张裕B:2022年年度财务报告（英文版）

YANTAI CHANGYU PIONEER WINE COMPANY LIMITED

ENGLISH TRANSLATION OF FINANCIAL STATEMENTS

FOR THE YEAR 1 JANUARY 2022 TO 31 DECEMBER 2022

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. 2304287

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 2022 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 2022 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. 2304287

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. Significantaccounting policies and accounting estimates” 22 and “V. Notes to the consolidated financialstatements” 37.How the Matter was Addressed in Our

The 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. 2304287

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. 2304287

Other Information

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

information comprises all the information included in the 2022 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. 2304287

Auditor’s Responsibilities for the Audit of the Financial Statements (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. 2304287

Auditor’s Responsibilities for the Audit of the Financial Statements (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 Jiang Hui

(Signature and stamp)

Date: 11 04 2023

Page 6 of 6Yantai Changyu Pioneer Wine Company Limited

Consolidated balance sheet

as at 31 December 2022

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20222021

Assets

Current assets

Cash at bank and on hand V.1 1651454115 1567095993

Bills receivable V.2 2712460 42827666

Accounts receivable V.3 343982985 291006410

Receivables under financing V.4 309329918 364457497

Prepayments V.5 60415508 75235879

Other receivables V.6 70542398 30125270

Inventories V.7 2903398515 2802622520

Other current assets V.8 185337393 217152601

Total current assets 5527173292 5390523836

Non-current assets ?

Long-term equity investments V.9 41371385 46496510

Investment properties V.10 22115318 24502258

Fixed assets V.11 6028137972 5687867314

Construction in progress V.12 40934161 590172099

Bearer biological assets V.13 184420741 193712942

Right-of-use assets V.14 139887159 134569039

Intangible assets V.15 578240846 617866879

Goodwill V.16 107163616 112374541

Long-term deferred expenses V.17 274699232 284593163

Deferred tax assets V.18 227362656 245210731

Other non-current assets V.19 - 144120442

Total non-current assets 7644333086 8081485918

Total assets 13171506378 13472009754

The notes on pages 20 to 103 form part of these financial statements.

1Yantai Changyu Pioneer Wine Company Limited

Consolidated balance sheet

as at 31 December 2022 (continued)

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20222021

Liabilities and shareholders’ equity

Current liabilities

Short-term loans V.20 389378480 622066457

Accounts payable V.21 503323746 493453816

Contract liabilities V.22 165727991 147120716

Employee benefits payable V.23 182951538 195019441

Taxes payable V.24 239695902 342322300

Other payables V.25 372608689 453033491

Other current liabilities V.26 18945706 18374193

Non-current liabilities due within

V.27 144020834 110865126

one year

Total current liabilities 2016652886 2382255540

Non-current liabilities ?

Long-term loans V.28 128112115 176047043

Lease liabilities V.14 109505093 101811588

Long-term payables V.29 42000000 64000000

Deferred income V.30 38389058 41295338

Deferred tax liabilities V.18 11266932 11803970

Other non-current liabilities V.31 - 2119671

Total non-current liabilities 329273198 397077610

Total liabilities 2345926084 2779333150

The notes on pages 20 to 103 form part of these financial statements.

2Yantai Changyu Pioneer Wine Company Limited

Consolidated balance sheet

as at 31 December 2022 (continued)

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20222021

Liabilities and shareholders’ equity

(continued)

Shareholders’ equity

Share capital V.32 685464000 685464000

Capital reserve V.33 524968760 524968760

Other comprehensive income V.34 (23760238) (34707177)

Surplus reserve V.35 342732000 342732000

Retained earnings V.36 9049649211 8929426600

Total equity attributable to shareholders of

1057905373310447884183

the Company

Non-controlling interests 246526561 244792421

Total owners’ equity 10825580294 10692676604

Total liabilities and shareholders’ equity 13171506378 13472009754

These financial statements were approved by the Board of Directors of the Company on 11

042023.

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 103 form part of these financial statements.

3Yantai Changyu Pioneer Wine Company Limited

Company balance sheet

as at 31 December 2022

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20222021

Assets

Current assets

Cash at bank and on hand 874241771 562588819

Accounts receivable 2301505 -

Bills receivable XIV.1 - 9800000

Receivables under financing XIV.2 41061417 62411636

Prepayments 3518783 406500

Other receivables XIV.3 720176320 398072976

Inventories 335031522 383294208

Other current assets 20080844 20637860

Total current assets 1996412162 1437211999

Non-current assets ?

