张裕B:2021年年度审计报告（英文版）

YANTAI CHANGYU PIONEER WINE COMPANY LIMITED

ENGLISH TRANSLATION OF FINANCIAL STATEMENTS

FOR THE YEAR 1 JANUARY 2021 TO 31 DECEMBER 2021

IF THERE IS ANY CONFLICT BETWEEN THE CHINESE VERSION AND ITS ENGLISH

TRANSLATION THE CHINESE VERSION WILL PREVAILAUDITOR’S REPORT

KPMG Huazhen Shen Zi No. 2205034

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 2021 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 company financial position of Yantai Changyu as at 31

December 2021 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.Page 1 of 6AUDITOR’S REPORT (continued)

KPMG Huazhen Shen Zi No. 2205034

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” 37.How the Matter was Addressed in Our

Key Audit Matters

Audit

The principal activities of Yantai Changyu and Our audit procedures to evaluate revenue

its subsidiaries (hereinafter referred to as recognition of sales revenue from

“Yantai Changyu Group”) include manufacture distributors included the following:

and sales of wine brandy and sparkling wine.Understand and evaluate the

The revenue of Yantai Changyu Group is Management’s design and operation

mainly derived from sales of distributors. All effectiveness of key internal controls

distributor transaction terms adopt the unified related to distributor sales revenue

transaction terms formulated by Yantai recognition;

Changyu Group.Selecting the sales contracts Yantai

Based on the contractual agreement and the Changyu signed with distributors in

business arrangement Yantai Changyu sells order to examine whether Yantai

products to distributors and the transfer of Changyu has adopted the unified

product ownership is completed and the transaction terms and evaluate

revenue is recognised when the goods are whether the accounting policy of

delivered to distributors and signed for revenue recognition meets the

acceptance. requirements of the Accounting

Standards for Business Enterprises;

As revenue is one of the key performance

indicators of Yantai Changyu Group there is a On a sampling basis reconcile the

risk that management may recognise revenue revenue recorded for the year to

earlier or later in order to meet specific

relevant supporting files such as

performance targets or expectations therefore

relevant orders and signed delivery

the risk of cut-off misstatement arising from

notes etc. to evaluate whether

distributors’ sales revenue is identified as a key

revenue is recognised in accordance

audit matter. with the accounting policy of Yantai

Changyu;

Page 2 of 6AUDITOR’S REPORT (continued)

KPMG Huazhen Shen Zi No. 2205034

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” 37.How the matter was addressed in our

The Key Audit Matters

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;

Check the sales record after the balance

sheet date to identify significant sales

returns and check relevant supporting

files (If applicable) 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.Page 3 of 6AUDITOR’S REPORT (continued)

KPMG Huazhen Shen Zi No. 2205034

Other Information

Management of Yantai Changyu is responsible for the other information. The other

information comprises all the information included in the 2021 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.Page 4 of 6AUDITOR’S REPORT (continued)

KPMG Huazhen Shen Zi No. 2205034

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.Page 5 of 6AUDITOR’S REPORT (continued)

KPMG Huazhen Shen Zi No. 2205034

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

(Stamp) in the People’s Republic of China

Wang Ting (Engagement Partner)

(Signature and stamp)

Beijing China Xu Weiran

(Signature and stamp)

Date: 25 April 2022

Page 6 of 6Yantai Changyu Pioneer Wine Company Limited

Consolidated balance sheet

as at 31 December 2021

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20212020

Assets

Current assets

Cash at bank and on hand V.1 1567095993 1194214929

Bills receivable V.2 42827666 -

Accounts receivable V.3 291006410 183853362

Receivables under financing V.4 364457497 338090187

Prepayments V.5 75235879 71296416

Other receivables V.6 30125270 22428956

Inventories V.7 2802622520 2945548651

Other current assets V.8 217152601 234118715

Total current assets 5390523836 4989551216

Non-current assets

Long-term equity investments V.9 46496510 48263507

Investment properties V.10 24502258 27057730

Fixed assets V.11 5687867314 5724935846

Construction in progress V.12 590172099 635495152

Bearer biological assets V.13 193712942 192173536

Right-of-use assets V.14 134569039 -

Intangible assets V.15 617866879 660989065

Goodwill V.16 112374541 132938212

Long-term deferred expenses V.17 284593163 314465855

Deferred tax assets V.18 245210731 206241275

Other non-current assets V.19 144120442 170370147

Total non-current assets 8081485918 8112930325

Total assets 13472009754 13102481541

The notes on pages 20 to 111 form part of these financial statements.

