张裕Ｂ：2019年年度报告（英文版）

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Co. Ltd.2019Annual Report

Final 2020-01

April 2020

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Contents

I、Important Notice，Contents and Definition ............................................................................. 3

II、Brief Introduction for the Company and Main Financial Indicators .................................. 5

III、Summary of the Company’s Businesses .............................................................................. 10IV、ManagementDiscussionandAnalysis .................................................................................... 14V、Major issues ............................................................................................................................. 37

VI、Changes in Shares and the Shareholders’ Situation .......................................................... 55

VII、Related Situation of Preferred Shares ............................................................................... 63VIII、Related Situation of Convertible Corporate Bonds .......................................................... 63IX、Situation for Directors Supervisors Senior Executives and Staffs .................................... 64

X、Corporate Governance ........................................................................................................... 76

XI、Related Situation of Corporation Bonds ............................................................................... 83XII、Financial Report..................................................................................................................... 84XIII、Reference Document .......................................................................................................... 214Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

I. Important Notice Content and Definition

The board of directors，the board of Supervisors，directors supervisors and senior executivesof the Company guarantee the truthfulness accuracy and completeness of the contents

contained in the report with no false records misleading statements or significant omissions

and undertake individual and joint legal liabilities.Mr. Zhou Hongjiang (Person in charge of the Company) Mr. Jiang Jianxun (Person in charge

of accounting work) and Ms. Guo Cuimei (Person in charge of accounting organ &

Accountant in charge) assure the truthfulness accuracy and completeness of the financial

report in the annual report.

Except following directors all other directors have personally attended the meeting for

deliberating the annual report.

Director name with

non-present in person

Director post with

non-present in person

Reason for

non-present in

person

Name of

mandatory

Augusto Reina Director Die of illness --

Aldino Marzorati Director Trip blocked due

to COVID-19

epidemic

Zhou Hongjiang

Enrico Sivieri Director Trip blocked due

to COVID-19

epidemic

Zhou Hongjiang

About significant risks that may be faced in production and operation process please refer

to“(5) Risks likely to occur” part of “9. Expectation for the Company’s Future Development”

in the Chapter Four “Management Discussion and Analysis” of the report.Investors are

advised to read carefully and pay attention to investment risks.

Forward-looking statements such as future plans and development strategies covered in this

report do not constitute a substantial commitment of the Company to investors. Investors are

advised to pay attention to investment risks.The Company’s preliminary scheme of profit distribution deliberated and passed by the board

of directors this time is shown as following:Based on the Company’s total 685464000

shares we plan to pay CNY7(including tax) in cash as dividends for every 10 shares to all

shareholders and send 0 bonus share (including tax). Capital reserve will not be transferred to

equity.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Definition

Definition Item Refers to Definition Content

Company/The Company Refers to Yantai Changyu Pioneer Wine Co. Ltd.

Changyu Group/Controlling Shareholder Refers to Yantai Changyu Group Co. Ltd.

CSRC Refers to China Securities Regulatory Commission

SSE Refers to Shenzhen Stock Exchange

KPMG Huazhen Refers to KPMG Huazhen LLP (Limited Liability Partnership)

CNY Refers to Chinese Yuan

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

II. Brief Introduction for the Company and Main Financial Indicators

1. Company’s information

Stock Abbreviation Changyu A Changyu B Stock Code 000869 200869

Stock Abbreviation after Alteration -

Place of Stock Listing Shenzhen Stock Exchange

Legal Name in Chinese 烟台张裕葡萄酿酒股份有限公司

Abbreviation of Chinese Name 张裕

Legal Name in English YANTAI CHANGYU PIONEER WINE COMPANY LIMITED

Abbreviation of English Name CHANGYU

Legal Representative Mr. Zhou Hongjiang

Registered Address 56 Dama Road Yantai Shandong China

Postal Code 264000

Office Address 56 Dama Road Yantai Shandong China

Postal Code 264000

Website http://www.changyu.com.cn

E-mail webmaster@changyu.com.cn

2. Contact person and information

Secretary to the Board of Directors Authorized Representative of Securities Affairs

Name Mr. Jiang Jianxun Mr. Li Tingguo

Address 56 Dama Road Yantai Shandong China 56 Dama Road Yantai Shandong China

Tel. 0086-535-6602761 0086-535-6633656

Fax. 0086-535-6633639 0086-535-6633639

E-mail jiangjianxun@changyu.com.cn stock@changyu.com.cn

3. Information disclosure and filing location

Media name for information disclosure

selected by the Company

China Securities Newspaper Securities Times and Hong

Kong Commercial Daily

Web Site assigned by CSRC to carry the

annual report http://www.cninfo.com.cn

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Filing location of the Company’s annual

report

Board of Directors’ Office of the Company56 Dama Road

Yantai Shandong

4. Registration changes

Organization Code 913700002671000358

Changes for the main businesses

of the Company since it was listed

The business scope determined by the Company when it was

established on September 18th 1997 is production processing and

sales of wine distilled liquor healthy liquor fruit liquor non-alcohol

beverage fruit jam packing material and winemaking machine.On

April 17th 2008 approved by the 2007 shareholders’ meeting the

Company’s business scope is changed to production processing and

sales of wine distilled liquor medicinal liquor fruit liqueur

non-alcohol beverage fruit jam packing material winemaking

machines and licensed import and export. On May12th 2010

approved by the 2009 shareholders’ meeting the Company changed

its business scope to production processing and sales of wine

distilled liquor medicinal liquor fruit liqueur non-alcohol beverage

fruit jam packing material and its products winemaking machinery

licensed import and export and external investment according to

national policy. On September 23rd 2016 approved by the 2016

annual 1stInterim shareholders’ meeting the Company changed its

operating scope to wine and fruit wine (bulk wine processing and

filling) production blending liquor and other blending liquors (grape

liqueur) production other liquors (other distilled liquors) production

production processing and sales of packing material and wine

making machinerygrape plantation and procurement tourism

resources development (excluding tourism) packaging design

activity of building rental licensed import and export

warehouse business and external investment according to national

policy.

Changes for all previous

controlling shareholders No.

5. Other relevant information

The accounting firm appointed by the Company

Name KPMG Huazhen LLP

Address Level 8 No.2 East Wing of Dongfang Square No.1 East Chang’an Street Dongcheng District Beijing

Name of signatory accountants Ms. Wang Ting Ms. Chai Jing

The sponsor institution appointed by the Company to perform the duty of continuous

supervision during the report period

□Available ?Not available

The financial adviser appointed by the Company to perform the duty of continuous

supervision during the report period

□Available ?Not available

6. Key accounting data and financial indicators

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Whether the Company needs to retrospectively adjust or restate the accounting data of

previous fiscal years.□Yes ?No

2019 2018 More or less than Last year (%) 2017

Operating revenue (CNY) 5031011489 5142244740 -2.16% 4932545229

Net profit attributed to

shareholders of the listed

company (CNY)

1129735749 1042632929 8.35% 1031695056

Net profit attributed to

shareholders of the listed

company after deducting

non-recurring profits and

losses (CNY)

892075931 965426238 -7.60% 986095872

Net cash flows from

operating activities (CNY) 837838024 975978746 -14.15% 973243027

Basic earnings per share

(CNY) 1.65 1.52 8.55% 1.51

Diluted earnings per share

(CNY) 1.65 1.52 8.55% 1.51

Weighted average for

earning rate of net assets

(CNY)

11.30% 11.23% 0.07% 12.14%

December 31st

2019

December 31st

2018

More or less than

Last year (%)

December 31st

2017

Total assets (CNY) 13647932568 13117729052 4.04% 12536755208

Net Assets attributed to

shareholders of the listed

company (CNY)

10308910198 9606099365 7.32% 8906342299

7. Differences in accounting data under PRC accounting standards and international

accounting standards

(1) Differences between net profits and net assets in the financial report disclosed

according to both international accounting standards and PRC accounting standards

□Available ?Not available

There are no differences between net profits and net assets in the financial report disclosed

according to both international accounting standards and PRC accounting standards during

the report period.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Differences between net profits and net assets in the financial report disclosed

according to both foreign accounting standards and PRC accounting standards

□Available ?Not available

There are no differences between net profits and net assets in the financial report disclosed

according to both foreign accounting standards and PRC accounting standards during the

report period.

8. Key financial indicators by quarter

Unit：CNY

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Operating revenue 1667424758 890850027 968100175 1504636529

Net profit attributed to

shareholders of the

listed company

456381471 147022318 125557834 400774126

Net profit attributed to

shareholders of the

listed company after

deducting non-recurring

profits and losses

450709661 101781034 119702422 219882814

Net cash flows from

operating activities 294678342 204797664 145855707 192506311

Whether there are significant differences between the above mentioned financial indicators or

their sum and the related financial indicators in the quarterly reports and semi-annual reports

disclosed by the Company.□Yes ?No

9. Item and amount of non-recurring profit and loss

?Available □Not available

Unit：CNY

Item 2019 2018 2017 Explanation

Profits and losses on disposal of

non-current assets including the

provision for asset impairment write-off

part

6272676 11368355 -222586

Including return

on investment of

CNY 6233661

through

disposing equity

of Mirefleurs

Government grants included in the

current profits and losses(except for

those recurring government grants that

are closely related to the entity's

operation in line with related regulations

and have proper basis of calculation)

84837581 87281434 47638384

Other non-operating revenues and 7298479 3817401 13999251

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

expenditures in addition to the

aforementioned items

Other profit and loss projects conforming

to the definition of non-recurring profit

and loss

218649636

Offsetting the

trademark use

fee in previous

years

For detailed

information

please refer to

(5)(a) of X in

Financial Report

Less：Income tax effect 79367893 25157188 15523424

Minority shareholders' equity

effect (after taxes) 30661 103311 292441

Total 237659818 77206691 45599184 --

The reasons shall be made clear and definitely as to the non-recurring profit and loss that the

Company has defined by virtue of the Explanatory Announcement on Public Company’s

Information Disclosure No.1 - Non-recurring Profit and Loss and as to regarding the

non-recurring profit and loss as recurrent profit and loss as specified in the Explanatory

Announcement on Public Company’s Information Disclosure No.1 –Non-recurring Profit and

Loss.

□Available ?Not available

There are no cases that non-recurring profit and loss is defined and specified as recurrent

profit and loss in accordance with the Explanatory Announcement on Public Company’s

Information Disclosure No.1 - Non-recurring Profit and Loss during the report period.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

III. Summary of the Company’s Businesses

1. Main businesses during the report period

During the report period the Company’s main businesses are production and operation of wine and brandy thus providing domestic and foreign

consumers with healthy and fashionable alcoholic drinks. Compared with earlier stage there are no significant changes happened to the

Company’s main businesses. The wine industry that the Company involved in is still in growth stage. Although being affected by many factors

for the short-term the competition in the market is fierce and the wine consumption temporarily declines. However seen from the long term

the whole domestic wine market is on the rising trend. The Company is at the forefront in the domestic wine market.

2. Significant changes of main assets

(1) Significant changes of main assets

Main assets Explanation of significant changes

Equity asset

During the report period this Company’s subsidiary Francs Champs Participations SAS signed Cooperation

Agreement with SC Garri du Gai to jointly establish joint venture company L&M Holdings in which Francs

Champs Participations SAS used 100% equity of Societe Civile Argricole Du Chateau De Mirefleurs as

contribution of capital; determined the long-term equity investment of CNY 45.10 million the carrying

amount of long-term equity investment adjusted and reduced by CNY 1.12 million in accordance to the

equity method at the end of the period and the ending balance with CNY 43.98 million.

Fixed asset

The fixed assets increased by 2.51% compared with the initial stage owing to part of constructions in process

have been transferred to fixed asset during the report period.Intangible asset There are no significant changes of intangible asset during the report period.

Construction in process

The constructions in process decreased by 25.26% compared with the initial stage owing to part of

constructions in process have been transferred to fixed asset during the report period.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Main overseas assets situation

?Available □Not available

Unit：CNY

Details of

assets

Formation

reasons

Assets scale Location

Operation

mode

Control

measures for

safeguarding of

asset security

Earning

condition

Proportion of

overseas assets in

the Company’s

net assets

Whether there are

significant

impairment risks

Hacienda Y

Vinedos

Marques Del

Atrio. SL

Acquisition of

equity

561790770 Spain

Independent

operation

The Company

participates in

making

important

decisions

through board of

directors and

appoints CFO

on financial

management.

6463473 1.21% No

Indomita

Wine

Company

Chile S.p.A.

Establishment

of joint

venture

515352803 Chile

Independent

operation

The Company

participates in

making

important

decisions

through board of

directors and

appoints CFO

on financial

management.

16279461 3.47% No

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Kilikanoon

Estate Pty.

Ltd.

Acquisition of

equity

156244219 Australia

Independent

operation

The Company

participates in

making

important

decisions

through board of

directors.

463409 0.79% No

FrancsChamps

Participations

SAS

Sole

proprietorship

establishment

229962968 France

Independent

operation

The Company

participates in

making

important

decisions

through board of

directors.

4117668 2.17% No

Explanation

for other

situation

3. Analysis of core competitiveness

Compared with the participants in the arena of the Chinese wine sector we believe that the Company is with the following advantages:

Firstly the Company has been enjoying a well-known wine brand since 120-odd years. “Changyu” “Noble Dragon” and “AFIP” are all China

famous brand that have strong influence and good reputation.Secondly the Company has set up a nationwide marketing network formed a “three-level” marketing network system mainly composed of the

Company’s salesmen and dealers with strong marketing ability and market exploitation ability.

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Thirdly the Company has strong scientific prowess and a product R&D system. Relying on the country’s only “State-level Wine R&D Center”

the Company has mastered advanced winemaking technology and production processes as well as been powerful enough in product innovation

and perfect quality control system.

Fourthly the Company is in possession of a lot of grape-growing bases that are compatible with its development requirements. The Company

has developed a great deal of vineyards in the most suitable areas for wine grape growing such as Shandong Ningxia Xinjiang Liaoning Hebei

and Shanxi whose scale and structure have generally met the Company’s needs for development.

Fifthly products in high medium and low-grade as well as varieties and categories are all complete. Over 100 varieties of series products such

as wine brandy and sparkling wine covers various grades including high medium and low-grade which can meet different consumer groups’

demands. The Company has taken the dominant status in the domestic wine industry through rapid development in the past 10-odd yearand has

comparative advantages in the future competition.Sixthly the Company has a relatively perfect motivation system. Most of Company’s employees indirectly hold the Company’s equity through

controlling shareholders. There are high consistency between employee benefits and shareholders benefits in favor of motivating employees to

create value for shareholders.Seventhly the Company has set up flexible and efficient decision-making mechanism. The Company’s core management team always maintains

a working style of unity and pragmatic and flexible and efficient decision-making mechanism which makes the Company can deal with market

changes more calmly.

Eighthly the global production capacity layout has been basically completed. The Company has completed production capacity layout in China

France Chile Spain Australia and other major wine producing countries in the world enabling making better use of global high-quality raw

material resources capital talents and advanced production processes and technologies to provide consumers with diversified quality products

and better serve consumers.

Based on the above reasons the Company has formed relatively strong core competence and will maintain a relatively dominant position in the

future predictable market competition.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

IV. Management Discussion and Analysis

1. Summarization

In 2019 influenced by many factors such as the slowdown of domestic economic growth and

the increase in uncertainty resulting from Sino-US trade friction the competition in domestic

wine market was very strong. The sales volumes of both imported wine and domestic wine

decreased and some wine production enterprises got into trouble.Facing quite a lot of external

disadvantages the Company persisted in taking the market as the center adhered to thedevelopment strategy of “Focus on middle-and-high level Focus on high quality Focus onbig product” and the marketing philosophy of “obtaining growth from the terminal andnurturing consumers” and strived to promote product sales achieving good results and

realizing operating revenue of CNY5031.01million with a year-on-year decrease of

2.16%and net profit of CNY1129.74million belonging to the parent company’s shareholders

with a year-on-year increase of8.35%.

2. Analysis of main business

(1) Summarization

Description

Increase or decrease of

the end of the period

over the end of last year

Cause of significant changes

Operating revenue -2.16%

Mainly because of decrease in sales

volume

Operating cost -0.74% Mainly because of decline in wine sales

Sales expense -17.37%

Mainly because of return of trademark use

fee during this report period

Management expense -9.22%

Mainly because of year-on-year decrease

in wage & welfare and depreciation

expenses

R&D expense 26.27%

Mainly because of increase in expenses

for technology research and development

in 2019

Financial expense -1.82%

Mainly because of decrease in loan

interest expenditure

Net amount of cash

flow generated in

operating activities

-14.15%

Mainly because of decrease in received

cash from product sales and rendering of

service

Net amount of cash

flow generated in

investment activities

-59.01%

Mainly because of decrease in paid cash

for investment activities

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Net amount of cash

flow generated in

capital-raising

activities

9.06%

Mainly because of decrease in cash inflow

from capital-raising activities

Review and summary of the process of the Company’s early-disclosed development strategy

and business plan during the report period

During the report period the Company realized the operating revenue of

CNY5031.01millionwithandecrease of 2.16% compared with last year slightly lower than

the target fixed at the beginning of the year of realizing operating revenue no less than CNY

5.3 billion. The net profit of CNY 1129.74 million belonging to the parent company’s

shareholders was realized with an increase of 8.35% compared with last year. The main

works during the report period were shown as followed:

Firstly the Company adjusted the sales structure and rationalized the marketing system

further promoting the market strategy. During the report period the Company strengthened

the sales structure led by alcohol product variety and streamlined the marketing system for

various alcohol products such as wine brandy and imported wine etc. making sales team

become more focused and further clarifying the responsibilities rights and benefits. The

relationship between parent brand Changyu and its subsidiary brands were rationalized. The

Company first proposed and implemented“Brand Manager System” highlighted the key

points according to different brand positioning studied different target consumer groups in a

targeted manner and let dedicated people do professional things so that the brand

development planning became clearer. Each variety of alcohol products focused according to

respective brand development trend and clarified corresponding power point. To brandy the

Company actively changed its market positioning strived to learn promotion experience of

high-end Chinese liquor in order to cut the “cake” of liquor market; to wine the Company

studied the market strategy with the bench marking of international competitive products

based on the characteristics of different wineries. To imported wine the Company selected

the best from imported wines and paid special attention to Chilean Indomita and Australian

Kilikanoon. Through the “jointly building a fee pool with distributors” an exclusive team of

Changyu under each backbone distributor system was built to ensure the proper

implementation of “obtaining growth from the terminal and nurturing consumers”.Secondly the Company insisted on product innovation strengthened brand building and

continuously expanded market influence. During the report period the Company adhered to

the general principle of “not stunning not listed” for new products and successively launched

a series of new products including new Rena Chateau new Castel Shartar five-star brandy

Pagese Mminni Long Tailed Cat Vini Panda and limited-edition Noble Dragon and so on.These new products were well received by the market and recognized by consumers making

the domestic and foreign influence of “Changyu” brand increase steadily. The data from L.W.Institute of Xinhua News Agency showed that “The global brand awareness of Changyu isYantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Reportequivalent to Lafite”. Based on the annual global wine brand influence index issued by Wine

Intelligence a British wine research agency “Changyu” ranked first in the Chinese market.Thirdly The Company implemented precision marketing by virtue of digital technology to

improve operating efficiency. During the report period the Company further implemented

the order-driven approach and fully realized online coding for chateau wines Noble Dragon

and ordinary wines basically achieving order driving of products.The identification

management work “one bottle one code” was put in place and the anti-counterfeiting work

for high-end products is continued being promoted.The Company gradually completed the

transformation of marketing code deeply investigated the distributor identification

management and product traceability and preliminarily made the planning of product

anti-counterfeiting trackability and marketing promotion system integrating logistics code

anti-channeling code and marketing code into one code which further strengthened the link

control. The Company implemented a “comprehensive digital transformation” strategy to

drive sales orders online and offline. The Company collaborated with online Tmall JD and

Suning and other digital platforms while cooperating with offline distributors to promote

APP ordering.The Company formed strategic partnership with Tencent JD Tmall andSuning etc. and utilized digital means to gradually achieve “more precise user positioningmore sophisticated marketing promotion and more efficient customer conversion”.

Fourthly the Company enhanced quality management and improved production processes

further improving product quality. During the report period the Company strategically

deployed global high-quality raw material bases and laid out medium-and-long-term

premium raw material bases in China Australia Chile and France respectively which has

provided a sufficient quantity of medium- and high-grade bulk wine resources for the

implementation of the “Three Focus” strategy.The Company strengthened technical

exchanges between domestic and foreign winemakers vigorously carried out research on

new technologies and new processes improved traditional processes and continuously

improved product quality which achieved significant results. 3 great gold medals and 34

gold medals were awarded in various international competitions. Koya XO 15 years won the

championship at the Global Brandy Blind Tasting Fair surpassing the world’s five

well-known XO brands. The Company also built “Koya” to be a Chinese high-end brandy

brand.Changyu Koya chateau was awarded the title of “The First Brandy Chateau in China”

by China Alcohol Drinks Association and the winemaker Ms. Zhang Baochun was awarded

the title of “Chief Brandy Master in China”. The Chinese Brandy Research Institution was

formally settled in Koya chateau. Changyu Noble Dragon became “Global TOP5” in the

global best-selling wine brands blind tasting competition and was rated as “Asian TOP1” by

the Singapore Lianhe Zaobao.

Fifthly the Company strengthened internal audit intensified risk prevention and control and

reduced operating costs. During the report period the Company strengthened tax planning

conducted comprehensive audits to off-site warehouses accounts receivable advertising fee

management and distributor inventory etc. and established and improved risk prevention and

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

control system and budget dynamic management system for overseas enterprises which

effectively prevented operating risks and reduced operating costs.

(2) Revenue and cost

① Composition of operating revenue

Unit: CNY

2019 2018

Year-on-year

increase or

decrease (%) Amount

Proportion in

operating

revenue

Amount

Proportion in

operating

revenue

Total operating

revenue

5031011489 100% 5142244740 100% -2.16%

Sector-classified

Sector of liquor

and alcoholic

beverage

5031011489 100% 5142244740 100% -2.16%

Product-classified

Wine 3833828384 76.20% 4000233434 77.79% -4.16%

Brandy 1071623817 21.30% 999207299 19.43% 7.25%

Tourism 88716296 1.76% 101978938 1.98% -13.01%

Others 36842992 0.74% 40825069 0.79% -9.75%

Total 5031011489 100% 5142244740 100% -2.16%

Area-classified

Domestic 4482413271 89.10% 4486387956 87.25% -0.09%

Overseas 548598218 10.90% 655856784 12.75% -16.35%

Total 5031011489 100% 5142244740 100% -2.16%

② The cases of industry product or area accounting for over 10% in the Company’s

operating revenue or operating profit

?Available □Not available

Unit: CNY

Operating

revenue

Operating cost

Gross

margin

Year-on-year

increase or

decrease (%)

of operating

revenue

Year-on-year

increase or

decrease (%)

of operating

cost

Year-on-year

increase or

decrease (%)

of gross

profit rate

Sector-classified

Sector of

liquor and

alcoholic

beverage

5031011489 1887495991 62.48% -2.16% -0.74% -0.54%

Product-classified

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Wine 3833828384 1401341243 63.45% -4.16% -4.07% -0.03%

Brandy 1071623817 436894314 59.23% 7.25% 8.22% -0.37%

Tourism 88716296 27251750 69.28% -13.01% -12.93% -0.03%

Others 36842992 22008684 40.26% -9.75% 282.20% -45.63%

Total 5031011489 1887495991 62.48% -2.16% -0.74% -0.54%

Area-classified

Domestic 4482413271 1523524727 66.01% -0.09% 3.11% -1.05%

Abroad 548598218 363971264 33.65% -16.35% -14.16% -1.69%

Total 5031011489 1887495991 62.48% -2.16% -0.74% -0.54%

Under the condition that the statistical caliber of the Company’s main business data is

adjusted during the report period the Company’s main business data adjusted on the basis of

caliber at the end of report period in recent one year.

□Available ?Not available

③Whether the Company’s sales revenue for material object is more than labor service

revenue

?Yes □No

Sector Project Unit 2019 2018

Year-on-year

increase or

decrease (%)

Wine Sales volume Ton 95902 112600 -14.83%

Brandy Sales volume Ton 38895 39315 -1.07%

Explanation on the causes of over 30% year-on-year changes of the related comparison data

□Available ? Not available

④ The fulfillment of major sales contract signed by the Company up to the report

period

□Available ? Not available

⑤ Composition of operating costs

Classification of sector and product

Unit: CNY

Sector Project

2019 2018

Year-on-year

increase or

decrease (%)

Amount

Proportion in

the operating

cost (%)

Amount

Proportion in

the operating

cost (%)

Liquor

and

alcoholic

Blending liquor 941841689 50.76% 981838789 52.42% -1.66%

Packing

material

632114480 34.07% 633281194 33.82% 0.26%

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

beverage Wages 65607419 3.54% 63385522 3.38% 0.15%

Manufacturing

expenses

215835927 11.63% 194485534 10.38% 1.25%

Unit: CNY

Sector Project

2019 2018

Year-on-year

increase or

decrease (%)

Amount

Proportion in

the operating

cost (%)

Amount

Proportion in

the operating

cost (%)

Wine

Blending liquor 711784892 50.79% 759623724 52.00% -1.21%

Packing

material

464625885 33.16% 484791303 33.19% -0.03%

Wages 56725667 4.05% 54718770 3.75% 0.30%

Manufacturing

expenses

168204799 12.00% 161721616 11.06% 0.93%

Brandy

Blending liquor 230056797 52.66% 217997239 54.00% -1.34%

Packing

material

167488596 38.34% 144272064 35.74% 2.60%

Wages 8881752 2.03% 8666752 2.14% -0.11%

Manufacturing

cost

30467170 6.97% 32763918 8.12% -1.14%

Explanation

⑥ Whether there are changes of consolidation scope during the report period

?Yes □No

For detailed information about the changes in the scope of consolidated financial statements

in this year please refer to VI“Change in consolidation scope” in Financial Report of this

report.⑦ Major changes or adjustments of the Company’s businesses products or service

during the report period

□Available ?Not available

⑧Information of major sales customers and major suppliers

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The Company’s major sales customers

The total sales amount of the top five customers（CNY） 271566418

The proportion that total sales amount of the top five customers accounting

for the annual total sales amount（%）

5.40%

The proportion that sales amount of the related party in the total sales

amount of the top five customers accounting for the annual total sales

amount（%）

Information of the Company’s 5 biggest sales customers

No. Customer name

Sales amount

（CNY）

Proportion in total

sales for the year

（%）

Changyuexin Trading Company Limited in

Shenzhen city

77966257.00 1.55%

2 Shenzhen Ruiqi Trading Company Limited 68303967.00 1.36%

Xinbaicheng Food Firm in Hanjiang district

of Putian city

45629821.00 0.91%

Fuzhou Shengshihanggang Trading

Company Limited

42902091.00 0.85%

Yukun Information Technology Co. Ltd. in

Foshan city

36764282.00 0.73%

Total -- 271566418.00 5.40%

Other situation explanations of major customers

□Available ?Not available

Information on the Company’s main suppliers

The total purchase amount of the top 5 suppliers 602438946.00

The proportion of the total purchase amount of the top 5 suppliers in the

annual purchase amount

45.48%

The proportion of the related party purchase amount in the top 5 supplier

purchase amount in annual purchase amount

10.08%

Information on the Company’s top 5 biggest suppliers

No. Supplier name

Purchase amount

(CNY)

Proportion in total

purchase for the

year（%）

Liquan Sales Department of Shandong

Yantai Winery Co.Ltd.

139869748.00 10.56%

2 Yantai Shenma Packaging Co. Ltd. 133587430.00 10.08%

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

3 Qixia Changyu Glass Co.Ltd. 131011805.00 9.89%

4 Xinjiang Yuyuan Liquor Co.Ltd. 127813447.00 9.65%

Xinjiang Tianyu Winery Co. Ltd.

Fangcaohu Branch

70156516.00 5.30%

Total -- 602438946.00 45.48%

Other situation explanations of main suppliers

□Available ?Not available

(3) Expense

Unit: CNY

2019 2018

Year-on-year

increase or

decrease (%)

Explanation of significant

changes

Sales

expense

1053232024 1274599146 -17.37%

Mainly because of return of

trademark use fee during this

report period

Management

expense

311904656 343580651 -9.22%

Mainly because of

year-on-year decrease in

wage & welfare and

depreciation expenses

Financial

expense

35290702 35945302 -1.82%

Mainly because of decrease

in loan interest expenditure

Research and

Development

expense

6041116 4784118 26.27%

Mainly because of increase in

expenses for technology

research and development in

2019

(4) Research and development investment

□Available ?Not available

(5) Cash flow

Unit: CNY

Item 2019 2018

Year-on-year increase

or decrease (%)

Subtotal of cash inflow in

operating activities

4782456490 5080363769 -5.86%

Subtotal of cash outflow in

operating activities

3944618466 4104385023 -3.89%

Net amount of cash flow 837838024 975978746 -14.15%

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

generated in operating

activities

Subtotal of cash inflow in

investment activities

242866775 423413326 -42.64%

Subtotal of cash outflow in

investment activities

451029212 931261875 -51.57%

Net amount of cash flow

generated in investment

activities

-208162437 -507848549 59.01%

Subtotal of cash inflow in

capital-raising activities

942134032 1114333670 -15.45%

Subtotal of cash outflow in

capital-raising activities

1413600451 1546641222 -8.60%

Net amount of cash flow

generated in capital-raising

activities

-471466419 -432307552 9.06%

Net increase of cash and cash

equivalents

158912341 25971060 511.88%

Explanation of main influence factors contributing to great changes in related data on

year-on-year basis

?Available □Not available

Compared with the same period of last year during the report periodthe net amount of cash

flow generated in operating activities decreased by 14.15% mainly due to the year-on-year

decrease in the cash received from commodity sales and rendering service; subtotal of cash

inflow in investment activities decreased by 42.64% mainly due to the decrease in received

cash in recouping the capital outlay; subtotal of cash outflow in investment activities

decreased by 51.57% mainly due to the decrease in the cash paid for acquiring fixed assets

intangible assets and other long-term assets and the cash paid for investment;net amount of

cash flow generated in investment activities increased by 59.01% mainly due to the decrease

in the cash outflow in investment activities; subtotal of cash inflow in capital-raising activities

decreased by 15.45% mainly due to the decrease in received cash from loan; net increase of

cash and cash equivalents increased by 511.88% mainly due to the decrease in cash outflow

in investment activities.

Explanation on the causes of major differences between the net cash flow generated by the

Company’s operating activities and net profit of this year during the report period.

□Available ?Not available

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

3. Analysis to non-main business

□Available ?Not available

4. Assets and liabilities

(1) Significant changes of assets composition

Whether the Company implements new financial instruments standard new revenue standard

or new lease standard for the first time since 2019 and adjusts related items in the financial

statement at the beginning of the execution year

?Available □Not available

Unit: CNY

At the end of 2019 At the end of 2018 Proportion

increase or

decrease

(%)

Explanation on

significant

changes Amount

Proportion in

the total

assets (%)

Amount

Proportion in

the total assets

(%)

Monetary funds 1565783980 11.47% 1475700477 11.25% 0.22%

No significant

changes

Receivables 266218153 1.95% 242153083 1.85% 0.10%

No significant

changes

Inventory 2872410407 21.05% 2724591457 20.77% 0.28%

No significant

changes

Investment real

estate

29714586 0.22% 31572489 0.24% -0.02%

No significant

changes

Long-term

equity

investments

43981130 0.32% 0 0% 0.32%

No significant

changes

Fixed assets 5894068898 43.19% 5749731667 43.83% -0.64%

No significant

changes

Construction in

progress

567478833 4.16% 759296591 5.79% -1.63%

No significant

changes

Short-term

borrowings

754313744 5.53% 688002410 5.24% 0.29%

No significant

changes

Long-term

borrowings

128892501 0.94% 156480662 1.19% -0.25%

No significant

changes

(2) Assets and liabilities measured at fair value

□Available ?Not available

(3) Limitations of assets rights up to the end of the report period

At the end of report period the Company has no assets sealed up detained or frozen. For

information about assets mortgage and pledge please refer to Announcement on External

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Guarantee disclosed on China Securities Journal Securities Times and CNINFO

(http://www.cninfo.com.cn/) in 2016 2017 2018 and 2019.

5. Investment condition

(1) Overall situation

?Available □Not available

Investment amount during the

report period (CNY)

Investment amount of the same

period of last year (CNY)

Variation

399750000 450762420 -11.32%

(2) Cases of acquired significant equity investments during the report period

□Available ?Not available

(3) Cases of significant ongoing non-equity investments during the report period

?Available □Not available

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Unit: CNY

Project name

Investment

mode

Whether

Belongs

to fixed

assets

investmen

Involveds

ectors of

investmen

t projects

Investment

amountduring

the report

period

Accumulated

actual

investmentamoun

t upto the endof

the reportperiod

Capitalsour

Project

progres

Estimated

earnings

Accumulated

realized

earnings

upto the

end of

thereportpe

riod

Reasonsfor

unreachedp

lanningsch

edule and

estimatede

arnings

Disclosureda

te (ifhave)

Disclosureindex (if have)

Yantai

ChangyuIntern

ationalWine

CityBlending

andCoolingCe

nter

Self-constru

cted

Yes

Liquor

andalcoho

licbevera

gesector

250180000 1626294100 Ownedfund 100% 0 0 — 2017.04.22 Please refer to Resolution

Announcement of Seventh

Session Board of Directors

4th Meeting Resolution

Announcement of Seventh

Session Board of Directors

8th Meetingand Resolution

Announcement of Seventh

Session Board of Directors

10th Meeting disclosed on

China Securities Journal

Securities Times and

CNINFO

(http://www.cninfo.com.cn/)

Yantai

ChangyuIntern

ationalWine

CityBottlingCe

nter

Self-constru

cted

Yes 91000000 1004200000 Ownedfund 100% 0 0 — 2017.04.22

Yantai

ChangyuIntern

ationalWine

CityLogisticsC

enter

Self-constru

cted

Yes 46170000 462677200 Ownedfund 100% 0 0 — 2017.04.22

Changyu

Vineand

Self-constru

cted

Yes 6000000 122974800 Owned fund 85% 0 0 — 2017.04.22

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

WineResearchI

nstitute

TreasureWine

Chateau

Self-constru

cted

Yes 0 128820000 Owned fund 75% 0 0 — 2017.04.22

Koya

BrandyChate

Self-constru

cted

Yes 0 147329000 Owned fund 85% 0 0 — 2017.04.22

Oak barrel

procurement

project

Self-constru

cted

Yes 0 0 Owned fund 0% 0 0 — 2018.04.20

SAP

informatization

for industrial

production

Self-constru

cted

Yes 2600000 40450000 Owned fund 100% 0 0 — 2018.04.20

Project of

purchase in

trinityjoint

action

equipment by

Yantai chateau

Self-constru

cted

Yes 0 0 Owned fund 0% 0 0 — 2018.04.20

Project of“constanttemperatureand humidity”

system in

underground

cellar of

Self-constru

cted

Yes 3800000 3800000 Owned fund 100% 0 0 — 2018.04.20

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Research &

Development

Center

Construction

project of

supplier

relationship

management

platform and

plant

maintenance

platform

Self-constru

cted

Yes 0 0 Owned fund 0% 0 0 — 2018.04.20

Total -- -- -- 399750000.00 3536545100.00 -- -- 0 0 -- -- --

(4) Financial assets investment

①Security investment situation

□Available ?Not available

There are no security investments for the Company during the report period.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

②Derivatives investment

□Available ?Not available

There are no derivatives investments for the Company during the report period.

(5) The usage situation of raised capital

□Available ?Not available

There are no usage situations of raised capital for the Company during the report period.

6. Sale of significant assets and equities

(1) Sale of significant assets

?Available □Not available

Transacti

on party

Sold asset Sale date

Transactio

n price

(CNY’000

Net profit

contributed by

this asset for

listed company

from the

beginning of

report period to

sale date

Influence of

sale in listed

company

(note III)

Proportion

of net

profit

contribute

d to listed

company

resulting

from asset

sale in

total net

profit

Pricing

principle

for asset

sale

transacti

on or

not

Associat

ion

Relation

ship

with

transacti

on party

(if

applicab

le)

Whether

the

property

right of

involved

assets

has been

transferr

Whether

the credit

and debt

has been

transferre

Whether

impleme

nted as

schedule

if not

explain

the

reason

and

measure

s that

have

been

taken

Disclo

sure

date

Disclosure

index

Yantai The April 2411.55 0 Through this 0 Contract Yes Parent No No Yes April Please refer

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Changyu

Pioneer

Wine

Co. Ltd.

workshop

and office

building

brandy

manufact

uring

plant and

correspon

ding lands

20th

2019

transaction

the Company

could replace

idle

workshop

and lands for

the land

occupied by

Xishan office

building so

that the

Company

could not

only better

guarantee the

safety and

integrality of

Xishan office

building in

order to

realize the

asset

appreciation

and hedge but

also eliminate

ual

pricing

company

and

subsidiar

company

20th

2019

Announcement

OnAsset

Replacement

disclosed by

the

Company

(announcement

2019-temporaty 1

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

transaction

including

land rental

fee. This

transaction

will not affect

the continuity

of business

and the

stability of

management.

(2) Sale of significant equities

□Available ?Not available

7. Analysis of main holding and joint stock companies

?Available □Not available

Situation of main subsidiaries and joint stock companies affecting over 10% of the Company’s net profit

Unit: CNY

Company name Company type Main business Registered capital Total assets Net assets Operating revenue Operating profit Net profit

Yantai Changyu

Pioneer Wine

Sales Co. Ltd.Subsidiary Sales CNY8million 1420161516 191198133 3821020948 942128095 793451810

Yantai Changyu

Wine Sales Co.Ltd.Subsidiary Sales CNY5million 396403239 378470761 1081596277 186864347 140221071

Changyu Trading Subsidiary Sales CNY5million 88463752 233496494 436530152 173831064 131639723

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Co. Ltd. in

Development

Zone of Yantai

LaizhouChangyu

Wine Sales Co.Ltd.Subsidiary Sales CNY1million 88463752 1000000 226162063 157486950 118115212

Acquisition and disposal of subsidiaries during the report period

?Available □Not available

Company name

Mode of acquisition and disposal of subsidiaries during the

report period

Effect on overall production management and

performance

Chateau De Mirefleurs Establishment of joint venture company for contracted

transfer

The difference between the disposal price and the

enjoyed net asset share of this subsidiary is CNY

6233661.

Explanation on main holding and joint stock companies

8. Situation of the structured subjects controlled by the Company

□Available ?Not available

9. Expectation for the Company’s future development

On the basis of our limited experience and professional skills the Company makes the following judgments on the wine industry and future

development:

(1) The sector competition pattern and development trend

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Under uncertainty effects caused by the slowdown of national macroscopic economy growth the Sino-American trade friction and the

novelcoronaviruspneumoniaepidemic the overall demand of Chinese wine market in 2020 will be still comparatively weak the total wine consumption

is more likely to maintain a downward trend and the wine industry's operating situation will be even more severe. With the rise of Chinese

e-commerce and Internet generation the scene and habits of people's consumption in wine continue to change. The mobile terminal media on the

“mobile phone screen” including WeChat Douyin Toutiao and Internet celebrity IP etc. has become an important channel for wine operators to

communicate with consumers. Owing to the serious “fragmentation” of the wine market it is more difficult to target wine consumers. Whether

compared with the per capita consumption of domestic beer and liquor or compared with the per capita consumption of major foreign wine consuming

countries the consumption popularizing rate and penetration rate of Chinese wine in domestic are very low. Although there are some twists and turns

during its development period in the short term seen from the long term the huge development potential has not changed.In such a case of long-term

coexistence of opportunities and challenges those enterprises that possess strong brand influence and marketing ability catch the opportunities

actively take adjustments make full use of newly emerging and traditional sales channels timely satisfy the consumers’ demands and provide products

with high cost performance will have the opportunity to be the final winner of competitions and then form a new pattern of the future Chinese wine

market.