Long-term equity investments XIV.4 7705853378 7599421494

Investment properties 22115318 24502258

Fixed assets 216651596 231284799

Construction in progress 375969 255996

Bearer biological assets 108370882 114753306

Right-of-use assets 36153799 36826342

Intangible assets 75298044 78043888

Deferred tax assets 12120605 18033185

Other non-current assets 1850200000 2023500000

Total non-current assets 10027139591 10126621268

Total assets 12023551753 11563833267

The notes on pages 20 to 103 form part of these financial statements.

4Yantai Changyu Pioneer Wine Company Limited

Company balance sheet

as at 31 December 2022 (continued)

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20222021

Liabilities and shareholders’ equity

Current liabilities

Short-term loans 100000000 150000000

Accounts payable 100583550 90339903

Employee benefits payable 68112832 66770838

Taxes payable 39101259 32588429

Other payables 499751275 445874937

Non-current liabilities due within

51296071485190

one year

Total current liabilities 812678523 787059297

Non-current liabilities ?

Lease liabilities 38757167 43312517

Deferred income 877814 2268527

Deferred tax liabilities - 88555

Other non-current liabilities - 1164471

Total non-current liabilities 39634981 46834070

Total liabilities 852313504 833893367

The notes on pages 20 to 103 form part of these financial statements.

5Yantai Changyu Pioneer Wine Company Limited

Company balance sheet

as at 31 December 2022 (continued)

(Expressed in Renminbi Yuan)

31 December 31 December

Note

20222021

Liabilities and shareholders’ equity

(continued)

Shareholders’ equity

Share capital 685464000 685464000

Capital reserve 560182235 560182235

Surplus reserve 342732000 342732000

Retained earnings 9582860014 9141561665

Total owners’ equity 11171238249 10729939900

Total liabilities and shareholders’ equity 12023551753 11563833267

These financial statements were approved by the Board of Directors of the Company on 11

042023.

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 103 form part of these financial statements.

6Yantai Changyu Pioneer Wine Company Limited

Consolidated income statement

for the year ended 31 December 2022

(Expressed in Renminbi Yuan)

Note 2022 2021

I. Operating income V.37 3918941160 3953067583

Less: Operating costs V.37 1680794732 1647789874

Taxes and surcharges V.38 289656627 264057570

Selling and distribution

V.39 1028966138 998954105

expenses

General and administrative

V.40 287605531 299076376

expenses

Research and development

1543131010919262

expenses

Financial expenses V.41 7256207 21178727

Including: Interest expenses 26856890 28851606

Interest income 24186351 19558354

Add: Other income V.42 33145440 48240741

Investment losses V.43 (3447794) (2784997)

Including: Losses from

investment

(3447794)(2784997)

associates and in

joint ventures

Credit reversal/(losses) V.44 4752797 (7937144)

Impairment losses V.45 (5789670) (19874251)

Losses from disposal of assets V.46 (16191903) (11939284)

The notes on pages 20 to 103 form part of these financial statements.

7Yantai Changyu Pioneer Wine Company Limited

Consolidated income statement

for the year ended 31 December 2022 (continued)

(Expressed in Renminbi Yuan)

Note 2022 2021

II. Operating profit 621699485 716796734

Add: Non-operating income V.47 6832809 5214304

Less: Non-operating expenses V.47 2949991 6311844

III. Total profit 625582303 715699194

Less: Income tax expenses V.48 194233589 209020821

IV. Net profit 431348714 506678373

(1) Net profit classified by

continuity of operations:

1. Net profit from continuing

431348714506678373

operations

2. Net profit from discontinued

operations

(2) Net profit classified by

ownership:

1. Net profit attributable to

428681411500102606

owners of the Company

2. Non-controlling interests 2667303 6575767

V. Other comprehensive income net of

12282545(39307949)

tax

(1) Other comprehensive income

(net of tax) attributable to 10946939 (35283306)

shareholders of the Company

Translation differences arising

from translation of foreign 10946939 (35283306)

currency financial statements

(2) Other comprehensive income

(net of tax) attributable to 1335606 (4024643)

non-controlling interests

The notes on pages 20 to 103 form part of these financial statements.

8Yantai Changyu Pioneer Wine Company Limited

Consolidated income statement

for the year ended 31 December 2022 (continued)

(Expressed in Renminbi Yuan)

Note 2022 2021

VI. Total comprehensive income for the

443631259467370424

year

(1) Attributable to shareholders of

439628350464819300

the Company

(2) Attributable to non-controlling

40029092551124

interests

VII. Earnings per share: ?

(1) Basic earnings per share V.49 0.63 0.73

(2) Diluted earnings per share V.49 0.63 0.73

These financial statements were approved by the Board of Directors of the Company on 11

042023.