1Yantai Changyu Pioneer Wine Company Limited

Consolidated balance sheet

as at 31 December 2021 (continued)

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20212020

Liabilities and shareholders’ equity

Current liabilities

Short-term loans V.20 622066457 689090715

Accounts payable V.21 493453816 484347958

Contract liabilities V.22 147120716 135073280

Employee benefits payable V.23 195019441 188779911

Taxes payable V.24 342322300 213412813

Other payables V.25 453033491 386105526

Other current liabilities V.26 18374193 14820653

Non-current liabilities due within

V.27 110865126 133311890

one year

Total current liabilities 2382255540 2244942746

Non-current liabilities

Long-term loans V.28 176047043 200352968

Lease liabilities V.14 101811588 -

Long-term payables V.29 64000000 86000000

Deferred income V.30 41295338 52653609

Deferred tax liabilities V.18 11803970 12022613

Other non-current liabilities V.31 2119671 2078971

Total non-current liabilities 397077610 353108161

Total liabilities 2779333150 2598050907

The notes on pages 20 to 111 form part of these financial statements.

2Yantai Changyu Pioneer Wine Company Limited

Consolidated balance sheet

as at 31 December 2021 (continued)

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20212020

Liabilities and shareholders’ equity

(continued)

Shareholders’ equity

Share capital V.32 685464000 685464000

Capital reserve V.33 524968760 524968760

Other comprehensive income V.34 (34707177) 576129

Surplus reserve V.35 342732000 342732000

Retained earnings V.36 8929426600 8714091755

Total equity attributable to shareholders of

1044788418310267832644

the Company

Non-controlling interests 244792421 236597990

Total owners’ equity 10692676604 10504430634

Total liabilities and shareholders’ equity 13472009754 13102481541

These financial statements were approved by the Board of Directors of the Company on 25

April 2022.Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp)

Legal Representative The person in charge The head of the

of accounting affairs accounting department

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 20 to 111 form part of these financial statements.

3Yantai Changyu Pioneer Wine Company Limited

Company balance sheet

as at 31 December 2021

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20212020

Assets

Current assets

Cash at bank and on hand 562588819 267548326

Bills receivable XIV.1 9800000 -

Receivables under financing XIV.2 62411636 13920000

Prepayments 406500 171709

Other receivables XIV.3 398072976 580131798

Inventories 383294208 482442935

Other current assets 20637860 24842325

Total current assets 1437211999 1369057093

Non-current assets

Long-term equity investments XIV.4 7599421494 7599778880

Investment properties 24502258 -

Fixed assets 231284799 270692477

Construction in progress 255996 2865243

Bearer biological assets 114753306 115103753

Right-of-use assets 36826342 -

Intangible assets 78043888 80789731

Deferred tax assets 18033185 18285685

Other non-current assets 2023500000 1530700000

Total non-current assets 10126621268 9618215769

Total assets 11563833267 10987272862

The notes on pages 20 to 111 form part of these financial statements.

4Yantai Changyu Pioneer Wine Company Limited

Company balance sheet

as at 31 December 2021 (continued)

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20212020

Liabilities and shareholders’ equity

Current liabilities

Short-term loans 150000000 150000000

Accounts payable 90339903 76470081

Employee benefits payable 66770838 67808910

Taxes payable 32588429 9123959

Other payables 445874937 521505947

Non-current liabilities due within

1485190-

one year

Total current liabilities 787059297 824908897

Non-current liabilities

Lease liabilities 43312517 -

Deferred income 2268527 5507708

Deferred tax liabilities 88555 -

Other non-current liabilities 1164471 1164471

Total non-current liabilities 46834070 6672179

Total liabilities 833893367 831581076

The notes on pages 20 to 111 form part of these financial statements.

5Yantai Changyu Pioneer Wine Company Limited

Company balance sheet

as at 31 December 2021 (continued)

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20212020

Liabilities and shareholders’ equity

(continued)

Shareholders’ equity

Share capital 685464000 685464000

Capital reserve 560182235 560182235

Surplus reserve 342732000 342732000

Retained earnings 9141561665 8567313551

Total owners’ equity 10729939900 10155691786

Total liabilities and shareholders’ equity 11563833267 10987272862

These financial statements were approved by the Board of Directors of the Company on 25

April 2022.Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp)

Legal Representative The person in charge The head of the

of accounting affairs accounting department

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 20 to 111 form part of these financial statements.