(2) The Company’s development strategy

The Company will adhere to the development strategy of “Focus on middle-and-high level Focus on high quality Focus on big product” and the

marketing philosophy of “obtaining growth from the terminal and nurturing consumers”continue improving the relatively independent system

construction of wine brandy imported wine and overseas business enhance wine scale up brandy improve imported wine stabilize overseas business

and promote the all-round development of various alcohol products.

(3) Management plan for the new year

In 2020 the Company will try its best to realize operating revenue of not less than CNY3.7 billion and control the main operating costs and three period

expenses below CNY2.8 billion.

(4) Measures to be taken by the Company

In order to better seize the opportunities and meet the challenges the Company will stand from the present take a long-term perspective forge ahead

adhere to market-oriented approach take advantage of profit assessment take innovation and major work as driving force and persevere in

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

management and implementation. The Company will make every effort to do following major work in 2020 in order to strive to achieve annual

business target.The first is to further deepen and implement the “Three Focus” strategy. For domestic wine the Company clearly defines the development direction of

“focusing on chateau wine strengthening Noble Dragon and scaling up ordinary wine” and will continue focusing on brands of seven chateau wines

Noble Dragon and Zenithwirl etc.. Under the premise of keeping the total investment unchanged the Company will transfer part of offline funds to

online channels to future increase the proportion of input on online channels. For brandy the Company will continue adhering to the strategy of

“focusing on middle-and-high-end products and driving the sales of low-end products in virtue of middle-and-high-end products” and focus on Koya

Five Star Mminni and Pegase these four brands. The main brands will be further focused on Koya XO 15 and Fine Five-star through which the brandy

category could be expanded thus driving the all-round development of brandy brands. For imported wine the Company will focus on six acquired

brands especially on Kilikanoon and IWCC.The second is to continue to implement business philosophy of “customer-centered striver-based and result-oriented”. The Company will takeeffective measures to fully implement the market strategy of “let fewer people manage distributors let more people serve terminals and consumerstogether with distributors”. Also the Company will continue increasing the salary level of sales personnel and enhancing front-line personnel’s working

enthusiasm through measures such as increasing efficiency while reducing staff and improving compensation system and so on. The Company will

advocate that“everyone is product experience officer” “everyone is a service experience officer” and “everyone is a self-media” to comprehensively

improve product awareness service awareness and marketing awareness.The third is to make efforts to expand new marketing channels. The Company will strengthen the development of online channels new retail channels

big distributor channels and personalized-ordering group purchase channels and establish a system of “brand team” + “outsourcing brand consultingcompany” to provide more accurate and effective marketing support. Through the innovation of marketing system the Company will push forward 1-2

chateau brands to establish an alliance company with big distributors to expand the market scale;mobilize more than 2000 key distributors across the

country to open their own smart retail malls;guide distributors to recruit “community partners”;promote distributors make full use of city-wide

platforms like Meituan Eleme 58 Tongcheng Douyin JingdongDaojia and Little Red Book to run their business in various new formats;promote

contactless delivery of wines among distributors through their own distribution system or courier delivery in the same city and help them improve

contactless delivery capacity and open up sales channels;mobilize all employees to participate in short video marketing and live streaming video

marketing.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The fourth is to comprehensively promote the Company’s traditional business to be transferred to digitization business. The Company will strive to

realize digitalization of planting production sales and marketing in an all-round way thus to provide accurate service to clients and targeted marketing

to consumers. In 2020 the Company will print anti-counterfeiting codes on the back and conduct the reformation of one-off marketing codes to

promote distributor-driven orders in an all-round way and introduce the inbound and outbound identification management and product traceability in

the distributor link. The Company will also cooperate with Tencent and other companies to complete the digital integration of marketing to promote

digital marketing level.The fifth is to continue improving product quality. The Company will stabilize the total number of contracted bases improve the planting level of its

own grape bases and cultivate new wine grape varieties according to different geographical and climatic characteristics in China. Besides that the

Company will establish long-term stabled high medium and low raw material bases for wine and brandy to meet different product demands and

complete wine and brandy overseas grape base layout from a global perspective. The Company will also increase the import quantity of oak barrels and

formulate a three-year purchase plan of oak barrels for high-end products such as chateau wines and Koya brandy and so on and improve the way and

method of using oak barrels. The Company will further establish and improve the “evaluation system for brand wine-makers team” mobilize

winemakers to go deep into the production line to improve product quality and go deep into the market line to understand consumer demand in order

to better play the winemakers team’s technical and work capability. The Company will support and encourage the research and development

investment of new technology and new process to ensure the steady improvement of product quality.The sixth is to further improve the employment mechanism. The Company will continue to implement the general policy of “strictly control theemployment and release the demission” and strive to achieve the general goal of “control the total number and keep the income non-decreasing”. The

Company will accelerate the reform of the selection and employment mechanism salary distribution and incentive mechanism to open up a dual

channel for employees’ career development and salary incentive. A three-year talent development plan for management brewing equipment

marketing production and other aspects will be made. The system of “management trainee” and “guidance of mentor to apprentice”will be established

to form the talent training model of “everyone has a mentor in front and anechelon formation in back”. Meanwhile the Company will also establish a

good mechanism to reward innovation success and tolerate innovation failure and create a favorable atmosphere to encourage innovation and tolerate

failure providing reliable guarantee for the smooth development of innovation work in all aspects of the Company.The seventh is to strengthen audit supervision and internal control system construction. The Company will further strengthen the audit supervision of

each operating unit and intensify the trinity supervision system of auditing financing and discipline inspection commission.The Company will enhance

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

the punishment level investigate every problems discovered in auditing and not promote or appoint responsible personnel. The Company will further

improve the internal control system of areas prone to serious fraud including seal related transaction sales advertising fee material procurement

project construction and inventory and so on in order to timely eliminate major hidden dangers and prevent operational risks.The eighth is to strengthen the financial management. The Company will improve the budgeting mode timely and dynamically adjust and improve the

annual budget in accordance with the major changes inside and outside of the Company and enhance the timeliness and pertinence of budget

management. The Company will improve the simulation profit assessment system for secondary enterprises to improve the overall

profitability.Meanwhile the Company will make full use of national policy of reducing taxes and fees to rationalize tax planning and strengthen

financial management of overseas enterprises to prevent major risks.The above business plan and business goals do not represent the listed company’s profit forecast for 2020. Whether it can be realized depends on

various factors such as changes in market conditions and the efforts of the management team which has great uncertainties. Please pay special

attention to this.

10. The Company’s receptions of research communication visit and other activities

Activity registration form for receptions of research communication visit and other activities during the report period

?Available □Not available

Reception time Reception pattern Type of reception

object

Basic situation index of

reception

October 16th 2019 Other Individual

Yantai Changyu Pioneer

Wine Co. Ltd. Investor

Relations Activation Record

Form

Times of reception 1

Number of institution reception 0

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Number of individual reception 6

Number of other objects reception 0

Whether to disclose reveal and leak

material nonpublic information

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

V. Major issues

1. The Company’s ordinary share profit distribution and increasing equity with capital

reserve

Ordinary share profit distribution policies especially promulgation implementation or

adjustment of cash dividends policies during the report period

?Available □Not available

Deliberated and passed by the 2018 Shareholders’ Meeting convened on May 17th 2019 by

the Company the Company’s 2018 annual profit distribution scheme is shown as follows:

based on total 685464000 shares (including 453460800 A shares and 232003200 B shares)

up to December 31st 2018 the Company would pay cash dividend to all shareholders

registered on the share registration day: CNY6 in cash per ten shares. This time the Company

would neither dispatch bonus shares nor increase equity with capital reserve.Total amount of shares has not changed since the disclosure of the distribution plan to the

implementation period.On June 28th 2019 the Company published the Implementation Announcement of

2018Annual Equity Distribution on China Securities Journal Securities Times and

www.cninfo.com.cn determining that the share registration day and the ex-dividend dayof A

Share was respectively on July 5th 2019 and on July 8th 2019; the last trading day the share

registration day and the ex-dividend dayof B Share was respectively on July 5th 2019 on

July 8th 2019 and on July 10th 2019.This time the dispatching objects contain all A Shareshareholders registered at China

Securities Depository and Clearing Corporation Limited Shenzhen Company after closing of

Shenzhen Stock Exchange in the afternoon of July 5th 2019 and all B Shareshareholders

registered at China Securities Depository and Clearing Corporation Limited Shenzhen

Company after closing of Shenzhen Stock Exchange in the afternoon of July 10th 2019 (the

last trading day is July 5th 2019).This dispatching has already been completed in mid-July 2019. The profit distribution

scheme implemented this time is consistent with the scheme deliberated and passed by the

shareholders’ meeting. The implementation of the profit distribution scheme for this time is

not more than two months after the shareholders' meeting passing it.Special explanation for the cash dividends policy

Whether it is in accordance with the requirements of the regulation in the Articles

of Association and the resolution of shareholders

Yes

Whether the distribution standard and proportion is clear and definite Yes

Whether the relevant decision process and mechanism is complete Yes

Whether the independent directors perform their responsibilities and play the roles Yes

Whether the small and middle shareholders have the chance to express their

addeputys and appeals as well as their lawful right and interest is in an enough

protection

Yes

Whether it is legal and transparent for the condition and process while adjusting

and amending the cash dividends policy

Yes

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The Company’s scheme (preliminary scheme) of ordinary share profit distribution and

increasing equity with capital reserve in the recent three years (including the report period)

The Company’s profit distribution scheme in 2017 is as following: Because the left amount of

legal earned surplus reserve reaches 50% of the registered capital while making profit

distribution the legal earned surplus reserve will not be drawn. Based on the Company’s

685464000 shares at total up to December 31st 2017 the Company plans to pay CNY5 in

cash as dividends for every ten shares (including tax) to the Company’s all shareholders

totaling up to CNY342732000 accounting for 33.22% of the net profit

CNY1031695056attributable to the shareholders of the parent company in the consolidated

statement the retained and undistributed profit of CNY688963056 will be reserved for the

distribution of next year.The Company’s profit distribution scheme in 2018 is as following: Because the left amount of

legal earned surplus reserve reaches 50% of registered capital while making profit distribution

the legal earned surplus reserve will not be drawn. Based on the Company’s 685464000

shares at total up to December 31st 2018 the Company plans to pay CNY6 in cash as

dividends for every ten share (including tax) to the Company’s all shareholders totaling up to

CNY411278400 accounted for 39.45% of net profits CNY1042632929 attributable to

shareholders of parent company in the consolidated statements. The retained and

undistributed profit of CNY631354529 will be reserved for distribution in the next year.The Company’s profit distribution draft scheme in 2019 is as following: Because the left

amount of legal earned surplus reserve reaches 50% of registered capital while making profit

distribution the legal earned surplus reserve will not be drawn. Based on the Company’s

685464000 shares at total up to December 31st 2019 the Company plans to pay CNY7 in

cash as dividends for every ten share (including tax) to the Company’s all shareholders

totaling up to CNY479824800 accounted for 42.47% of net profits CNY1129735749

attributable to shareholders of parent company in the consolidated statements. The retained

and undistributed profit of CNY649910949will be reserved for distribution in the next year.The Company’s ordinary share cash dividend record in recent three years (including the

report period)

Unit: CNY

Year of

distribution

Amount of cash

dividend

(including tax)

Net profit belonging

to the listed

company’s

shareholders in the

consolidated

statement of the

distribution year

Proportion in

the net profit

belonging to

the listed

company’s

shareholders

in the

consolidated

statement (%)

Amount of

cash

dividends(eg.shares

buy-back) in

other ways

Proportion

of cash

dividends

in other

ways

Amount of cash

dividend

(including other

ways)

Proportion

(including

other ways)in

the net profit

belonging to

the listed

company’s

shareholders

in the

consolidated

statement (%)

2019 479824800.00 1129735749.00 42.47% 0.00 0.00% 479824800.00 42.47%

2018 411278400.00 1042632929.00 39.45% 0.00 0.00% 411278400.00 39.45%

2017 342732000.00 1031695056.00 33.22% 0.00 0.00% 342732000.00 33.22%

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

During the report period the Company earned profit the profit of the parent company that

could be distributed to ordinary share shareholders was positive but without proposing

ordinary share cash dividend distribution preliminary scheme.

□Available ?Not available

2. The Company’s preliminary scheme of profit distribution and preliminary scheme of

increasing equity with capital reserve for the report period

?Available □Not available

Number of sending bonus shares per ten shares (share) 0

Number of dividend payout per ten shares (CNY) (including tax) 7

Number of transferring per ten shares(share) 0

The cardinal number of the capital stocks for the preliminary distribution

scheme (share) 685464000

Total cash dividend distribution（CNY）(including tax) 479824800.00

Amount of cash dividends(eg. shares buy-back)（CNY）in other ways 0.00

Total cash dividend distribution（CNY）(including other ways) 479824800

Attributable profit（CNY） 1129735749.00

The proportion of cash dividend distribution in the total profit

distribution(including other ways) 100%

Cash dividend distribution this time

If the Company’s development is in growth stage and major capital expenditure is arranged

while making profit distribution the proportion of cash dividends should takes up no less

than 20% in this profit distribution.

Detailed explanation for the preliminary scheme of profit distribution or increasing equity

with capital reserve

According to the audit result from KMPG Huazhen LLP the net profit belonging to the

parent company’s stockholders in the consolidated statement in 2019 is CNY1129735749

and the net profit of the parent company in financial statement in 2019is CNY593298849.

According to PRC accounting standard the situation for attributable profits of the

consolidation and the parent company in 2019as following:

Unit: CNY

Consolidation Parent company

Undistributed profits at the end the year 8719899359 8619977577

Including: net profits in 2019 1129735749 593298849

Undistributed profit carried forward of the

beginning of the year

8001442010 8437957128

Distribution of 2018 dividends 411278400 411278400

Withdrawal legal surplus reserve 0 0

According to regulation of 157th item in the Articles of Association which is that “the

Company can distribute dividends either in cash or by stock the profit to be distributed each

year is not less than 25% of the distributable profit realized in the same year and the

accumulated sum of profit to be distributed in cash in the last three years is not less than 30%

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Reportof the yearly average distributable profit to be realized in the last three years”.Meanwhile

considering the large amount on the capital expenditure in 2020 under the condition of not

influencing the normal production and operation the Company put forward preliminary

scheme on profit distribution in 2019 as following:

Because the left amount of legal earned surplus reserve reaches 50% of registered capital

while making profit distribution the legal earned surplus reserve will not be drawn. Based on

the Company’s 685464000 shares at total up to December 31st 2019 the Company plans to

pay CNY7 in cash as dividends for every ten share (including tax) to the Company’s all

shareholders totaling up to CNY479824800 accounted for 42.47% of net profits

CNY1129735749 attributable to shareholders of parent company in the consolidated

statements. The retained and undistributed profit of CNY649910949will be reserved for

distribution in the next year.The cash dividend distributed to shareholders of domestic listed foreign shares (B share) is

paid in Hongkong dollar converted based on the middle rate between CNY and Hongkong

dollar issued by the People’s Bank of China on the first working day after the resolution date

of 2019 shareholders’ meeting.

3. Implementation of commitments

(1) Commitments that the Company’s actual controllers shareholders related parties

acquirers and the Company and other related commitment parties have implemented

during the report period and have not implemented up to the end of the report period

?Available □Not available

Commitments Commitment party

Commitment

type

Commitment

content

Commitment

time

Commitment

period Implementation

Commitments at

share reform

Commitments made

in acquisition report

or equity changes

report

Commitments at

asset restructuring

－－－－

Commitments at the

initial public

offering or

refinancing

Yantai

Changyu

Group Co.Ltd.Solve

horizontal

competition

Non-horizontal

competition

May 18th 1997 Forever Has been performing

Yantai

Changyu

Group Co.Ltd.

Clear the use

of trademark

royalty

According to

Trademark

License

Contract the

trademark

royalty of

Changyu and

other trademarks

May 18th 1997

From May

18th 1997 to

April 4th 2019

According to

Trademark License

Contract the

trademark use fee

annually paid by the

Company to

Changyu Group shall

be mainly used

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

paid by the

Company to

Yantai Changyu

Group Co. Ltd

ever year is

mainly used for

advertising

Changyu and

other trademarks

and this contract

products by

Yantai Changyu

Group Co. Ltd.

byChangyu Group to

publicize trademarks

and contract

products. Except

2013 to 2017 during

which the

commitment was not

strictly performed

Yantai

ChangyuGroup Co.

Ltd. has been

performing its

commitment.

Equity incentive

commitments

Commitments at

middle and small

shareholders of the

Company

Yantai

Changyu

Group Co.Ltd.

Compensating

unredeemed

commitment

The

CNY23176861

5 that was not

used for

publicity of

trademarks and

contract

products as

promised will be

offset by the

four-year

trademark use

fee from 2019 to

2022. If

insufficient the

shortfall would

be filled in one

time in 2023. If

there is any

excess the

excess portion of

the trademark

use fee would be

collected from

the year with

excess

occurrence.

April 4th 2019

From April 4th

2019 to

December 31st

2023

Has been performing

Commitment under

timely

implementation or

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

not

Whether or not to

have specific

reasons of the

unimplemented

commitment and

next steps

According to t Trademark License Contract (hereafter referred to as “the Contract”)Changyu Group

promises that the trademark use fee annually paid by the Company to Changyu Group shall be mainly

used byChangyu Group to publicize trademarks and contract products. But above-mentioned ‘mainly’ is

not a specific number which is easy to cause divergence due to different understanding and leads to

problem appearance during the implementation process.

From 2013 to 2017 Changyu Group collected a total of CNY420883902 trademark use fee of which

51% was used to publicize trademarks including Changyu and contract products with amount of

CNY214650790. The amount has been used to publicize trademarks including Changyu and contract

products is CNY50025181 with a balance of CNY164625609.

In 2018 and 2019 the trademark use fee collected of 2017 and 2018 is CNY155623907 of which 51%

is used to publicize trademarks including Changyu and contract products with amount of

CNY79368193. The amount has been used to publicize trademarks including Changyu and contract

products is CNY12225187 with a balance of CNY67143006.Since 2013 the accumulated balance of Changyu Group using to publicize trademarks including

Changyu and contract products is CNY231768615.

Changyu Group promises that the four-year trademark use fee from 2019 to 2022 will be used for offset.

If insufficient the shortfall would be filled in one time in 2023. If there is any excess the excess portion

of the trademark use fee would be collected from the year with excess occurrence. If Changyu Group is

not able to implement the above-mentioned commitment owing to various reasons the Company will

timely supervise and urge Changyu Group to fulfill its commitment and request Changyu Group to raise

funds through bank loaning assets sales and equity sales etc. in order to implement the commitment.

For detailed information please refer to Announcement on Commitment Issues of Yantai Changyu Group

Co. Ltd disclosed on April 4th 2019.

(2) The Company should make a statement on the achieved original profit forecast of

assets or projects and its reason if there is profit forecast of Company’s assets or

projects and the report period is still in the profit forecast period

□Available ?Not available

4. Non-business capital occupying of listed company by controlling shareholder and its

related parties

□Available ?Not available

There are no non-business capitals occupying of listed company by controlling shareholder

and its related parties during the report period.

5. Explanation of Non-standard Audit Report given by accounting firm in the report

period from board of directors board of supervisors and independent directors (if

have)

□Available ?Not available

6. Compared with the last year’s financial report explanation for the changes of

accounting policy accounting estimation and accounting method

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

?Available □Not available

The Company has implemented the new financial standard since January 1st 2019. According

to the transition requirements of the standard the Company made retrospective adjustments

to classification and measurement (including impairment) of financial instruments that were

not derecognized on the date (January 1st 2019) of the implementation of the New Financial

Instruments Standard. This company did not adjust the comparative financial statement data

and the difference between the original book value of financial instrument and the new book

value on the date of implementation of the New Financial Instruments Standard was recorded

into retained income or other comprehensive income in early 2019.The Company prepared financial statements according to the relevant requirements of

Accounting [2019] No. 6 which only affected the format of financial statements and the

listing of some items and did not have significant effects on the Company's net asset net

profit and other related financial indexes.

For other information about changes in accounting policy please refer to Announcement on

Changes in Accounting Policy disclosed by the Company in SecuritiesTimes

ChinaSecuritiesJournal and CNINFO.

7. The situation explanation for the correction of major accounting errors which need to

be retrospect and restated during the report period

□Available ?Not available

There is no situation for the correction of major accounting errors which need to be retrospect and

restated.

8. Compared with the last year’s financial report explanation for the changes of the

consolidated statements scope

?Available □Not available

For detailed information about the changes in the scope of consolidated financial statements

in this year please refer to VI“Change in consolidation scope” in Financial Report of this

report.

9. The appointment and dismissal of certified public accountants

Currently appointed accounting firm

Domestic accounting firm name KPMG Hua Zhen LLP

Remuneration for domestic accounting firm

(CNY‘0000) 195

Consecutive period for the audit service of

domestic accounting firm 1

Name of certified public accountant for the audit

service of domestic accounting firm Ms. Wang Ting Ms. Chai Jing

Consecutive period for the certified public

accountant’s audit service of domestic

accounting firm

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Overseas accounting firm name (if have)

Remuneration for overseas accounting firm

(CNY‘0000) (if have)

Consecutive period for the audit service of

overseas accounting firm(if have)

Name of certified public accountant for the audit

service of overseas accounting firm(if have)

Consecutive period for the certified public

accountant’s audit service of overseas accounting

firm (if have)

Whether or not to employ a new accounting firm during the report period

?Yes □No

Whether or not to employ a new accounting firm during the audit period

□Yes ?No

Whether the change in accounting firm fulfils approval procedure

?Yes □No

Detailed explanation for employing a new accounting firm and the change in accounting firm

This Company did not continue employing Deloitte Hua Yong certified public accountants

co. Ltd. (special general partnership) to be the audit authority of 2019 annual financial report

and internal control and to employ KMPG Hua Zhen LLP to be the audit authority of 2019

annual financial report and internal control. The employment period is one year and the

annual audit expense (including travel expenses and total labor expenses) is CNY1.95million.To employ internal control audit accounting firms financial adviser or sponsor.

?Available □Not available

The Company employs KMPG Hua Zhen LLP to be the audit authority of 2019 annual

financial report and internal control. The employment period is one year and the annual audit

expense (including travel expenses and total labor expenses) is CNY1.95million.

10. Face of suspension and termination of listing after the disclosure of annual report

□Available ?Not available

11.Bankruptcy reorganization

□Available ?Not available

There is no bankruptcy reorganization during the report period.

12. Material litigation and arbitration

□Available ?Not available

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

There are no material litigation and arbitration during the report period.

13. Penalty and rectification

?Available □Not available

Name Type Reason Type of

investigation

and

punishment

Decision

(if have)

Disclosure

date

Disclosure index

Yantai

Changyu

Group Co.Ltd.Shareholder

holding

more than

5% of

equity

Fail to

implement

commitment

strictly from

2013 to

2017

Other April 4th

2019

Rectification Report on Related

Questions in

Decision on Administrative

Supervision Measures from

China Securities Regulatory

Commission Shandong

Regulatory Authority by

RelevantResponsiblePersonnel

Yantai

Changyu Pioneer Wine

Co. Ltd. disclosed in China

Securities Journal

Securities Timesand CNINFO

(http://www.cninfo.com.cn/)

(announcement no.:

2019-temporaty 05)

Yantai

Changyu

Pioneer

Wine Co.Ltd.Other Issues of

trademark

and patent

Other April 4th

2019

Zhou

Hongjiang

QuWeimin

Senior

executive

Zhou

Hongjiang

acting as the

general

manager at

that time

and

QuWeimin

acting as the

board

secretary at

that time fail

to be

industrious

and

responsible

Other April 4th

2019

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Explanation for rectification situation

?Available □Not available

For detailed information about rectification situation please refer to Announcement on

Commitments of Yantai Changyu Group Co. Ltd to Yantai Changyu Pioneer Wine Co. Ltd.and

Rectification Report on Related Questions in Decision on Administrative Supervision Measures

from China Securities Regulatory Commission Shandong Regulatory Authority by

RelevantResponsiblePersonnel in Yantai Changyu Pioneer Wine Co. Ltd disclosed in China

Securities Journal Securities Times and CNINFO on April 4th 2019.

14. Credit of the Company holding shareholders and actual controllers

□Available ?Not available

15. Implementation of the Company’s equity inventive plan employee stock ownership plan

or other employee incentive measures

□Available ?Not available

There are no implementation of the Company’s equity inventive plan employee stock ownership

plan and other employee incentive measures during the report period.

16. Significant related transactions

(1) Related transactions in relation to daily operations

?Available □Not available

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Related transactions in relation to acquisition and sales of assets or equity

party

Relationship Type Content Pricing

principle

Price Amount

(CNY‘0000)

Proportion

accounting

for amount

of similar

transactions

Approved

transaction

quota

(CNY‘0000)

Whether

exceed

approved

transaction

quota

Clearing

form

Available

market price

of similar

transactions

Disclosure

date

Disclosure

index

YantaiShe

nma

Packaging

Co. Ltd.

Controlled

by the same

parent

company

Purchase

and

commission

processing

Purchase

and

commission

processing

packing

materials

Agreement

pricing

Determined

by agreement

13359 15.07% 17500 No Cash No

April 20th

2019

Announcem

ent on 2019

Annual

Routine

Transaction

disclosed in

China

Securities

JournalSec

uritiesTimes

and

CNINFO in

2019

Yantai

Changyu

Group Co.Ltd.Parent

company

Licensed

use of

intangible

assets

Licensed use

of trademark

and patent

Agreement

pricing

Determined

by agreement

21865 100% 21865 No Cash No

April 4th

2019

Total - - 35224 -- 39365 - -

Details of the return of large sales No

Actual performance of the estimated total amount for

daily operations related transactions by category that will

occur during this period. (if have)

Reason for the deference between transaction price and

market reference price(if available)

Not available

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

□Available ?Not available

There are no related transactions in relation to acquisition or sales of assets or equity during the

report period.

(3) Related transactions in relation to common foreign investment

□Available ?Not available

There are no related transactions in relation to common foreign investment during the report

period.

(4) Related current credit and debt transactions

?Available □Not available

Whether or not existing non-operating related credit and debt transactions

□Yes ?No

There are no non-operating related credit and debt transactions during the report period.

(5) Other major related transactions

?Available □Not available

Disclosure website of interim report for major related transaction

Name of interim

announcement

Disclosure date of interim

announcement

Name of disclosure website for interim

announcement

Announcement

On Asset

Replacement

April 20th 2020 http://www.cninfo.com.cn

17. Major and important contracts and execution results

(1) Trusteeship contract and leasehold issues

? Trusteeship situation

□Available ?Not available

There is no trusteeship situation during the report period.

? Contract situation

?Available □Not available

Contract situation description

During the report period about the Company’s contract operation situation please see “1.Thestructure of Enterprise group” in VIII “Rights and interests of other subject” in the financialreport of this report.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Project in gains and losses for the Company to achieve more than 10% of the total profit

□Available ?Not available

There are no contract projects in gains and losses for the Company to achieve more than 10%

of the total profit during the report period.? Leasehold situation

□Available ?Not available

There is no leasehold situation during the report period.

(2) Major guarantee

?Available □Not available

? Guarantee situation

Unit: CNY’0000

External guarantee of the Company and its subsidiaries（excluding guarantee to subsidiaries）

Guarantee object

name

Disclosure date of

announcement

about guarantee

quota

Guarantee

quota

Actual date of

occurrence (date

of agreement)

Actual

guarantee

amount

Guarantee

type

Guarantee

Period

Whether or not

complete

implementation

Whether or

not belong to

related-party

guarantee

Yantai Economic

and Technological

Development

Zone Management

Council.

2016.12.22 34160 2016.12.21 34160

Mortgage;

Pledge

10years No No

Total of the external guarantee quota

approved during the report period (A1)

Total of the actual external

guarantee amount during the

report period (A2)

Total of the external guarantee quota

approved by the end of the report period

(A3)

34160

Balance of the actual

external guarantee by the

end of the report period

(A4)

34160

Guarantee situations between the Company and subsidiaries

Guarantee object

name

Disclosure date of

announcement about

guarantee quota

Guarantee

quota

Actual date of

occurrence (date

of agreement)

Actual

guarantee

amount

Guarantee

type

Guarantee

Period

Whether or not

complete

implementation

Whether or

not belong to

related-party

guarantee

Sales &

Marketing

Company of

Yantai Changyu

Pioneer Wine

2016.10.31 10000 2016.11.05 10000

Joint liability

assurance

2 years No Yes

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Company Limited

Yantai Changyu

Pioneer Wine

Company Limited

2016.12.22 11984 2016.12.21 11984

Mortgage;

Pledge

10 years No Yes

Yantai Changyu

Wine Research

and Development

Company Limited

2016.12.22 72176 2016.12.21 72176

Joint

liability

assurance;M

ortgage

10 years No Yes

Kilikanoon Estate

Pty Ltd

2017.12.12 7100 2018.01.09 7100

Joint

liability

assurance

1 year No Yes

Total of the guarantee quota approved to

subsidiaries during the report period

(B1)

Total of the actual guarantee

amount for subsidiaries

during the report period

(B2)

Total of the guarantee quota approved to

subsidiaries by the end of the report

period (B3)

89276

Balance of the actual

guarantee for subsidiaries by

the end of the report period

(B4)

89276

Guarantee situations between subsidiaries

Guarantee object

name

Disclosure date of

announcement

about guarantee

quota

Guarantee

quota

Actual date of

occurrence (date

of agreement)

Actual

guarantee

amount

Guarantee

type

Guarantee

Period

Whether or not

complete

implementation

Whether or

not belong to

related-party

guarantee

Hacienda Y

Vinedos Marques

Del Atrio. SL

2016.04.29 3502 2015.10.08 3502 Mortgage; Long term No No

Indomita Wine

Company Chile

SpA

2018.04.23 1986 2018.04.20 1986 Mortgage; Long term No No

SocieteCivileArgr

icole Du Chateau

De Mirefleurs

854 2019.07.30 854 Mortgage; Long term No No

SCEA Chateau

Liversan

5122 2019.07.30 5122 Mortgage; Long term No No

Total of the guarantee quota approved

to subsidiaries during the report period

(C1)

5976

Total of the actual guarantee

amount for subsidiaries

during the report period

(C2)

5976

Total of the guarantee quota approved

to subsidiaries by the end of the report

11464

Balance of the actual

guarantee for subsidiaries by

11464

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

period (C3) the end of the report period

(C4)

Total guarantee amount of the Company（Total of above three major items）

Total of the approved guarantee quota

during the report period（A1+B1+C1）

5976

Total of the actual guarantee

amount during the report

period（A2+B2+C2）

5976

Total of the approved guarantee quota

by the end of the report period

（A3+B3+C3）

134900

Balance of the actual

guarantee by the end of the

report period（A4+B4+C4）

134900

The proportion of actual total guarantee amount (A4+B4+C4)

accounting for the Company’s net asset

13.09%

Among :

The amount of guarantee for shareholders actual controllers and their related

parties（D）

The amount of debt guarantee for the guaranteed objects whose asset-liability

ratio is more than 70% directly or indirectly（E）

Total amount of guarantee of the part that exceeds 50% of net assets（F） 0

Total amount of the above-mentioned three items（D+E+F） 0

Explanation for undue guarantees that have happened warranty liability or

may take joint payback liabilities during the report period (if have)

Explanation for violating due process to provide external guarantee (if have) No

Specific explanation on adopting complex guarantee type

No.? Illegal external guarantee

□Available ?Not available

There is no illegal guarantee situation during the report period.

(3) Entrusting others to manage cash assets

? Financial management entrustment

□Available ?Not available

There is no financial management entrustment during the report period.? Loan entrustment

□Available ?Not available

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

There is no loan entrustment during the report period.

(4) Other important contracts

□Available ?Not available

There are no other important contracts during the report period.

18. Social Responsibility

(1) Social responsibility performance

Please refer to2019 Annual Social Responsibility Report disclosed on Securities Times China

Securities Newspaperandwww.cninfo.com.cn by the Company.

(2) Targeted poverty alleviation social responsibility performance

①Targeted poverty plan

The Company has reached the mutual agreementwithZhuqiao Town Party Committee

Government and Da Langya Village Committee to establish professional grapecooperative.Itplans to help to conductthe construction of 100mu of vineyard per year from 2019 to 2021

with a total area of 300 m and also to sign grape purchase contract in order to help local

villagers to get rid of poverty and become better off.②Summary of annual targeted poverty

Related leaders of the Company visited the village held meetings with local leaders and

personnel receiving assistance and worked on the spot to discuss and accelerate assistance

measures. 3 motor-pumped wells have been digged to assist the target personnel in the

construction of grape bases.③ Targeted poverty effectiveness

At present the Company has completed the preliminary preparations for targeted poverty

alleviation in Dalangya Village and officially started the implementation of poverty

alleviation work.④ Subsequent targeted poverty plan

(3) Environmental protection related situation

Whether the listed company and its subsidiaries belong to major polluterspublished by the

environmental protection department

Yes

Name

compan

Name of

major

pollutants

Mod

e of

disch

Qua

ntity

Distributi

situation

Discha

rge

concen

Implemente

dpollution

discharge

Tota

volu

Tota

appr

Con

ditio

n of

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

y or

subsidia

and

particular

pollutants

arge disc

harg

outle

discharge

outlet

tration standard me

disc

harg

oved

volu

disc

harg

exce

ssive

disc

harg

Liaoning

Changyu

Icewine

Chateau

Co. Ltd.

Organize

d exhaust

gas

inorganiz

edexhaust

gas

waster

water

noise

Disc

harg

outle

t of

boile

chim

ney

and

disch

arge

outle

t of

facto

wast

wate

2 Confirme

d in line

with

national

standard

Graphica

l Signs

for

Environm

ental

Protectio

(GB1556

2.1-1995)

(GB1556

2.2-1995)

Meetin

g the

nation

standa

rds

Emission

Standard

for Air

Pollutants

Boiler(GB1

3271-2014)

Emission

Standard

for Odor

Pollutants

(GB14554-

93) 4a in

Class 2 of

Emission

Standard

for

Environmen

tal Noise at

the

Boundary of

Industrial

Enterprises

(GB12348-

2008)

Comprehen

sive

Wastewater

Discharge

Standard of

Liaoning

Province

(DB21/1627

-2008)

35m

3/d

120

m3/

Construction and operation of pollution prevention facilities

The exhaust gas SO2 and NOX produced by this company's boiler are discharged through

ceramic tube dust removers and bag dust removers. A wastewater treatment station has been

constructed. The wastewater treatment process adopts thetreatment process of

hydrolysis-aerobiont. Production wastewater and domestic sewage are treated by the in-plant

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

wastewater treatment station and then discharged into thewastewater treatment

plantinBeidianzixiang Town.

Environmental impact assessment of construction projects and other environmental

protection administrative permits

It has been approved in the Huanhuanjianzi (2016) No.24 issued by the Environmental

Protection Bureau of Huanren Manchu Autonomous County.

Emergency plan for emergentenvironmentalincident

The Company has formulated a comprehensive emergency plan for

emergentenvironmentalincident.

Environmental self-monitoring program

The Company has formulated a complete environmental self-monitoring program.Other environmental information that should be made public

Other related environmental information

19. Other Major issues

□Available ?Not available

There are no other major issues need to be explained during the report period.

20. Major issues of Company’s subsidiaries

□Available ?Not available

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

VI. Changes in Shares and the Shareholders’ Situation

1. Changes in shares

(1) Changes in shares

Unit: share

Amount before this change Change (+ -) Amount after this change

Amount

Percentage

Allot new

Distribute

bonus share

Transfer other capital

to share capital

others Sub total Amount

Percentage

1.Shares without trading

limited condition

685464000 100.00% 685464000 100.00%

(1). A shares 453460800 66.15% 453460800 66.15%

(2). B shares 232003200 33.85% 232003200 33.85%

2. Total shares 685464000 100.00% 685464000 100.00%

Cause of share change

□Available ?Not available

Approval of share change

□Available ?Not available

Transfer ownership of changed shares

□Available ?Not available

Implementation progress of share buy-back

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

□Available ?Not available

Implementation progress of reducing holding buy-back share through the way of centralized bidding

□Available ?Not available

The influence of share change on the financial indicators such as basic earnings per share dilutedearnings per share of the latest year and the

latest period net asset per share belonging to the Company’s common shareholders etc.

□Available ?Not available

Other contents the Company thinks necessary or securities regulatory departments ask to make public.

□Available ?Not available

(2) Changes in restricted shares

□Available ?Not available

2. Securities issuance and listing situation

(1) Securities issuance (exclude preferred share) during report period

□Available ?Not available

(2) Explanation of change in Company’s total shares and shareholding structure and change in Company’s assets and liability structure

□Available ?Not available

(3) Current employee shares

□Available ?Not available

3. Situation for shareholders and the actual controllers

(1) The number of shareholders of the Company and the shareholdings

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Unit：share

Total shareholders in

the report period

43856

Total number of shareholders by

the end of last month before the

disclosure day of the annual report

45626

Total number of preferred shareholder

recovering voting power by the end of

report period (if have) (see note 8)

Total number of preferred shareholder

recovering voting power by the end of

last month before the disclosure day of

the annual report (if have) (see note 8)

Shareholders holding more than 5% or the top 10 shareholders holding situation

Name of Shareholders Character of shareholders

Percentage

(%)

Shares held until

the end of the

report period

Changes during

the report period

Number of

restricted

Number of

unrestricted

Pledged or frozen

Share status Amount

YANTAI CHANGYU GROUP CO.

LTD.

Domestic non-state legal

person

50.40% 345473856 0 345473856

GAOLING FUND L.P. Foreign legal person 3.08% 21090219 0 21090219

CHINA SECURITIES FINANCE CORP State legal person 2.25% 15440794 0 15440794

BBH BOS S/A FIDELITY FD - CHINA

FOCUS FD

Foreign legal person 2.22% 15241826 0 15241826

SHENWAN HONGYUAN

SECURITIES(HONGKONG) LIMITED

Foreign legal person

1.20% 8243333 -104330 8243333

FIDELITY PURITAN TRUST:

FIDELITY SERIES INTRINSIC

OPPORTUNITIES FUND

Foreign legal person 0.93% 6350762 250000 6350762

GUOTAI JUNAN

SECURITIES(HONGKONG) LIMITED

Foreign legal person 0.70% 4810345 -233162 4810345

CENTRAL HUIJIN ASSET

MANAGEMENT LIMITED

State legal person 0.69% 4761200 0 4761200

VANGUARD EMERGING MARKETS

STOCK INDEX FUND

Foreign legal person 0.55% 3788487 0 3788487

FIDELITY CHINA SPECIAL Foreign legal person 0.55% 3779202 0 3779202

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

SITUATIONS PLC

Strategic investors or legal result of the placement of new shares to

become a top 10 shareholders(if have)(see note 3)

The explanation for the associated relationship and accordant action

Among the top 10 shareholders Yantai Changyu Group Company Limited has no associated relationship or accordant

action relationship with the other 9 listed shareholders while the relationship among the other shareholders is unknown.The top 10 shareholders with shares without trading limited condition

Name of Shareholders Number of shares without trading limited condition held until the end of the year

Type of share

Type of share Amount

YANTAI CHANGYU GROUP CO. LTD. 345473856 A 345473856

GAOLING FUNDL.P. 21090219 B 21090219

CHINA SECURITIES FINANCE CORP 15440794 A 15440794

BBH BOS S/A FIDELITY FD - CHINA FOCUS FD 15241826 B 15241826

SHENWAN HONGYUAN SECURITIES(HONGKONG) LIMITED 8243333 B 8243333

FIDELITY PURITAN TRUST: FIDELITY SERIES INTRINSIC

OPPORTUNITIES FUND

6350762 B 6350762

GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 4810345 B 4810345

CENTRAL HUIJIN ASSET MANAGEMENT LIMITED 4761200 A 4761200

VANGUARD EMERGING MARKETS STOCK INDEX FUND 3788487 B 3788487

FIDELITY CHINA SPECIAL SITUATIONS PLC 3779202 B 3779202

The explanation for the associated relationship and accordant action of

the top 10 shareholders with unrestricted shares the the associated

relationship and accordant action between the top 10 shareholders with

unrestricted shares and the top 10 shareholders

Among the top 10 shareholders Yantai Changyu Group Company Limited has no associated relationship or accordant

action relationship with the other 9 listed shareholders and the relationship among the other shareholders is unknown.

