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张裕B:2016年年度报告(英文版) 下载公告
公告日期:2017-04-22
Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Yantai Changyu Pioneer Wine Co. Ltd.
         2016 Annual Report
              2016 Final 01
             April, 2017
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                         Contents
I、Important Notice,Contents and Definition..............................................................................3
II、Brief Introduction for the Company and Main Financial Indicators .................................. 5
III、Summary of the Company’s Businesses .............................................................................. 10
IV、Management Discussion and Analysis ................................................................................. 13
V、Major issues ............................................................................................................................. 34
VI、Changes in Shares and the Shareholders’ Situation ...........................................................50
VII、Related Situation of Preferred Shares ................................................................................59
VIII、 Situation for Directors, Supervisors, Senior Management and Staffs...........................60
IX、 Corporate Governance ........................................................................................................ 73
X、 Related Situation of Corporation Bonds ............................................................................. 83
XI、Financial Report.......................................................................................................................84
XII、Reference Document .......................................................................................................... 185
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
               I. Important Notice, Contents and Definition
The Board of Directors,the Board of Supervisors,directors, supervisors & senior managers
of the Company collectively and individually accept full responsibility for the truthfulness,
accuracy and completeness of the information contained in this report and confirm that to the
best of their knowledge and belief there are no unfaithful facts, significant omissions or
misleading statements.
Mr. Sun Liqiang (Chairman of the Company), Mr. Leng Bin (Chief Financial Officer) and Mr.
Jiang Jianxun (Financial Director) assure the truthfulness, accuracy and completeness of the
financial report in the annual report.
All directors personally attended the meeting for deliberating the annual report.
About significant risks that may be faced in production and operation process, please refer
to“5. Risks likely to occur” part of “9.Expectation for the Company’s Future Development”
in chapter four “Management Discussion and Analysis” of this report. We advise investors to
read carefully and pay attention to the investment risks.
The business plan and target in the report do not represent the earnings forecast of the listed
company to 2017. Whether the Company could achieve that or not depends on several factors
including the changes of market conditions and the effort extent of managing team etc. with a
great uncertainty, so the investors should be in a special attention.
The Company’s preliminary scheme of profit distribution deliberated and passed by the
Board of Directors is shown as following:“Based on the Companys’ total 685,464,000 shares,
we plan to pay CNY5 (including tax) in cash as dividends for every 10 shares to all
shareholders and to send 0 bonus share (including tax) and capital reserve will not be
transferred to equity. ”
                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Definition
Definition Item             Refers to Definition Content
Company/The Company         Refers to Yantai Changyu Pioneer Wine Co. Ltd.
Changyu Group/Controlling   Refers to
                                      Yantai Changyu Group Co. Ltd.
Shareholder
CSRC                        Refers to China Securities Regulatory Commission
SSE                         Refers to Shenzhen Stock Exchange
                            Refers to Deloitte Hua Yong Certified Public Accountants
Deloitte Hua Yong
                                      Co., LTD (special general partnership)
CNY                         Refers to Chinese Yuan
II. Brief Introduction for the Company and Main Financial Indicators
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
1. Company’s information
                                                            Code number of the
Abbreviation of the Shares:      Changyu A、Changyu B                          000869、200869
                                                            Shares
Abbreviation of the Shares
                                 _
after alteration (if have)
Place of listing of the Shares   Shenzhen Stock Exchange
Legal Name in Chinese            烟台张裕葡萄酿酒股份有限公司
Abbreviation of Chinese
                                 张裕
name
Legal Name in English (if
                                 YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
have)
Abbreviation of English name
                                 CHANGYU
(if have)
Legal Representative             Mr. Sun Liqiang
Registered Address               56 Dama Road, Yantai, Shandong, China
Postal Code
Office Address                   56 Dama Road, Yantai, Shandong, China
Postal Code
Website                          http://www.changyu.com.cn
E-mail                           webmaster@changyu.com.cn
2. Contact person and information
                                     Secretary to the Board of   Authorized Representative of the
                                             Directors                   Securities Affairs
Name                             Mr. Qu Weimin                   Mr. Li Tingguo
                                 56 Dama Road, Yantai, Shandong, 56 Dama Road, Yantai,
Address
                                 China                           Shandong, China
Tel                              0086-535-6633656                0086-535-6633656
Fax                              0086-535-6633639                0086-535-6633639
E-mail                           quwm@changyu.com.cn             stock@changyu.com.cn
3. Information disclosure and filing location
The newspapers in which the         “China Securities Newspaper” , “Securities Times” and
Company’s information is disclosed “Hong Kong Commercial Daily”
Web Site assigned by CSRC to carry
                                    http://www.cninfo.com.cn
the annual report
                                    Board of Directors’ Office of the Company,
Filing location
                                    56 Dama Road, Yantai, Shandong
4. Registration changes
Organization Code
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                            On 18th September 1997 the Company’s operating scope was the
                            production, processing and sales of wine, distilled liquor, healthy
                            liquor, fruit liquor, non-alcohol beverages, fruit jam, packing
                            materials and winemaking machines.