6Yantai Changyu Pioneer Wine Company Limited

Consolidated income statement

for the year ended 31 December 2021

(Expressed in Renminbi Yuan)

Note 2021 2020

I. Operating income V.37 3953067583 3395402001

Less: Operating cost V.37 1647789874 1503877407

Taxes and surcharges V.38 264057570 203789274

Selling and distribution

V.39 998954105 788252485

expenses

General and administrative

V.40 299076376 290646466

expenses

Research and development

109192624531418

expenses

Financial expenses V.41 21178727 20441713

Including: Interest expenses 28851606 32890621

Interest income 19558354 14247274

Add: Other income V.42 48240741 73063620

Investment losses V.43 (2784997) (2217623)

Including: Losses from

investment in joint

(2784997)(2217623)

ventures and

associates

Credit (losses)/reversal V.44 (7937144) 4348309

Impairment losses V.45 (19874251) (3215978)

Losses from disposal of assets V.46 (11939284) (1180655)

The notes on pages 20 to 111 form part of these financial statements.

7Yantai Changyu Pioneer Wine Company Limited

Consolidated income statement

for the year ended 31 December 2021 (continued)

(Expressed in Renminbi Yuan)

Note 2021 2020

II. Operating profit 716796734 654660911

Add: Non-operating income V.47 5214304 11908510

Less: Non-operating expenses V.47 6311844 1702858

III. Total profit 715699194 664866563

Less: Income tax expenses V.48 209020821 191804500

IV. Net profit 506678373 473062063

(1) Net profit classified by

continuity of operations:

1. Net profit from continuing

506678373473062063

operations

2. Net profit from discontinued

operations

(2) Net profit classified by

ownership:

1. Net profit attributable to

500102606470860587

owners of the Company

2. Non-controlling interests 6575767 2201476

V. Other comprehensive income net of

(39307949)5171635

tax

(1) Other comprehensive income

(net of tax) attributable to (35283306) 4811712

shareholders of the Company

Translation differences arising

from translation of foreign (35283306) 4811712

currency financial statements

(2) Other comprehensive income

(net of tax) attributable to non- (4024643) 359923

controlling interests

The notes on pages 20 to 111 form part of these financial statements.

8Yantai Changyu Pioneer Wine Company Limited

Consolidated income statement

for the year ended 31 December 2021 (continued)

(Expressed in Renminbi Yuan)

Note 2021 2020

VI. Total comprehensive income for the

467370424478233698

year

(1) Attributable to shareholders of

464819300475672299

the Company

(2) Attributable to non-controlling

25511242561399

interests

VII. Earnings per share:

(1) Basic earnings per share V.49 0.73 0.69

(2) Diluted earnings per share V.49 0.73 0.69

These financial statements were approved by the Board of Directors of the Company on 25

April 2022.Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp)

Legal Representative The person in charge The head of the

of accounting affairs accounting department

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 20 to 111 form part of these financial statements.

9Yantai Changyu Pioneer Wine Company Limited

Company income statement

for the year ended 31 December 2021

(Expressed in Renminbi Yuan)

Note 2021 2020

I. Operating income XIV.5 578895802 512303553

Less: Operating cost XIV.5 472158738 452368512

Taxes and surcharges 38263612 19841835

General and administrative

7494820074929302

expenses

Research and development

907975728793

expenses

Financial expenses 2193348 (602459)

Including: Interest expenses 5870092 4875912

Interest income 7122455 5594285

Add: Other income 6108832 5339898

Investment income XIV.6 867523178 449504721

Credit reversal - 601610

II. Operating profit 864055939 420483799

Add: Non-operating income 997416 3961267

Less: Non-operating expenses 3295694 1050415

The notes on pages 20 to 111 form part of these financial statements.