Explanation for the top 10 shareholders who involved in financing

activities and stock trading business (if have)(see note 4)

The top 10 shareholders do not involve in financing activities and stock trade business.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Whether or not the Company’s top 10 common shareholders and shareholders withshares without trading limited conditiontake agreed

repurchase trading during the report period

□Yes ?No

There is no agreed repurchase trading taken by the Company’s top 10 common shareholders and shareholders withshares without trading limited

conditionduring the report period.

(2) Situation for the controlling shareholders of the Company

Property of holding shareholders: Property of holding main body undefined

Type of holding shareholders: Legal representative

Name of controlling shareholder Legal representative Establishment date Organization code Main business

Yantai Changyu Group Co. Ltd. Zhou Hongjiang 1997.04.27 913706002656458244

Production and distribution of wine healthy liquor distilled liquor

and non-alcohol beverages planting of agricultural products and

export business under the scope of permission.

Equity situation for the other domestic listed companies controlled

or shared by the controlling shareholders during the report period

No.

Changes in the controlling shareholder during the report period

□Available ?Not available

There are no changes in the controlling shareholder during the report period.

(3) Situation for the actual controllers of the Company

Property of actual controllers: domestic other institutions; foreign other institutions

Type of actual controllers: Legal representative

Name of actual controllers Legal representative Establishment date Organization code Main business

Yantai Yuhua Investment & Development JiangHua 2004.10.28 76779294－7 Under state permission property investment tenancy of machine and facility

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Co. Ltd. wholesale and retail of construction material chemical products (chemical hazard

products excluded) hardware and electronical products grape plantation.ILLVA Saronno Holding S.p.a. Augusto Reina 1984.07.25 －

Directly or indirectly conduct the production and distribution of food products

(alcoholic products included) as well as industrial commercial financial and service

activities of any other kinds through joint-stock companies and organizations.International Finance Corporation

Philippe LE

HOUEROU

1956.07.25 －

International Finance Corporation is one of the members of World Bank mainly

dedicated to investment in private sectors of developing countries while providing

technical support and consultation service. The corporation is a multilateral financial

institution that ranks first in the world in terms of providing capital stock and loans to

developing countries. Its purpose is to promote sustainable investments of private

sectors of developing countries in order to alleviate poverty and improve people’s life.Yantai Guofeng Investment Holdings

Group Co. Ltd.Rong Feng 2009.02.12 00426068-6

Operating management of state-owned property right (stock right) authorized by

State-owned Assets Supervision and Administration Commission of Yantai Municipal

Government; Financing investment and operating management of government

projects such as strategic investment and industrial investment and so on; Capital

operation (including acquisition reintegration and transfer etc) of state-owned

property right and state-owned stock right within the scope of authorization; Venture

capital investment business; Agency of venture capital investment business of other

venture investment enterprises or individuals; Participation in the establishment of

venture capital investment enterprises and venture capital investment management

consultant institutions; Investment and financing service business; Investment and

financing consultant business; Other business authorized by State-owned Assets

Supervision and Administration Commission of Yantai Municipal

Government.(Projects need to be authorized in accordance with the law could carry out

business activities only after the approval of relevant departments )

Equity situation for the other domestic

listed companies controlled by the actual

controller during the report period

Yantai Yuhua Investment & Development Co. Ltd. did not control the equity of other domestic and foreign listed companies except the Company

during the reporting period; It is not clear that other actual controllers control the equity of other domestic and foreign listed companies other than the

Company during the reporting period.

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Changes of the actual controllers during the report period

□Available ?Not available

There are no changes in actual controllers during the report period.Introduction for property right and control relations between the Company and its actual controllers

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Actual controller controls the Company through a trust or other asset management ways

□Available ?Not available

(4) Other institutional shareholders holding more than 10% shares

□Available ?Not available

(5) Shares reduction situations of holding shareholders actual controllers restructuring side and other commitment subjects

□Available ?Not available

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

VII. Related Situation of Preferred Shares

□Available ?Not available

There are no preferred shares during the report period.VIII. Related Situation of Convertible Corporate Bonds

□Available ?Not available

There are no convertible corporate bonds during the report period.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

IX. Situation for Directors Supervisors Senior Executives and Staff

1. Changes in shareholdings of directors supervisors and senior executives

Name Post Status Gender Age

Beginning date

of tenure

Ending date of

tenure

Shares held at

the beginning of

the period

Increased

shares during

the period

Decreased

shares during

the period

Other

changes of

shares held

Shares held at

the end of the

period

Zhou Hongjiang Chairman Incumbent M 55 2002.05.20 2022.05.18 0 0 0 0 0

Sun Liqiang Director Outgoing M 72 1997.09.18 2019.05.17 0 0 0 0 0

Leng Bin Director Incumbent M 57 2000.08.22 2022.05.18 0 0 0 0 0

Sun Jian Director Incumbent M 53 2019.05.17 2022.05.18 0 0 0 0 0

Li Jiming Director Incumbent M 53 2019.05.17 2022.05.18 0 0 0 0 0

Chen Dianxin Director Incumbent F 53 2019.05.17 2022.05.18 0 0 0 0 0

Qu Weimin Director Outgoing M 62 1997.09.18 2019.05.17 0 0 0 0 0

Zhang Ming Director Outgoing M 46 2016.05.26 2019.05.17 0 0 0 0 0

Augusto Reina Director Incumbent M 79 2006.12.07 2020.02.20 0 0 0 0 0

Aldino Marzorati Director Incumbent M 67 2006.12.07 2020.05.18 0 0 0 0 0

Appignani

Antonio

Director Outgoing M 81 2006.12.07 2019.05.17 0 0 0 0 0

Enrico Sivieri Director Incumbent M 51 2019.05.17 2022.05.18 0 0 0 0 0

Wei Anning Director Incumbent M 56 2017.06.15 2022.05.18 0 0 0 0 0

Wang Zhuquan Independent director Incumbent M 54 2014.05.23 2022.05.18 0 0 0 0 0

Wang Shigang Independent director Outgoing M 54 2011.05.10 2019.05.17 0 0 0 0 0

Luo Fei Independent director Incumbent M 67 2016.09.23 2022.05.18 0 0 0 0 0

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Duan Changqing Independent director Incumbent M 55 2019.05.17 2022.05.18 0 0 0 0 0

Liu Huirong Independent director Incumbent F 56 2019.05.17 2022.05.18 0 0 0 0 0

Liu Qinglin Independent director Incumbent M 56 2019.07.02 2022.05.18 0 0 0 0 0

Liu Yan Independent director Outgoing F 46 2016.09.23 2019.05.17 0 0 0 0 0

Guo Guoqing Independent director Outgoing M 57 2018.12.04 2019.07.02 0 0 0 0 0

Kong Qingkun

Chairman of the Board

of Supervisors

Incumbent M 47 2013.05.14. 2022.05.18 0 0 0 0 0

Zhang Lanlan Supervisor Incumbent F 50 2013.05.14. 2020.05.18 0 0 0 0 0

Liu Zhijun Supervisor Incumbent M 39 2016.05.26 2020.05.18 0 0 0 0 0

Sun Jian General manager Incumbent M 53 2018.01.10 2022.05.18 0 0 0 0 0

Li Jiming Chief engineer Outgoing M 53 2001.09.14 2019.05.28 0 0 0 0 0

Li Jiming Deputy general manager Incumbent M 53 2019.05.28 2022.05.29 0 0 0 0 0

Jiang Hua Deputy general manager Incumbent M 56 2001.09.14 2022.05.29 0 0 0 0 0

Peng Bin Deputy general manager Incumbent M 53 2018.01.10 2022.05.29 0 0 0 0 0

Qu Weimin Board secretary Outgoing M 62 1997.09.18 2019.05.28 0 0 0 0 0

Jiang Jianxun Chief financial officer Outgoing M 53 2018.01.10 2019.05.27 0 0 0 0 0

Jiang Jianxun

Deputy general manager

and Board secretary

Incumbent M 53 2019.05.28 2022.05.29 0 0 0 0 0

Pan Jianfu

General manager

assistant

Incumbent M 44 2018.04.19 2022.05.29 0 0 0 0 0

Liu Shilu

General manager

assistant

Incumbent M 45 2018.04.19 2022.05.29 0 0 0 0 0

Xiao Zhenbo

General manager

assistant

Incumbent M 43 2018.04.19 2022.05.29 0 0 0 0 0

Total -- -- -- -- -- -- 0 0 0 0 0

2. Changes in the Company’s directors supervisors and senior executives

?Available □Not available

Name Position Type Date Reason

Sun Liqiang Director Outgoing due to the expiry of term 2019.05.17 The term of office has expired and will no longer be appointed as a

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

director

Qu Weimin Director Outgoing due to the expiry of term 2019.05.17 The term of office has expired and will no longer be appointed as a

director

Zhang Ming Director Outgoing due to the expiry of term 2019.05.17 The term of office has expired and will no longer be appointed as a

director

Appignani Antonio Director Outgoing due to the expiry of term 2019.05.17 The term of office has expired and will no longer be appointed as a

director

Wang Shigang Independent director Outgoing due to the expiry of term 2019.05.17 The term of office has expired and will no longer be appointed as an

independent director

Liu Yan Independent director Outgoing due to the expiry of term 2019.05.17 The term of office has expired and will no longer be appointed as an

independent director

GuoGuoqing Independent director Outgoing 2019.07.02 Voluntary resignation prior to expiration of term

Li Jiming Chief engineer Outgoing due to the expiry of term 2019.05.28 The term of office has expired and will no longer be appointed as a

chief engineer

Qu Weimin Board secretary Outgoing due to the expiry of term 2019.05.28 The term of office has expired and will no longer be appointed as a

board secretary

Jiang Jianxun Chief financial officer Outgoing due to the expiry of term 2019.05.28 The term of office has expired and will no longer be appointed as a

chief financial officer

Sun Jian Director Appointment 2019.05.17 Be appointed as a director of the Company

Li Jiming Director Appointment 2019.05.17 Be appointed as a director of the Company

Chen Dianxin Director Appointment 2019.05.17 Be appointed as a director of the Company

Enrico Sivieri Director Appointment 2019.05.17 Be appointed as a director of the Company

DuanChangqing Independent director Appointment 2019.05.17 Be appointed as an independent director of the Company

Liu Huirong Independent director Appointment 2019.05.17 Be appointed as an independent director of the Company

Liu Qinglin Independent director Appointment 2019.07.02 Be appointed as an independent director of the Company

Li Jiming Deputy general manager Appointment 2019.05.28 Be appointed as a deputy general manager of the Company

Jiang Jianxun

Deputy general manager and

Board secretary

Appointment 2019.05.28

Be appointed as a deputy general manager of the Company and board

secretary

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

3. Situation for work experience

The professional background main work experiences and present positions of the Company’s

directors supervisors and senior executives

(1) Members of Board of Directors

Mr. ZhouHongjiang male 55 Chinese with doctoral degree senior engineer used to be

the General Manager of Yantai Changyu Pioneer Wine Sales Co. Ltd.the DeputyGeneral

Manager the General Manager and the Deputy Chairman of Yantai Changyu Pioneer Wine

Co. Ltd.. He is incumbent asthe representative of the 13thNational People’s Congress the

Chairman of Yantai Changyu Group Co. Ltd.and the board director and the Chairman of the

Company.

Mr. Leng Bin male 57 Chinese with master degree senior accountantused to be

theDeputy Section Chief and the Section Chief of Yantai Audit Bureauthe board director and

the Chief Accountant of Yantai Changyu Group Co. Ltd. and the board director and the

Deputy General Manager of the Company. He is incumbent as the board director of the

Group Company and the Company and with an additional post of the General Manager of

the Group Company.Mr. Sun Jianmale 53Chinese MBA used to be the Deputy General Manager of the

Company. He is incumbent as the board director and the General Manager of the Company

and with an additional post of the board director of the Group Company.Mr. Li Jiming male 53Chinese with doctoral degree application researcher used to be the

Chief Engineer of the Company. He is incumbent as the board director and the Deputy

General Manager of the Company and with an additional post of the board director of the

Group Company.Mrs. Chen Dianxin female 53Chinese with master degree of the Party School; from July

1985 to September 2013 she successively served as staff of Yantai Chemical Purchasing and

Supply Station Yantai Bureau of Commerce for secondment staff of Yantai Stated-owned

Assets Assessment Center the Deputy Director of Yantai Stated-owned Assets Assessment

Center the Deputy Section Chief of Assets Assessment Management Department in Yantai

State-owned Assets Bureau the Deputy Section Chief of Assets Assessment Management

Department in Yantai State-owned Assets Supervision and Administration Commission

full-time Deputy Secretary of Party branch in Yantai State-owned Assets Supervision and

Administration Commission the Section Chief of Property Management Department in

Yantai State-owned Assets Supervision and Administration Commission. From September

2013 to February 2014 she served as the Director of retired carders work office and the

Section Chief of Property Management Department in Yantai State-owned Assets

Supervision and Administration Commission. From February 2014 to October 2018 she

served as the Director of retired carders work office in Yantai State-owned Assets

Supervision and Administration Commission (During the period she successively and

concurrently served as the Director of Yantai Moon Group Co. Ltd. and Yantai Moon Co.Ltd. director of Yantai Tayho Advanced Materials Group Co.Ltd. the Chairman of Yantai

Guofeng Investment Holding Group Co. Ltd. the Chairman and the General Manager of

Yantai Guosheng Investment Holding Co. Ltd. the Chairman of Yantai Guoxin Investment

Holding Co. Ltd. the Vice Chairman and the Director of Yantai CIMC Raffles Offshore Co.Ltd. the Vice chairman and the Director of Yantai CIMC Raffles Shipyard Co. Ltd. and the

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Director of Yantai Guoyu Lease Finance Co. Ltd. and so on). Since October 2018 she has

been served as the Deputy Secretary of Party branch and the General Manager of Yantai

Guofeng Investment Holding Group Co. Ltd. and the current board director of the Company.Mr. Augusto Reina male 79 by the end of 2019 Italian died on February 19th2020 (local

time) (Beijing time: February 20th2020) died as theChief Executive Officer of several

companies including Illva Saronno Holding S.p.A. and Illva Saronno Investment S.R.L. the

member of the board of directors of Barberini S.p.a. the director of Federvini (Italian

Alcohols Production and Export Association) the director of Instituto Del Liquore (Wine

Research Institute) the director of Assovini (Sicily Viniculture and Wine Production

Association) and the board director of the Changyu Group Co. Ltd. and the Company.

Mr. Aldino Marzorati male 67 Italian with bachelor degree servescurrently as the

General Manager of Illva Saronno Holding S.p.A the member of the board of directors of

some branches under the Group Company and the board director of Changyu Group Co. Ltd.and the Company.Mr. Enrico Sivieri male 51 Italian with bachelor degree served successively as the

financial controller of ARNEG S.p.a. the commercial analyst of SPILLERS FOODS

ITALIA S.p.a. the trade controller of Nestle’ Purina Petcare Europe European marketing &

sales controller of Nestle’ Purina Petcare Europe the European supply chain controller of

Nestle’ Purina Petcare Europe the Southern Europe regional controller of Nestle’ Purina

Petcare Europe and theDirector of group financial controlling of IllvaSaronno Holding S.p.A.and currently serving as a member of the board of directors for Royal Oak Distillery Ltd. and

theGeneral Manager of Illva Saronno Holding S.p.A. and the board director of the Company.Mr. Wei Anning male Chinese 56 with doctoral degree ever served as Agricultural

Economist of the World Bank the Director of North East Asia Food & Agribusiness

Research of the Rabobank China CEO of the Fortis Bank Belgium the Executive Deputy

President of the New Hope Group (Sichuan) the President of Shandong Liuhe Group the

Director of Xinjiang Kuntai Group Co. Ltd. the Director of Hangzhou United Rural

Commercial Bank Co. Ltd theChairman of the Shandong Chinwhiz Group. He is good at

corporate governance enterprise development strategy and equity investments. Now he is

serving as the Executive Director and the General Manager of Shanghai Gueva Fund

Management Co. Ltd Co. Ltd the Executive Director of both Ningxia Gueva Fund

Management Co. Ltd and Ningbo Gueva Fund Management Co. Ltd the independent

director of Dachan Food (Asia) Co. Ltd Orient Securities Co. Ltd and Fortune SG Fund

Management Co. Ltd..He is serving as the board director of the Group Company and the

Company.

Mr. Luo Fei male 67 Chinese with doctoral degree visiting scholar of University of

Toronto doctoral supervisors Government Special Allowance expert first batch of

trans-century subject (academic) leading personals of Financial Department. He successively

served as the Dean of Accounting Institute in Zhongnan University of Economics and the

Dean of Accounting Institute in Zhongnan University of Economics and Law. He focuses on

the study of Financial Accounting Cost Accounting Financial Management and so on. He

has worked in companies for many years and has practical working experience with

companies. Now he is serving as independent director of the Company.Mr. Wang Zhuquan male 54 Chinese with doctoral degree of Management

(Accountancy) first batch of national accounting academic leading personals of Financial

Department the entrant of accountant master cultivation project of Financial Department

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

outstanding teacher of Shandong province Government Special Allowance expert acted as

independent director of the Company from 13th May 2010 to 12th May 2013. Now he is a

professor and a doctoral supervisor of the Ocean University of China as well as the current

independent director of the Company and the some listed companies which could be

exemplified as Qingdao Double-Star Co. Ltd.Mr. DuanChangqingmale 55Chinese with doctoral degree professor doctoral and

master’s supervisor and the national senior winemaker and senior wine taster.He currently

serves as the chief scientist of national grape industry technology system andthe Director of

Wine Processing Key Laboratory of Ministry of Agriculture and Rural Affairs. Meanwhile

he holds concurrent posts of the Director of China Wine Technology Committee the Director

of China Wine and Fruit Wine Expert Committee the Executive President and the Secretary

General of Grape and Wine Branch of Chinese Horticultural Society and the Vice President

of China Agricultural Society Grape Branch. Hismajor research fields are the basic

theoretical research and related high and new technology research and development as well

as application promotion work in the direction of suitability between ecology in producing

area and grape variety and liquor variety evolvement mechanism and directional brewing of

wine flavor formation grape fruit flavor metabolism regulation and product flavor quality

evaluation and so on. He is a current independent director of the Company.Mrs. Liu Huirong female 56 Chinese with doctoral degree the former Deputy Dean and

Dean of the Institute of Political Science and Law of Ocean University of China. She used to

serve as an independent director of Sailun Group Co. Ltd. Longda Meatand Sacred Sun Co.Ltd. and Shandong Sacred Sun Power Sources Co. Ltd.. Currently she is a second-level

professor and doctoral supervisor of Ocean University of China and with additional post as a

researcher of the “Belt and Road Initiative” Judicial Research Center of the Supreme

People’s Court an expert at the Supreme People’s Court for foreign-related commercial and

maritime action expert database the Deputy Chairman of the sixth Shandong Law Society

and the Deputy Director of the Academic Committee and the Chairman of the Qingdao

Law-based Government Research Institute. Her research fields are International Law and

Legislative Science. She has won the title of Shandong Top Ten Outstanding Young and

Middle-aged Jurists the third prize of Excellent Social Science Achievement of the Ministry

of Education the third prize of Shandong Excellent Social Science Achievement the second

prize of Shandong Excellent Philosophy and Social Science Achievement the first prize of

Excellent Achievement of Shandong Education Department and the Top Talent in Qingdao

City. She is a current independent director of the Company.

Mr. Liu Qinglin male 56 doctoral degree of Management Chinese no overseas permanent

residence. He is currently a professor and doctoral supervisor of Economics Faculty of

Shandong University the Director of Institute for World Economy Studies of Shandong

University the Executive Deputy President of Shandong Institute of Development of

Shandong University a member of a council of China Society of World Economics an

executive member of a council of The Association for Canadian Studies in Chinaand

Shandong Youth Scholars Association a member of a council of Shandong Association for

Business Economics and Shandong Price Association. He currently serves as an independent

director of Shandong XinnengTaishan Power Generation Co. Ltd. an independent director

of WeihaiHuadong Automation Co. Ltd. and an independent director of the Company.

(2) Members of board of supervisors

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Mr.Kong Qingkun male 47 Chinese MBA and economist successively served as a section

member of production department in the healthy liquor branch office a clerk and the

DeputyDirector and the Director of general manager office.

Ms. Zhang Lanlan female 50 bachelor degree and economist successively served as the

Deputy Manager of the import and export branch of the Company and the Manager of import

department of the Company. She now is the Director of board of directors’ office.Mr. Liu Zhijun male 39 Chinese bachelor degree worked in foreign fund department of

Economy and Trade Bureau in LongkouEconomic Development Zone served as a news

section member of propaganda department in Longkou Municipal Committee a member of

propaganda and mass work section a member of planning section the Deputy Director

Member of programming development and enterprise distribution section the Deputy

Director Member and the Deputy Chief of programming development section. He now is a

supervisor of the Company.

(3) Other senior executives

Mr. Jiang Hua male 56 Chinese with master degree senior engineer has been serving as

the DeputyGeneral Manager of the Company since 14th September 2001.Mr. Peng Bin male 53 MBA senior engineer ever successively served as the Deputy

Director of wine-blending workshop and the Director of wine-storage workshop of Brandy

Company under Yantai Changyu Group Co. Ltd. the DepartmentChief of Technical

Transformation Department and the Minister of Investment and Development Department as

well as theDeputy General Manager of Yantai Changyu Group Co. Ltd. and the General

Manager Assistant of Yantai ChangyuGroup Co. Ltd.. He serves as the Deputy General

Manager of the Company.Mr. Jiang Jianxun male 53 Chinese MBA and accountant served as the Financial Manager

of the Company from 20th May 2002 to 10th January2018. He serves as the Deputy General

Manager and Board Secretary of the Company.Mr. PanJianfumale Han ethnic Chinese 44 MBA and senior economist used to serve as

the General Manager of the Jiangxi Branch of the Company the General Manager of the

Shanghai marketing management company and the General Manager of Beijing marketing

management center. Currently he is the General Manager Assistant of the Company and the

General Manager of Beijing marketing management center and Beijing Chateau AFIP.Mr. Liu Shilumale Han ethnic Chinese 45 master degree used to be the Manager of

Tianjin branch of the Company the Competence Manager of North China market the

General Manger of Beijing marketing management company the General Manager of

Guangdong marketing management center and the General Manager of e-commerce branch

of the Company. Currently he serves as the General Manager Assistance of the Company

and the General Manager of Yantai Changyu Pioneer Wine Sales Co. Ltd..Mr. Xiao Zhenbo male Han ethnic Chinese 43 MBA served as the Deputy Manager of the

Company’s market strategy development center the General Manager of Shandong

marketing management company and Yantai Changyu liquor company. He currently serves

as the General Manager Assistant of the Company and the General Manager of Zhejiang

marketing management company.Post in the shareholder’s company

?Available □Not available

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Name Shareholder’s Company Post

Beginning date

of the post

Ending date

of the post

Paid by shareholder’s

company or not

Zhou Hongjiang Yantai Changyu Group Co. Ltd. Chairman 2018.01.10 2022.01.11 No

Leng Bin Yantai Changyu Group Co. Ltd. Director 2018.01.10 2022.01.11 Yes

Leng Bin Yantai Changyu Group Co. Ltd. General manager 2018.01.10 2022.01.11 Yes

Sun Jian Yantai Changyu Group Co. Ltd. Director 2018.01.10 2022.01.11 No

Li Jiming Yantai Changyu Group Co. Ltd. Director 2018.01.10 2022.01.11 No

Chen Dianxin Yantai Changyu Group Co. Ltd. Director 2018.11.15 2022.01.11 No

Augusto Reina Yantai Changyu Group Co. Ltd. Director 2018.01.10 2022.01.11 No

Aldino Marzorati Yantai Changyu Group Co. Ltd. Director 2018.01.10 2022.01.11 No

Enrico Sivieri Yantai Changyu Group Co. Ltd. Director 2018.01.10 2022.01.11 No

Stefano Battioni Yantai Changyu Group Co. Ltd. Director 2020.04.09 2022.01.11 No

Wei Anning Yantai Changyu Group Co. Ltd. Director 2018.01.10 2022.01.11 No

Explanation for the post in

the shareholder’s company

No.Post at other companies

□Available ?Not available

Disciplinary actions taken by securities regulators in recent 3 years to the Company’s

directors supervisors and senior management both on the job and left during the report

period

?Available □Not Available

During the report period the Shandong Regulatory Bureau of China Securities Regulatory

Commission issued a “Decision on Measures to Issue Warning Letters to Mr. ZhouHongjiang and Mr. Qu Weimin” but it did not impose administrative penalty on Mr. Zhou

Hongjiang and Mr. Qu Weimin.

4. Salary of directors supervisors and senior executives

The situation of decision-making process the basis of determination and the actual payment

of directors supervisors and senior executives

The salary for the independent directors is paid according to the resolution of shareholders’

meeting. The salary for the chairman directors with administration duty supervisors

managers and other senior management should be paid on basis of the evaluation result

according to the Yantai Changyu Pioneer Wine Co. Ltd. Executive Compensation and

Performance Design which was passed during the Board of Directors’ meeting.Salary of directors supervisors and senior executives during the report period

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Unit: CNY’0000

Name Post Gender Age Status Total reward from the Company before tax

Whether get reward

from related parties

of the Company

Zhou Hongjiang Chairman M 55 Incumbent 146.53 No

Sun Liqiang Director M 72 Outgoing 61.06 No

Leng Bin Director M 57 Incumbent 0 Yes

Sun Jian Director and General Manager M 53 Incumbent 132.12 No

Li Jiming Director and Deputy General Manager M 53 Incumbent 98.33 No

Chen Dianxin Director F 53 Incumbent 0 No

Qu Weimin Director and Board Secretary M 62 Outgoing 41.68 No

Zhang Ming Director M 46 Outgoing 0 No

Augusto Reina Director M 79 Incumbent 0 No

Aldino Marzorati Director M 67 Incumbent 0 No

Appignani Antonio Director M 81 Outgoing 0 No

Enrico Sivieri Director M 51 Incumbent 0 No

Wei Anning Director M 56 Incumbent 0 No

Wang Zhuquan Independent Director M 54 Incumbent 8 No

Wang Shigang Independent Director M 54 Outgoing 4 No

Luo Fei Independent Director M 67 Incumbent 8 No

Duan Changqing Independent Director M 55 Incumbent 5.33 No

Liu Huirong Independent Director F 56 Incumbent 5.33 No

Liu Qinglin Independent Director M 56 Incumbent 4 No

Liu Yan Independent Director F 46 Outgoing 4 No

GuoGuoqing Independent Director M 57 Outgoing 8 No

Kong Qingkun Chairman of the Board of Supervisors M 47 Incumbent 67.19 No

Zhang Lanlan Supervisor F 50 Incumbent 21.48 No

Liu Zhijun Supervisor M 39 Incumbent 0 No

Jiang Hua Deputy General Manager M 56 Incumbent 110.23 No

Peng Bin Deputy General Manager M 53 Incumbent 95.23 No

Jiang Jianxun

Deputy General Manager and Board

Secretary

M 53 Incumbent 101.54 No

Pan Jianfu General Manager Assistant M 44 Incumbent 65.47 No

Liu Shilu General Manager Assistant M 45 Incumbent 73.21 No

Xiao Zhenbo General Manager Assistant M 43 Incumbent 97.79 No

Total - - - - 1158.52 -

The awarded equity incentives for the directors supervisors and senior executives of the

Company during the report period

□Available ?Not available

5. Staff of the Company

(1) Staff number specialty constitution and education degree

Incumbent staff number of parent company (people) 1280

Incumbent staff number of major subsidiary companies (people) 1399

Total incumbent staff (people) 2679

Total staff getting paid in current period (people) 2679

Retired staff number whose expenses are undertaken by parent company or 0

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

subsidiary companies (people)

Specialty constitution

Category Number of people (people)

Production staff 873

Sales staff 1316

Technical staff 165

Financial staff 131

Administrative staff 194

Total 2679

Education degree

Category Number (People)

Bachelor and above 907

Junior College 884

Technical secondary school 495

Senior high school and below 393

Total 2679

(2) Remuneration policy

The Company has established and improved the remuneration and welfare system including

salary system incentive mechanism social security and medical insurance and so on to

ensurethe participation of all employees. In accordance with the law the Company purchases

social endowment insurance medical insurance occupational injury insurance

unemployment insurance and maternity insurance and pays housing fund for the employees.

Based on the principle of “distribution according to work and equal pay for equal work” the

Company pays the staff’s remuneration timely. With the improvement of the Company’s

profitability the Company steadily improves the staff’s remuneration and welfare and

provides its employees the competitive salary and equal opportunity for development.

(3) Training plan

① Senior and Middle-level Managers

1) General training

By hiring professional lecturers to the Company or giving centralized lectures through

remote network videos the Company could select training topics related to the

company’s industrial development business direction and management philosophy to

expand the strategic thinking of middle and senior managers improve the business

philosophy and improve the scientific decision-making ability and business ability.The Company takes meetings instead of training; during each meeting to learn the

central national and governmental fundamental policies to analyze the domestic and

international political situation and economic situation and research and interpret the

influences of relevant policies and regulations on the development of the Company;

meanwhile through the research and analysis of domestic and foreign industry

production technology management marketing and other development trends it

provides a basis for the Company to timely adjust the business strategy.

2)Professional training

Middle and senior management personnel determine self-study books by optional ways

every year and submit their post-reading and suggestions for the Company’s

development at the end of the year.

According to the different personal responsibilities the Company organizes

management team to attend high-end entrepreneurial forums and summits and to visit

and learn from successful enterprises at home and abroad.Middle-level managers are encouraged to participate in university correspondence and

self-taught examination or engage in advanced studies such as MBA and other master

degrees. The Company organized professional managerial staffs from human resource

finance equipment safety and technical quality to participate in the qualification

examination and obtain qualification certificates.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The Company organized managers to participate in specialized training of safety

human resource law technology equipment finance WSET tourism etc. organized

by the professional management departments.② Ordinary Management Personnel

1). General training

The Company sets courses aiming at improving employees’ management ability

innovation ability and executive ability and hiring professional lecturers or university

teachers to teach at the Company.Ordinary management personnel are encouraged to attend the common-sense general

trainings including enterprise culture regulation framework and various liquor products

knowledge.The Company organizes employees’ outdoor quality development trainings in order to

improve team work and cohesion.

2). Professional training

During the year the professional supervisors selected 2 books for their ordinary

management personnel for personal self-study; at the end of the year the ordinary

management personnel submit post-reading and the development suggestions for the

Company.

The Company encourages qualified ordinary management personnel to take university

correspondence and self-taught examination or engage in advanced studies such as

MBA and other master degrees. The Company organized professional managerial staffs

from human resource finance equipment safety and technical quality to participate in

the qualification examination and obtain qualification certificates.

③ First-line Production Personnel

1). General training

First-line production personnel participate in the general training on enterprise culture

rules and regulations and the knowledge of various alcoholic products of the Company

organized by their units and strengthen the knowledge training on human resource

management such as attendance management labor discipline and comprehensive

evaluation and so on.

2). Professional training

For workers of different trades such as electricians coolerman forklift drivers

assemblers tour guides personalized product designers etc. the Company organizes

them to participate in training to improve professional skills and operation levels as

well as the special training on safety technology equipment and comprehensive

management of the unit and participate in the vocational skills completion organized

by the City Municipal Bureau of Human Resources and Social Affairs.④ Marketing Personnel

1). General training

Marketing personnel independently study mainly focuses on the marketing textbooks of

“Growth” as well as training materials including the Company’s related management

system production knowledge sales responsibility system etc..

2). Professional training

Professional lecturers would be employed to the company or through remote internet

videos to give lectures about successful liquor cases current economic trend research

for domestic and foreign wine industry and other topic in order to take training for

personnel whose levels are or above manager assistant in city marketing management

companies.

Besides that the Company takes training for city marketing managers on how to

improve marketing skill as well as executive force of sales policy by professional

management cadres or hired professional lecturers.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

For business directors and other personnel each marketing management company shall

base itself on the local area to conduct trainings on successful marketing cases and

marketing management concepts with the combination training method of hiring

lecturers and going out to visit and learn.⑤ New Entry University Students

New entry university students are trained by middle and senior managers in the aspects

of corporate culture rules and regulations production safety product quality

marketing strategy salary and assessment system etc.; meanwhile professional

lecturers will be hired to conduct training on role change workplace etiquette

teamwork and other aspects as well as interspersed the military training and quality

development training.

(4) Labor outsourcing

□Available ?Not available

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

X. Corporate Governance

1. Current Corporate Governance Situation of the Company

(1) About shareholders and shareholders’ meeting

The Company has set up the Deliberation Rules of Shareholders’ Meeting and convened the

shareholders’ meetings in strict accordance with requirements of standard opinions of

shareholders’ meeting made the great effort to provide convenient conditions for more

shareholders to participate the shareholders’ meeting and ensured all shareholders to enjoy

same equity and well exercised their rights. The Company drew great attention to the

communication and exchange with shareholders actively responded the shareholders’

inquiry and questions and widely listened to the suggestions and comments from

shareholders.

(2) About the Company and holding shareholder

The Company has independent business and self-management capacity which is

independent from the controlling shareholders in business staffs assets institutions and

finance. The Board of Directors Board of Supervisors management teams and also internal

institutions are able to operate independently in the Company. The controlling shareholders

of the Company could regulate their behaviors without directly or indirectly interfering in the

Company’s decision-making and business activities beyond the shareholder’s meeting;

meanwhile there is no case of encroaching on the Company’s assets and damaging the

interest of the Company and minority shareholders.

(3) About the director and board of directors

The Company strictly appoints all directors in light of Corporation Act and Articles of

Associations. The qualifications of all directors are in line with the requirements of laws and

regulations. In accordance with the requirements of Corporate Governance Guidelines the

Company has carried out the cumulative voting system in the director selection. At present

the Company has five independent directors accounting for above one third of all directors

and the number and personnel composition of board of directors was basically in accord with

requirements of regulations as well as Articles of Associations. All directors of the Company

were able to carry out work in accordance with the Rules of Board of Directors’ Procedure

and Working Rules for Independent Directors punctually attended the board of directors’

and shareholders’ meetings actively took part in relevant knowledge training were familiar

with the laws and regulations concerned had a deep knowledge and long experience of

practitioners and performed their duties according to the law and regulations. The Board of

Directors convened the meetings complies with relevant laws and regulations.

(4) About supervisor and board of supervisors

The Company strictly elected all supervisors in light of the procedures stipulated in the

Corporation Act and Articles of Associations. At present board of supervisors has three

people among which one supervisor is representative for staff. The number and composition

of board of supervisor meet the requirements of regulations and laws. All supervisors of the

Company could follow the requirement of Rules of Board of Supervisors’ Procedure insist

the principle of responsibility to all shareholders seriously perform their duties effectively

supervise and present their independent opinions on important issues interrelated deals

financial status the duty performance of directors and managers of the Company.

(5) About performance evaluation and incentive system

The engagement of managers was open and transparent and accorded with laws and

regulations. The Company has established and gradually improved the performance

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

evaluation standard and formed efficient incentive system so as to ensure the salary of staff

to be linked with work performance.

(6) About stakeholders

The Company could fully respect and safeguard the legal rights of the party with relevant

benefit cooperate actively with the stakeholders jointly drive the Company to develop

continually and stably pay great attention to the issues such as local environmental protection

and public utilities etc. and fully assume the due social responsibility.

(7) About the information disclosure and transparency

The Company has appointed the board secretary to be responsible as the head of investor

relation management including information disclosure investor relations management and

reception of shareholders’ visit and consultation. The Company has also assigned China

Securities Newspaper Securities Times Honkong Commercial Daily and web site

http://www.cninfo.com.cn/ to disclose information punctually accurately and truly disclosed

any information in the light of requirement of relevant laws and rules and also ensured all

shareholders to have same opportunity to acquire any information.In order to further perfect the Company’s governance system during the report period the

Company formulated and improved the management systems including Three-year Plan for

Wine and Brandy Raw Materials and Bulk Wines Options on the Construction of the

Winemaker Team of Changyu Company and so on.Whether or not there is significant variance between the Company’s actual situation of

corporate governance and the normative documents about listed company governance issued

by China Securities Regulatory Commission.

□Yes ?No

There is no significant variance between the Company’s actual situation of corporate

governance and the normative documents about listed company governance issued by China

Securities Regulatory Commission.

2. Relative to the controlling shareholder independence of the Company on business

personnel assets organization and finance

(1) Personnel Arrangement

The Company’s general manager deputy general managers and other senior officers all of

whom were paid by the Company and did not hold any concurrent administrative ranks in the

controlling units. The Company was entirely independent in personnel arrangement

conclusion and adjustment of labor contracts thanks to its sound and independent system for

labor personal and salary management.

(2) Assets:

Tangible assets and Intangible assets including trademark industrial property right and

non-patent technologies were all clearly divided between the Company and the controlling

shareholders and all legal formalities were completed. As an independent legal entity the

Company operates independently in accordance with the law and does not provide any form

of guarantee with its assets for shareholders’ or individuals’ liabilities or other legal or natural

persons. The Company owns trademarks including “黄金冰谷” “爱斐堡” “爱菲堡”

“爱斐” and “AFIP” etc. However due to some historical problems the ownership of the

intangible assets such as the trademark of “张裕” (Changyu) that the Company is licensed to

use patent and so on is still owned by the controlling shareholders. Except for partial

trademarks which cannot be separated from “张裕”(Changyu) trademark the trademarks

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

and patents that could have been registered or applied by the Company but were registered or

applied by Changyu Group who then authorized the Company for usage excluding a handful

of which are unable to transfer due to the reasons such as litigation most of them have been

transferred to the Company by Changyu Group for free before the end of 2019 in order to

ensure the independence and completeness of the Company’s assets.

(3) Finance

The Company is equipped with independent finance department financial administrator and

financial and accounting staff as well as a complete independent and standardized financial

accounting system. The Company also opened its own bank accounts independent and

legally paying taxes and workers insurance fund. All financial individuals do not hold any

concurrent posts in associated companies and are able to make financial decisions

independently. The Company has its own audit department which is especially responsible

for the internal audit work of the Company.