                            On 17th April 2008, after the deliberation of 2007 shareholders’
                            meeting, the Company’s operating scope is amended to “the
                            Company, legally registered, is in business of production, processing
                            and sales of wine, distilled liquor, medicated liquor, fruit liquor,
                            non-alcohol beverages, fruit jam, packing materials and winemaking
                            machines; licensed import and export.”
                        On 12th May 2010, after the deliberation of 2009 shareholders’
Changes for the main meeting, the Company revised its operating scope to “the Company,
                                            is in                                      and sales
business of the Company legally registered, liquor,business of production, processingnon-alcohol
                        of wine, distilled           medicated liquor, fruit liquor,
since it was listed     beverages, fruit jam, packing materials and its products, winemaking
                        machines; licensed import and export; external investments according
(if have)               to governmental policies. ”
                            On 23rd September 2016, after the deliberation of 2016annual 1st
                            Interim shareholders’ meeting, the Company revised its operating
                            scope to “wine and fruit wine (bulk wine, processing and filling)
                            production; blending liquor and other blending liquors (grape wine)
                            production; other liquors (other distilling liquors) production;
                            production, processing and sales of package materials and
                            winemaking machines; grape plantation and procurement; tourism
                            resources development (excluding tourism); package design; activity
                            of building rental; licensed import and export; warehouse business;
                            external investments according to governmental policies. ”
Changes for all previous
controlling shareholders No.
(if have)
5. Other documents
The accountant appointed by the Company
                                 Deloitte Hua Yong Certified Public Accountants Co., LTD
Name
                                 (special general partnership)
Address                          No. 1 East Chang'an Avenue, Dongcheng District, Beijing
Name of signatory accountants Li Xu, Li Yangang
The sponsor agency the Company appointed to perform the duty of continuous supervision
during the report period
□Available     Not available
The financial adviser the Company appointed to perform the duty of continuous supervision
during the report period
□Available     Not available
6. Key accounting data and financial indicators
Whether the Company makes retroactive adjustments or restates the accounting data of
previous fiscal years because of changes of accounting policy and/or accounting errors.
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
□Yes    No
                                                               More or less
Item                     2016               2015               than
                                                               Last year (%)
Business revenue              4,717,596,472      4,649,722,368         1.46%      4,156,727,525
Net profit attributed
to the shareholders
                                982,460,488             1,030,073,860              -4.62%               977,707,711
of      the     listed
company
Net profit attributed
to the shareholders
of      the     listed
company          after          941,730,478              993,268,823               -5.19%               950,191,379
deducting          the
irregular profit and
loss
Net cash flows
from the operating              889,911,970             1,143,046,367            -22.15%              1,070,083,296
activities
Basic earnings per
                                          1.43                       1.5           -4.67%                            1.43
share
Diluted     earnings
                                          1.43                       1.5           -4.67%                            1.43
per share
Weighted average
for earning rate of                  12.55%                    14.40%              -1.85%                        13.96%
the net assets
                                                                           More or less
Item                     Dec. 31st 2016          Dec. 31st 2015            than          Dec. 31st 2014
                                                                           Last year (%)
Total assets                 11,528,077,971           10,344,211,461              11.44%              8,912,232,640
Net          Assets
attributed to the
                              8,209,010,989             7,564,099,003               8.53%             6,840,452,145
shareholders of the
listed company
7. Differences in accounting data under PRC accounting standards and international
accounting standards
(1) Differences of net profit and net asset in the financial report disclosed according to
both international accounting standards and PRC accounting standards
□Available      Not available
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
  There are no differences of net profit and net asset in the financial report disclosed according
  to both international accounting standards and PRC accounting standards during the report
  period.