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 103 form part of these financial statements.

9Yantai Changyu Pioneer Wine Company Limited

Company income statement

for the year ended 31 December 2022

(Expressed in Renminbi Yuan)

Note 2022 2021

I. Operating income XIV.5 675062421 578895802

Less: Operating cost XIV.5 577316851 472158738

Taxes and surcharges 27984695 38263612

General and administrative expenses 58441386 74948200

Research and development expenses 2674191 907975

Financial expenses (4912837) 2193348

Including: Interest expenses 3238235 5870092

Interest income 10840336 7122455

Add: Other income 5318209 6108832

Investment income XIV.6 736516479 867523178

Proceeds from the disposal of assets 33453 -

II. Operating profit 755426276 864055939

Add: Non-operating income 3665752 997416

Less: Non-operating expenses 1281047 3295694

The notes on pages 20 to 103 form part of these financial statements.

10Yantai Changyu Pioneer Wine Company Limited

Company income statement

for the year ended 31 December 2022 (continued)

(Expressed in Renminbi Yuan)

Note 2022 2021

III. Total profit 757810981 861757661

Less: Income tax expenses 8053832 6703679

IV. Net profit 749757149 855053982

(i) Net profit from continuing

749757149855053982

operations

(ii) Net profit from discontinued

operations

V. Other comprehensive income net of

tax

VI. Total comprehensive income for the

749757149855053982

year

These financial statements were approved by the Board of Directors of the Company on 11

042023.

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 103 form part of these financial statements.

11Yantai Changyu Pioneer Wine Company Limited

Consolidated cash flow statement

for the year ended 31 December 2022

(Expressed in Renminbi Yuan)

Note 2022 2021

I. Cash flows from operating activities:

Proceeds from sale of goods and

36811332823674741084

rendering of services

Refund of taxes 186197815 48716047

Proceeds from other operating

V.50(1) 61825407 89142251

activities

Sub-total of cash inflows 3929156504 3812599382

Payment for goods and services 1266006299 957499905

Payment to and for employees 493589542 507532110

Payment of various taxes 718434215 659986692

Payment for other operating activities V.50(2) 582249801 562198017

Sub-total of cash outflows 3060279857 2687216724

Net cash flows from operating

V.51(1) 868876647 1125382658

activities

II. Cash flows from investing activities: ?

Proceeds from disposal of

13320000093553062

investments

Investment returns received 1340518 2587932

Net proceeds from disposal of fixed

assets intangible assets and other 28412630 7923724

long-term assets

Sub-total of cash inflows 162953148 104064718

Payment for acquisition of fixed

assets intangible assets and other 198791362 225502766

long-term assets

Payment for acquisition of

10820000054218000

investments

Sub-total of cash outflows 306991362 279720766

Net cash flows from investing

(144038214)(175656048)

activities

The notes on pages 20 to 103 form part of these financial statements.

12Yantai Changyu Pioneer Wine Company Limited

Consolidated cash flow statement

for the year ended 31 December 2022 (continued)

(Expressed in Renminbi Yuan)

Note 2022 2021

III. Cash flows from financing activities: ?

Proceeds from investors - 7840000

Proceeds from borrowings 641331495 847358786

Sub-total of cash inflows 641331495 855198786

Repayments of borrowings 903179998 1036788771

Payment for dividends profit

333134330302051763

distributions or interest

Payment for other financing activities V.50(3) 19774744 15904567

Sub-total of cash outflows 1256089072 1354745101

Net cash flows from financing

(614757577)(499546315)

activities

IV. Effect of foreign exchange rate

changes on cash and cash 345715 (518371)

equivalents

V. Net increase in cash and cash

V.51(1) 110426571 449661924

equivalents

Add: Cash and cash equivalents at

15023270291052665105

the beginning of the year

VI. Cash and cash equivalents at the

V.51(2) 1612753600 1502327029

end of the year

These financial statements were approved by the Board of Directors of the Company on 11

042023.

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 103 form part of these financial statements.