(4) Independent Institutions

The Company has set up a sound organizational framework in which the Board of Directors

and Board of Supervisors operate independently no superior and subordinate relationship

exists between the functional departments of the controlling shareholder. The Company has

its own independent production & business offices and all functional departments are

independent to exercise their powers and carry out the production and business activities

independently.

(5) Operations

The operations of the Company are independent of the controlling shareholders. The

Company owns itself completely independent systems covering research and development

financial accounting labor and human resource quality control raw materials purchase

production and sales has the independent management ability and does not have the problem

that entrusts the controlling shareholders to buy and sell on commission nor exist the

horizontal competition with controlling shareholders.

3. Situation for Horizontal Competition

□Available ?Not available

4. Information for the shareholders’ meeting and temporary shareholders’ meeting held

during the report period

(1) Information for the shareholders’ meeting during the report period

Session Meeting type

Participation ratio

of investors

Convening

date

Disclosure

date

Disclosure Index

2018 Annual

Shareholders’

Meeting

Annual

shareholders’

meeting

60.86% 2019.05.17 2019.05.18

http://www.cninfo.com.cn

Resolution Announcement of 2018

Annual Shareholders’ Meeting

(Announcement

no.:2019-Temporary25)

2019 Annual First

Interim

Shareholders’

Meeting

Interim

Shareholders’

Meeting

62.36% 2019.07.02 2019.07.03

http://www.cninfo.com.cn

Resolution Announcement of 2019

Annual First Interim Shareholders’

Meeting (Notification

no.:2019-Temporary37)

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Request for convening temporary shareholders’ meeting by priority shareholders

owing recovered voting right

□Available ?Not available

5. Performance of independent directors during the report period

(1) Attendance of independent directors for the board of directors and the shareholders’

meeting

Attendance of independent directors for the board of directors

Name

Required

attendance time

Personal

attendance

Communication

attendance

Authorized

attendance

Absence

Whether or not to

attend the meetings

personally for

successive twice

Attendance

time for the

shareholders’

meeting

Wang Zhuquan 8 2 6 0 0 No 0

Wang Shigang 4 1 3 0 0 No 0

Luo Fei 8 2 6 0 0 No 0

DuanChangqing 4 0 3 1 0 No 0

Liu Huirong 4 1 3 0 0 No 0

Liu Qinglin 2 1 1 0 0 No 1

Liu Yan 4 1 3 0 0 No 0

GuoGuoqing 6 1 5 0 0 No 0

Explanation for failed to personally attend the Board of Directors’ meetings for successive

two times

During the report period there were no independent directors who did not attend the

shareholders’ meetings in person for two consecutive times.

(2) Any objections for the Company’s projects from the independent directors

Whether or not the independent directors raised any objection for the Company’s projects

□Yes ?No

During the report period the independent directors did not raise any objections for the

Company’s projects.

(3) Other explanations on independent directors’ performance

Whether or not the independent directors’ propositions are accepted by the Company

?Yes □No

Explanation on acceptance or refusal of the independent directors’ propositions to the

Company

During the report period the independent directors suggested the Company to communicate

with all stakeholders as soon as possible to properly handle the trademark and patent

registration matters concerned by investors; as well as the charged using fee and using issues of

trademark such as “Changyu” etc.. The Company has adopted the suggestions of the

independent directors actively coordinated with various stakeholders and finally reached a

consensus to better solve the above issues.

6. Performance of the special committees under the Board of Directors during the

report period

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

①Auditing Committee: During the report period the Company’s auditing Committee

conducted an ex-ante in-process and post-event review to related annual report audit work

and made relevant arrangements. The auditing Committee believed that 2018 annual financial

statements issued by the Company met the requirement of Accounting Standards for Business

Enterprises and truly and fairly reflected the balance condition up to December 31st 2018 as

well as 2018 annual business performance and cash flow. There were no unsolved major

divergences in accounting and auditing or major risk issues affecting the Company's

management. The Company operated steadily and had the ability of continuous operations.Proposals including 2018 Annual Self-assessment Report on Internal ControlDraft proposal

on 2018 Annual Profit DistributionAppointing Certified Public Accountants FirmChange in

Accounting Policy，2018 Annual Report 2019 Semi-annual Report and 2019 Annual Audit

Plan were deliberated. Auditing committee passed above-mentioned proposals and submitted

the related proposals to board of directors for deliberation.

②Emolument Committee: Emolument Committee is responsible for assessment of the

economy responsibilities of the directors and the senior executives who receive salaries from

the Company and examination of the salary policy and scheme designed for the Company’s

directors and senior executives. During the report period the Company held Emolument

Committee meeting three times and deliberated and passed the Executive Compensation and

Performance Design Proposal on 2018 Annual Performance Assessment Results of the

Company’s Senior Executives and Proposal on the Election of the Convener of the

Compensation Committee. The meeting considered that all the contents of the Proposal on

2018 Annual Performance Assessment Results of the Company’s Senior Executives submitted

to the meeting deliberation by the Company are in line with the relevant provisions of the

Company and the Executive Compensation and Performance Designcon forms with the

actual situation of the Company in which the performance appraisal is more scientific and

reasonable that could better restrain and motivate senior managers. The meeting agreed to the

above proposals and submitted them to the board of directors for deliberation. Mr. Wang

Zhuquan was elected as the convener of the Remuneration Committee in this meeting.

During the report period the Board of Directors’ Emolument Committee also examined the

2018 annual payroll records of the directors and the senior managers who receive salaries

from the Company and believes that the salaries of the Company’s directors supervisors and

senior managers received from the Company is strictly assessed and delivered based on the

Company’s economic responsibility assessment system. The salaries disclosed by the

Company are in conformity with the actually paid amount.

7. The work of the Board of Supervisors

Whether or not the Board of Supervisors found any existence risk to the Company in

oversight activities during the report period

□Yes ?No

The Board of Supervisors has no objections to supervision matters during the report period.

8. Performance Evaluation and Incentive situations of Senior Management

The Company has already established a sound system for evaluation of achievement of senior

management and the related incentive system which linked the reward with the Company’s

benefit and personal achievement. The Emolument Committee under Board of Directors

assumed the responsibility of stipulating the policy and appraising the scheme for salaries and

rewards. Based on the Company’s annual business planning goals this committee examined

senior personals and also their responsible subsidiaries or departments according to their

management achievement and index and took these as criterion of awards or penalties.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

During the report period because of not finishing the annual business plan deliberated and

passed in the Board of Directors’ meeting at the beginning of the year the total salaries and

rewards of the senior management are basically equal to that of last year.

9. Internal Control

(1) Specific situations for significant defects of the internal control found during the

report period

□Yes ?No

(2) Self-assessment report on internal control

Disclosure date for full text of the internal control

self-assessment report 2020.04.24

Disclosure index for full text of the internal control

self-assessment report

2018 Annual Self-Assessment Report on Internal Control and2019 Annual Self-Assessment

Report on Internal Control disclosed on Securities TimesChina Securities Journal and

www.cninfo.com.cn by the Company on April 20th 2019 and April 24th 2020.Percentage of total unit assets included in scope of

the assessment accounting for the Company’s total

assets of consolidated financial statements

89.23%

Percentage of unit operating income included in

scope of the assessment accounting for the

Company’s operating income of consolidated

financial statements

91.77%

Standards of Defect Identification

Category Financial report Non-financial report

Qualitative criteria Significant defects: one defect of internal control

individually or together with other defects has the

reasonable probability to cause the significant

misstatements which cannot be promptly prevented or

found and corrected timely in the financial report. For

example: ? Company’s Directors Supervisors and

Senior Management have fraudulent practices; ? The

Company makes corrections for the published financial

report; ? The audit of external intermediary agent finds

significant misstatement existing in the current financial

report but the Company does not realize it during the

operation process; ? Negative information frequently

appears in the medias with involving a wide scope; ?

The Company’s audit committee and internal audit

department makes an inefficient supervision for internal

control; ? Other situations maybe cause significant

misdirection which guides the report users to make the

right judgment.Major defects：The defect of internal control individually

or together with other defects has the reasonable

probability to cause the significant misstatements which

cannot be promptly prevented or found and corrected

timely in the financial report although the misstatements

neither achieves nor exceeds the importance level but still

arising the attention of Board of Directors and

management team. ? Failure to select and apply

accounting regulations in accordance with generally

accepted accounting principles; ? Failure to establish the

anti-fraud procedures and control measures; ? Failure to

set up corresponding control mechanism or to carry out

and take corresponding compensating control for the

accounting treatments with irregular and special deal; ?

Negative news appears in the media with influencing a

wide scope; ? One or more defects exist in the control

during the process of the ending financial report and the

target of achieving truthfulness and integrality cannot be

reasonably guaranteed in the financial report; ? General

defects refer to the other control defects which do not

constitute the significant and major defects.Significant defects: Any situations listed below

appears it can be regarded as significant defects. ?

Operation: Unable to achieve all operation target or key

business index widely out of budget in various aspects.? Safety accident effects: Cause no less than one

person death or more than 3 person serious injuries. ?

Major negative effects: Negative information

frequently appears in the medias with involving a wide

scope in the international and national mainstream

media. ? Environment effects: Create irreparable

damages to environment and cause massive public

complains.Major defects: Any situations listed below appears it

can be regarded as major defects. ?Operation: Unable

to achieve partly operation target a big margin out of

budget in various aspects. ? Safety accident effects:

Without reaching the person loss or the number of

serious injury of significant defects. ? Major negative

effects: Negative news appears in the media with

influencing a wide scope in the provincial mainstream

media. ? Environment effects: Cause heavy

environment damages and massive public complains

ought to carry out the significant remedial measures.General defects: Any situations listed below appears it

can be regarded as general defects. ?Operation: Other

effects unable to constitute the significant defects or

major defects. ? Safety accident effects: Personal

injury less than the quantitative standards of major

defects. ? Major negative effects: Other defects unable

to constitute the significant defects or major defects. ?

Environment effects: Other environment effects unable

to constitute the significant defects or major defects.Quantitative criterion For total assets/Owner’s equity: For direct property loss:

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

? Significant defects: misstatements ≧1%

? Major defects: 0.5%≦misstatements<1%

? General defects: misstatements<0.5%

For operation revenue:

? significant defects: misstatements ≧1%

? Major defects: 0.5%≦misstatements<1%

? General defects: misstatements<0.5%

For pretax profit:

? Significant defects: misstatements≧5%

? Major defects: 2%≦misstatements<5%

? General defects: misstatements<2%

? Significant defects: More than CNY10 million

? Major defects: CNY1 million-CNY10 million

(including 1 million)

? General defects: Less than CNY1 million

Number of significant defect

in financial report

Number of significant defect

in non-financial report

Number of major defect in

financial report

Number of major defect in

non-financial report

10. Internal control audit report

?Available □Not available

Audit opinions of the internal control audit report

We believe that Yantai Changyu Pioneer Wine Co. Ltd. kept effective internal control to financial report in all significant aspects in

accordance with General Criteria of Company’s Internal Control and other related rules on December 31st 2019.

Disclosure of the internal control audit report Disclosure

Disclosure date for the full text of the internal control audit

report April 24

th 2020

Disclosure index for the full text of the internal control audit

report

2019 Annual Self-Assessment Report on Internal Control disclosed on

Securities Times China Securities Journal and www.cninfo.com.cn by the

Company.

Opinion type of the internal control audit report Standard without reserved opinion

Whether or not exists significant defects in non-financial

reports No

Whether or not the accounting firm issued non-standard opinions for the audit report of

internal control

□Yes ?No

Whether the audit report of internal control issued by the accounting firm is in consistency

with the self-assessment report of the board of directors

?Yes?No

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

XI. Related Situation of Corporation Bonds

Whether the Company has the corporation bonds issued publicly and listed on the stock

exchange which has not matured or has matured but failed to fully redeem on the date of

approval of the annual report

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

XII. Financial Report

1. Audit Report

Type of audit opinion Standard unqualified audit opinion

Date signed on audit report April 22nd 2020

Audit agency name KPMG HuazhenCertified Public Accountants Co. Ltd. (special general partnership)

Audit report No. KPMG Huazhen ShenZi No. 2001809

Certified public accountant's name Ms. Wang Ting Ms. Chai Jing

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

YANTAI CHANGYU PIONEER WINE COMPANY LIMITED

ENGLISH TRANSLATION OF FINANCIAL STATEMENTS

FOR THE YEAR 1 JANUARY 2019 TO 31 DECEMBER 2019

IF THERE IS ANY CONFLICT BETWEEN THE CHINESE VERSION AND ITS ENGLISH

TRANSLATION THE CHINESE VERSION WILL PREVAIL

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

AUDITOR’S REPORT

KPMG Huazhen Shen Zi No. 2001809

All Shareholders of Yantai Changyu Pioneer Wine Company Limited:

Opinion

We have audited the accompanying financial statements of Yantai Changyu Pioneer Wine

Company Limited (“Yantai Changyu”) which comprise the consolidated balance sheet and

company balance sheet as at 31 December 2019 the consolidated income statement and

company income statement the consolidated cash flow statement and company cash flow

statement the consolidated statement of changes in shareholders’ equity and company

statement of changes in shareholders’ equity for the year then ended and notes to the

financial statements.In our opinion the accompanying financial statements present fairly in all material respects

the consolidated financial position and financial position of Yantai Changyu as at 31

December 2019 and of its consolidated financial performance and company financial

performance and its consolidated cash flows and company cash flows for the year then ended

in accordance with Accounting Standards for Business Enterprises issued by the Ministry of

Finance of the People’s Republic of China.

Basis for Opinion

We conducted our audit in accordance with China Standards on Auditing for Certified Public

Accountants (“CSAs”). Our responsibilities under those standards are further described in the

Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We

are independent of Yantai Changyu in accordance with the China Code of Ethics for Certified

Public Accountants (“the Code”) and we have fulfilled our other ethical responsibilities in

accordance with the Code. We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our opinion.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

AUDITOR’S REPORT (continued)

KPMG Huazhen Shen Zi No. 2001809

Key Audit Matters

Key audit matters are those matters that in our professional judgement were of most

significance in our audit of the financial statements for the year. These matters were

addressed in the context of our audit of the financial statements as a whole and in forming

our opinion thereon and we do not provide a separate opinion on these matters.Recognition of Sales Revenue from DistributorsRefer to the accounting policies set out in the notes to the financial statements “III.Significant accounting policies and accounting estimates” 22 and “V. Notes to theconsolidated financial statements” 35.Key Audit Matters How the Matter was Addressed in Our Audit

The principal activities of Yantai Changyu and

its subsidiaries (hereinafter referred to as

“Yantai Changyu Group”) include manufacture

and sales of wine brandy and sparkling wine.The revenue of Yantai Changyu Group is

mainly derived from sales of sidtributors. All

distributor transaction terms adopt the unified

transaction terms formulated by Yantai

Changyu Group.

Sales revenue from distributors is recognised

when Yantai Changyu Group transfers the

major risks and rewards of product ownership

to the distributors and these transfers are

completed when the goods are delivered to

distributors and signed for acceptance.

As revenue is one of the key performance

indicators of Yantai Changyu Group there is an

inherent risk that the management will

manipulate revenue in order to achieve specific

performance objectives or expectations.Therefore we recognise sales revenue from

distributors as a key audit matter.Our audit procedures to evaluate revenue

recognition of sales revenue from

distributors included the following:

? Understand and evaluate the

Management’s design and operation

effectiveness of key internal controls

related to distributor sales revenue

recognition;

? Selecting samples review sales

contracts Yantai Changyu Group

signed with distributors in order to

examine whether the Group has

adopted the unified transaction terms

and evaluate whether the accounting

policy of revenue recognition meets

the requirements of the Accounting

Standards for Business Enterprises;

? On a sampling basis reconcile the

revenue to relevant supporting files

such as relevant orders and signed

delivery notes etc. to evaluate

whether revenue is recognised in

accordance with the accounting policy

of Yantai Changyu Group;

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

AUDITOR’S REPORT (continued)

KPMG Huazhen Shen Zi No. 2001809

Key Audit Matters (continued)

Recognition of Sales Revenue from Distributors (continued)Refer to the accounting policies set out in the notes to the financial statements “III.Significant accounting policies and accounting estimates” 22 and “V. Notes to theconsolidated financial statements” 35.The Key Audit Matters How the matter was addressed in our audit

? On a sampling basis reconcile the

sales transaction before and after

balance sheet date to relevant

supporting files such as relevant

orders signed delivery notes etc. to

evaluate whether revenue is

recognised in appropriate accounting

period;

? Selecting samples perform

confirmation procedures to the

balances of current accounts on

balance sheet date and the amount of

sales transaction for the year;

? Check whether significant sales

returns exist in sales record after the

balance sheet date and check relevant

supporting files in order to evaluate

whether relevant revenue is recorded

in the appropriate accounting period;

? Select revenue accounting entries that

meet specific risk criteria and check

related supporting documents.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

AUDITOR’S REPORT (continued)

KPMG Huazhen Shen Zi No. 2001809

Other Information

Management of Yantai Changyu is responsible for the other information. The other

information comprises all the information included in the 2019 annual report other than the

financial statements and our auditor’s report thereon.Our opinion on the financial statements does not cover the other information and we do not

express any form of assurance conclusion thereon.In connection with our audit of the financial statements our responsibility is to read the other

information and in doing so consider whether the other information is materially inconsistent

with the financial statements or our knowledge obtained in the audit or otherwise appears to

be materially misstated.If based on the work we have performed we conclude that there is a material misstatement

of this other information we are required to report that fact. We have nothing to report in this

regard.Responsibilities of Management and Those Charged with Governance for the Financial

Statements

Management is responsible for the preparation and fair presentation of the financial

statements in accordance with the Accounting Standards for Business Enterprises and for

the design implementation and maintenance of such internal control necessary to enable that

the financial statements are free from material misstatement whether due to fraud or error.In preparing the financial statements management is responsible for assessing Yantai

Changyu’s ability to continue as a going concern disclosing as applicable matters related to

going concern and using the going concern basis of accounting unless management either

intends to liquidate Yantai Changyu or to cease operations or has no realistic alternative but

to do so.Those charged with governance are responsible for overseeing Yantai Changyu’s financial

reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as

a whole are free from material misstatement whether due to fraud or error and to issue an

auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance

but is not a guarantee that an audit conducted in accordance with CSAs will always detect a

material misstatement when it exists. Misstatements can arise from fraud or error and are

considered material if individually or in the aggregate they could reasonably be expected to

influence the economic decisions of users taken on the basis of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

AUDITOR’S REPORT (continued)

KPMG Huazhen Shen Zi No. 2001809

Auditor’s Responsibilities for the Audit of the Financial Statement (continued)

As part of an audit in accordance with CSAs we exercise professional judgement and

maintain professional scepticism throughout the audit. We also:

(1) Identify and assess the risks of material misstatement of the financial statements

whether due to fraud or error design and perform audit procedures responsive to those

risks and obtain audit evidence that is sufficient and appropriate to provide a basis for

our opinion. The risk of not detecting a material misstatement resulting from fraud is

higher than for one resulting from error as fraud may involve collusion forgery

intentional omissions misrepresentations or the override of internal control.

(2) Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances.

(3) Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the management.

(4) Conclude on the appropriateness of management’s use of the going concern basis of

accounting and basis of accounting and based on the audit evidence obtained

whether a material uncertainty exists related to events or conditions that may cast

significant doubt on Yantai Changyu’s ability to continue as a going concern. If we

conclude that a material uncertainty exists we are required to draw attention in our

auditor’s report to the related disclosures in the financial statements or if such

disclosures are inadequate to modify our opinion. Our conclusions are based on the

audit evidence obtained up to the date of our auditor’s report. However future events or

conditions may cause Yantai Changyu to cease to continue as a going concern.

(5) Evaluate the overall presentation structure and content of the financial statements

including the disclosures and whether the financial statements represent the underlying

transactions and events in a manner that achieves fair presentation.

(6) Obtain sufficient appropriate audit evidence regarding the financial information of the

entities or business activities within the Group to express our audit opinion on the

financial statements. We are responsible for the direction supervision and performance

of the group audit. We remain solely responsible for our audit opinion.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

AUDITOR’S REPORT (continued)

KPMG Huazhen Shen Zi No. 2001809

Auditor’s Responsibilities for the Audit of the Financial Statement (continued)

We communicate with those charged with governance regarding among other matters the

planned scope and timing of the audit and significant audit findings including any significant

deficiencies in internal control that we identify during our audit.We also provide those charged with governance with a statement that we have complied with

relevant ethical requirements regarding independence and communicate with them all

relationships and other matters that may reasonably be thought to bear on our independence

and where applicable related safeguards.

From the matters communicated with those charged with governance we determine those

matters that were of most significance in the audit of the financial statements of the year and

are therefore the key audit matters. We describe these matters in our auditor’s report unless

law or regulation precludes public disclosure about the matter or when in extremely rare

circumstances we determine that a matter should not be communicated in our report

because the adverse consequences of doing so would reasonably be expected to outweigh

the public interest benefits of such communication.KPMG Huazhen LLP Certified Public Accountants Registered

in the People’s Republic of China

(Stamp)

Wang Ting (Engagement Partner)

(Signature and stamp)

Beijing China Chai Jing

(Signature and stamp)

Date:22/04/2020

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Consolidated balance sheet

as at 31 December 2019

(Expressed in Renminbi Yuan)

Note 2019 2018

Assets

Current assets

Cash at bank and on hand V. 1 1565783980 1475700477

Bills receivable V. 2 - 288667988

Accounts receivable V. 3 266218153 242153083

Receivables under financing V. 4 316470229 -

Prepayments V. 5 67707537 4219949

Other receivables V. 6 24246812 22636086

Inventories V. 7 2872410407 2724591457

Other current assets V. 8 267424938 258676396

Total current assets 5380262056 5016645436

Non-current assets

Available-for-sale financial assets - 467251

Long-term equity investments V. 9 43981130 -

Investment properties V. 10 29714586 31572489

Fixed assets V. 11 5894068898 5749731667

Construction in progress V. 12 567478833 759296591

Bearer biological assets V. 13 202425286 209266373

Intangible assets V. 14 651946355 655473459

Goodwill V. 15 141859193 165199111

Long-term deferred expenses V. 16 277595408 244640416

Deferred tax assets V. 17 264926503 285436259

Other non-current assets V. 18 193674320 -

Total non-current assets 8267670512 8101083616

Total assets 13647932568 13117729052

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Consolidated balance sheet

as at 31 December 2019 (continued)

(Expressed in Renminbi Yuan)

Note 2019 2018

Liabilities and shareholders’ equity

Current liabilities

Short-term loans V. 19 754313744 688002410

Accounts payable V. 20 570252612 713572881

Advance payments received V. 21 120609499 226075244

Employee benefits payable V. 22 234459116 212304217

Taxes payable V. 23 375169971 128912790

Other payables V. 24 450532485 608479890

Non-current liabilities due within

one year V. 25 150826221 152940788

Total current liabilities 2656163648 2730288220

Non-current liabilities

Long-term loans V. 26 128892501 156480662

Long-term payables V. 27 191000000 225000000

Deferred income V. 28 70701288 86227293

Deferred tax liabilities V. 17 14691424 22010647

Other non-current liabilities V. 29 7645777 7234853

Total non-current liabilities 412930990 496953455

Total liabilities 3069094638 3227241675

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Consolidated balance sheet

as at 31 December 2019 (continued)

(Expressed in Renminbi Yuan)

Note 2019 2018

Liabilities and shareholders’ equity

(continued)

Shareholders’ equity

Share capital V. 30 685464000 685464000

Capital reserve V. 31 565050422 565955441

Other comprehensive income V. 32 (4235583) 2965377

Surplus reserve V. 33 342732000 342732000

Retained earnings V. 34 8719899359 8008982547

Total equity attributable to

shareholders of the Company 10308910198 9606099365

Non-controlling interests 269927732 284388012

Total owners’ equity 10578837930 9890487377

Total liabilities and shareholders’ equity 13647932568 13117729052

These financial statements were approved by the Board of Directors of the Company on 22

April 2020.

Zhou Hongjiang

Legal

Representative

Jiang Jianxun

The person in

charge

of accounting affairs

Guo Cuimei

The head of the

accounting

department

(Company stamp)

(Signature and

stamp)

(Signature and

stamp)

(Signature and

stamp)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Company balance sheet

as at 31 December 2019

(Expressed in Renminbi Yuan)

Note 2019 2018

Assets

Current assets

Cash at bank and on hand 710505269 624588809

Bills receivable - 39885254

Accounts receivable XV.1 1988326 1447973

Receivables under financing XV.2 41679635 -

Prepayments 776539 227

Other receivables XV.3 586424958 1025643356

Inventories 434007808 385154740

Other current assets 39130466 24704844

Total current assets 1814513001 2101425203

Non-current assets

Long-term equity investments XV.4 7432422621 7420803069

Investment properties 29714586 31572489

Fixed assets 261137072 265311274

Construction in progress - 6311701

Bearer biological assets 121414096 125002793

Intangible assets 64864913 67244066

Deferred tax assets 16255870 24194967

Other non-current assets 1427700000 972700000

Total non-current assets 9353509158 8913140359

Total assets 11168022159 11014565562

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Company balance sheet

as at 31 December 2019 (continued)

(Expressed in Renminbi Yuan)

Note 2019 2018

Liabilities and shareholders’ equity

Current liabilities

Short-term loans 150000000 150000000

Accounts payable 63655240 132704304

Employee benefits payable 70445847 72345179

Taxes payable 6052456 13111431

Other payables 660149563 607974519

Total current liabilities 950303106 976135433

Non-current liabilities

Deferred income 9176315 12343972

Other non-current liabilities 3146707 2710575

Total non-current liabilities 12323022 15054547

Total liabilities 962626128 991189980

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Company balance sheet

as at 31 December 2019 (continued)

(Expressed in Renminbi Yuan)

Note 2019 2018

Liabilities and shareholders’ equity

(continued)

Shareholders’ equity

Share capital 685464000 685464000

Capital reserve 557222454 557222454

Surplus reserve 342732000 342732000

Retained earnings 8619977577 8437957128

Total owners’ equity 10205396031 10023375582

Total liabilities and shareholders’ equity 11168022159 11014565562

These financial statements were approved by the Board of Directors of the Company on 22

April 2020.

Zhou Hongjiang

Legal

Representative

Jiang Jianxun

The person in

charge

of accounting affairs

Guo Cuimei

The head of the

accounting

department

(Company stamp)

(Signature and

stamp)

(Signature and

stamp)

(Signature and

stamp)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Consolidated Income statement

for the year ended 31 December 2019

(Expressed in Renminbi Yuan)

Note 2019 2018

I. Operating income V. 35 5031011489 5142244740

Less: Operating cost V. 35 1887495991 1901611507

Taxes and surcharges V. 36 268462378 276491674

Selling and distribution

expenses V. 37 1053232024 1274599146

General and administrative

expenses V. 38 311904656 343580651

Research and development

expenses 6041116 4784118

Financial expenses V. 39 35290702 35945302

Including: Interest expenses 41570794 46354902

Interest income 12327441 12086007

Add: Other income V. 40 77337581 87281434

Investment income V. 41 5112733 -

Including: Losses from

investment in

joint ventures

(1120928) -

Credit losses V. 42 (7304777) -

Impairment (losses) /

reversal V. 43 (20552916) 912166

Gains from disposal of

assets V. 44 39015 11368355

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Consolidated Income statement

for the year ended 31 December 2019 (continued)

(Expressed in Renminbi Yuan)

Note 2019 2018

II. Operating profit 1523216258 1404794297

Add: Non-operating income V. 45 10921748 7353309

Less: Non-operating expenses V. 45 3623269 3535908

III. Total profit 1530514737 1408611698

Less: Income tax expenses V. 46 400806109 367127522

IV. Net profit 1129708628 1041484176

(1) Net profit classified by

continuity of operations:

1. Net profit from continuing

operations 1129708628 1041484176

2. Net profit from discontinued

operations - -

(2) Net profit classified by

ownership (“-” for net loss):

1. Net profit attributable to

owners of the company 1129735749 1042632929

2. Non-controlling losses (27121) (1148753)

V. Other comprehensive income net

of tax (8542792) (376524)

(1) Other comprehensive income

(net of tax) attributable to

shareholders of the

Company

Translation differences arising

from translation of foreign

currency financial

statements

(7200960) (143863)

(2) Other comprehensive income

(net of tax) attributable to

non-controlling interests

(1341832) (232661)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Consolidated Income statement

for the year ended 31 December 2019 (continued)

(Expressed in Renminbi Yuan)

Note 2019 2018

VI. Total comprehensive income for

the year 1121165836 1041107652

(1) Attributable to shareholders of

the company 1122534789 1042489066

(2) Attributable to non-controlling

interests (1368953) (1381414)

VII. Earnings per share:

(1) Basic earnings per share V. 47 1.65 1.52

(2) Diluted earnings per share V. 47 1.65 1.52

These financial statements were approved by the Board of Directors of the Company on 22

April 2020.

Zhou Hongjiang

Legal

Representative

Jiang Jianxun

The person in

charge

of accounting affairs

Guo Cuimei

The head of the

accounting

department

(Company stamp)

(Signature and

stamp)

(Signature and

stamp)

(Signature and

stamp)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Company income statement

for the year ended 31 December 2019

(Expressed in Renminbi Yuan)

Note 2019 2018

I. Operating income XV.5 740856362 876447070

Less: Operating cost XV.5 655504063 774487031

Taxes and surcharges 25045041 38346761

General and administrative

expenses 86481192 90505208

Research and development

expenses 815233 887355

Net financial income (4798485) (20292737)

Including: Interest expenses 497277 16075353

Interest income 5843698 41821372

Add: Other income 3953002 4237655

Investment income XV.6 621620723 964128659

Credit impairment losses (601610) -

Gains from disposal of

assets 22297 12411962

II. Operating profit 602803730 973291728

Add: Non-operating income 1840062 1483478

Less: Non-operating expenses 1118124 593694

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Income statement of the company

for the year ended 31 December 2019 (continued)

(Expressed in Renminbi Yuan)

Note 2019 2018

III. Total profit 603525668 974181512

Less: Income tax expenses 10226819 4592939

IV. Net profit 593298849 969588573

(i) Net profit from continuing

operations 593298849 969588573

(ii) Net profit from discontinued

operations - -

V. Other comprehensive income net

of tax - -

VI. Total comprehensive income for

the year 593298849 969588573

These financial statements were approved by the Board of Directors of the Company on 22

April 2020.

Zhou Hongjiang

Legal

Representative

Jiang Jianxun

The person in

charge

of accounting affairs

Guo Cuimei

The head of the

accounting

department

(Company stamp)

(Signature and

stamp)

(Signature and

stamp)

(Signature and

stamp)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Consolidated cash flow statement

for the year ended 31 December 2019

(Expressed in Renminbi Yuan)

Note 2019 2018

I. Cash flows from operating activities:

Proceeds from sale of goods and

rendering of services 4647970683 4950603207

Refund of taxes and surcharges 40741286 57056690

Proceeds from other operating

activities V. 48(1) 93744521 72703872

Sub-total of cash inflows 4782456490 5080363769

Payment for goods and services 1338542601 1383945233

Payment to and for employees 576928850 544742974

Payment of various taxes 1115582679 1111980499

Payment for other operating

activities V. 48(2) 913564336 1063716317

Sub-total of cash outflows 3944618466 4104385023

Net cash flows from operating

activities V. 49(1) 837838024 975978746

II. Cash flows from investing activities:

Proceeds from disposal of

investments 234722614 400000000

Investment returns received 1809786 3445895

Net proceeds from disposal of fixed

assets intangible assets and

other long-term assets

6334375 19967431

Sub-total of cash inflows 242866775 423413326

Payment for acquisition of fixed

assets intangible assets and

other long-term assets

281005768 347384820

Payment for acquisition of

investments 169618600 478042400

Net cash paid for the acquisition of

subsidiaries and other business

units

404844 105834655

Sub-total of cash outflows 451029212 931261875

Net cash flows from investing

activities (208162437) (507848549)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Consolidated cash flow statement

for the year ended 31 December 2019 (continued)

(Expressed in Renminbi Yuan)

Note 2019 2018

III. Cash flows from financing activities:

Proceeds from investors - 2050000

Including: Cash received from

minority shareholders

of subsidiaries

- 2050000

Proceeds from borrowings 942134032 1049815411

Proceeds from other financing

activities V. 48(3) - 62468259

Sub-total of cash inflows 942134032 1114333670

Repayments of borrowings 939525426 1103189409

Payment for dividends profit

distributions or interest 462455473 397351813

Payment for other financing

activities V. 48(4) 11619552 46100000

Sub-total of cash outflows 1413600451 1546641222

Net cash flows from financing

activities (471466419) (432307552)

IV. Effect of foreign exchange rate

changes on cash and cash

equivalents

703173 (9851585)

V. Net increase in cash and cash

equivalents V. 49(1) 158912341 25971060

Add: Cash and cash equivalents

at the beginning of the year 1206860334 1180889274

VI. Cash and cash equivalents at the

end of the year V. 49(2) 1365772675 1206860334

These financial statements were approved by the Board of Directors of the Company on 22

April 2020.

Zhou Hongjiang

Legal

Representative

Jiang Jianxun

The person in

charge

of accounting affairs

Guo Cuimei

The head of the

accounting

department

(Company stamp)

(Signature and

stamp)

(Signature and

stamp)

(Signature and

stamp)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Company cash flow statement

for the year ended 31 December 2019

(Expressed in Renminbi Yuan)

Note 2019 2018

I. Cash flows from operating

activities:

Proceeds from sale of goods and

rendering of services 737920018 817341175

Proceeds from other operating

activities 211049689 177786322

Sub-total of cash inflows 948969707 995127497

Payment for goods and services 710601952 608241452

Payment to and for employees 91738062 107256441

Payment of various taxes 48817363 62066449

Payment for other operating

activities 28434079 74357324

Sub-total of cash outflows 879591456 851921666

Net cash flows from operating

activities 69378251 143205831

II. Cash flows from investing activities:

Proceeds from disposal of

investments 131133236 370000000

Investment returns received 922250025 874520633

Net proceeds from disposal of fixed

assets intangible assets and

other long-term assets

1354733 11212195

Proceeds from borrowings to

subsidiaries 8000000 -

Sub-total of cash inflows 1062737994 1255732828

Payment for acquisition of fixed

assets intangible assets and

other long-term assets

21417387 28842911

Payment for acquisition of

investments 138566890 410000000

Net cash paid for the acquisition of

subsidiaries and other business

units

- 107194420

Cash paid to subsidiaries 463000000 -

Sub-total of cash outflows 622984277 546037331

Net cash flows from investing

activities 439753717 709695497

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Company cash flow statement

for the year ended 31 December 2019 (continued)

(Expressed in Renminbi Yuan)

Note 2019 2018

III. Cash flows from financing activities:

Proceeds from borrowings 150000000 200000000

Sub-total of cash inflows 150000000 200000000

Repayments of borrowings 150000000 650000000

Payment for dividends or interest 418400308 364085312

Sub-total of cash outflows 568400308 1014085312

Net cash flows from financing

activities (418400308) (814085312)

IV. Effect of foreign exchange rate

changes on cash and cash

equivalents

- -

V. Net increase in cash and cash

equivalents 90731660 38816016

Add: Cash and cash equivalents

at the beginning of the year 532384882 493568866

VI. Cash and cash equivalents at the

end of the year 623116542 532384882

These financial statements were approved by the Board of Directors of the Company on 22

April 2020.

Zhou Hongjiang

Legal

Representative

Jiang Jianxun

The person in

charge

of accounting affairs

Guo Cuimei

The head of the

accounting

department

(Company stamp)

(Signature and

stamp)

(Signature and

stamp)

(Signature and

stamp)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Consolidated statement of changes in shareholders’ equity

for the year ended 31 December 2019

(Expressed in Renminbi Yuan)

Note

Attributable to shareholders of the Company

Non-controlling

interests

Total owners’

equity Share capital Capital reserve

Other

comprehensive

income

Surplus reserve Retained earnings Sub-total

I. Balance at the

beginning of the year 685464000 565955441 2965377 342732000 8008982547 9606099365 284388012 9890487377

Add: Changes in

accounting policies III. 32 - - - - (7540537) (7540537) - (7540537)

Adjusted balance at the

beginning of the year 685464000 565955441 2965377 342732000 8001442010 9598558828 284388012 9882946840

II. Changes in equity

during the year

(1) Total

comprehensive

income

- - (7200960) - 1129735749 1122534789 (1368953) 1121165836

(2) Contribution by

owners

Acquisitions of

non-controlling

interests

- (905019) - - - (905019) (10714533) (11619552)

(3) Appropriation of

profits V. 34

Distributions to

shareholders - - - - (411278400) (411278400) (2376794) (413655194)

III. Balance at the end of the

year 685464000 565050422 (4235583) 342732000 8719899359 10308910198 269927732 10578837930

These financial statements were approved by the Board of Directors of the Company on 22 April 2020.Zhou Hongjiang

Legal Representative

Jiang Jianxun

The person in charge of

accounting affairs

Guo Cuimei

The head of the accounting

department

(Company stamp)

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Consolidated statement of changes in shareholders’ equity

for the year ended 31 December 2018

(Expressed in Renminbi Yuan)

Note

Attributable to shareholders of the Company

Non-controlling

interests

Total

shareholders’

equity Share capital Capital reserve

Other

comprehensive

income

Surplus reserve Retained earnings Sub-total

I. Balance at the beginning of

the year 685464000 565955441 3109240 342732000 7309081618 8906342299 271636379 9177978678

II. Changes in equity during the

year

(1) Total comprehensive

income - - (143863) - 1042632929 1042489066 (1381414) 1041107652

(2) Shareholders’

contributions and

decrease of capital

Acquired as subsidiaries - - - - - - 17532823 17532823

(3) Appropriation of profits V. 34

Distributions to

shareholders - - - - (342732000) (342732000) (3399776) (346131776)

III. Balance at the end of the year 685464000 565955441 2965377 342732000 8008982547 9606099365 284388012 9890487377

These financial statements were approved by the Board of Directors of the Company on 22 April 2020.Zhou Hongjiang

Legal Representative

Jiang Jianxun

The person in charge of

accounting affairs

Guo Cuimei

The head of the accounting

department

(Company stamp)

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Company statement of changes in shareholders’ equity

for the year ended 31 December 2019

(Expressed in Renminbi Yuan)

Note Share capital Capital reserve Surplus reserve Retained earnings

Total

shareholders’

equity

I、 Balance at the

beginning of the year

685464000 557222454 342732000 8437957128 10023375582

Add: Changes in

accounting policies III. 32 - - - - -

Adjusted balance at the

beginning of the year 685464000 557222454 342732000 8437957128 10023375582

II、 Changes in equity forthe year

1. Total

comprehensive

income

- - - 593298849 593298849

2. Appropriation of

profits

Distributions to

shareholders - - - (411278400) (411278400)

III、 Balance at the end ofthe year

685464000 557222454 342732000 8619977577 10205396031

These financial statements were approved by the Board of Directors of the Company on 22

April 2020.