  (2) Differences of net profit and net asset in the financial report disclosed according to
  both foreign accounting standards and PRC accounting standards
  □Available Not available
  There are no differences of net profit and net asset in the financial report disclosed according
  to both foreign accounting standards and PRC accounting standards during the report period.
  8. Key financial indicators by quarter
                                                                               Unit:CNY
                            1 Quarter
                             st
                                             2 Quarter
                                                  nd
                                                             3 Quarter    rd
                                                                             4 Quarter           th
Business revenue               1,882,230,620     870,802,179   1,010,732,839    953,830,834
Net profit attributed to
the shareholders of the         542,806,719         152,215,128        129,748,790      157,689,851
listed company
Net profit attributed to
the shareholders of the
listed company after            538,762,161         139,716,160        123,011,178      140,240,980
deducting the irregular
profit and loss
Net cash flows from the
                                605,256,456          77,491,913        308,317,385     -101,153,784
operating activities
   Whether there are differences between the above mentioned financial indicators or their sum
   and the related financial indicators in the quarterly reports and semi-annual reports disclosed
   by the Company.
  □Yes     No
  9. Item and amount of irregular profit and loss
  V Available □Not available
                                                                                                 Unit:CNY
Item                                     2016            2015                  2014            Explanation
Gain on disposal of non-current
assets, including the reversal of               14,719           136,061          -5,086,545 -
accrued impairment provision
Tax refund or exemption that is either
non-recurring or without proper                                                   13,405,520 -
approval
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Government grants credited in profit
and loss (except for those recurring
government grants that are closely
                                             49,130,643       38,952,919          27,140,194 -
related to the entity's operation, in line
with related regulations and have
proper basis of calculation)
Reversal of impairment loss for
receivables which was separately                                                     192,908 -
undertaken impairment test
Other non-operating income and
non-operating expenses except the             4,656,971        9,071,448             166,987 -
aforementioned items
Less. Income tax effect                      13,072,324       11,355,391           8,302,732 -
Total                                        40,730,009       36,805,037          27,516,332              --
   The reasons shall be made clear and definitely as to the irregular profit and loss that the
   Company has defined by virtue of the Explanatory Announcement on Public Company’s
   Information Disclosure No.1 - Irregular Profit and Loss and as to regarding the irregular
   profit and loss as recurrent profit and loss as specified in the Explanatory Announcement on
   Public Company’s Information Disclosure No.1 - Irregular Profit and Loss.
   □Available      V Not available
   There is no situation that the irregular profit and loss is defined and specified as recurrent
   profit and loss in accordance with the Explanatory Announcement on Public Company’s
   Information Disclosure No.1 - Irregular Profit and Loss during the report period.
                                                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                          III. Summary of the Company’s Businesses
1. Main businesses during the report period
Whether the Company need to follow the disclosure requirement of special business?
No.
During the report period, the Company’s main business is to produce and operate wine and brandy, thus providing the domestic and foreign
consumers with healthy and fashionable alcoholic drinks. Compared with earlier stage, there are no significant changes happened to the
Company’s main businesses. The wine industry that the Company involved in is still in the growth stage, the whole domestic wine market is on
the rising trend. The Company takes the dominant position in the domestic wine market.
2. Significant changes of main assets
(1) Significant changes of main assets
          Main assets                            Explanation of significant changes
          Equity asset           No significant changes
                                 The book value of fixed assets increases by 51.60% compared
          Fixed asset            with the beginning of the year, owing that parts of construction
                                 projects have transferred to fixed asset during the report period.