10Yantai Changyu Pioneer Wine Company Limited

Company income statement

for the year ended 31 December 2021 (continued)

(Expressed in Renminbi Yuan)

Note 2021 2020

III. Total profit 861757661 423394651

Less: Income tax expenses 6703679 (3766123)

IV. Net profit 855053982 427160774

(i) Net profit from continuing

855053982427160774

operations

(ii) Net profit from discontinued

operations

V. Other comprehensive income net of

tax

VI. Total comprehensive income for the

855053982427160774

year

These financial statements were approved by the Board of Directors of the Company on 25

April 2022.Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp)

Legal Representative The person in charge The head of the

of accounting affairs accounting department

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 20 to 111 form part of these financial statements.

11Yantai Changyu Pioneer Wine Company Limited

Consolidated cash flow statement

for the year ended 31 December 2021

(Expressed in Renminbi Yuan)

Note 2021 2020

I. Cash flows from operating activities:

Proceeds from sale of goods and

36747410843259057195

rendering of services

Refund of taxes and surcharges 48716047 45642498

Proceeds from other operating

V.50(1) 89142251 81197248

activities

Sub-total of cash inflows 3812599382 3385896941

Payment for goods and services 957499905 1095500438

Payment to and for employees 507532110 529304037

Payment of various taxes 659986692 704054796

Payment for other operating activities V.50(2) 562198017 551890997

Sub-total of cash outflows 2687216724 2880750268

Net cash flows from operating

V.51(1) 1125382658 505146673

activities

II. Cash flows from investing activities:

Proceeds from disposal of

93553062135647402

investments

Investment returns received 2587932 1730511

Net proceeds from disposal of fixed

assets intangible assets and other 7923724 49200301

long-term assets

Sub-total of cash inflows 104064718 186578214

Payment for acquisition of fixed

assets intangible assets and other 225502766 155918502

long-term assets

Payment for acquisition of

5421800083508393

investments

Net cash paid for the acquisition of

subsidiaries and other business V.51(2) - 89519789

units

Sub-total of cash outflows 279720766 328946684

Net cash flows from investing

(175656048)(142368470)

activities

The notes on pages 20 to 111 form part of these financial statements.

12Yantai Changyu Pioneer Wine Company Limited

Consolidated cash flow statement

for the year ended 31 December 2021 (continued)

(Expressed in Renminbi Yuan)

Note 2021 2020

III. Cash flows from financing activities:

Proceeds from investors 7840000 -

Proceeds from borrowings 847358786 987668379

Sub-total of cash inflows 855198786 987668379

Repayments of borrowings 1036788771 1098773637

Payment for dividends profit

302051763531697065

distributions or interest

Payment for other financing activities V.50(3) 15904567 62966747

Sub-total of cash outflows 1354745101 1693437449

Net cash flows from financing

(499546315)(705769070)

activities

IV. Effect of foreign exchange rate

changes on cash and cash (518371) (1743498)

equivalents

V. Net increase/(decrease) in cash and

V.51(1) 449661924 (344734365)

cash equivalents

Add: Cash and cash equivalents at

10526651051397399470

the beginning of the year

VI. Cash and cash equivalents at the

V.51(3) 1502327029 1052665105

end of the year

These financial statements were approved by the Board of Directors of the Company on 25

April 2022.Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp)

Legal Representative The person in charge The head of the

of accounting affairs accounting department

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 20 to 111 form part of these financial statements.

13Yantai Changyu Pioneer Wine Company Limited

Company cash flow statement

for the year ended 31 December 2021

(Expressed in Renminbi Yuan)

Note 2021 2020

I. Cash flows from operating activities:

Proceeds from sale of goods and

514762698365804968

rendering of services

Proceeds from other operating

4711210019507538

activities

Sub-total of cash inflows 561874798 385312506

Payment for goods and services 313397323 261854964

Payment to and for employees 76053780 65247752

Payment of various taxes 39248076 6778231

Payment for other operating activities 71110685 139442785

Sub-total of cash outflows 499809864 473323732

Net cash flows from operating

62064934(88011226)

activities

II. Cash flows from investing activities:

Proceeds from disposal of

3820000058238750

investments

Investment returns received 1068448220 450538570

Net proceeds from disposal of fixed

assets intangible assets and other 408885 131260

long-term assets

Proceeds from borrowings to

1622000009000000

subsidiaries

Sub-total of cash inflows 1269257105 517908580

Payment for acquisition of fixed

assets intangible assets and other 22919289 51762211

long-term assets

Payment for acquisition of

38200000131408115

investments

Net cash paid for the acquisition of

subsidiaries and other business - 89519789

units

Cash paid to subsidiaries 655000000 112000000

Sub-total of cash outflows 716119289 384690115

Net cash flows from investing

553137816133218465

activities

The notes on pages 20 to 111 form part of these financial statements.