Zhou Hongjiang

Legal

Representative

Jiang Jianxun

The person in

charge

of accounting affairs

Guo Cuimei

The head of the

accounting

department

(Company stamp)

(Signature and

stamp)

(Signature and

stamp)

(Signature and

stamp)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Company statement of changes in shareholders’ equity

for the year ended 31 December 2018 (continued)

(Expressed in Renminbi Yuan)

Note Share capital Capital reserve Surplus reserve Retained earnings

Total

shareholders’

equity

IV、 Balance at thebeginning of the year

685464000 557222454 342732000 7811100555 9396519009

V、 Changes in equity for

the year

1. Total

comprehensive

income

- - - 969588573 969588573

2. Appropriation of

profits

Distributions to

shareholders - - - (342732000) (342732000)

VI、 Balance at the end ofthe year

685464000 557222454 342732000 8437957128 10023375582

These financial statements were approved by the Board of Directors of the Company on 22

April 2020.

Zhou Hongjiang

Legal

Representative

Jiang Jianxun

The person in

charge

of accounting affairs

Guo Cuimei

The head of the

accounting

department

(Company stamp)

(Signature and

stamp)

(Signature and

stamp)

(Signature and

stamp)

The notes on pages 111 to 213 form part of these financial statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Yantai Changyu Pioneer Wine Company Limited

Notes to the financial statements

(Expressed in Renminbi Yuan unless otherwise indicated)

I. Company statusYantai Changyu Pioneer Wine Co. Ltd. (the "Company” or the “Joint Stock Company”) wasincorporated as a joint stock limited company in accordance with the Company Law of the

People's Republic of China (the "PRC") in a reorganisation carried out by Yantai Changyu

Group Co. Ltd. ("Changyu Group") in which Changyu Group Company injected certain

assets and liabilities in relation to the brandy wine and sparkling wine production and sales

businesses to the Company. The Company and its subsidiaries (the "Group") are principally

engaged in the production and sales of wine brandy sparkling wine grape growing and

acquisition as well as travel resource development etc. Registration place of the Company is

Yantai Shandong. Headquarter of the Company is located at No. 56 Da Ma Lu Zhifu District

Yantai Shandong PRC.

As at 31 December 2019 the total shares issued by the Company amounts to 685464000

shares. Please refer to Note VI. 30 in detail.The holding company of the Group is Changyu Group Company which is jointly controlled by

Yantai GuoFeng Investment Holding Group Co. Ltd. ILLVA SARONNO HOLDING SPA

International Finance Corporation and Yantai Yuhua Investment and Development Company

Limited.The financial statements have been authorised by the board of directors on 22 April 2020.

According to the Company's articles of association the financial statements will be reviewed

by shareholders on the shareholder's meeting.

For consolidation scope of the year please refer to Note VII "Equity in other entities" in detail.

For detail of changes in consolidation scope of the year please refer to Note VI "Change in

consolidation scope".II. Basis of preparation

The financial statements have been prepared on the going concern basis.Since 1 January 2019 the Company has adopted new financial instrument standards revised

by MOF in 2017 including CAS 22 — Recognition and Measurement of Financial Instruments

(See Note III. 32(1)).The Group has not adopted CAS No.14 — Revenue and CAS No. 22 — Lease revised in

2017 and 2018 respectively.

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

III. Significant accounting policies and accounting estimates

1 Statement of compliance

The financial statements have been prepared in accordance with the requirements of

Accounting Standards for Business Enterprises or referred to as China Accounting Standards

(“CAS”) issued by the MOF. These financial statements present truly and completely the

consolidated financial position and financial position of the Company as at 31 December

2019 and the consolidated financial performance and financial performance and the

consolidated cash flows and cash flows of the Company for the year then ended.These financial statements also comply with the disclosure requirements of “Regulation onthe Preparation of Information Disclosures by Companies Issuing Securities No. 15: GeneralRequirements for Financial Reports” as revised by the China Securities Regulatory

Commission (“CSRC”) in 2014.

2 Accounting period

The accounting period is from 1 January to 31 December.

3 Operating cycle

The Company takes the period from the acquisition of assets for processing to until the

ultimate realisation of cash or cash equivalents as a normal operating cycle. The operating

cycle of the Company is 12 months.

4 Functional currency

Renminbi ("RMB") is the currency of the primary economic environment in which the

Company and its domestic subsidiaries operate. Therefore the Company and its domestic

subsidiaries choose RMB as their functional currency. Overseas subsidiaries of the Company

adopt Euro Chilean Peso and Australian Dollar as their functional currencies on the basis of

the primary economic environment in which they operate. The Company adopts RMB to

prepare its financial statements.

5 Accounting treatments for business combinations involving entities under common control and

not under common control

(1) Business combinations involving entities under common control

A business combination involving entities under common control is a business combination in

which all of the combining entities are ultimately controlled by the same party or parties both

before and after the business combination and that control is not transitory. The assets

acquired and liabilities assumed are measured based on their carrying amounts in the

consolidated financial statements of the ultimate controlling party at the combination date.The difference between the carrying amount of the net assets acquired and the consideration

paid for the combination (or the total par value of shares issued) is adjusted against share

premium in the capital reserve with any excess adjusted against retained earnings. Any costs

directly attributable to the combination are recognised in profit or loss when incurred. The

combination date is the date on which one combining entity obtains control of other combining

entities.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Business combinations involving entities not under common control

A business combination involving entities not under common control is a business

combination in which all of the combining entities are not ultimately controlled by the same

party or parties both before and after the business combination. Where (1) the aggregate of

the acquisition-date fair value of assets transferred (including the acquirer’s previously held

equity interest in the acquiree) liabilities incurred or assumed and equity securities issued by

the acquirer in exchange for control of the acquiree exceeds (2) the acquirer’s interest in the

acquisition-date fair value of the acquiree’s identifiable net assets the difference is

recognised as goodwill (see Note III.18). If (1) is less than (2) the difference is recognised in

profit or loss for the current period. Other acquisition-related costs are expensed when

incurred. The acquiree’s identifiable asset liabilities and contingent liabilities if the

recognition criteria are met are recognised by the Group at their acquisition-date fair value.The acquisition date is the date on which the acquirer obtains control of the acquiree.

For a business combination involving entities not under common control and achieved in

stages the Group remeasures its previously-held equity interest in the acquiree to its

acquisition-date fair value and recognises any resulting difference between the fair value and

the carrying amount as investment income or other comprehensive income for the current

period. In addition any amount recognised in other comprehensive income that may be

reclassified to profit or loss in prior reporting periods relating to the previously-held equity

interest and any other changes in the owners’ equity under equity accounting are transferred

to investment income in the period in which the acquisition occurs (see Note III.11(2)(b)). If

equity interests of the acquiree held before acquisition-date were equity instrument

investments measured at fair value through other comprehensive income other

comprehensive income recognised shall be moved to retained earnings on acquisition-date.

6 Consolidated financial statements

(1) General principles

The scope of consolidated financial statements is based on control and the consolidated

financial statements comprise the Company and its subsidiaries. Control exists when the

investor has all of following: power over the investee; exposure or rights to variable returns

from its involvement with the investee and has the ability to affect those returns through its

power over the investee. When assessing whether the Group has power only substantive

rights (held by the Group and other parties) are considered. The financial position financial

performance and cash flows of subsidiaries are included in the consolidated financial

statements from the date that control commences until the date that control ceases.Non-controlling interests are presented separately in the consolidated balance sheet within

shareholders’ equity. Net profit or loss attributable to non-controlling shareholders is

presented separately in the consolidated income statement below the net profit line item.Total comprehensive income attributable to non-controlling shareholders is presented

separately in the consolidated income statement below the total comprehensive income line

item.When the amount of loss for the current period attributable to the non-controlling shareholders

of a subsidiary exceeds the non-controlling shareholders’ share of the opening owners’ equity

of the subsidiary the excess is still allocated against the non-controlling interests.When the accounting period or accounting policies of a subsidiary are different from those of

the Company the Company makes necessary adjustments to the financial statements of the

subsidiary based on the Company’s own accounting period or accounting policies. Intra-group

balances and transactions and any unrealised profit or loss arising from intra-group

transactions are eliminated when preparing the consolidated financial statements. Unrealised

losses resulting from intra-group transactions are eliminated in the same way as unrealised

gains unless they represent impairment losses that are recognised in the financial

statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Subsidiaries acquired through a business combination

Where a subsidiary was acquired during the reporting period through a business combination

involving entities under common control the financial statements of the subsidiary are

included in the consolidated financial statements based on the carrying amounts of the assets

and liabilities of the subsidiary in the financial statements of the ultimate controlling party as if

the combination had occurred at the date that the ultimate controlling party first obtained

control. The opening balances and the comparative figures of the consolidated financial

statements are also restated.Where a subsidiary was acquired during the reporting period through a business combination

involving entities not under common control the identifiable assets and liabilities of the

acquired subsidiaries are included in the scope of consolidation from the date that control

commences based on the fair value of those identifiable assets and liabilities at the

acquisition date.

(3) Disposal of subsidiaries

When the Group loses control over a subsidiary any resulting disposal gains or losses are

recognised as investment income for the current period. The remaining equity investment is

re-measured at its fair value at the date when control is lost any resulting gains or losses are

also recognised as investment income for the current period.When the Group loses control of a subsidiary in multiple transactions in which it disposes of

its long-term equity investment in the subsidiary in stages the following are considered to

determine whether the Group should account for the multiple transactions as a bundled

transaction:

- arrangements are entered into at the same time or in contemplation of each other;

- arrangements work together to achieve an overall commercial effect;

- the occurrence of one arrangement is dependent on the occurrence of at least one other

arrangement;

- one arrangement considered on its own is not economically justified but it is economically

justified when considered together with other arrangements.If each of the multiple transactions does not form part of a bundled transaction the

transactions conducted before the loss of control of the subsidiary are accounted for in

accordance with the accounting policy for partial disposal of equity investment in subsidiaries

where control is retained (see Note III.6(4)).If each of the multiple transactions forms part of a bundled transaction which eventually

results in the loss of control in the subsidiary these multiple transactions are accounted for as

a single transaction. In the consolidated financial statements the difference between the

consideration received and the corresponding proportion of the subsidiary’s net assets

(calculated continuously from the acquisition date) in each transaction prior to the loss of

control shall be recognised in other comprehensive income and transferred to profit or loss

when the parent eventually loses control of the subsidiary.

(4) Changes in non-controlling interests

Where the Company acquires a non-controlling interest from a subsidiary’s non-controlling

shareholders or disposes of a portion of an interest in a subsidiary without a change in control

the difference between the proportion interests of the subsidiary’s net assets being acquired

or disposed and the amount of the consideration paid or received is adjusted to the capital

reserve (share premium) in the consolidated balance sheet with any excess adjusted to

retained earnings.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

7 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand deposits that can be readily withdraw on

demand and short-term highly liquid investments that are readily convertible into known

amounts of cash and are subject to an insignificant risk of change in value.

8 Foreign currency transactions and translation of foreign currency financial statements

When the Group receives capital in foreign currencies from investors the capital is translated

to Renminbi at the spot exchange rate at the date of the receipt. Other foreign currency

transactions are on initial recognition translated to Renminbi at the spot exchange rates.Monetary items denominated in foreign currencies are translated to Renminbi at the spot

exchange rate at the balance sheet date. The resulting exchange differences are generally

recognised in profit or loss unless they arise from the re-translation of the principal and

interest of specific borrowings for the acquisition and construction of qualifying assets (see

Note III. 15)). Non-monetary items that are measured at historical cost in foreign currencies

are translated to Renminbi using the exchange rate at the transaction date.In translating the financial statements of a foreign operation assets and liabilities of foreign

operation are translated to Renminbi at the spot exchange rate at the balance sheet date.

Equity items excluding retained earnings and the translation differences in other

comprehensive income are translated to Renminbi at the spot exchange rates at the

transaction dates. Income and expenses in the income statement are translated to

Renminbi at the spot exchange rates at the transaction dates. The resulting translation

differences are recognised in other comprehensive income. The translation differences

accumulated in other comprehensive income with respect to a foreign operation are

transferred to profit or loss in the period when the foreign operation is disposed.

9 Financial instruments

Financial instruments include cash at bank and on hand investments in debt and equity

securities other than those classified as long-term equity investments (see Note III.11)

receivables payables loans and borrowings and share capital.

(1) Recognition and initial measurement of financial assets and financial liabilities

A financial asset or financial liability is recognised in the balance sheet when the Group

becomes a party to the contractual provisions of a financial instrument.

A financial assets (unless it is a trade receivable without a significant financing component)

and financial liabilities is measured initially at fair value. For financial assets and financial

liabilities at fair value through profit or loss any related directly attributable transaction costs

are charged to profit or loss; for other categories of financial assets and financial liabilities

any related directly attributable transaction costs are included in their initial costs. Accounts

receivable containing no significant financing component are measured initially at transaction

prices determined by the accounting policies set out in Note III.22.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Classification and subsequent measurement of financial assets

(a) Classification of financial assets

The classification of financial assets is generally based on the business model in which

a financial asset is managed and its contractual cash flow characteristics. On initial

recognition a financial asset is classified as measured at amortised cost at fair value

through other comprehensive income (“FVOCI”) or at fair value through profit or loss

(“FVTPL”).

Financial assets are not reclassified subsequent to their initial recognition unless the

Group changes its business model for managing financial assets in which case all

affected financial assets are reclassified on the first day of the first reporting period

following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following

conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is to hold assets to collect

contractual cash flows; and

- its contractual terms give rise on specified dates to cash flows that are solely

payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and

is not designated as at FVTPL:

- it is held within a business model whose objective is achieved by both collecting

contractual cash flows and selling financial assets; and

- its contractual terms give rise on specified dates to cash flows that are solely

payments of principal and interest on the principal amount outstanding.On initial recognition of an equity investment that is not held for trading the Group may

irrevocably elect to present subsequent changes in the investment’s fair value in other

comprehensive income. This election is made on an investment-by-investment basis.The instrument meets the definition of equity from the perspective of the issuer.

All financial assets not classified as measured at amortised cost or FVOCI as described

above are measured at FVTPL. On initial recognition the Group may irrevocably

designate a financial asset that otherwise meets the requirements to be measured at

amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces

an accounting mismatch that would otherwise arise.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The business model refers to how the Group manages its financial assets in order to

generate cash flows. That is the Group’s business model determines whether cash

flows will result from collecting contractual cash flows selling financial assets or both.The Group determines the business model for managing the financial assets according

to the facts and based on the specific business objective for managing the financial

assets determined by the Group’s key management personnel.In assessing whether the contractual cash flows are solely payments of principal and

interest the Group considers the contractual terms of the instrument. For the purposes

of this assessment ‘principal’ is defined as the fair value of the financial asset on initial

recognition. ‘Interest’ is defined as consideration for the time value of money and for the

credit risk associated with the principal amount outstanding during a particular period of

time and for other basic lending risks and costs as well as a profit margin. The Group

also assesses whether the financial asset contains a contractual term that could change

the timing or amount of contractual cash flows such that it would not meet this condition.(b) Subsequent measurement of financial assets

- Financial assets at FVTPL

These financial assets are subsequently measured at fair value. Net gains and

losses including any interest or dividend income are recognised in profit or loss

unless the financial assets are part of a hedging relationship.

- Financial assets at amortised cost

These assets are subsequently measured at amortised cost using the effective

interest method. A gain or loss on a financial asset that is measured at amortised

cost and is not part of a hedging relationship shall be recognised in profit or loss

when the financial asset is derecognised through the amortisation process or in

order to recognise impairment gains or losses.

- Debt investments at FVOCI

These assets are subsequently measured at fair value. Interest income calculated

using the effective interest method impairment and foreign exchange gains and

losses are recognised in profit or loss. Other net gains and losses are recognised in

other comprehensive income. On derecognition gains and losses accumulated in

other comprehensive income are reclassified to profit or loss.

- Equity investments at FVOCI

These assets are subsequently measured at fair value. Dividends are recognised as

income in profit or loss. Other net gains and losses are recognised in other

comprehensive income. On derecognition gains and losses accumulated in other

comprehensive income are reclassified to retained earnings.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(3) Classification and subsequent measurement of financial liabilities

Financial liabilities are classified as measured at FVTPL or amortised cost by the Group.

- Financial liabilities at FVTPL

A financial liability is classified as at FVTPL if it is classified as held-for-trading (including

derivative financial liability) or it is designated as such on initial recognition.

Financial liabilities at FVTPL are subsequently measured at fair value and net gains and

losses including any interest expense are recognised in profit or loss unless the financial

liabilities are part of a hedging relationship.

- Financial liabilities at amortised cost

These financial liabilities are subsequently measured at amortised cost using the effective

interest method.

(4) Offsetting

Financial assets and financial liabilities are generally presented separately in the balance

sheet and are not offset. However a financial asset and a financial liability are offset and the

net amount is presented in the balance sheet when both of the following conditions are

satisfied:

- The Group currently has a legally enforceable right to set off the recognised amounts；

- The Group intends either to settle on a net basis or to realise the financial asset and settle

the financial liability simultaneously.

(5) Derecognition of financial assets and financial liabilities

Financial asset is derecognised when one of the following conditions is met:

- the Group’s contractual rights to the cash flows from the financial asset expire;

- the financial asset has been transferred and the Group transfers substantially all of the

risks and rewards of ownership of the financial asset; or；

- the financial asset has been transferred although the Group neither transfers nor retains

substantially all of the risks and rewards of ownership of the financial asset it does not

retain control over the transferred asset.Where a transfer of a financial asset in its entirety meets the criteria for derecognition the

difference between the two amounts below is recognised in profit or loss:

- the carrying amount of the financial asset transferred measured at the date of

derecognition;

- the sum of the consideration received from the transfer and when the transferred financial

asset is a debt investment at FVOCI any cumulative gain or loss that has been recognised

directly in other comprehensive income for the part derecognised.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The Group derecognises a financial liability (or part of it) only when its contractual obligation

(or part of it) is extinguished.

(6) Impairment

The Group recognises loss allowances for expected credit loss (ECL) on:

- financial assets measured at amortised cost;

- financial investments at fair value through other comprehensive income

Financial assets measured at fair value including debt investments or equity securities at

FVPL equity securities designated at FVOCI and derivative financial assets are not subject

to the ECL assessment.Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the

present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity

in accordance with the contract and the cash flows that the Group expects to receive).The maximum period considered when estimating ECLs is the maximum contractual period

(including extension options) over which the Group is exposed to credit risk.Lifetime ECLs are the ECLs that result from all possible default events over the expected life

of a financial instrument.

12-month ECLs are the portion of ECLs that result from default events that are possible within

the 12 months after the balance sheet date (or a shorter period if the expected life of the

instrument is less than 12 months).

For accounts receivable loss allowance always measured at an amount equal to lifetime

ECLs. ECLs on these financial assets are estimated using a provision matrix based on the

Group’s historical credit loss experience adjusted for factors that are specific to the debtors

and an assessment of both the current and forecast general economic conditions at the

balance sheet date.

For assets other than accounts receivable that meet one of the following conditions loss

allowance are measured at an amount equal to 12-month ECLs. For all other financial

instruments the Group recognises a loss allowance equal to lifetime ECLs:

- If the financial instrument is determined to have low credit risk at the balance sheet date;

- If the credit risk on a financial instrument has not increased significantly since initial

recognition.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Financial instruments that have low credit risk

The credit risk on a financial instrument is considered low if the financial instrument has a low

risk of default the borrower has a strong capacity to meet its contractual cash flow obligations

in the near term and adverse changes in economic and business conditions in the longer term

may but will not necessarily reduce the ability of the borrower to fulfil its contractual cash flow

obligations.Significant increases in credit risk

In assessing whether the credit risk of a financial instrument has increased significantly since

initial recognition the Group compares the risk of default occurring on the financial instrument

assessed at the balance sheet date with that assessed at the date of initial recognition.When determining whether the credit risk of a financial asset has increased significantly since

initial recognition and when estimating ECL the Group considers reasonable and supportable

information that is relevant and available without undue cost or effort including

forward-looking information. In particular the following information is taken into account:

- failure to make payments of principal or interest on their contractually due dates;

- an actual or expected significant deterioration in a financial instrument’s external or internal

credit rating (if available);

- an actual or expected significant deterioration in the operating results of the debtor; and

- existing or forecast changes in the technological market economic or legal environment

that have a significant adverse effect on the debtor’s ability to meet its obligation to the

Group.

Depending on the nature of the financial instruments the assessment of a significant increase

in credit risk is performed on either an individual basis or a collective basis. When the

assessment is performed on a collective basis the financial instruments are grouped based

on shared credit risk characteristics such as past due status and credit risk ratings.The Group assumes that the credit risk on a financial asset has increased significantly if it is

more than 30 days past due.

Credit-impaired financial assets

At each balance sheet date the Group assesses whether financial assets carried at

amortised cost and debt investments at FVOCI are credit-impaired. A financial asset is

‘credit-impaired’ when one or more events that have a detrimental impact on the estimated

future cash flows of the financial asset have occurred. Evidence that a financial asset is

credit-impaired includes the following observable data:

- significant financial difficulty of the borrower or issuer;

- a breach of contract such as a default or delinquency in interest or principal payments;

- for economic or contractual reasons relating to the borrower’s financial difficulty the Group

having granted to the borrower a concession that would not otherwise consider;

- it is probable that the borrower will enter bankruptcy or other financial reorganisation; or

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

- the disappearance of an active market for that financial asset because of financial

difficulties.Presentation of allowance for ECL

ECLs are remeasured at each balance sheet date to reflect changes in the financial

instrument’s credit risk since initial recognition. Any change in the ECL amount is recognised

as an impairment gain or loss in profit or loss. The Group recognises an impairment gain or

loss for all financial instruments with a corresponding adjustment to their carrying amount

through a loss allowance account except for debt investments that are measured at FVOCI

for which the loss allowance is recognised in other comprehensive income.Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the

extent that there is no realistic prospect of recovery. A write-off constitutes a derecognition

event. This is generally the case when the Group determines that the debtor does not have

assets or sources of income that could generate sufficient cash flows to repay the amounts

subject to the write-off. However financial assets that are written off could still be subject to

enforcement activities in order to comply with the Group’s procedures for recovery of amounts

due.Subsequent recoveries of an asset that was previously written off are recognised as a

reversal of impairment in profit or loss in the period in which the recovery occurs.

(7) Equity instrument

The consideration received from the issuance of equity instruments net of transaction costs is

recognised in shareholders’ equity. Consideration and transaction costs paid by the Company

for repurchasing self-issued equity instruments are deducted from shareholders’ equity.When the Company repurchases its own shares those shares are treated as treasury shares.

All expenditure relating to the repurchase is recorded in the cost of the treasury shares with

the transaction recording in the share register. Treasury shares are excluded from profit

distributions and are presented as a deduction under shareholders’ equity in the balance

sheet.

10 Inventories

(1) Classification and cost

Inventories include raw materials work in progress and reusable materials. Inventories are

initially measured at cost. Cost of inventories comprises all costs of purchase costs of

conversion and other expenditure incurred in bringing the inventories to their present location

and condition. In addition to the purchase cost of raw materials work in progress and finished

goods include direct labour costs and an appropriate allocation of production overheads.

Agricultural products harvested are reported in accordance with the CAS No.1 - Inventories.

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Measurement method of cost of inventories

Cost of inventories is calculated using the weighted average method.

Consumables including low-value consumables and packaging materials are amortised when

they are used. The amortisation charge is included in the cost of the related assets or

recognised in profit or loss for the current period.

(3) Basis for determining the net realisable value and method for provision for obsolete

inventories

At the balance sheet date inventories are carried at the lower of cost and net realisable value.

Net realisable value is the estimated selling price in the ordinary course of business less the

estimated costs of completion and the estimated costs necessary to make the sale and

relevant taxes. The net realisable value of materials held for use in the production is

measured based on the net realisable value of the finished goods in which they will be

incorporated. The net realisable value of the inventory held to satisfy sales or service

contracts is measured based on the contract price to the extent of the quantities specified in

sales contracts and the excess portion of inventories is measured based on general selling

prices.

Any excess of the cost over the net realisable value of each item of inventories is recognised

as a provision for impairment and is recognised in profit or loss.

(4) Inventory count system

The Group maintains a perpetual inventory system.

11 Long-term equity investments

(1) Investment cost of long-term equity investments

(a) Long-term equity investments acquired through a business combination

- The initial cost of a long-term equity investment acquired through a business

combination involving entities under common control is the Company’s share of the

carrying amount of the subsidiary’s equity in the consolidated financial statements of

the ultimate controlling party at the combination date. The difference between the

initial investment cost and the carrying amount of the consideration given is adjusted

to the share premium in the capital reserve with any excess adjusted to retained

earnings. For a long-term equity investment in a subsidiary acquired through a

business combination achieved in stages which do not form a bundled transaction

and involving entities under common control the Company determines the initial cost

of the investment in accordance with the above policies. The difference between this

initial cost and the sum of the carrying amount of previously-held investment and the

consideration paid for the shares newly acquired is adjusted to capital premium in the

capital reserve with any excess adjusted to retained earnings.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

- For a long-term equity investment obtained through a business combination not

involving enterprises under common control the initial cost comprises the aggregate

of the fair value of assets transferred liabilities incurred or assumed and equity

securities issued by the Company in exchange for control of the acquiree. For a

long-term equity investment obtained through a business combination not involving

entities under common control and achieved through multiple transactions in stages

which do not form a bundled transaction the initial cost comprises the carrying

amount of the previously-held equity investment in the acquiree immediately before

the acquisition date and the additional investment cost at the acquisition date.(b) Long-term equity investments acquired other than through a business combination

- A long-term equity investment acquired other than through a business combination is

initially recognised at the amount of cash paid if the Group acquires the investment

by cash or at the fair value of the equity securities issued if an investment is acquired

by issuing equity securities.

(2) Subsequent measurement of long-term equity investment

(a) Investments in subsidiaries

In the Company’s separate financial statements long-term equity investments in

subsidiaries are accounted for using the cost method unless the investment is classified

as held for sale (See Note III. 27). Except for cash dividends or profit distributions

declared but not yet distributed that have been included in the price or consideration

paid in obtaining the investments the Company recognises its share of the cash

dividends or profit distributions declared by the investee as investment income for the

current period.The investments in subsidiaries are stated in the balance sheet at cost less

accumulated impairment losses.

For the impairment of the investments in subsidiaries refer to Note III.20.

In the Group’s consolidated financial statements subsidiaries are accounted for in

accordance with the policies described in Note III.6.(b) Investments in joint ventures

A joint venture is an arrangement whereby the Group and other parties have joint control

(see Note III.11(3)) and rights to the net assets of the arrangement.

A long-term equity investment in a joint venture is accounted for using the equity method

for subsequent measurement unless the investment is classified as held for sale (see

Note III.27).Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The accounting treatments under the equity method adopted by the Group are as

follows:

- Where the initial cost of a long-term equity investment exceeds the Group’s interest

in the fair value of the investee’s identifiable net assets at the date of acquisition the

investment is initially recognised at cost. Where the initial investment cost is less than

the Group’s interest in the fair value of the investee’s identifiable net assets at the

date of acquisition the investment is initially recognised at the investor’s share of the

fair value of the investee’s identifiable net assets and the difference is recognised in

profit or loss.

- After the acquisition of the investment the Group recognises its share of the

investee’s profit or loss and other comprehensive income as investment income or

losses and other comprehensive income respectively and adjusts the carrying

amount of the investment accordingly. Once the investee declares any cash

dividends or profit distributions the carrying amount of the investment is reduced by

the amount attributable to the Group. Changes in the Group’s share of the investee’s

owners’ equity other than those arising from the investee’s net profit or loss othercomprehensive income or profit distribution (referred to as “other changes in owners’equity”) is recognised directly in the Group’s equity and the carrying amount of the

investment is adjusted accordingly.- In calculating its share of the investee’s net profits or losses other comprehensive

income and other changes in owners’ equity the Group recognises investment

income and other comprehensive income after making appropriate adjustments to

align the accounting policies or accounting periods with those of the Group based on

the fair value of the investee’s identifiable net assets at the date of acquisition.Unrealised profits and losses resulting from transactions between the Group and its

associates or joint ventures are eliminated to the extent of the Group’s interest in the

associates or joint ventures. Unrealised losses resulting from transactions between

the Group and its associates or joint ventures are eliminated in the same way as

unrealised gains but only to the extent that there is no impairment.- The Group discontinues recognising its share of further losses of the investee after the

carrying amount of the long-term equity investment and any long-term interest that in

substance forms part of the Group’s net investment in the associate is reduced to

zero except to the extent that the Group has an obligation to assume additional

losses. If the joint venture subsequently reports net profits the Group resumes

recognising its share of those profits only after its share of the profits equals the

share of losses not recognised.

For the impairment of the investments in joint ventures and associates refer to Note

III.20.

(3) Criteria for determining the existence of joint control over an investee

Joint control is the contractually agreed sharing of control of an arrangement which exists

only when decisions about the relevant activities (activities with significant impact on the

returns of the arrangement) require the unanimous consent of the parties sharing control.The following factors are usually considered when assessing whether the Group can exercise

joint control over an investee:

- Whether no single participant party is in a position to control the investee’s related activities

unilaterally;

- Whether strategic decisions relating to the investee’s related activities require the

unanimous consent of all participant parties that sharing of control.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Significant influence is the power to participate in the financial and operating policy decisions

of an investee but does not have control or joint control over those policies.

12 Investment properties

Investment properties are properties held either to earn rental income or for capital

appreciation or for both. Investment properties are accounted for using the cost model and

stated in the balance sheet at cost less accumulated depreciation amortisation and

impairment losses and adopts a depreciation or amortisation policy for the investment

property which is consistent with that for buildings or land use rights unless the investment

property is classified as held for sale (see Note III.27). For the impairment of the investment

properties refer to Note III.20.

Category Estimated useful life (years)

Residual value rate

(%)

Depreciation rate

(%)

Plant and buildings 20-40 years 0 - 5% 2.4%-5.0%

13 Fixed assets

(1) Recognition of fixed assets

Fixed assets represent the tangible assets held by the Group for use in production of goods

supply of services for rental or for administrative purposes with useful lives over one

accounting year.The cost of a purchased fixed asset comprises the purchase price related taxes and any

directly attributable expenditure for bringing the asset to working condition for its intended use.The cost of self-constructed assets is measured in accordance with the policy set out in Note

III.14.Where the parts of an item of fixed assets have different useful lives or provide benefits to the

Group in a different pattern thus necessitating use of different depreciation rates or methods

each part is recognised as a separate fixed asset.

Any subsequent costs including the cost of replacing part of an item of fixed assets are

recognised as assets when it is probable that the economic benefits associated with the costs

will flow to the Group and the carrying amount of the replaced part is derecognised. The costs

of the day-to-day maintenance of fixed assets are recognised in profit or loss as incurred.

Fixed assets are stated in the balance sheet at cost less accumulated depreciation and

impairment losses.

(2) Depreciation of fixed assets

The cost of a fixed asset less its estimated residual value and accumulated impairment

losses is depreciated using the straight-line method over its estimated useful life unless the

fixed asset is classified as held for sale (see Note III.27).Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The estimated useful lives residual value rates and depreciation rates of each class of fixed

assets are as follows:

Class Estimated useful life (years)

Residual value rate

(%)

Depreciation rate

(%)

Plant and buildings 20-40 years 0 - 5% 2.4%-5.0%

Machinery equipment 5-30 years 0 - 5% 3.2%-20.0%

Motor vehicles 4-12 years 0 - 5% 7.9%-25.0%

Useful lives estimated residual values and depreciation methods are reviewed at least at

each year-end.

(3) For the impairment of the fixed assets refer to Note III.20.

(4) Disposal of fixed assets

The carrying amount of a fixed asset is derecognised:

- when the fixed asset is holding for disposal; or

- when no future economic benefit is expected to be generated from its use or disposal.Gains or losses arising from the retirement or disposal of an item of fixed asset are

determined as the difference between the net disposal proceeds and the carrying amount of

the item and are recognised in profit or loss on the date of retirement or disposal.

14 Construction in progress

The cost of self-constructed assets includes the cost of materials direct labour capitalised

borrowing costs (see Note III.15) and any other costs directly attributable to bringing the asset

to working condition for its intended use.

A self-constructed asset is classified as construction in progress and transferred to fixed asset

when it is ready for its intended use. No depreciation is provided against construction in

progress.

Construction in progress is stated in the balance sheet at cost less accumulated impairment

losses (see Note III.20).

15 Borrowing costs

Borrowing costs incurred directly attributable to the acquisition and construction or production

of a qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are

recognised as financial expenses when incurred.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

During the capitalisation period the amount of interest (including amortisation of any discount

or premium on borrowing) to be capitalised in each accounting period is determined as

follows:

- Where funds are borrowed specifically for the acquisition and construction or production of

a qualifying asset the amount of interest to be capitalised is the interest expense

calculated using effective interest rates during the period less any interest income earned

from depositing the borrowed funds or any investment income on the temporary investment

of those funds before being used on the asset.- To the extent that the Group borrows funds generally and uses them for the acquisition and

construction or production of a qualifying asset the amount of borrowing costs eligible for

capitalisation is determined by applying a capitalisation rate to the weighted average of the

excess amounts of cumulative expenditure on the asset over the above amounts of specific

borrowings. The capitalisation rate is the weighted average of the interest rates applicable

to the general-purpose borrowings.The effective interest rate is determined as the rate that exactly discounts estimated future

cash flow through the expected life of the borrowing or when appropriate a shorter period to

the initially recognised amount of the borrowings.

During the capitalisation period exchange differences related to the principal and interest on a

specific-purpose borrowing denominated in foreign currency are capitalised as part of the cost

of the qualifying asset. The exchange differences related to the principal and interest on

foreign currency borrowings other than a specific-purpose borrowing are recognised as a

financial expense when incurred.The capitalisation period is the period from the date of commencement of capitalisation of

borrowing costs to the date of cessation of capitalisation excluding any period over which

capitalisation is suspended. Capitalisation of borrowing costs commences when expenditure

for the asset is being incurred borrowing costs are being incurred and activities of acquisition

construction or production that are necessary to prepare the asset for its intended use are in

progress and ceases when the assets become ready for their intended use. Capitalisation of

borrowing costs should cease when the qualifying asset being constructed or produced has

reached its expected usable or saleable condition. Capitalisation of borrowing costs is

suspended when the acquisition construction or production activities are interrupted

abnormally for a period of more than three months.

16. Biological assets

The Group's biological assets are bearer biological assets.

Bearer biological assets are those that are held for the purposes of producing agricultural

produce rendering of services or rental. Bearer biological assets in the Group are vines.

Bearer biological assets are initially measured at cost. The cost of self-grown or self-bred

bearer biological assets represents the necessary directly attributable expenditure incurred

before satisfying the expected production and operating purpose including capitalised

borrowing costs.

Bearer biological assets after reaching the expected production and operating purpose are

depreciated using the straight-line method over its estimated useful life. The estimated useful

lives estimated net residual value rates and depreciation rates of bearer biological assets are

as follows:

Category Estimated useful life (years)

Estimated net

residual value rate

Depreciation rate

(%)

Vines 20 years 0% 5.0%

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The Group evaluates the useful life and expected net salvage value by considering the normal

producing life of the bearer biological assets.Useful lives estimated residual values and depreciation methods of bearer biological assets

are reviewed at least at each year-end. Any changes should be treated as changes in

accounting estimates.

For a bearer biological asset that has been sold damaged dead or destroyed any difference

between the disposal proceeds and the carrying amount of the asset (after tax deduction)

should be recognised in profit or loss for the period in which it arises.

17 Intangible assets

Intangible assets are stated in the balance sheet at cost less accumulated amortization

(where the estimated useful life is finite) and impairment losses (see Note III.20). For an

intangible asset with finite useful life its cost estimated less residual value and accumulated

impairment losses is amortised on the straight-line method over its estimated useful life

unless the intangible asset is classified as held for sale (see Note III.27).The respective amortisation periods for intangible assets are as follows:

Item Amortisation period (years)

Land use rights 40-50 years

Software licenses 5-10 years

Trademarks 10

An intangible asset is regarded as having an indefinite useful life and is not amortised when

there is no foreseeable limit to the period over which the asset is expected to generate

economic benefits for the Group. At the balance sheet date the Group had intangible assets

with infinite useful lives including the land use rights and trademarks. Land use rights with

infinite useful lives are permanent land use rights with permanent ownership held by the

Group under the relevant Chile and Australian laws arising from the Group’s acquisition of

Vi?a Indómita S.A. Vi?a Dos Andes S.A. and Bodegas Santa Alicia SPA. (collectively

referred to as the "Chile Indomita Wine Group") and the acquisition of Kilikanoon Estate Pty

Ltd.( hereinafter referred to as the "Australia Kilikanoon Estate") therefore there was no

amortisation. The right to use trademark refers to the trademark held by the Group arising

from the acquisition of the Chile Indomita Wine Group and the Australia Kilikanoon Estate with

infinite useful lives. The valuation of trademark was based on the trends in the market and

competitive environment product cycle and managing long-term development strategy.Those basis indicated the trademark will provide net cash flows to the Group within an

uncertain period. The useful life is indefinite as it was hard to predict the period that the

trademark would bring economic benefits to the Group.

18 Goodwill

The initial cost of goodwill represents the excess of cost of acquisition over the acquirer’s

interest in the fair value of the identifiable net assets of the acquiree under a business

combination not involving entities under common control.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Goodwill is not amortised and is stated in the balance sheet at cost less accumulated

impairment losses (see Note III.20). On disposal of an asset group or a set of asset groups

any attributable goodwill is written off and included in the calculation of the profit or loss on

disposal.

19 Long-term deferred expenses

Long-term deferred expenses are amortised using a straight-line method within the benefit

period. The respective amortisation periods for such expenses are as follows:

Item Amortisation period

Land requisition fee 50 years

Land lease prepayment 50 years

Greening fee 5-20 years

Leasehold improvement 3-5 years

Others 3 years

20 Impairment of assets other than inventories and financial assets

The carrying amounts of the following assets are reviewed at each balance sheet date based

on internal and external sources of information to determine whether there is any indication of

impairment:

- fixed assets

- construction in progress

- intangible assets

- Bearer biological assets

- investment properties measured using a cost model

- long-term equity investments

- goodwill

- long-term deferred expenses etc.If any indication exists the recoverable amount of the asset is estimated. In addition the

Group estimates the recoverable amounts of goodwill and intangible assets with infinite

useful lives at each year-end irrespective of whether there is any indication of impairment.Goodwill is allocated to each asset group or set of asset groups that is expected to benefit

from the synergies of the combination for the purpose of impairment testing.The recoverable amount of an asset (or asset group set of asset groups) is the higher of its

fair value (see Note III.21) less costs to sell and its present value of expected future cash

flows.

An asset group is composed of assets directly related to cash-generation and is the smallest

identifiable group of assets that generates cash inflows that are largely independent of the

cash inflows from other assets or asset groups.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The present value of expected future cash flows of an asset is determined by discounting the

future cash flows estimated to be derived from continuing use of the asset and from its

ultimate disposal to their present value using an appropriate pre-tax discount rate.

An impairment loss is recognised in profit or loss when the recoverable amount of an asset is

less than its carrying amount. A provision for impairment of the asset is recognised

accordingly. Impairment losses related to an asset group or a set of asset groups are

allocated first to reduce the carrying amount of any goodwill allocated to the asset group or set

of asset groups and then to reduce the carrying amount of the other assets in the asset group

or set of asset groups on a pro rata basis. However such allocation would not reduce the

carrying amount of an asset below the highest of its fair value less costs to sell (if

measurable) its present value of expected future cash flows (if determinable) and zero.Once an impairment loss is recognised it is not reversed in a subsequent period.

21 Fair value measurement

Unless otherwise specified the Group measures fair value as follows:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date.When measuring fair value the Group takes into account the characteristics of the particular

asset or liability (including the condition and location of the asset and restrictions if any on

the sale or use of the asset) that market participants would consider when pricing the asset or

liability at the measurement date and uses valuation techniques that are appropriate in the

circumstances and for which sufficient data and other information are available to measure

fair value. Valuation techniques mainly include the market approach the income approach

and the cost approach.