13Yantai Changyu Pioneer Wine Company Limited

Company cash flow statement

for the year ended 31 December 2022

(Expressed in Renminbi Yuan)

Note 2022 2021

I. Cash flows from operating activities:

Proceeds from sale of goods and

610597839514762698

rendering of services

Tax returns received 1597879 -

Proceeds from other operating activities 84262490 47112100

Sub-total of cash inflows 696458208 561874798

Payment for goods and services 401136965 313397323

Payment to and for employees 67906188 76053780

Payment of various taxes 50709754 39248076

Payment for other operating activities 23452120 71110685

Sub-total of cash outflows 543205027 499809864

Net cash flows from operating activities 153253181 62064934

II. Cash flows from investing activities: ?

Proceeds from disposal of investments 118200000 38200000

Investment returns received 489479719 1068448220

Net proceeds from disposal of fixed

assets intangible assets and other 1853309 408885

long-term assets

Proceeds from borrowings to

312000000162200000

subsidiaries

Sub-total of cash inflows 921533028 1269257105

Payment for acquisition of fixed assets

intangible assets and other long-term 21831779 22919289

assets

Payment for acquisition of investments 218200000 38200000

Cash paid to subsidiaries 138700000 655000000

Sub-total of cash outflows 378731779 716119289

Net cash flows from investing activities 542801249 553137816

The notes on pages 20 to 103 form part of these financial statements.

14Yantai Changyu Pioneer Wine Company Limited

Company cash flow statement

for the year ended 31 December 2022 (continued)

(Expressed in Renminbi Yuan)

Note 2022 2021

III. Cash flows from financing activities:

Proceeds from borrowings 100000000 150000000

Sub-total of cash inflows 100000000 150000000

Repayments of borrowings 150000000 150000000

Payment for dividends or interest 311697035 280055692

Payment for other financing activities 4796838 3460687

Sub-total of cash outflows 466493873 433516379

Net cash flows from financing activities (366493873) (283516379)

IV. Effect of foreign exchange rate

changes on cash and cash - -

equivalents

V. Net increase in cash and cash

329560557331686371

equivalents

Add: Cash and cash equivalents at the

513809440182123069

beginning of the year

VI. Cash and cash equivalents at the end

843369997513809440

of the year

These financial statements were approved by the Board of Directors of the Company on 11

042023.

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 103 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 2022

(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 year 685464000 524968760 (34707177) 342732000 8929426600 10447884183 244792421 10692676604

II. Changes in equity during the year ? ? ? ? ? ? ? ?

(1) Total comprehensive income - - 10946939 - 428681411 439628350 4002909 443631259

(2) Appropriation of profits V.36 ? ? ? ? ? ? ? ?

Distributions to shareholders - - - - (308458800) (308458800) (2268769) (310727569)

III. Balance at the end of the year 685464000 524968760 (23760238) 342732000 9049649211 10579053733 246526561 10825580294

These financial statements were approved by the Board of Directors of the Company on 11 04 2023.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 103 form part of these financial statements.

16Yantai Changyu Pioneer Wine Company Limited

Consolidated statement of changes in shareholders’ equity (continued)

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 year 685464000 524968760 576129 342732000 8714091755 10267832644 236597990 10504430634

Add: Changes in accounting policies - - - - (10582161) (10582161) - (10582161)

Adjusted balance at the beginning of

68546400052496876057612934273200087035095941025725048323659799010493848473

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 11 04 2023.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 103 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 2022

(Expressed in Renminbi Yuan)

Total

Capital Surplus Retained

Note Share capital shareholders’

reserve reserve earnings

equity

I. Balance at the beginning of the

685464000560182235342732000914156166510729939900

year

II. Changes in equity during the year ? ? ? ? ?

(1) Total comprehensive income - - - 749757149 749757149

(2) Appropriation of profits ? ? ? ? ?

Distributions to shareholders - - - (308458800) (308458800)

III. Balance at the end of the year 685464000 560182235 342732000 9582860014 11171238249

These financial statements were approved by the Board of Directors of the Company on 11

042023.

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 103 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 2021 (continued)

(Expressed in Renminbi Yuan)

Total

Surplus Retained

Note Share capital Capital reserve shareholders’

reserve earnings

equity

I. Balance at the beginning of

685464000560182235342732000856731355110155691786

the year

Add: Changes in accounting

III.33 - - - (6620268) (6620268)

policies

Adjusted balance at the

685464000560182235342732000856069328310149071518

beginning of the year

II. Changes in equity during the

year

(1) Total comprehensive

---855053982855053982

income

(2) Appropriation of profits

Distributions to

---(274185600)(274185600)

shareholders

III. Balance at the end of the year 685464000 560182235 342732000 9141561665 10729939900

These financial statements were approved by the Board of Directors of the Company on 11

042023.

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 103 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 wine brandy 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 2022 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 11 04 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.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

2022 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.

202 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.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.

21(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.

22When 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.

(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)).

23If 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.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.

24(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.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.

25All 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.- 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.

26(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.The Group derecognises a financial liability (or part of it) only when its contractual obligation

(or part of it) is extinguished.

27(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 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.

28Significant 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

- 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.

29Write-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 finished goods. 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.

30Net 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.- 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.

31(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.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 or an associate 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.

32- 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 or the associate 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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