14Yantai Changyu Pioneer Wine Company Limited

Company cash flow statement

for the year ended 31 December 2021 (continued)

(Expressed in Renminbi Yuan)

Note 2021 2020

III. Cash flows from financing activities:

Proceeds from borrowings 150000000 150000000

Sub-total of cash inflows 150000000 150000000

Repayments of borrowings 150000000 150000000

Payment for dividends or interest 280055692 486200712

Payment for other financing

3460687-

activities

Sub-total of cash outflows 433516379 636200712

Net cash flows from financing

(283516379)(486200712)

activities

IV. Effect of foreign exchange rate

changes on cash and cash - -

equivalents

V. Net increase/(decrease) in cash and

331686371(440993473)

cash equivalents

Add: Cash and cash equivalents at

182123069623116542

the beginning of the year

VI. Cash and cash equivalents at the

513809440182123069

end of the year

These financial statements were approved by the Board of Directors of the Company on 25

April 2022.Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp)

Legal Representative The person in charge The head of the

of accounting affairs accounting department

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 20 to 111 form part of these financial statements.

15Yantai Changyu Pioneer Wine Company Limited

Consolidated statement of changes in shareholders’ equity

for the year ended 31 December 2021

(Expressed in Renminbi Yuan)

Attributable to shareholders of the Company

Total

Other Non-controlling

Note Retained shareholders’

Share capital Capital reserve comprehensive Surplus reserve Sub-total interests

earnings equity

income

I. Balance at the beginning of the

68546400052496876057612934273200087140917551026783264423659799010504430634

year

Add: Changes in accounting

----(10582161)(10582161)-(10582161)

policies

Adjusted balance at the beginning

68546400052496876057612934273200087035095941025725048323659799010493848473

of the year

II. Changes in equity during the year

(1) Total comprehensive income - - (35283306) - 500102606 464819300 2551124 467370424

(2) Shareholders’ contributions

Establishment of subsidiaries - - - - - - 7840000 7840000

(3) Appropriation of profits V.36

Distributions to shareholders - - - - (274185600) (274185600) (2196693) (276382293)

III. Balance at the end of the year 685464000 524968760 (34707177) 342732000 8929426600 10447884183 244792421 10692676604

These financial statements were approved by the Board of Directors of the Company on 25 April 2022.Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp)

Legal Representative The person in charge of The head of the accounting

accounting affairs department

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 20 to 111 form part of these financial statements.

16Yantai Changyu Pioneer Wine Company Limited

Consolidated statement of changes in shareholders’ equity

for the year ended 31 December 2020

(Expressed in Renminbi Yuan)

Attributable to shareholders of the Company

Total

Other Non-controlling

Note Retained shareholders’

Share capital Capital reserve comprehensive Surplus reserve Sub-total interests

earnings equity

income

I. Balance at the beginning of the

685464000642775360(4235583)34273200087355130441040224882127187606410674124885

year

II. Changes in equity during the year

(1) Total comprehensive income - - 4811712 - 470860587 475672299 2561399 478233698

(2) Shareholders’ contributions

Acquisitions of non-controlling

-(28286811)---(28286811)(34679936)(62966747)

interests

(3) Appropriation of profits V.36

Distributions to shareholders - - - - (492281876) (492281876) (3159537) (495441413)

(4) Business combination under

-(89519789)---(89519789)-(89519789)

common control

III. Balance at the end of the year 685464000 524968760 576129 342732000 8714091755 10267832644 236597990 10504430634

These financial statements were approved by the Board of Directors of the Company on 25 April 2022.Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp)

Legal Representative The person in charge of The head of the accounting

accounting affairs department

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 20 to 111 form part of these financial statements.

