRANSPORTATION/DISTRIBUTION
---------------------------

          In view of the single location of the breweries and the wide
geographic market in China, the Company is constantly reviewing the methods of
distributing its malt beverages.

                                       12
<PAGE>
 
          Transportation:  During 1996, 35% of the Company products sold were
          --------------                                                     
shipped by rail tank cars from Zhaoqing to distributors throughout the Guangdong
Province.  The railcars assigned to the breweries by the shipping railroads are
specially built and insulated to maintain temperature control en route.

          The remaining 65% of the Company's volume is shipped by truck (40%)
and    boat (25%) directly to distributors.  Transportation vehicles are
insulated to keep malt beverage products at proper temperatures until they are
delivered to distributor locations.

          Domestic brand beers made by Zhaoqing Brewery were primarily
transported by trucks and shipped within the regional markets.

          Distribution:  Delivery of Pabst Blue Ribbon beer to retail markets in
          ------------                                                          
Guangdong Province and the rest of China is accomplished through a network of
non-exclusive regional distributors which sell to tobacco and alcohol companies,
bars, restaurants and retail stores.  The Marketing Company has over 400
distributors throughout China.  During 1995 and 1996, the Marketing Company
generally required a 50% cash deposit from its customers as security, based on
the volume of their order flow.  However, for those customers located in
Guangdong Province, the deposit policy had been replaced by cash-on-delivery or
pre-approved credit terms.  Commencing January 1, 1997, as a result of more
intensive competition from the breweries in China, the Marketing Company
abolished the customer deposit requirement except for certain new customers
which are required to make a cash deposit as security.  Customers with material
transaction volume are required to issue bills of exchange from their respective
banks to secure payment on the due date.  As a matter of policy, each regional
distributor works on a non-exclusive basis.  The breweries typically appoint
only one distributor in each region (except for a large region in which more
than one may be appointed) to ensure that such distributor devotes adequate
effort and resources to the development of a broad based retail distribution
network for Pabst Blue Ribbon beer in that distributor's region.  These
distribution arrangements include the flexibility for the breweries to replace
distributors, or reach different arrangements with existing distributors, if it
is in their best interest. No single distributor accounted for more than
approximately 5% of 1996 barrel sales.

          In order to ensure the highest product quality, distributors must
maintain proper rotation of the products at retail accounts and are required to
replace the Company's malt beverage products at their own expense if sales to
consumers have not occurred within the prescribed time period.

          In 1996, approximately RMB 63,000,000 was allocated to promotional
advertising for Pabst Blue Ribbon beer.  Advertising media include television,
radio, billboards, magazines, and newspapers.  In addition, the breweries
provide their

                                       13
<PAGE>
 
distributors with promotional gift items and sales incentive bonuses.  Pabst
Blue Ribbon beer has also been featured in beer festivals organized by the
National Beer Industry Cooperative District Organizations in major, highly
populated urban centers such as Beijing, Shanghai and Guangzhou.

MARKETS AND COMPETITION
-----------------------

          With the recent influx of foreign branded beer into the China markets,
the Company anticipates that competition among all premium beers will grow and
more marketing and advertising efforts will have to be utilized in order to
maintain its market leadership.

          There is a considerable difference in the prices at which local or
regional beer is sold in China as compared to the price of foreign or premium
brands such as Pabst Blue Ribbon beer or the San Miguel, Foster's or Carlsberg
brands.  Generally, a 640 ml. bottle of local beer typically sells for 1-2 RMB
($0.12 U.S. to $0.24 U.S.), compared to premium beers which sells for 4-6 RMB
($0.48 U.S. to $0.72 U.S.).

          Markets:  The beer market in China is experiencing tremendous growth
          -------                                                             
in rates of production and demand.  However, the industry is largely fragmented
and highly regionalized.  A key reason for the fragmented market is the lack of
an effective  transportation system.  China's system of highways is in an early
stage of development, and  combined with heavy traffic, makes it inefficient to
distribute beer over long distances.  Another reason for the fragmented market
is that local breweries are generally small in capacity and lack  the financial
resources and capability to launch a national distribution network and promotion
program.

          Approximately 850 breweries exist in China, over 90% of which are
small local  breweries that produce non-premium beer for local or regional
consumption.  With rising consumer affluence, premium brands such as Pabst Blue
Ribbon are gaining in market share.  In addition, certain Chinese taxes based on
volume rather than sales price favor the higher priced premium beer breweries.

          Competition:  Of the brands comprising the premium sector, Tsing Tao
          -----------                                                         
and Pabst Blue Ribbon are the market leaders.  Tsing Tao is the largest brewer
of  beer in China, producing approximately 348,000 metric tons or 2,958,000
barrels of beer in 1996.  In addition, Tsing Tao has announced plans to increase
its production capacity to 500,000 metric tons.  Tsing Tao is one of the  best
selling beers in China and the largest Chinese exported brand.  It is sold in 32
countries and is China's number one exported beer to the U.S. However, the
Company has been able to attract distributors from Tsing Tao due to the faster
growth rate of Pabst Blue Ribbon beer as well as by offering higher margins.
Other companies seeking market share in the Chinese  market include Carlsberg,
Singha, San Miguel, Beck's, Lowenbrau,

                                       14
<PAGE>
 
Anheuser-Busch, Stroh's, Miller, Foster's, Coor's and Heileman.  Sales for most
of these brands in China are substantially lower than sales of beer produced
under the Pabst Blue Ribbon and Tsing Tao labels.

          The Company also faces competition from Guangdong Blue Ribbon and its
wholly-owned affiliates with respect to the production and distribution of Pabst
Blue Ribbon beer (See "PABST LICENSING ARRANGEMENTS AND TRADEMARKS - Production
by Guangdong Blue Ribbon").  Other than Guangdong Blue Ribbon and its wholly-
owned affiliates, the Company's subsidiary, High Worth JV and its affiliates
(including Noble Brewery), are the only entities that can produce Pabst Blue
Ribbon beer in China.  Guangdong Blue Ribbon Group has commenced its own
production in the Sichuan province of China.  By voluntary agreement with the
Company, the Sichuan production is marketed and sold through the Company's
marketing subsidiary, thus enabling the management of an orderly market.  If the
demand for Pabst Blue Ribbon continues to grow, the Sichuan production can fill
the new demand and may not cause any substantial adverse effect on the Company.
In the event that demand deteriorates and fails to exceed the aggregate
production capacity of all the Pabst Blue Ribbon producing breweries in China,
the Sichuan production could be considered competitive and could have an adverse
effect on the Company.

CAPITAL EXPANSION
-----------------

          In 1994, the Company launched an expansion program to increase brewing
capacity to fulfill projected volume requirements for the foreseeable future.
Noble Brewery spent approximately RMB 216,300,000 in 1994 to construct the
second phase brewing facilities and RMB 5,000,000 to perform routine maintenance
in all plants and to make incremental capital upgrades to all production
facilities.  Zhaoqing Brewery spent approximately RMB 30,800,000 in 1994 to
convert the facilities to produce Pabst Blue Ribbon beer and RMB 1,700,000 to
perform routine maintenance.  In order to expand the annual production capacity
from 50,000 metric tons to 10,000 metric tons,  Zhaoqing Brewery commenced its
expansion program in early 1995 and had completed all major equipment
installation by the end of 1995.  Zhaoqing Brewery spent approximately RMB
139,800,000 in 1995 and early 1996 for this expansion program.

          The Company estimates that capital expenditures in 1997 in connection
with the continuing expansion of Zhaoqing Brewery and the installation of new
packaging lines at Noble Brewery will total approximately RMB15,000,000 and
RMB32,010,000, respectively.

                                       15
<PAGE>
 
RESEARCH AND DEVELOPMENT
------------------------

          The Company is continually engaged in research and development
programs and has developed various improvements in raw materials, processes and
packaging systems and in the development of innovative, quality products.

          The Company's research and development expenditures are primarily
devoted to new product development, its brewing process and ingredients, brewing
equipment, improved manufacturing techniques for packaging  supplies and
environmental improvements in the Company's operational processes.  The focus of
these programs is to improve the quality and value of its malt beverage products
while reducing costs through more efficient processing techniques, equipment
design and improved varieties of raw materials.

ENERGY
------

          The breweries use both heavy oil and electricity as primary sources of
energy.  Heavy oil is used as the primary fuel in the breweries' steam
generation system and is supplied from regional sources with which it has
annual fixed price supply contracts.

          Electricity is supplied by the Zhaoqing City Electricity Bureau.
Since the breweries are one of the larger employers in the region, the breweries
are given priority in obtaining electricity.  The breweries have not experienced
any energy supply problems to  date.  As an alternative source of energy, the
Company also has fuel oil and propane available.  Management of the Company does
not anticipate any supply problems in the future with respect to these natural
resources.

EMPLOYEES
---------

          There are approximately 1,537 employees employed by Zhaoqing Brewery,
Noble Brewery and the Marketing Company, categorized as follows:

                                      16
<PAGE>
 
<TABLE>
<CAPTION>

FUNCTION  
--------                                             ZHAOQING    NOBLE    MARKETING
                                           TOTAL     BREWERY    BREWERY    COMPANY
                                          --------   --------   -------   ---------
<S>                                       <C>        <C>        <C>       <C>
 
     (1)  Production                           795        303       492          --
     (2)  Engineering and Technology
           and Quality Control                 131         60        71          --
     (3)  Management and
           Administration                      178         46        70          62
     (4)  Warehouse                            152         22        40          90
     (5)  Others                               281        131       107          43
                                             -----        ---       ---         ---
                                             1,537        562       780         195
                                             =====        ===       ===         ===
 
</TABLE>

          In 1996, labor costs (including the cost of benefits) accounted for
approximately 3.2% and 4.5% of the total costs of production for Noble Brewery
and Zhaoqing Brewery, respectively.  The Company expects average wage rates of
the employees will increase by approximately 12% in 1997.

          Each full time employee is a member of a local trade union.  Labor
relations have remained positive and the breweries have not had any employee
strikes or major labor disputes.  Unlike trade unions in the western countries,
trade unions in most parts of China are organizations mobilized by the
Government and the enterprises' management.


PABST LICENSING ARRANGEMENTS AND TRADEMARKS

Pabst Trademarks in China
-------------------------

          The arrangements regarding the use of Pabst trademarks in China were
formalized in an agreement dated August 30, 1993 (the "License Agreement")
between Pabst US and Pabst Zhaoqing.  Pabst Zhaoqing was wholly owned at that
time by Zhaoqing Brewery, which was owned by Guangdong Blue Ribbon.  The License
Agreement was for a period of fifteen years from November 7, 1988.  Under the
terms of the License Agreement, Pabst Zhaoqing obtained the exclusive right to
produce and market products under Pabst trademarks in China, the non-exclusive
right to market such Pabst products in other Asian countries except Hong Kong,
Macau, Japan and South Korea, and the right to sublicense the use of the  Pabst
trademarks to any other enterprise in China, subject to approval of Pabst US.
Royalties are payable quarterly to Pabst US based on the volume (units) of beer
produced.

          By an Assets Transferring Agreement dated May 20, 1994 between Pabst
Zhaoqing, Pabst US and Guangdong Blue Ribbon, all rights and duties of the

                                       17
 
<PAGE>
 
License Agreement were assigned and transferred from Pabst Zhaoqing to Guangdong
Blue Ribbon.  Guangdong Blue Ribbon agreed to fulfill the obligation as
sublicensor under the License Agreement between Pabst Zhaoqing as sublicensor,
and Noble Brewery and High Worth JV as sublicensee, respectively, which are
described below.

Noble Brewery
-------------

          By a Sublicense Agreement dated October 12, 1993 (the "Noble
Sublicense Agreement") between Pabst Zhaoqing and Noble Brewery and approved by
Pabst US, Pabst Zhaoqing granted to Noble Brewery a sublicense to use beer-
related Pabst trademarks, the non-exclusive right to produce beer in accordance
with its production capacity under the sublicensed trademarks, and the non-
exclusive right to market such Pabst products in China and other Asian countries
except Hong Kong, Macau, Japan and South Korea.  Royalties calculated on the
same basis as those payable to Pabst US are payable by  Noble Brewery to Pabst
Zhaoqing.  Under the terms of the Noble Sublicense Agreement, Pabst Zhaoqing
agreed that, except to the enterprises of Guangdong Blue Ribbon, it would not
grant further sublicenses to any other enterprises in Guangdong Province to use
the Pabst trademarks thereby granted.  At the time of the Noble Sublicense
Agreement, Zhaoqing Brewery was a member enterprise of Guangdong Blue Ribbon.

High Worth JV/Zhaoqing Brewery
------------------------------

          By a Sublicense Agreement dated May 6, 1994, (the "High Worth
Sublicense Agreement") made between Pabst Zhaoqing and High Worth JV and
approved by Pabst US on September 18, 1994, Pabst Zhaoqing granted to High Worth
JV a sublicense to allow Zhaoqing Brewery to use Pabst trademarks to produce
beer in accordance with its then production capacity under the sublicensed Pabst
trademarks and to market such Pabst products in China and other Asian countries
except Hong Kong, Macau, Japan and South Korea.  With respect to the production
of Pabst Blue Ribbon beer in Guangdong Province, since Zhaoqing Brewery was a
member enterprise of Guangdong Blue Ribbon at the time of the Noble Sublicense
Agreement, Zhaoqing Brewery was entitled to produce Pabst Blue Ribbon beer in
Guangdong Province.

          Under the terms of the High Worth Sublicense Agreement, High Worth JV
and/or its affiliates have the sole right to be granted further sublicenses by
Pabst Zhaoqing for the use of the Pabst trademarks to produce beer in China
provided that they are located outside Guangdong Province.  Further, Pabst
Zhaoqing covenanted that it would not grant further sublicenses in respect of
the Pabst trademarks to produce beer to any other enterprises except High Worth
JV or its affiliates.  Accordingly, High Worth JV controls all future
sublicensing for the production of Pabst Blue Ribbon beer in China, which can be
sold throughout China and other Asian countries, excluding Hong Kong, Macau,
Japan and South Korea.

                                       18

<PAGE>
 
          The term of the High Worth Sublicense Agreement is the same as the
License Agreement.  Royalties are payable quarterly by High Worth JV to Pabst
Zhaoqing based on the volume (units) of beer produced.

Production by Guangdong Blue Ribbon
-----------------------------------

          In late 1996, Guangdong Blue Ribbon established a wholly-owned
subsidiary in Le Shang City, Sichuan Province, PRC, and started converting an
existing brewery with an annual production capacity of 20,000 metric tons into a
Pabst Blue Ribbon brewing complex ("Sichuan Brewery").  Production and sale of
Pabst Blue Ribbon beer commenced in April 1997.

          To the extent that total market demand or sales for Pabst Blue Ribbon
beer is less than the aggregate production capacity of Zhaoqing Brewery and
Noble Brewery, the Company would face competition from Guangdong Blue Ribbon in
China.  As a result, the value of the Company's sublicense rights and its
ability to expand in provinces outside of Guangdong could be affected if the
Company does not establish additional affiliated breweries in the near future.

          The Company currently estimates that the Sichuan Brewery will produce
from 16,000 to 18,000 metric tons of Pabst Blue Ribbon beer in 1997.  In order
to facilitate the efficient distribution and sale of Pabst Blue Ribbon beer in
China, the Company has agreed with Guangdong Blue Ribbon for the coordination of
the sales of Pabst Blue Ribbon beer in an orderly manner.  In April 1997, the
Marketing Company and the Sichuan Brewery entered into a Memorandum of
Understanding.  The Memorandum of Understanding requires the Sichuan Brewery to
sell all of its production of Pabst Blue Ribbon beer to the Marketing Company at
mutually agreed ex-factory prices, and grants the Marketing Company the right to
regulate production to reflect market demand.

          Since the Marketing Company is only allowed to mark-up the cost of
Pabst Blue Ribbon beer purchased in order to adequately cover the selling,
advertising, promotional, distribution and administrative expenses incurred in
selling to distributors, the sale of the Sichuan Brewery's production by the
Marketing Company is not expected to have a material effect on consolidated
results of operations.  However, to the extent that the production of Pabst Blue
Ribbon beer by the Sichuan Brewery causes a commensurate reduction in beer
production and sales by Zhaoqing Brewery and/or Noble Brewery, the Company's
consolidated results of operations could be adversely affected.  The Company
currently estimates that the Sichuan Brewery's 1997 production will represent
approximately 6% of the Company's total 1997 sales.

          As the Company and Guangdong Blue Ribbon are the only entities that
can produce Pabst Blue Ribbon beer in China outside of Guangdong Province, the

                                       19
 

<PAGE>
 
Company is now seeking expansion and cooperation opportunities to extend its
brewing operation into other provinces either with Guangdong Blue Ribbon or with
other local strategic brewers.


THE JOINT VENTURE COMPANIES

Formation of the Joint Venture Companies
----------------------------------------

          In 1980, Zhaoqing Brewery was initially established as a state-owned
enterprise to manufacture beer and non-alcoholic beverages.  In 1992, Zhaoqing
Brewery became a member enterprise (affiliate) of Guangdong Blue Ribbon.  In
June 1993, Zhaoqing Brewery entered into a Joint Venture Agreement with
Goldjinsheng Holding Ltd. ("Goldjinsheng") to form Noble Brewery (the "Noble
Joint Venture Agreement"), pursuant to which Goldjinsheng acquired a 60%
interest and Zhaoqing Brewery acquired a 40% interest.  Goldjinsheng was a
wholly owned subsidiary of Noble China Inc., a company listed on the Toronto
Stock Exchange, Canada.  Upon formation of the joint venture, Noble Brewery
consisted of the beer production facilities and assets of Pabst Zhaoqing, the
then subsidiary of Zhaoqing Brewery, which were utilized to produce and
distribute beer under the Pabst Blue Ribbon brand name.  Zhaoqing Brewery
continued to produce beer under local brands in its separate facility.

          In May 1994, Guangdong Blue Ribbon and Holdings entered into a Joint
Venture Agreement providing for the establishment of High Worth JV.  The term of
the joint venture is 50 years, and is subject to extension by agreement of the
parties and approval from the government.  Holdings contributed 60% of the
capital, which was used by High Worth JV to purchase Zhaoqing Brewery from
Guangdong Blue Ribbon, including its 40% interest in Noble Brewery.  Holdings
and Guangdong Blue Ribbon then owned 60% and 40% interests, respectively, in
High Worth JV.  All of the governmental approvals for the ownership transfer of
Zhaoqing Brewery to High Worth JV were completed in November 1994.  Zhaoqing
Brewery produced and distributed beer under local brands at the time of this
transaction.  Subsequently, in December 1994, the Company acquired all of the
shares of Holdings (See "BUSINESS DEVELOPMENT").

Operation of the Joint Venture Companies
----------------------------------------

          The establishment and activities of High Worth JV and Noble Brewery
are governed by the joint venture law and regulations of China and the
applicable joint venture agreements.  Holdings' interest in the profits of High
Worth JV is in the same proportion (i.e., 60%) as its investment in High Worth
JV;  Zhaoqing Brewery's interest  in the profits of Noble Brewery is in the same
proportion (i.e., 40%) as its investment in Noble Brewery.

                                       20
<PAGE>
 
          With regard to Noble Brewery, pursuant to the Noble Joint Venture
Agreement, the term of the joint venture is for 20 years which may be extended
upon the agreement of the two joint venture partners and approval from the
applicable Chinese  governmental agencies.  Under the Noble Joint Venture
Agreement, Noble Brewery is governed by a board of directors consisting of five
individuals, three of whom, including the Chairman, are nominated by
Goldjinsheng, with the remaining two, including the Vice Chairman, by Zhaoqing
Brewery.  The operation and management of Noble Brewery is  the responsibility
of Zhaoqing Brewery.  Accordingly, Zhaoqing Brewery has the decision making
authority on substantially all aspects of the daily operations of  Noble Brewery
such as purchasing, production, sales and marketing, finance and human
resources.  Goldjinsheng may appoint staff to participate in the accounting
functions of Noble Brewery.  All matters to be approved by the Board of
Directors require either unanimous vote or the vote of four out of the five
directors.  Accordingly, no board decision can be made without the approval of
Zhaoqing Brewery's designee.

          With regard to High Worth JV, pursuant to the High Worth JV Joint
Venture Agreement, High Worth JV is governed by a board of directors consisting
of seven individuals, four of whom are appointed by Holdings and three of whom
are appointed by Guangdong Blue Ribbon.  The Board of Directors controls the
management and operation of High Worth JV.  Generally, votes on the board of
directors are taken by majority vote, except for the following matters relating
to the existence and legal structure of the joint venture, all  of which require
a unanimous vote: amendments to the articles of association; termination or
dissolution of the joint venture; increase in, or transfer of, the registered
capital of the joint venture; establishment of subsidiaries or combination with
other entities; and change in the share structure.  The general manager is
appointed by the Board of Directors and is responsible for carrying out the
decisions of the Board as well as for the day-to-day management of High Worth
JV.

Goldjinsheng Agreement
----------------------

          A provisional agreement, subject to the approval of the applicable
Chinese governmental agencies and the execution of separate definitive
agreements with respect to the various matters referred to as below, was made
among Goldjinsheng the owner of the remaining 60% interest in Noble Brewery,
Zhaoqing Brewery, Noble Brewery, High Worth JV and Guangdong Blue Ribbon on May
10, 1995 (the "Goldjinsheng Agreement") confirming that:

(a)  High Worth JV was entitled to brew and sell beer under the Pabst Blue
     Ribbon label produced in its brewing facilities up to a maximum production
     capacity of 100,000 tons per annum.

                                       21
<PAGE>
 
(b)  High Worth JV and/or companies in which High Worth JV has an interest are
     entitled to be granted a sublicense from Guangdong Blue Ribbon with the
     right to produce and sell beer under the Pabst Blue Ribbon label in the
     Guangdong Province of the PRC ("Additional Facility") to a maximum
     production capacity of 300,000 tons per annum.

     In the event that High Worth JV desires to obtain a sublicense for any
     Additional Facility, Goldjinsheng has the right to purchase up to a 40%
     interest in such Additional Facility.  The purchase price for such interest
     shall be the actual cost of such Additional Facility multiplied by the
     percentage interest that Goldjinsheng elects to purchase.

(c)  A marketing company, owned as to 8% by Guangdong Blue Ribbon, 52% by High
     Worth JV and 40% by Goldjingsheng, will handle and organize the sales of
     Pabst Blue Ribbon beer produced by High Worth JV and the Noble Brewery.
     Each of High Worth JV and the Noble Brewery will create a separate
     distribution company or division of their own.  The distribution company of
     High Worth JV will have the sole right to acquire 100% of the production of
     High Worth JV and 40% of the production of the Noble Brewery; while the
     distribution company of the Noble Brewery will have the sole right to
     acquire 60% of the production of the Noble Brewery.  The respective
     distribution companies will appoint the marketing company as their sole and
     exclusive agent to market Pabst Blue Ribbon beer in the PRC.  If the
     provisions as to ownership are implemented, the respective interests of
     Guangdong Blue Ribbon and the Company in the Marketing Company will be
     adjusted.  (See "BUSINESS - DESCRIPTION OF BUSINESS" and "MARKETING AND
     OPERATIONS - Summary of Operations").

          Subsequent to the signing of the Goldjinsheng Agreement, the Company,
Guangdong Blue Ribbon and Goldjinsheng have attempted to complete the respective
separate definitive agreements.  In December 1996, Guangdong Blue Ribbon and
Goldjinsheng advised the Company that they intend to modify some of the terms of
the Goldjinsheng Agreement and to propose incorporating those modifications in
the respective separate definitive agreements.  The Company is unable to predict
when the respective separate definitive agreements will be completed.

OPERATING IN CHINA
------------------

          Because the operations of the Company are based exclusively in China,
the Company is subject to rules and restrictions governing China's legal and
economic system as well as general economic and political conditions in that
country.

                                       22
<PAGE>
 
          Inflation/Economic Policies.  General economic conditions in China
          ---------------------------                                       
could have a significant impact on the Company.  The economy of China differs in
certain material respects from that of the United States, including its
structure, levels of development and capital reinvestment, growth rate,
government involvement, resource allocation, rate of inflation and balance of
payments position.  Although the majority of China's productive  assets is still
owned by the state, the adoption of an economic reform policy since 1978 has
resulted in the gradual reduction in the role of state economic plans and the
allocation of resources, pricing and management of such assets, with increased
emphasis on the utilization of market forces, and rapid growth in the Chinese
economy.  The success of the Company depends in substantial part on the
continued economic growth in the Chinese economy.

          In recent years, the Chinese economy has experienced periods of rapid
economic growth as well as high rates of inflation, which in turn, has resulted
in the adoption by the Chinese government from time to time of various
corrective measures designed to regulate growth and contain inflation.  Since
1993, the Chinese government has implemented an economic program to control
inflation which has resulted in the tightening of working capital available to
Chinese state-owned enterprises, and in the slowing of the pace of economic
growth and general market consumption.

          Currency Matters.  The State Administration for Exchange Control
          ----------------                                                
("SAEC"), under the authority of the People's Bank of China ("PBOC"), controls
the conversion of Renminbi, the Chinese currency ("RMB") into foreign currency.
Prior to January 1, 1994, RMB could be converted into foreign currency through
the Bank of China or other authorized institutions at official rates fixed daily
by the SAEC.  RMB could also be converted at swap centers ("Swap Centers") open
to Chinese enterprises and foreign-funded Chinese enterprises, subject to SAEC
approval of each foreign currency trade, at exchange rates negotiated by the
parties for each transaction.  In the year ended December 31, 1993, as much as
80% by value of all foreign exchange transactions in China took place through
the Swap Centers.  The exchange rate quoted by the Bank of China differed
substantially from that available in the Swap Centers.  Effective January 1,
1994, a unitary exchange rate system was introduced in China, replacing the
dual-rate system previously in effect.  In connection with the creation of a
unitary exchange rate, the establishment of the China Foreign Exchange Trading
System inter-bank foreign exchange market and the phasing out of the Swap
Centers were announced.  However, the Swap Centers were retained, and foreign-
funded enterprises have been permitted to satisfy foreign exchange requirements
through the Swap Centers.

          Effective July 1, 1996, the government of China began to take steps to
make its currency fully convertible on a "current account" basis by the end of
1996.  This will allow foreign-funded enterprises, whether wholly owned or joint
ventures with Chinese, to buy and sell foreign exchange in banks for purposes of
trade,

                                       23
<PAGE>
 
services, debt repayment and profit repatriation.  The "current account"
measures the flow of money into and out of a nation, including the net balance
on trade in goods and services, plus remittances.

          Legal System.  Since 1979, many laws and regulations dealing with
          ------------                                                     
economic matters in general and foreign investment in particular have been
promulgated in China.  The Chinese constitution adopted in 1989 authorizes
foreign investment, and guaranties the "lawful rights and interests" of foreign
investors in China.  The trend of legislation over the past twelve years has
significantly enhanced the protection afforded foreign investment and  allowed
for more active control by foreign parties of foreign investment enterprises in
China.  There can be no assurance, however, that the current trend and economic
legislation toward promoting market reforms and experimentation will not be
slowed, curtailed or reversed, especially in the event of a change in
leadership, social or political disruption, or unforeseen circumstances
affecting China's political, economic or social life.

          Despite some progress in developing a legal system, China does not
have a comprehensive system of laws.  The interpretation of Chinese laws may be
subject to policy changes reflecting domestic political factors.  Enforcement of
existing laws may be uncertain and sporadic, and implementation and
interpretation may be inconsistent.  The Chinese judiciary is relatively
inexperienced in enforcing the laws or terms of contracts, leading to a higher
than usual degree of uncertainty as to the outcome of litigation.  Even where
adequate laws exist in China, it may be impossible to obtain swift and equitable
law enforcement, or to obtain enforcement of a judgment by a court of another
jurisdiction.  As the Chinese legal system develops, the promulgation of new
laws, changes to existing laws and the preemption of local regulations by
national laws may adversely affect foreign investors, such as the Company.

          The Company's activities in China may by law be subject, in some
cases, to administrative review and approval by various national, provincial and
local agencies of the Chinese government.  While China has promulgated an
administrative procedural law permitting redress to the courts with respect to
certain administrative actions, this law appears to be largely untested in its
context.

          Tax Matters.  The Company's operations in China are subject to four
          -----------                                                        
types of taxes: Income Tax, Value Added Tax ("VAT"), Consumption Tax and other
Sales Tax.

          Noble Brewery and High Worth JV are governed by the Income Tax Law of
China concerning Foreign Investment Enterprises and Foreign Enterprises (the
"FIE Law"). Under the current FIE Law, Noble Brewery and High Worth JV are
exempt from payment of Income Tax for the first two taxation years in which
Noble Brewery and High Worth JV become profitable.  The Income Tax rate for the

                                       24
<PAGE>
 
following three years is reduced by 50% and is thereafter calculated at the full
rate.  The 100% tax exemption for High Worth JV and the 50% tax exemption for
Noble Brewery commenced on January 1, 1996.  The current Income Tax rate on
profits for Noble Brewery is 27% (33% less a 6% temporary reduction provided as
an economic incentive by the Chinese government) and for High Worth JV is 33%,
unless specifically exempted or reduced by the local authorities.

          In addition to the FIE Law, which is computed on profits, Noble
Brewery and Zhaoqing Brewery are also subject to two kinds of turnover taxes for
their respective sales, namely the VAT and Consumption Tax.  The applicable VAT
rate is 17% for brewery products sold in China.  The amount of VAT liability is
determined by applying the    applicable tax rate to the invoiced amount less
VAT paid on purchases made with the relevant invoices in support.  The
Consumption Tax rate together with a Government Surcharge for brewery products
is RMB 220 per metric ton.  The Consumption Tax is determined on the volume of
sales within China.

          Currently, there are no withholding taxes imposed on dividends paid by
High Worth JV to Holdings.

          Distribution of Profits.  Applicable Chinese laws and regulations
          -----------------------                                          
require that, before a Sino-foreign joint venture enterprise (such as High Worth
JV and Noble  Brewery) distributes profits to investors, it must (1) satisfy all
tax liabilities; (2) provide for losses in previous years; and (3) make
allocations in proportions determined at the sole discretion of the Board of
Directors to a general reserve fund, an enterprise development fund and a staff
welfare and employee bonus fund.  Distribution of profits by the Joint Ventures
to  the Company and their other equity investors are required to be in
proportion to each party's respective investment in the joint venture.

Regulations
-----------

          Central, provincial and local laws and regulations govern the
operations of the breweries. The central government and all provinces in which
the Company's malt beverage products are distributed regulate trade practices,
advertising and marketing practices, relationships with distributors and related
matters. Governmental entities also levy various taxes, license fees and other
similar charges and may require bonds to ensure compliance with applicable laws
and regulations.

BUSINESS DEVELOPMENT
--------------------

          The Company was organized in the state of Florida as Video Promotions,
Inc. on April 20, 1988.  The Company subsequently changed its name to

                                       25
<PAGE>
 
National Sweepstakes, Inc. and then to Natural Fuels, Inc. For a period of time
prior to December 16, 1994, the business of the Company was devoted to seeking
potential acquisition or merger opportunities.

          On December 16, 1994, the Company acquired all of the outstanding
shares of Holdings from Oriental Win Holdings Ltd. ("Oriental Win") and
Goldchamp Ltd. ("Goldchamp") in exchange for 3,960,000 shares and 240,000 shares
of the Company's Class A Common Stock issued to Oriental Win and Goldchamp,
respectively, and 3,000,000 shares of the Company's Class B Common Stock issued
to Oriental Win.  The Class B shares carry two votes per share but are otherwise
equivalent to the Class A Common Stock.  In addition, the Company issued an
aggregate of 600,000 shares of the Company's Class A Common Stock to various
parties for consulting services in connection with the acquisition.  At the time
of the acquisition, Holdings owned a 60% interest in High Worth JV.  This
transaction was accounted for as a recapitalization of Holdings with Holdings as
the acquirer (reverse acquisition).

          On November 22, 1994, the Company effected a 1-for-22 reverse stock
split in anticipation of the transaction.

          On March 15, 1995, the Company changed its name to CBR Brewing
Company, Inc.
 
ITEM 2.   PROPERTIES

          The Company's major facilities are set forth below:
<TABLE>
<CAPTION>
 
FACILITY              LOCATION                   PRODUCT
--------              --------                   -------        
<S>                   <C>                        <C>
 
Noble Brewery         City of Zhaoqing on site   Malt Beverages
                      containing approximately
                      135,000 square meters
 
Zhaoqing Brewery      City of Zhaoqing on site   Malt Beverages
                      containing approximately
                      131,000 square meters 
</TABLE>
                                     

          All of the Company's facilities are well maintained and suitable for
their respective operations.

          In 1996, the Company estimates that Zhaoqing Brewery and Noble Brewery
operated at approximately 83% and 77%, respectively, of their theoretical

                                       26
<PAGE>
 
brewing capacities.  Annual production capacity can vary due to product mix,
packaging mix and seasonality.


ITEM 3.   LEGAL PROCEEDINGS

          The Company is not a party to, nor is any of its property subject to,
any pending legal proceedings.  The Company, however, is contemplating
commencing legal proceedings in the PRC against Guangdong Blue Ribbon in
connection with the establishments of the Sichuan Brewery as well as against Yun
Zhong Liu and Zi Hang Niu, former directors of the Company, who are the General
Manager and Deputy General Manager, respectively, of Guangdong Blue Ribbon.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ended December 31, 1996.

                                       27
<PAGE>
 
                                   PART  II.

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

          The Class A Common Stock of CBR Brewing Company, Inc. is listed for
trading on the NASD's Electronic Bulletin Board under the symbol CBRB.  During
1994, 1995 and 1996, there was no trading activity.

          The approximate number of security holders of record of the Class A
Common Stock at July 31, 1997 was 16.

          The Company has never paid cash dividends on its Common Stock and has
no present intention of paying cash dividends in the foreseeable future.  It is
the present policy of the Board of Directors to retain all earnings to provide
for the growth of the Company.

          The Company's ability to pay dividends to its shareholders is
dependent on the Company receiving distributions through Holdings from its PRC
subsidiaries and affiliates, which generate all of the Company's earnings.  The
Company is required to provide for U.S. Federal income taxes on the earnings
distributed in the form of dividends from Noble Brewery.

          Pursuant to the relevant laws and regulations of Sino-foreign joint
venture enterprises, the profits of High Worth JV, calculated pursuant to
generally accepted accounting principles in the PRC ("PRC GAAP"), are available
for distribution in the form of cash dividends to each equity investor, in
proportion to each investor's interest in the joint venture, after satisfaction
of all tax liabilities, provision for any losses in previous years, and
appropriations to reserve funds, as determined at the discretion of the board of
directors in accordance with PRC accounting standards and regulations.  The
principal adjustments necessary to conform PRC GAAP financial statements to
financial statements prepared in accordance with generally accepted accounting
principles in the United States ("US GAAP") are the reclassification of certain
expense items from income appropriations to charges against income, adjustments
for sales, other income and purchases recognized on a cash basis, depreciation
charges, deferred taxation and revaluation of fixed assets.