    Intangible asset         No significant changes
                                 The book value of construction projects decreases by 32.89%
                                 compared with the beginning of the year, owing to parts of
    Construction in process
                                 construction projects have transferred to fixed asset during the
                                 report period.
                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
(2) Main overseas assets condition
Available      □Not available
                                                                                                                               Unit:CNY
Details     Formation     Assets scale   Location   Operation mode    Control measures   Earning    The proportion of     Whether there
of assets   reasons                                                   for                condition overseas assets in the are significant
                                                                      safeguarding of               Company’s net        impairment risks
                                                                      asset security                assets
Equity      Acquisition                  Spain      Wine production                                                       No
asset       of equity     465,376,681               and operation                        -7,484,378               5.54%
Other explanation         No.
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
3. Analysis of core competitiveness
Whether the Company need to follow the disclosure requirement of special business?
No.
Compared with the participants in the arena of the Chinese wine sector, we believe that the
Company is provided with the following advantages:
Firstly, the Company has been enjoying a well-known wine brand since 120-odd years,
“Changyu”, “Jiebaina” and “AFIP” are Chinese famous trademarks that have strong influence
and good reputation.
Secondly, the Company has set up a nationwide marketing network, formed a “three-level”
marketing network system mainly composed of the company’s salesmen and distributors,
possessed the strong marketing ability and market exploitation ability.
Thirdly, the Company has already had strong research strength and a product R&D system,
owned a one and only “State-level Wine R&D Center”, made mastery of advanced
winemaking technology and production processes, been powerful enough in product
innovation and established a perfect quality control system.
Fourthly, the Company is in possession of a lot of grape-growing bases to meet its future
development, having developed a great deal of vineyards in the most suitable areas for wine
grape growing such as in Shandong, Ningxia, Xinjiang, Liaoning, Hebei and Shanxi, whose
scales and structures have generally met the Company’s needs for development.
Fifthly, the Company has a great variety of products composed of all grades, its wine,brandy
and sparkling wine of over 100 sorts can meet different consumers’ demands. The Company
has taken the lead in the domestic wine sector through rapid development in the past 10-odd
years and has possessed comparative superiority in the future competition.
Sixthly, the Company has a relatively respect motivation system. Most of Company’s
employees indirectly hold the Company’s equity through controlling shareholders. There are
high consistency between employee benefits and shareholders benefits, in favor of motivating
employees to create value for shareholders.
All in all, the Company has built up a strong core competitive edge and obtained and
maintained a relatively dominant position in the long-term market competition.
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                           IV. Management Discussion and Analysis
    1. Summarization
    In 2016, influenced by the slowdown of domestic economic growth, the overall domestic
    wine industry is relatively stable, the effective demands for top-level products is weakness,
    the medium-and-low-level products suitable for mass consumption maintains a favorable
    growth tendency. Because of the overwhelming flow of foreign wine into Chinese market,
    product price range further decreases, making market competition further intensified and
    bringing bigger challenges for the Company to achieve sustained and steady growth. Facing
    quite a lot of external disadvantages, the Company insists to focus on the market, adjust the
    marketing tactics and product structure, strive to develop brandy and imported wine, optimize
    the market layout, perfect the marketing channels and effort to promote product sales,
    achieving good results and realizing business income of CNY 4717.59 million, an increase of
    1.46% compared with last year; but due to the impact of decreasing the proportion of the
    sales in the products with high gross profit margin and increasing the proportion of the sales
    in the products with the low profit margin, the Company realized net profit of CNY982.46
    million belonging to the parent company’s shareholders, an decrease of 4.62% compared with
    last year.
    2. Analysis of main business
    Whether or not the same as the disclosed summarization in operation situation discussion and
    analysis?