22 Revenue recognition

Revenue is the gross inflow of economic benefits arising in the course of the Group’s ordinary

activities when the inflows result in increase in shareholders’ equity other than increase

relating to contributions from shareholders. Revenue is recognised in profit or loss when it is

probable that the economic benefits will flow to the Group the revenue and costs can be

measured reliably and the following conditions are met:

(1) Sale of goods

Revenue is recognised when the general conditions stated above and the following conditions

are satisfied:

- Significant risks and rewards of ownership of goods have been transferred to the buyer;

- The Group retains neither continuing managerial involvement to the degree usually

associated with ownership nor effective control over the goods sold.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Revenue from the sale of goods is measured at the fair value of the consideration received or

receivable under the sales contract or agreement.Sales of the Group are mainly conducted by distributors. The sales are generally completed

when the goods are delivered to distributors and are signed for acceptance.

(2) Rendering of services

Revenue is measured at the fair value of the consideration received or receivable under the

contract or agreement.Where the outcome of a transaction involving the rendering of services can be estimated

reliably at the balance sheet date revenue is recognised by reference to the stage of

completion based on the proportion of services performed to date to the total services to be

performed.Where the outcome cannot be estimated reliably revenues are recognised to the extent of the

costs incurred that are expected to be recoverable and an equivalent amount is charged to

profit or loss as service cost; otherwise the costs incurred are recognised in profit or loss and

no service revenue is recognised.

(3) Interest income

Interest income is recognised on a time proportion basis with reference to the principal

outstanding and the applicable effective interest rate.

23 Employee benefits

(1) Short-term employee benefits

Employee wages or salaries bonuses social security contributions such as medical

insurance work injury insurance maternity insurance and housing fund measured at the

amount incurred or accured at the applicable benchmarks and rates are recognised as a

liability as the employee provides services with a corresponding charge to profit or loss or

included in the cost of assets where appropriate.

(2) Post-employment benefits – defined contribution plans

Pursuant to the relevant laws and regulations of the People’s Republic of China the Group

participated in a defined contribution basic pension insurance plan in the social insurance

system established and managed by government organisations. The Group makes

contributions to basic pension insurance plans based on the applicable benchmarks and rates

stipulated by the government. Basic pension insurance contributions payable are recognised

as a liability as the employee provides services with a corresponding charge to profit or loss

or included in the cost of assets where appropriate.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(3) Termination benefits

When the Group terminates the employment with employees before the employment

contracts expire or provides compensation under an offer to encourage employees to accept

voluntary redundancy a provision is recognised with a corresponding expense in profit or loss

at the earlier of the following dates:

- When the Group cannot unilaterally withdraw the offer of termination benefits because of

an employee termination plan or a curtailment proposal;

- When the Group has a formal detailed restructuring plan involving the payment of

termination benefits and has raised a valid expectation in those affected that it will carry out

the restructuring by starting to implement that plan or announcing its main features to those

affected by it.

24 Government grants

Government grants are non-reciprocal transfers of monetary or non-monetary assets from the

government to the Group except for capital contributions from the government in the capacity

as an investor in the Group.

A government grant is recognised when there is reasonable assurance that the grant will be

received and that the Group will comply with the conditions attaching to the grant.If a government grant is in the form of a transfer of a monetary asset it is measured at the

amount received or receivable. If a government grant is in the form of a transfer of a

non-monetary asset it is measured at fair value.Government grants related to assets are grants whose primary condition is that the Group

qualifying for them should purchase construct or otherwise acquire long-term assets.Government grants related to income are grants other than those related to assets. A

government grant related to an asset is recognised as deferred income and amortised over

the useful life of the related asset on a reasonable and systematic manner as other income or

non-operating income. A grant that compensates the Company for expenses or losses to be

incurred in the future is recognised as deferred income and included in other income or

non-operating income in the periods in which the expenses or losses are recognised. Or

included in other income or non-operating income directly.

25 Income tax

Current tax and deferred tax are recognised in profit or loss except to the extent that they

relate to a business combination or items recognised directly in equity (including other

comprehensive income).

Current tax is the expected tax payable calculated at the applicable tax rate on taxable

income for the year plus any adjustment to tax payable in respect of previous years.

At the balance sheet date current tax assets and liabilities are offset only if the Group has a

legally enforceable right to set them off and also intends either to settle on a net basis or to

realise the asset and settle the liability simultaneously.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Deferred tax assets and deferred tax liabilities arise from deductible and taxable temporary

differences respectively being the differences between the carrying amounts of assets and

liabilities for financial reporting purposes and their tax bases which include the deductible

losses and tax credits carried forward to subsequent periods. Deferred tax assets are

recognised to the extent that it is probable that future taxable profits will be available against

which deductible temporary differences can be utilised.

Deferred tax is not recognised for the temporary differences arising from the initial recognition

of assets or liabilities in a transaction that is not a business combination and that affects

neither accounting profit nor taxable profit (or deductible loss). Deferred tax is not recognised

for taxable temporary differences arising from the initial recognition of goodwill.

At the balance sheet date deferred tax is measured based on the tax consequences that

would follow from the expected manner of recovery or settlement of the carrying amounts of

the assets and liabilities using tax rates enacted at the balance sheet date that are expected

to be applied in the period when the asset is recovered or the liability is settled.The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is

reduced to the extent that it is no longer probable that the related tax benefits will be utilised.Such reduction is reversed to the extent that it becomes probable that sufficient taxable profits

will be available.

At the balance sheet date deferred tax assets and deferred tax liabilities are offset if all of the

following conditions are met:

- the taxable entity has a legally enforceable right to offset current tax liabilities and current

tax assets;

- they relate to income taxes levied by the same tax authority on either:

- the same taxable entity; or

- different taxable entities which intend either to settle the current tax liabilities and current

tax assets on a net basis or to realise the assets and settle the liabilities simultaneously

in each future period in which significant amounts of deferred tax liabilities or deferred

tax assets are expected to be settled or recovered.

26 Operating leases and finance leases

A lease is classified as either a finance lease or an operating lease. A finance lease is a lease

that transfers substantially all the risks and rewards incidental to ownership of a leased asset

to the lessee irrespective of whether the legal title to the asset is eventually transferred. An

operating lease is a lease other than a finance lease.

(1) Operating lease charges

Rental payments under operating leases are recognised as part of the cost of another related

asset or as expenses on a straight-line basis over the lease term. Contingent rental payments

are expensed as incurred.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Assets leased out under operating leases

Fixed assets leased out under operating leases except for investment properties (see Note

III.12) are depreciated in accordance with the Group’s depreciation policies described in Note

III.13(2). Impairment losses are recognised in accordance with the accounting policy

described in Note III.20. Income derived from operating leases is recognised in profit or loss

using the straight-line method over the lease term. If initial direct costs incurred in respect of

the assets leased out are material the costs are initially capitalised and subsequently

amortised in profit or loss over the lease term on the same basis as the lease income.Otherwise the costs are charged to profit or loss immediately.

27 Assets held for sale

The Group classified a non-current asset or disposal group as held for sale when the carrying

amount of a non-current asset or disposal group will be recovered through a sale transaction

rather than through continuing use.

A disposal group refers to a group of assets to be disposed of by sale or otherwise together

as a whole in a single transaction and liabilities directly associated with those assets that will

be transferred in the transaction.

A non-current asset or disposal group is classified as held for sale when all the following

criteria are met:

- According to the customary practices of selling such asset or disposal group in

similar transactions the non-current asset or disposal group must be available for

immediate sale in their present condition subject to terms that are usual and customary for

sales of such assets or disposal groups;

- Its sale is highly probable that is the Group has made a resolution on a sale plan

and has obtained a firm purchase commitment. The sale is to be completed within one

year.Non-current assets or disposal groups held for sale are stated at the lower of carrying amount

and fair value (see Note III.21) less costs to sell (except financial assets (see Note III.9)

deferred tax assets (see Note III.25) and investment properties subsequent measured at fair

value (see Note III. 12) initially and subsequently. Any excess of the carrying amount over the

fair value (see Note III.21) less costs to sell is recognised as an impairment loss in profit or

loss.

28 Profit distributions

Dividends or profit distributions proposed in the profit appropriation plan which will be

approved after the balance sheet date are not recognised as a liability at the balance sheet

date but are disclosed in the notes separately.

29 Related parties

If a party has the power to control jointly control or exercise significant influence over another

party or vice versa or where two or more parties are subject to common control or joint

control from another party they are considered to be related parties. Related parties may be

individuals or enterprises. Enterprises with which the Company is under common control only

from the State and that have no other related party relationships are not regarded as related

parties.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

In addition to the related parties stated above the Company determines related parties based

on the disclosure requirements of Administrative Procedures on the Information Disclosures of

Listed Companies issued by the CSRC.

30 Segment reporting

The Group is principally engaged in the production and sales of wine brandy and sparkling

wine in China France Spain Chile and Australia. In accordance with the Group's internal

organisation structure management requirements and internal reporting system the Group's

operation is divided into four parts: China Spain France Chile and Australia. The

management periodically evaluates segment results in order to allocate resources and

evaluate performances. In 2019 over 89% of revenue more than 98% of profit and over 92%

of non-current assets derived from China / are located in China. Therefore the Group does not

need to disclose additional segment report information.

31 Significant accounting estimates and judgements

The preparation of the financial statements requires management to make estimates and

assumptions that affect the application of accounting policies and the reported amounts of

assets liabilities income and expenses. Actual results may differ from these estimates.

Estimates as well as underlying assumptions and uncertainties involved are reviewed on an

ongoing basis. Revisions to accounting estimates are recognised in the period in which the

estimate is revised and in any future periods affected.

(1) Significant accounting estimates

Except for accounting estimates relating to depreciation and amortisation of assets such as

investment properties fixed assets bearer biological assets and intangible assets (see Notes

III. 12 13 16 and 17) and provision for impairment of various types of assets (see Notes V.3

6 7 11 12 13 14 15 and Note XV.1 and 3). Other significant accounting estimates are as

follows:

(i) Note V. 17 – Recognition of deferred tax asset;

(ii) Note IX. – Fair value measurements of financial instruments.

32 Changes in significant accounting policies and accounting estimates

(1) Description and reasons of changes in accounting policies

In 2019 the Group has adopted the following revised accounting standards issued by the

MOF recently:

- Accounting Standard for Business Enterprises No. 22 — Recognition and Measurement of

Financial Instruments (revised) Accounting Standard for Business Enterprises No. 23 —

Transfer of Financial Instruments (revised) Accounting Standard for Business Enterprises

No. 22 — Hedging Accounting (revised) and Accounting Standard for Business EnterprisesNo. 37 — Presentation of Financial Instruments (revised) (hereinafter referred to as “newfinancial instrument standard”)

- Notice on Revision of the 2019 Illustrative Financial Statements (Caikuai [2019] No.6)

- Notice on Revision of Illustrative Consolidated Financial Statements (2019 version) (Cai

Kuai [2019] No. 16).Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

- CAS No.7 – Exchange of Non-monetary Assets (Revised) (“CAS 7 (2019)”)

- CAS No.12 – Debt Restructuring (Revised) (“CAS 12 (2019)”)

(a) Presentation of financial statements

The Group has prepared financial statements for the year ended 31 December 2019 in

accordance with the financial statement format specified in Caikuai [2019] No.6 and

Caikuai [2019] No.16. The Group has applied the new presentation requirements

retrospectively.

Affected assets and liabilities items in the consolidated and company balance sheets as

at 31 December 2018:

The Group

Before

adjustments Adjustments

After

adjustments

Bills and accounts receivable 530821071 (530821071) -

Bills receivable - 288667988 288667988

Accounts receivable - 242153083 242153083

Bills and accounts payable 713572881 (713572881) -

Accounts payable - 713572881 713572881

Deferred income due within one year 15860254 (15860254) -

Deferred income 70367039 15860254 86227293

Total 1330621245 - 1330621245

The Company

Before

adjustments Adjustments

After

adjustments

Bills and accounts receivable 41333227 (41333227) -

Bills receivable - 39885254 39885254

Accounts receivable - 1447973 1447973

Bills and accounts payable 132704304 (132704304) -

Accounts payable - 132704304 132704304

Deferred income due within one year 3433054 (3433054) -

Deferred income 8910918 3433054 12343972

Total 186381503 - 186381503

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(b) New financial instrument standards

The new financial instrument standards revise the Accounting Standard for Business

Enterprises No. 22 — Recognition and Measurement of Financial Instruments

Accounting Standard for Business Enterprises No. 23 — Transfer of Financial

Instruments Accounting Standard for Business Enterprises No. 24 — Hedging and

Accounting Standard for Business Enterprises No. 37 — Presentation of FinancialInstruments issued by the MOF in 2006 (hereinafter referred to as “previous financialinstrument standards”).The new financial instrument standards classify financial assets into three basic

categories: (1) financial assets measured at amortised cost; (2) financial assets

measured at FVOCI;(3) financial assets at FVTPL. The classification of financial assets

under new financial instruments standards is generally based on the business model in

which a financial asset is managed and its contractual cash flow characteristics. New

financial instruments standards cancel the previous categories of held to maturity

investments loans and receivables and available for sale financial assets under

previous financial instruments standards. Under new financial instruments standards

derivatives embedded in contracts where the host is a financial asset are never

separated. Instead the hybrid financial instrument as a whole is assessed for

classification.New financial instruments standards replace the “incurred loss” model in previous

financial instruments standards with the ECL model. The ECL model requires an

ongoing measurement of credit risk associated with a financial asset and therefore

recognises ECLs earlier than under the “incurred loss” accounting model in previous

financial instruments standards.Retrospective adjustments were made to classification and measurement (including

impairment) of financial instruments not derecognised on the date of effectiveness of the

standards (i.e. 1 January 2019) according to transition requirements of the new financial

instrument standards. The Group has not yet adjusted the financial statement and

recognises the difference between the previous carrying amount of financial instruments

and the new carrying amount on the date of effectiveness of the standards as retained

earnings or other comprehensive income at the beginning 2019.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(i) The impact of adoption new financial instrument standards on the consolidated

and company balance sheets as at 31 December 2018 after retrospective

adjustments in accordance with Caikuai [2019] No.6 and Caikuai [2019] No.16 are

summarised as follows:

The Group 31 December 2018 1 January 2019 Adjustments

Assets

Current assets

Bills receivable 288667988 - (288667988)

Accounts receivable 242153083 232099034 (10054049)

Receivables under financing - 288667988 288667988

Available-for-sale financial assets 467251 - (467251)

Other non-current financial assets - 467251 467251

Deferred tax assets 285436259 287949771 2513512

The Company 31 December 2018 1 January 2019 Adjustments

Assets

Bills receivable 39885254 - (39885254)

Receivables under financing - 39885254 39885254

(ii) Impact of classification of financial instruments

? The Group endorses some bank acceptance bills according to its daily capital

management needs. Bank acceptance bills of the Group are managed within a

business model whose objective is to collect contractual cash flows and sell the

financial asset. As at 1 January 2019 the Group reclassified bank acceptance

bills of its subsidiaries of RMB288667988 to financial assets at fair value

through other comprehensive income and presented as receivables under

financing.

? As at 31 December 2018 the carrying amount of unlisted equity investment

measured at cost held by the Group was RMB467251. As at 1 January 2019

the Group designated the equity investment as financial assets at fair value

through profit or loss and presented as other non-current financial assets.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Based on balance sheets as at 31 December 2018 after retrospective adjustments in accordance with Caikuai [2019] No.6 and

Caikuai [2019] No.16 results of the classification and measurement of financial assets in accordance with the previous financial

instrument standards and the new financial instrument standards are summarised as follows:

The Group

Previous financial instrument standards

(31 December 2018)

New financial instrument standards

(1 January 2019)

Item Type of measurement Carrying amount Item Type of measurement Carrying amount

Cash at bank and on

hand

Amortised cost (loans and

receivables) 1475700477

Cash at bank and on

hand Amortised cost 1475700477

Bills receivable Amortised cost (loans and receivables) 288667988

Receivables under

financing

Measured at fair value

through other

comprehensive income

288667988

Accounts receivable Amortised cost (loans and receivables) 242153083 Accounts receivable Amortised cost 232099034

Other receivables Amortised cost (loans and receivables) 22636086 Other receivables Amortised cost 22636086

Available-for-sale

financial assets

Measured at cost (equity

instrument) 467251

Other non-current

financial assets

Measured at fair value

through profit or loss

(standard requirements)

467251

Other current assets Amortised cost (loans and receivables) 258676396 Other current assets Amortised cost 258676396

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The Company

Previous financial instrument standards

(31 December 2018)

New financial instrument standards

(1 January 2019)

Item Type of measurement Carrying amount Item Type of measurement Carrying amount

Cash at bank and on

hand

Amortised cost (loans and

receivables) 624588809

Cash at bank and on

hand Amortised cost 624588809

Bills receivable Amortised cost (loans and receivables) 39885254

Receivables under

financing

Measured at fair value

through other

comprehensive income

39885254

Accounts receivable Amortised cost (loans and receivables) 1447973 Accounts receivable Amortised cost 1447973

Other receivables Amortised cost (loans and receivables) 1025643356 Other receivables Amortised cost 1025643356

Other current assets Amortised cost (loans and receivables) 24704844 Other current assets Amortised cost 24704844

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Based on balance sheets as at 31 December 2018 after retrospective

adjustments in accordance with Caikuai [2019] No.6 and Caikuai [2019] No.16

adjustment of the carrying amount of the Previous financial assets to the carrying

amount of the new financial assets classified and measured in accordance with

the new financial instruments standards is as follows:

The Group

Carrying amount

under original

financial instruments

standards (31

December 2018)

Reclassification Remeasurement

Carrying amount

under new financial

instruments

standards (31

December 2019)

Amortised cost

Receivables

Balance under previous

financial instruments

standards

242153083 - - -

Re-measurement: ECL

allowance - - (10054049) -

Balance under new financial

instruments standards - - - 232099034

Bills receivable

Balance under previous

financial instruments

standards

288667988 - - -

Less: transferred to FVOCI

(new financial

instrument standards)

- (288667988) - -

Balance under new financial

instruments standards - - - -

Available-for-sale financial

assets

Balance under previous

financial instruments

standards

467251 - - -

Less: transferred to FVTPL

(new financial

instrument standards)

- (467251) - -

Balance under new financial

instruments standards - - - -

FVOCI

Receivables under financing

Balance under previous

financial instruments

standards

- - - -

Add: Transferred from bills

receivable (under

previous financial

instrument standards)

- 288667988 - -

Balance under new financial

instruments standards - - - 288667988

FVTPL

Financial assets held for

trading (including other

non-current financial

assets)

Balance under previous

financial instruments

standards

- - - -

Add: transferred from

available-for-sale

financial assets (under

previous financial

instrument standards)

- 467251 - -

Balance under new financial

instruments standards - - - 467251

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The Company

Balance under

previous financial

instruments standards

(31 December 2018)

Reclassification Remeasurement

Carrying amount

under new financial

instruments

standards (31

December 2019)

Amortised cost

Bills receivable

Balance under previous

financial instruments

standards

39885254 - - -

Less: transferred to FVOCI

(new financial

instrument standards)

- (39885254) - -

Balance under new financial

instruments standards - - - -

FVOCI

Receivables under financing

Balance under previous

financial instruments

standards

- - - -

Add: Transferred from bills

receivable (under

previous financial

instrument standards)

- 39885254 - -

按新金融工具准则列示的余额 - - - 39885254

(iii) Impacts of adoption of ECL measurement

The Group applies the new ECL model to the following items:

- financial assets measured at amortised cost;

- financial investments at fair value through other comprehensive income.The new ECL model do not apply to investments in equity instruments.

Based on balance sheets as at 31 December 2018 after retrospective adjustments

in accordance with Caikuai [2019] No.6 and Caikuai [2019] No.16 adjustment of

the closing amount of the previous financial instrument provision for impairments

to the new provision for impairments classified and measured in accordance with

the new financial instrument standards is as follows:

The Group

Type of measurement

Provision for losses

under previous financial

instrument standards /

Estimated liabilities

recognised in

accordance with

contingency standard

(31 December 2018)

Reclassification Remeasurement

Loss allowance

under new financial

instruments

standards

(1 January 2019)

Loans and receivables

(previous financial

instrument standards) /

financial assets

measured at amortised

cost

(new financial instrument

standards)

Accounts receivable - - 10054049 10054049

Total - - 10054049 10054049

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The CAS 7 (2019) specifies the applicability of standard for exchange of non-monetary

assets and clarifies the accounting treatment for the situation in which the recognising

timing of assets received is inconsistent with the derecognising timing of assets given

up. The standard also revises the measurement principle for several assets to be

received or given up at the same time during exchange of non-monetary assets at fair

value. Additionally the standard includes disclosure requirements on whether the

exchange of non-monetary assets has commercial substance and the reasons behind

this determination.The effective date of CAS 7 (2019) is 10 June 2019. Exchanges of non-monetary assets

that occurred between 1 January 2019 and the effective date shall be adjusted

according to CAS 7 (2019). Retrospective adjustment is not required for exchanges of

non-monetary assets prior to 1 January 2019. The adoption of the Standard did not

have any material impact on the financial position and financial performance of the

Group.(d) CAS 12 (2019)

CAS 12 (2019) modifies the definition of debt restructuring to specify the scope of this

standard as well as the application of relevant financial instruments standards with

respect to the recognition measurement and presentation of financial instruments

involved in debt restructuring. For debt restructuring in which a debt is settled by the

transfer of assets CAS 12 (2019) modifies the principle of measurement for initial

recognition of non-financial assets received by the creditor and gains or losses of the

debtor from debt restructuring are recognised without distinguishing whether they are

gains or losses from asset transfer or debt restructuring. For debt restructuring in which

a debt is settled by the issuance of equity instruments to the creditor CAS 12 (2019)

revises the principle of measurement for initial recognition of its share of equity by the

creditor and provides more guidance on the principle of measurement for initial

recognition of equity instruments by the debtor.The effective date of CAS 12 (2019) is 17 June 2019. Debt restructuring that occurred

between 1 January 2019 and the effective date shall be adjusted according to CAS 12

(2019). Retrospective adjustment is not required for debt restructuring prior to 1 January

2019. The adoption of the Standard did not have any material impact on the financial

position and financial performance of the Group.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

IV. Taxation

1 Main types of taxes and corresponding tax rates

Tax type Tax basis Tax rate

Value-added tax

(VAT)

Output VAT is calculated on

product sales and taxable

services revenue. The basis for

VAT payable is to deduct input

VAT from the output VAT for

the period

13% 9% 6% (China after 1 April

2019) 16% 10% 6% (China 1 May

2018 to 31 March 2019) 17% 13%

6% (China before 1 May 2018) 20%

(France) 21% (Spain) 19% (Chile)

and 10% (Australia)

Consumption tax Based on taxable revenue 10% of the price 20% of the price and RMB1000 each ton (China)

Urban

maintenance and

construction tax

Based on VAT paid 7% (China)

Corporate

income tax Based on taxable profits

25% (China) 28% (France) 28%

(Spain) 27% (Chile) 30% (Australia)

Other than tax incentives stated in Note IV. 2 applicable tax rates of the Group in 2019 and

2018 are all stated as above.

2 Tax preferential treatments

Ningxia Changyu Grape Growing Co. Ltd.("Ningxia Growing") a subsidiary of the Group

whose principal activity is grape growing is incorporated in Ningxia Huizu Autonomous

Region. According to clause 27 of the Corporate Income Tax Law of the People’s Republic of

China and clause 86 of the Implementation Rules of Enterprise Income Tax Law of the

People’s Republic of China Ningxia Growing enjoys an exemption of corporate income tax.Yantai Changyu Grape Growing Co. Ltd.(" Grape Growing ") a branch of the Company

whose principal activity is grape growing is incorporated in Zhifu District Yantai City

Shandong Province. According to clause 27 of the Corporate Income Tax Law of the People’s

Republic of China and clause 86 of the Implementation Rules of Enterprise Income Tax Law

of the People’s Republic of China Grape Growing enjoys an exemption of corporate income

tax.

Beijing Changyu AFIP Agriculture Development Co. Ltd ("Agriculture Development") a

subsidiary of the Group whose principal activity is grape growing is incorporated in Miyun

Beijing. According to clause 27 of the Corporate Income Tax Law of the People’s Republic of

China and clause 86 of the Implementation Rules of Enterprise Income Tax Law of the

People’s Republic of China Agriculture Development enjoys an exemption of corporate

income tax.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Xinjiang Tianzhu Wine Co. Ltd. ("Xinjiang Tianzhu") a subsidiary of the Company is an

enterprise of wine production and sales incorporated in Shihezi city Xinjiang Weizu

Autonomous. In accordance with the Notice on Tax Policy Issues concerning Further

Implementation of the Western China Development Strategy (Cai Shui [2011] No.58) Xinjiang

Tianzhu is qualified to enjoy preferential taxation policies which means it can pay corporate

income tax at a preferential rate of 15% for the period from 2015 to 2020.Xinjiang Chateau Changyu Baron Balboa Co. Ltd. ("Chateau Shihezi") a subsidiary of the

Company is an enterprise of wine production and sales incorporated in Shihezi city Xinjiang

Weizu Autonomous. In accordance with the Notice on Tax Policy Issues concerning Further

Implementation of the Western China Development Strategy (Cai Shui [2011] No.58) Shihezi

Chateau is qualified to enjoy preferential taxation policies which means it can pay corporate

income tax at a preferential rate of 15% for the period from 2015 to 2020.V. Notes to the consolidated financial statements

1 Cash at bank and on hand

Item 2019 2018

Cash on hand 59975 114335

Bank deposits 1474489177 1382399749

Other monetary funds 91234828 93186393

Total 1565783980 1475700477

Including: Total overseas deposits 42752630 22664704

As at 31 December 2019 the balance of restricted cash of the Group is as follows:

Item 2019 2018

House maintenance funds 2647877 2611350

As at 31 December 2019 the Group's other monetary assets is as follows:

Item 2019 2018

Yantai Changyu Pioneer Wine Company Limited

Research and Development Co. Ltd. ("R&D

Centre") pledged deposit for long-term payables

46100000 46100000

Deposits for letters of credit 44540850 44540850

Alipay account balance 583978 2483816

Deposit for Company cards - 51727

Deposit for ICBC platform 10000 10000

Total 91234828 93186393

As at 31 December 2019 the Group's term deposits with previous maturity of more than three

months is RMB106128600 with interest rate 1.10%-2.75% (31 December 2018:

RMB173042400).

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

2 Bills receivable

Classification of bills receivable

Item 31 December 2019 31 December 2018

Bank acceptance bills - 288667988

Total - 288667988

3 Accounts receivable

(1) Accounts receivable by customer type are as follows:

Type 31 December 2019 1 January 2019 31 December 2018

Amounts due from related parties 5902871 4696685 4696685

Amounts due from other

customers 277619657 237456398 237456398

Sub-total 283522528 242153083 242153083

Less: Provision for bad and

doubtful debts (17304375) (10054049) -

Total 266218153 232099034 242153083

As at 31 December 2019 ownership restricted accounts receivable is RMB54663422 (31

December 2018: RMB52015032) referring to Note V. 50.

(2) The ageing analysis of accounts receivable is as follows:

Ageing 2019 2018

Within 1 year (inclusive) 275693658 240312773

Over 1 year but within 2 years (inclusive) 7354262 1566622

Over 2 years but within 3 years (inclusive) 308950 273688

Over 3 years 165658 -

Sub-total 283522528 242153083

Less: Provision for bad and doubtful debts (17304375) -

Total 266218153 242153083

The ageing is counted starting from the date when accounts receivable are recognised.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(3) Accounts receivable by provisioning method

(a) Assessment of ECLs on accounts receivable in 2019:

At all times the Group measures the impairment loss for accounts receivable at an

amount equal to lifetime ECLs and the ECLs are based on the number of overdue days

and the loss given default. According to the historical experience of the Group there are

no significant differences in the losses of different customer groups. Therefore different

customer groups are not further distinguished when calculating impairment loss based

on the overdue information.Loss given default Carrying amount at the end of the year

Impairment loss at the

end of the year

Current 0.5% 212429920 1039698

Overdue for 1 to 30 days 3.4% 30728775 1047549

Overdue for 31 to 60 days 7.1% 11523509 814636

Overdue for 61 to 90 days 12.1% 5764703 700190

Overdue for 91 to 120 days 17.4% 1590671 276279

Overdue for 121 to 150

days 22.4% 2311625 517066

Overdue for 151 to 180

days 28.5% 661492 188571

Overdue for 181 to 210

days 33.3% 2583362 861027

Overdue for 211 to 240

days 39.4% 6296727 2478756

Overdue for 241 to 270

days 72.9% 588355 428627

Overdue for 271 to 300

days 87.8% 583701 512581

Overdue for 331 to 330

days 97.3% 753239 732946

Overdue for 330 to 360

days 100.0% 1491202 1491202

Overdue for 360 days 100.0% 6215247 6215247

Total 6.1% 283522528 17304375

The loss given default is measured based on the actual credit loss experience in the

past 12 months and is adjusted taking into consideration the differences among the

economic conditions during the historical data collection period the current economic

conditions and the economic conditions during the expected lifetime.(b) Impairment of account receivables in 2018

Under previous financial instruments standards provision for impairments is mde when

there is objective evidence of impairment.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(4) Movements of provisions for bad and doubtful debts:

2019 2018

Balance under the previous financial instruments

standards - -

Adjustment on initial application of the new financial

instruments standards (10054049) -

Balance at the beginning of the year after

adjustment (10054049) -

Charge for the year (7304777) -

Written-off during the year 54451 -

Balance at the end of the year (17304375) -

(5) Five largest accounts receivable by debtor at the end of the year:

Name Relationship with the Group

Balance at the

end of the year Ageing

Percentage of

ending balance

of others (%)

Ending

balance of

provision for

bad and

doubtful debts

THE CO-OP FOOD GROUP Third party 14953492 Within 1 year 5.6% 817989

Lianhua Supermarket

Holdings Co. Ltd. Third party 13988131

Within

1 year 5.3% 636038

NGS Supermarket (Group)

Co. Ltd. Third party 9278350

Within

1 year 3.3% 1916366

Jiajiayue Group Co. Ltd. Third party 8437439 Within 1 year 3.0% 45468

MARKS AND SPENCER Third party 7427424 Within 1 year 2.6% 406296

Total 54084836 19.2% 3822157

4 Receivables under financing

Item Note 2019 2018

Bills receivable (1) 316470229 -

(1) The pledged bills receivable of the Group at the end of the year

As at 31 December 2018 there was no pledged bills receivable (31 December 2018: Nil).

(2) Outstanding endorsed bills that have not matured at the end of the year

Item Amount derecognised at year end

Bank acceptance bills 265759455

Total 265759455

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

As at 31 December 2019 bills endorsed by the Group to other parties which are not yet due at

the end of the period is RMB265759455 (31 December 2018: RMB182829674). The notes

are used for payment to suppliers and constructions. The Group believes that due to good

reputation of bank the risk of notes not accepting by bank on maturity is very low therefore

derecognise the note receivables endorsed. If the bank is unable to pay the notes on maturity

according to the relevant laws and regulations of China the Group would undertake limited

liability for the notes.

5 Prepayments

(1) Prepayments by category:

Item 2019 2018

Prepayments 66807537 4219949

Other prepayments 900000 -

Total 67707537 4219949

(2) The ageing analysis of prepayments is as follows:

Ageing

2019 2018

Amount Percentage (%) Amount

Percentage

(%)

Within 1 year (inclusive) 67441713 100% 4219949 100%

Over 1 year but within 2 years

(inclusive) 265824 - - -

Total 67707537 100% 4219949 100%

The ageing is counted starting from the date when prepayments are recognised.

(3) Five largest prepayments by debtor at the end of the year:

Name Nature of the receivable

Balance at the

end of the year Ageing

Percentage of

ending balance of

others (%)

Ending

balance of

provision for

bad and

doubtful debts

Beijing Aod Investment Group Co.

Ltd.Prepayment

s 49396000

Within 1

year 73.0% -

Xinjiang Yuyuan Wine Co. Ltd. Prepayments 11749019

Within 1

year 17.3% -

State Grid Shandong Electronic

Power Yantai Company

Prepaid

electricity

fees

1229571 Within 1 year 1.8% -

Yantai Mingyuan Refrigeration and

Air-conditioning Equipment Co.

Ltd.Prepayment

s for the

equipment

600000 Within 1 year 0.9% -

Yantai Huibao Artware

Manufacturing Co. Ltd.Prepayment

s for the

equipment

533855 Within 1 year 0.8% -

Total 63508445 93.8% -

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

6 Other receivables

Note 31 December 2019 31 December 2018

Interest receivable (1) 148927 1332681

Others (2) 24097885 21303405

Total 24246812 22636086

(1) Interest receivable

(a) Interest receivable by category:

Item 31 December 2019 31 December 2018

Interest receivable on bank deposits 148927 1332681

(b) Significant overdue interest:

As at 31 December 2019 there was no overdue interest receivable (31 December

2018: Nil).

(2) Others

(a) Others by customer type:

Customer type 31 December 2019 31 December 2018

Amounts due from related parties 813440 813440

Amounts due from other companies 23284445 20489965

Sub-total 24097885 21303405

Less: Provision for bad and doubtful debts - -

Total 24097885 21303405

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(b) The ageing analysis is as follows:

Ageing 2019 2018

Within 1 year (inclusive) 16052916 11293908

Over 1 year but within 2 years (inclusive) 940668 6693702

Over 2 years but within 3 years (inclusive) 6547178 1922998

Over 3 years 557123 1392797

Sub-total 24097885 21303405

Less: Provision for bad and doubtful debts - -

Total 24097885 21303405

The ageing is counted starting from the date when other receivables are recognised.[(c) Movements of provisions for bad and doubtful debts

As at 31 December 2019 no bad and doubtful debt provision was made for other

receivables (31 December 2018: Nil).

As at 31 December 2019 the Group has no other receivables written off (31 December

2018: Nil).

(d) Others categorised by nature

Nature of other receivables Note 2019 2018

Deposit 9812027 10453624

Refund of consumption tax and

VAT

8937164 6273882

Petty cash receivable 1741147 2274038

Others 3607547 2301861

Sub-total 24097885 21303405

Less: Provision for bad and

doubtful debts

- -

Total 24097885 21303405

(a) Five largest others-by debtor at the end of the year

Name Nature of the receivable

Balance at the

end of the year Ageing

Percentage of

ending balance of

others (%)

Ending balance of

provision for bad

and doubtful debts

Sercicio de Impuestos Internos Refund of VAT 7710362 Within 1 year 32.0% -

Finance Bureau of Yantai Economic

and Technological Development

Area

Deposits 5262324 Over 2 years 21.8% -

Yantai Economic and Technological

Development Zone Construction

Industry Federation

Construction

deposit 1143500

Over 2

years 4.7% -

Yantai Shenma Packaging Co. Ltd. Lease receivables 813440

Within 1

year 3.4% -

Yantai Municipal Tax Service State

Taxation Administration Refund of VAT 736946

Within 1

year 3.1% -

Total 15666572 65.0% -

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

7 Inventories

(1) Inventories by category:

Item

2019 2018

Book value

Provision for

impairment of

inventories

Carrying amount Book value

Provision for

impairment of

inventories

Carrying amount

Raw materials 71681418 - 71681418 67267035 - 67267035

Work in progress 2102781536 - 2102781536 1787819923 - 1787819923

Finished goods 718127090 (20179637) 697947453 894187725 (24683226) 869504499

Total 2892590044 (20179637) 2872410407 2749274683 (24683226) 2724591457

(2) Provision for impairment of inventories:

Item Opening balance

Increase during

the year

Decrease during

the year Closing balance

Recognised Reversal

Finished goods 24683226 20179637 (24683226) 20179637

8 Other current assets

Item 2019 2018

Prepaid income taxes 16854091 24077323

Input tax to be credited 248975183 233087707

Prepaid rent 1595664 1511366

Total 267424938 258676396

9 Long-term equity investments

(1) Long-term equity investments by category:

Item 2019 2018

Investments in joint ventures 43981130 -

Less: Provision for impairment - -

Total 43981130 -

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Movements of long-term equity investments during the year are as follows:

Investee

2018

Balance at the

beginning of the

year

Movements during the year

2019

Closing balance

Shareholding

percentage Increase in capital

Losses from

investments under

equity-method

Joint ventures

SAS L&M Holdings (“L&M Holdings”) - 45102058 (1120928) 43981130 55%

Total - 45102058 (1120928) 43981130

On 22 February 2019 Francs Champs Participations SAS (“Francs Champs”) a subsidiary of the Group signed the Cooperation Agreement with

SC Garri du Gai to establish L&M Holdings a joint venture. Francs Champs contributed 100% of the equity of its subsidiary Societe Civile

Argricole Du Chateau De Mirefleurs (“Mirefleurs”) with a fair value of RMB45102058 accounting for 55% of the shares of L&M Holdings. As per

the Agreement and the Articles of Association L&M Holdings is jointly controlled by shareholders of both parties.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

10 Investment properties

Buildings and plants

Cost

Balance as at 31 December 2018 and 31 December 2019 70954045

Accumulated depreciation

31 December 2018 (39381556)

Charge for the year (1857903)

31 December 2019 (41239459)

Carrying amount

Carrying amount at 31 December 2019 29714586

Carrying amount at 31 December 2018 31572489

11 Fixed assets

(1) Fixed assets

Item Plant & buildings Machinery & equipment Motor vehicles Total

Cost

31 December 2018 4761426425 2665798814 26580639 7453805878

Additions during the year

- Purchases 14592625 114964123 2963537 132520285

- Transfers from

construction in progress 335319537 8856929 - 344176466

Disposals or written-offs

during the year (6035224) (59313825) (2874020) (68223069)

Disposal of subsidiaries (11674567) - - (11674567)

31 December 2019 5093628796 2730306041 26670156 7850604993

Accumulated depreciation

31 December 2018 (621266769) (1062064237) (20743205) (1704074211)

Charge for the year (143711571) (156813823) (2260577) (302785971)

Disposals or written-offs

during the year 5930965 55080117 2859001 63870083

Disposal of subsidiaries 3932031 - - 3932031

31 December 2019 (755115344) (1163797943) (20144781) (1939058068)

Provision for impairment

31 December 2018 - - - -

Charge for the year - (17478027) - (17478027)

31 December 2019 - (17478027) - (17478027)

Carrying amount

31 December 2019 4338513452 1549030071 6525375 5894068898

31 December 2018 4140159656 1603734577 5837434 5749731667

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

As at 31 December 2019 ownership restricted net value of fixed assets is RMB344670852

(31 December 2018: RMB412006421) referring to Note V. 50.