          In accordance with the relevant laws and regulations in the PRC, the
profits available for distribution are based on the PRC GAAP financial
statements.  If High Worth JV has foreign currency available after meeting the
operational needs of its PRC subsidiaries, it may make a profit distribution to
Holdings.  Otherwise, it will be necessary to obtain approval and convert such
distributions at the exchange centers.  At December 31, 1996, the Company's
distributable profits were  approximately RMB 38,727,000.

                                       28
<PAGE>
 
ITEM 6.   SELECTED FINANCIAL DATA

     The following financial data has been derived from the audited consolidated
financial statements, and should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this document.
All amounts are in RMB.  The exchange rate was US$1.00 to RMB 8.45 at December
31, 1994, RMB 8.32 at December 31, 1995 and RMB 8.32 at December 31, 1996.

                                       29
<PAGE>
 
<TABLE>
<CAPTION>
 
                                                     CBR Brewing Company, Inc.
(in RMB)                                             and Subsidiaries (3) (4)                  Zhaoqing Brewery and Subsidiaries (3)
                                         --------------------------------------------          ---------------------------------
                                                                          Two Months      Ten Months
                                         Years Ended December 31            Ended          Ended        Years Ended December 31,  
                                         -----------------------         December 31,    October 31,    ------------------------
                                              1996           1995            1994           1994           1993           1992
                                         -------------    -----------     -----------     ----------   ------------    -----------
Consolidated Statement
  of Income Data:
 
<S>                                      <C>              <C>              <C>            <C>           <C>            <C>
Sales, net of sales taxes                1,233,277,624    566,786,939      11,400,806     57,287,429    191,582,526    154,440,090
Gross profit                               194,138,432     71,133,533       4,226,389     19,027,672     89,167,691     71,100,982
Operating income                            25,325,483      6,458,405       2,978,087     11,616,044     67,013,472     51,011,530
Net income                                  20,211,809     19,625,968       3,713,687     42,012,446    106,586,492        135,719
Net income per common share (1) (2)               2.53           2.45             .46           5.25          13.32            .02
Cash dividends declared per
  common share                                     -0-            -0-             -0-            -0-            -0-            -0-
 
<CAPTION>  
                                                        As of December 31,                          As of December 31,
                                         --------------------------------------------               ------------------
                                               1996           1995            1994                         1993
                                               ----           ----            ----                         ----     
Consolidated Balance
  Sheet Data:
 
<S>                                        <C>            <C>             <C>                          <C>
Net working capital (deficiency)           (83,554,409)   (97,555,553)    (40,970,594)                 (112,717,589)
Total assets                               826,502,148    746,898,874     357,149,524                   326,758,328
Long term liabilities                       15,862,549     24,897,291      27,866,856                    28,035,303
Advances from shareholders                  73,794,948     73,794,948      74,947,990                             -
Shareholders' equity                       147,588,482    127,376,673     107,750,705                    99,707,666
</TABLE>

                                       30
<PAGE>
 
(1)  Net income per common share is presented  for the ten months ended October
     31, 1994 and the years ended December 31, 1993 and 1992, assuming that the
     8,000,013 shares of common stock issued and outstanding for the years ended
     December 31, 1996 and 1995, and the two months ended December 31, 1994,
     were also issued and outstanding for all prior periods.

(2)  Adjusted for the 1-for-22 reverse stock split effective November 22, 1994.

(3)  Holdings was formed to acquire a 60% interest in High Worth JV, a Sino-
     foreign equity joint venture enterprise, which in turn acquired a 100%
     interest in Zhaoqing Brewery on October 31, 1994.  The consideration for
     this purchase transaction was approximately RMB 166,400,000 (See "ITEM 1.
     BUSINESS - THE JOINT VENTURE COMPANIES").

(4)  On December 16, 1994, Holdings was acquired by the Company, a United
     States- based public company, in a reverse acquisition.  This transaction
     has been accounted for as a recapitalization of Holdings with Holdings as
     the acquirer (See "ITEM 1.  BUSINESS - BUSINESS DEVELOPMENT").


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

Overview
--------

          Effective December 16, 1994, the Company acquired Holdings, which,
through its subsidiaries and affiliates, is engaged in the production and sale
of Pabst  Blue Ribbon beer in China.  Holdings is a holding company which was
formed solely to    effect the acquisition of a 60% interest in High Worth JV.
On October 31, 1994, High Worth JV acquired a 100% interest in Zhaoqing Brewery,
including Zhaoqing Brewery's 40% interest in Noble Brewery.

          The acquisition of Zhaoqing Brewery, including Zhaoqing Brewery's 40%
interest in the Noble Brewery, has been accounted for under the purchase method
of accounting.  The consolidated financial statement include the results of
operations of Zhaoqing Brewery on a consolidated basis and Nobel Brewery under
the equity method of accounting for investments commencing October 31, 1994.
Accordingly, the Company's post-acquisition consolidated statements of income
are presented for the two months ended December 31, 1994, and the years ended
December 31, 1995 and 1996; a comparative consolidated statement of income for
the year ended December 31, 1994 is not presented, although certain comparative
financial information is provided separately for the operations of Zhaoqing
Brewery and its affiliate, Noble Brewery.

                                       31
<PAGE>
 
          For accounting purposes, the acquisition of Holdings by the Company
has been treated as a recapitalization of Holdings with Holdings as the acquirer
(reverse acquisition).  Accordingly, the historical financial statements prior
to December 16, 1994 are those of Holdings.

          During February 1995, the Marketing Company was established to conduct
the distribution, marketing and promotion throughout China of the Pabst Blue
Ribbon beer produced by Zhaoqing Brewery and Noble Brewery.  The Marketing
Company also sells mineral water and non-carbonated soft drinks produced by
Guangdong Blue Ribbon under the Blue Ribbon brand name.  Zhaoqing Brewery HC
owns a 70% interest and Guangdong Blue Ribbon owns a direct 30% interest and an
indirect 28% interest in the Marketing Company.  As a result, the Company owns a
42% net interest in the Marketing Company.  Zhaoqing Brewery and Noble Brewery
commenced selling their production of Pabst Blue Ribbon beer through the
Marketing  Company in April 1995 and July 1995, respectively.  The consolidated
financial statements include the results of operations of the Marketing Company
on a consolidated basis commencing from April 1, 1995.  The Company has a
controlling interest in the Marketing Company even though it has an effective
interest of only 42% because of the Company's 60% interest in High Worth JV and
70% interest in the Marketing Company (through Zhaoqing Brewery HC), and because
the Company controls the majority of the votes on the board of directors of the
Marketing Company and Zhaoqing Brewery HC.

          Prior to March 1995, Zhaoqing Brewery had produced exclusively
domestic brands of beer, and had an annual production capacity of 50,000 metric
tons or 425,000 barrels of beer.  In late 1994, Zhaoqing Brewery commenced the
conversion and refinement of its original facilities and adopted a new brewing
technology in order to produce beer under the Pabst Blue Ribbon label.  During
March 1995, Zhaoqing Brewery discontinued the production of all domestic brand
beer and commenced exclusive production of Pabst Blue Ribbon beer on a full-
scale basis.  However, approximately 5% of beer production normally does not
meet Pabst Blue Ribbon quality standard and is packed and distributed as lower-
priced, local brand beer.  With the implementation of the new brewing technology
and the purchase of additional equipment during 1995, Zhaoqing Brewery reached
its current full-scale annual production capacity of 100,000 metric tons or
850,000 barrels of beer at the end of 1995.

          Noble Brewery has produced Pabst Blue Ribbon beer exclusively since it
commenced operations.  Prior to 1994, Noble Brewery had an annual production
capacity of 80,000 metric tons or 680,000 barrels of beer.  With the completion
of a second brewing facility in July 1994, Noble Brewery reached its full-scale
annual production capacity of  200,000 metric tons or 1,700,000 barrels of beer
in late 1994.

                                       32
<PAGE>
 
          In January 1996, Zhaoqing Brewery HC transferred all of its operating
assets and liabilities to High Worth JV pursuant to the original Joint Venture
Agreement, the Asset Transfer Agreement signed in May 1994, and the relevant
government regulations.  Subject to the completion of certain legal procedures
and documentation, the investments in Noble Brewery and the Marketing Company
will be transferred to High Worth JV.  Zhaoqing Brewery HC is currently acting
as the nominee for High Worth JV with respect to the investments in Noble
Brewery and the Marketing Company.

          Upon the completion of the required procedures and documentation, all
of the assets and liabilities formerly controlled by Zhaoqing Brewery will have
been transferred to High Worth JV.  During 1996, the operating activities of
Zhaoqing Brewery were part of High Worth JV.  The consensus and approval from
the local tax authority was recently obtained.  In the following text, "Zhaoqing
Brewery" refers to the brewing complex, which was transferred to High Worth JV
in January 1996, and "Zhaoqing Brewery HC" refers to the PRC entity that
previously owned the brewing complex from November 1994 through December 1995.

          In late 1996, Guangdong Blue Ribbon established a wholly-owned
subsidiary in Le Shang City, Sichuan Province, PRC, and started converting an
existing brewery with an annual production capacity of 20,000 metric tons into a
Pabst Blue Ribbon brewing complex ("Sichuan Brewery").  Production and sale of
Pabst Blue Ribbon beer commenced in April 1997.  To the extent that total market
demand is less than the aggregate production capacity of Zhaoqing Brewery and
Noble Brewery, the Company would face competition from Guangdong Blue Ribbon in
China.  As a result, the value of the Company's sublicense rights and its
ability to expand in provinces outside of Guangdong could be affected if the
Company does not establish additional affiliated breweries in the near future.

          The Company currently estimates that the Sichuan Brewery will produce
from 16,000 to 18,000 metric tons of Pabst Blue Ribbon beer in 1997.  In order
to facilitate the efficient distribution and sale of Pabst Blue Ribbon beer in
China, the Company has agreed with Guangdong Blue Ribbon for the coordination of
the sales of Pabst Blue Ribbon beer in an orderly manner.  During April 1997,
the Marketing Company and the Sichuan Brewery entered into a Memorandum of
Understanding.  The Memorandum of Understanding requires the Sichuan Brewery to
sell all of its production of Pabst Blue Ribbon beer to the Marketing Company at
mutually agreed ex-factory prices, and grants the Marketing Company the right to
regulate production to reflect market demand.

          Since the Marketing Company is only allowed to mark-up the cost of
Pabst Blue Ribbon beer purchased in order to adequately cover the selling,
advertising, promotional, distribution and administrative expenses incurred in
selling

                                       33
<PAGE>
 
to distributors, the sale of the Sichuan Brewery's production by the Marketing
Company is not expected to have a material effect on consolidated results of
operations.  However, to the extent that the production of Pabst Blue Ribbon
beer by the Sichuan Brewery causes a commensurate reduction in beer production
and sales by Zhaoqing Brewery and/or Noble Brewery, the Company's consolidated
results of operations could be adversely affected.  The Company currently
estimates that the Sichuan Brewery's 1997 production will represent
approximately 6% of the Company's total 1997 sales.

          As the Company and Guangdong Blue Ribbon are the only entities that
can produce Pabst Blue Ribbon beer in China outside of Guangdong Province, the
Company is now seeking expansion and cooperation opportunities to extend its
brewing operation into other provinces either with Guangdong Blue Ribbon or with
other local strategic brewers.

Consolidated Results of Operations:
---------------------------------- 

          Zhaoqing Brewery and Noble Brewery commenced distribution of their
production of Pabst Blue Ribbon beer through the Marketing Company during April
1995 and July 1995, respectively.  The commencement of the Marketing Company's
operations, which are presented on a consolidated basis, resulted in a
significant change in the Company's operating structure and income statement
presentation during 1995.  Accordingly, a comparison of results of operations
for the year ended December 31, 1996 to results of operations for the year ended
December 31, 1995 is not necessarily meaningful.

          The Company conducts a substantial portion of its purchases through
related parties, and has additional significant continuing transactions with
such parties (See "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS")

Years Ended December 31, 1996 and 1995 :

Sales:
----- 

          During the year ended December 31, 1996, Zhaoqing Brewery produced
83,494 metric tons and sold 83,439 metric tons of beer, of which 2,526 metric
tons (3.0%) were local brand beer and 80,913 metric tons (97.0%) were Pabst Blue
Ribbon beer.  The 2,526 metric tons of local brand beer were produced throughout
1996.  During the year ended December 31, 1995, Zhaoqing Brewery produced 42,318
metric tons and sold 45,708 metric tons of beer, of which 11,388 metric tons
(24.9%) were local brand beer and 34,320 metric tons (75.1%) were Pabst Blue
Ribbon beer.  Of the 11,388 metric tons of local brand beer produced in

                                       34
<PAGE>
 
1995, 8,324 metric tons (73.1%) were produced during the three months ended
March 31, 1995.  As a result of increased demand for Pabst Blue Ribbon beer, in
conjunction with the implementation of the new brewing technology and the
installation of new equipment to increase the production capacity at the end of
1995, total beer sold increased by 37,731 metric tons or 82.5% from 1995 to
1996.

          For the year ended December 31, 1996, net sales, almost all of which
were conducted through the Marketing Company, were RMB1,233,277,624, of which
RMB 1,158,091,595 (93.9%) was from the sale of 232,066 metric tons of beer and
RMB 75,186,029 (6.1%) was from the sale of mineral water and non-carbonated soft
drinks.  During the year ended December 31, 1996, the Marketing Company
purchased for resale RMB 695,150,225 of beer products from Noble Brewery and RMB
69,166, 604 of mineral water and non-carbonated soft drinks from Guangdong Blue
Ribbon.  Approximately 99% of total sales in 1996 were from products with the
Pabst Blue Ribbon brand name.

          For the year ended December 31, 1995, net sales, consisting of sales
both by Zhaoqing Brewery directly and through the Marketing Company, were RMB
566,786,939, of which RMB 504,500,315 (89.0%) was from the sale of 107,015
metric tons of beer and RMB 62,286,624 (11.0%) was from the sale of mineral
water and non-carbonated soft drinks.  During the year ended December 31, 1995,
the Marketing Company purchased for resale RMB 327,805,406 of beer products from
Noble Brewery and RMB 61,708,086 of mineral water and non-carbonated soft drinks
from Guangdong Blue Ribbon.  Approximately 95% of total sales in 1995 were from
products with the Pabst Blue Ribbon brand name.

Gross Profit:
------------ 

          For the year ended December 31, 1996, gross profit was RMB 194,138,432
or 15.7% of net sales, as compared to RMB 71,133,533 or 12.6% of net sales for
the year ended December 31, 1995.  The increase in the gross profit margin of
3.1% on an absolute basis or 24.6% in 1996 as compared to 1995 was a result of a
change in the product mix, an increase in sales unit volume, an increase in
sales prices, the introduction of a bottle recycling program during 1996, and
the Marketing Company handling the distribution of all of the Company's
production of Pabst Blue Ribbon beer throughout 1996.

          The Company expects that it will experience pressure on its gross
profit margin during 1997 as a result of the following factors:  a general
softening of consumer demand in China, caused in substantial party by the
central government of China's regulatory controls and economic policies;
increasing competition from foreign premium brand beers; and potential
competition from the brewery being established by Guangdong Blue Ribbon in
Sichuan Province.

                                       35
<PAGE>
 
          During July 1996, Renhe Trading Company, a trading company located in
Shenzhen, PRC, commenced importing and distributing U.S. - brewed Pabst Blue
Ribbon beer in Southern China, and advertised widely throughout Southern China
that Pabst US had granted it the exclusive right to distribute U.S. - brewed
Pabst Blue Ribbon beer in China.  Pabst US officially denied granting such
authorization.

          The Company and its joint venture partner, Guangdong Blue Ribbon,
which is the exclusive license holder of the Pabst Blue Ribbon brand in China,
jointly undertook actions to stop the importation of U.S. - brewed Pabst Blue
Ribbon beer by making successful applications to the head offices of the Customs
Bureau and the Industrial and Commercial Bureau in Beijing for protection of the
trademark and the exclusive license rights.  During September 1996, the head
office of the Customs Bureau officially notified all Provincial Customs
Departments to confiscate all imported Pabst Blue Ribbon beer.  In addition, the
Industrial and Commercial Bureau instructed its provincial branches to
confiscate any imported U.S. - brewed Pabst Blue Ribbon beer that appeared in
the retail market.  Accordingly, the influx of imported U.S. - brewed Pabst Blue
Ribbon beer was substantially reduced after September 1996.  However, there can
be no assurances that this problem will not reoccur in the future.

Selling, General and Administrative Expenses:
-------------------------------------------- 

          For the year ended December 31, 1996, selling, general and
administrative expenses were RMB 168,812,949 (13.7% of net sales), consisting of
selling expenses of RMB 103,460,671 and general and administrative expenses of
RMB 65,352,278.  For the year ended December 31, 1995, selling, general and
administrative expenses were RMB 64,675,128 (11.4% of net sales), consisting of
selling expenses of RMB 32,821,498 and general and administrative expenses of
RMB 31,853,630.

          Selling expenses include costs relating to the advertising, promotion,
marketing and distribution of Pabst Blue Ribbon beer in China.  During 1995, the
Marketing Company was established to market throughout China the Pabst Blue
Ribbon beer produced by Zhaoqing Brewery and Noble Brewery.  The Marketing
Company assumed the responsibility for marketing the Pabst Blue Ribbon beer
produced by Zhaoqing Brewery and Noble Brewery during April 1995 and July 1995,
respectively, and incurred most of the 1995 and almost all of the 1996 selling
expenses.  General and administrative expenses include the costs associated with
the operation of the Company's executive offices, and the legal and accounting
costs associated with the operation of a public company.

          Selling expenses increased by RMB 70,639,173 or 215.2% in 1996 as
compared to 1995, and represented 8.4% of net sales in 1996 as compared to 5.8%
of

                                       36
<PAGE>
 
net sales in 1995, as a result of increased marketing and promotion costs
incurred during 1996 to support increased marketing efforts necessitated by the
increased production capacity of Zhaoqing Brewery and Noble Brewery.  General
and administrative expenses increased by RMB 33,498,648 or 105.2% in 1996 as
compared to 1995, and represented 5.3% of net sales in 1996 as compared to 5.6%
of net sales in 1995.  During the year ended December 31, 1996, the Company
recorded an allowance for doubtful accounts of RMB 9,914,114, as compared to an
allowance for doubtful accounts of RMB 5,600,000 for the year ended December 31,
1995.

          As a result of softening consumer demand and increasing competition
from foreign premium brand beers, the Company anticipates that it will continue
to implement an expanded advertising and promotional program in 1997 in order to
stimulate consumer demand and maintain the market position of Pabst Blue Ribbon
beer in China.

Operating Income:
---------------- 

          For the year ended December 31, 1996, operating income was RMB
25,325,483 or 2.1% of net sales, as compared to operating income of RMB
6,458,405 or 1.1% of net sales for the year ended December 31, 1995.

Interest Income and Interest Expense:
------------------------------------ 

          For the year ended December 31, 1996, interest income was RMB
6,119,470.  There was no interest income for the year ended December 31, 1995.
The increase in interest income in 1996 as compared to 1995 is primarily the
result of interest earned on amounts due from Guangdong Blue Ribbon during 1996.

          For the year ended December 31, 1996, interest expense, net of amounts
capitalized, was RMB 20,767,252, as compared to RMB 3,236,058 for the year ended
December 31, 1995.  The increase in interest expense in 1996 as compared to 1995
is primarily the result of amounts borrowed from Guangdong Blue Ribbon,
increased borrowings by Zhaoqing Brewery and the amounts borrowed from related
companies that are controlled by beneficial shareholders of the Company.

Income Taxes:
------------ 

          For the year ended December 31, 1996, income tax expense was RMB
4,721,444.  Although the Company's operations in China were subject to a 100%
tax exemption in 1995 and 1996, deferred income taxes were recorded in 1996
primarily as a result of a United States Federal tax liability of RMB 4,413,000
resulting from dividends declared during January 1997 by Noble Brewery on its
December 31, 1996 retained earnings, payable to Zhaoqing Brewery HC.  For the
year ended December

                                       37
<PAGE>
 
31, 1995, income tax expense was RMB 1,000,000, which represented deferred
income taxes as a result of temporary timing differences with respect to
accelerated depreciation of property, plant and equipment.

Net Income:
---------- 

          For the year ended December 31, 1996, net income was RMB 20,211,809
(RMB 2.53 per share) or 1.6% of net sales, as compared to net income of RMB
19,625,968 (RMB 2.45 per share ) or 3.5% of net sales for the year ended
December 31, 1995.

Year Ended December 31, 1995 and Two Months Ended December 31, 1994 :

Sales:
----- 

          During the year ended December 31, 1995, Zhaoqing Brewery produced
42,318 metric tons and sold 45,708 metric tons of beer, of which 11,388 metric
tons (24.9%) were local brand beer and 34,320 metric tons (75.1%) were Pabst
Blue Ribbon beer.  Of the 11,388 metric tons of local brand beer produced in
1995, 8,324 metric tons  (73.1%) were produced during the three months ended
March 31, 1995.  During the year ended December 31, 1994 and the two months
ended December 31, 1994, Zhaoqing Brewery sold 33,000 metric tons and 4,686
metric tons of beer, respectively, 100% of which was local brand beer.  Total
beer sold increased by 12,708 metric tons or 38.5% from 1994 to 1995 as a result
of a shift in product mix from local brand beer to Pabst Blue Ribbon beer, which
allowed the Company to take advantage of growing consumer demand in China for
premium beers such as Pabst Blue Ribbon beer as compared to local brand beer.

          For the year ended December 31, 1995, net sales, consisting of sales
both by Zhaoqing Brewery directly and through the Marketing Company, were RMB
566,786,939, of which RMB 504,500,315 (89.0%) was from the sale of 107,015
metric tons of beer and RMB 62,286,624 (11.0%) was from the sale of mineral
water and non-carbonated soft drinks.  During the year ended December 31, 1995,
the Marketing Company purchased for resale RMB 327, 805,406 of beer products
from Noble Brewery and RMB 61,708,086 of mineral water and non-carbonated soft
drinks from Guangdong Blue Ribbon.  Approximately 95% of total sales in 1995
were from products with the Pabst Blue Ribbon brand name.  For the two months
ended December 31, 1994, net sales were RMB 11,400,806, consisting exclusively
of 4,687 metric tons of beer sales by Zhaoqing Brewery directly.

                                       38
<PAGE>
 
Gross Profit:
------------ 

          For the year ended December 31, 1995,  gross profit was RMB 71,133,533
or 12.6% of net sales.  For the two months ended December 31, 1994, gross profit
was RMB 4,226,389 or 37.1% of net sales.  As a result of the change in the
product mix, increased discounts offered to distributors, increased raw material
costs, and, in particular, the establishment and operating structure of the
Marketing Company, gross margins will not return to pre-1995 levels.

Selling, General and Administrative Expenses:
-------------------------------------------- 

          For the year ended December 31, 1995, selling, general and
administrative expenses were RMB 64,675,128 (11.4% of net sales), consisting of
selling expenses of RMB 32,821,498 and general and administrative expenses of
RMB 31,853,630.  For the two months ended December 31, 1994, selling, general
and administrative expenses were RMB 1,248,302 (10.9% of net sales).  During
1995, the Company recorded an allowance for doubtful accounts of RMB 5,600,000.

          Selling expenses include costs relating to the advertising, promotion,
marketing and distribution of Pabst Blue Ribbon beer in China.  During 1995, the
Marketing Company was established to market throughout China the Pabst Blue
Ribbon beer produced by Zhaoqing Brewery and Noble Brewery.  The Marketing
Company assumed the responsibility for marketing the Pabst Blue Ribbon beer
produced by Zhaoqing Brewery and Noble Brewery during April 1995 and July 1995,
respectively, and incurred most of the 1995 selling expenses.  General and
administrative expenses include the costs associated with the operation of the
Company's executive offices, and the legal and accounting costs associated with
the operation of a public company.

Operating Income:
---------------- 

          For the year ended December 31, 1995, operating income was RMB
6,458,405 or 1.1% of net sales.  For the two months ended December 31, 1994,
operating income was RMB 2,978,087 or 26.1% of net sales.

Corporate Reorganization Expenses:
--------------------------------- 

          For the two months ended December 31, 1994, corporate reorganization
expenses were RMB 2,551,921, and consisted of  management's estimate of the fair
value of the shares of common stock issued to certain merchant bankers,
consultants and several executives of the Company in conjunction with the
reverse acquisition of Holdings by the Company effective December 16, 1994.

                                       39
<PAGE>
 
Interest Income and Interest Expense:
------------------------------------ 

          There was no interest income for the year ended December 31, 1995 and
for the two months ended December 31, 1994.

          For the year ended December 31, 1995, interest expense, net of amounts
capitalized, was RMB 3,236,058.  For the two months ended December 31, 1994,
interest expense, net of amounts capitalized, was RMB 1,317,178.

Income Taxes:
------------ 

          For the year ended December 31, 1995, income tax expense was RMB
1,000,000.  Although the Company's operations in China were subject to a tax
holiday in 1995, deferred income taxes were recorded as a result of temporary
timing differences with respect to accelerated depreciation of property, plant
and equipment.  For the two months ended December 31, 1994, no income tax
expense was incurred.

Net Income:
---------- 

          For the year ended December 31, 1995, net income was RMB 19,625,968
(RMB 2.45 per share) or 3.5% of net sales.  For the two months ended December
31, 1994, net income was RMB 3,713,687 (RMB .46 per share) or 32.6% of net
sales.


NOBLE BREWERY
-------------

Years Ended December 31, 1996 and 1995:

Sales:
----- 

          During the year ended December 31, 1996, Noble Brewery produced
155,506 metric tons and sold 154,435 metric tons of beer, as compared to 155,974
metric tons produced and 161,200 metric tons of beer sold during the year ended
December 31, 1995.  Total beer sold decreased by 6,765 metric tons or 4.2% from
1995 to 1996 as a result of the regulation of sales by the Marketing Company,
which purchases beer from the two breweries in accordance with their respective
production capacities.

          For the year ended December 31, 1996, net sales were RMB 655,316,991,
consisting of 154,435 metric tons of beer sold to the Marketing Company for
resale.  For the year ended December 31, 1995, net sales were RMB

                                       40
<PAGE>
 
681,724,168, consisting of 161,200 metric tons of beer sold, including RMB
327,805,406 of beer sold to the Marketing Company for resale.

Gross Profit:
------------ 

          For the year ended December 31, 1996, gross profit was RMB 145,150,002
or 22.1% of net sales, as compared to gross profit of RMB 155,864,163 or 22.9%
of net sales for the year ended December 31, 1995.  The decrease in the gross
profit margin of .8% on an absolute basis or 3.4% in 1996 as compared to 1995
was a result of a change in the product mix, the increase in cost of raw
materials, and the Marketing Company handling the distribution of all of the
Company's production of Pabst Blue Ribbon beer throughout 1996.

Selling, General and Administrative Expenses:
-------------------------------------------- 

          For the year ended December 31, 1996, selling, general and
administrative expenses were RMB 38,937,354 (5.9% of net sales), consisting of
selling  expenses of RMB 6,057,013 and general and administrative expenses of
RMB 32,880,341.  For the year ended December 31, 1995, selling, general and
administrative expenses were RMB 60,819,562 (8.9% of net sales), consisting of
selling expenses of RMB 31,794,779 and general and administrative expenses of
RMB 29,024,783.  Selling expenses consist of warehousing, storage and freight
costs, and, in 1995, also included advertising, promotion, marketing and
distribution costs prior to the Marketing Company commencing the distribution of
Noble Brewery's production in July 1995.

          During 1995, the Marketing Company was established to market
throughout China the Pabst Blue Ribbon beer produced by Zhaoqing Brewery and
Noble Brewery.  The Marketing Company assumed the responsibility for marketing
the Pabst Blue Ribbon beer produced by Noble Brewery during July 1995, and
incurred most of the 1995 and almost all of the 1996 selling expenses.

          Selling expenses decreased by RMB 25,737,766 or 80.9% in 1996 as
compared to 1995, and represented 0.9% of net sales in 1996 as compared to 4.7%
of net sales in 1995, as a result of the establishment of the Marketing Company
in 1995.  General and administrative expenses increased by RMB 3,855,558 or
13.3% in 1996 as compared to 1995, and represented 5.0% of net sales in 1996 as
compared to 4.2% of net sales in 1995.  During the year ended December 31, 1996,
Noble Brewery recorded an allowance for doubtful accounts of RMB 1,459,963, as
compared to an allowance for doubtful accounts of RMB 786,740 for the year ended
December 31, 1995.

                                       41
<PAGE>
 
Operating Income:
---------------- 

          For the year ended December 31, 1996, operating income was RMB
106,212,648 or 16.2% of net sales, as compared to operating income of RMB
95,044,601 or 13.9% of net sales for the year ended December 31, 1995.

Interest Income and Interest Expense:
------------------------------------ 

          For the year ended December 31, 1996, interest income was RMB
3,901,929, as compared to interest income of RMB 3,846,001 for the year ended
December 31, 1995.

          For the year ended December 31, 1996, interest expense was RMB
3,450,585, as compared to interest expense of RMB 2,240,015 for the year ended
December 31, 1995, as a result of higher borrowings.

Income Taxes:
------------ 

          For the year ended December 31, 1996, income tax expense was RMB
16,535,421, which consisted of RMB 13,053,421 for PRC income taxes and RMB
3,500,000 for deferred income taxes as a result of temporary timing differences
with respect to accelerated depreciation of property, plant and equipment.  For
the year ended December 31, 1995, income tax expense was RMB 2,200,000, which
represented the deferred income taxes as a result of temporary timing
differences with respect to accelerated depreciation of property, plant and
equipment.  During 1996 and 1995, Noble Brewery was subject to a 50% and 100%
tax exemption, respectively.

Net Income:
---------- 

          For the year ended December 31, 1996, net income was RMB 90,128,571 or
13.8% of net sales, as compared to RMB 94,450,587 or 13.9% of net sales for the
year ended December 31, 1995.

Year Ended December 31, 1995 and Two Months Ended December 31, 1994 :

Sales:
----- 

          For the year ended December 31, 1995, net sales were RMB 681,724,168,
consisting of 161,200 metric tons of beer, including RMB 327,805,406 of beer
sold to the Marketing Company for resale.  For the two months ended December 31,
1994, net sales were RMB 126,438,179, consisting of 26,272 metric tons of beer.

                                       42
<PAGE>
 
Gross Profit:
------------ 

          For the year ended December 31, 1995, gross profit was RMB 155,864,163
or 22.9% of net sales.  For the two months ended December 31, 1994, gross profit
was RMB 36,414,406 or 28.8% of net sales.  As a result of increased discounts
offered to distributors, increased raw material costs, and, in particular, the
establishment and operating structure of the Marketing Company, gross margins
will not return to pre-1995 levels.

Selling, General and Administrative Expenses:
-------------------------------------------- 

          For the year ended December 31, 1995, selling, general and
administrative expenses were RMB 60,819,562 (8.9% of net sales), consisting of
selling expenses of RMB 31,794,779 and general and administrative expenses of
RMB 29,024,783.  Selling expenses consist of warehousing, storage and freight
costs, and, in 1995, also included advertising, promotion, marketing and
distribution costs prior to the Marketing Company commencing the distribution of
Noble Brewery's production in July 1995.  For the two months ended December 31,
1994, selling, general and administrative expenses were RMB 16,488,878 or 13.0%
of net sales.

          During 1995, the Marketing Company was established to market
throughout China the Pabst Blue Ribbon beer produced by Zhaoqing Brewery and
Noble Brewery.  The Marketing Company assumed the responsibility for marketing
the Pabst Blue Ribbon beer produced by Noble Brewery during July 1995, and
incurred most of the 1995 selling expenses.

          During the year ended December 31, 1995, Noble Brewery recorded an
allowance for doubtful accounts of RMB 786,740.

Operating Income:
---------------- 

          For the year ended December 31, 1995, operating income was RMB
95,044,601 or 13.9% of net sales.  For the two months ended December 31, 1994,
operating income was RMB 19,925,528 or 15.8% of net sales.

Interest Income and Interest Expense:
------------------------------------ 

          For the year ended December 31, 1995, interest income was RMB
3,846,001.  For the two months ended December 31, 1994, interest income was RMB
325,451.

                                       43
<PAGE>
 
          For the year ended December 31, 1995, interest expense was RMB
2,240,015.  For the two months ended December 31, 1994, there was no interest
expense.

Income Taxes:
------------ 

          For the year ended December 31, 1995, income tax expense was RMB
2,200,000.  For the two months ended December 31, 1994, income tax expense was
RMB 720,000.  Although Noble Brewery's operations were subject to a 100% tax
exemption during 1994 and 1995, deferred income taxes were recorded as a result
of temporary timing differences with respect to accelerated depreciation of
property, plant and equipment.

Net Income:
---------- 

          For the year ended December 31, 1995, net income was RMB 94,450,587 or
13.9% of net sales.  For the two months ended December 31, 1994, net income was
RMB 19,530,979 or 15.4% of net sales.

Consolidated Financial Condition - December 31, 1996:
---------------------------------------------------- 

Liquidity and Capital Resources
-------------------------------

          For the year ended December 31, 1996, the Company's operations
provided cash resources of RMB 19,407,707.  The major components of the cash
provided from operations in 1996 were the increase of RMB 47,928,065 in accounts
payable and accrued liabilities, the dividends received from an associated
company of RMB 39,797,878, and the increase of RMB 30,670,338 in sales taxes
payable.  The Company's cash balance decreased by RMB 17,738,711 to RMB
39,709,594 at December 31, 1996, as compared to RMB 57,448,305 at December 31,
1995.  The Company's net working capital deficit decreased by RMB 14,001,144 to
RMB 83,554,409 at December 31, 1996, as compared to RMB 97,555,553 at December
31, 1995.  As a  result, the Company's current ratio improved to 0.82:1 at
December 31, 1996 as compared 0.77:1 at December 31, 1995.

          The Company's inventories increased by RMB 30,711,035 or 54.0% to RMB
87,549,836 at December 31, 1996, as compared to RMB 56,838,801 at December 31,
1995.  Such increase resulted from the expansion of production to meet the
growth in market demand for beer products, and consisted primarily of an
increase in finished goods in order to satisfy expected market demand.

          The amounts due from related companies mainly represented receivable
balances from Guangdong Blue Ribbon and its affiliated companies.  The amounts
due

                                       44
<PAGE>
 
from related companies decreased by RMB 13,322,446 or 28.7% to RMB 33,089,333 at
December 31, 1996, as compared to RMB 46,411,779 at December 31, 1995.  The
decrease was primarily due to the increase in payments by Guangdong Blue Ribbon
and the increase in transaction volume with other related companies under normal
operating levels during the year.  The amounts due from Guangdong Blue Ribbon
and its affiliates were short term in nature and should be wholly repayable in
1997.