        □Available Not available
        (1) Summarization
Description                    Increase or decrease of Cause of significant changes
                               the end of the period
                               over the end of last year
Operating revenue                                1.46% Mainly because of increase in sales volume
Operating cost                                         Mainly because of increase in sales volume,
                                                 4.18% especially the proportion of sales in medium-low
                                                       price products increased
Sales expense                                          Mainly because of year-on-year increase of wage &
                                                 3.48%
                                                       welfare, transport cost and depreciation in 2016
Management expense                                     Mainly because of year-on-year reduction of property
                                                -1.33% tax, stamp tax, business travel expense and service
                                                       cost in 2016
R&D investment                                         Mainly because of increase in expenses for
                                                 0.34%
                                                       technology research and development in 2016
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Financial expense                                       Mainly because of reduction of interest income due to
                                                 94.63% decrease of time deposit balance, and the increase
                                                        in loan interest expenditure and exchange loss
Net amount of cash flow                                 Mainly because of decline of received cash from
                                                -22.15%
generated in operating activities                       production sales and rendering of service
Net amount of cash flow                                 Mainly because of the decrease in received cash paid
generated in investment                          26.70% by subsidiary and other business units
activities
Net amount of cash flow                                   Mainly because of increase in received cash from loan
generated in capital-raising                     47.24%
activities
         Review and summary of the process of the Company’s early-disclosed development strategy
         and business plan during the report period
         During the report period, influenced by the decelerated growth on the demand for domestic
         wine and intensified market competition, the Company has realized the business income of
         CNY 4.72 billion, increased by 1.46% compared with last year, exceeding the target fixed at
         the beginning of the year of realizing business income no less than CNY 4.6 billion. In order
         to deal with the unfavorable business environment, the Company continuously carried out the
         development strategy of multi-liquor, pushed hard on harmonious development of
         multi-liquor, which played an important part in realizing the increase in the business income.
         The main work in the report period is as following:
         Firstly, the Company further strengthened the construction of marketing system, optimized
         product structure, increased the marketing promotion efforts and enhanced the marketing
         capability. the Company promoted the construction of wine distributor system, especially for
         chateau wine mainly pushed by the Company; quickened the national sales system
         construction and organized brandy-tasting meeting for 450 times. The Company further
         perfected the sales system of multi-channel and multi-corporation, integrated middle-and-low
         channel and middle-and-small hotel companies, and adjusted sales system for imported
         liquor. The Company built independent sales system for imported liquors, making marketing
         promotion more professional and more systematic. the Company conducted accurate
         dissemination for brands through new media platforms and took many activities, such as
         “G20 State Banquet”, “World Cabernet Gernischt Day” and “Grappie Launch” and so on.
         According to Baidu search index, the visibility of Changyu brands in the whole year ranked
         first in the wine industry.
         Secondly, the management of production was enhanced in order to lower the production cost
         and improve the production efficiency. Under the circumstance of raw material shortage, the
         Company fully took the advantage of centralized purchasing to ensure the full and timely
         supply of raw materials as well as the inhibition of increase in raw material price, resulting
         that the purchasing prices of main packaging materials were lower over 5% than average
         price. The Company further strictly controlled various expenses, reinforced the management
         of production process consumption index in order to keep major production expenses within
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
the standard scope of the Company. Owing to the improvement of production efficiency per
capita in production system, the output per capita was increased through mode of production
structure optimization.
Thirdly, the research for new products and new technologies was continued being conducted
and the quality management was strengthened in order to improve technological level and
product quality. The Company confirmed 41 technologies for improving internal quality of
products, such as chateau wine, Jiebaina and brandy and so on, conducted technology
research mainly in the aspects of product anti-oxidation and extension of bulk wine stability,
and promoted steady improvement in internal quality of various products; combined with
North West Agriculture and Forestry University to report a “Innovation and Application of
Key Technology in Chinese Wine Industry Chain” project and won the second prize of 2016
National Scientific and Technological Progress Award; combined with Jiangnan University
to report a “Establishment and Application of Quality Assessment and Management System
for Premium Wine-making Grape Material and Wine” project and won the first prize of
2016 China General Chamber of Commerce Scientific and Technological Progress Award;
its technology center was awarded as 2016 “National Agricultural Products Processing and
Development Center Technological Innovation Top 10 Unit”; applied for 2 national patents
for invention and published 5 academic paper; attended wine and spirit tasting contest owing
international influence, which could be exemplified as Brussels, winning 3 gold awards and 8
silver awards; The Company enhanced product quality testing and mentoring, and
implemented annual quality target, major work and special work, improving the quality
management level.