(2) Temporarily idle fixed assets

Item Cost Accumulated depreciation

Provision for

impairment Carrying amount

Buildings 47821026 (14796008) - 33025018

Machinery equipment 73592531 (52434878) (17478027) 3679626

Other equipment 3344518 (3173906) - 170612

Total 124758075 (70404792) (17478027) 36875256

(3) Fixed assets leased out under operating leases

Item Carrying amount at the end of the year

RMB

Machinery equipment 102608

Total 102608

(4) Fixed assets pending certificates of ownership

Item Carrying amount Reason why the certificates are pending

Industry Production Centre of R&D Centre 1761265190 Processing

Dormitories main building and reception

building of Changan Chateau 287560490 Processing

European town main building and service

building of Chateau Beijing 181809121 Processing

Main building of Chateau Tinlot of Yantai

Changyu 79992032 Processing

Fermentation shop and warehouse of Xinjiang

Tianzhu 17124481 Processing

Office and packaging shop of Golden Icewine

Valley 8890557 Processing

Fermentation shop of Zhangyu (Jingyang) 3862118 Processing

Office experiment building and workshop of

Fermentation Centre 3484107 Processing

Finished goods warehouse and workshop of

Kylin Packaging 2306172 Processing

Office of Sales Company 981632 Processing

The buildings without property certificate above have no significant impact on the Group's

management.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

12 Construction in progress

(1) Construction in progress

Project

2019 2018

Book value Provision for impairment Carrying amount Book value

Provision for

impairment Carrying amount

R&D Centre ("Changyu

Wine Complex")

Project

485017326 - 485017326 608553618 - 608553618

Ningxia Chateau

Construction Project 46448561 - 46448561 47163862 - 47163862

Sales Company

Construction Project 6313962 - 6313962 17985881 - 17985881

Changan Chateau

Construction Project 4052839 - 4052839 39793898 - 39793898

Shihezi Chateau

Construction Project 877348 - 877348 23664126 - 23664126

Other Companies’

Construction Project 24768797 - 24768797 22135206 - 22135206

Total 567478833 - 567478833 759296591 - 759296591

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Movements of major construction projects in progress during the year

Item Budget Opening balance Additions during the year

Transfers to fixed

assets

Transfers to

long-term

deferred

expenses

Closing balance

Percentage of

actual cost to

budget (%)

Accumulated

capitalised

interest

Attributable to:

Interest

capitalised for the

year

Interest rate for

capitalisation in

2019 (%)

Sources of funding

Changyu Wine

Complex 4505780000 608553618 150740457 (268583246) (5693503) 485017326 77.6% 15413102 1141265

1.2% and

4.3%

Loans from

financial

institutions and

self-raised

Ningxia Chateau

Construction

Project

414150000 47163862 306115 (1021416) - 46448561 102.2% - - - Self-raised

Changan Chateau

Construction

Project

620740000 39793898 10349914 (44440973) (1650000) 4052839 110.4% - - - Self-raised

Shihezi Chateau

Construction

Project

780000000 23664126 905888 (276666) (23416000) 877348 96.4% - - - Self-raised

Sales Company

Construction

Project

161350000 17985881 4236485 (15908404) - 6313962 100.3% - - - Self-raised

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

13. Bearer biological assets

Bearer biological assets are vines which measured in cost method.

Item Immature biological assets

Mature biological

assets Total

Original book value

31 December 2018 13837608 235246042 249083650

Additions during the year

- Increase in cultivated 7824116 - 7824116

- Transferred to mature (8832902) 8832902 -

Disposals during the year - (3560972) (3560972)

31 December 2019 12828822 240517972 253346794

Accumulated amortisation

31 December 2018 - (39817277) (39817277)

Charge for the year - (12722828) (12722828)

Disposals during the year - 1618597 1618597

31 December 2019 - (50921508) (50921508)

Carrying amount

31 December 2019 12828822 189596464 202425286

31 December 2018 13837608 195428765 209266373

As at 31 December 2019 there is no biological asset with ownership restricted (31 December

2018: Nil).

As at 31 December 2019 no provision for impairment of biological asset of the Group was

recognised as there is no any indication exists (31 December 2018: Nil).Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

14 Intangible assets

Intangible assets

Item Land use rights Software licenses Trademarks Total

Original book value

31 December 2018 528252911 75822057 170068735 774143703

Additions during the year

- Purchase 3502791 12436424 704531 16643746

31 December 2019 531755702 88258481 170773266 790787449

Accumulated amortisation

31 December 2018 (78070910) (26722815) (13876519) (118670244)

Additions during the year

- Charge for the year (11262596) (8442975) (465279) (20170850)

Decrease during the year - - - -

31 December 2019 (89333506) (35165790) (14341798) (138841094)

Carrying amount

31 December 2019 442422196 53092691 156431468 651946355

31 December 2018 450182001 49099242 156192216 655473459

As at 31 December 2019 the Group has land use right with infinite useful lives of

RMB30589474 ( 31 December 2018: RMB30881409) representing the freehold land held

by Chile Indomita Wine Group and Australia Kilikanoon Estate under relevant Chile and

Australia laws on which the amortisation is not required.

As at 31 December 2019 the Group has trademark with infinite useful lives of

RMB154674985 (31 December 2018: RMB154150933) which is held by Chile Indomita

Wine Group and Australia Kilikanoon Estate. The recoverable amount of the trademark is

determined according to the present value of the expected future cash flows generated from

the asset group to which the single assets of trademark right belongs. The management

prepares the cash flow projection for future 5 years (the "projecting period") based on the

latest financial budget assumption and estimates the cash flows after the future 5 years (the

"subsequent period"). The pretax discount rates used in the cash flow projections are 11.6%

and 12.8% respectively. A key assumption in the estimate of future cash flows is the revenue

growth rate in the projecting period. Such revenue growth rate is determined based on the

industry and the expected growth rate of Chile Indomita Wine Group and Australia Kilikanoon

Estate.

The Group recognises the trademark with infinite useful lives as intangible assets the

impairment assessment of which is made at the end of each reporting year. The management

believes that any reasonable change of the above assumptions will not result in the total book

value of the asset group to which the single assets of trademark right belongs exceeding its

recoverable amount.

According to the result of impairment assessment by the end of 31 December 2019 the

management believes there is no impairment loss on those trademarks with infinite useful

lives of the Group.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

As at 31 December 2019 ownership restricted net value of intangible assets is

RMB212495435 (31 December 2018: RMB218070414) referring to Note V. 50.

15 Goodwill

(1) Changes in goodwill

Name of investee or events from which

goodwill arose Note 31 December 2018

Additions during the

year

Disposals during

the year 31 December 2019

Original book value

Etablissements Roullet Fransac

(“Roullet Fransac”) (a) 13112525 - - 13112525

Dicot Partners S.L (“Dicot”) (a) 92391901 - - 92391901

Societe Civile Argricole Du Chateau

De Mirefleurs (“Mirefleurs”) (b) 15761440 - (15761440) -

Chile Indomita Wine Group (a) 6870115 - - 6870115

Australia Kilikanoon Estate (a) 37063130 - - 37063130

Sub-total 165199111 - (15761440) 149437671

Impairment provision - (7578478) - (7578478)

Carrying amount 165199111 (7578478) (15761440) 141859193

(a) The Group acquired Fransac Sales Dicot and Mirefleurs and Chile Indomita Wine Group

in December 2013 September 2015 January 2016 and July 2017 respectively resulting

in respective goodwill amounting to RMB 13112525 RMB 92391901 RMB

15761440 and RMB 6870115. The Group acquired Australia Kilikanoon Estate in

January 2018 resulting goodwill amounting to RMB 37063130 which have been

allocated to corresponding asset groups for impairment testing.(b) On 22 February 2019 Francs Champs a subsidiary of the Group signed the

Cooperation Agreement with SC Garri du Gai to contribute 100% of the equity of

Mirefleurs to establish L&M Holdings a joint venture. The Group lost control of

Mirefleurs this year and the goodwill decreased by RMB15761440 accordingly.

(2) Provision for impairment of goodwill

The Group has allocated the above goodwill to relevant asset groups for impairment testing.The recoverable amount of the asset group is determined according to the present value of

the expected future cash flows. The management prepares the cash flow projection for future

5 years (the "projecting period") based on the latest financial budget assumption and

estimates the cash flows after the future 5 years (the "subsequent period"). The pretax

discount rate used in calculating the recoverable amounts of Fransac Sales Dicot Mirefleurs

Indomita Wine and Australia Kilikanoon Estate are 14.2% 11.4% 11.6% and 12.8%

respectively (2018: 16.6% 12.4% 16.6 % 12.3% and 13.1%). The key assumption is the

growth rate of annual revenue growth rate of relevant subsidiaries which is computed based

on the expected growth rate of each subsidiary and long-term average growth rates of

relevant industries. Other relevant key assumption is budget gross profit margin which is

determined based on the historical performance of each subsidiary and its expectations for

market development. According to the results of the impairment test the Group found that the

recoverable amount of the asset group including goodwill of Australia Kilikanoon Estate is

lower than its book value. Therefore on 31 December 2019 the provision for impairment of

goodwill was RMB7578478. The impairment loss was recognised in asset impairment loss.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

16 Long-term deferred expenses

Item 31 December 2018 Additions during the year

Amortisation for the

year Other decreases 31 December 2019

Land lease

prepayment 54217763 753161 (1472473) (1369037) 52129414

Land requisition fee 43427739 - (1967479) - 41460260

Greening fee 141224472 13983448 (9255420) - 145952500

Leasehold

improvement 775647 33568156 (1354917) - 32988886

Others 4994795 1075628 (1006075) - 5064348

Total 244640416 49380393 (15056364) (1369037) 277595408

17 Deferred tax assets and deferred tax liabilities

(1) Deferred tax assets and liabilities

Item

31 December 2019 1 January 2019 31 December 2018

Deductible or

taxable

temporary

differences

Deferred tax

assets /

(liabilities)

Deductible or

taxable

temporary

differences

Deferred tax

assets /

(liabilities)

Deductible or

taxable

temporary

differences

Deferred tax

assets /

(liabilities)

Deferred tax assets:

Provision for

impairment of

assets

54771519 13692880 34737276 8684319 24683226 6170807

Unrealised profits

of intra-group

transactions

479898175 119974545 602476583 150619145 602476583 150619145

Unpaid bonus 184674946 46168736 141808257 35485814 141808257 35485814

Termination

benefits 24833512 6208378 26186243 6546561 26186243 6546561

Deductible tax

losses 247147752 63459305 262937999 67566387 262937999 67566387

Deferred income 70643437 15422659 86227293 18868963 86227293 18868963

Assets

assessment

impairment

- - 661415 178582 661415 178582

Sub-total 1061969341 264926503 1155035066 287949771 1144981016 285436259

Deferred tax

liabilities:

Revaluation due to

business

combinations

involving entities

not under

common control

(51829561) (14691424) (81338130) (22010647) (81338130) (22010647)

(2) Details of unrecognised deferred tax assets

Item 2019 2018

Deductible tax losses 132081819 171430831

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(3) Expiration of deductible tax losses for unrecognised deferred tax assets

Year 2019 2018

2019 - 7311273

2020 5718454 45960766

2021 36741465 82685213

2022 26609674 14362787

2023 31350376 21110792

2024 31661850 -

Total 132081819 171430831

18 Other non-current assets

Item 2019 2018

Royalty 193674320 -

Pursuant to a royalty agreement dated 18 May 1997 starting from 18 September 1997 the

Company may use certain trademarks of Changyu Group Company which have been

registered with the PRC Trademark Office. An annual royalty fee at 2% of the Group's annual

sales is payable to Changyu Group. The license is effective until the expiry of the registration

of the trademarks.

According to the above royalty agreement Changyu Group collected a total of

RMB576507809 for royalty from 2013 to 2019 of which 51% was used to promote

trademarks such as Changyu and the product of this contract totalling RMB294018093.The amount is used for promotion of Changyu and other trademarks and the products of this

contract totalling RMB62250368 the difference is RMB231768615.

On 18 May 2019 the general meeting of shareholders approved the proposal of the

amendment to the royalty agreement. Article 6.1 of the royalty agreement with Changyu

Group was amended to: During the validity period of this contract the Group pays Changyu

Group royalty on an annual basis. The royalty is calculated based on 0.98% of the sales

volume of the Group ’s contract products using this trademark. The article is amended to:

The royalty paid to the Changyu Group by the Group shall not be used to promote this

trademark and the contract products.

Changyu Group promised to offset the difference of RMB231768615 above with the royalty

for four years i.e. from 2019 to 2022.If it is not sufficient for deduction the rest will be repaid

in a one-off manner in 2023. If there is surplus the surplus part of the royalty will be charged

from the year when the surplus occurs. As the amount is a long-term prerpayment the

Company recognises the amount as other non-current assets and meanwhile offset the sales

fee i.e. royalty.

As at 31 December 2019 the Group's royalty in 2019 was RMB38094295. When the

difference is deducted by the above-mentioned amount the balance of royalty due from

Changyu Group was RMB193674320.

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

19 Short-term loans

Short-term loans by category:

Item 2019 2018

Unsecured loans 661067617 605202708

Mortgaged loans 82568222 79467832

Guaranteed loans 10677905 3331870

Total 754313744 688002410

As at 31 December 2019 details of short-term borrowings were as follows:

Amount Exchange rate Amount

Nature of

interest rate Interest rate

Interest rate at

the

end of the year

RMB % %

Credit loans (RMB) 150000000 1.0000 150000000 Floating 1-year LPR+0.04% 4.35%

Credit loans (RMB) 400000000 1.0000 400000000 Floating

Annual

benchmark

interest rate (%)

4.35%

Credit loans (EUR) 6632932 7.8155 51839679 Fixed 0.85%-2.0% 0.85%-2.0%

Credit loans (USD) 8490000 6.9762 59227938 Fixed 2.81%-4.90% 2.81%-4.90%

Mortgaged loans

(EUR) 6994232 7.8155 54663422 Fixed 0.35%-2.86% 0.35%-2.86%

Mortgaged loans

(USD) 4000000 6.9762 27904800 Fixed 2.86% 2.86%

Guaranteed loans

(AUD) 2186169 4.8843 10677905 Fixed 3% 3%

754313744

As at 31 December 2019 mortgaged loans were Hacienda y Vi?edos Marques del Atrio

S.L.U (" Atrio ") factoring of accounts receivable from banks including Banco de Sabadell

S.A. of EUR6994232 (equivalent of RMB54663422) (31 December 2018: RMB52015032).

Mortgaged loans were Indomita Wine mortgaged USD4000000 (equivalent of

RMB27904800) of its fixed assets to BBVA (31 December 2018: RMB27452800). Australia

Kilikanoon Estate has guaranteed loans of AUD2186169 (equivalent of RMB10677905) (31

December 2018: RMB3331870).

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

20 Accounts payable

Ageing 2019 2018

Within 1 year (inclusive) 564803430 710208269

Over 1 year but within 2 years (inclusive) 2255083 3091659

Over 2 years but within 3 years (inclusive) 3007686 121598

Over 3 years 186413 151355

Total 570252612 713572881

There is no significant account payable with ageing of more than one year.

21 Advance payments received

Details of advances from customers are as follows:

Item 2019 2018

Advances from customers 120609499 226075244

There is no significant advances from customers with ageing of more than one year:

22 Employee benefits payable

(1) Employee benefits payable:

Note 31 December 2018 Additions during the year

Decrease during the

year 31 December 2019

Short-term employee

benefits (2) 185893109 530648082 (507651734) 208889457

Post-employment benefits -

defined contribution

plans

(3) 224865 56303607 (55792325) 736147

Termination benefits 26186243 12542984 (13895715) 24833512

Total 212304217 599494673 (577339774) 234459116

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Short-term employee benefits

31 December 2018 Additions during the year

Decrease during the

year 31 December 2019

Salaries bonuses

allowances 187685990 481363315 (457031510) 212017795

Staff welfare 3014288 13807921 (14820620) 2001589

Social insurance 461095 20088329 (19981978) 567446

Medical insurance 460440 17829589 (17722583) 567446

Work-related injury

insurance 655 1131235 (1131890) -

Maternity insurance - 1127505 (1127505) -

Housing fund 52510 11993406 (12031721) 14195

Labour union fee staff and

workers’ education fee 1914079 3806035 (3785905) 1934209

Sub-total 193127962 531059006 (507651734) 216535234

Less: Non-current liabilities 7234853 410924 - 7645777

Total 185893109 530648082 (507651734) 208889457

(3) Post-employment benefits - defined contribution plans

31 December 2018 Additions during the year

Decrease during the

year 31 December 2019

Basic pension insurance 224533 55054748 (54543144) 736137

Unemployment insurance 332 1248859 (1249181) 10

Total 224865 56303607 (55792325) 736147

23 Taxes payable

Item 2019 2018

Value-added tax 88590035 36442868

Consumption tax 48497550 28636646

Corporate income tax 216958309 40869507

Individual income tax 840997 2476527

Tax on the use of urban land 2216390 5669099

Education surcharges 4858904 4337712

Urban maintenance and construction tax 6731772 5165128

Others 6476014 5315303

Total 375169971 128912790

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

24 Other payables

Note 31 December 2019 31 December 2018

Interest payable 758047 712826

Dividends payable 1366559 -

Others (1) 448407879 607767064

Total 450532485 608479890

(1) Others

(a) Details of others by nature are as follows:

Item 2019 2018

Deposit payable to dealer 164649995 159191138

Advertising fee payable 90741404 80715461

Equipment and construction fee payable 72004009 152825734

Freight charges payable 31842443 38867725

Contracting fee payable 16997685 27070584

Deposits due to suppliers 13990900 15901210

Staff deposit 1866765 2806766

Royalty due to Changyu Group - 78414978

Others 56314678 51973468

Total 448407879 607767064

(b) Significant others aged over one year:

Item Balance at the end of the year

Reasons why not

settled

VASF Company 4877876 Payables for contracting fee

Total 4877876

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

25 Non-current liabilities due within one year

Non-current liabilities due within one year by category are as follows:

Item 2019 2018

Long-term loans due within one year 116826221 118940788

Long-term payables due within one year 34000000 34000000

Total 150826221 152940788

26 Long-term loans

(1) Long-term loans by category

Item 2019 2018

Credit loans 136749730 139171506

Guaranteed loans 105093000 129500000

Mortgaged loans 3875992 6749944

Less: Long-term loans due within one year 116826221 118940788

Total 128892501 156480662

As at 31 December 2019 details of long-term borrowings were as follows:

Amount Exchange rate Amount

Nature of

interest

rate

Interest rate

Interest rate at

the end of the

year

Long-term loans

due within one

year

Long-term loans

due after one

year

RMB % %

Credit loans (EUR) 17497246 7.8155 136749730 Fixed 1.0%-1.7% 1.0%-1.7% 88740091 48009639

Guaranteed loans

(RMB) 56250000 1 56250000 Floating

90% of 5-year

LPR 4.275% 25000000 31250000

Guaranteed loans

(AUD) 10000000 4.8843 48843000 Fixed 2.5% 2.5% - 48843000

Mortgaged loans

(EUR) 495937 7.8155 3875992 Fixed 1.8% 1.8% 3086130 789862

Total 245718722 116826221 128892501

As at 31 December 2019 Credit loans were EUR17497246 borrowed by Atrio from Bankia

Banco Santander BBVA and Caja Rural de Navarr etc. (equivalent of RMB136749730) (31

December 2018: RMB139171506). Mortgaged loans (RMB) were long-term borrowings of

RMB56250000 of the R&D Centre a subsidiary of the Company (31 December 2018:

RMB81250000). Australia Kilikanoon Estate has borrowed AUD10000000(equivalent of

RMB48843000) (31 December 2018: RMB48250000) from ANZ Bank and its guaranteed

by the Company. Mortgaged loans were borrowings of EUR495937 (equivalent of

RMB3875992) form Popular Espa?ol pledged with its land which valued EUR2931722

(equivalent of RMB22912873) (31 December 2018: RMB6749944).Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

27 Long-term payables

Item 2019 2018

Agricultural Development Fund of China ("CADF") 225000000 259000000

Less: Long-term payables due within one year 34000000 34000000

Balance of long-term payables 191000000 225000000

In 2016 RMB 305000000 from CADF was invested in R&D Centre CADF accounted for

37.9% of the registered capital. According to the investment agreement CADF will recovery

investment funds over 10 years the investment income received equal to 1.2% of the

remaining unpaid principal per annum. In addition to the fixed income CADF will no longer

enjoy other profits or bear the loss of R&D Centre. Therefore although the investment in R&D

Centre nominally equity investment is actually a debt investment (financial discount loan).

The Group take this investment as long-term payables which measured in amortized cost.The Group repays the principal of RMB 34000000 in 2019. Refer to Note V. 50 for details of

mortgaged and pledged assets.

Balance of

long-term

payables

Return

investm

ent

Investment

date

Termination

date of

repayment

Due within one

year Due after one year

Mortgaged and

pledged assets

RMB RMB RMB

57000000 1.2% 12 January 2016

24 December

2025 10000000 47000000

Cash at bank and on

hand and intangible

assets

154000000 1.2% 29 February 2016

28 February

2026 22000000 132000000

Fixed assets and

intangible assets

14000000 1.2% 16 June 2016 22 May 2026 2000000 12000000 Cash at bank and on hand

225000000 34000000 191000000

28 Deferred income

Item 31 December 2018 Additions during the year

Decrease during the

year 31 December 2019

Government grants 86227293 7833097 (23359102) 70701288

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Government grants:

Liability 31 December 2018

Additions of

government grants

during the year

Amounts recognised

in other income

during the year

31 December 2019 Related to assets/income

Industrial development support

project 32800000 - (4100000) 28700000

Government

grants related

to assets

Xinjiang industrial revitalisation

and technological

transformation project

15642000 - (1422000) 14220000

Government

grants related

to assets

Fixed asset investment reward

of Shihezi Chateau project 6996600 - (2280000) 4716600

Government

grants related

to assets

Shandong Peninsula Blue

Economic Area construction

funds

6000000 - (2000000) 4000000

Government

grants related

to assets

Special government grant for

infrastructure 4240000 - (1060000) 3180000

Government

grants related

to assets

Raw wine fermentation project

3304500 - (1434900) 1869600

Government

grants related

to assets

Wine fermentation capacity

construction (Huanren)

project

3200000 - (400000) 2800000

Government

grants related

to assets

Engineering technology

transformation of information

system project

2900000 - (580000) 2320000

Government

grants related

to assets

Liquor electronic tracking

project 2525257 - (667054) 1858203

Government

grants related

to assets

Infrastructure construction

project 1718750 - (1368750) 350000

Government

grants related

to assets

Special fund for efficient

water-saving irrigation

project

1639000 500000 (262000) 1877000

Government

grants related

to assets

Subsidy for economic and

energy-saving technological

transformation projects

1026400 - (128300) 898100

Government

grants related

to assets

Wine industry development

project 558000 - (186000) 372000

Government

grants related

to assets

Subsidy for mechanic

development of Penglai

Daliuhang Base

- 265397 - 265397

Government

grants related

to assets

Coal subsidy

- 260000 (58500) 201500

Government

grants related

to assets

Introduction fund for service

industry development 2000000 400000 (2400000) -

Related to

income

Cross-border e-commerce

project 880256 29000 (69298) 839958

Related to

income

Travelling development fund

subsidy project 500000 60000 - 560000

Related to

income

Water pollution control project

fund 206530 - (113600) 92930

Related to

income

Subsidy for boiler

reconstruction and

demolition

90000 - (10000) 80000 Related to income

Special funds for the

development of enterprises - 6318700 (4818700) 1500000

Related to

income

Total 86227293 7833097 (23359102) 70701288

29 Other non-current liabilities

Item 31 December 2019 31 December 2018

Employee benefits payable 7645777 7234853

As at 31 December 2019 employee benefit represents deposit from bonus accrued for

managers and above. The bonus is expected to be paid during 2021 to 2023.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

30 Share capital

At 31 December 2018 and 31 December 2019

Unrestricted A shares 453460800

B shares 232003200

Total of unrestricted shares 685464000

31 Capital reserve

Item 31 December 2018 Additions during the year

Decrease during the

year 31 December 2019

Share premium 560038853 - (905019) 559133834

Others 5916588 - - 5916588

Total 565955441 - (905019) 565050422

The balance between the long-term equity investment acquired due to the purchase of

minority shareholding and the share of net assets continuously calculated since the date of

acquisition by the subsidiary based on the proportion of newly increased shareholding shall

be offset against the capital reserve. Details of non-controlling interests acquired during the

year see Note- VII. 2.

32 Other comprehensive income

Item

Balance at the

beginning of the year

attributable to

shareholders of the

Company

Accrued during the year

Balance at the

end of the year

attributable to

shareholders of

the Company

Before-tax

amount

Less:

Previously

recognised

amount

transferred to

profit or loss

Less:

Income tax

expenses

Net-of-tax

amount

attributable to

shareholders of

the Company

Net-of-tax

amount

attributable to

non-controlling

interests

Items that may be

reclassified to profit or

loss

Translation

differences arising

from translation of

foreign currency

financial

statements

2965377 (8542792) - - (7200960) (1341832) (4235583)

33 Surplus reserve

Item 31 December 2019 31 December 2018

Statutory surplus reserve 342732000 342732000

In accordance with the Company Law and the Articles of Association Company the Company

appropriated 10% of its net profit to statutory surplus reserve. The appropriation to the

statutory surplus reserve may be ceased when the accumulated appropriation reaches over

50% of the registered capital of the Company. The Company does not appropriate net profit to

the surplus reserve in 2019 as surplus reserve of the Company is above 50% of the registered

capital.The Company can appropriate discretionary surplus reserve after appropriation of the

statutory surplus reserve. Discretionary surplus reserve can be utilised to offset the deficit or

increase the share capital after approval.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

34 Retained earnings

Item Note 2019 2018

Retained earnings at the beginning of the

year (before adjustment) 8008982547 7309081618

Total adjustments for opening retained

earnings (1) (7540537) -

Retained earnings at the beginning of the

year (after adjustment) 8001442010 7309081618

Add: Net profits for the year attributable to

shareholders of the Company 1129735749 1042632929

Less: Dividends to ordinary shares (2) 411278400 342732000

Retained earnings at the end of the year (3) 8719889359 8008982547

(1) Adjustments on beginning retained earnings are as follows:

Retrospective adjustments of RMB7540537 made on beginning retained earnings in

accordance with CAS and related new regulations (See Note III. 32).

(2) Dividends in respect of ordinary shares declared during the year

Pursuant to the shareholders’ approval at the shareholders’ general meeting on 17 May 2019

a cash dividend of RMB0.6 per share (2018: RMB0.5 per share) totalling RMB41127840

(2018: RMB342732000) was declared and paid to the Company’s ordinary shareholders on

8 July 2019 and 10 July 2019.

(3) Retained earnings at the end of the year

As at 31 December 2019 the consolidated retained earnings attributable to the Company

included an appropriation of RMB56059538 (2018: RMB54336543) to surplus reserve

made by the subsidiaries.

35 Operating income and operating costs

Item

2019 2018

Income Cost Income Cost

Principal activities 4944119295 1855399515 5066265044 1872991039

Other operating activities 86892194 32096476 75979696 28620468

Total 5031011489 1887495991 5142244740 1901611507

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Details of operating income:

2019 2018

Operating income from principal activities

- Sale of goods 4944119295 5066265044

Sub-total 4944119295 5066265044

Income from other business 86892194 75979696

Total 5031011489 5142244740

36 Taxes and surcharges

Item 2019 2018

Consumption tax 159206181 157037382

Urban maintenance and construction tax 36159526 39655738

Education surcharges 26463129 28762507

Property tax 29984237 31461708

Tax on the use of urban land 11033252 12098790

Stamp duty 3088747 4507785

Others 2527306 2967764

Total 268462378 276491674

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

37 Selling and distribution expenses

Item 2019 2018

Marketing fee 376428191 386519123

Salaries and benefits 353390023 297489665

Transport charges 121007566 141756007

Labour service fee 72788245 72036252

Advertising fee 45359135 35857276

Conference fee 42272189 32731215

Depreciation expense 40227482 41410740

Storage rental 37586638 45668613

Design and production fee 26471703 29437757

Travelling expenses 26010813 27176277

Water electricity and gas fee 14136779 11297244

Royalty (182711622) 73976395

Others 80264882 79242582

Total 1053232024 1274599146

38 General and administrative expenses

Item 2019 2018

Salaries and benefits 90477287 114473209

Depreciation expenses 61831915 71978485

Repair costs 28555032 25189384

Administrative expenses 23101636 23766176

Amortisation expenses 18373495 18187049

Amortisation of greening fee 18409031 14730804

Contracting fee 13377255 13364835

Rental charge 12938864 13012167

Safety production costs 9510828 9692574

Security and cleaning fee 8124135 8659405

Others 27205178 30526563

Total 311904656 343580651

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

39 Financial expenses

Item 2019 2018

Interest expenses from loans and payables 50212059 52198774

Less: Borrowing costs capitalised 1141265 5843872

Less: Financial expenses offset by fiscal interest

subsidy 7500000 -

Interest income from deposits and receivables (12327441) (12086007)

Net exchange (gains) / losses 3611536 (666323)

Other financial expenses 2435813 2342730

Total 35290702 35945302

Fiscal interest subsidy during reporting period has been included in non-recurring gains and

losses.

40 Other income

Item 2019 2018 Related to assets/income

Reward on the fixed asset

investment 2280000 2280000

Government grants

related to assets

Shandong Peninsula Blue

Economic Area construction

funds

2000000 2000000 Government grants related to assets

Industrial development support

project 4100000 4100000

Government grants

related to assets

Others - Government grants

related to assets 7567504 8579199

Government grants

related to assets

Special funds for the development

of enterprises 37449390 42953900 Related to income

Tax refunds 8724775 6587773 Related to income

Strong industrial city special funds 2518700 4750000 Related to income

Others - Government grants

related to income 12697212 16030562 Related to income

Total 77337581 87281434

Other income during reporting period has been included in non-recurring gains and losses.

41 Investment income

Investment income by item

Item Note 2019 2018

Long-term equity investment losses

under equity method

(1120928) -

Investment income from disposal of

long-term equity investments

(1) 6233661 -

Total 5112733 -

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(1) On 22 February 2019 Francs Champs a subsidiary of the Group signed the Cooperation

Agreement with SC Garri du Gai to establish L&M Holdings a joint venture. Francs Champs

contributed 100% of the equity of its subsidiary Mirefleurs with a fair value of

RMB45102058. The deference of RMB6233661 between the book value of fair value of net

asset of Mirefleurs and the goodwill of Mirefleurswas when it was acquired by the Group was

included in investment income.

42 Credit losses

Item 2019

Accounts receivable 7304777

Total 7304777

43 Impairment losses / (reversal)

Item 2019 2018

Inventories (4503589) (912166)

Fixed assets 17478027 -

Goodwill 7578478 -

Total 20552916 (912166)

44 Gains from asset disposals

Item 2019 2018

Gains from disposal of fixed assets 39015 11368355

Gains from disposal of assets during reporting period has been included in non-recurring

gains and losses.

45 Non-operating income and non-operating expenses

(1) Non-operating income by item is as follows:

Item 2019 2018

Net penalty income 2593116 1901530

Others 8328632 5451779

Total 10921748 7353309

Non-operating income during reporting period has been included in non-recurring gains and

losses.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Non-operating expenses

Item 2019 2018

Compensation penalty and fine expenses 403975 1445721

Donations provided 699296 593819

Others 2519998 1496368

Total 3623269 3535908

Non-operating expenses during reporting period has been included in non-recurring gains and

losses.

46 Income tax expenses

Item Note 2019 2018

Current tax expense for the year based on

tax law and regulations 385102064 352598370

Changes in deferred tax assets/liabilities (1) 15704045 14529152

Total 400806109 367127522

(1) The analysis of changes in deferred tax is set out below:

Item 2019 2018

Origination of temporary differences 15704045 14529152

Total 15704045 14529152

(2) Reconciliation between income tax expenses and accounting profit:

Item 2019 2018

Profit before taxation 1530514737 1408611698

Estimated income tax at 25% 382628684 352152925

Effect of different tax rates applied by subsidiaries (707938) (949634)

Effect of non-deductible costs expense and losses 6705569 5496292

Effect of deductible losses of deferred tax assets not

recognised for the year 7397810 4642727

Deferred tax assets written-off 4781984 5785212

Income tax expenses 400806109 367127522

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

47 Basic earnings per share and diluted earnings per share

(1) Basic earnings per share

Basic earnings per share is calculated as dividing consolidated net profit attributable to

ordinary shareholders of the Company by the weighted average number of ordinary shares

outstanding:

2019 2018

Consolidated net profit attributable to ordinary

shareholders of the Company 1129735749 1042632929

Weighted average number of ordinary shares

outstanding 685464000 685464000

Basic earnings per share (RMB/share) 1.65 1.52

Weighted average number of ordinary shares is calculated as follows:

2019 2018

Issued ordinary shares at the beginning of the year 685464000 685464000

Weighted average number of ordinary shares at the

end of the year 685464000 685464000

(2) The Group does not have any potential dilutive ordinary shares for the listed years.

48 Cash flow statement

(1) Proceeds relating to other operating activities:

Item 2019 2018

Government grants 69311576 57123900

Penalty income 2593116 1901530

Interest income from bank 12327441 7871853

Others 9512388 5806589

Total 93744521 72703872

(2) Payments relating to other operating activities:

Item 2019 2018

Selling and distribution expenses 761969906 918966855

General and administrative expenses 138738416 140112380

Others 12856014 4637082

Total 913564336 1063716317

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(3) Proceeds relating to other financing activities:

Item 2019 2018

R&D Centre pledged deposit for long-term payables - 61700000

Interest income from R&D Centre pledged deposit

for long-term payables - 768259

Total - 62468259

(4) Payments relating to other financing activities:

Item 2019 2018

Proceed from acquisitions of non-controlling

interests’ distributions or interest 11619552 -

R&D Centre pledged deposit for long-term payables - 46100000

Total 11619552 46100000

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

49 Supplementary information on cash flow statement

(1) Supplement to cash flow statement

a. Reconciliation of net profit to cash flows from operating activities:

Item 2019 2018

Net profit 1129708628 1041484176

Add: Provisions for impairment of assets /

(reversal) 20552916 (912166)

Credit losses 7304777 -

Depreciation of fixed assets and

investment property 304643874 299696260

Amortisation of intangible assets 20170850 19018740

Amortisation of long-term deferred

expenses 15056364 12082117

Amortisation of biological assets 12722828 12034812

Gains from disposal of fixed assets

intangible assets and other long-term

assets

(39015) (11368355)

Financial expenses 49508886 45855744

Royalty (182711622) -

Investment income (5112733) -

Decrease in deferred tax assets 23023268 22685137

Decrease in deferred tax liabilities (7319223) (8155985)

Decrease in gross inventories (158274938) (180452933)

Increase in operating receivables (290520189) (137899294)

Decrease in operating payables (100876647) (138089507)

Net cash flows from operating activities 837838024 975978746

b. Significant investing and financing activities not requiring the use of cash:

Item 2019 2018

Payment of intangible assets and other

long-term assets by bank acceptances 165716961 109378598

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

c. Change in cash and cash equivalents:

Item 2019 2018

Cash equivalents at the end of the year 1365772675 1206860334

Less: Cash equivalents at the beginning of

the year 1206860334 1180889274

Net increase in cash and cash equivalents 158912341 25971060

(2) Details of cash and cash equivalents

Item 2019 2018

Cash at bank and on hand

Including: Cash on hand 59975 114335

Bank deposits available on demand 1365712700 1206745999

Closing balance of cash and cash equivalents 1365772675 1206860334

50 Assets with restrictive ownership title or right of use

Item Opening balance Additions during the year

Decrease during

the year

Balance at the end

of the year

Reason for

restriction

Cash at

bank and

on hand

95797743 - (1915038) 93882705

R&D Centre

mortgage for

long-term payables

etc.

Account

receivable

(i)

52015032 183997103 (181348713) 54663422

Short-term

borrowings

mortgage from

Atrio

Fixed assets 412006421 - (67335569) 344670852

R&D Centre

mortgage for

long-term payables

and long-term and

short-term

borrowings

Intangible

assets 218070414 - (5574979) 212495435

R&D Centre

mortgage for

long-term payables

Total 777889610 183997103 (256174299) 705712414

(i) As at 31 December 2019 the amount of accounts receivable with restricted ownership

is EUR 6994232 (equivalent of RMB54663422) which refers to accounts receivable

Atrio conducted for factoring from Banco de Sabadell S.A. Etc. (31 December 2018:

EUR6628399 equivalent of RMB52015032)

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

VI. Change of consolidation scope

Disposal of subsidiaries

Disposal of investments in subsidiaries through a single transaction resulting in loss of

control

Name Consideration

Shareholding

being

disposed

(%)

Disposal

method

Date of losing

control

Basis for

determining date

of losing control

Difference between

consideration received

and the related share

of net assets in

consolidated financial

statements

Mirefleurs 45102058 100 Transfer by agreement 30/03/2019

Asset delivery

date 6233661

The Group recognised a gain of RMB6233661 on disposal of Mirefleurs resulting in loss

of control which has been included in investment income of consolidated financial

statements.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

VII. Interests in other entities

1 Interests in subsidiaries

(1) Composition of the Group

Name of the Subsidiary Principal place of business Registered place

Business

nature Registered capital

Shareholding ratio

(%)

Acquisition method

(or similar equity

interest)Xinjiang Tianzhu Wine Co. Ltd. (“XinajingTianzhu”)

Shihezi Xinjiang

China

Shihezi Xinjiang

China Manufacturing RMB75000000 60 -

Business combinations

involving entities not under

common control

Etablissements Roullet Fransac

(“Roullet Fransac”) Cognac France Cognac France Trading EUR2900000 - 100

Business combinations

involving entities not under

common control

Dicot Partners S.L (“Dicot”) Navarre Spain Navarre Spain Marketing and sales EUR2000000 75 -

Business combinations

involving entities not under

common control

Vi?a Indómita S.A.Vi?a Dos AndesS.A.and Bodegas Santa Alicia SpA. (“ChileIndomita Wine Group”)

Santiago Chile Santiago Chile Marketing and sales CLP31100000000 85 -

Acquired through

establishment or investment

Kilikanoon Estate Pty Ltd

(“Australia Kilikanoon Estate”) Adelaide Australia Adelaide Australia

Marketing and

sales AUD6420000 82.5 -

Business combinations

involving entities not under

common control

Beijing Changyu Sales and Distribution Co.

Ltd ("Beijing Sales") Beijing China Beijing China

Marketing and

sales RMB1000000 100 -

Acquired through

establishment or investment

Yantai Kylin Packaging Co. Ltd. ("Kylin

Packaging")

Yantai Shandong

China

Yantai Shandong

China Manufacturing RMB15410000 100 -

Acquired through

establishment or investment

Yantai Chateau Changyu-Castel Co. Ltd

("Chateau Changyu") (c)

Yantai Shandong

China

Yantai Shandong

China Manufacturing RMB5000000 70 -

Acquired through

establishment or investment

Changyu (Jingyang) Wine Co. Ltd.

("Jingyang Wine")

Xianyang Shaanxi

China

Xianyang Shaanxi

China Manufacturing RMB1000000 90 10

Acquired through

establishment or investment

Yantai Changyu Pioneer Wine Sales Co. Yantai Shandong Yantai Shandong Marketing and RMB8000000 100 - Acquired through

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Name of the Subsidiary Principal place of business Registered place

Business

nature Registered capital

Shareholding ratio

(%)

Acquisition method

(or similar equity

interest)

Ltd. ("Sales Company") China China sales establishment or investment

Langfang Development Zone

Castel-Changyu Wine Co. Ltd ("Langfang

Castel")

Langfang Hebei

China

Langfang Hebei

China Manufacturing RMB6108818 39 10

Acquired through

establishment or investment

Changyu (Jingyang) Wine Sales Co. Ltd.