          The Company's accounts payable increased by RMB 9,696,390 or 48.3% and
accrued liabilities increased by RMB 38,231,675 or 105.7% to an aggregate of RMB
104,207,246 at December 31, 1996 as compared to RMB 56,279,181 at December 31,
1995.  The increase in accounts payable was primarily due to the increase in
purchases of raw materials and packing materials to support the expanded sales
and production volume in 1996, and the increase in accrued expenses was a result
of the expansion of production and operating activities.

          The conversion and expansion of Zhaoqing Brewery has required
substantial capital to finance the costs of expansion and to support
substantially higher sales levels.  Guangdong Blue Ribbon has provided and
committed to provide Zhaoqing Brewery a line of credit, or to otherwise arrange
financing, sufficient to finance the purchase of new machinery and equipment in
connection with the expansion of Zhaoqing Brewery to an annual production
capacity of 100,000 metric tons of beer.

          For the year ended December 31, 1996, additions to property, plant and
equipment in connection with the planned expansion of Zhaoqing Brewery to an
annual production capacity of 100,000 metric tons of beer aggregated RMB
46,786,402, and were financed by advances under the line of credit from
Guangdong Blue Ribbon, bank borrowings, and dividends from an associated
company.  The Company anticipates that additional capital expenditures in
connection with the continuing expansion of Zhaoqing Brewery in 1997 will be
approximately RMB 15,000,000.

          During the year ended December 31, 1996, the Company's secured and
unsecured short-term bank loans increased by RMB 7,925,600.  The bank loans bear
interest at rates ranging from 10.8% to 12.1%, and are repayable in 1997.  A
substantial portion of the bank loans have been utilized to fund the expansion
of Zhaoqing Brewery.

          During 1996, Noble Brewery declared and paid a dividend relating to
earnings for the year ended December 31, 1995,  resulting in a dividend to the
Zhaoqing Brewery HC of RMB 39,797,878.

                                       45
<PAGE>
 
          In connection with the acquisition of High Worth JV, Oriental Win
advanced US$8,869,585 to Holdings during 1994.  The rights to collect
US$8,000,000 of the advance were transferred from Oriental Win to its
shareholders in proportion to their respective shareholdings interests in August
1996 (West Coast Star Enterprises Ltd. - US$4,800,000; Mapesbury Limited -
US$1,600,000;  Redcliffe Holdings Ltd. - US$1,600,000).  The advances bear no
interest and are not repayable unless the Company obtains additional long term
debt or  equity financing.  Repayments of the advances are at the discretion of
the Company and the shareholders have no right to demand repayment.  The Company
has the option of offsetting or repaying the advance or part thereof by
allotment of shares at par value in Holdings.  As of December 31, 1996, advances
from such shareholders, West Coast Star Enterprises Ltd.,  Mapesbury Limited,
Redcliffe Holdings Ltd. and Oriental Win, were approximately RMB 39,900,000, RMB
13,300,000, RMB 13,300,000 and RMB 7,300,000, respectively.

          During the year ended December 31, 1996, Guangdong Blue Ribbon and its
affiliated companies provided the Company with raw materials financing
aggregating RMB 21,357,655, which obligations are unsecured, interest free and
repayable on demand.  In addition, during the year ended December 31, 1996,
companies beneficially owned by Guangdong Blue Ribbon and directors of the
Company provided loans in the form of advances to the Company aggregating RMB
10,000,000, which obligations are unsecured, bear interest at 12% per annum and
are repayable in 1997.

          The Company anticipates that its operating cash flow, combined with
cash on hand, bank lines of credit, and other external credit sources, and the
credit facilities provided by affiliates or related parties, are adequate to
satisfy the Company's working capital requirements for the fiscal year ending
December 31, 1997.  In order to finance the continuing capital requirements of
the Company subsequent to the completion of Zhaoqing Brewery expansion, the
Company has begun negotiations to arrange additional long-term bank or lease
financing.  In addition, accelerated development or acquisition of additional
brewing facilities or other support facilities may require the use of long-term
borrowing or equity financing by the Company.

Inflation and Currency Matters:
------------------------------ 

          In recent years, the Chinese economy has experienced periods of rapid
economic growth as well as relatively high rates of inflation, which in turn has
resulted in the periodic adoption by the Chinese government of various
corrective designed to regulate growth and contain inflation.  Since 1993, the
Chinese government has implemented an economic program designed to control
inflation, which has resulted in the tightening of working capital to Chinese
business

                                       46
<PAGE>
 
enterprises.  The success of the Company depends on substantial part on the
continued growth and development of the Chinese economy.

          Foreign operations are subject to certain risks inherent in conducting
business abroad, including price and currency exchange controls, and
fluctuations in the relative value of currencies.  Changes in the relative
values of currencies occur periodically and may, in certain instances,
materially affect the Company's results of operations.

          Zhaoqing Brewery and Noble Brewery conduct virtually all of their
business in China and, accordingly, the sale of their products are settled
primarily in RMB.  As a result, devaluation of the RMB against the USD would
adversely affect their financial performance when measured in USD, and could
have material adverse effects upon the results of operations and financial
condition.  In addition, a significant portion of revenues will need to be
converted into USD on a continuing basis to meet foreign currency obligations.
Although prior to 1994 the RMB experienced significant devaluation against the
USD, the RMB has remained fairly stable during 1994, 1995 and 1996.  The swap
center rate was US$1.00 to RMB 8.70 at December 31, 1993, RMB 8.45 at December
31, 1994, RMB 8.32 at December 31, 1995, and RMB 8.32 at December 31, 1996.

Environmental Matters:
--------------------- 

          Management believes that the Company complies with all national and
local environmental protection laws and regulations of the PRC.  In 1996,
compliance with the provisions of all national and local environmental laws and
regulations did not have a material effect upon earnings, capital expenditures
or the competitive position of the Company.

          The Company also continues its commitment to programs directed toward
efficient use of resources, waste reduction and pollution prevention.  Programs
currently underway include that all waste and emissions must pass through a
comprehensive sewage treatment system to reduce organic matters and the use of
heavy oil instead of coal for power in order to reduce carbon dioxide levels.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The financial statements and exhibits are listed at ITEM 14 "EXHIBITS,
FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K".

          Selected 1995 and 1996 Quarterly Financial Information, in RMB
(unaudited):

                                       47
<PAGE>
 
          Selected quarterly financial information for 1995 and 1996 interim
periods is presented below.  High Worth JV acquired Zhaoqing Brewery, including
Zhaoqing Brewery's 40% interest in Noble Brewery, effective October 31, 1994.
The consolidated results of operations includes the results of operations of
Zhaoqing Brewery on a consolidated basis and Noble Brewery under the equity
method of accounting, commencing October 31, 1994, to reflect the post-
acquisition consolidated results of operations of Zhaoqing Brewery and Noble
Brewery attributable to the Company.

          On February 19, 1995, the Marketing Company was established and was
registered as a limited company and owned 70% by Zhaoqing Brewery HC and 30% by
Guangdong Blue Ribbon.  Through its ownership in High Worth JV, Guangdong Blue
Ribbon also has a 28% indirect interest in the Marketing Company.  The Company
has a controlling interest in the Marketing Company even though it has an
effective interest of only 42% because of the Company's 60% interest in High
Worth JV and 70% interest in the Marketing Company (through Zhaoqing Brewery
HC), and because the Company controls the majority of the votes on the board of
directors of the Marketing Company and Zhaoqing Brewery HC.  The Marketing
Company was appointed as the sole distributor to conduct the distribution,
marketing and promotion of all Pabst Blue Ribbon beer products produced by
Zhaoqing Brewery and Noble Brewery.  Zhaoqing Brewery and Noble Brewery
commenced selling their production of Pabst Blue Ribbon beer through the
Marketing Company in April 1995 and July 1995, respectively.  The commencement
of the Marketing Company's operations, which are presented on a consolidated
basis, resulting in a significant change in the Company's operating structure
and income statement presentation during 1995.

                                       48
<PAGE>
 
<TABLE>
<CAPTION>
                                                                 1995
                                                       ----------------------------------------
                                            1996       As Previously Reported   As Adjusted (1)
                                        ------------   ----------------------   ---------------
<S>                                     <C>            <C>                      <C>
Three Months Ended March 31:
----------------------------         
 
Sales, net of sales taxes                277,531,766               39,924,512       32,494,522
Gross profit                              43,507,222                7,401,635        7,220,540
Operating income (loss)                    6,953,738                1,048,920          (18,539)
Net income                                 3,671,837                8,670,737        6,327,097
Net income per common share                      .46                     1.08              .79
 
Three Months Ended June 30:
---------------------------           
 
Sales, net of sales taxes                353,658,873               94,880,814       94,880,814
Gross profit                              55,699,266               13,716,288       13,716,288
Operating income                          10,476,677                2,944,896        1,473,384
Net income                                 5,000,557                6,371,369        3,882,265
Net income per common share                      .63                      .80              .48
 
Three Months Ended September 30:
--------------------------------    
 
Sales, net of sales taxes                300,905,499              250,040,388      250,040,388
Gross profit                              44,986,152               30,752,081       30,752,081
Operating income                           7,666,083                6,709,893        4,453,277
Net income                                 3,989,207                6,811,619        4,843,457
Net income per common share                      .50                      .85              .61
 
Three Months Ended December 31:
-------------------------------      
 
Sales, net of sales taxes                301,181,486                        -      189,371,215
Gross profit                              49,945,792                        -       19,444,624
Operating income                             228,985                        -          550,283
Net income                                 7,550,208                        -        4,573,149
Net income per common share                      .94                        -              .57
 
Year Ended December 31:
-----------------------                  
 
Sales, net of sales taxes              1,233,277,624                        -      566,786,939
Gross profit                             194,138,432                        -       71,133,533
Operating income                          25,325,483                        -        6,458,405
Net income                                20,211,809                        -       19,625,968
Net income per common share                     2.53                        -             2.45
</TABLE>
(1) Reflects certain year-end adjustments properly allocable to prior 1995
    interim periods, including additional charges by Zhaoqing Brewery for the
    staff welfare fund and by the Marketing Company for the provision for
    doubtful accounts, accrued liability for sales commissions, and unrecorded
    renovation expenses.  With respect to Noble Brewery, an unconsolidated
    subsidiary, additional charges due to improper cut-offs, unrecorded expenses
    and account misclassifications resulted in an understatement of cost of
    sales and of selling, general and administrative expenses.

                                       49
<PAGE>
 
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

          On December 16, 1994, the Company (which was then known as Natural
Fuels, Inc.), acquired all of the outstanding shares of Holdings.  The firm of
Williams, Dickerson, Allen & Co., L.L.P. ("Williams") had audited the balance
sheet of the Company as of December 31, 1993, 1992 and 1991 and the related
statements of operations, stockholders' equity and cash flows for the years then
ended.

          Effective January 30, 1995, the Company dismissed Williams as the
Company's independent accountants, and engaged Ernst & Young as the Company's
new independent accountants.  Prior to the engagement of Ernst & Young, the
Company did not consult with that firm regarding the application of accounting
principles to a specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Company's financial statements.
Ernst & Young were the independent accountants for Zhaoqing Brewery.

          The decision to change accountants was approved by the Company's Board
of Directors.

          None of the reports by Williams on such financial statements contained
an adverse opinion or a disclaimer of opinion, or were qualified or modified as
to uncertainty, audit scope or accounting principles, except that (a) the report
of Williams dated February 26, 1994, was qualified with respect to the
uncertainty of the Company's ability to continue as a going concern in view of
the Company's limited cash flow.

          During the years ended December 31, 1993 and 1994 and the period from
January 1, 1995 through January 30, 1995, there  were no disagreements with
Williams on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Williams would have caused Williams to make
reference to the subject matter of the disagreements in connection with the
firm's reports on the Company's financial statements.

          Effective November 22, 1996, the Company dismissed Ernst & Young as
the Company's independent accountants, and engaged Deloitte Touche Tohmatsu as
the Company's new independent accountants.  Prior to the engagement of Deloitte
Touche Tohmatsu, the Company did not consult with that firm regarding the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's

                                       50
<PAGE>
 
financial statements. Deloitte Touche Tohmatsu were the independent accountants
for Noble Brewery.

          The decision to change accountants was approved by the Company's Board
of Directors.

          None of the reports by Ernst & Young on such financial statements
contained an adverse opinion or a disclaimer of opinion, or were qualified or
modified as to uncertainty, audit scope or accounting principles.

          During the ten months ended October 31, 1994, the two months ended
December 31, 1994, the year ended December 31, 1995 and the period from January
1, 1996 through November 22, 1996, there  were no disagreements with Ernst &
Young on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Ernst & Young would have caused Ernst & Young to make
reference to the subject matter of the disagreements in connection with the
firm's reports on the Company's financial statements.

                                       51
<PAGE>
 
                                   PART  III.


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          The following tables and text sets forth the names and ages of all
directors and executive officers of the Company as of July 31, 1997, and their
positions and offices with the Company.  The Board of Directors of the Company
is comprised of only one class.  All of the directors will serve until the next
annual meeting of shareholders and until their successors are elected and
qualified, or until their earlier death, retirement, resignation or removal.
Executive officers serve at the discretion of the Board of Directors, and are
appointed to serve until the first Board of Directors' meeting following the
annual meeting of shareholders.  There are no family relationships among
directors and executive officers.  Also provided is a brief description of the
business experience of each director and executive officer during the past five
years and an indication of directorships held by each director in other
companies subject to the reporting requirements under the Federal securities
laws.

          In conjunction with the formation of the Company in 1994, Oriental Win
acquired a controlling interest in the Company, and received the right to
appoint a majority of the members of the Board of Directors for so long as it
held its shares.  As a result of the distribution by Oriental Win to its
shareholders during October 1996 of all of the shares of Common Stock of the
Company that it owned, West Coast Star Enterprises Ltd. became the controlling
shareholder of the Company and acquired the right to appoint a majority of the
members of the Board of Directors for so long as it holds its shares.

<TABLE>
<CAPTION>
                 DIRECTORS
                 ---------
 
                            Date Elected
Name                 Age    as Director
----                 ---   --------------
<S>                  <C>   <C>
 
John Zhao Li          42   November 1994
 
Lee Tak Wong          40   September 1995
 
Jin-qiang Zhang       55   July 1997
 
Zi-shou Chan          56   July 1997
 
Deng-chen Yin         56   July 1997
 
Long-sheng Zhu        31   July 1997
</TABLE>

                                       52
<PAGE>
 
<TABLE>
<CAPTION>
                      EXECUTIVE OFFICERS
                      ------------------
 
                                                Date Elected
Name                   Age     Position(s)       as Officer
----                   ---   ----------------   -------------
<S>                    <C>   <C>                <C>
 
Jin-qiang Zhang         55   Chairman           August 1997
 
Zi-shou Chan            56   President          August 1997
 
John Zhao Li            42   Vice President     November 1994
 
Kai Cheng Chen          46   Vice President     December 1996
 
Long-sheng Zhu          31   Vice President     August 1997
 
Gary Chun Kin Lui       36   Chief Financial    April 1996
                             Officer
</TABLE>


Biographies of Directors and Executive Officers
-----------------------------------------------

JIN-QIANG ZHANG

          Mr. Zhang, Chairman and a director of the Company, has over 30 years
experience in manufacturing.  Since the early 1980's, Mr. Zhang has held senior
management positions in several manufacturing enterprises in China which were
engaged principally in the electronics industry.  During the last past five
years, he has participated extensively in syndication financing, property
development and project investment in China.

ZI-SHOU CHAN

          Mr. Chan, President and a director of the Company, has over 30 years
experience in the Chinese manufacturing sector.  Since the early 1980's, Mr.
Chan has held senior management positions in several manufacturing enterprises
in China which were mainly engaged in the electronics industry.  During the past
five years, he has participated extensively in syndication financing, property
development and project investment in China.

JOHN ZHAO LI

          Mr. Li, Vice President and a director of the Company, held a senior
management position with an international investment company in the United
States

                                       53
<PAGE>
 
from 1992 to 1994.  During this period, he was actively involved in consulting
for Pabst Zhaoqing with respect to the project management for the development of
the first and second phases of Noble Brewery.  Mr. Li was President of the
Company from 1994 until July 31, 1997.

LEE TAK WONG

          Mr. Wong, a Director of the Company, is a member of senior management
engaged in the investment planning and syndication business.  During the last
five years, he has participated in brewery and soft drink investment projects in
China.  He is currently a Director of Guang Yin International (Holdings)
Limited.

DENG-CHEN YIN

          Mr. Yin, a director of the Company, has over 30 years experience in
manufacturing.  Since 1970's, Mr. Yin has held senior management positions in
several manufacturing enterprises in China which were engaged in the plastics
and electronics industry.  During the past five years, he has participated in
many project investments in China.

LONG-SHENG ZHU

          Mr. Zhu, Vice President and a director of the Company, received his
Master's Degree majoring in Mechanical Engineering.  He has been engaged in
project management and investment in China for 9 years.

KAI CHENG CHEN

          Mr. Chen, Vice President of the Company, received his Master's Degree
majoring in Corporate Accounting from the Research Institute of Fiscal Science
in Beijing, China, and a Master's in Business Administration Degree majoring in
Finance from the University of Rochester, New York, USA.  Mr. Chen has been an
auditor and financial consultant in both the United States and China.  He
practiced as a CPA in China and was Vice President of China Consultants of
Accounting and Financial Management, Inc., a leading accounting firm in China.

GARY CHUN KIN LUI

          Mr. Lui, Chief Financial Officer of the Company, graduated from the
University of Hong Kong with a degree of Bachelor of Social Sciences in 1987.
After graduation, he worked in the Hong Kong office of the Corporate Recovery
Division of Arthur Andersen & Co. for three years.  In 1990, he joined a ship
building company listed in Hong Kong as the Group Assistant Financial Controller

                                       54
<PAGE>
 
and was the Financial Controller of the Group's major ship yard in Singapore.
From 1992 to 1994, Mr. Lui was the General Manager of a private investment
company with extensive joint venture projects in Northeastern China.  Prior to
joining the Company in 1995, Mr. Lui was the Project Controller of a Hong Kong
listed investment company with major investments in Eastern China.

Section 16(a) Beneficial Ownership Reporting Compliance:

          During the year ended December 31, 1996, the Company did not have any
class of equity securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, and accordingly, was not subject to the
reporting requirements of Section 16 of the Securities Exchange Act of 1934, as
amended.


ITEM 11.  EXECUTIVE COMPENSATION

          The following table sets forth the compensation paid by the Company
during the last three fiscal years.


<TABLE>
<CAPTION>
                      Summary Compensation Table (US$)
                      --------------------------------
 
Name and                                           Other
Principal                                          Annual
Position             Year    Salary      Bonus     Compensation
----------           ----   ---------   --------   -------------
<S>                  <C>    <C>         <C>        <C>
 
John Zhao Li(1)      1996   $140,000    $27,644       $6,000
President            1995   $101,266    $ 6,010       $6,000
                     1994       (2)        (2)          (2)
                                                      
Lee Tak Wong(3)      1996   $135,951    $27,644       $6,000
Vice President       1995          -    $ 6,010       $2,000
                     1994       (2)        (2)          (2)

--------------------
</TABLE>


(1)  Mr. Li was President of the Company until July 31, 1997.  Mr Li continues
     as an officer and director of the Company.

(2)  There was no compensation paid or accrued during the two months ended
     December 31, 1994.

                                       55
<PAGE>
 
(3)  Mr. Wong was a Vice President of the Company until July 31, 1997.  Mr. Wong
     continues as a director of the Company.


Compensation Agreements:

          The Company has not entered into any long-term employment or
consulting agreements with its officers or directors.

Board of Directors:

          During the year ended December 31, 1996, 10 meetings of the Board of
Directors were held.  All directors receive compensation of US$500 per month for
serving on the Board of Directors, which aggregated $40,000 during the year
ended December 31, 1996.  All directors are reimbursed for any out-of-pocket
expenses incurred in attending board meetings.  The Company had no audit,
nominating, or compensation committees, or committees performing similar
functions, during the year ended December 31, 1996.

Stock Option Plan:

          The Company has not adopted a stock option plan.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          As used in this section, the term beneficial ownership with respect to
a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, as consisting of sole or shared voting power (including the power to
vote or direct the vote) and/or sole or shared investment power (including the
power to dispose of or direct the disposition of) with respect to the security
through any contract, arrangement, understanding, relationship or otherwise,
subject to community property laws where applicable.

          As of July 31, 1997, the Company had a total of 8,000,013 shares of
Common Stock issued and outstanding, consisting of 5,000,013 shares of Class A
Common Stock ($.0001 par value) and 3,000,000 shares of Class B Common Stock
($.0001 par value).  The Class A Common Stock and Class B Common Stock are
identical, except that the Class A Common Stock has one vote per share and the
Class B Common Stock has two votes per share.  Each share of Class B Common
Stock is convertible into one share of Class A Common Stock at the option of the
holder.  All

                                       56
<PAGE>
 
common share amounts reflect the 1-for-22 reverse stock split effective November
22, 1994.  There are no other classes of equity securities outstanding.

          The following table sets forth, as of July 31, 1997:  (a)  the names
and addresses of each beneficial owner of more than five percent (5%) of the
Company's Common Stock known to the Company, the number of shares of Common
Stock beneficially owned by each such person, and the percent of the Company's
Common Stock so owned; and (b) the number of shares of Common Stock of the
Company beneficially owned, and the percentage of the Company's Common Stock so
owned, by each director, and by all directors and officers of the Company as a
group.  Each such person has sole voting and investment power with respect to
the shares of Common Stock, except as otherwise indicated.  Beneficial ownership
consists of a direct interest in the shares of Common Stock, except as otherwise
indicated.

                                       57
<PAGE>
 
<TABLE>
<CAPTION>
                                    Amount and Nature of     Percent of Shares
Name of Beneficial Owner            Beneficial Ownership      of Common Stock
------------------------            --------------------     ----------------- 
<S>                                        <C>                            <C>
 
West Coast Star                            4,176,000(1)(2)                52.2%
Enterprises Ltd.
21/F., Pearl Oriental Centre
189 Gloucester Road
Wanchai, Hong Kong
 
Mapesbury Limited                          1,392,000(1)(3)                17.4%
Unit 2202M, 22/F.,
Nan Fung Centre
264-298 Castle Peak Road
Tsuen Wan, Hong Kong
 
Redcliffe Holdings Ltd.                    1,392,000(1)(4)                17.4%
25/F., Wyndham Place
40-44 Wyndham Street
Central, Hong Kong
 
Jin-qiang Zhang                                       0(5)                   -
                                                           
Zi-shou Chan                                          0(6)                   -
                                                           
John Zhao Li                                          0(7)                   -
                                                           
Lee Tak Wong                                          0(8)                   -
                                                           
Deng-chen Yin                                         0(9)                   -
                                                           
Long-sheng Zhu                                        0(10)                  -
                                                           
All Directors and                               240,000(11)                3.0%
Executive Officers
as a Group
(10 persons)
</TABLE>

___________________

(1)  On October 14, 1996, Oriental Win distributed to its shareholders a total
     of 6,960,000 shares of the Company's Common Stock, consisting of 3,960,000
     shares of Class A Common Stock and 3,000,000 shares of Class B Common
     Stock, which represented Oriental Win's entire 87% interest in the Company.
     The shareholders of Oriental Win received such shares in proportion to
     their respective shareholder interests in Oriental Win (West Coast Star
     Enterprises Ltd. - 60%; Mapesbury Limited - 20%; Redcliffe Holdings Ltd. -
     20%).  In conjunction with the distribution of such shares by Oriental Win,
     the shareholders' agreement among Oriental Win, West Coast Star Enterprises

                                       58
<PAGE>
 
     Ltd., ("West Coast") Mapesbury Limited and Redcliffe Holdings Ltd. was
     terminated.

(2)  Consists of 2,376,000 shares of Class A Common Stock and 1,800,000 shares
     of Class B Common Stock.

(3)  Consists of 792,000 shares of Class A Common Stock and 600,000 shares of
     Class B Common Stock.

(4)  Consists of 792,000 shares of Class A Common Stock and 600,000 shares of
     Class B Common Stock.  Victor Choi, a former Director, is the beneficial
     owner of Silvercliff Venture Inc., which owns 50% of the capital stock of
     Redcliffe Holdings Ltd.

(5)  Mr. Zhang is a minority shareholder of West Coast, but disclaims any
     beneficial ownership of such shares.  Mr. Zhang owns 35% of the capital
     stock of West Coast.

(6)  Mr. Chan is a minority shareholder of West Coast, but disclaims any
     beneficial ownership of such shares.  Mr. Chan owns 15% of the capital
     stock of West Coast.

(7)  Mr. Li is a minority shareholder of West Coast, but disclaims any
     beneficial ownership of such shares.  Mr. Li owns 5% of the capital stock
     of West Coast.

(8)  Mr. Wong is a minority shareholder of West Coast, but disclaims any
     beneficial ownership of such shares.  Mr. Wong owns 5% of the capital stock
     of West Coast.

(9)  Mr. Yin is a minority shareholder of West Coast, but disclaims any
     beneficial ownership of such shares.  Mr. Yin owns 20% of the capital stock
     of West Coast.

(10) Mr. Zhu is a minority shareholder of West Cost, but disclaims any
     beneficial ownership of such shares.  Mr. Zhu owns 10% of the capital stock
     of West Coast.

(11) See footnotes (5) through (10)

Changes in Control:

                                       59
<PAGE>
 
          The Company is unaware of any contract or other arrangement, the
operation of which may at a subsequent date result in a change in control of the
Company.

                                       60
<PAGE>
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Shareholder Loans
-----------------

          In connection with the acquisition of High Worth JV, Oriental Win
advanced US$8,869,585 to Holdings during 1994.  The right to collect
US$8,000,000 of the advance was transferred from Oriental Win to its
shareholders in proportion to their respective shareholdings interests in August
1996 (West Coast Star Enterprises Ltd. - US$4,800,000; Mapesbury Limited -
US$1,600,000;  Redcliffe Holdings Ltd. - US$1,600,000).  The advances bear no
interest and are not repayable unless the Company obtains additional long term
debt or  equity financing.  Repayments of the advances are at the discretion of
the Company and the shareholders have no right to demand repayment.  The Company
has the option of offsetting or repaying the advance or part thereof by the
issuance of shares at par value in Holdings.  As of December 31, 1996, advances
from such shareholders, West Coast Star Enterprises Ltd.,  Mapesbury Limited,
Redcliffe Holdings Ltd. and Oriental Win, were approximately RMB 39,900,000, RMB
13,300,000, RMB 13,300,000 and RMB 7,300,000, respectively.

Noble Brewery
-------------

          During the years ended December 31, 1995 and 1996, the Company
purchased for resale beer products from Noble Brewery aggregating RMB
327,805,406 and RMB 695,150,225, respectively.  As of December 31, 1995 and
1996, RMB 154,185,606 and RMB 166,501,751, respectively, was due to Noble
Brewery for the purchase of beer products, and was unsecured, interest free and
repayable on demand.

Guangdong Blue Ribbon
---------------------

          Until July 31, 1997, Liu Yun Zhong and Niu Zi Hang were directors and
executive officers of the Company.  Messrs. Liu and Niu are the General Manager
and Deputy General Manager, respectively, of Guangdong Blue Ribbon.  Guangdong
Blue Ribbon owns 40% of High Worth JV.

          During the years ended December 31, 1995 and 1996, the Company
purchased packaging materials from Guangdong Blue Ribbon and its affiliated
companies aggregating RMB 27,657,968 and RMB 44,778,187, respectively.

          During the year ended December 31, 1996, the Company sold beer
products to Guangdong Blue Ribbon aggregating RMB 6,169,170.

                                       61
<PAGE>
 
          During the years ended December 31, 1995 and 1996, the Company
purchased for resale mineral water and non-carbonated soft drinks from Guangdong
Blue Ribbon and its affiliated companies aggregating RMB 61,708,086 and RMB
69,166,604, respectively.

          During the years ended December 31, 1995 and 1996, the Company paid
RMB 3,454,067 and RMB 7,945,874, respectively, equivalent to US$11.70 per ton of
beer production, to Guangdong Blue Ribbon as a royalty fee for the right to use
the Pabst Blue Ribbon trademarks in the Guangdong Province of China.

          During the year ended December 31, 1996, the Company paid Guangdong
Blue Ribbon a management fee of RMB 3,780,000 pursuant to a three year agreement
commencing January 1, 1996.

          As of December 31, 1995 and 1996, amount due from related companies
aggregated RMB 46,411,779 and RMB 33,089,333, respectively, and consisted of
amounts due from Guangdong Blue Ribbon and its affiliated companies for trade
deposits received on behalf of the Company and expenses paid on behalf of
Guangdong Blue Ribbon and its affiliated companies.  Included in the net amounts
due from related companies at December 31, 1996 is RMB 27,500,000 (RMB
16,000,000 in 1995), which bears interest at 15% per annum, and RMB 38,200,000
(nil in 1995), which bears interest at 10% per annum, due from Guangdong Blue
Ribbon and its affiliated companies.  The remaining amounts due from Guangdong
Blue Ribbon and its affiliated companies are unsecured, interest-free and
repayable on demand.

          As of December 31, 1995 and 1996, the Company owed an aggregate of
approximately RMB 18,600,000 and RMB 21,400,000, respectively, to related
parties as follows:

          (a) approximately RMB 11,400,000 (RMB 10,500,000 in 1995) was due to
companies affiliated with Guangdong Blue Ribbon for the purchases of raw
materials, and was unsecured, interest free and repayable on demand;

          (b) approximately RMB 3,100,000 (RMB 3,300,000 in 1995) was due to
Wealth Guide Development Limited, a company affiliated with Guangdong Blue
Ribbon, as an advance, and was unsecured, bears interest at 12% per annum, and
is repayable in 1997;

          For the year ended December 31, 1996, interest expense with respect to
the above obligations relating to Guangdong Blue Ribbon and its affiliated
companies was RMB 9,282,985 and to the other related parties was RMB 948,513.

                                       62
<PAGE>
 
For the year ended December 31, 1996, interest income from Guangdong Blue Ribbon
was RMB 3,981,278.

          For the year ended December 31, 1995, interest expense with respect to
the above obligations relating to Guangdong Blue Ribbon and its affiliated
companies was RMB 3,091,364 and to the other related parties was RMB 328,207.

Other Transactions
------------------

          Approximately RMB 5,700,000 and RMB nil (RMB 2,200,000 and RMB
1,400,000 in 1995) were due to Evermoni Trading Limited and Very Temper Limited,
respectively, companies beneficially owned by Wong Lee Tak, a director of the
Company, as advances, and were unsecured, bear interest at 12% per annum, and
are repayable in 1997; and

          Approximately RMB 1,200,000 (RMB 1,200,000 in 1995) was due to Trade
Link Investment Limited, a company beneficially owned by Victor Choi, a former
director of the Company, as an advance, and was unsecured, bears interest at 12%
per annum, and is repayable in 1997.

                                       63
<PAGE>
 
                                   PART  IV.

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) The following financial statements and exhibits are filed with and as a
part of this document.

          (1)  Financial Statements

               CBR Brewing Company, Inc.
               -------------------------

               Report of Independent Auditors
                 Deloitte Touche Tohmatsu
                 Ernst & Young
               
               Consolidated Balance Sheets
               - As of December 31, 1995 and 1996

               Consolidated Statements of Income
               - Period from October 31, 1994 to December 31, 1994,
                 and years ended December 31, 1995 and 1996

               Consolidated Statements of Shareholders' Equity 
               - Period from November 1, 1994 through
                 December 31, 1996

               Consolidated Statements of Cash Flows
               - Period from October 31, 1994 to December 31, 1994,
                 and years ended December 31, 1995 and 1996

               Notes to Consolidated Financial Statements

               Zhaoqing Blue Ribbon Brewery Noble Ltd.
               ---------------------------------------

               Report of Independent Auditors
                 Deloitte Touche Tohmatsu
                 Ernst & Young

               Balance Sheets 
               - As of December 31, 1995 and 1996

                                       64
<PAGE>

               Statements of Income
               - Ten months ended October 31, 1994, two months
                 ended December 31, 1994, and years ended
                 December 31, 1995 and 1996

               Statements of Equity
               - Period from January 1, 1994 through
                 December 31, 1996

               Statements of Cash Flows
               - Ten months ended October 31, 1994, two months
                 ended December 31, 1994, and years ended
                 December 31, 1995 and 1996

               Notes to Financial Statements

               Zhaoqing Brewery
               ----------------

               Report of Independent Auditors
                 Ernst & Young
               
               Consolidated Statement of Income
               - For the ten months ended October 31, 1994

               Consolidated Statement of Equity
               - For the ten months ended October 31, 1994

               Consolidated Statement of Cash Flows
               - For the ten months ended October 31, 1994
              
               Notes to Consolidated Financial Statements

          (2)  Exhibits


Exhibit No.    Description of Document                                         
-----------    -----------------------                                         

2.1    (P)     Share Exchange Agreement, dated November
               1994, with Amendment among the Company,
               Oriental Win and Holdings(1).

3(I).1 (P)     Articles of Incorporation and Amendments(2).

3(I).2 (P)     Certificate of Amendment of Articles of
               Incorporation(3).

3(ii)  (P)     Bylaws(2).

10.1  (P)      Joint Venture Agreement dated June 10,
               1993 between Zhaoqing Brewery and
               Goldjinsheng regarding Noble Brewery with
               amendments, with English translation(3).

10.2  (P)      Joint Venture Agreement dated May 6, 1994
               between Guangdong Blue Ribbon and
               Holdings, as supplemented by Supplementary
               Joint Venture Agreement dated September 5,
               1994 among Holdings, Guangdong Blue
               Ribbon and Star Quality Ltd. regarding

                                       65
<PAGE>
 
Exhibit No.    Description of Document
-----------    -----------------------


               Zhaoqing High Worth, with English
               translation(3).

10.3  (P)      Assets Transferring Agreement dated
               September 6, 1994 among Guangdong Blue
               Ribbon, Zhaoqing Brewery and High Worth
               JV regarding High Worth JV, with English
               translation(3).

10.4  (P)      Agreement on License of Transferring and
               Using the registered trademarks of Pabst
               Blue Ribbon dated August 30, 1993,
               between Pabst Zhaoqing and Pabst US, with
               English translation(3).

10.5  (P)      Agreement on  Quality of Pabst Beer dated
               August 30, 1993 between Pabst Zhaoqing
               and Pabst US, with English translation(3).

10.6  (P)      Power of Attorney between Pabst US and
               Pabst Zhaoqing, dated August 30, 1993(3).

10.7  (P)      Sublicense Agreement on Using the
               Registered Trademarks of Pabst Blue Ribbon
               dated October 12, 1993 between Pabst
               Zhaoqing and Noble Brewery, with English
               translation(3).