Fourthly, the procurement of raw materials such as grapes was completed successfully and
the management of grape base was further strengthened. The Company balanced domestic
and international raw material resource, and optimized grape purchase pricing method, so
that grape purchase pricing controlled in reasonable level.
Fifthly, the construction of technological upgrading projects is steadily promoted to
strengthen momentum for future development. During the report period, the 7 projects run
smoothly among 9 projects which planed to be constructed. Another 2 projects (named
Changyu International Wine City Tourism Projects and Pioneer Monopoly Shop) Suspended
implementation owing to the changes of domestic economic situation and consumer
market ,engineering quality of each construction project is excellent.
(2) Revenue and cost
 Composition of operating incomes
                                                                                          Unit: CNY
                           2016
                               Proportion                       Proportion Year-on-year
                                   in                               in      increase or
                  Amount                           Amount
                               operating                        operating decrease (%)
                                incomes                          incomes
   Total         4,717,596,472      100%          4,649,722,368      100%         1.46%
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
  operation
   revenue
Industry-classified
Industry of
liquor and
                  4,717,596,472      100%      4,649,722,368               100%              1.46%
alcoholic
beverage
Product-classified
Wine              3,700,806,317    78.45%      3,659,597,234            78.71%              -0.26%
Brandy              905,687,936    19.20%        883,276,247               19%               0.20%
Others              111,102,219     2.36%        106,848,887             2.30%               0.06%
Area-classified
Domestic          4,437,302,746    94.06%      4,481,598,915            96.38%              -2.32%
Abroad              280,293,726     5.94%        168,123,453             3.62%               2.32%
 The condition of sectors, products or areas accounting for over 10% in the
Company’s operating incomes or operating profits
Available □Not available
Whether the Company follow disclosure requirement of special industry?
No.
                                                                              Unit: CNY
                                                                                     Year-on
                                                                Year-on- Year-on-
                                                                                       -year
                                                                   year    year
                                                                                     increase
                                                                increase increase
                                                      Gross                              or
                                                                     or      or
             Operating income    Operating cost       profit                         decrease
                                                                decrease decrease
                                                       rate                           (%) of
                                                                  (%) of  (%) of
                                                                                       gross
                                                               operating operating
                                                                                       profit
                                                                 income     cost
                                                                                        rate
Industry-classified
Industry
of liquor
and               4,717,596,472     1,575,770,979 66.60%            1.46%   4.18% -0.87%
alcoholic
beverage
Product-classified
Wine              3,700,806,317     1,204,784,351 67.45%            1.13%   5.15% -1.24%
Brandy              905,687,936       317,845,705 64.91%            2.54%   3.46% -0.31%
Area-classified
Domestic          4,437,302,746     1,372,112,826 69.08%           -0.99%  -5.77%       1.57%
                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
   Under the situation that the statistical caliber of the Company’s main business data was
   adjusted during the report period, the Company’s main business data adjusted on the basis of
   caliber at the end of report period in recent one year.
   □Available Not available
    Whether the Company’s sales revenue for material object is more than labor income
   Yes      □No
   Sector             Project            Unit           2016               2015               Year-on-year
                                                                                              increase     or
                                                                                              decrease (%)
                      Sales volume       Ton                   98,958              86,318            14.64%
   Wine
                      Production         Ton                   99,784              84,446            18.16%
                      Sales volume       Ton                   40,171              40,074              0.24%
   Brandy
                      Production         Ton                   43,262              39,432              9.71%
   Explanation on the causes of over 30% year-on-year changes of the related comparison data.