17Yantai Changyu Pioneer Wine Company Limited

Company statement of changes in shareholders’ equity

for the year ended 31 December 2021

(Expressed in Renminbi Yuan)

Total

Retained

Note Share capital Capital reserve Surplus reserve shareholders’

earnings

equity

I. Balance at the

685464000560182235342732000856731355110155691786

beginning of the year

Add: Changes in

III.33 (6620268) (6620268)

accounting policies

Adjusted balance at the

685464000560182235342732000856069328310149071518

beginning of the year

II. Changes in equity

during the year

(1) Total

comprehensive - - - 855053982 855053982

income

(2) Appropriation of

profits

Distributions to

---(274185600)(274185600)

shareholders

III. Balance at the end of

685464000560182235342732000914156166510729939900

the year

These financial statements were approved by the Board of Directors of the Company on 25

April 2022.Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp)

Legal Representative The person in charge The head of the

of accounting affairs accounting department

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 20 to 111 form part of these financial statements.

18Yantai Changyu Pioneer Wine Company Limited

Company statement of changes in shareholders’ equity

for the year ended 31 December 2020 (continued)

(Expressed in Renminbi Yuan)

Total

Retained

Note Share capital Capital reserve Surplus reserve shareholders’

earnings

equity

I. Balance at the

685464000557222454342732000861997757710205396031

beginning of the year

II. Changes in equity

during the year

(1) Total

comprehensive - - - 427160774 427160774

income

(2) Shareholders’

contributions

Purchase of share

equity of Yantai

Changyu Culture

-2959781--2959781

Development Co.Ltd (“CultureDevelopment”)

(3) Appropriation of

profits

Distributions to

---(479824800)(479824800)

shareholders

III. Balance at the end of

685464000560182235342732000856731355110155691786

the year

These financial statements were approved by the Board of Directors of the Company on 25

April 2022.Zhou Hongjiang Jiang Jianxun Guo Cuimei (Company stamp)

Legal Representative The person in charge The head of the

of accounting affairs accounting department

(Signature and stamp) (Signature and stamp) (Signature and stamp)

The notes on pages 20 to 111 form part of these financial statements.

19Yantai 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”) was

incorporated 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 2021 the total shares issued by the Company amounts to 685464000

shares. Please refer to Note V. 32 in detail.The holding company of the Group is Changyu Group Company which is jointly controlled by

Yantai GuoFeng Investment Holding 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 25 April 2022.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 VI "Equity in other entities" in detail.II. Basis of preparation

The financial statements have been prepared on the going concern basis.The Group has adopted the revised “Accounting Standard for Business Enterprises No. 22 –Financial Instruments: Recognition and Measurement” and related new financial instruments

standards and “Accounting Standard for Business Enterprises No. 14 – Revenue” issued by

the Ministry of Finance (“MOF”) of the People’s Republic of China in 2017 since 1 January

2019 and 1 January 2020 respectively. In addition it has adopted the revised “AccountingStandard for Business Enterprises No. 21 – Leases” issued by the MOF in 2018 since 1

January 2021 (see Note III.33(1)).

20Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

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

2021 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

A transaction constitutes a business combination when the Group obtains control of one or

more entities (or a group of assets or net assets). Business combination is classified as

either business combinations involving enterprises under common control or business

combinations not involving enterprises under common control.For a transaction not involving enterprises under common control the acquirer determines

whether acquired set of assets constitute a business. The Group may elect to apply the

simplified assessment method the concentration test to determine whether an acquired set

of assets is not a business. If the concentration test is met and the set of assets is

determined not to be a business no further assessment is needed. If the concentration test

is not met the Group shall perform the assessment according to the guidance on the

determination of a business.

21Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

When the set of assets the group acquired does not constitute a business acquisition costs

should be allocated to each identifiable assets and liabilities at their acquisition?date fair

values. It is not required to apply the accounting of business combination described as

below.

(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.

(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.

22Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

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.

(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.

23Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

(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.

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.

24Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

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. A trade

receivable without significant financing component or practical expedient applied for one

year or less contracts is initially measured at the transaction price in accordance with Note

III.22.

(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.

25Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

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.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.

26Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

- 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 reclassified 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.

(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.

27Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

(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.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).

28Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

For accounts receivable loss allowance are 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.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.

29Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

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

- 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.

30Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

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.

(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.

31Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

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.- 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. 28). 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.

32Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

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) Investment in joint ventures and associates

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.Associated enterprises refer to enterprises to which the Group can exercise significant

influence (see Note III.11(3)).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.28).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 orloss other comprehensive income or profit distribution (referred to as “otherchanges 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.

33Yantai Changyu Pioneer Wine Company Limited

Financial statements for the year ended 31 December 2021

- 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.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.28). For the impairment of the investment

properties refer to Note III.20.Estimated useful Residual value rate Depreciation rate

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