10.8  (P)      Sublicense on Using the Registered Trademarks
               of Pabst Blue Ribbon dated May 6, 1994 between 
               Pabst Zhaoqing and High Worth JV, with 
               English translation(3).

10.9  (P)      Transferring Agreement dated May 20, 1994
               among Pabst Zhaoqing, Pabst US and
               Guangdong Blue Ribbon, with English
               translation(3).

10.10 (P)      Deed dated December 5, 1994 between
               Oriental Win and Holdings regarding the
               Shareholder Loan, with supplementary
               documentation(3).

                                       66
<PAGE>
 
Exhibit No.    Description of Document                               Page No.(s)
-----------    -----------------------                               -----------

10.11          Long Term Purchase Agreement dated
               April 1, 1995 between the Marketing
               Company and Zhaoqing Brewery (English
               Translation).                                             167

10.12          Long Term Purchase Agreement dated
               July 11, 1995 between the Marketing
               Company and Noble Brewery (English
               Translation).                                             168

     22             The Company's subsidiaries are:


<TABLE>
<CAPTION>
                                     Percentage
Name of Subsidiary                   Ownership                             Place of Incorporation   
------------------                   ----------                            ----------------------   
<S>                                  <C>                                   <C>                    
                                                                                                 
High Worth Holdings Ltd.             100%                                  British Virgin Islands
                                                                                                 
CBR Finance (B.V.I.) Ltd.            100%                                  British Virgin Islands 
 
Zhaoqing Blue Ribbon
  High Worth Brewery, Ltd.           60% (effective interest)              People's Republic of
  (Sino-foreign joint venture)                                             China
 
Zhaoqing Brewery                     60% (effective interest)              People's Republic of
                                                                           China
 
Zhaoqing Blue Ribbon
  Brewery Noble, Ltd.                24% (effective interest)              People's Republic of
  (Sino-foreign joint venture)                                             China
 
Zhaoqing Blue Ribbon
  Beer Marketing Company
  Limited                            42% (effective interest)              People's Republic of
                                                                           China
</TABLE>

                                       67
<PAGE>
 
     Exhibit No.    Description of Document 
     -----------    -----------------------

     27             Financial Data Schedule (Electronic filing only).


     (1)  Filed as an Exhibit to the Company's Current Report on Form 8-K filed
          on December 30, 1994 and incorporated herein by reference.

     (2)  Filed as Exhibits to the Company's Registration Statement No. 33-
          26617A on Form S-18 filed January 19, 1989 and incorporated herein by
          reference.

     (3)  Filed as Exhibits to the Company's Annual Report on Form 10-K for
          fiscal year ended December 31, 1994, and incorporated herein by
          reference.

     (P)  Indicates that document was originally filed with the Securities
          and Exchange Commission in paper form and that there have been no
          changes or amendments to the document which would require filing of
          the document electronically with this Form 10-K.

(b)  Reports on Form 8-K - Three Months Ended December 31, 1996 -

     (1)  A Current Report on Form 8-K dated October 23, 1996, was filed to
          report a change in control of the Company (Item 1) as a result of the
          distribution of the Company's shares of Common Stock by Oriental Win.

     (2)  A Current Report on Form 8-K dated November 11, 1996, and subsequently
          amended on November 22, 1996, was filed to report the termination of
          Ernst & Young and the retention of Deloitte Touche Tohmatsu as the
          Company's independent accountants (Item 4).

                                       68
<PAGE>
 
                                   SIGNATURES
                                   ----------


In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                              CBR Brewing Company, Inc.
                              -------------------------
                                    (Registrant)


Date:  August 12, 1997        By: /s/ Zi-shou Chan
                                 ----------------------
                                      Zi-shou Chan
                                      President


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
 

Date:  August 12, 1997            By: /s/ Zi-shou Chan
                                  ----------------------
                                      Zi-shou Chan
                                      President and Director
 
Date:  August 12, 1997            By: /s/ John Zhao Li
                                  ----------------------
                                      John Zhao Li
                                      Vice President and Director
 
Date:  August 12, 1997            By: /s/ Gary Chun Kin Lui
                                  ----------------------
                                      Gary Chun Kin Lui
                                      Chief Financial Officer
 
Date:  August 12, 1997            By: /s/ Lee Tak Wong
                                  ---------------------------
                                      Lee Tak Wong
                                      Director
 
Date:  August 12, 1997            By: /s/ Jin-qiang Zhang
                                  ---------------------------
                                      Jin-qiang Zhang
                                      Director

                                       69
<PAGE>
 
Date:  August 12, 1997            By: /s/ Long-sheng Zhu
                                  ---------------------------
                                      Long-sheng Zhu
                                      Director
 
Date:  August 12, 1997            By: /s/ Deng-chen Yin
                                  ---------------------------
                                      Deng-chen Yin
                                      Director

                                       70
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

REPORTS AND FINANCIAL STATEMENTS FOR THE PERIOD 
FROM OCTOBER 31, 1994 TO DECEMBER 31, 1994, 
AND THE YEARS ENDED DECEMBER 31, 1995 AND 1996
-----------------------------------------------

<TABLE> 
<CAPTION> 

CONTENTS                                                           PAGE(S)
--------                                                           -------
<S>                                                                <C> 
REPORT OF INDEPENDENT AUDITORS...................................    F - 1


REPORT OF PREDECESSOR AUDITORS...................................    F - 2


CONSOLIDATED BALANCE SHEETS......................................    F - 3  -  F - 4


CONSOLIDATED STATEMENTS OF INCOME................................    F - 5  -  F - 6


CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY..................    F - 7


CONSOLIDATED STATEMENTS OF CASH FLOWS............................    F - 8  -  F - 9


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......................    F - 10 -  F - 42
</TABLE> 

                                       71

<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS

     To The Board of Directors and Shareholders of
     CBR Brewing Company, Inc.
     
     We have audited the accompanying consolidated balance sheet of CBR Brewing
     Company, Inc. and its subsidiaries as of December 31, 1996, and the related
     consolidated statements of income, shareholders' equity and cash flows for
     the year ended December 31, 1996.  These financial statements are the
     responsibility of the Company's management.  Our responsibility is to
     express an opinion on these financial statements based on our audit.

     We conducted our audit in accordance with auditing standards generally
     accepted in the United States of America.  Those standards require that we
     plan and perform the audit to obtain reasonable assurance about whether the
     financial statements are free of material misstatement.  An audit includes
     examining, on a test basis, evidence supporting the amounts and disclosures
     in the financial statements.  An audit also includes assessing the
     accounting principles used and significant estimates made by management, as
     well as evaluating the overall financial statement presentation.  We
     believe that our audit provides a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements present fairly, in
     all material respects, the financial position of CBR Brewing Company, Inc.
     and its subsidiaries as of December 31, 1996, and the results of their
     operations and their cash flows for the year then ended in conformity with
     accounting principles generally accepted in the United States of America.

     We draw your attention to notes 14, 21 and 24 to the consolidated financial
     statements which state that the Company is exposed to foreign currency
     exchange risk and other risks through its operation in the People's
     Republic of China, and the risk of its business which could be adversely
     affected as a result of new competition.



                                                 /s/ Deloitte Touche Tohmatsu

     Hong Kong
     June 27, 1997

                                     F - 1
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS



To the shareholders of
CBR Brewing Company, Inc.



     We have audited the accompanying consolidated balance sheets of CBR Brewing
Company, Inc. and its subsidiaries as of December 31, 1995 and 1994, and related
consolidated statements of income, changes in shareholders' equity and cash
flows for the year ended December 31, 1995 and the period from October 31, 1994
to December 31, 1994.  These financial statements are the responsibility of CBR
Brewing Company, Inc.'s management.  Our responsibility is to express an opinion
on these financial statements based on our audits.

     We have conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
CBR Brewing Company, Inc. and its subsidiaries as of December 31, 1995 and 1994,
and the consolidated results of their operations and their cash flows for the
year ended December 31, 1995 and the period from October 31, 1994 to December
31, 1994 in conformity with generally accepted accounting principles in the
United States of America.



                                                            /s/ Ernst & Young



Hong Kong
March 28, 1996


                                      F-2
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------
 
                          CONSOLIDATED BALANCE SHEETS
<TABLE> 
<CAPTION> 
                                                                                 As of December 31,
                                                                  ------------------------------------------------
                                                                  1995                   1996                 1996
                                                                  ----                   ----                 ----
                                                                   RMB                    RMB                  US$
                                                                                                             (Note 3)
<S>                                                             <C>                   <C>                <C>  
                                     ASSETS
Current assets:
  Cash and cash equivalents............................           57,448,305           39,709,594          4,772,788
  Accounts receivable, net of allowance for doubtful
    accounts of RMB5,600,000 and RMB14,921,542
    for 1995 and 1996, respectively (note 4)...........          158,677,644          168,845,494         20,293,930
  Bills receivable (note 5)............................                    -           38,653,659          4,645,872
  Inventories (note 6).................................           56,838,801           87,549,836         10,522,817
  Amounts due from related companies (note 18).........           46,411,779           33,089,333          3,977,083
  Prepayments, deposits and other receivables..........            7,423,161           17,779,904          2,137,008
                                                                 -----------          -----------         ----------
  Total current assets.................................          326,799,690          385,627,820         46,349,498
Interest in an associated company (note 7).............          222,742,476          216,984,220         26,079,834
Deferred tax assets (note 11)..........................               48,444                    -                  -
Property, plant and equipment, net of accumulated
  depreciation and amortization of RMB8,227,160
  and RMB26,410,498 for 1995 and 1996,
  respectively (note 8)................................          197,308,264          223,890,108         26,909,869
                                                                 -----------          -----------         ----------
  Total assets.........................................          746,898,874          826,502,148         99,339,201
                                                                 ===========          ===========         ==========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Bank borrowings (note 9)................................        32,574,400           40,500,000          4,867,789
  Capital lease obligations (note 10).....................         5,634,848            9,034,742          1,085,907
  Accounts payable........................................        20,095,488           29,791,878          3,580,755
  Accrued liabilities.....................................        36,183,693           74,415,368          8,944,154
  Customer deposits.......................................       123,817,626           59,003,600          7,091,779
  Amounts due to related companies (note 18)..............        18,629,685           21,357,655          2,567,026
  Amount due to an associated company (note 7)............       154,185,606          166,501,751         20,012,230
  Income taxes payable (note 11)..........................                 -              260,000             31,250
  Sales taxes payable (note 12)...........................        33,233,897           63,904,235          7,680,798
  Deferred tax liabilities (note 11)......................                 -            4,413,000            530,409
                                                                 -----------          -----------         ----------
  Total current liabilities...............................       424,355,243          469,182,229         56,392,097
                                                                 -----------          -----------         ----------
Long term liabilities:
  Capital lease obligations (note 10).....................        24,897,291           15,862,549          1,906,556
                                                                 -----------          -----------         ----------
Minority interests........................................        96,474,719          120,073,940         14,431,964
                                                                 -----------          -----------         ----------
Commitments and contingencies (notes 14, 21, 23 and 24)...
Shareholders' advances and shareholders' equity:
  Advances from shareholders (note 13)....................        73,794,948           73,794,948          8,869,585
                                                                 -----------          -----------         ----------
  Common stock
  - Class A, US$0.0001 par value, 90,000,000 shares
      authorized, 5,000,013 shares outstanding............             4,265                4,265                513
  - Class B, US$0.0001 par value, 10,000,000 shares
      authorized, 3,000,000 shares outstanding............             2,559                2,559                307
  Additional paid-in capital..............................       104,030,194          104,030,194         12,503,629
  General reserve and enterprise development funds........         2,159,613            4,823,561            579,754
  Retained earnings.......................................        21,180,042           38,727,903          4,654,796
                                                                 -----------          -----------         ----------
</TABLE>

                                     F - 3
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

<TABLE>

<S>                                                               <C>                  <C>                  <C>
  Total shareholders' equity..............................        127,376,673          147,588,482         17,738,999
                                                                  -----------          -----------         ----------
Total shareholders' advances and shareholders'
  equity..................................................        201,171,621          221,383,430         26,608,584
                                                                  -----------          -----------         ----------
  Total liabilities and shareholders' equity..............        746,898,874          826,502,148         99,339,201
                                                                  ===========          ===========         ==========
</TABLE>

        See accompanying notes to the consolidated financial statements

                                     F - 4
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


                       CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                             
                                                              Period from    
                                                            October 31, 1994                  Year ended December 31,
                                                                   to           ----------------------------------------------------
                                                           December 31, 1994       1995                1996                1996
                                                           ------------------   -----------      -------------        --------------
                                                                  RMB               RMB                 RMB                 US$
                                                                                                                          (Note 3)
<S>                                                             <C>            <C>              <C>                   <C>
Sales, including sales to related companies of
  RMB6,169,170 in 1996 (note 18a).......................          12,562,589    580,260,386      1,255,940,985        150,954,445
Sales taxes (note 12)...................................           1,161,783     13,473,447         22,663,361          2,723,962
                                                                  ----------    -----------      -------------        -----------
Net sales...............................................          11,400,806    566,786,939      1,233,277,624        148,230,483
Cost of sales, including inventory purchased                                                                                     
  from related companies of RMB450,961,                                                                                          
  RMB417,171,460 and RMB809,095,016 in 1994, 1995                                                                                
  and 1996, respectively; and royalty fee paid to a                                                                              
   related                                                                                                                       
  company of RMB3,454,067 and RMB7,945,874 in 1995                                                                               
  and 1996, respectively (note 18b to e)................           7,174,417    495,653,406      1,039,139,192        124,896,538
                                                                  ----------    -----------      -------------        -----------
Gross profit............................................           4,226,389     71,133,533        194,138,432         23,333,945
Selling, general and administrative expenses,                                                                                    
  including management fee paid to a related                                                                                     
   company of RMB3,780,000 in 1996 (note 18f)...........           1,248,302     64,675,128        168,812,949         20,290,018
                                                                  ----------    -----------      -------------        -----------
Operating income........................................           2,978,087      6,458,405         25,325,483          3,043,927
                                                                  ----------    -----------      -------------        -----------
Other income:                                                                                                                    
  Interest income, including interest income from                                                                                
    a related company of RMB3,981,278 in 1996                                                                                    
    (note 18g)..........................................                   -              -          6,119,470            735,513
  Foreign exchange gains................................           1,217,119      1,614,652            119,907             14,412
  Others................................................                   -              -            695,244             83,563
                                                                  ----------    -----------      -------------        -----------
  Total other income....................................           1,217,119      1,614,652          6,934,621            833,488
                                                                  ----------    -----------      -------------        -----------
Other expenses:                                                                                                                  
  Corporate reorganization expenses.....................           2,551,921              -                  -                  -
  Interest expense, including interest paid to related                                                                           
    companies of RMB328,207 and RMB10,231,528                                                                                    
    for 1995 and 1996, respectively (note 18h)..........           1,317,178      3,236,058         20,767,252          2,496,064
  Loss on disposal of property, plant and                                                                                        
    equipment...........................................             394,988      1,001,788                  -                  -
                                                                  ----------    -----------      -------------        -----------
  Total other expenses..................................           4,264,087      4,237,846         20,767,252          2,496,064
                                                                  ----------    -----------      -------------        -----------
(Loss) income before income taxes.......................             (68,881)     3,835,211         11,492,852          1,381,351
Income taxes (note 11)..................................                   -      1,000,000          4,721,444            567,481
                                                                  ----------    -----------      -------------        -----------
(Loss) income before equity in earnings of an                                                                                    
  associated company....................................             (68,881)     2,835,211          6,771,408            813,870
Equity in earnings of an associated company.............           7,812,392     34,213,058         34,039,622          4,091,301
                                                                  ----------    -----------      -------------        -----------
Income before minority interests........................           7,743,511     37,048,269         40,811,030          4,905,171
Minority interests......................................           4,029,824     17,422,301         20,599,221          2,475,868
                                                                  ----------    -----------      -------------        -----------
Net income for the period/year..........................           3,713,687     19,625,968         20,211,809          2,429,303
                                                                  ==========    ===========      =============        ===========
Net income per share....................................                0.46           2.45               2.53               0.30
                                                                  ==========    ===========      =============        =========== 
</TABLE>

                                     F - 5
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

<TABLE>

<S>                                                              <C>           <C>               <C>                <C>
Average number of shares outstanding....................           8,000,013      8,000,013          8,000,013         8,000,013
                                                                   =========      =========          =========         =========
</TABLE>

        See accompanying notes to the consolidated financial statements

                                     F - 6
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                -----------------------------------------------
<TABLE>
<CAPTION>
 
                                                            Common stock
                                ----------------------------------------------------------------------                              
                                             Shares                     Amount            
                                          outstanding         par value of US$0.0001 each  Additional
                                          -----------         ---------------------------    paid-in        Reserves      Retained
                                  Class A           Class B         Class A   Class B        capital         funds        earnings
                                  -------           -------         -------   -------      -----------     --------      ---------  
                                                                      RMB       RMB           RMB            RMB            RMB
                                                                                                          (Note 15)      (Note 15)
<S>                             <C>           <C>                   <C>       <C>        <C>             <C>           <C>
Balance at November 1, 1994..             -                  -            -          -               -            -               -
Issue of common stock to the                                       
  Company's existing                                               
  stockholders...............        55,013                  -          132          -       1,077,785            -               -
Issue of common stock to                                           
  merchant bankers,                                                
  consultants and several                                          
  executives of the                                                
  Company....................       645,000                  -          550          -       2,756,710            -               -
Issue of common stock in                                           
  consideration for the                                            
  entire issued share                                              
  capital of High Worth                                            
  Holdings Limited...........     4,200,000          3,000,000        3,583      2,559     104,030,194            -               -
Net income...................                                -            -          -               -            -       3,713,687
Appropriation................             -                  -            -          -               -      219,062        (219,062)
Advances from shareholders...             -                  -            -          -               -            -               -
                                 ----------         ----------       ------     ------   -------------   ----------    ------------
Balance at December 31, 1994.     5,000,013          3,000,000        4,265      2,559     104,030,194      219,062       3,494,625
Net income...................             -                  -            -          -               -            -      19,625,968
Appropriation................             -                  -            -          -               -    1,940,551      (1,940,551)
                                 ----------         ----------       ------     ------   -------------   ----------    ------------
Balance at December 31, 1995.     5,000,013          3,000,000        4,265      2,559     104,030,194    2,159,613      21,180,042
Net income...................             -                  -            -          -               -            -      20,211,809
Appropriation................             -                  -            -          -               -    2,663,948      (2,663,948)
                                 ----------         ----------       ------     ------   -------------   ----------    ------------
Balance at December 31, 1996.     5,000,013          3,000,000        4,265      2,559     104,030,194    4,823,561      38,727,903
                                 ==========         ==========       ======     ======   =============   ==========    ============ 
Converted to US$                                                   
Balance at December 31, 1996                                       
 (note 3)....................     5,000,013          3,000,000       US$513     US$307   US$12,503,629   US$579,754    US$4,654,796
                                 ==========         ==========       ======     ======   =============   ==========    ============
</TABLE>

Holders of Class A common stock are entitled to one vote per share.  Holders of
Class B common stock are entitled to two votes per share.  Each share of Class B
common stock is convertible into one share of Class A common stock at the option
of the holders.

On March 31, 1995, the Company changed the authorized share capital of Class A
common stock from 95,000,000 shares to 90,000,000 shares and Class B common
stock from 5,000,000 shares to 10,000,000 shares.

        See accompanying notes to the consolidated financial statements

                                     F - 7
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                           
                                                            Period from    
                                                          October 31, 1994                    Year ended December 31,
                                                                 to           ------------------------------------------------------
                                                         December 31, 1994        1995                  1996                1996
                                                         ------------------   -------------   ------------------------   -----------
                                                                RMB                RMB                  RMB                  US$
<S>                                                      <C>                  <C>                   <C>                  <C>
Cash flows from operating activities:
  Net income..........................................           3,713,687      19,625,968             20,211,809         2,429,303
  Adjustments to reconcile net income to net cash                                                                    
    provided by operating activities:                                                                                
    Allowance for doubtful accounts...................                   -       5,600,000              9,914,114         1,191,600
    Corporate reorganization expenses.................           2,551,921               -                      -                 -
    Depreciation and amortization.....................             606,130       9,459,519             18,703,203         2,247,981
    Foreign exchange gains............................          (1,141,284)     (1,737,759)              (119,907)          (14,412)
    Loss on disposal of property, plant and equipment.             394,988       1,001,788                      -                 -
    Minority interests................................           4,029,824      17,422,301             20,599,221         2,475,868
    Equity in earnings of an associated company.......          (7,812,392)    (34,213,058)           (34,039,622)       (4,091,301)
    Dividend received from an associated company......                   -      28,644,569             39,797,878         4,783,400
    Deferred income taxes.............................                   -       1,000,000              4,461,444           536,231
    Income taxes payable..............................                   -               -                260,000            31,250
                                                                                                                     
Changes in operating assets and liabilities:                                                                         
  Decrease (increase) in accounts receivable..........             108,264    (163,350,396)           (20,081,964)       (2,413,698)
  Increase in inventories.............................          (4,076,782)    (40,728,195)           (30,711,035)       (3,691,231)
  (Increase) decrease in amounts due from related                                                                    
    companies.........................................                   -     (46,411,779)            13,322,446         1,601,256
  Decrease (increase) in prepayments, deposits and                                                                   
   other receivables..................................           1,098,544      (5,297,981)           (10,356,743)       (1,244,800)
  Increase in bills receivable........................                   -               -            (38,653,659)       (4,645,873)
  (Decrease) increase in customer deposits............          (6,418,891)    119,863,548            (64,814,026)       (7,790,147)
  Increase in accounts payable and accrued                                                                           
    liabilities.......................................             422,196      27,746,442             47,928,065         5,760,585
  Increase in amount due to an associated company.....                   -     154,185,606             12,316,145         1,480,306
  Increase in amounts due to related companies........           2,446,970               -                      -                 -
  (Decrease) increase in sales taxes payable..........          (1,891,878)     14,414,744             30,670,338         3,686,340
                                                                ----------    ------------            -----------        ----------
Net cash (used) provided by operating activities......          (5,968,703)    107,225,317             19,407,707         2,332,658
                                                                ----------    ------------            -----------        ----------
Cash flows from investing activities:                                                                                
  Purchases of property, plant and equipment..........          (8,076,187)    (89,365,441)           (46,786,402)       (5,623,366)
  Purchase of subsidiaries............................           7,584,942               -                      -                 -
  Proceeds from disposal of property, plant and                                                                      
    equipment.........................................             991,973         413,679              1,501,355           180,451
                                                                ----------    ------------            -----------        ----------
  Net cash provided (used) by investing activities....             500,728     (88,951,762)           (45,285,047)       (5,442,915)
                                                                ----------    ------------            -----------        ----------
Cash flows from financing activities:                                                                                
  New bank borrowings.................................           8,595,000      22,574,400             48,500,000         5,829,327
  New other borrowings................................           5,000,000               -                      -                 -
  New loans for leased assets.........................                   -      21,250,000                      -                 -
  Contribution by minority interests..................                   -               -              3,000,000           360,577
  Increase in amounts due to related companies........                   -      13,199,030              2,727,970           327,881
  Repayment of bank borrowings........................            (150,000)    (16,595,000)           (40,574,400)       (4,876,731)
  Repayment of other borrowings.......................                   -      (5,000,000)                     -                 -
  Repayment of capital lease obligations..............            (579,098)     (3,651,607)            (5,514,941)         (662,853)
                                                                ----------    ------------            -----------        ----------
  Net cash provided by financing activities...........          12,865,902      31,776,823              8,138,629           978,201
                                                                ----------    ------------            -----------        ----------
</TABLE>

                                     F - 8
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

<TABLE> 
<S>                                                      <C>                  <C>                   <C>                  <C>
Net increase (decrease) in cash.......................           7,397,927      50,050,378              (17,738,711)     (2,132,056)

Cash at beginning of the period/year..................                   -       7,397,927               57,448,305       6,904,844
                                                                ----------    ------------              -----------      ----------
Cash at end of the period/year........................           7,397,927      57,448,305               39,709,594       4,772,788
                                                                ==========    ============              ===========      ========== 
</TABLE>

        See accompanying notes to the consolidated financial statements

                                     F - 9
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------


1.   ORGANIZATION AND PRINCIPAL ACTIVITIES

     CBR Brewing Company, Inc. (the "Company"), formerly Natural Fuels, Inc. and
     National Sweepstakes, Inc., was originally incorporated as Video
     Promotions, Inc. on April 20, 1988 under the laws of the State of Florida.
     The Company and its subsidiaries are collectively referred to as the
     "Group".

     The Company is a holding company and its principal subsidiaries are engaged
     in the production and sale of beer and beer products in the People's
     Republic of China ("PRC").

     On December 16, 1994, the Company issued 3,960,000 shares of Class A common
     stock and 3,000,000 shares of Class B common stock to Oriental Win Holdings
     Ltd. ("Oriental Win") and 240,000 shares of Class A common stock to
     Goldchamp Limited ("Goldchamp"), both of these companies and their
     shareholders were unrelated to the Company prior to becoming shareholders,
     in consideration for the entire issued share capital of High Worth Holdings
     Limited ("High Worth Holdings").  Upon completion of the share exchange on
     December 16, 1994, High Worth Holdings became a wholly-owned subsidiary of
     the Company.

     This transaction has been treated as a recapitalization of High Worth
     Holdings with High Worth Holdings as the acquirer (reverse acquisition).
     The historical financial statements prior to December 16, 1994 are those of
     High Worth Holdings.

     High Worth Holdings is a holding company formed solely to effect the
     acquisition of a 60% interest in Zhao Qing Blue Ribbon High Worth Brewery
     Ltd.  ("High Worth Brewery").  High Worth Brewery is a Sino-foreign equity
     joint venture enterprise registered in the PRC on July 2, 1994 in which
     Star Quality Limited ("Star Quality"), Guangdong Blue Ribbon Group Co.,
     Ltd. ("Blue Ribbon Group"), a joint stock limited company incorporated in
     PRC and High Worth Holdings held 38%, 2% and 60% interests, respectively.
     Star Quality and Blue Ribbon Group are not connected with the Group.
     During the year ended December 31, 1995, Star Quality transferred its 38%
     interest to Blue Ribbon Group.  Accordingly, Blue Ribbon Group and High
     Worth Holdings hold 40% and 60% interests, respectively.  Apart from the
     investment in High Worth Brewery which was partly financed by a long term,
     interest free advance from Oriental Win (see note 13), High Worth Holdings
     has no other significant assets and liabilities.  The following is a
     summary of the acquisition undertaken by High Worth Holdings, through its
     subsidiary, High Worth Brewery, during the period ended December 31, 1994.

     On October 31, 1994, High Worth Brewery acquired a 100% interest in
     Zhaoqing Brewery, including Zhaoqing Brewery's 40% interest in Zhaoqing
     Blue Ribbon Brewery Noble Ltd. ("Blue Ribbon Noble"). The consideration for
     the acquisition of an effective 60% interest in Zhaoqing Brewery by High
     Worth Holdings through High Worth Brewery was approximately US$20 million.
     Prior to the acquisition of the entire interest in Zhaoqing Brewery by High
     Worth Brewery, Zhaoqing Brewery was the then wholly-owned subsidiary of
     Blue Ribbon Group.  Blue Ribbon Noble is a Sino-foreign equity joint
     venture enterprise registered in the PRC on October 8, 1993 in which
     Goldjinsheng Holding Limited, an unrelated party, and Zhaoqing Brewery hold

                                    F - 10
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

     60% and 40% interests, respectively.  Zhaoqing Brewery and Blue Ribbon
     Noble are both engaged in the production and sale of beer and beer products
     in the PRC.

                                    F - 11
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

1.   ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

     Commencing from April 1995, Zhaoqing Brewery ceased the production of
     Zhaoqing beer and started to produce Blue Ribbon beer.  Pursuant to the
     terms of the sublicense agreement, Zhaoqing Brewery was granted by Blue
     Ribbon Group the right for the production and distribution of Blue Ribbon
     beer under Pabst trademarks in the PRC at royalty fee of US$11.70 for each
     ton produced.

     Blue Ribbon Noble's principal line of product is Blue Ribbon beer under
     Pabst trademarks which were granted by Blue Ribbon Group.  Pursuant to the
     terms of the sublicense agreement, Blue Ribbon Noble was granted by Blue
     Ribbon Group the right in the PRC to use the two specific Pabst trademarks
     for the production, promotion, distribution and sale of beer under such
     trademarks.  The production right of Blue Ribbon Noble however is confined
     exclusively for the Guangdong Province only and it does not preclude High
     Worth Brewery's production rights in Guangdong as described in notes 23(a)
     and 23(b).  The sublicense agreement is valid until November 7, 2003.  In
     consideration for the sublicense granted, Blue Ribbon Noble is committed to
     pay Blue Ribbon Group a royalty fee of US$0.10 for each carton of bottled
     or canned beer produced.

     On February 19, 1995, Zhaoqing Blue Ribbon Beer Marketing Company Limited
     ("Blue Ribbon Marketing") was registered as a limited company and owned as
     to 70% by Zhaoqing Brewery and 30% by Blue Ribbon Group.  Blue Ribbon
     Marketing was appointed as the sole distributor to conduct the
     distribution, marketing and promotion of all Pabst Blue Ribbon beer
     products produced by Zhaoqing Brewery and Blue Ribbon Noble.  Blue Ribbon
     Marketing commenced to purchase beer products from Zhaoqing Brewery and
     Blue Ribbon Noble in April 1995 and July 1995, respectively.  Its principal
     trading product is Blue Ribbon beer which constitutes approximately 94% of
     the Group's sales.  Blue Ribbon Marketing is also engaged in the trading of
     mineral water and non-carbonated soft drinks purchased from Blue Ribbon
     Group and its group of companies.

     On April 5, 1995, CBR Finance (BVI) Ltd. ("Finance Company"), which is
     wholly owned by the Company, was incorporated in the British Virgin Islands
     ("BVI").  The Finance Company has remained dormant since incorporation.

     In January 1996, Zhaoqing Brewery transferred all of its operating assets
     and liabilities to High Worth Brewery pursuant to the original Joint
     Venture Agreement, the Asset Transfer Agreement signed in May 1994, and the
     relevant government regulations.  Subject to the completion of certain
     legal procedures and documentation, investments in Blue Ribbon Noble and
     the Blue Ribbon Marketing, will be transferred to High Worth Brewery.
     Zhaoqing Brewery is currently acting as the nominee for High Worth Brewery
     with respect to the investments in Blue Ribbon Noble and the Blue Ribbon
     Marketing.

     Upon the completion of the required procedures and documentation, all of
     the assets and liabilities formerly controlled by Zhaoqing Brewery will
     have been transferred to High Worth Brewery. During 1996, the operating
     activities of Zhaoqing Brewery were part of High Worth

                                    F - 12
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

          Brewery.  The consensus and approval of the local tax authority with
          respect to this transfer was recently obtained.

                                    F - 13
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

1.   ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

     The following unaudited consolidated pro forma information for the year
     ended December 31, 1994 is prepared on the basis as if the acquisition of a
     60% interest in Zhaoqing Brewery had occurred on January 1, 1993, including
     the beginning of the tax exemption period.  This information is extracted
     from the Group's unaudited pro forma financial statements which have been
     prepared for comparative purposes only and do not purport to indicate the
     results of operations which would actually have occurred had the
     acquisition been in effect on January 1, 1993 or which may occur in the
     future.  The pro forma information does not include the effect of Blue
     Ribbon Marketing.
<TABLE>
<CAPTION>
                                        1994
                                        ----
                                         RMB
                                     (Unaudited)
 
<S>                                   <C>
Sales, net of sales taxes........     68,088,628
                                      ==========

Net income.......................     29,097,029
                                      ==========
  
Net income per share.............           3.64
                                      ==========
</TABLE>


2.   BASIS OF PRESENTATION

     The acquisition of a 60% interest in Zhaoqing Brewery by High Worth
     Holdings on October 31, 1994, as more fully described in note 1, has been
     accounted for in the consolidated financial statements using the purchase
     method of accounting.  Since the Company had no operations prior to this
     acquisition, the Company's consolidated financial statements were prepared
     for the period from October 31, 1994 (the date of acquisition of Zhaoqing
     Brewery) to December 31, 1994 to reflect the post-acquisition consolidated
     operating results of Zhaoqing Brewery attributable to the Company for the
     period ended December 31, 1994.

     The consolidated financial statements have been prepared in accordance with
     generally accepted accounting principles in the United States of America
     ("US GAAP"). This basis of accounting differs from that used in the
     preparation of the statutory financial statements of each relevant PRC
     subsidiary which are prepared in accordance with the accounting principles
     and relevant financial regulations established by the Ministry of Finance
     of the PRC.

                                    F - 14
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


2.   BASIS OF PRESENTATION - continued

     The major adjustments made to the relevant PRC statutory financial
     statements to conform with US GAAP include the following:

     .    The reclassification of certain expense items from income
          appropriations to charges against income;

     .    Adjustment for sales, other income and purchases recognized on a cash
          basis;

     .    Adjustment for depreciation charges;

     .    Adjustment for deferred taxation; and

     .    Adjustment for revaluation of fixed assets.

     The consolidated financial statements have been prepared on a going concern
     basis notwithstanding that the Group has a net current liability position
     as of December 31, 1994, 1995 and 1996.  The Company believes that its
     operating cash flow, combined with cash on hand, bank lines of credit, and
     other external credit sources, and the credit facilities provided by
     affiliates or related parties are adequate to satisfy the Company's working
     capital requirements for the foreseeable future.


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF ACCOUNTING - The consolidated financial statements have been
     prepared under the historical cost convention.

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
     the financial statements of the Company and its subsidiaries which the
     Company has an effective controlling interest including High Worth
     Holdings, High Worth Brewery, Zhaoqing Brewery, Finance Company and Blue
     Ribbon Marketing.  All material intercompany balances and transactions have
     been eliminated on consolidation.  Investments in affiliates over which the
     Company exercises significant influence but does not have effective control
     and own greater than a 50% or less than a 20% voting interest including 40%
     investment in Blue Ribbon Noble, are accounted for using the equity method.

     REVENUE RECOGNITION - Sales represent the invoiced value of goods sold, net
     of returns and discounts.  Sales and sales discounts are recognized upon
     delivery of goods to customers.  Sales returns are recognized upon receipt
     of goods returned from customers.

     INVENTORIES - Inventories are stated at the lower of cost or market value.
     Cost, which comprises direct materials, direct labor costs and overheads
     associated with the manufacturing process, is calculated using the first-
     in, first-out method.