   □Available  Not available
    The fulfillment of major sales contract signed by the Company up to the report
   period
   □Available  Not available
    Composition of operating costs
                                                                                                  Unit: CNY
Sector      Project             2016                        2015                                Year-on-yea
                                Amount          Proportio   Amount              Proportio       r increase or
                                                n in the                        n in the        decrease
                                                operating                       operating       (%)
                                                cost (%)                        cost (%)
            Blending
                                692,570,791        57.49%      608,095,160           53.07%              4.41%
            liquor
            Packing
                                372,613,924        30.93%      408,405,997           35.64%             -4.72%
            material
Wine
            Wages                44,895,195         3.73%        41,930,611           3.66%              0.07%
            manufacturi
                                 94,704,442         7.86%        87,353,461           7.62%              0.24%
            ng cost
                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
          Blending
                          187,495,081      58.99%        189,302,330           61.62%             -2.63%
          liquor
          Packing
                          105,943,197      33.33%          93,152,552          30.32%              3.01%
          material
Brandy
          Wages            11,965,588        3.76%         12,551,940           4.09%             -0.32%
          manufacturi
                           12,441,839        3.91%         12,206,568           3.97%             -0.06%
          ng cost
   Whether there are changes of consolidation scope during the report period
  Yes     □No
  For the scope of consolidated financial statement in this year, please see Notes VIII \"Equity
  in other entities\" in detail. For detail of changes in the scope of consolidated financial
  statement in this year, please see Notes VII \"Change in consolidation scope\".
   Major changes or adjustments of the Company’s products or services during the
  report period
  □Available       Not available
   Information of major customers and major suppliers
  The Company’s important customers
  The total sales amount of the top five customers(CNY)                                               173,506,000
  The proportion that total sales amount of the top five customers                                           3.68%
  accounting for the annual total sales amount(%)
  The proportion that sales amount of the related party in the total
  sales amount of the top five customers accounting for the annual                                              0%
  total sales amount(%)
  Information on the Company’s 5 biggest customers
                                                         Sales Amount            Proportion in Total Sales for
  No.     Customer Name
                                                         (CNY)                 the year(%)
          Chuxin Trade Company Limited in
  1                                                               49,540,846                                 1.05%
          Guangzhou city
  2       New Baicheng Food Trade Company in                      34,594,182                                 0.73%
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
    Hanjiang district of Putian city
    Huahaipengcheng Liquor Company Limited
3                                                                   31,452,543                                    0.67%
    in Zhuhai city
    Wal-Mart (China) Investment Company
4                                                                   29,012,715                                    0.61%
    Limited
    Dali Qianxingrong Wine Shop in Nanhai
5                                                                   28,905,714                                    0.61%
    district of Foshan city
Total   —                                                         173,506,000                                    3.68%
Available □Not available
There is no associated relationship between top 5 customers and the Company. The
Company’s directors, supervisors, senior management, core technicians, shareholders
holding over 5% shares, actual controller and other related party don’t gain benefits directly
and indirectly in major customers.
Information on the Company’s important suppliers
The total purchase amount of the top 5 suppliers                                        510,981,344
The proportion of the total purchase amount of the top 5 suppliers in the annual
                                                                                              38.32%
purchase amount
Purchase amount of the related party in total purchase amount of the top five five
                                                                                              11.29%
suppliers accounting for annual total purchase amount(%)
Information on the Company’s top 5 biggest suppliers
                                                   Purchase Amount         Proportion in Total Purchase
No.         Supplier Name
                                                   (CNY)                   for the year(%)
1           Yantai Shenma Packaging Co., Ltd.              150,590,287                                    11.29%
2           Yantai Changyu Glass Co.,Ltd.                  128,098,740                                        9.61%
3           Xinjiang Yuyuan Liquor Co.,Ltd.                 85,691,150                                        6.43%
            Liquan    Sales   Department      of
4                                                           85,477,737                                        6.41%
            Shandong Yantai Winery Co.,Ltd.