("Jingyang Sales")

Xianyang Shaanxi

China

Xianyang Shaanxi

China

Marketing and

sales RMB1000000 10 90

Acquired through

establishment or investment

Langfang Changyu Pioneer Wine Sales Co.Ltd ("Langfang Sales")

Langfang Hebei

China

Langfang Hebei

China

Marketing and

sales RMB1000000 10 90

Acquired through

establishment or investment

Shanghai Changyu Sales and Distribution

Co. Ltd. ("Shanghai Sales") Shanghai China Shanghai China

Marketing and

sales RMB1000000 30 70

Acquired through

establishment or investment

Beijing Changyu AFIP Agriculture

development Co. Ltd ("Agriculture

Development")

Miyun Beijing China Miyun Beijing China

Marketing and

sales RMB1000000 - 100

Acquired through

establishment or investment

Beijing Chateau Changyu AFIP Global Co.

Ltd. (“AFIP”) (d) Beijing China Beijing China Manufacturing RMB 642750000 91.53 -

Acquired through

establishment or investment

Yantai Changyu Wine Sales Co. Ltd.("Wines Sales")

Yantai Shandong

China

Yantai Shandong

China

Marketing and

sales RMB5000000 90 10

Acquired through

establishment or investment

Yantai Changyu Pioneer International Co.Ltd. ("Pioneer International")

Yantai Shandong

China

Yantai Shandong

China

Marketing and

sales RMB5000000 70 30

Acquired through

establishment or investment

Hangzhou Changyu Wine Sales Co. Ltd.("Hangzhou Changyu")

Hangzhou Zhejiang

China

Hangzhou Zhejiang

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Ningxia Changyu Grape Growing Co. Ltd.(“Ningxia Growing”)

Yinchuan Ningxia

China Ningxia China Plating RMB1000000 100 -

Acquired through

establishment or investment

Huanren Changyu National Wines Sales

Co. Ltd. ("National Wines") Benxi Liaoning China

Benxi Liaoning

China

Marketing and

sales RMB2000000 100 -

Acquired through

establishment or investment

Liaoning Changyu Golden Icewine Valley

Co. Ltd. ("Golden Icewine Valley") (e) Benxi Liaoning China

Benxi Liaoning

China Manufacturing RMB59687300 51 -

Acquired through

establishment or investment

Yantai Development Zone Changyu Trading

Co. Ltd ("Development Zone Trading")

Yantai Shandong

China

Yantai Shandong

China

Marketing and

sales RMB5000000 - 100

Acquired through

establishment or investment

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Name of the Subsidiary Principal place of business Registered place

Business

nature Registered capital

Shareholding ratio

(%)

Acquisition method

(or similar equity

interest)

Shenzhen Changyu Wine Marketing Ltd.("Shenzhen Marketing") (a)

Shenzhen

Guangdong China

Shenzhen

Guangdong China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Yantai Changyu Fushan Trading Company

("Fushan Trading")

Yantai Shandong

China

Yantai Shandong

China

Marketing and

sales RMB5000000 - 100

Acquired through

establishment or investment

Beijing AFIP Meeting Center ("Meeting

Center") Miyun Beijing China

Miyun Beijing

China Services RMB500000 - 100

Acquired through

establishment or investment

Beijing AFIP Tourism and Culture ("AFIP

Tourism") Miyun Beijing China

Miyun Beijing

China Tourism RMB500000 - 100

Acquired through

establishment or investment

Changyu (Ningxia) Wine Co. Ltd. (“NingxiaWine”) Ningxia China Ningxia China Manufacturing RMB1000000 100 -

Acquired through

establishment or investment

Yantai Changyu Chateau Tinlot Co. Ltd.

("Chateau Tinlot")

Yantai Shandong

China

Yantai Shandong

China

Wholesale and

retail RMB400000000 65 35

Acquired through

establishment or investment

Qing Tong Xia Changyu Wine Marketing Ltd.("Qing Tong Xia Sales") Ningxia China Ningxia China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Xinjiang Chateau Changyu Baron Balboa

Co. Ltd. (“Chateau Shihezi”)

Shihezi Xinjiang

China

Shihezi Xinjiang

China Manufacturing RMB550000000 100 -

Acquired through

establishment or investment

Ningxia Chateau Changyu Moser XV Co.Ltd. (“Chateau Ningxia”)

Yinchuan Ningxia

China

Yinchuan Ningxia

China Manufacturing RMB2000000 100 -

Acquired through

establishment or investment

Shaanxi Chateau Changyu Rena Co. Ltd.

(“Chateau Changan”)

Xianyang Shaanxi

China

Xianyang Shaanxi

China Manufacturing RMB20000000 100 -

Acquired through

establishment or investment

Yantai Changyu Wine Research &

Development Centre Co. Ltd. (“R&D

Centre”) (f)

Yantai Shandong

China

Yantai Shandong

China Manufacturing RMB805000000 68.97 -

Acquired through

establishment or investment

Changyu (HuanRen) Wine Co. Ltd ("Huan

Ren Wine") Benxi Liaoning China

Benxi Liaoning

China

Wine

production

projecting

RMB5000000 100 - Acquired through establishment or investment

Xinjiang Changyu Sales Co. Ltd ("Xinjiang

Sales")

Shihezi Xinjiang

China

Shihezi Xinjiang

China

Marketing and

sales RMB10000000 - 100

Acquired through

establishment or investment

Ningxia Changyu Trading Co. Ltd ("Ningxia

Trading")

Yinchuan Ningxia

China

Yinchuan Ningxia

China

Marketing and

sales RMB1000000 - 100

Acquired through

establishment or investment

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Name of the Subsidiary Principal place of business Registered place

Business

nature Registered capital

Shareholding ratio

(%)

Acquisition method

(or similar equity

interest)

Shaanxi Changyu Rena Wine Sales Co. Ltd

("Shaanxi Sales")

Xianyang Shaanxi

China

Xianyang Shaanxi

China

Marketing and

sales RMB3000000 - 100

Acquired through

establishment or investment

Penglai Changyu Wine Sales Co. Ltd

("Penglai Sales")

Penglai Shandong

China

Penglai Shandong

China

Marketing and

sales RMB5000000 - 100

Acquired through

establishment or investment

Laizhou Changyu Wine Sales Co. Ltd

("Laizhou Sales")

Laizhou Shandong

China

Laizhou Shandong

China

Marketing and

sales RMB1000000 - 100

Acquired through

establishment or investment

Francs Champs Participations SAS (“Francs

Champs”) Cognac France Cognac France

Investment

and trading EUR32000000 100 -

Acquired through

establishment or investment

Lanzhou Changyu Wine Sales Co. Ltd

("Lanzhou Sales") (a)

Lanzhou Gansu

China

Lanzhou Gansu

China

Marketing and

sales RMB100000 - 100

Acquired through

establishment or investment

Beijing Retailing Co. Ltd ("Beijing Retailing") Beijing China Beijing China Marketing and sales RMB500000 - 100

Acquired through

establishment or investment

Tianjin Changyu Pioneer Sales Co. Ltd

("Tianjin Pioneer") Tianjin China Tianjin China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Fuzhou Changyu Pioneer Sales Co. Ltd

("Fuzhou Pioneer") (a) Fuzhou Fujian China

Fuzhou Fujian

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Nanjing Changyu Pioneer Sales Co. Ltd

("Nanjing Pioneer") (a)

Nanjing Jiangsu

China

Nanjing Jiangsu

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Xianyang Changyu Pioneer Sales Co. Ltd

("Xianyang Pioneer") (a)

Xianyang Shaanxi

China

Xianyang Shaanxi

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Shenyang Changyu Pioneer Sales Co. Ltd

("Shenyang Pioneer") (a)

Shenyang Liaoning

China

Shenyang Liaoning

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Jinan Changyu Pioneer Sales Co. Ltd

("Jinan Pioneer") (a)

Jinan Shandong

China

Jinan Shandong

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Shanghai Changyu Pioneer Sales Co. Ltd

("Shanghai Pioneer") (a) Shanghai China Shanghai China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Fuzhou Changyu Pioneer Sales Co. Ltd

("Fuzhou Pioneer") (a)

Fuzhou Jiangxi

China

Fuzhou Jiangxi

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Shijiazhuang Changyu Pioneer Sales Co. Shijiazhuang Hebei Shijiazhuang Hebei Marketing and RMB500000 - 100 Acquired through

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Name of the Subsidiary Principal place of business Registered place

Business

nature Registered capital

Shareholding ratio

(%)

Acquisition method

(or similar equity

interest)

Ltd ("Shijiazhuang Pioneer") (a) China China sales establishment or investment

Hangzhou Yuzefeng Sales Co. Ltd

("Hangzhou Yuzefeng") (a)

Hangzhou Zhejiang

China

Hangzhou Zhejiang

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Jilin Changyu Pioneer Sales Co. Ltd ("Jilin

Pioneer") (a)

Changchun Jilin

China

Changchun Jilin

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Beijing Changyu Pioneer Sales Co. Ltd

("Beijing Pioneer") Beijing China Beijing China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Harbin Changyu Pioneer Sales Co. Ltd

("Harbin Pioneer") (a) Heilongjiang China Heilongjiang China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Hunan Changyu Pioneer Sales Co. Ltd

("Hunan Pioneer") (a)

Changsha Hunan

China

Changsha Hunan

China

Marketing and

sales RMB2000000 - 100

Acquired through

establishment or investment

Yinchuan Changyu Pioneer Sales Co. Ltd

("Yinchuan Pioneer") (a) Ningxia China Ningxia China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Kunming Changyu Pioneer Sales Co. Ltd

("Kunming Pioneer") (a)

Kunming Yunnan

China

Kunming Yunnan

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Chongqing Changyu Pioneer Sales Co. Ltd

("Chongqing Pioneer") (a) Chongqing China Chongqing China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Wuhan Changyu Pioneer Sales Co. Ltd

("Wuhan Pioneer") (a) Wuhan Hubei China

Wuhan Hubei

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Hohhot Changyu Pioneer Sales Co. Ltd

("Hohhot Pioneer") (a)

Hohhot Inner

Mongolia China

Hohhot Inner

Mongolia China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Chengdu Changyu Pioneer Sales Co. Ltd

("Chengdu Pioneer") (a)

Chengdu Sichuan

China

Chengdu Sichuan

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Nanning Changyu Pioneer Sales Co. Ltd

("Nanning Pioneer") (a)

Nanning Guangxi

China

Nanning Guangxi

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Lanzhou Changyu Pioneer Sales Co. Ltd

("Lanzhou Pioneer") (a)

Lanzhou Gansu

China

Lanzhou Gansu

China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Name of the Subsidiary Principal place of business Registered place

Business

nature Registered capital

Shareholding ratio

(%)

Acquisition method

(or similar equity

interest)

Yantai Roullet Fransac Wine Sales Co. Ltd.(“Yantai Roullet Fransac”)

Yantai Shandong

China

Yantai Shandong

China

Marketing and

sales RMB1000000 - 100

Acquired through

establishment or investment

Hefei Changyu Pioneer Sales Co. Ltd

("Hefei Pioneer") (a) Hefei Anhui China Hefei Anhui China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Urumchi Changyu Pioneer Sales Co. Ltd

("Urumchi Pioneer") (a) Xinjiang China Xinjiang China

Marketing and

sales RMB500000 - 100

Acquired through

establishment or investment

Guangzhou Changyu Pioneer Sales Co. Ltd

("Guangzhou Pioneer") (a)

Guanghzou

Guangdong China

Guanghzou

Guangdong China

Marketing and

sales RMB11000000 - 100

Acquired through

establishment or investment

Yantai Changyu Wine Sales Co. Ltd. ("Wine

Sales Company")

Yantai Shandong

China

Yantai Shandong

China

Marketing and

sales RMB5000000 100 -

Acquired through

establishment or investment

Shaanxi Chateau Changyu Rena Tourism

Co. Ltd ("Chateau Tourism")

Xianxin Shaanxi

China

Xianxin Shaanxi

China Tourism RMB1000000 - 100

Acquired through

establishment or investment

Longkou Changyu Wine Sales Co. Ltd

("Longkou Sales")

Yantai Shandong

China

Yantai Shandong

China

Marketing and

sales RMB1000000 - 100

Acquired through

establishment or investment

Societe Civile Argricole Du Chateau De

Mirefleurs (“Mirefleurs”) (b) Bordeaux France Bordeaux France Trading EUR30000 - 100

Business combinations

involving entities not under

common control

(a) Companies above were deregistered in 2019.(b) Mirefleurs was disposed as the contribution of L&M Holdings for the year.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Reasons for the inconsistency between the proportion of shareholdings in a subsidiary and the proportion of voting rights:

(c) Chateau Changyu is a Sino-foreign joint venture established by the Company and a foreign investor accounting for 70% of Changyu

Chateau's equity interest. Through agreement arrangement the Company has the full power to control Changyu Chateau's strategic

operating investing and financing policies. The agreement arrangement will be terminated on 31 December 2022.(d) AFIP is a limited liability company established by [ ] (“Yantai Dean”) and [ ] (“Beijing Qinglang”). In June 2019 Yantai Dean

transferred 1.31% of its equity to Yantai Changyu.After the equity change the Company holds 91.53% of its equity. Through agreement

arrangement the Company has the full power to control AFIP's strategic operating investing and financing policies. The agreement

arrangement will be terminated on 2 September 2024.(e) Golden Icewine Valley is a Sino-foreign joint venture established by the Company and a foreign investor accounting for 51% of Golden

Icewine Valley's equity interest. Through agreement arrangement the Company has the full power to control Golden Icewine Valley's

strategic operating investing and financing policies. The agreement arrangement will be terminated on 31 December 2021.(f) R&D Centre is a joint venture established by the Company and CADF accounting for 68.97% of R&D Centre's equity interest. Through

agreement arrangement in Note V. 27 the Company has the full power to control R&D Centre's strategic operating investing and financing

policies. The agreement arrangement will be terminated on 22 May 2026. As at 31 December 2019 remaining investment of CADF

accounts for 31.03% of the registered capital.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(2) Material non-wholly owned subsidiaries

Name of the Subsidiary

Proportion of

ownership

interest held by

non-controlling

interests

Comprehensive

income attributable

to non-controlling

interests for the

year

Dividend declared

to non-controlling

shareholders during

the year

Balance of

non-controlling

interests at the end

of the year

Xinjiang Tianzhu 40% 3028510 - (47584138)

Dicot 25% (1509224) 1366691 (31869464)

Chateau Changyu 30% - - (12365016)

Langfang Castel 51% 1288873 - (19639108)

AFIP 8% - - (56409393)

Golden Icewine Valley 49% - - (33319062)

IWCC 15% (1697700) 846398 (53931129)

Australia Kilikanoon Estate 17% 258494 163705 (14810422)

Total 1368953 2376794 (269927732)

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(3) Key financial information about material non-wholly owned subsidiaries

The following table sets out the key financial information of the above subsidiaries without offsetting internal transactions but with adjustments

made for the fair value adjustment at the acquisition date and any differences in accounting policies:

Xinjiang Tianzhu Dicot Chateau Changyu Langfang Castel

2019 2018 2019 2018 2019 2018 2019 2018

Current assets 24829435 27390495 470219326 464421130 142525011 141298023 19021766 17659511

Non-current assets 61886751 66486795 91571444 99080668 113168202 114694168 14958223 16001682

Total assets 86716186 93877290 561790770 563501798 255693213 255992191 33979989 33661193

Current liabilities 36185 - 380788880 381659315 174843671 171869662 4023101 3358322

Non-current liabilities 5336114 5336114 53110213 54520937 400000 - - -

Total liabilities 5372299 5336114 433899093 436180252 175243671 171869662 4023101 3358322

Operating income - 18803 289273434 327550545 87051981 121235278 - 5038281

Net profit (7571274) (6902010) 6463473 3811465 611622 3710124 (123706) (3479492)

Total comprehensive inco (7571274) (6902010) 6036896 3376761 611622 3710124 (123706) (3479492)

Cash flows from operating

activities 20457 43112 (8744451) 6129923 6919481 16096447 7875 673422

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

AFIP Golden Icewine Valley Chile Indomita Wine Group Australia Kilikanoon Estate

2019 2018 2019 2018 2019 2018 2019 2018

Current assets 251829164 219973582 38234720 45194591 223722688 214784490 94473620 87634707

Non-current assets 452444880 461115089 23291375 23920890 291630115 300969342 61770599 63759866

Total assets 704274044 681088671 61526095 69115481 515352803 515753832 156244219 151394573

Current liabilities 45607611 62598545 12077206 14974458 142365749 148359328 21801347 13387942

Non-current liabilities 201500 - 100000 100000 5152974 4976161 50741981 51893171

Total liabilities 45809111 62598545 12177206 15074458 147518723 153335489 72543328 65281113

Operating income 266347444 159369783 32223734 57290490 253543171 262104563 56399115 57648905

Net profit 30398744 16555846 (5764649) 870994 16279461 15934347 463409 217869

Total comprehensive inco 30398744 16555846 (5764649) 870994 10322810 17465900 (1477115) (1550720)

Cash flows from operating

activities 27503336 19627933 1655465 289782 5073408 3584648 479624 (1522151)

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

2 Transactions that cause changes in interests in subsidiaries that do not result in loss of control

(1) Changes in interests in subsidiaries:

Year Name of the Subsidiary

Proportion of ownership

interest held by

non-controlling interests

acquired

Acquisition date

2019 AFIP 1.31% 21 June 2019

2019 Australia Kilikanoon Estate 2.5% 08 October 2019

(2) Impact from transactions with non-controlling interests and equity attributable to the

shareholders of the Company:

AFIP Australia Kilikanoon Estate

Purchase cost

- Cash 8479444 3140108

Total 8479444 3140108

Less: share of net assets in subsidiaries based on

the shares acquired 8724476 1990057

Difference

Including: Adjustment on capital reserve (245032) 1150051

VIII. Risk related to financial instruments

The Group has exposure to the following main risks from its use of financial instruments in the

normal course of the Group’s operations:

- Credit risk

- Liquidity risk

- Interest rate risk

- Foreign currency risk

The following mainly presents information about the Group’s exposure to each of the above

risks and their sources their changes during the year and the Group’s objectives policies

and processes for measuring and managing risks and their changes during the year.The Group aims to seek appropriate balance between the risks and benefits from its use of

financial instruments and to mitigate the adverse effects that the risks of financial instruments

have on the Group’s financial performance. Based on such objectives the Group’s risk

management policies are established to identify and analyse the risks faced by the Group to

set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk

management policies and systems are reviewed regularly to reflect changes in market

conditions and the Group’s activities.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

1 Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the

other party by failing to discharge an obligation. The Group’s credit risk is primarily attributable

to cash at bank receivables debt investments and derivative financial instruments entered

into for hedging purposes. Exposure to these credit risks are monitored by management on

an ongoing basis.The cash at bank of the Group is mainly held with well-known financial institutions.Management does not foresee any significant credit risks from these deposits and does not

expect that these financial institutions may default and cause losses to the Group.

As at 31 December 2019 the Group's maximum exposure to credit risk which will cause a

financial loss to the Group due to failure to discharge an obligation by the counterparties.In order to minimise the credit risk the Group has adopted a policy to ensure that all sales

customers have good credit records. According to the policy of the Group credit review is

required for clients who require credit transactions. In addition the Group continuously

monitors the balance of account receivable to ensure there’s no exposure to significant bad

debt risks. For transactions that are not denominated in the functional currency of the relevant

operating unit the Group does not offer credit terms without the specific approval of the

Department of Credit Control in the Group. In addition the Group reviews the recoverable

amount of each individual trade debt at each balance sheet date to ensure that adequate

impairment losses are made for irrecoverable amounts. In this regard the management of the

Group considers that the Group's credit risk is significantly reduced.Since the Group trades only with recognised and creditworthy third parties there is no

requirement for collateral. Concentrations of credit risk are managed by

customer/counterparty by geographical region and by industry sector. As at 31 December

2019 20.3% of the Group trade receivables are due from top five customers (31 December

2018: 19.8%). There is no collateral or other credit enhancement on the balance of the trade

receivables of the Group.

2 Liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulty in meeting obligations that

are settled by delivering cash or another financial asset. The Company and its individual

subsidiaries are responsible for their own cash management including short-term investment

of cash surpluses and the raising of loans to cover expected cash demands (subject to

approval by the Company’s board when the borrowings exceed certain predetermined levels).The Group’s policy is to regularly monitor its liquidity requirements and its compliance with

lending covenants to ensure that it maintains sufficient reserves of cash readily realisable

marketable securities and adequate committed lines of funding from major financial

institutions to meet its liquidity requirements in the short and longer term.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The following tables set out the remaining contractual maturities at the balance sheet date of

the Group’s financial liabilities which are based on contractual undiscounted cash flows

(including interest payments computed using contractual rates or if floating based on rates

current at the balance sheet date) and the earliest date the Group can be required to pay:

Item

2019 Contractual undiscounted cash flow Carrying amount

at balance sheet

date

Within 1 year or on

demand

1 to 2 years

More than 2 years

but less than 5

years

More than 5 years Total

Short-term loans 768403432 - - - 768403432 754313744

Accounts payable 570252612 - - - 570252612 570252612

Other payables 450532485 - - - 450532485 450532485

Long-term loans (including the

portion due within one year) 121077261 51214719 77814096 5577899 255683975 245718722

Long-term payables (including

the portion due within one

year)

36462109 36054170 106374904 55473753 234364936 225000000

Total 1946727899 87268889 184189000 61051652 2279237440 2245817563

Item

2018 Contractual undiscounted cash flow Carrying amount

at balance sheet

date

Within 1 year or on

demand

1 to 2 years

More than 2 years

but less than 5

years

More than 5 years Total

Short-term loans 701861292 - - - 701861292 688002410

Accounts payable 713572881 - - - 713572881 713572881

Other payables 608479890 - - - 608479890 608479890

Long-term loans (including the

portion due within one year) 126176001 121080909 47493128 - 294750038 275421450

Long-term payables (including

the portion due within one

year)

36921367 36462109 107093324 90356300 270833100 259000000

Total 2187011431 157543018 154586452 90356300 2589497201 2544476631

3 Interest rate risk

Interest-bearing financial instruments at variable rates and at fixed rates expose the Group to

cash flow interest rate risk and fair value interest risk respectively. The Group determines the

appropriate weightings of the fixed and floating rate interest-bearing instruments based on the

current market conditions and performs regular reviews and monitoring to achieve an

appropriate mix of fixed and floating rate exposure.

(1) As at 31 December the Group held the following interest-bearing financial instruments:

Fixed rate instruments:

Item

2019 2018

Effective interest

rate Amounts

Effective interest

rate Amounts

Financial assets

- Cash at bank 1.1%-2.75% 106128600 1.5%-3.8% 173042400

Financial liabilities

- Short-term loans 0.35%-4.9% (204313744) 0.35%-4.9% (138002410)

- Long-term loans (including the

portion due within one year) 1%-2.5% (189468722) 1%-3% (194171450)

- Long-term payables (including

the portion due within one

year)

1.20% (225000000) 1.20% (259000000)

Total (512653866) (418131460)

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

Variable rate instruments:

Item

2019 2018

Effective interest

rate Amounts

Effective interest

rate Amounts

Financial assets

- Cash at bank 0.3%-1.75% 1459595405 0.3%-1.75% 1302543742

Financial liabilities

- Short-term loans LPR (550000000) LPR (550000000)

- Long-term loans (including the

portion due within one year)

90% of 5-year

LPR (56250000)

90% of 5-year

LPR (81250000)

Total 853345405 671293742

(2) Sensitivity analysis

Management of the Group believes interest rate risk on bank deposit is not significant

therefore does not disclose sensitivity analysis for interest rate risk.

As at 31 December 2019 based on assumptions above it is estimated that a general increase

of 50 basis points in interest rates with all other variables held constant would decrease the

Group’s equity by RMB2273438 (2018: RMB2016667) and net profit by RMB2273438

(2018: RMB2016667).

The sensitivity analysis above indicates the instantaneous change in the net profit and equity

that would arise assuming that the change in interest rates had occurred at the balance sheet

date and had been applied to re-measure those financial instruments held by the Group which

expose the Group to fair value interest rate risk at the balance sheet date. In respect of the

exposure to cash flow interest rate risk arising from floating rate non-derivative instruments

held by the Group at the balance sheet date the impact on the net profit and equity is

estimated as an annualised impact on interest expense or income of such a change in interest

rates.

4 Foreign currency risk

In respect of cash at bank and on hand accounts receivable and payable short-term loans

denominated in foreign currencies other than the functional currency the Group ensures that

its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot

rates when necessary to address short-term imbalances.

(1) As at 31 December the Group’s exposure to currency risk arising from recognised assets or

liabilities denominated in foreign currencies is presented in the following tables. For

presentation purposes the amounts of the exposure are shown in Renminbi translated using

the spot rate at the balance sheet date. Differences resulting from the translation of the

financial statements denominated in foreign currency are excluded.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

2019 2018

Balance at foreign

currency

Balance at RMB

equivalent

Balance at foreign

currency

Balance at RMB

equivalent

Cash at bank and on hand 6662525 46592414 7497971 51483850

- USD 6525673 45524399 7472303 51283910

- EUR 136628 1067814 25455 199753

- HKD 224 201 213 187

Short-term loans 12490000 87132738 11000000 75495200

- USD 12490000 87132738 11000000 75495200

(2) The following are the exchange rates for Renminbi against foreign currencies applied by the

Group:

Average rate

Balance sheet date mid-spot

rate

2019 2018 2019 2018

USD 6.8948 6.7158 6.9762 6.8632

EUR 7.7161 7.8113 7.8155 7.8473

HKD 0.8801 0.8464 0.8958 0.8762

(3) Sensitivity analysis

Assuming all other risk variables remained constant a 5% strengthening of the Renminbi

against the US dollar Euro and Hong Kong dollar at 31 December would have impact on the

Group’s equity and net profit by the amount shown below. whose effect is in Renminbi and

translated using the spot rate at the year-end date:

Equity Net profit

31 December 2019

USD 2080417 2080417

EUR (53391) (53391)

HKD (10) (10)

Total 2027016 2027016

31 December 2018

USD 1210565 1210565

EUR (53391) (53391)

HKD - -

Total 1157174 1157174

A 5% weakening of the Renminbi against the US dollar Euro and Hong Kong dollar at 31

December would have had the equal but opposite effect to the amounts shown above on the

basis that all other variables remained constant.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

IX. Fair value disclosure

All financial assets and financial liabilities held by the Group are carried at amounts not materially different from their fair value at 31 December

2019 and 31 December 2018.

X. Related parties and related party transactions

1 Information about the parent of the Company

Company name Registered place Business nature Registered capital

Shareholding

percentage (%)

Percentage of voting

rights (%) Ultimate controlling party of the Company

Changyu Group Yantai Manufacturing 50000000 50.4% 50.4%

Jointly controlled by Yantai GuoFeng

Investment Holding Group Co. Ltd.ILLVA SARONNO HOLDING SPA

International Finance Corporation and

Yantai Yuhua Investment and

Development Company Limited.

There are no changes on the registered capital and shareholding percentage / percentage of voting rights of the parent company.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

2 Information about the subsidiaries of the Company

For information about the subsidiaries of the Company refer to Note VII.1.

3 Information about joint ventures and associates of the Company

For information about the joint ventures and associates of the Company refer to Note VII.3.

Joint ventures and associates that have related party transactions with the Group during this

year or the previous year are as follows:

Name of entity Relationship with the Company

L&M Holdings Joint venture of the Group

4 Information on other related parties

Name of other related parties Related party relationship

Yantai Changyu Wine Culture Museum Co.Ltd.("Wine Culture Museum")

Controlled by the same parent

company

Yantai Changyu International Window of the Wine City

Co. Ltd.("Window of the Wine City”)

Controlled by the same parent

companyYantai Shenma Packaging Co. Ltd. (“ShenmaPackaging”)

Controlled by the same parent

company

Yantai Zhongya Pharmaceutical Tonic Wine Co.Ltd.("Zhongya Pharmaceutical")

Controlled by the same parent

company

Yantai Changyu Culture Tourism Production Sales

Co. Ltd.(" Culture Sales")

Controlled by the same parent

company

Yantai Changyu Culture Tourism Development Co.Ltd.(" Culture Development ")

Controlled by the same parent

company

L&M Holdings Joint ventures

Mirefleurs Subsidiaries of the joint venture

CHATEAU DE LIVERSAN (“LIVERSAN”） Subsidiaries of the joint venture

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

5 Transactions with related parties

(1) Product procurement

Related parties Nature of transaction 2019 2018

Shenma Packaging Product procurement 133587430 173238289

Zhongya Pharmaceutical Product procurement 1244991 15690930

Wine Culture Museum Product procurement 10832751 16784711

Window of the Wine City Product procurement 8556698 7913342

Culture sales Product procurement 573849 35857

Culture development Product procurement 2820545 -

Mirefleurs Product procurement 6429542 -

L&M Holdings Product procurement 1632941 -

Total 165678747 213663129

(2) Sales of goods

Related parties Nature of transaction 2019 2018

Culture development Sales of goods 9592510 -

Wine Culture Museum Sales of goods 8305228 23515379

Window of the Wine City Sales of goods 7723602 13821555

Zhongya Pharmaceutical Sales of goods 4474004 4552269

Culture sales Sales of goods 3840804 2914686

Shenma Packaging Sales of goods 347453 348247

Total 34283601 45152136

(3) Leases

(a) As the lessor

Name of lessee Type of assets leased

Lease income

recognised in 2019

Lease income

recognised in 2018

Shenma Packaging Offices and plants 1492550 1478982

Zhongya Pharmaceutical Offices and plants 522936 518182

Total 2015486 1997164

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(b) As the lessee

Name of lessor Type of assets leased

Lease expense

recognised in 2019

Lease expense

recognised in 2018

Changyu Group Office buildings 1612118 1538840

Changyu Group Offices and plants 1394762 1331364

Changyu Group Offices and plants 4184286 3994091

Total 7191166 6864295

(4) Remuneration of key management personnel

Item 2019 2018

Remuneration of key management personnel 12297689 13102005

(5) Other related party transactions

Related parties Nature of transaction Note 2019 2018

Changyu Group Royalty (a) 35938014 73976395

Changyu Group Royalty deducted in the previous years (a) (218649636) -

Changyu Group Patent fee - 50000

Total (182711622) 74026395

(a) Contract of trademarks usage

Pursuant to a royalty agreement dated 18 May 1997 starting from 18 September 1997

the Company may use certain trademarks of Changyu Group Company which have

been registered with the PRC Trademark Office. An annual royalty fee at 2% of the

Group's annual sales is payable to Changyu Group. The license is effective until the

expiry of the registration of the trademarks.

According to the above royalty agreement Changyu Group collected a total of

RMB576507809 for royalty from 2013 to 2019 of which 51% was used to promote

trademarks such as Changyu and the product of this contract totalling

RMB294018093. The amount is used for promotion of Changyu and other trademarks

and the products of this contract totalling RMB62250368 the difference is

RMB231768615.

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

On 18 May 2019 the general meeting of shareholders approved the proposal of the

amendment to the royalty agreement. Article 6.1 of the royalty agreement with Changyu

Group was amended to: During the validity period of this contract the Group pays

Changyu Group royalty on an annual basis. The royalty is calculated based on 0.98% of

the sales volume of the Group ’s contract products using this trademark. The article is

amended to: The royalty paid to the Changyu Group by the Group shall not be used to

promote this trademark and the contract products.In addition in accordance with agreement the Group signed with Changyu Group in

November 2019 Changyu Group promised to offset the difference of RMB231768615

above with the royalty for four years i.e. from 2019 to 2022.If it is not sufficient for

deduction the rest will be repaid in a one-off manner in 2023. If there is surplus the

surplus part of the royalty will be charged from the year when the surplus occurs.

As at 31 December 2019 the Group offset the royalty for the year of RMB182711622

including the royalty of RMB35938014 occurred in 2019 and the deduction of the

previous year's sales expenses of RMB218649636 (exclusive of tax).

6 Receivables from and payables to related parties

Receivables from related parties

Item Related party

2019 2018

Book value

Provision for

bad and doubtful

debts

Book value

Provision for

bad and doubtful

debts

Accounts receivable

Zhongya

Pharmaceutica

4292386 909935 2768391 -

Accounts receivable Shenma Packaging - - 17137 -

Accounts receivable Window of the Wine City 1610485 633980 1911157 -

Other non-current assets Changyu Group 193674320 - - -

Other receivables Shenma Packaging 813400 - 813400 -

Payables to related parties

Item Related party 2019 2018

Accounts payable Shenma Packaging 39893538 55366785

Accounts payable Zhongya

Pharmaceutical 1024310 6722667

Accounts payable Wine Culture Museum 4874963 4646731

Accounts payable Window of the Wine

City 3758054 4789600

Accounts payable Culture sales 297956 -

Accounts payable Culture development 142610 -

Other payables Shenma Packaging 450000 450000

Other payables Changyu Group - 78414978

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

XI. Capital management

The Group’s primary objectives when managing capital are to safeguard its ability to continue

as a going concern so that it can continue to provide returns for shareholders by pricing

products and services commensurately with the level of risk and by securing access to

finance at a reasonable cost.The Group’s capital structure is regularly reviewed and managed to achieve an optimal

structure and return for shareholders. Factors for the Group’s consideration include: its future

funding requirements capital efficiency actual and expected profitability expected cash

flows and expected capital expenditure. Adjustments are made to the capital structure in light

of changes in economic conditions affecting the Group.Neither the Company nor any of its subsidiaries are subject to externally imposed capital

requirements.XII. Commitments and contingencies

1 Significant commitment

(1) Capital commitments

Item 2019 2018

Long-term assets acquisition commitment 679980000 996675000

Total 679980000 996675000

(2) Operating lease commitments

As at 31 December the total future minimum lease payments under non-cancellable

operating leases of the Group’s properties were payable as follows:

Item 2019 2018

Within 1 year (inclusive) 17756000 20576000

Over 1 year but within 2 years (inclusive) 16189000 11757000

Over 2 years but within 3 years (inclusive) 9757000 10064000

Over 3 years 89550940 84095000

Total 133252940 126492000

2 Contingencies

The Group do not have any significant contingencies as at balance sheet date.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

XIII. Subsequent events

1 Distribution of dividends on ordinary shares approved after the balance sheet date

According to the proposal of the Board of Directors on 22 April 2020 the Company intends to

distribute cash dividend totaling RMB479824800 to all shareholders of 685464000 capital

shares for the year ended 31 December 2019 on the basis of RMB7.0 (including tax) for every

10 shares. The proposal is subject to the approval by the Shareholders’ meeting. This

distribution of profit in cash has not been recognised as a liability at the balance sheet date.

2 Impact of COVID-19

Since the outbreak of COVID-19in January 2020 the Company has been proactively

performing prevention and control measures internally. The Company has also fulfilled its

social responsibility while conducting prevention and control measures and operation. After

the outbreak the Company has analysed the possible impact and sorted out all business

objectives and adjusted operation contingency plans to make sure the normal business

operations.The Company will closely follow the development of COVID-19 assess and proactively react

to the possible impacts on the financial position and financial performance etc.XIV. Other significant items

1 Segment reporting

The Group is principally engaged in the production and sales of wine brandy and sparkling

wine in China France Spain Chile and Australia. In accordance with the Group's internal

organisation structure management requirements and internal reporting system the Group's

operation is divided into four parts: China Spain France Chile and Australia. The

management periodically evaluates segment results in order to allocate resources and

evaluate performances. In 2019 over 89% of revenue more than 98% of profit and over 92%

of non-current assets derived from China / are located in China. Therefore the Group does

not need to disclose additional segment report information.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

XV. Notes to the Company’s financial statements

1 Accounts receivable

(1) Accounts receivable by customer type are as follows:

Type 31 December 2019 31 December 2018

Amounts due from related parties 2589936 1447973

Sub-total 2589936 1447973

Less: Provision for bad and doubtful debts 601610 -

Total 1988326 1447973

(2) The ageing analysis of accounts receivable is as follows:

Ageing 2019 2018

Within 1 year (inclusive) 2019936 1447973

Over 1 year but within 2 years (inclusive) 570000 -

Sub-total 2589936 1447973

Less: Provision for bad and doubtful debts 601610 -

Total 1988326 1447973

The ageing is counted starting from the date when account receivables are recognised.

(3) Accounts receivable by provisioning method

(a) Assessment of ECLs on accounts receivable in 2019:

At all times the Company measures the impairment loss for accounts receivable at an

amount equal to lifetime ECLs and the ECLs are based on the number of overdue days

and the loss given default. According to the historical experience of the Company there

are no significant differences in the losses of different customer groups. Therefore

different customer groups are not further distinguished when calculating impairment

loss based on the overdue information.Loss given default Carrying amount at the end of the year

Impairment loss at

the end of the year

Current 0.8% 1449936 12179

Overdue for 1 to 30 days 3.4% 570000 19431

Overdue for 330 to 360

days 100.0% 570000 570000

Total 23.2% 2589936 601610

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

The loss given default is measured based on the actual credit loss experience in the

past 12 months and is adjusted taking into consideration the differences among the

economic conditions during the historical data collection period the current economic

conditions and the economic conditions during the expected lifetime.(b) Impairment of account receivables in 2018

Under previous financial instruments standards provision for impairments is mde when

there is objective evidence of impairment.

(4) Accounts receivable by debtor at the end of the year:

Name Relationship with the Group

Balance of account

receivable Ageing

Percentage of

total

receivables

Provisio

n for bad

and

doubtful

debts

Zhongya

Pharmaceutica

Other related parties of

the Company 2589936

Within 1

year 100% 601610

2 Receivables under financing

Item Note 2019 2018

Bills receivable (1) 41679635 -

Total 41679635 -

(1) The pledged bills receivable of the Company at the end of the year

As at 31 December 2019 there was no pledged bills receivable (31 December 2018: Nil).

(2) Outstanding endorsed bills that have not matured at the end of the year

Item Amount derecognised at year end

Bank acceptance bills 65303181

Total 65303181

As at 31 December 2019 bills endorsed by the Company to other parties which are not yet

due at the end of the period is RMB65303181 (31 December 2018: RMB94755124). The

notes are used for payment to suppliers. The Company believes that due to good reputation

of bank the risk of notes not accepting by bank on maturity is very low therefore derecognise

the note receivables endorsed. If the bank is unable to pay the notes on maturity according to

the relevant laws and regulations of China the Company would undertake limited liability for

the notes.Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

3 Other receivables

Note 31 December 2019 31 December 2018

Interest receivable (1) 90355 254088

Dividends receivable (2) 200000000 500000000

Others (3) 386334603 525389268

Total 586424958 1025643356

(1) Interest receivable

(a) Interest receivable by category:

Item 31 December 2019 31 December 2018

Interest receivable on bank deposits 90355 254088

Total 90355 254088

(b) Significant overdue interest: N/A

(2) Dividends receivable

Item 31 December 2019 31 December 2018

Dividends to subsidiaries 200000000 500000000

Total 200000000 500000000

(3) Others

(a) Others by customer type:

Customer type 31 December 2019 31 December 2018

Amounts due from subsidiaries 385328319 523579831

Amounts due from related parties 813440 813440

Others 192844 995997

Sub-total 386334603 525389268

Less: Provision for bad and doubtful debts - -

Total 386334603 525389268

Yantai Changyu Pioneer Wine Co. Ltd. 2019 Annual Report

(b) The ageing analysis is as follows:

Ageing 2019 2018

Within 1 year (inclusive) 386314603 525362872

Over 1 year but within 2 years (inclusive) - 26396

Over 2 years but within 3 years (inclusive) 20000 -

Sub-total 386334603 525389268

Less: Provision for bad and doubtful debts - -

Total 386334603 525389268

The ageing is counted starting from the date when other receivables are recognised.(c) Others by method of provisioning

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