                                    F - 15
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
     cost less an allowance for depreciation and amortization.  Depreciation and
     amortization are provided on the straight line method based on the
     estimated useful lives of the assets as follows:

     Land use rights...................   50 years
     Buildings.........................   50 years
     Plant, machinery and equipment....   5 - 15 years
     Motor vehicles....................   5 - 10 years

     According to the laws of the PRC, the title to all PRC land is retained by
     the PRC government.  The land use rights, which represent the cost for the
     rights to use the land for premises granted by the State Land
     Administration Bureau, have no definite term of use.  The land use rights
     are stated at cost and are amortized over 50 years on the same basis as the
     buildings.

     Construction in progress is stated at cost which comprises the direct costs
     of buildings, plant under construction and deposits and prepayments made on
     machinery pending installation.  Cost comprises the direct cost of
     construction and finance expenses arising from borrowings used to finance
     the construction of buildings, plant and machinery until the construction,
     installation and testing is complete.  The amount of finance expenses
     capitalized is the interest cost which could theoretically have been
     avoided if the expenditure on the qualifying asset had not been made.  No
     depreciation is provided until the relevant assets have been put into
     commercial use.

     IMPAIRMENT OF LONG-LIVED ASSETS - The Company regularly reviews its long-
     lived assets for impairment whenever events or changes in circumstances
     indicate that the carrying amount of an asset may not be recoverable based
     upon undiscounted cash flows expected to be produced by such assets over
     their expected useful lives.

     LEASED ASSETS - Leases that transfer substantially all the rewards and
     risks of ownership of assets to the Group are accounted for as capital
     leases.  At the inception of a capital lease, the cost of the leased asset
     is capitalized at the present value of the minimum lease payments and
     recorded together with the obligation, excluding the interest element, to
     reflect the purchase and financing.  Assets held under capital leases are
     included in property, plant and equipment and are depreciated over their
     estimated useful lives.

     ADVERTISING EXPENSES - Advertising expenses are charged to expense in the
     statements of income as incurred.

     INCOME TAXES - Income taxes are determined under the liability method in
     accordance with Statement of Financial Accounting Standards No.109,
     "Accounting for Income Taxes" ("SFAS 109").  SFAS 109 requires deferred
     taxes be adjusted to reflect the tax rates at which future taxable amounts
     will be settled or recognized.  The effects of tax rate changes on future
     deferred tax liabilities and deferred tax benefits, as well as other
     changes in income tax laws, are recognized in net earnings in the period
     when such changes are enacted.

                                    F - 16
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

          CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on
          hand, cash accounts, interest bearing saving accounts, and short-term
          bank deposits with original maturities of three months or less.

                                    F - 17
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     FOREIGN CURRENCY TRANSLATION - The financial records and the statutory
     financial statements of the Company's subsidiaries and associated companies
     in PRC are maintained in Renminbi.  In preparing the financial statements,
     all foreign currency transactions are translated into Renminbi using the
     applicable rates of exchange, quoted by the Zhaoqing Foreign Exchange
     Adjustment Center (the "swap center") for the respective periods.  Monetary
     assets and liabilities denominated in foreign currencies have been
     translated into Renminbi using the rate of exchange quoted by the swap
     center prevailing at the balance sheet date.  The resulting exchange gains
     or losses have been credited or charged to the statement of income for the
     period in which they occur.

     The Company's share capital is denominated in United States dollars ("US$")
     and for reporting purposes, the US$ share capital amounts have been
     translated into Renminbi ("RMB") at the applicable rates prevailing on the
     transaction dates.

     Translation of amounts from RMB into US$ is for the convenience of the
     reader only and has been made at the swap center rate as quoted by the
     People's Bank of China on December 31, 1996 of US$1.00 = RMB8.32.  No
     representation is made that the Renminbi amounts could have been, or could
     be, converted into United States dollars at that rate or at any other rate.

     EARNINGS PER SHARE - Earnings per share is based on the net income and the
     average number of shares of common stock issued and outstanding during each
     of the years/period.

     USE OF ESTIMATES - The preparation of financial statements in conformity
     with generally accepted accounting principles requires management to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities and disclosures of contingent assets and liabilities at the
     date of the financial statements and the reported amounts of revenues and
     expenses during the reporting period.  Actual results could differ from
     those estimates.

     EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS - The United States Financial
     Accounting Standards Board ("FASB") has issued SFAS No.121, "Accounting for
     the Impairment of Long-Lived Assets and for Long-Lived Assets to be
     Disposed of". This statement requires that the Company review for
     impairment of long-lived assets, certain identifiable intangibles, and
     goodwill related to those assets whenever events or changes in
     circumstances indicate that the carrying amount of an asset may not be
     recoverable. SFAS No.121 was effective for the Company's fiscal year
     beginning January 1, 1996. The adoption of this statement did not have a
     material impact on the Company's financial position or results of
     operations for the year ended December 31, 1996. The FASB also issued SFAS
     No.123, "Accounting for Stock-Based Compensation". The Company was required
     to adopt SFAS No.123 for the fiscal year beginning January 1, 1996. This
     statement establishes accounting and disclosure requirements using a fair
     value-based method of accounting for stock-based employee compensation
     plans. Under SFAS No.123, the Company may either adopt the new fair value-
     based accounting method or continue the intrinsic value-based method and
     provide pro forma disclosures of net income and earnings per share as if
     the fair value accounting provisions of this statement had been adopted.
     The Company adopted only the disclosure requirements of SFAS No.123;
     therefore such adoption had no effect on the Company's financial position
     or results of operations for the fiscal year ended

                                    F - 18
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

               December 31, 1996.  The FASB has also issued SFAS No.128,
               "Earning Per Share" in February, 1996.  Management of the Company
               believed that adoption of this statement did not have a material
               impact on the Company's earning per share.

                                    F - 19
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

4.   ACCOUNTS RECEIVABLE
 
     Accounts receivable comprises:
<TABLE>
<CAPTION>
 
                                                              1995          1996
                                                              ----          ----    
                                                              RMB           RMB
 
<S>                                               <C>                    <C>
Accounts receivables - trade...................           164,277,644    183,767,036
Less: Allowance for doubtful accounts..........            (5,600,000)   (14,921,542)
                                                          -----------    -----------
 
                                                          158,677,644    168,845,494
                                                          ===========    ===========
 
Movement of allowance for doubtful accounts:
                                                              1995          1996
                                                              ----          ----     
                                                              RMB           RMB
 
Balance as at January 1........................                    --      5,600,000
Provided during the year.......................             5,600,000      9,914,114
Written off during the year....................                    --       (592,572)
                                                          -----------    -----------
 
Balance as at December 31......................             5,600,000     14,921,542
                                                          ===========    ===========
 
</TABLE>
5.   BILLS RECEIVABLE

     Bills receivable represents accounts receivable in form of bills of
     exchange whose acceptances and settlements are handled by banks.


6.   INVENTORIES
<TABLE>
<CAPTION>
                              1995         1996
                              ----         ----   
                              RMB          RMB
<S>                        <C>          <C>
Inventories comprise:
 
Raw materials...........   14,154,395   30,935,530
Work in progress........    3,713,686    6,224,036
Finished goods..........   38,970,720   50,390,270
                           ----------   ----------
 
                           56,838,801   87,549,836
                           ==========   ========== 
</TABLE>

                                    F - 20
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


7.   INTERESTS IN AN ASSOCIATED COMPANY
<TABLE>
<CAPTION>
                                                                 1995          1996
                                                                 ----          ----   
                                                                  RMB           RMB
<S>                                                           <C>           <C>
 
     Unlisted investment, at cost..........................   209,361,595   209,361,595
     The Group's share of undistributed post acquisition
       earnings of an associated company...................    13,380,881     7,622,625
                                                              -----------   -----------

                                                              222,742,476   216,984,220
                                                              ===========   =========== 
</TABLE> 

     The unlisted investment represents the Group's 40% equity interest in Blue
     Ribbon Noble held by a 60% owned subsidiary.  Please refer to note 1 for a
     description of its principal activities.

     Upon the acquisition of Blue Ribbon Noble by the Group on October 31, 1994,
     the Group's share of the underlying net assets of the associated company of
     RMB229 million exceeded the Group's investment of RMB209 million by
     approximately RMB20 million.  This difference is being amortized to income
     over 20 years.

     Amount due to an associated company principally represented the balances
     arising from the purchases of beer products for resale.  The balance is
     unsecured, interest-free and repayable on demand.

     The summarized information of Blue Ribbon Noble is presented below:
<TABLE>
<CAPTION>
 
                                                      1995          1996
                                                      ----          ----    
                                                      RMB           RMB
<S>                                               <C>           <C>
Balance sheets
--------------                                           
 
Current assets.................................   349,596,574   388,296,705
Property, plant and equipment..................   462,021,855   433,480,695
                                                  -----------   -----------
 
Total assets...................................   811,618,429   821,777,400
                                                  ===========   ===========
 
Current liabilities............................   189,758,137   205,848,080
Deferred income taxes..........................     5,500,000     9,000,000
Equity.........................................   616,360,292   606,929,320
                                                  -----------   -----------
 
Total liabilities and equity...................   811,618,429   821,777,400
                                                  ===========   ===========
 
 
Statements of income
--------------------
 
Sales, net of sales taxes......................   681,724,168   655,316,991
                                                  ===========   ===========
 
Gross profit...................................   155,864,163   145,150,002
                                                  ===========   ===========
 
Net income.....................................    94,450,587    90,128,571
                                                  ===========   ===========
 
The Group's share of net income after the
 
</TABLE>

                                    F - 21
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

<TABLE>
<S>                                                    <C>           <C>
deduction of unrealized intercompany profit...    34,213,058    34,039,622
                                                 ===========   ===========
</TABLE>

                                    F - 22
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


8.   PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
                                                               1995           1996
                                                               ----           ----    
                                                               RMB            RMB
<S>                                                         <C>           <C>
     At cost:
      Land use rights and buildings.....................    44,776,692     74,276,962
      Plant, machinery and equipment....................    72,235,275    166,921,345
      Motor vehicles....................................     3,950,171      5,213,923
      Construction in progress..........................    84,573,286      3,888,376
                                                           -----------    -----------
 
        Total...........................................   205,535,424    250,300,606
      Less: Accumulated depreciation and amortization...    (8,227,160)   (26,410,498)
                                                           -----------    -----------
 
                                                           197,308,264    223,890,108
                                                           ===========    ===========
</TABLE>

     Depreciation and amortization charges in respect of property, plant and
     equipment for the period ended December 31, 1994 and the years ended
     December 31, 1995 and 1996 were RMB606,130, RMB9,459,519 and RMB18,703,203,
     respectively.

     Interest capitalized in construction in progress for the period ended
     December 31, 1994 and the years ended December 31, 1995 and 1996 were
     RMB44,820, RMB7,595,604 and nil, respectively.

     Included in property, plant and equipment are assets acquired under capital
     leases with the following net book values:
<TABLE>
<CAPTION>
                                                               1995           1996
                                                               ----           ----    
                                                               RMB            RMB
<S>                                                         <C>           <C>
 
     At cost:
      Plant, machinery and equipment....................    33,747,792    33,747,792
      Less: Accumulated depreciation and amortization...    (2,195,237)   (5,570,016)
                                                            ----------    ----------
 
                                                            31,552,555    28,177,776
                                                            ==========    ==========
</TABLE>

     Depreciation and amortization charges in respect of property, plant and
     equipment held under capital leases for the period ended December 31, 1994
     and the years ended December 31, 1995 and 1996 were RMB129,705,
     RMB2,065,532 and RMB3,374,779, respectively.

                                    F - 23

<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


9.   BANK BORROWINGS
<TABLE>
<CAPTION>
                                         1995         1996
                                         ----         ----    
                                         RMB          RMB
<S>                                   <C>          <C>
     Bank borrowings consist of:
 
     Secured bank borrowings.......   24,000,000   40,500,000
     Unsecured bank borrowings.....    8,574,400            -
                                      ----------   ----------
 
                                      32,574,400   40,500,000
                                      ==========   ==========
 
</TABLE>
     The bank borrowings are interest bearing and repayable within the next
     twelve months.

     The weighted average interest rate as of December 31, 1995 and 1996 were
     13.1% and 11.3%, respectively per annum for the secured bank loans.  The
     weighted average interest rate of the unsecured bank loans as of December
     31, 1995 was 11.3%.

     There are no significant covenants or financial restrictions relating to
     the Company's short-term debt.  Details of assets pledged by the Company
     are described in note 22.


10.  CAPITAL LEASE OBLIGATIONS

     The capital lease obligations maturing during each of the years in the four
     year period subsequent to the balance sheet date are:
<TABLE>
<CAPTION>
 
                                                1996
                                                ----
                                                RMB
<S>                                          <C>
 
Year ending December 31,
 1997.....................................   10,742,329
 1998.....................................    8,349,260
 1999.....................................    6,191,979
 2000.....................................    2,922,233
                                             ----------
Total minimum lease payments..............   28,205,801
Less: Amount representing interest........   (3,308,510)
                                             ----------
Present value of minimum lease payments...   24,897,291
Less: Current portion.....................   (9,034,742)
                                             ----------
Long term portion.........................   15,862,549
                                             ==========
</TABLE>

                                    F - 24
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

11.  INCOME TAXES

     The components of (loss) income before income taxes, equity in earnings of
     an associated company and minority interests are as follows:
<TABLE>
<CAPTION>
 
                                                          Year ended
                                   Period ended           December 31,
                                   December 31,        ------------------
                                       1994            1995          1996
                                       ----            ----          ----    
                                       RMB             RMB            RMB
<S>                                <C>             <C>            <C>
 
     United States of America...              -               -   (7,420,000)
     PRC........................        (68,881)      3,835,211   18,912,852
                                        -------       ---------   ----------
 
                                        (68,881)      3,835,211   11,492,852
                                        =======       =========   ==========
</TABLE>
     United States of America

     The Company is subject to taxes in the United States of America.  The
     Company's share of the dividend declared by the Company's associated
     company on its retained earnings on December 31, 1996 amounted to
     approximately RMB20,648,000.  After the deduction of the expenses and
     outgoings incurred by the Company of approximately RMB7,668,000, the deemed
     taxable income of Company for the year ended December 31, 1996 would be
     RMB12,980,000.  The income tax provision for 1996 amounted to RMB4,413,000,
     which has been computed using a rate of 34% for taxes in the United States
     of America.  The Company had no taxable income for the period ended
     December 31, 1994 and year ended December 31, 1995.

     PRC

     The Company's subsidiaries incorporated in the PRC are subject to Chinese
     income taxes at the applicable tax rate (currently 33%) on the taxable
     income as reported in their Chinese statutory financial statements in
     accordance with the relevant income tax laws applicable to foreign
     enterprises.  Pursuant to the same income tax laws, the subsidiary, High
     Worth Brewery, and the associated company, Blue Ribbon Noble, are fully
     exempt from Chinese income tax for two years starting from the first profit
     making year, followed by a 50% exemption for the next three years.  The 50%
     exemption for Blue Ribbon Noble and the tax holiday for High Worth Brewery
     commenced on January 1, 1996.

     Had these tax holidays and concessions not been available, the tax charge
     would have been higher by approximately RMB1,300,000, RMB6,300,000 and
     RMB14,080,000, representing RMB0.16, RMB0.79 and RMB1.76 per share, for the
     period ended December 31, 1994, and the years ended December 31, 1995 and
     1996 respectively.

     British Virgin Islands

     The Company's subsidiaries incorporated in the British Virgin Islands
     ("BVI") are not taxed in BVI. Under current BVI laws, dividends and capital
     gains arising from the BVI subsidiary's

                                    F - 25
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


          investments are not subject to income taxes, and no withholding tax is
          imposed on payments of dividends by the BVI subsidiaries to the
          Company.

                                    F - 26
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


11.  INCOME TAXES - continued

     The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
 
                                                            Year ended
                                       Period ended         December 31,
                                       December 31,   ------------------------
                                           1994           1995         1996
                                       ------------   ------------   ---------
                                           RMB            RMB           RMB
<S>                                    <C>            <C>            <C>
     Current
       - PRC........................              -              -     260,000
 
     Deferred
       - United States of America...              -              -   4,413,000
       - PRC........................              -      1,000,000      48,444
 
                                                  -      1,000,000   4,461,444

                                                  -      1,000,000   4,721,444
</TABLE>


     The reconciliation of effective income tax rates of the Group to the
     statutory income tax rate in the PRC is as follows:
<TABLE>
<CAPTION>
                                                                    Year ended
                                            Period ended            December 31,
                                            December 31,         ----------------- 
                                                1994             1995         1996
                                                ----             ----         ---- 
<S>                                         <C>               <C>           <C>
 
Statutory tax rate......................     33%               33%           33%
Tax holiday.............................    (33%)             (33%)         (30%)
Accelerated depreciation allowances
 during the tax exemption period........        -              26%              -
Tax on dividend declared by an
 associated company.....................        -                -           36%
Reversal of deferred tax asset arised
 from the revaluation of property,
 plant and equipment....................        -                -            1%
Difference in tax rate..................        -                -            1%
                                             ----             ----          ----
                                                -              26%           41%
                                             ====             ====          ====
</TABLE>

     Deferred income taxes are based on the liability method prescribed by
     Statement of Financial Accounting Standards No. 109.  The Group's deferred
     tax liabilities mainly represents the temporary differences in respect of
     the time when dividends declared by the Company's subsidiaries and
     associated company, and at the time when the Company received those

                                    F - 27
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

     dividends.  The Group's share of dividends declared by the Company's
     associated company on its retained earnings at December 31, 1996 in January
     1997 amounted to approximately RMB20,648,000.

                                    F - 28
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


12.  SALES TAXES

     The Group is subject to three kinds of sales taxes, being the value added
     tax ("VAT"), the consumption tax and other sales taxes.  The applicable VAT
     tax rate is 17% for beverage products sold in the PRC and nil for exported
     goods.  The amount of VAT liability is determined by applying the
     applicable tax rate to the invoiced amount of goods sold less VAT paid on
     purchases made with the relevant supporting invoices.  VAT is collected
     from customers by the Group on behalf of the PRC tax authorities and is
     therefore not expensed to the statement of income.  The applicable
     consumption tax rate in respect of brewery products sold by a brewing
     company is RMB220 per ton.  No consumption tax is levied on wholesale
     trading of brewery products, on exported goods or on non-alcoholic beverage
     products.  The other sales taxes are assessed as a percentage of
     consumption tax and VAT.


13.  ADVANCES FROM SHAREHOLDERS

     In connection with the acquisition of High Worth Brewery, Oriental Win
     advanced US$8,869,585 to the High Worth Holdings during 1994. The rights to
     collect US$8,000,000 of the advance were transferred from Oriental Win to
     its shareholders in proportion to their respective shareholdings interests
     in August 1996 (West Coast Star Enterprises Ltd.: US$4,800,000; Mapesbury
     Limited: US$1,600,000; Redcliffe Holdings Ltd.: US$1,600,000).  The
     advances bear no interest and are not repayable unless the Company obtains
     additional long term debt or equity financing.  Repayments of the advances
     are at the discretion of the Company and the shareholders have no right to
     demand repayment.  The Company has the option of offsetting or repaying the
     advance or part thereof by allotment of shares at par value in High Worth
     Holdings.

     As of December 31, 1996, advances from respective shareholders, namely
     Mapesbury Limited, Redcliffe Holdings Ltd., West Coast Star Enterprises
     Ltd. and Oriental Win were approximately RMB13.3 million (US$1.6 million),
     RMB13.3 million (US$1.6 million), RMB39.9 million (US$4.8 million) and
     RMB7.3 million (US$0.9 million), respectively.

                                    F - 29
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


14.  FOREIGN CURRENCY EXCHANGE

     On January 1, 1994, the PRC government abolished the dual exchange rate
     system, comprising the official rates and swap center rates, and introduced
     a single rate of exchange as quoted by the People's Bank of China.  The
     unified exchange rate is quoted at levels similar to those quoted by the
     swap centers.  However, the unification of exchange rates does not imply
     full convertibility of Renminbi into United States dollars or other foreign
     currencies.  All foreign exchange transactions continue to take place
     either through the Bank of China or other institutions authorized to buy
     and sell foreign currencies or the swap centers at the exchange rates
     quoted by the People's Bank of China.  In April 1994, the National Foreign
     Exchange Trading Center in Shanghai (the "exchange center") commenced
     operations.  Enterprises operating in the PRC can enter into exchange
     transactions at the exchange center through the Bank of China or other
     authorized institutions.  Payments for imported materials and remittances
     of earnings outside the PRC are subject to the availability of foreign
     currency which are dependent on the foreign currency denominated earnings
     of each relevant PRC company within the Group or must be arranged through
     the exchange center.  Approval for exchange at the exchange center is
     granted to enterprises in the PRC for valid reasons such as purchases of
     imported materials and remittances of earnings.  While conversion of
     Renminbi into United States dollars or other foreign currencies can
     generally be effected at the exchange center, there is no guarantee that it
     can be effected at all times.

     Effectively July 1, 1996, the PRC government began to take steps to make
     its currency fully convertible on a "current account" basis.  This will
     allow foreign-funded enterprises, whether wholly owned or joint ventures
     with Chinese, to buy and sell foreign exchange in banks for purposes of
     trade, services, debt repayment and profit repatriation.  The "current
     account" measures the flow of money into and out of a nation, including the
     net balance on trade in goods and services, plus remittances.

     The unified exchange rate of the RMB equivalent of US$1.00 as of December
     31, 1994, 1995 and 1996 was 8.45, 8.32 and 8.32, respectively.


15.  DISTRIBUTION OF PROFITS

     The Company's ability to pay dividends is primarily dependent on the
     Company receiving distributions from its PRC subsidiaries through High
     Worth Holdings.

     Pursuant to the relevant laws and regulations of Sino-foreign joint venture
     enterprises, the profits of High Worth Brewery, which are based on their
     statutory financial statements, are available for distribution in the form
     of cash dividends after the PRC companies satisfy all tax liabilities,
     provide for losses in previous years, and make appropriations to reserve
     funds, as determined at the discretion of the board of directors in
     accordance with the PRC accounting standards and regulations.

                                    F - 30
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


15.  DISTRIBUTION OF PROFITS - continued

     As stipulated by the relevant laws and regulations for enterprises
     operating in the PRC, Zhaoqing Brewery and Blue Ribbon Marketing are
     required to make annual appropriations to two reserve funds consisting of
     the statutory surplus and collective welfare funds.  In accordance with the
     relevant PRC regulations and the companies' articles of association, the
     companies are required to allocate a certain percentage of their profits
     after taxation, as determined in accordance with the PRC accounting
     standards applicable to the companies, to the statutory surplus reserve
     until such reserve reaches 50% of the registered capital of the companies.
     Based on the business licences, the registered capital of Zhaoqing Brewery
     and Blue Ribbon Marketing is RMB33,670,000 and RMB10,000,000, respectively.
     Subject to certain restrictions as set out in the relevant PRC regulations
     and the companies' articles of association, the statutory surplus reserve
     may be distributed to equity holders in the form of bonus issues and/or
     dividends when such reserve exceeds 25% of the registered capital of the
     companies.

     The percentage of annual appropriations to statutory surplus and collective
     welfare funds of Zhaoqing Brewery for 1994 were 10% and 5%, respectively,
     on the profits reported in its statutory financial statements.  No
     appropriations to these reserve funds were made by Zhaoqing Brewery and
     Blue Ribbon Marketing for 1995 and 1996 as Zhaoqing Brewery was acting as a
     nominee of High Worth Brewery from October 31, 1994 onwards and Blue Ribbon
     Marketing made losses in those financial years.

     High Worth Brewery and Blue Ribbon Noble are also required to make
     appropriations to a general reserve fund, an enterprise development fund
     and an employee welfare and incentive fund, in which the percentage of
     annual appropriations are subject to the joint venture agreement.  The
     employee welfare and incentive fund are charged to the statement of income.
     The other appropriations are accounted for as reserve funds in the balance
     sheet and are not available for distribution as dividends to the joint
     venture partners of the companies.  Under the joint venture agreement, the
     board of directors shall determine the appropriations regarding to the
     economic situation of the companies.  The percentage of annual
     appropriations to a general reserve fund, an enterprise development fund
     and an employee welfare and incentive fund of Blue Ribbon Noble for 1996
     has already been determined by the board of directors and the appropriation
     has been reported in its statutory financial statements.

     Respective appropriations in High Worth Brewery for 1996 has not yet been
     determined by its board of directors and was not reported in its statutory
     financial statements.

     As described in note 2 to the consolidated financial statements, the net
     income as reported in the US GAAP financial statements differs from that as
     reported in the statutory financial statements.  In accordance with the
     relevant laws and regulations in the PRC, the profits available for
     distribution are based on the statutory financial statements.  If the Group
     has foreign currency available after meeting its operational needs, the
     Group may make its profit distributions in foreign currency to the extent
     it is available.  Otherwise, it will be necessary to obtain approval and
     convert such distributions at the exchange centers.  At December 31, 1994,
     1995 and 1996,

                                    F - 31
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

     the Group's distributable profits amounted to approximately RMB97,000,
     RMB21,180,000 and RMB38,727,000, respectively.

                                    F - 32
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


16.  SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

     Interest paid, net of capitalized interest during the period ended December
     31, 1994 and the years ended December 31, 1995 and 1996 was RMB618,571,
     RMB6,886,576 and RMB20,767,252, respectively.


17.  ADVERTISING EXPENSES

     The Group incurred advertising expenses of RMB1,157,766, RMB18,793,663 and
     RMB65,475,345 for the period ended December 31, 1994 and the years ended
     December 31, 1995 and 1996, respectively.


18.  RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

     (a)  Sales of beer products

     During the year ended December 31, 1996, sales to Blue Ribbon Group and its
     group of companies amounted to RMB6,169,170. Blue Ribbon Group has a 40%
     interest in High Worth Brewery, but is otherwise unrelated to the Company
     and has no shareholders in common.

     (b)  Purchases of packing materials

     During the period ended December 31, 1994 and the years ended December 31,
     1995 and 1996, the Group purchased packing materials from Blue Ribbon Group
     and its group of companies amounting to RMB450,961, RMB27,657,968 and
     RMB44,778,187, respectively.

     (c)  Purchases of non-alcoholic beverage

     During the years ended December 31, 1995 and 1996, the Group purchased non-
     alcoholic beverage from Blue Ribbon Group and its group of companies
     amounting to RMB61,708,086 and RMB69,166,604, respectively, for resale.

     (d)  Purchases of beer products

     During the years ended December 31, 1995 and 1996, the Group purchased beer
     products from Blue Ribbon Noble amounting to RMB327,805,406 and
     RMB695,150,225, respectively, for resale.

     (e)  Royalty fee


                                     F-33
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


     During the years ended December 31, 1995 and 1996, the royalty fee of
     RMB3,454,067 and RMB7,945,874, respectively, was payable to Blue Ribbon
     Group in respect of the right to use Pabst trademarks in the Guangdong
     Province of the PRC.


                                     F-34
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------


18.  RELATED PARTY TRANSACTIONS AND ARRANGEMENTS - continued

     (f)  Management fee

     Management fee paid to Blue Ribbon Group for the year ended December 1996
     was RMB3,780,000.

     (g)  Interest income

     Interest income from the Blue Ribbon Group for the year ended December 31,
     1996 was RMB3,981,278.

     (h)  Interest expense

     Interest expense for the years ended December 31, 1995 and 1996 included
     RMB3,091,364 and RMB9,282,985, respectively, payable to Blue Ribbon Group
     and RMB328,207 and RMB948,543, respectively, payable to other related
     companies, related to the advances which are more fully disclosed in (i)
     and (j) below.

     (i)  Amounts due from related companies

     The amounts due from related companies mainly represented receivable
     balances from Blue Ribbon Group and its group of companies.

     The balances with Blue Ribbon Group and its group of companies principally
     represented trade deposits received on behalf of the Group and expenses
     paid on their behalf.  Included in the net amounts due from Blue Ribbon
     Group at December 31, 1995 and 1996 are RMB16 million and RMB27.5 million,
     respectively, payable to the Group, which bear interest of 15% per annum.
     Amounts also include an amount due from the Blue Ribbon Group of
     RMB38,200,000 (1995: Nil) as of December 31, 1996 which bears interest at
     10% per annum.  Save aforementioned, the remaining balances with the group
     companies of the Blue Ribbon Group are unsecured, interest-free and
     repayable on demand.


                                     F-35
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

18.       RELATED PARTY TRANSACTIONS AND ARRANGEMENTS - continued

     (j)  Amounts due to related companies

     As of December 31, 1996, the amounts due to related companies mainly
     comprises of payable balances to the following companies:
<TABLE>
<CAPTION>
                                                                                 As of December 31,
                                                                            ----------------------------
                                                                                1995           1996
                                                                            ------------    ------------
                                                                                 RMB            RMB
                                                                            (in million)    (in million)
<S>                                                                              <C>            <C>
 
          American National Can (Zhaoqing) Co., Ltd.
           ("American National Can")                                              5.3            4.8
          Blue Ribbon Mineral Water Factory ("Mineral Water")                     3.6            4.2
          Evermoni Trading Limited ("Evermoni")                                   2.2            5.7
          Trade Link Investment Limited ("Trade Link")                            1.2            1.2
          Very Temper Limited ("Very Temper")                                     1.4              -
          Wealth Guide Development Limited ("Wealth Guide")                       3.3            3.1
          Other subsidiaries and associated companies
           of Blue Ribbon Group                                                   1.6            2.4
                                                                                 ----           ----
                                                                                 18.6           21.4
                                                                                 ====           ====
</TABLE>

          American National Can and Mineral Water are companies in which Blue
          Ribbon Group has equity interests.

          Evermoni and Very Temper are beneficially owned by Wong Lee Tak who is
          a director of the Company.  Trade Link is beneficially owned by Victor
          Choi who is a former director of the Company.  Wealth Guide is
          beneficially owned by Blue Ribbon Group.

          The balances with group companies of Blue Ribbon Group, except Wealth
          Guide, represented the balances arising from the purchases of raw
          materials from them.  The balances are unsecured, interest-free and
          repayable on demand.

          The balances with Evermoni, Trade Link, Very Temper and Wealth Guide
          are advances in nature.  The amounts due to such related companies are
          unsecured, bear interest at 3% above Hong Kong dollar prime rate in
          1995 (11.75% as of December 31, 1995) and 3.5% above the Hong Kong
          dollar prime rate (12% as of December 31, 1996) and are repayable on
          demand.

     (k)  Shareholders' advances

          Reference is made to note 13.

                                     F-36
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

19.  RETIREMENT PLAN

     The Company, High Worth Holdings and the Finance Company do not have any
     retirement plans in operation.  High Worth Brewery did not have any
     retirement plans in operation until December 31, 1995, the date when
     transfer of the legal ownership of the brewery facilities and all assets
     and liabilities held by Zhaoqing Brewery to High Worth Brewery was approved
     by the PRC Government.  The application to the PRC Government for the legal
     title transfer of a 70% interest in Blue Ribbon Marketing and a 40%
     interest in Blue Ribbon Noble is still in progress.

     As stipulated by the PRC government regulations, High Worth Brewery,
     Zhaoqing Brewery and Blue Ribbon Marketing have defined contribution
     retirement plans for all their permanent staff.  Zhaoqing Brewery and its
     staff are required to contribute to PRC insurance companies organized by
     the PRC government which are responsible for the payments of pension
     benefits to retired staff.  During the year ended December 31, 1996, the
     monthly contributions of both High Worth Brewery and Blue Ribbon Marketing
     for permanent staff were calculated at 14.6% and 2% respectively of the
     basic salary of the permanent staff.  The pension costs expensed by the
     Group during the period ended December 31, 1994 and the years ended
     December 31, 1995 and 1996 amounted to RMB32,410, RMB706,566 and
     RMB3,236,633, respectively.


20.  FINANCIAL INSTRUMENTS

     The carrying amounts reported in the balance sheets at December 31, 1995
     and 1996 for current assets and current liabilities, except for bank loans,
     qualifying as financial instruments approximate their fair values because
     of the short maturity of such instruments.  Cash denominated in foreign
     currency has been translated at the applicable unified exchange rate.

     The carrying values and estimated fair values of bank loans, based on the
     borrowing rates for borrowings with similar terms and average maturities
     are RMB32,574,000 and RMB29,251,151, respectively, at December 31, 1995 and
     RMB40,500,000 and RMB40,500,000, respectively, at December 31, 1996.  The
     fair value of the shareholders' advances is not able to be determined
     because no comparable borrowing terms are currently available.

                                     F-37
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

21.  CONCENTRATION OF RISKS

     The Group's operating assets and primary source of income and cash flow are
     its interest in subsidiaries and associated company in the PRC.  The PRC
     economy has, for many years, been a centrally-planned economy, operating on
     the basis of annual, five-year and ten-year state plans adopted by central
     PRC governmental authorities which set out national production and
     development targets.  The PRC government has been pursuing economic reforms
     since it first adopted its "open-door" policy in 1978.  There is no
     assurance that the PRC government will continue to pursue economic reforms
     or that there will not be any significant change in its economic or other
     policies, particularly in the event of any change in the political
     leadership of, or the political, economic or social conditions in, the PRC.
     There is also no assurance that the Group will not be adversely affected by
     any such change in governmental policies or any unfavorable change in the
     political, economic or social conditions, the laws or regulations or the
     rate or method of taxation in the PRC.

     As many of the economic reforms which have been or are being implemented by
     the PRC government are unprecedented or experimental, they may be subject
     to adjustment or refinement which may have adverse effects on the Group.
     Further, through state plans and other economic and fiscal measures, it
     remains possible for the PRC government to exert significant influence on
     the PRC economy.

     The sale and distribution of products under the "Pabst Blue Ribbon"
     brandname in 1995 and 1996 accounted for 95% and 94%, respectively of the
     Group's turnover.  The Group purchases Pabst Blue Ribbon beer from Blue
     Ribbon Noble and recognizes its heavy dependence on Blue Ribbon Noble.
     Stoppages of production and/or supply from Blue Ribbon Noble for reasons
     within or outside their control could affect the Group's operation,
     although so far the Group has never encountered any problems in securing
     adequate supplies from Blue Ribbon Noble.

     In November, 1996, Blue Ribbon Group advised the Company that it believed
     it had the right to brew Pabst Blue Ribbon beer in the PRC either by itself
     or through one or more of its affiliates.  Blue Ribbon Group had recently
     established a wholly-owned subsidiary in Le Shang City, Sichuan Province of
     the PRC, with an intention to convert a brewery with an annual production
     capacity of 20,000 metric tons, (the "Sichuan Brewery"), into a brewing
     complex for the production of Pabst Blue Ribbon beer in 1997.  Although the
     Company believes that the terms of the sublicense agreement legally
     preclude Blue Ribbon Group from brewing Pabst Blue Ribbon beer in the PRC,
     the Company has been advised by its legal counsel in the PRC that it is
     uncertain if the Company will prevail in this matter.

     In the event that Blue Ribbon Group is able to successfully assert its
     position and commence the production of Pabst Blue Ribbon beer in the
     Sichuan Brewery, the Company would face competition from Blue Ribbon Group
     in the PRC. As a result, the value of the Company's sublicense rights could
     be diminished, and the Company's practical ability to expand in the PRC
     could be affected. The Company is currently in discussions with Blue Ribbon
     Group in an attempt to resolve this dispute in an amicable manner, but
     there can be no assurances that the Company will be successful in this
     regard. 

                                     F-38
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

21.  CONCENTRATION OF RISKS - continued

     The Group currently uses foreign currency to pay for imported raw
     materials.  In addition, the Group obtained foreign currency loans from
     shareholders to acquire the subsidiaries in the PRC and obtained foreign
     currency loans for working capital purposes.  For the risks relating to
     foreign currency, please refer to note 14.

     The Group's financial instruments that are exposed to concentration of
     credit risk consists primarily of cash and accounts receivable from
     customers.  Cash is maintained with major banks in the PRC.  The Group's
     business activity is with customers in the PRC.  The Group periodically
     performs credit analysis and monitors the financial condition of its
     clients in order to minimize credit risk.


22.  PLEDGE OF ASSETS

     Certain assets of High Worth Brewery were collaterialized to secure bank
     borrowings. The net book value of the property, plant and equipment and the
     carrying amounts of the other assets pledged to banks as of December 31,
     1996 amounted to RMB193,594,443 and RMB203,209,679 respectively.  The net
     book value of property, plant and equipment pledged to banks as of December
     31, 1995 amounted to RMB162,554,656.


23.  COMMITMENTS AND CONTINGENCIES

     As of December 31, 1996, the Group had no capital commitments.  The Group
     was committed to capital expenditures of RMB43,168,954 as of December 31,
     1995.

     Blue Ribbon Group entered into licensing arrangements with Pabst Brewery
     Company whereby Blue Ribbon Group was granted the exclusive right to
     produce and market products under four specific Pabst trademarks in the
     PRC, the non-exclusive right to market products in other Asian countries
     except Hong Kong, Macau, Japan and South Korea, and the right to sublicense
     the use of the trademarks to any other enterprise in the PRC. Pursuant to
     the terms of the sublicense agreement, High Worth Brewery was granted by
     Blue Ribbon Group the right in the Guangdong Province of the PRC to use two
     specific Pabst trademarks in its production, promotion, distribution and
     sale of beer under such trademarks. In addition, Blue Ribbon Group also
     granted the right to use two specific Pabst trademarks for the production,
     promotion, distribution and sale of beer to High Worth Brewery or those
     enterprises owned by High Worth Brewery which are located outside Guangdong
     Province in the PRC. The sublicense agreement is valid until November 7,
     2003. In consideration for the sublicense granted, High Worth Brewery is
     committed to pay Blue Ribbon Group a royalty fee of US$11.70 for each ton
     produced.

                                     F-39
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

23.  COMMITMENTS AND CONTINGENCIES - continued

     A provisional agreement, subject to governmental approval, was made among
     CBR Brewing Company, Inc. and its subsidiary, the group companies of Noble
     China Inc., a company incorporated in Canada and Blue Ribbon Group on May
     10, 1995 to the effect that:

     (a)  High Worth Brewery was entitled to be granted from Blue Ribbon Group
          the right to brew and sell beer under the Pabst Blue Ribbon label
          produced in its brewing facilities up to a maximum production capacity
          of 100,000 tons per annum.

     (b)  High Worth Brewery and/or companies that High Worth Brewery has an
          interest in are entitled to be granted a sublicense from Blue Ribbon
          Group with the right to produce and sell beer under the Pabst Blue
          Ribbon label in the Guangdong Province of the PRC ("Additional
          Facility") to a maximum production capacity of 300,000 tons per annum.

          In the event that High Worth Brewery desires to obtain sublicense for
          any Additional Facility, Goldjinsheng Holding Limited ("Goldjinsheng")
          has the right to purchase up to a 40% interest in such Additional
          Facility.  The purchase price for such interest shall be the actual
          cost of such Additional Facility multiplied by the percentage interest
          that Goldjinsheng elects to purchase.

     (c)  A proposed new marketing company ("New Marketing Company"), owned as
          to 8% by Blue Ribbon Group, 52% by High Worth Brewery and 40% by
          Goldjinsheng, shall be formed to handle and organize the sales of
          Pabst Blue Ribbon beer produced by Zhaoqing Brewery and the Blue
          Ribbon Noble.  Each of Zhaoqing Brewery and the Blue Ribbon Noble will
          create a separate distribution company or division of their own.  The
          distribution company of Zhaoqing Brewery will have the sole right to
          acquire 100% of the production of Zhaoqing Brewery and 40% of the
          production of the Blue Ribbon Noble; whilst the distribution company
          of the Blue Ribbon Noble will have the sole right to acquire 60% of
          the production of the Blue Ribbon Noble.  The respective distribution
          companies will appoint the New Marketing Company as their sole and
          exclusive agent to market Pabst Blue Ribbon beer in the PRC.

     Another agreement was made among Goldjinsheng, Blue Ribbon Group and Blue
     Ribbon Noble on May 10, 1995 to the effect that Blue Ribbon Noble agreed to
     pay Blue Ribbon Group a management fee of RMB2,035,000 per annum for a
     period of five years.

     As of December 31, 1995, the Group was committed to pay operating lease in
     respect of rental expenses of RMB447,240 for the year ended December 31,
     1996.

     As of December 31, 1996, the Group has no operating lease commitments.

     An agreement was made between Blue Ribbon Group and High Worth Brewery on
     December 31, 1995 to the effect that High Worth Brewery agreed to pay Blue
     Ribbon Group a management fee

                                     F-40
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

     of RMB3,780,000 per annum for a period of three years commencing on January
     1, 1996 (see note 18(f)).

                                     F-41
<PAGE>
 
CBR BREWING COMPANY, INC.
-------------------------

24.  POST BALANCE SHEET EVENTS

     (a)  Subsequent to the balance sheet date, certain allegations were raised
          against Blue Ribbon Noble by the former chairman and CEO of Noble
          China Inc., ultimate holding company of Blue Ribbon Noble concerning
          irregularities on the financial statements of Blue Ribbon Noble in
          previous years.  Having considered Blue Ribbon Noble's position and on
          the advice of legal counsel, the directors of Blue Ribbon Noble are of
          the opinion that the allegations were of no substance and,
          accordingly, will not have any material adverse effect to Blue Ribbon
          Noble.

     (b)  In April 1997, the Sichuan Brewery commenced the production and sale
          of Pabst Blue Ribbon beer.  The Company currently estimates that the
          Sichuan Brewery will produce from 16,000 to 18,000 metric tons of
          Pabst Blue Ribbon beer in 1997.  In the same month, in order to
          facilitate the efficient distribution and sale of Pabst Blue Ribbon
          beer in the PRC, the Blue Ribbon Marketing and the Sichuan Brewery
          entered into a Memorandum of Understanding.  The Memorandum of
          Understanding requires the Sichuan Brewery to sell all of its
          production of Pabst Blue Ribbon beer to the Blue Ribbon Marketing at
          mutually agreed ex-factory prices, and grants Blue Ribbon Marketing
          the right to regulate production to reflect market demand.  In signing
          the Memorandum of Understanding, the Company does not consent to, or
          waives any rights with respect to, Blue Ribbon Group's assertion that
          Blue Ribbon Group has the right to brew Pabst Blue Ribbon beer in the
          PRC either by itself or through one or more of its affiliates.

          To the extent that the production of Pabst Blue Ribbon beer by the
          Sichuan Brewery causes a commensurate reduction in beer production and
          sales by Zhaoqing Brewery and Blue Ribbon Noble, the Company's
          consolidated results of operations could be adversely affected.  The
          Company currently estimates that the Sichuan Brewery's 1997 production
          volume will represent approximately 6% of the Company's budgeted
          volume of sales in 1997.

                                     F-42
<PAGE>
 
ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
---------------------------------------
(Registered in the People's Republic of China)


REPORTS AND FINANCIAL STATEMENTS FOR THE TEN MONTHS 
ENDED OCTOBER 31, 1994, TWO MONTHS ENDED DECEMBER 31, 
1994, AND THE YEARS ENDED DECEMBER 31, 1995 AND 1996
-----------------------------------------------------

<TABLE> 
<CAPTION> 

CONTENTS                                                              PAGES
--------                                                              -----

<S>                                                                   <C> 
REPORT OF INDEPENDENT AUDITORS......................................  FS - 1


REPORT OF PREDECESSOR AUDITORS......................................  FS - 2


BALANCE SHEETS......................................................  FS - 3


STATEMENTS OF INCOME................................................  FS - 4


STATEMENTS OF EQUITY................................................  FS - 5


STATEMENTS OF CASH FLOWS............................................  FS - 6


NOTES TO FINANCIAL STATEMENTS.......................................  FS - 7  -  FS - 21
</TABLE> 
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS

To the board of directors and shareholders of
CBR Brewing Company, Inc.


We have audited the accompanying balance sheet of Zhaoqing Blue Ribbon Brewery
Noble Ltd. as of December 31, 1996 and the related statements of income, equity
and cash flows for the year then ended.  These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements present fairly, in all material
respects, the financial position of Zhaoqing Blue Ribbon Brewery Noble Ltd. as
of December 31, 1996 and the results of its operation and its cash flows for the
year then ended in conformity with generally accepted accounting principles in
the United States in America.

We draw your attention to notes 11, 19 and 22 to the financial statements which
state that the Company is exposed to foreign exchange risk and other risks
through its operation in the People's Republic of China, and the risk of its
business which could be adversely affected as a result of new competition.



                                              /s/ Deloitte Touche Tohmatsu

Hong Kong
June 27, 1997

                                     FS-1
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS



To the shareholders of
CBR Brewing Company, Inc.



     We have audited the accompanying balance sheets of Zhaoqing Blue Ribbon
Brewery Noble Ltd. as of December 31, 1995 and 1994 and the related statements
of income, equity and cash flows for the year ended December 31, 1995, the two
months ended December 31, 1994, the ten months ended October 31, 1994 and the
two months ended December 31, 1993.  These financial statements are the
responsibility of Zhaoqing Blue Ribbon Brewery Noble Ltd.'s management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with generally accepted auditing
standards in the United States of America.  Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Zhaoqing Blue Ribbon Brewery
Noble Ltd. as of December 31, 1995 and 1994 and the results of its operation and
its cash flows for the year ended December 31, 1995 and the two months ended
December 31, 1994, the ten months ended October 31, 1994 and the two months
ended December 31, 1993 in conformity with generally accepted accounting
principles in the United States of America.



                                                    /s/ Ernst & Young



Hong Kong
March 28, 1996

                                     FS-2
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


                                 BALANCE SHEETS

                        AS OF DECEMBER 31, 1995 AND 1994

<TABLE> 
<CAPTION> 
 
                                                                 As of December 31,
                                                       --------------------------------------
                                                           1995        1996          1996
                                                           ----        ----          ----
                                                           RMB          RMB           US$
                                                                                   (Note 3)
                                     ASSETS
 
Current assets:
<S>                                                    <C>           <C>           <C>
  Cash and cash equivalents                            118,046,066   123,938,892   14,896,501
  Accounts receivable, net of allowance for
    doubtful accounts of RMB786,740 and
    RMB2,246,703 for 1995 and 1996,
      respectively (note 4)                              1,056,823     7,223,259      868,180
  Inventories (note 5)                                  33,025,879    40,577,951    4,877,158
  Prepayments and deposits                              28,842,225    40,205,803    4,832,428
  Amounts due from related companies (note 16a)        168,625,581   176,350,800   21,196,010
                                                       -----------   -----------   ----------
  Total current assets                                 349,596,574   388,296,705   46,670,277
 
Property, plant and equipment, net of accumulated
  depreciation and amortization of RMB53,352,907
  and RMB89,983,400 for 1995 and 1996,
  respectively (notes 6 and 20)                        462,021,855   433,480,695   52,101,045
                                                       -----------   -----------   ----------
  Total assets                                         811,618,429   821,777,400   98,771,322
                                                       ===========   ===========   ==========
</TABLE>

                             LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
 
Current liabilities:
<S>                                                    <C>           <C>           <C>
  Bank loans (note 7)                                   13,500,000    13,500,000    1,622,596
  Accounts payable                                      47,500,745    58,293,169    7,006,391
  Accrued liabilities                                   13,014,546    34,972,066    4,203,373
  Employee welfare and incentive fund                    9,727,271     6,217,309      747,272
  Amounts due to related companies (note 16b)           26,998,322    29,286,818    3,520,050
  Sales taxes payable (note 9)                          79,017,253    50,543,297    6,074,916
  Income taxes payable (note 8)                                  -    13,035,421    1,566,757
                                                       -----------   -----------   ----------
                                                   
  Total current liabilities                            189,758,137   205,848,080   24,741,355
                                                   
Long term liabilities:                             
  Deferred income taxes (note 8)                         5,500,000     9,000,000    1,081,731
  Commitments and contingencies                    
    (notes 11, 19, 21 and 22)                      
Equity:                                            
Contributed capital                                    475,940,000   475,940,000   57,204,327
General reserve and enterprise development funds         9,727,271    14,506,926    1,743,621
Retained earnings                                      130,693,021   116,482,394   14,000,288
                                                       -----------   -----------   ----------
Total equity                                           616,360,292   606,929,320   72,948,236
                                                       -----------   -----------   ----------
Total liabilities and equity                           811,618,429   821,777,400   98,771,322
                                                       ===========   ===========   ==========
</TABLE>
               See accompanying notes to the financial statements

                                     FS-3
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


                              STATEMENTS OF INCOME
<TABLE>
<CAPTION>
 
                                    
                                               Ten months            Two months                Year ended December 31,             
                                                  ended                 ended         -------------------------------------------
                                             October 31, 1994     December 31, 1994       1995            1996           1996    
                                             ----------------     -----------------   ------------   -------------   ------------ 
                                                   RMB                   RMB              RMB             RMB            US$ 
                                                                                                                       (Note 3)
<S>                                             <C>                  <C>              <C>             <C>             <C>         
Sales, including sales to a related                                                                                               
 company of RMB327,805,406 and                                                                                                    
 RMB695,150,225 in 1995 and 1996                                                                                                  
 respectively (note 16c)                        413,361,747          133,139,232      724,233,282     695,150,225     83,551,710  
Sales taxes (note 9)                            (20,668,193)          (6,701,053)     (42,509,114)    (39,833,234)    (4,787,648) 
                                               ------------          -----------     ------------    ------------    -----------  
                                                                                                                                  
Net sales                                       392,693,554          126,438,179      681,724,168     655,316,991     78,764,062  
Cost of sales, including inventory                                                                                                
 purchased from related companies                                                                                                 
 of RMB94,682,501,                                                                                                                
 RMB91,355,485 and                                                                                                                
 RMB117,344,580 in 1994, 1995                                                                                                     
 and 1996 respectively and royalty fee                                                                                            
 paid to a related company of                                                                                                     
 RMB13,082,271, RMB15,434,144 and                                                                                                 
 RMB15,106,029 in 1994, 1995                                                                                                      
 and 1996 respectively (note 16c)              (275,455,836)         (90,023,773)    (525,860,005)   (510,166,989)   (61,318,148) 
                                               ------------          -----------     ------------    ------------    -----------  
                                                                                                                                  
Gross profit                                    117,237,718           36,414,406      155,864,163     145,150,002     17,445,914  
Selling, general and administrative                                                                                               
 expenses, including management                                                                                                   
 fee paid to a related company of                                                                                                 
 RMB2,035,000 and                                                                                                                 
 RMB2,035,000 in 1995 and 1996                                                                                                    
 respectively (note 16c)                        (31,302,496)         (16,488,878)     (60,819,562)    (38,937,354)    (4,679,970) 
                                               ------------          -----------     ------------    ------------    -----------  
                                                                                                                                  
Operating income                                 85,935,222           19,925,528       95,044,601     106,212,648     12,765,944  
Interest income                                     863,151              325,451        3,846,001       3,901,929        468,982  
Interest expense                                          -                    -       (2,240,015)     (3,450,585)      (414,734) 
                                               ------------          -----------     ------------    ------------    -----------  
                                                                                                                                  
Income before income taxes                       86,798,373           20,250,979       96,650,587     106,663,992     12,820,192  
Income taxes (note 8)                            (2,580,000)            (720,000)      (2,200,000)    (16,535,421)    (1,987,430) 
                                               ------------          -----------     ------------    ------------    -----------  
                                                                                                                                  
Net income                                       84,218,373           19,530,979       94,450,587      90,128,571     10,832,762  
                                               ============          ===========     ============    ============    ===========   
</TABLE>
               See accompanying notes to the financial statements

                                     FS-4
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)

   
                              STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
 
                                                      General
                                                    reserve and
                                                    enterprise
                                   Contributed      development       Retained
                                     capital           funds          earnings          Equity
                                  --------------   -------------   --------------   --------------
                                       RMB              RMB             RMB              RMB
                                    (Note 10)        (Note 12)       (Note 13)
<S>                               <C>              <C>             <C>              <C>
Balance at January 1, 1994          475,940,000               -       13,831,773      489,771,773
Net income for the period                     -               -       84,218,373       84,218,373
                                  -------------    ------------    -------------    -------------
Balance at October 31, 1994         475,940,000               -       98,050,146      573,990,146
Net income for the period                     -               -       19,530,979       19,530,979
Appropriation of reserve                      -       4,199,788       (4,199,788)               -
                                  -------------    ------------    -------------    -------------
Balance at December 31, 1994        475,940,000       4,199,788      113,381,337      593,521,125
Net income for the year                       -               -       94,450,587       94,450,587
Appropriation of:
  Reserve                                     -       5,527,483       (5,527,483)               -
  Dividend                                    -               -      (71,611,420)     (71,611,420)
                                  -------------    ------------    -------------    -------------
Balance at December 31, 1995        475,940,000       9,727,271      130,693,021      616,360,292
Net income for the year                       -               -       90,128,571       90,128,571
Appropriation of:
  Reserve                                     -       4,779,655       (4,779,655)               -
  Dividend                                    -               -      (99,559,543)     (99,559,543)
                                  -------------    ------------    -------------    -------------
Balance at December 31, 1996        475,940,000      14,506,926      116,482,394      606,929,320
                                  =============    ============    =============    =============
Converted to US$
Balance at December 31, 1996
  (note 3)                        US$57,204,327    US$1,743,621    US$14,000,288    US$72,948,236
                                  =============    ============    =============    =============
</TABLE>
               See accompanying notes to the financial statements

                                     FS-5
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
 
                                                         
                                         Ten months          Two months                 Year ended December 31,
                                            ended               ended         -------------------------------------------
                                      October 31, 1994    December 31, 1994       1995           1996           1996
                                      ----------------    -----------------   ------------   ------------   -------------
                                            RMB                  RMB               RMB            RMB             US$
                                                                                                               (Note 3)
<S>                                       <C>                  <C>            <C>            <C>              <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
 
NET INCOME........................         84,218,373           19,530,979     94,450,587     90,128,571       10,832,761          
                                                                                                                                   
ADJUSTMENTS TO RECONCILE NET                                                                                                       
 INCOME TO NET CASH PROVIDED                                                                                                       
 BY OPERATING ACTIVITIES:                                                                                                          
Depreciation and amortization.....         14,840,444            6,063,562     30,115,484     36,630,493        4,402,703          
Deferred income taxes.............          2,580,000              720,000      2,200,000      3,500,000          420,673          
Allowance for doubtful accounts...                  -                    -        786,740      1,459,963          175,476          
Provision for income tax..........                  -                    -              -     13,035,421        1,566,757          
                                                                                                                                   
CHANGES IN OPERATING ASSETS                                                                                                        
AND LIABILITIES:                                                                                                                   
Accounts receivable...............        (40,321,210)         (26,866,386)    97,194,303     (7,626,399)        (916,634)          
Prepayments and deposits..........        (19,072,269)           2,089,933    (11,461,759)   (11,363,578)      (1,365,815)          
Inventories.......................        (11,930,272)         (23,200,138)    20,043,860     (7,552,072)        (907,701)          
Amounts due from related companies        (47,477,712)          (5,223,518)   (77,218,250)    (7,725,219)        (928,512)          
Accounts payable and accrued                                                                                                       
 liabilities......................         31,276,709           17,226,020      7,276,109     32,685,096        3,936,291          
Employee welfare and incentive                                                                                                     
 fund.............................                  -            4,199,788      5,527,483     (3,509,962)        (421,871)          
Deposits received from customers..         36,094,489            5,804,093    (61,464,582)             -                -          
Amounts due to related companies..        (33,242,589)          15,579,727      9,504,527      2,288,496          275,060          
Sales taxes payable...............         34,610,703           (6,847,842)    39,759,438    (28,473,956)      (3,422,350)          
                                          -----------          -----------    -----------    -----------      -----------          
NET CASH PROVIDED BY                                                                                                               
 OPERATING ACTIVITIES.............         51,576,666            9,076,218    156,713,940    113,476,854       13,646,838          
                                          -----------          -----------    -----------    -----------      -----------          
                                                                                                                                   
CASH FLOWS FROM INVESTING                                                                                                          
 ACTIVITIES                                                                                                                        
Purchases of property, plant and                                                                                                   
 equipment........................         (2,065,532)          (7,191,395)   (31,927,658)    (8,089,333)        (972,275)          
Proceeds from disposals of                                                                                                         
 property, plant and equipment....                  -                    -      1,749,823              -                -
                                          -----------          -----------    -----------    -----------      -----------          
NET CASH USED IN INVESTING
 ACTIVITIES.......................         (2,065,532)          (7,191,395)   (30,177,835)    (8,089,333)        (972,275)          
                                          -----------          -----------    -----------    -----------      -----------          
                                                                                                                                   
CASH FLOWS FROM FINANCING                                                                                                          
 ACTIVITIES
New bank loans....................                  -           17,200,000     13,500,000              -                -          
Repayment of bank loans...........                  -                    -    (17,200,000)             -                -          
Repayment of loans from related                                                                                                    
 companies........................         (3,240,000)                   -              -              -                -          
Dividend paid.....................                  -                    -    (71,611,420)   (99,494,695)     (11,966,291)          
                                          -----------          -----------    -----------    -----------      -----------          
NET CASH (USED IN) PROVIDED BY                                                                                                     
 FINANCING ACTIVITIES.............         (3,240,000)          17,200,000    (75,311,420)   (99,494,695)     (11,966,291)          
                                          -----------          -----------    -----------    -----------      -----------          
NET INCREASE IN CASH AND                                                                                                           
 CASH EQUIVALENTS.................         46,271,134           19,084,823     51,224,685      5,892,826          708,272          
CASH AND CASH EQUIVALENTS                                                                                                          
 AT BEGINNING OF YEAR/PERIOD......          1,465,424           47,736,558     66,821,381    118,046,066       14,188,229          
                                          -----------          -----------    -----------    -----------      -----------          
CASH AND CASH EQUIVALENTS                                                                                                          
 AT END OF YEAR/PERIOD............         47,736,558           66,821,381    118,046,066    123,938,892       14,896,501          
                                          ===========          ===========    ===========    ===========      ===========           

 </TABLE>
               See accompanying notes to the financial statements

                                     FS-6
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------------


1.   ORGANIZATION AND PRINCIPAL ACTIVITY

     Zhaoqing Blue Ribbon Brewery Noble Ltd. (the "Company") is a Sino-foreign
     equity joint venture enterprise registered in the People's Republic of
     China ("PRC") in October 1993 in which Goldjinsheng Holding Limited
     ("Goldjinsheng") and Zhaoqing Brewery hold 60% and 40% interests,
     respectively.  The venture term of the Company is twenty years which term
     may be extended upon mutual agreement of the joint venture parties and
     approval from the relevant PRC government authorities.

     Pursuant to the joint venture agreements and with the approval of the
     relevant PRC government authorities, the property, plant, equipment and the
     business of Pabst Blue Ribbon Brewery (Zhaoqing) Co. Ltd. ("Pabst Blue
     Ribbon") an unrelated PRC owned enterprise, were disposed of to Zhaoqing
     Brewery and then to the Company as capital contribution.

     The Company is principally engaged in the production and sale of beer and
     beer products in the PRC since commencement of business on November 6,
     1993.  The Company's principal line of product is Blue Ribbon beer under
     non exclusive Pabst trademarks which were granted by Blue Ribbon Group (see
     note 21), an unrelated PRC owned enterprise.  Malt, rice, water and packing
     materials are the major raw materials in the production of Blue Ribbon
     beer.  Effective from July 1995, all beer products produced by the Company
     were sold to Zhaoqing Blue Ribbon Beer Marketing Company Limited ("Blue
     Ribbon Marketing"), which was formed to promote and distribute beverage
     products.  Blue Ribbon Marketing is owned as to 70% by Zhaoqing Brewery
     which acts as a nominee on behalf of Zhaoqing Blue Ribbon High Worth
     Brewery Ltd. ("High Worth Brewery") 60% owned indirectly by CBR Brewing
     Company, Inc. ("CBR") and 40% by Blue Ribbon Group, and 30% directly by
     Guangdong Blue Ribbon Group Co., Ltd. ("Blue Ribbon Group").  The Blue
     Ribbon Group also owns indirectly 28% of the Blue Ribbon Marketing.

     Goldjinsheng is a wholly owned subsidiary of Noble China Inc., a company
     listed in the Toronto Stock Exchange and Pabst Blue Ribbon was a subsidiary
     of the Blue Ribbon Group.

     Zhaoqing Brewery is a wholly owned subsidiary of High Worth Brewery, a
     Sino-foreign equity joint venture enterprise registered in the PRC in which
     Blue Ribbon Group and High Worth Holdings Limited, a wholly owned
     subsidiary of CBR, hold 40% and 60% interests, respectively.

                                     FS-7
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


2.   BASIS OF PRESENTATION

     The financial statements have been prepared in accordance with generally
     accepted accounting principles in the United States of America ("US GAAP").
     This basis of accounting differs from that used in the preparation of the
     statutory financial statements of the Company which are prepared in
     accordance with the accounting principles and relevant financial
     regulations established by the Ministry of Finance of the PRC.

     The major adjustments made to the PRC statutory financial statements to
     conform with the accrual basis under US GAAP include the adjustments for
     sales, interest income and purchases recognized on a cash basis,
     depreciation and deferred taxation.

     On October 31, 1994, High Worth Holdings Limited, a wholly-owned subsidiary
     of CBR Brewing Company, Inc., acquired an effective 60% interest in
     Zhaoqing Brewery, including Zhaoqing Brewery's 40% interest in the Company.
     Accordingly, the Company's statements of income and cash flows were
     prepared for the ten months ended October 31, 1994 and for the two months
     ended December 31, 1994 to show the pre-acquisition and the post-
     acquisition operating results and cash flows of the Company attributable to
     CBR Brewing Company, Inc. for the period ended December 31, 1994.


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF ACCOUNTING - The financial statements have been prepared under the
     historical cost convention.

     REVENUE RECOGNITION - Sales represent the invoiced value of goods sold, net
     of returns and discounts.  Sales and sales discounts are recognized upon
     delivery of goods to customers.  Sales returns are recognized upon receipt
     of goods returned from customers.

     INVENTORIES - Inventories are stated at the lower of cost or market value.
     Cost, which comprises direct materials, direct labor costs and overhead
     associated with the manufacturing process, is calculated using the first-
     in, first-out method.

     PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at
     cost less allowance for depreciation and amortization.  Cost includes the
     fair value of property, plant and equipment transferred from Pabst Blue
     Ribbon.

     Depreciation and amortization are provided using the straight-line method
     to write off the cost of property, plant and equipment over their estimated
     useful lives as follows:

                                     FS-8
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     Land use rights.................   20 years
     Buildings.......................   20 years
     Plant, machinery and equipment..   15 years
     Motor vehicles..................   10 years


     According to the laws of the PRC, the title to all PRC land is retained by
     the PRC government.  The land use rights represent the cost for the rights
     to use the land for premises granted by the State Land Administration
     Bureau.  The land use rights are stated at cost and are amortized over the
     shorter of the venture term of the Company or the term of the land use
     right.

     Construction in progress is stated at cost which comprises the direct cost
     of buildings, plant under construction and deposits and prepayments made on
     machinery pending installation.  Cost comprises the direct costs of
     construction and installation.  No depreciation is provided until the
     relevant assets have been put into commercial use.

     The Company regularly reviews its property, plant and equipment for
     impairment whenever events or changes in circumstances indicate that the
     carrying amount of an asset may not be recoverable based upon undiscounted
     cash flows expected to be produced by such assets over their expected
     useful lives.

     ADVERTISING EXPENSES - Advertising expenses are charged to expense in the
     statements of income as incurred.

     INCOME TAXES - Income taxes are determined under the liability method in
     accordance with Statement of Financial Accounting Standards No. 109,
     "Accounting for Income Taxes" ("SFAS 109").  SFAS 109 requires deferred
     taxes be adjusted to reflect the tax rates at which future taxable amounts
     will be settled or recognized.  The effects of tax rate changes on future
     deferred tax liabilities and deferred tax benefits, as well as other
     changes in income tax laws, are recognized in net earnings in the period
     such changes are enacted.

     CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash on hand,
     cash accounts, interest bearing saving accounts, and short-term bank
     deposits with maturities of three months or less.

     FOREIGN CURRENCY TRANSLATION - The financial records and the statutory
     financial statements of the Company are maintained in Renminbi.  In
     preparing the financial statements, all foreign currency transactions are
     translated into Renminbi using the applicable rates of exchange, quoted by
     the Zhaoqing Foreign Exchange Adjustment Center (the "swap center") for the
     respective periods.  Monetary assets and liabilities denominated in foreign
     currencies

                                     FS-9
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued


     have been translated into Renminbi using the rate of exchange quoted by the
     swap center prevailing at the balance sheet date.  The resulting exchange
     gains or losses have been credited or charged to the statement of income
     for the period in which they occur.

     Translation of amounts from Renminbi ("RMB") into United States dollars
     ("US$") is for the convenience of the reader only and has been made at the
     swap center rate as quoted by the People's Bank of China on December 31,
     1996 of US$1.00 = RMB8.32.  No representation is made that the Renminbi
     amounts could have been, or could be, converted into United States dollars
     at that rate or at any other rate.

     USE OF ESTIMATES - The preparation of financial statements in conformity
     with generally accepted accounting principles requires management to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities and disclosures of contingent assets and liabilities at the
     date of the financial statements and the reported amounts of revenues and
     expenses during the reporting period.  Actual results could differ from
     those estimates.

     EFFECTS OF RECENT ACCOUNTING PRONOUNCEMENTS - The United States Financial
     Accounting Standards Board ("FASB") has issued SFAS No. 121, "Accounting
     for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
     Disposed of".  This statement requires that the Company review for
     impairment of long-lived assets, certain identifiable intangibles, and
     goodwill related to those assets whenever events or changes in
     circumstances indicate that the carrying amount of an asset may not be
     recoverable.  SFAS No. 121 was effective for the Company's fiscal year
     beginning January 1, 1996.  The adoption of this statement did not have a
     material impact on the Company's financial position or results of
     operations for the year ended December 31, 1996.  The FASB also issued SFAS
     No. 123, "Accounting for Stock-Based Compensation".  The Company was
     required to adopt SFAS No. 123 for the fiscal year beginning January 1,
     1996.  This statement establishes accounting and disclosure requirements
     using a fair value-based method of accounting for stock-based employee
     compensation plans.  Under SFAS No. 123, the Company may either adopt the
     new fair value-based accounting method or continue the intrinsic value-
     based method and provide pro forma disclosures of net income and earnings
     per share as if the fair value accounting provisions of this statement had
     been adopted.  The Company adopted only the disclosure requirements of SFAS
     No. 123; therefore such adoption had no effect on the Company's financial
     position or results of operations for the fiscal year ended December 31,
     1996.

                                     FS-10
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


4.   ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
 
     Accounts receivable comprises:
                                                                                 1995           1996
                                                                              -----------    -----------
                                                                                  RMB            RMB
<S>                                                                           <C>            <C>
     Accounts receivables - trade.......................                        1,843,563      9,469,962
     Less: Allowance for doubtful accounts..............                         (786,740)    (2,246,703)
                                                                              -----------    -----------
 
                                                                                1,056,823      7,223,259
                                                                              ===========    ===========
     Movement of allowance for doubtful accounts:                                                        
                                                                                                         
     Balance as at January 1............................                                -        786,740 
     Provided during the year...........................                          786,740      1,459,963 
                                                                              -----------    ----------- 
                                                                                                         
     Balance as at December 31..........................                          786,740      2,246,703 
                                                                              ===========    ===========  
 
5.   INVENTORIES
                                                                                 1995           1996
                                                                              -----------    -----------
                                                                                  RMB            RMB
 
     Raw materials.....................................                        20,296,779     30,136,756 
     Work in progress..................................                        11,334,431      8,247,938 
     Finished goods....................................                         1,394,669      2,193,257 
                                                                              -----------    -----------  
 
                                                                               33,025,879     40,577,951
                                                                              ===========    ===========
 
6.   PROPERTY, PLANT AND EQUIPMENT
                                                                                 1995           1996
                                                                              -----------    -----------
                                                                                  RMB            RMB
     At cost:                                                                                            
      Land use rights and buildings.....................                      157,686,309    162,700,681 
      Plant, machinery and equipment....................                      349,397,573    354,772,134 
      Motor vehicles....................................                        3,727,084      5,991,280 
      Construction in progress..........................                        4,563,796              - 
                                                                              -----------    ----------- 
                                                                                                         
      Total.............................................                      515,374,762    523,464,095 
      Less: Accumulated depreciation and amortization...                      (53,352,907)   (89,983,400)
                                                                              -----------    -----------  
 
                                                                              462,021,855    433,480,695
                                                                              ===========    ===========
</TABLE>

                                     FS-11
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


7.   BANK LOANS

     The short-term bank loans as at December 31, 1996 were collaterized by
     certain property, plant and equipment of the Company, bore fixed interest
     rates of 13.3% and 13.2% in 1995 (1994: 11.0%) and 12.3% in 1996 and are
     wholly repayable in 1997.  The weighted average interest rates as of
     December 31, 1995 and 1996 are 13.3% and 12.3% per annum, respectively.

     There are no significant covenants or financial restrictions relating to
     the Company's short-term bank borrowings.  Details of assets pledged by the
     Company are described in note 20.


8.   INCOME TAXES

     The Company is governed by the Income Tax Laws of the PRC concerning
     Foreign Investment Enterprises and Foreign Enterprises and various rules
     and regulations (the "Income Tax Laws").  Pursuant to the Income Tax Laws,
     foreign investment enterprises engaging in a production business located in
     Zhaoqing are subject to income tax at the rate of 27% on income as reported
     in its statutory financial statements.

     Pursuant to the Income Tax Laws, if the investor of a foreign investment
     enterprise reinvests its share of distributed profits from the enterprise,
     the investor is entitled to receive a tax refund of the income tax paid on
     the reinvested amount.

     With a tax concession obtained from the tax authority, the Company is
     exempt from income taxes for the two financial years commencing with its
     first profitable year of operations, and thereafter with a 50% reduction
     for the next three financial years.  Based on its local statutory financial
     statements, the Company has attained its first profitable year of
     operations for the financial year ended December 31, 1993.  As the Company
     only earned profits for two months in 1993, the Company has applied for an
     extension of the tax holiday period to 1995 which was approved by the PRC
     tax authority.  Accordingly, no current income taxes were provided by the
     Company for the ten months ended October 31, 1994, the two months ended
     December 31, 1994 and the year ended December 31, 1995.  For the year ended
     December 31, 1996, current income taxes based on the 50% reduction rule
     were provided.

     The provision for deferred income taxes is based on the liability method
     prescribed by Statement of Financial Accounting Standards No. 109.  The
     Company's temporary differences mainly represented the accelerated
     depreciation allowances provided on property, plant and equipment.

     The reconciliation of the effective income tax rates of the Company to the
     relevant statutory income tax rate in the PRC is an follows:

                                     FS-12
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)

<TABLE>
<CAPTION>
 
                                    Ten months       Two months          Year             Year
                                       ended           ended            ended            ended
                                    October, 31     December 31,     December 31,     December 31,
                                       1994             1994             1995             1996
                                   -------------   --------------   --------------   --------------
<S>                                    <C>             <C>              <C>              <C>
 
     Statutory tax rate.........         33%              33%              27%              27%   
     Tax holiday................        (33%)            (33%)            (27%)            (15%)   
     Accelerated depreciation                                                                     
      allowances................          3%               4%               3%               4%   
     Change in tax rate.........          -                -               (1%)              -    
                                       ----             ----             ----             ----    
                                                                                                  
     Effective tax rate.........          3%               4%               2%              16%   
                                       ====             ====             ====             ====     
 </TABLE>

     The aggregate income tax benefit from the tax exemption and reduction
     status for the ten months ended October 31, 1994, the two months ended
     December 31, 1994 and the years ended December 31, 1995 and 1996 amounted
     to approximately RMB28,644,000, RMB6,683,000, RMB26,100,000 and
     RMB16,000,000, respectively.


9.   SALES TAXES

     Effective from January 1, 1994, the Company is subject to three kinds of
     sales taxes, being the value added tax ("VAT"), the consumption tax and
     other sales taxes. The applicable VAT rate is 17% for brewery products sold
     in the PRC and nil for exported goods.  The amount of VAT liability is
     determined by applying the applicable tax rate to the invoiced amount of
     goods sold less VAT paid on purchases made with the relevant invoices in
     support.  VAT is collected from customers by the Company on behalf of the
     PRC tax authorities and is therefore not expensed to the statement of
     income.  The applicable consumption tax rate in respect of brewery products
     is RMB220 per ton.  The consumption tax expensed to the statement of income
     is determined based on the volume of sales within the PRC.  Exported goods
     are exempt.  The other sales taxes are assessed as a percentage of
     consumption tax and VAT.


10.  CONTRIBUTED CAPITAL

     The Company was registered with a capital of US$50,000,000.  At the balance
     sheet date, a total of RMB475,940,000 was contributed by the joint venture
     parties.

                                     FS-13
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


11.  FOREIGN CURRENCY EXCHANGE

     The Renminbi is not freely convertible into foreign currencies.  Prior to
     January 1, 1994, all foreign exchange transactions involving Renminbi in
     the PRC took place either through the Bank of China or other institutions
     authorized to buy and sell foreign exchange, or at an approved swap center
     in the PRC.  The swap centers are institutions which belong to the State
     Administration of Exchange Control and its branches.  The exchange rates
     used for transactions through the Bank of China and other authorized
     institutions were set by the PRC government, through the State
     Administration of Exchange Control, from time to time.  The exchange rates
     available at a swap center are determined largely by supply and demand
     based on foreign currency and Renminbi requirements of enterprises
     operating or doing business in the PRC.

     On January 1, 1994, the PRC government abolished the dual exchange rate
     system, comprising the official rates and the swap center rates, and
     introduced a single rate of exchange as quoted by the People's Bank of
     China. The unified exchange rate is quoted at levels similar to those
     quoted by the swap centers. However, the unification of exchange rates does
     not imply full convertibility of Renminbi into United States dollars or
     other foreign currencies. All foreign exchange transactions continue to
     take place either through the Bank of China or other institutions
     authorized to buy and sell foreign currencies or the swap centers at the
     exchange rates quoted by the People's Bank of China. In April 1994, the
     National Foreign Exchange Trading Center in Shanghai (the "exchange
     center") commenced operations. Enterprises operating in the PRC can enter
     into exchange transactions at the exchange center through the Bank of China
     or other authorized institutions. Payments for imported materials and
     remittances of earnings outside the PRC are subject to the availability of
     foreign currency which are dependent on the foreign currency denominated
     earnings of the Company or must be arranged through the exchange center.
     Approval for exchange at the exchange center is granted to enterprises in
     the PRC for valid reasons such as purchases of imported materials and
     remittances of earnings. While conversion of Renminbi into United States
     dollars or other foreign currencies can generally be effected at an
     exchange center, there is no guarantee that it can be effected at all
     times.

     Effectively July 1, 1996, the PRC government began to take steps to make
     its currency fully convertible on a "current account" basis.  This will
     allow foreign-funded enterprises, whether wholly owned or joint ventures
     with Chinese, to buy and sell foreign exchange in banks for purposes of
     trade, services, debt repayment and profit repatriation.  The "current
     account" measures the flow of money into and out of a nation, including the
     net balance on trade in goods and services, plus remittances.

     The unified exchange rates of the RMB equivalent of US$1.00 as of December
     31, 1994, 1995 and 1996 were 8.45, 8.32 and 8.32, respectively.

                                     FS-14
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


12.  GENERAL RESERVE AND ENTERPRISE DEVELOPMENT FUNDS

     As stipulated by the relevant laws and regulations for foreign investment
     enterprises, the Company is required to make appropriations to a general
     reserve fund, an enterprise development fund and an employee welfare and
     incentive fund, in which the percentage of annual appropriations are
     subject to the joint venture agreement.  The employee welfare and incentive
     fund are charged to the statement of income.  The other appropriations are
     accounted for as reserve funds in the balance sheet and are not available
     for distribution as dividends to the joint venture partners of the Company.
     Under the joint venture agreement, the board of directors shall determine
     the appropriations by regard to the economic situation of the Company.  The
     percentage of annual appropriations to a general reserve fund, an
     enterprise development fund and an employee welfare and incentive fund for
     1996 has already been determined by the board of directors and the
     appropriation has been reported in the statutory financial statements.


13.  RETAINED EARNINGS

     As described in note 2, the net income as reported in the US GAAP financial
     statements differs from that as reported in the PRC statutory financial
     statements.  In accordance with the relevant laws and regulations for Sino-
     foreign equity joint venture enterprises, the profits available for
     distribution are based on the statutory financial statements.  If the
     Company has foreign currency available after meeting its operational needs,
     the Company may make profit distributions in foreign currency to the extent
     it is available.  Otherwise, it will be necessary to convert such
     distributions at an exchange center.  At December 31, 1995 and 1996, the
     retained earnings available for distribution amounted to approximately
     RMB99,593,000 and RMB86,034,000, respectively.


14.  ADVERTISING EXPENSES

     The Company incurred advertising expenses of RMB13,986,841, RMB3,168,384,
     RMB25,517,797 and RMB3,298,054 for the ten months ended October 31, 1994,
     the two months ended December 31, 1994 and the years ended December 31,
     1995 and 1996, respectively.


15.  SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

     Interest paid during the years ended December 31, 1995 and 1996 was
     RMB2,240,015 and RMB3,450,585, respectively.  No interest was paid during
     1994.

                                     FS-15
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


16.  RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

     (a)  Amounts due from related companies

          The amounts receivable from related companies mainly represented the
          receivable balances from companies of the Blue Ribbon Group, High
          Worth Brewery, (Zhaoqing Brewery in 1995) Goldjinsheng Holding Limited
          and Blue Ribbon Marketing amounting to approximately RMB12.9 million,
          RMB0.5 million, RMB0.3 million and RMB154.9 million, respectively, for
          1995 and RMB9.1 million, RMB0.2 million, RMB0.1 million and RMB167
          million, respectively, for 1996.

          The balance with Blue Ribbon Group principally represented expenses
          paid on its behalf by the Company.

          The balances with High Worth Brewery and Goldjinsheng Holding Limited
          principally represented payment of expenses on their behalf.

          The balance with Blue Ribbon Marketing was operating in nature and
          principally represented accounts receivable from sales of finished
          goods.  Subsequent to the balance sheet date, a total amount of
          approximately RMB46 million has been repaid by Blue Ribbon Marketing.

          The amounts receivable from related companies are unsecured, interest-
          free and repayable on demand.

     (b)  Amounts due to related companies

          As of December 31, 1995 and 1996, the amounts due to related companies
          principally represented balances arising from the purchases of raw
          materials from American National Can (Zhaoqing) Co., Ltd. and Zhaoqing
          Blue Ribbon Carton Manufacturing Co. in which Blue Ribbon Group has
          equity interests.

          The balances were unsecured, interest-free and repayable on demand.

                                     FS-16
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


16.  RELATED PARTY TRANSACTIONS AND ARRANGEMENTS - continued

     (c)  Related party transactions

          The Company had transactions with companies in which Blue Ribbon Group
          or High Worth Brewery have equity interests.  These significant
          transactions are summarised below:
<TABLE>
<CAPTION>
 
                                     Ten months     Two months        Year           Year
                                        ended         ended          ended          ended
                                     October, 31   December 31,   December 31,   December 31,
                                        1994           1994           1995           1996
                                     -----------   ------------   ------------   ------------
<S>                                  <C>           <C>            <C>            <C>
     Sales of beer products to
     Blue Ribbon Marketing........             -              -    327,805,406    695,150,225
 
     Purchases of raw materials
     from American National
     Can (Zhaoqing) Co., Ltd......    59,339,382     19,225,776     78,818,909     94,037,194
 
     Purchases of raw materials
     from Zhaoqing Blue
     Ribbon Carton
     Manufacturing Co.............    11,819,385      4,297,958     12,536,576     23,307,386
 
     Royalty fee paid to Blue
     Ribbon Group.................     9,755,178      3,327,093     15,434,144     15,106,029
 
     Management fee paid to
     Blue Ribbon Group............             -              -      2,035,000      2,035,000
                                      ==========     ==========    ===========   ============
</TABLE>
17.  RETIREMENT PLAN

     As stipulated by the PRC government regulations, the Company has defined
     contribution retirement plans for all its permanent staff.  The Company and
     its staff are required to contribute to the PRC insurance companies
     organized by the PRC government which are responsible for the payment of
     pension benefits to retired staff.  Prior to June 30, 1994, the monthly
     contribution of the Company was calculated at 9.3% of the basic salary of
     the permanent staff and the monthly contribution of each permanent staff
     was RMB2.  Effective from July 1, 1994, the monthly contributions of the
     Company and the permanent staff were calculated at 14.6% and 2%,
     respectively of the basic salary of the permanent staff.  The pension costs
     expensed by the Company for the ten months ended October 31, 1994, the two
     months ended December 31, 1994 and the years ended December 31, 1995 and
     1996 amounted to RMB226,987, RMB45,400, RMB472,371 and RMB337,760,
     respectively.

                                     FS-17
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


18.  FINANCIAL INSTRUMENTS

     The carrying amounts reported in the balance sheet for current assets and
     current liabilities qualifying as financial instruments approximate their
     fair values because of the short maturity of such instruments.


19.  CONCENTRATION OF RISKS

     The Company's operating assets and primary source of income and cash flow
     are in the PRC.  The PRC economy has, for many years, been a centrally-
     planned economy, operating on the basis of annual, five-year and ten-year
     state plans adopted by central PRC governmental authorities which set out
     national production and development targets.  The PRC government has been
     pursuing economic reforms since it first adopted its "open-door" policy in
     1978.  There is no assurance that the PRC government will continue to
     pursue economic reforms or that there will not be any significant change in
     its economic or other policies, particularly in the event of any change in
     the political leadership of, or the political, economic or social
     conditions in, the PRC.  There is also no assurance that the Company will
     not be adversely affected by any such change in government policies or any
     unfavorable change in the political, economic or social conditions, the
     laws or regulations or the rate or method of taxation in the PRC.

     As many of the economic reforms which have been or are being implemented by
     the PRC government are unprecedented or experimental, they may be subject
     to adjustment or refinement which may have adverse effects on the Company.
     Further, through state plans and other economic and fiscal measures, it
     remains possible for the PRC government to exert significant influence on
     the PRC economy.

     All the Company's revenue are wholly derived from the sale of Pabst Blue
     Ribbon beer.

     The Company sold 45% and 100% of its products to Blue Ribbon Marketing in
     1995 and 1996, respectively and recognizes its heavy dependence on the
     sales to the related company.

     The Company currently uses foreign currency to pay for imported raw
     materials and its dividend. For details of foreign currency risks, please
     refer to note 11.

     The financial instruments that are exposed to concentration of credit risk
     consist primarily of cash and accounts receivable from customers and
     related companies.  Cash is maintained with major banks in the PRC.  The
     Company's business activity is with customers and related companies in the
     PRC.  The Company periodically performs credit analysis and

                                     FS-18
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


19.  CONCENTRATION OF RISKS - continued

     monitors the financial condition of its customers and related companies in
     order to minimize credit risk.

     In November 1996, the Company awared that Blue Ribbon Group had established
     a wholly-owned subsidiary in Le Shang City, Sichuan Province of the PRC,
     with an intention to convert a brewery with an annual production capacity
     of 20,000 metric tons, (the "Sichuan Brewery"), into a brewing complex for
     the production of Pabst Blue Ribbon beer in 1997.

     In the event that Blue Ribbon Group is able to successfully assert its
     position and commence the production of Pabst Blue Ribbon beer in the
     Sichuan Brewery, the Company would face competition from Blue Ribbon Group
     in the PRC.  As a result, the Company's business could be adversely
     affected.


20.  PLEDGE OF ASSETS

     Land use rights and buildings and certain plant, machinery and equipment of
     the Company with a net book value amounting to RMB148,178,817 and
     RMB138,497,516 as at December 31, 1995 and 1996, respectively, were
     collateralized to secure bank borrowings of RMB13,500,000.


21.  COMMITMENTS AND CONTINGENCIES

     Blue Ribbon Group entered into licensing arrangements with Pabst Brewing
     Company whereby Blue Ribbon Group was granted the exclusive right to
     produce and market products under four specific Pabst trademarks in the
     PRC, the non-exclusive right to market such products in other Asian
     countries except Hong Kong, Macau, Japan and South Korea, and the right to
     sublicense the use of the trademarks to any other enterprise in the PRC.

     Pursuant to the terms of the sublicense agreement, the Company was granted
     by Blue Ribbon Group the right to use the two specific Pabst trademarks for
     the production, promotion, distribution and sale of beer under such
     trademarks.  The production right of the Company however is confined
     exclusively for the Guangdong Province only and it does not preclude High
     Worth Brewery's production rights in Guangdong as described in (a) and (b)
     below.

     The sublicense agreement is valid until November 7, 2003.  In consideration
     for the sublicense granted, the Company is committed to pay Blue Ribbon
     Group a royalty fee of US$0.10 for each carton of bottled or canned beer
     produced.

                                     FS-19
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


21.  COMMITMENTS AND CONTINGENCIES - continued

     A provisional agreement, subject to governmental approval, was made among
     CBR Brewing Company, Inc. and its subsidiary, the group companies of Noble
     China Inc., a company incorporated in Canada and Blue Ribbon Group on May
     10, 1995 to the effect that:

     (a)  High Worth Brewery was entitled to be granted from Blue Ribbon Group
          the right to brew and sell beer under the Pabst Blue Ribbon label
          produced in its brewing facilities up to a maximum production capacity
          of 100,000 tons per annum.

     (b)  High Worth Brewery and/or companies that High Worth Brewery has an
          interest in are entitled to be granted a sublicense from Blue Ribbon
          Group with the right to produce and sell beer under the Pabst Blue
          Ribbon label in the Guangdong Province of the PRC ("Additional
          Facility") to a maximum production capacity of 300,000 tons per annum.

          In the event that High Worth Brewery desires to obtain sublicense for
          any Additional Facility, Goldjinsheng has the right to purchase up to
          a 40% interest in such Additional Facility.  The purchase price for
          such interest shall be the actual cost of such Additional Facility
          multiplied by the percentage interest that Goldjinsheng elects to
          purchase.

     (c)  A proposed new marketing company ("New Marketing Company"), owned as
          to 8% by Blue Ribbon Group, 52% by High Worth Brewery and 40% by
          Goldjinsheng, shall be formed to handle and organize the sales of
          Pabst Blue Ribbon beer produced by Zhaoqing Brewery and the Blue
          Ribbon Noble.  Each of Zhaoqing Brewery and the Blue Ribbon Noble will
          create a separate distribution company or division of their own.  The
          distribution company of Zhaoqing Brewery will have the sole right to
          acquire 100% of the production of Zhaoqing Brewery and 40% of the
          production of the Blue Ribbon Noble; whilst the distribution company
          of the Blue Ribbon Noble will have the sole right to acquire 60% of
          the production of the Blue Ribbon Noble.  The respective distribution
          companies will appoint the New Marketing Company as their sole and
          exclusive agent to market Pabst Blue Ribbon beer in the PRC.

     Another agreement was made among Goldjinsheng, Blue Ribbon Group and the
     Company on May 10, 1995 to the effect that the Company agreed to pay Blue
     Ribbon Group management fees of RMB2,035,000 per annum for a period of five
     years commencing January 1, 1995 (see note 16(c).

     The Company has commitments of approximately, RMB32,010,000 for capital
     expenditure in respect of property, plant and equipment at December 31,
     1996.

                                     FS-20
<PAGE>
 
                    ZHAOQING BLUE RIBBON BREWERY NOBLE LTD.
                    ---------------------------------------
                (Registered in the People's Republic of China)


21.  COMMITMENTS AND CONTINGENCIES - continued

     For contingencies relates to foreign currency exchange risk and
     concentration of risks, see notes 11 and 19.


22.  POST BALANCE SHEET EVENTS

     (a)  Subsequent to the balance sheet date, certain allegations were raised
          against the Company by the former chairman and CEO of Noble China Inc.
          concerning irregularities on the financial statements of the Company
          in previous years.  Having considered the Company's position and on
          the advice of legal counsel, the directors of the Company are of the
          opinion that the allegations were of no substance and, accordingly,
          will not have any material adverse effect to the Company.

     (b)  In April 1997, the Sichuan Brewery commenced the production and sale
          of Pabst Blue Ribbon beer.  The Company currently estimates that the
          Sichuan Brewery will produce from 16,000 to 18,000 metric tons of
          Pabst Blue Ribbon beer in 1997.  In the same month, in order to
          facilitate the efficient distribution and sale of Pabst Blue Ribbon
          beer in the PRC, the Blue Ribbon Marketing and the Sichuan Brewery
          entered into a Memorandum of Understanding.  The Memorandum of
          Understanding requires the Sichuan Brewery to sell all of its
          production of Pabst Blue Ribbon beer to the Blue Ribbon Marketing at
          mutually agreed ex-factory prices, and grants Blue Ribbon Marketing
          the right to regulate production to reflect market demand.

          To the extent that the production of Pabst Blue Ribbon beer by the
          Sichuan Brewery causes a commensurate reduction in beer production and
          sales by the Company, the Company's results of operations could be
          adversely affected.  The Company currently estimates that the Sichuan
          Brewery's 1997 production volume will represent approximately 8% of
          the Company's budgeted volume of sales in 1997.

                                     FS-21
<PAGE>
 
                                ZHAOQING BREWERY

                                    CONTENTS


<TABLE>
<CAPTION>
                                                          Pages
                                                          -----
 
<S>                                                  <C>
 
REPORT OF INDEPENDENT AUDITORS                              Z-1
 
FINANCIAL STATEMENTS
 
     Consolidated balance sheet                             Z-2
 
     Consolidated statements of income                      Z-3
 
     Consolidated statements of equity                      Z-4
 
     Consolidated statements of cash flows            Z-5 - Z-6
 
     Notes to consolidated financial statements      Z-7 - Z-30
</TABLE>
<PAGE>
 
                         REPORT OF INDEPENDENT AUDITORS



To the shareholders of
CBR Brewing Company, Inc.


          We have audited the accompanying consolidated balance sheet of
Zhaoqing Brewery and its subsidiaries as of December 31, 1993 and the related
consolidated statements of income, equity and cash flows for each of the two
years ended December 31, 1993 and the ten months ended October 31, 1994.  These
consolidated financial statements are the responsibility of Zhaoqing Brewery's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

          We conducted our audits in accordance with generally accepted auditing
standards in the United States of America.  Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

          In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Zhaoqing Brewery and its subsidiaries as of December 31, 1993 and
the consolidated results of their operations and their cash flows for each of
the two years ended December 31, 1993 and the ten months ended October 31, 1994
in conformity with generally accepted accounting principles in the United States
of America.



                                                                   Ernst & Young

Hong Kong
March 31, 1995,
Except for note 20, as to which the date is May 10, 1995

                                      Z-1
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                            AS OF DECEMBER 31, 1993


<TABLE>
<CAPTION>
                                                        Notes           RMB
<S>                                                <C>          <C>
ASSETS
 
Current assets:
  Cash                                                           34,899,018
  Inventories                                               4    11,478,668
  Prepayments, deposits and other receivables                     3,920,084
  Due from a related company                                2    36,000,000
                                                                -----------
Total current assets                                             86,297,770
 
Property, plant and equipment, net                          5    43,576,107
Interests in associated companies                           6   196,884,451
                                                                -----------
 
Total assets                                                    326,758,328
                                                                ===========
 
LIABILITIES AND EQUITY
 
Current liabilities:
  Bank loans                                                7    20,595,000
  Other loans                                               8    20,655,000
  Lease payables                                            9    13,629,021
  Other payables                                            2    69,980,235
  Accounts payable and accrued liabilities                        6,575,244
  Due to ultimate holding company                          15    54,945,687
  Sales taxes payable                                      10    12,635,172
                                                                -----------
Total current liabilities                                       199,015,359
 
Long term liabilities:
  Bank loans                                                7    23,000,000
  Lease payables                                            9     2,035,303
  Deferred income taxes                                    11     3,000,000
                                                                -----------
Total long term liabilities                                      28,035,303
 
Equity                                                           99,707,666
                                                                -----------
 
Total liabilities and equity                                    326,758,328
                                                                ===========
</TABLE>

________________________        ________________________
Director                        Director


           The consolidated financial statements were approved by the
        board of directors of CBR Brewing Company, Inc. on May 10, 1995.

                 The accompanying notes are an integral part of
                     the consolidated financial statements.


                                     Z-2
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME

                 FOR THE TWO YEARS ENDED DECEMBER 31, 1993 AND

                     THE TEN MONTHS ENDED OCTOBER 31, 1994


<TABLE>
<CAPTION>
                                                          Ten months
                                                               ended                Year ended
                                                         October 31,                December 31,
                                               Notes            1994            1993            1992
                                                                 RMB             RMB             RMB
<S>                                              <C>      <C>            <C>              <C>
 
Sales                                             15      64,540,646     212,437,411      168,411,036
Sales taxes                                       10      (7,253,217)    (20,854,885)     (13,970,946)
                                                         -----------    ------------      -----------
 
Sales, net of sales taxes                                 57,287,429     191,582,526      154,440,090
Cost of sales                                            (38,259,757)   (102,414,835)     (83,339,108)
                                                         -----------    ------------      -----------
 
Gross profit                                              19,027,672      89,167,691       71,100,982
 
Expenses:
  Selling and administrative
    expenses                                              (7,411,628)    (22,154,219)     (20,089,452)
                                                         -----------    ------------      -----------
 
Operating income                                          11,616,044      67,013,472       51,011,530
 
Other income:
  Gain on disposal of property,
    plant, equipment and business
    of a subsidiary                                2               -      75,879,235                -
  Gain on disposal of property,
    plant and equipment                                            -         355,757                -
  Foreign exchange gains                                      67,874               -                -
                                                         -----------    ------------      -----------
 
Total other income                                            67,874      76,234,992                -
 
Other expense:
  Interest expense                                        (4,101,175)    (23,682,512)     (18,715,141)
  Foreign exchange losses                                          -     (17,825,176)     (31,560,670)
                                                         -----------    ------------      -----------
 
Total other expenses                                      (4,101,175)    (41,507,688)     (50,275,811)
                                                         -----------    ------------      -----------
 
Income before income taxes                                 7,582,743     101,740,776          735,719
 
Provision for deferred income taxes               11        (540,000)       (640,000)        (600,000)
                                                         -----------    ------------      -----------
 
Income before equity in earnings
  of associated companies                                  7,042,743     101,100,776          135,719
 
Equity in earnings of associated
  companies                                        6      34,969,703       5,485,716                -
                                                         -----------    ------------      -----------
 
Net income for the period/year                    13      42,012,446     106,586,492          135,719
                                                         ===========    ============      ===========
</TABLE>

                 The accompanying notes are an integral part of
                     the consolidated financial statements.

                                      Z-3
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EQUITY

                 FOR THE TWO YEARS ENDED DECEMBER 31, 1993 AND
                     THE TEN MONTHS ENDED OCTOBER 31, 1994


<TABLE>
<CAPTION>
                                                Sales tax          Statutory
                                               concession        surplus and
                                              development         collective        Capital         Retained           Reserve
                                                     fund      welfare funds        reserve         earnings             funds
                                                      RMB                RMB            RMB              RMB               RMB
<S>                                           <C>               <C>             <C>              <C>              <C>
                                               (Note 10)         
                                               (Note 13)

At December 31, 1991                           30,874,951                  -              -      (34,922,547)      (4,047,596)
                                                                                           
Net income for the year                                 -                  -              -          135,719          135,719
Appropriation                                  36,654,973          1,735,849              -      (38,390,822)               -
Appropriation of staff quarters                                                            
  upon corporate reorganization                         -                  -              -        2,966,949)      (2,966,949)
                                              -----------          ---------    -----------      -----------      -----------
At December 31, 1992                           67,529,924          1,735,849              -      (76,144,599)      (6,878,826)
                                                                                           
Net income for the year                                 -                  -              -      106,586,492      106,586,492
Appropriation                                   5,700,000          2,267,875              -       (7,967,875)               -
                                              -----------          ---------    -----------      -----------      -----------
At December 31, 1993                           73,229,924          4,003,724              -       22,474,018       99,707,666
                                                                                           
Net income for the ten months                                                              
  ended October 31, 1994                                -                  -              -       42,012,446       42,012,446
Appropriation                                           -          1,282,812              -       (1,282,812)               -
Dividends                                               -                  -              -     (105,511,921)    (105,511,921)
Capital contribution upon                                                                  
  corporate reorganization                                                                 
  - note 1                                              -                  -    156,339,945                -      156,339,945
Amount realized upon disposal of                                                           
  a subsidiary                                (54,233,023)                 -              -       54,233,023                -
                                              -----------          ---------    -----------      -----------      -----------
                                                                                           
At October 31, 1994                            18,996,901          5,286,536    156,339,945       11,924,754      192,548,136
                                              ===========          =========    ===========      ===========      =========== 
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      Z-4
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                 FOR THE TWO YEARS ENDED DECEMBER 31, 1993 AND
                     THE TEN MONTHS ENDED OCTOBER 31, 1994


<TABLE>
<CAPTION>
                                                                      Ten months
                                                                           ended              Year ended
                                                                     October 31,              December 31,
                                                           Notes            1994            1993          1992
                                                                             RMB             RMB           RMB
<S>                                                         <C>     <C>              <C>           <C>
Cash flows from operating activities:
  Net income                                                          42,012,446     106,586,492       135,719
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Equity in earnings of associated companies                     (34,969,703)     (5,485,716)            -
      Depreciation and amortization                                    3,898,431      11,337,972    11,885,967
      Gain on disposal of property, plant,
        equipment and business of a subsidiary                 2               -     (75,879,235)            -
      Gain on disposal of property, plant
        and equipment                                                          -        (355,757)            -
      Deferred income taxes                                              540,000         640,000       600,000
      Foreign exchange losses                                                  -      17,425,333    30,347,115
                                                                     -----------     -----------    ----------
                                                                      11,481,174      54,269,089    42,968,801
Changes in working capital:
  (Increase)/decrease in accounts receivable                          (1,035,512)      3,062,763    (3,180,045)
  (Increase)/decrease in inventories                                    (555,156)      4,419,262      (243,396)
  (Increase)/decrease in prepayments, deposits
    and other receivables                                                696,360       5,652,162    (6,823,907)
  Increase in amount due from a fellow subsidiary                              -               -    (2,421,619)
  Increase in amount due from a related company                          (28,958)              -             -
  (Increase)/decrease in balances with
    ultimate holding company                                             742,529      30,421,298      (177,114)
  Increase/(decrease) in accounts payable
    and accrued liabilities                                           (1,091,439)    (19,951,503)   14,922,089
  Increase in deposits received from customers                        10,372,969               -             -
  Increase/(decrease) in amount due to a
    fellow subsidiary                                                     12,643        (437,878)      (82,049)
  Increase/(decrease) in sales taxes payable                           8,075,859      (5,122,125)      483,337
                                                                     -----------     -----------    ----------
Net cash provided by operating activities                             28,670,469      72,313,068    45,446,097
                                                                     -----------     -----------    ----------
</TABLE>

                                      Z-5
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                 FOR THE TWO YEARS ENDED DECEMBER 31, 1993 AND
                     THE TEN MONTHS ENDED OCTOBER 31, 1994


<TABLE>
<CAPTION>
                                                                Ten months ended              Year ended
                                                                     October 31,              December 31,
                                                           Notes            1994            1993           1992
                                                                             RMB             RMB            RMB
<S>                                                         <C>     <C>              <C>           <C>
Cash flows from investing activities:
  Purchases of property, plant and equipment                         (10,303,054)    (97,311,649)   (77,483,587)
  Net cash outflow on disposal of a subsidiary                14(c)   (4,083,959)              -              -
  Proceeds from disposal of property, plant
    and equipment                                                              -         646,824              -
  Proceeds from disposal of property, plant,      
    equipment and business of a subsidiary                      2     18,000,000     249,564,000              -
  Costs incurred for construction in progress     
    of an associated company                                    2    (43,568,550)              -              -
  Loans from/(to) an associated company                               38,912,910     (48,494,458)             -
                                                                     -----------    ------------    ----------- 
Net cash provided by/(used in) investing activities                   (1,042,653)    104,404,717    (77,483,587)
                                                                     -----------    ------------    ----------- 
 
Cash flows from financing activities:
  New loans                                                            3,150,000      57,750,000     65,595,367
  Repayment of bank loans                                            (12,000,000)    (87,225,000)   (34,430,000)
  Repayment of other loans                                           (17,655,000)   (164,119,086)   (14,065,712)
  Repayment of lease payables                                        (12,156,742)    (13,884,645)   (10,175,042)
  Loans from/(to) ultimate holding company                           (16,429,306)     51,440,721     15,123,587
  Loans from/(to) fellow subsidiaries                                          -         275,414     (1,550,080)
                                                                     -----------    ------------    ----------- 
Net cash provided by/(used in) financing activities                  (55,091,048)   (155,762,596)    20,498,120
                                                                     -----------    ------------    ----------- 
 
Effect of foreign exchange rate changes on cash                                -       2,700,404        168,490
                                                                     -----------    ------------    ----------- 

Net increase/(decrease) in cash                                      (27,463,232)     23,655,593    (11,370,880)
 
Cash at beginning of period/year                                      34,899,018      11,243,425     22,614,305
                                                                     -----------    ------------    ----------- 
 
Cash at end of period/year                                             7,435,786      34,899,018     11,243,425
                                                                     ===========    ============    =========== 
</TABLE>

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      Z-6
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -  ORGANIZATION AND PRINCIPAL ACTIVITIES

          Zhaoqing Brewery (the "Company") was established in the People's
Republic of China (the "PRC") as a State-owned enterprise in 1980.  Pursuant to
a reorganization implemented by the Municipality of Zhaoqing in October 1990,
Guang Dong Blue Ribbon Group Co. Ltd. ("Blue Ribbon Group") (formerly Zhao Qing
Blue Ribbon Group Co., Ltd.), a State-owned enterprise in the PRC, was formed
and the Company then became a wholly-owned subsidiary of Blue Ribbon Group.  The
Company is principally engaged in the production and sale of beer and beer
products in the PRC.

          Prior to October 1994, the Company owned all of the capital of Pabst
Blue Ribbon Brewery (Zhaoqing) Co. Ltd. ("Pabst Blue Ribbon") which was
established on November 7, 1986 in the PRC for a term of fifteen years.  The
term was further extended to October 11, 2007 with the approval of the relevant
PRC government authorities.  Pabst Blue Ribbon is engaged in the production and
sale of beer and beer products in the PRC.  In October 1994, the remaining net
assets of Pabst Blue Ribbon were disposed of as dividend to Blue Ribbon Group at
its carrying value.

          Pursuant to an arrangement which changed Blue Ribbon Group from a
State-owned enterprise to a share capital company in July 1992, certain assets
of all group companies of Blue Ribbon Group, including those of the Company and
its subsidiaries (collectively referred to as the "Group"), were revalued on a
current replacement cost basis by State-owned Properties Evaluation Service of
Zhaoqing Municipality as at July 31, 1992.  Since there was no change in the
beneficial owner of the Group before and after the arrangement, the revalued
assets of the Group were restated at historical cost for the purpose of
preparing these consolidated financial statements.

                                      Z-7
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -  ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

          Pursuant to the joint venture agreements and with the approval of the
relevant PRC government authorities, the property, plant, equipment and the
business of Pabst Blue Ribbon were disposed of to Zhaoqing Blue Ribbon Brewery
Noble Ltd. ("Blue Ribbon Noble") as capital contribution to Blue Ribbon Noble, a
new Sino-foreign equity joint venture enterprise registered in the PRC on
October 8, 1993 in which Goldjinsheng Holding Limited, an unrelated party, and
the Company each hold 60% and 40% interests, respectively.  The venture term of
Blue Ribbon Noble is for twenty years which term may be extended upon mutual
agreement of the joint venture parties and approval from the relevant PRC
government authorities.  Blue Ribbon Noble is principally engaged in the
production and sale of beer and beer products in the PRC and commenced business
on November 6, 1993.  Under the joint venture agreements, the Company is given
control over the daily operations and management of Blue Ribbon Noble and
decisions of the board of directors of Blue Ribbon Noble will require approval
of both joint venture partners.

          Apart from the 40% interest in Blue Ribbon Noble, prior to October
1994, the Company also owned a 30% interest in Zhaoqing Blue Ribbon Beverage Co.
("Blue Ribbon Beverage"), which is a Sino-foreign equity joint venture
enterprise registered in the PRC on July 18, 1993.  Blue Ribbon Beverage is
principally engaged in the production and sale of natural fruit juices in the
PRC and commenced commercial production in July 1993.  In October 1994, the
Group's entire interest in Blue Ribbon Beverage was disposed of as dividend to
Blue Ribbon Group at its carrying value.

          Pursuant to a corporate reorganization undertaken by Blue Ribbon
Group, an additional capital contribution to the Company amounting to
RMB151,348,294 was made by Blue Ribbon Group.  The additional capital is not
available for distribution as dividends to the equity holder.

          On October 31, 1994, High Worth Holdings Limited, a wholly-owned
subsidiary of CBR Brewing Company, Inc., acquired an effective 60% interest in
the Company from Blue Ribbon Group.

                                      Z-8
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 -  BASIS OF PRESENTATION

          As more fully described in note 1, the property, plant, equipment and
the business of Pabst Blue Ribbon, the Company's subsidiary, were disposed of to
Blue Ribbon Noble in November 1993 as capital contribution to Blue Ribbon Noble,
an associated company.  Accordingly, the operating results of the business
previously run by Pabst Blue Ribbon were consolidated into the consolidated
financial statements up to November 1993.  The operating results of the business
acquired and currently run by Blue Ribbon Noble were thereafter equity accounted
for in the consolidated financial statements.

          The information for the disposal of property, plant, equipment and the
business of Pabst Blue Ribbon, the Company's subsidiary, to Blue Ribbon Noble,
an associated company, are summarized below:

<TABLE>
<CAPTION>
                                                                 RMB
<S>                                                     <C>
Consideration received:
 Cash paid by Goldjinsheng Holding Limited               249,564,000
 Due from Goldjinsheng Holding Limited                    36,000,000
 40% interest in Blue Ribbon Noble                       139,789,843
                                                        ------------
                                                         425,353,843
The carrying value of net assets disposed of:
 Property, plant and equipment, including
  construction in progress at the date of disposal      (316,966,208)
 Estimated costs to completion for construction
  in progress                                            (32,508,400)
                                                        ------------
 
Total net assets disposed of                            (349,474,608)
                                                        ------------
 
Gain on disposal                                          75,879,235
                                                        ============
</TABLE>

The anticipated costs and actual payables related to the construction in
progress have been reflected in other payables on the consolidated balance
sheet.

                                      Z-9
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 -  BASIS OF PRESENTATION (continued)

          The property, plant and equipment, including construction in progress,
and the business of Pabst Blue Ribbon were disposed of by the Company as a
capital contribution to Blue Ribbon Noble, a company in which Goldjinsheng
Holding Limited and the Company each hold 60% and 40% interests, respectively.
Under the terms of the joint venture agreements, the Company, being the sole
partner responsible for the overall construction of the production facilities of
Blue Ribbon Noble, was responsible for the cost of completion of construction in
progress in excess of RMB224 million.  Blue Ribbon Group agreed to undertake any
cost of completion of construction in progress in excess of RMB224 million paid
by the Company.

          The amount receivable from Goldjinsheng Holding Limited is unsecured,
interest-free and repayable on demand.

          On October 31, 1994, High Worth Holdings Limited, a wholly-owned
subsidiary of CBR Brewing Company, Inc., acquired an effective 60% interest in
the Company.  Accordingly, the Company's consolidated statements of income and
cash flows were prepared for the ten months ended October 31, 1994 to show the
pre-acquisition consolidated operating results and cash flows of the Company
prior to the acquisition.

          The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of America
("US GAAP").  This basis of accounting differs from that used in the preparation
of the statutory financial statements of each company within the Group which are
prepared in accordance with the accounting principles and relevant financial
regulations established by the Ministry of Finance of the PRC.

          The major adjustments made to the statutory financial statements to
conform to US GAAP include the following:

     .    The restatement of monetary assets and liabilities denominated in
          foreign currencies to reflect the exchange rates quoted by the
          Zhaoqing foreign exchange adjustment center prevailing at the balance
          sheet date;

                                     Z-10
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 -  BASIS OF PRESENTATION (continued)

     .    The restatement of certain assets of the Group revalued on July 31,
          1992 to historical cost;

     .    The reclassification of certain expense items from income
          appropriations to charges against income;

     .    Adjustment for sales, other income and purchases recognized on a cash
          basis; and

     .    Adjustment for deferred taxation.

          The financial statements have been prepared on a going concern basis
notwithstanding that the Group has a net current liability position at December
31, 1993 and October 31, 1994 as Oriental Win Holdings Ltd., its ultimate
holding company, and Blue Ribbon Group have undertaken to provide continuing
financial support.


NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          (a)  Basis of accounting

          The consolidated financial statements have been prepared under the
          historical cost convention.

          (b)  Consolidation principles

          The consolidated financial statements include the financial statements
          of the Company and its subsidiaries which are more than 50% owned. All
          material intercompany accounts and transactions are eliminated on
          consolidation.

          Investments, in which the Company exercises significant influence but
          does not own greater than a 50% voting interest, are accounted for
          under the equity basis.

          (c)  Revenue recognition

          Sales represent the net invoiced value of goods sold, net of returns
          and allowances. Sales are recognized upon delivery of goods to
          customers.

                                     Z-11
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

          (d)  Inventories

          Inventories are stated at the lower of cost and market value. Cost,
          which comprises direct materials and, where applicable, direct labour
          costs and those overhead items that have been incurred in bringing the
          inventories to their present location and condition, is calculated
          using the first-in, first-out method.

          (e)  Property, plant and equipment

          Property, plant and equipment are stated at cost less allowance for
          depreciation and amortization.

          Depreciation and amortization are provided using the straight-line
          method to write off the cost of property, plant and equipment over
          their estimated useful lives. The estimated useful lives are as
          follows:

<TABLE> 
<S>                                <C>    
          Land use rights          50 years
          Buildings                50 years
          Plant, machinery and
            equipment              5 - 15 years
          Motor vehicles           5 - 10 years
</TABLE>

          (e)  Property, plant and equipment (continued)

          According to the laws of the PRC, the title to all PRC land is
          retained by the PRC government. The land use rights, which represent
          the cost for the rights to use the land for premises granted by the
          State Land Administration Bureau, have no definite term of use. The
          land use rights are stated at cost and are amortised over 50 years on
          the same basis as the buildings.

                                     Z-12
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
          (continued)

          Construction in progress represents buildings, plant under
          construction and deposits and prepayments made on machinery pending
          installation. Cost comprises direct costs of construction and finance
          expenses arising from borrowings used to finance the construction of
          buildings and plant and machinery until the construction, installation
          and testing is complete. The amount of finance expenses capitalised is
          the interest cost which could theoretically have been avoided if the
          expenditure on the qualifying asset had not been made.

          No depreciation is provided on construction in progress until the
          relevant assets have been put into commercial use.

          (f)  Leased assets

          Leases that transfer substantially all the rewards and risks of
          ownership of assets to the Group are accounted for as capital leases.
          At the inception of a capital lease, the cost of the leased asset is
          capitalised at the present value of the minimum lease payments and
          recorded together with the obligation, excluding the interest element,
          to reflect the purchase and financing. Assets held under capital
          leases are included in property, plant and equipment and are
          depreciated over the shorter of the lease terms and the estimated
          useful lives.

          (g)  Income taxes

          Income taxes are determined under the liability method as required by
          Statement of Financial Accounting Standards No. 109, "Accounting for
          Income Taxes".

                                     Z-13
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

          (h)  Foreign currency translation

          The financial records and the statutory financial statements of the
          Group are maintained in Renminbi. In preparing the statutory financial
          statements, foreign currency transactions and monetary assets and
          liabilities denominated in foreign currencies are translated into
          Renminbi at the rates of exchange set by the PRC government from time
          to time (the "official exchange rate").

          In preparing the consolidated financial statements, the financial
          statements of the Group are measured using Renminbi as the functional
          currency. All foreign currency transactions are translated into
          Renminbi using the applicable rates of exchange, quoted by the
          Zhaoqing foreign exchange adjustment center (the "swap center") for
          the respective periods. Monetary assets and liabilities denominated in
          foreign currencies have been translated into Renminbi using the rates
          of exchange quoted by the swap center prevailing at the balance sheet
          date. The resulting exchange gains or losses have been credited or
          charged to the statements of income for the period in which they
          occur.

          On January 1, 1994, the PRC government abolished the dual exchange
          rate system, comprising the official rates and the swap center rates,
          and introduced a single rate of exchange as quoted by the People's
          Bank of China (the "unified exchange rate"). The unified exchange rate
          is quoted at levels similar to those quoted by the swap centers.
          However, the unification of exchange rates does not imply full
          convertibility of Renminbi into United States dollars or other foreign
          currencies.

                                     Z-14
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 -  INVENTORIES


<TABLE> 
<CAPTION>  
                                 1993
                                  RMB
 
<S>                       <C>
    Raw materials           7,500,186
    Work in progress        3,473,660
    Finished goods            504,822
                           ----------

                           11,478,668
                           ==========
</TABLE> 


NOTE 5 -  PROPERTY, PLANT AND EQUIPMENT, NET


<TABLE>
<CAPTION>
                                                         1993
                                                          RMB
<S>                                               <C>
     At cost:
      Land use rights and buildings                 7,531,154
      Plant, machinery and equipment               58,839,161
      Motor vehicles                                  602,309
      Construction in progress                        530,877
                                                   ----------
                                                   67,503,501
 
     Accumulated depreciation and amortization:
      Land use rights and buildings                 1,543,513
      Plant, machinery and equipment               22,143,753
      Motor vehicles                                  240,128
                                                   ----------
                                                   23,927,394
 
     Net book value                                43,576,107
                                                   ==========
</TABLE>

          Interest capitalised in construction in progress for the year ended
December 31, 1992 amounted to RMB9,187,402.  As more fully described in note 1,
the property, plant and equipment, including construction in progress, of Pabst
Blue Ribbon were disposed of to the Company and then to Blue Ribbon Noble.
Pabst Blue Ribbon's capitalised interest in construction in progress for the
period from January 1, 1993 up to November 6, 1993, the date of transfer of
property, plant and equipment, amounted to RMB9,279,134.

          The analysis of the Group's cost and accumulated depreciation and
amortization of property, plant and equipment held under capital leases at the
balance sheet date is set out below:

                                     Z-15
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
 
NOTE 5 -  PROPERTY, PLANT AND EQUIPMENT, NET (continued)

<TABLE>
<CAPTION>
                                                      1993
                                                       RMB 
<S>                                             <C>
At cost:
 Plant, machinery and equipment                 14,682,869
 Construction in progress                        1,000,000
                                                ----------
                                                15,682,869
 
Accumulated depreciation and amortization:
 Plant, machinery and equipment                  5,506,076
                                                ----------
 
Net book value                                  10,176,793
                                                ==========
</TABLE>

          Depreciation and amortization charges in respect of property, plant
and equipment held under capital leases for the years ended December 31, 1992
and 1993 and the ten months ended October 31, 1994 amounted to RMB1,730,948,
RMB917,679 and RMB344,890, respectively.


NOTE 6 -  INTERESTS IN ASSOCIATED COMPANIES

<TABLE>
<CAPTION> 
                                                                1993
                                                                 RMB
 
<S>                                                      <C>
     Unlisted investments, at cost                       142,904,277
     Loans to an associated company                       10,095,000
     Due from an associated company                       38,399,458
     The Group's share of post acquisition earnings
       less losses of associated companies                 5,485,716
                                                         -----------

                                                         196,884,451
                                                         ===========
</TABLE> 

          The unlisted investments as at December 31, 1993 represent the Group's
40% and 30% equity interests in Blue Ribbon Noble and Blue Ribbon Beverage
respectively.  Please refer to note 1 to the consolidated financial statements
for description of the principal activities of the respective associated
companies.

          As at December 31, 1993, the Group's share of the underlying net
assets of associated companies exceeded the Group's investments by approximately
RMB54,471,723. This difference is being amortised to income over 20 years.

          The Group's share of post acquisition earnings retained by associated
companies as at December 31, 1993 amounted to RMB5,485,716.

                                     Z-16
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 -  INTERESTS IN ASSOCIATED COMPANIES (continued)

          As at December 31, 1993, the loans to and the amount due from an
associated company were unsecured, interest-free and repayable on demand.

          The summarized information of Blue Ribbon Noble are:

<TABLE>
<CAPTION>
                                                           1993
                                                            RMB
<S>                                               <C>
 
     Balance sheet
     -------------
     
     Current assets                                  90,359,254
     Property, plant and equipment                  473,606,583
                                                    -----------
     
     Total assets                                   563,965,837
                                                    ===========
     
     
     Current liabilities                             74,194,064
     Equity                                         489,771,773
                                                    -----------
     
     Total liabilities and equity                   563,965,837
                                                    ===========
</TABLE> 

<TABLE> 
<CAPTION> 
                                      Ten months     Two months
                                           ended          ended
                                     October 31,   December 31,
                                            1994           1993
                                             RMB            RMB
<S>                                 <C>           <C>
     Statement of income
     -------------------
     
     Sales, net of sales taxes       392,693,554     66,593,478
                                     ===========   ============
     
     Net income                       84,218,373     13,831,773
                                     ===========   ============
</TABLE>

          As the operating results of and the assets and liabilities of Blue
Ribbon Beverage are insignificant to the Group's consolidated operating results
and the assets and liabilities, no separate summarized information of Blue
Ribbon Beverage is disclosed.

                                     Z-17
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
NOTE 7 -  BANK LOANS

<TABLE> 
<CAPTION> 
                                                           1993
                                                            RMB
 
 <S>                                                <C>
     Secured bank loans (see note 18)                35,000,000
     Unsecured bank loans                             8,595,000
                                                    -----------
                                                     43,595,000
     
     Portion classified as current liabilities      (20,595,000)
                                                    -----------
     
     Long term portion                               23,000,000
                                                    ===========
</TABLE>

          The bank loans as at December 31, 1993 bore fixed interest rates
ranging from 9.4% to 12.1% per annum with varying maturities ranging from 1994
to 1996. The weighted average interest rate of the short term bank loans as at
December 31, 1993 was 11.0%.

          The outstanding balances in respect of bank loans denominated in
United States dollars as at December 31, 1993 were equivalent to RMB8,595,000.

          The bank loans maturing during each of the years in the five year
period subsequent to the balance sheet date are:

<TABLE> 
<CAPTION> 
                                               1993
                                                RMB
<S>                                     <C>
    Year ending December 31,
    1994                                 20,595,000
    1996                                 23,000,000
                                         ----------

                                         43,595,000
                                         ==========
</TABLE>

NOTE 8 -  OTHER LOANS

          Other loans include short term debentures as at December 31, 1993
amounting to RMB5,000,000.  The short term debentures bore interest at the
weighted average rate of 10.5% per annum and were redeemable one year after
issuance.

          The other loans as at December 31, 1993 were unsecured, bore fixed
interest at the weighted average rate of 11.8% per annum and floating interest
rates of 1.2% over LIBOR and are wholly repayable in 1994.

                                     Z-18
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
 
NOTE 9 -  LEASE PAYABLES

          The details of collateralized property, plant and equipment held under
capital leases were disclosed in note 5 to the consolidated financial
statements.

          The lease payables as at December 31, 1993 bore interest ranging from
5.2% to 12.7% per annum and are repayable semi-annually to 1995.  The
outstanding balances in respect of lease payables denominated in United States
dollars as at December 31, 1993 amounted to RMB14,664,324.

          The lease payables maturing during each of the years in the five year
period subsequent to the balance sheet date are:

<TABLE> 
<CAPTION> 
                                                      1993
                                                       RMB
<S>                                            <C>
     Year ending December 31,
     1994                                       15,235,026
     1995                                        2,179,760
                                               -----------
                                                17,414,786
     
     Implicit interest                          (1,750,462)
                                               -----------
                                                15,664,324
     
     Portion classified as
      current liabilities                      (13,629,021)
                                               -----------
     
     Long term portion                           2,035,303
                                               ===========
</TABLE> 
 
 
 
NOTE 10 - SALES TAXES
 

<TABLE> 
<CAPTION> 
                                  Ten months
                                  ended         Year ended
                                  October 31,   December 31,
                                  1994          1993           1992
                                  RMB           RMB            RMB
<S>                               <C>           <C>            <C>      
     Sales taxes originally
      assessed                    7,253,217     26,554,885      50,625,919
     Less: tax concession                 -     (5,700,000)    (36,654,973)
                                  ---------     ----------     -----------
     
     Net sales taxes              7,253,217     20,854,885      13,970,946
                                  =========     ==========     ===========
</TABLE>

                                     Z-19
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10 - SALES TAXES (continued)

          Before the recent tax reform effective January 1, 1994, the Company
was liable to pay sales taxes on the value of brewery products sold, net of
certain packaging costs, pursuant to the sales tax rules and regulations in the
PRC. The effective sales tax rates applicable to each of the two years ended
December 31, 1993 are summarized below.

<TABLE> 
<CAPTION> 
     Period                                Effective tax rate
<S>                                       <C>
     January 1992 to February 1993         16% to 40%
     March 1993 to December 1993           16% to 27%

</TABLE>

          The rate of sales tax applicable to the Group for any one year may be
reduced upon application for tax concession by the Group in the following year.
The Group has applied for and received tax relief for each of the two years
ended December 31, 1993.  The tax authority in the PRC has restricted the use of
the tax concession to the repayment of borrowings and these are not available
for distribution to the equity holders.  The amounts of tax concession were
therefore appropriated from retained earnings to a reserve account in the
respective periods.

          Effective January 1, 1994, the Group is subject to three kinds of
sales taxes, being the value added tax ("VAT"), the consumption tax and other
sales taxes. The applicable VAT tax rate is 17% for brewery products sold in the
PRC and nil for exported goods. The amount of VAT liability is determined by
applying the applicable tax rate to the invoiced amount of goods sold less VAT
paid on purchases made with the relevant invoices in support. VAT is collected
from customers by the Group on behalf of the PRC tax authorities and is
therefore not expensed to the statement of income. The applicable consumption
tax rate in respect of brewery products is RMB220 per ton. The consumption tax
expensed to the statement of income is determined based on the volume of sales
within the PRC and exported goods are exempt. The other sales taxes are assessed
as a percentage of consumption tax and VAT.

                                     Z-20
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - INCOME TAXES

          The Company's subsidiary, Pabst Blue Ribbon is governed by the
relevant income tax laws in the PRC. With a tax concession obtained from the tax
authority, Pabst Blue Ribbon is exempt from income taxes for two years
commencing with its first profitable year of operations, and thereafter with a
50% exemption for the next three years. Based on its local statutory financial
statements, Pabst Blue Ribbon has attained its first profitable year of
operation for the year ended December 31, 1992. In view of the tax holiday
granted, no current income taxes were provided by Pabst Blue Ribbon for the two
years ended December 31, 1993. Based on its local statutory financial
statements, Pabst Blue Ribbon has suffered an operating loss for the ten months
ended October 31, 1994 and, accordingly, no income tax was provided for the
period by Pabst Blue Ribbon.

          The Company's profits are however taxable under the income tax laws in
the PRC.  Pursuant to an arrangement agreed with the tax authority, the income
tax of Blue Ribbon Group and its related companies, including the income tax of
the Company, were assessed on a combined basis and were paid and borne by Blue
Ribbon Group.  No current income taxes were provided by the Company for the two
years ended December 31, 1993 and the ten months ended October 31, 1994 as the
management considered that any such allocation to the Company would be
insignificant.  A tax indemnity letter has also been issued by Blue Ribbon Group
which waived all its right to claim from the Group for all unpaid income tax
liabilities for periods on or before October 31, 1994.

          The provision for deferred income taxes is based on the liability
method prescribed by Statement of Financial Accounting Standards No. 109. The
Group's temporary differences mainly represented the accelerated depreciation
allowances provided on property, plant and equipment during tax reduced periods.

                                     Z-21
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - INCOME TAXES (continued)

          The reconciliation of effective income tax rates of the Group stated
in the statements of income to the statutory income tax rate in the PRC is as
follows:

<TABLE>
<CAPTION>
                                                   Ten months
                                                   ended          Year ended
                                                   October 31,   December 31,
                                                   1994          1993      1992
<S>                                                <C>           <C>       <C>
 
     Statutory tax rate                               33%         33%       33%
     Reduction in tax due to arrangement
       with PRC tax authorities                      (33%)       (33%)     (33%)
     Accelerated depreciation allowances
       during tax reduced periods                      7%          1%       81%
                                                     ----        ----      ----
     
     Effective tax rate                                7%          1%       81%
                                                     ====        ====      ====
</TABLE>


NOTE 12 - FOREIGN CURRENCY EXCHANGE

          The Renminbi is not freely convertible into foreign currencies.  Prior
to January 1, 1994, all foreign exchange transactions involving Renminbi in the
PRC took place either through the Bank of China or other institutions authorized
to buy and sell foreign exchange, or at an approved swap center in the PRC.  The
swap centers are institutions which belong to the State Administration of
Exchange Control and its branches.  The exchange rates used for transactions
through the Bank of China and other authorized institutions were set by the
government, through the State Administration of Exchange Control, from time to
time.  The exchange rates available at a swap center are determined largely by
supply and demand based on foreign currency and Renminbi requirements of
enterprises operating or doing business in the PRC.

                                     Z-22
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 12 - FOREIGN CURRENCY EXCHANGE (continued)

          On January 1, 1994, the PRC government abolished the dual exchange
rate system, comprising the official rates and the swap center rates, and
introduced a single rate of exchange as quoted by the People's Bank of China.
The unified exchange rate is quoted at levels similar to those quoted by the
swap centers. However, the unification of exchange rates does not imply full
convertibility of Renminbi into United States dollars or other foreign
currencies. All foreign exchange transactions continue to take place either
through the Bank of China or other institutions authorized to buy and sell
foreign currencies or the swap centers at the exchange rates quoted by the
People's Bank of China. In April 1994, the National Foreign Exchange Trading
Center in Shanghai (the "exchange center") commenced operations. Enterprises
operating in the PRC can enter into exchange transactions at the exchange center
through the Bank of China or other authorized institutions. Payments for
imported materials are subject to the availability of foreign currency which is
dependent on the foreign currency denominated earnings of each company within
the Group or must be arranged through an exchange center. Approval for exchange
at the exchange center is granted to enterprises in the PRC for valid reasons
such as purchases of imported materials. While conversion of Renminbi into
United States dollars or other foreign currencies can generally be effected at
the exchange center, there is no guarantee that it can be effected at all times.

          The official exchange rates and swap center/unified exchange rates as
of December 31, 1992 and 1993 were as follows:

<TABLE>
<CAPTION>
                                                   December 31,
                                                   1993    1992
<S>                                                <C>     <C>
 
          RMB equivalent of US$1.00:
            Official exchange rate                  5.80   5.73
            Swap center/unified exchange rate       8.65   7.60
                                                    ====   ==== 
</TABLE>
                                     Z-23
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 - DISTRIBUTION OF PROFITS

          As stipulated by the relevant laws and regulations for enterprises
operating in PRC, Pabst Blue Ribbon, the Company's subsidiary,is required to
make appropriations to a general reserve fund, an enterprise development fund
and an employee welfare and incentive fund, in which the percentage of annual
appropriations are subject to the articles of association of Pabst Blue Ribbon.
The allocations to the employee welfare and the incentive fund should be charged
to the statement of income.  The other appropriations should be accounted for as
a transfer from retained earnings to reserve funds in the balance sheet and
should not be available for distribution as dividends to the equity holder.
Under the articles of association, the board of directors shall determine the
appropriations having regard to the economic situation of Pabst Blue Ribbon.  No
appropriations to these reserve funds and provision for employee welfare and
incentive fund were made for the period from January 1, 1992 to October 31,
1994.  In the opinion of the management, the required appropriation of the funds
in the respective periods would be insignificant.

          The Company's associated companies, Blue Ribbon Noble and Blue Ribbon
Beverage, are also required to make the same appropriations as Pabst Blue
Ribbon.  The percentage of annual appropriations, if any, determined by the
board of directors in the respective periods is also insignificant.

          The Company is required to make annual appropriations to two reserve
funds including statutory surplus and collective welfare fund.  In accordance
with the relevant PRC regulations and the Company's articles of association, the
Company is required to allocate a certain percentage of its profit after
taxation, as determined in accordance with the PRC accounting standards and
regulations applicable to the Company, to the statutory surplus reserve until
such reserve reaches 50% of the registered capital of the Company.  Based on the
statutory financial statements as of December 31, 1993, the registered capital
of the Company was RMB79,220,000.  Subject to certain restrictions as set out in
the relevant PRC regulations and the Company's articles of association, the
statutory surplus reserve may be distributed to equity holders in the form of
bonus issues and/or dividends when such reserve exceeds 25% of the registered
capital of the Company.

                                     Z-24
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13 - DISTRIBUTION OF PROFITS (continued)

          In accordance with the relevant PRC regulations and the Company's
articles of association, the Company's collective welfare fund, which is
determined annually at the discretion of the equity holders, is appropriated
from retained earnings.  The collective welfare fund is restricted to payments
of capital expenditure incurred on welfare facilities provided to employee.

          As described in note 2 to the consolidated financial statements, the
profits as reported in the US GAAP financial statements differ from those as
reported in the statutory financial statements.  In accordance with the relevant
laws and regulations in the PRC, the profits available for distribution are
declared based on the statutory financial statements.

          If the Group has foreign currency available after meeting its
operational needs, the Group may make its profit distributions in foreign
currency to the extent it is available.  Otherwise, it will be necessary to
convert such distributions at an exchange center.


NOTE 14-  SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION


<TABLE>
<CAPTION>
                                  Ten months
                                  ended          Year ended
                                  October 31,    December 31,
                                  1994           1993           1992
                                  RMB            RMB            RMB
<S>                               <C>            <C>            <C>
 
     New capital leases           14,031,675      1,000,000              -
     Interest paid by cash,
       net of capitalised
       interest                    4,697,857     23,220,209     17,058,853
                                  ==========     ==========     ==========
</TABLE>

          The major non-cash transactions undertaken by the Group for the two
years ended December 31, 1993 and the ten months ended October 31, 1994 are
summarized as follows:

(a)  Certain property, plant and equipment of the Company were disposed of at
     carrying value of RMB3,114,434 as capital contribution to Blue Ribbon
     Beverage, an associated company, in return for a 30% equity interest.

                                     Z-25
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 14-  SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION (continued)

(b)  Please refer to note 2 to the consolidated financial statements for the
     disposal of property, plant and equipment and the business of Pabst Blue
     Ribbon, the Company's subsidiary, to the Company as capital contribution to
     Blue Ribbon Noble, an associated company.

(c)  Please refer to note 1 to the consolidated financial statements for the
     disposal of the Group's remaining net assets in Pabst Blue Ribbon and the
     entire interest in Blue Ribbon Beverage as dividends to Blue Ribbon Group
     at their carrying values.

     The details of the remaining net assets of Pabst Blue Ribbon disposed of to
     Blue Ribbon Group are summarized below:


<TABLE>
<CAPTION>
                                                          RMB
<S>                                            <C>
 
     Net assets of a subsidiary disposed of:
       Cash                                         4,083,959
       Due from ultimate holding company           97,016,729
       Due from a related company                  18,000,000
       Bank loans                                  (5,000,000)
       Other loans                                 (3,000,000)
       Lease payables                              (3,009,982)
       Other payables                             (26,411,685)
                                                  -----------
     
                                                   81,679,021
                                                  ===========
     
     Satisfied by:
       Dividend payable to Blue Ribbon Group       81,679,021
                                                  ===========
</TABLE>

     The details of the interest in Blue Ribbon Beverage disposed of to Blue
     Ribbon Group are summarized below:

<TABLE>
<CAPTION>
                                                              RMB
<S>                                                  <C>
 
     Interest in an associated company disposed of:
       Investment cost in an associated company         3,114,434
       Loans to an associated company                   8,595,000
       Amount due from an associated company              986,548
       The Group's share of post acquisition
         losses of an associated company                 (332,388)
                                                       ----------
 
                                                       12,363,594
                                                       ==========
 
     Satisfied by:
       Dividend payable to Blue Ribbon Group           12,363,594
                                                       ==========
</TABLE>
                                     Z-26
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 14- SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
         (continued)

(d)  Dividends totalling RMB105,511,921 were declared and payable to Blue Ribbon
     Group, of which RMB81,679,021 and RMB12,363,594, as set out in note (c)
     above, were declared in consideration for the disposal of the Group's
     remaining net assets in Pabst Blue Ribbon and the entire interest in Blue
     Ribbon Beverage respectively.

(e)  Please refer to note 1 to the consolidated financial statements for the
     additional capital of RMB151,348,294 contributed by Blue Ribbon Group,
     including loans assumed totalling RMB11,595,000.


NOTE 15-  RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

(a)  Major customer

     The Group sold finished goods and raw materials to Blue Ribbon Group, the
     then ultimate holding company, under a distribution arrangement. The sales
     to Blue Ribbon Group, inclusive of the profit rebates received under the
     distribution arrangement and net of sales taxes, for the years ended
     December 31, 1992 and 1993 were RMB154,081,728 and RMB191,101,092,
     respectively. On January 1, 1994, the Group terminated its distribution
     arrangement and no finished goods and raw materials were sold to Blue
     Ribbon Group thereafter. The Group then traded with retailers directly.

(b)  Purchases of packing materials

     The Company purchased packing materials from American National Can
     (Zhaoqing) Co., Ltd. (formerly Zhao Gang Can Manufacturing Co.), a company
     in which Blue Ribbon Group has an equity interest. The purchases made
     during the years ended December 31, 1992 and 1993 and the ten months ended
     October 31, 1994 amounted to RMB587,950, RMB2,262,364 and RMB1,535,738,
     respectively.

(c)  Purchases of packing materials and sales of raw materials

                                     Z-27
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 15-  RELATED PARTY TRANSACTIONS AND ARRANGEMENTS (continued)

     The Company purchased packing materials from and sold raw materials to
     Zhaoqing Blue Ribbon Carton Manufacturing Co., a then fellow subsidiary of
     the Company.


     The significant related party transactions are set out below:

<TABLE>
<CAPTION> 
                                    Ten months ended             Year ended
                                         October 31,             December 31,
                                                1994           1993        1992
                                                 RMB            RMB         RMB

<S>                                        <C>          <C>          <C> 
     Purchases of packing
       materials                           1,997,721     11,914,670   4,001,785
     Sales of raw materials                  626,362        245,695           -
                                           =========     ==========   =========
</TABLE>

(d)  Due to ultimate holding company

     As at December 31, 1993, the amount due to Blue Ribbon Group represented
     the net balances of accounts receivable from sales of finished goods and
     short term advances to the Group. The balance was unsecured, interest-free
     and repayable on demand.


NOTE 16 - CONCENTRATION OF CREDIT RISKS

          The financial instruments that are exposed to concentration of credit
risk consist primarily of cash and accounts receivable from a related company.
Cash is maintained with major banks in the PRC.  The Company periodically
performs credit analysis and monitors the financial condition of the related
company in order to minimize credit risk.

                                     Z-28
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 17 - RETIREMENT PLAN

          As stipulated by the PRC government regulations, the Group has defined
contribution retirement plans for all their permanent staff.  The Group and its
staff are required to contribute to PRC insurance companies organized by the PRC
government which are responsible for the payments of pension benefits to retired
staff.  During the two years ended December 31, 1993 and from January 1, to June
30, 1994, the monthly contribution of the Group was calculated at 9.3% of the
basic salary of the permanent staff and the monthly contribution of each
permanent staff remained at RMB2.  Effective July 1, 1994, the monthly
contributions of the Company and of the permanent staff were calculated at 14.6%
and 2% of the basic salary of the permanent staff, respectively.  The pension
costs expensed by the Group during the years ended December 31, 1992 and 1993
and the ten months ended October 31, 1994 amounted to RMB158,930, RMB194,435 and
RMB178,232, respectively.


NOTE 18 - FINANCIAL INSTRUMENTS

          The carrying amounts reported in the balance sheet for current assets
and current liabilities, except for borrowings, qualifying as financial
instruments approximate their fair values because of the short maturity of such
instruments.  Cash denominated in foreign currency has been translated at the
applicable swap center rate.

          The fair values of borrowings are based on the borrowing rates
currently available at December 31, 1993 for borrowings with similar terms and
average maturities are:

<TABLE> 
<CAPTION> 
                        Carrying value      Estimated fair value
                        RMB                 RMB
<S>                    <C>                 <C> 
     Bank loans         43,595,000          35,371,456
     Other loans        20,655,000          18,777,273
                        ==========          ==========
</TABLE>

NOTE 19 - PLEDGE OF ASSETS

          Certain property, plant and equipment were collateralized to banks and
finance lessors for borrowing facilities granted to the Group and related
companies, the net book value of which amounted to RMB13,889,658 as at December
31, 1993.

                                     Z-29
<PAGE>
 
                       ZHAOQING BREWERY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 20 - SUBSEQUENT EVENTS

          On February 19, 1995, a marketing company is formed and owned as to
30% by Blue Ribbon Group and 70% by the Company.  The marketing company will
market Pabst Blue Ribbon beer and beverages in the PRC.

          An agreement was made among CBR Brewing Company, Inc. and its
subsidiaries, the group companies of Noble China Inc. and Blue Ribbon Group on
May 10, 1995 to the effect that:

     (a)  The Company was granted from Blue Ribbon Group the right to brew and
          sell beer under the Pabst Blue Ribbon label produced in its brewing
          facilities up to a maximum production capacity of 100,000 tons per
          annum.

     (b)  Zhao Qing Blue Ribbon High Worth Brewery Ltd., the Company's immediate
          holding company, granted Goldjinsheng Holding Limited ("Goldjinsheng")
          an option to purchase up to a 40% interest in the brewery factory
          operated by the Company, excluding the Company's 40% interest in Blue
          Ribbon Noble. This option may be exercised between August 31, 1996 and
          September 30, 1996. The purchase consideration for the first 30% and
          the remaining 10% interest is to be determined based on earning
          multiples of 8.5 times and 15 times, respectively, of the brewery
          factory's audited net income for the year ending June 30, 1997.
          However, the consideration shall not be less than 1.2 times of 30% of
          the net book value of the brewery operation for the first 30% interest
          and 2 times of 10% of the net book value for the remaining 10%
          interest.

     (c)  Distribution companies owned by the Company and Blue Ribbon Noble and
          another marketing company owned by Blue Ribbon Group, High Worth
          Brewery and Goldjinsheng, will be formed, subject to the governmental
          approval, to handle and organize the sales of Pabst Blue Ribbon beer
          produced by the Company and Blue Ribbon Noble.

                                     Z-30