            152   regiment    of   the   eighth
5                                                           61,123,430                                        4.58%
            agriculture production division
Total                                                      510,981,344                                    38.32%
Other situation explanation of main customers
□Available       Not available
(3) Costs
                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                                            Unit: CNY
                                                     Year-on-year     Explanation of
                         2016             2015       increase or      significant
                                                     decrease (%)     changes
                                                                      Mainly because
                                                                      of year-on-year
                                                                      increase of
                                                                      wage &
Sales expense          1,253,260,668   1,211,127,163            3.48% welfare,
                                                                      transport cost
                                                                      and
                                                                      depreciation in
                                                                      Mainly because
                                                                      of year-on-year
                                                                      reduction of
                                                                      property tax,
Management
                        309,783,548      313,968,409           -1.33% stamp tax,
expense
                                                                      business travel
                                                                      expense and
                                                                      service cost in
                                                                      Mainly because
                                                                      of reduction of
                                                                      interest income
                                                                      due to decrease
Financial                                                             of time deposit
                         21,968,859       11,287,685          94.63%
expense                                                               balance, and the
                                                                      increase
                                                                      of loan interest
                                                                      expenditure and
                                                                      exchange loss
(4) Research and development expenditure
□Available     Not available
(5) Cash flow
                                                                                      Unit: CNY
                                                                                          Year-on-year
                Item                      2016                        2015                 increase or
                                                                                          decrease (%)
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
    Subtotal of cash inflow in
                                            4,525,609,466                5,045,321,545              -10.30%
    operating activities
    Subtotal of cash outflow in
                                            3,635,697,496                3,902,275,178               -6.83%
    operating activities
     Net amount of cash flow
                                              889,911,970                1,143,046,367              -22.15%
 generated in operating activities
    Subtotal of cash inflow in
                                              112,952,925                    70,956,457              59.19%
       investment activities
    Subtotal of cash outflow in
                                              800,394,471                1,008,811,136              -20.66%
       investment activities
     Net amount of cash flow
                                             -687,441,546                  -937,854,679              26.70%
 generated in investment activities
    Subtotal of cash inflow in
                                            1,191,567,445                   602,060,185              97.92%
     capital-raising activities
    Subtotal of cash outflow in
                                            1,232,491,837                   679,633,059              81.35%
     capital-raising activities
     Net amount of cash flow
    generated in capital-raising              -40,924,392                   -77,572,874              47.24%
             activities
   Net increase of cash and cash
                                              164,700,643                   131,769,387              24.99%
            equivalents
Explanation of main influence factors contributing to great changes in related data on
year-on-year basis
Available      □Not available
During the report period, comparing with the same period of last year, net amount of cash
flow generated in operating activities was reduced by 22.15%, mainly due to the decrease in
received cash from selling commodity and providing labor service; subtotal of cash inflow in
investment activities increased by 59.19%, mainly due to the regain of the fixed deposit
whose duration is more than 3 months; subtotal of cash outflow in investment activities was
reduced by 20.66%, mainly due to the decrease in received net amount of cash paid by
subsidiary and other business units; net amount of cash flow generated in investment
activities increased by 26.7%, mainly due to the decrease in received cash paid by subsidiary
and other business units; subtotal of cash inflow in capital-raising activities increased by
                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
97.92%, mainly due to the increase in received cash from loan; subtotal of cash outflow in
capital-raising activities increased by 81.35%, mainly due to the increase in the cash paid for
debt repayment; net amount of cash flow generated in capital-raising activities increased by
47.24%, mainly due to the increase in the received cash from loan; net increased amount of
cash and cash equivalents increased by 24.99%, mainly due to the significant growth of net
amount of cash flow generated in both operating activities and financing activities.
Explanation on the causes of the major differences between the net cash flow generated by
the Company’s operating activities and this year’s net profit during the report period.
□Available      Not available
3. Analysis to non-main business
□Available      Not available
4. Assets and liabilities situation
(1) Major changes of assets
                                                                                             Unit: CNY
               At the end of 2016              At the end of 2015
                                    Proportio                       Proportio Proportion
                                                                                         Explanation
                                    n in the                        n in the increase or
                                                                                         on    major
               Amount               total     Amount                total     decrease
                                                                                         changes
                                    assets                          assets    (%)
                                    (%)                             (%)
Monetary
                   1,391,517,607      12.07%       1,285,362,414       12.43%         -0.36% -
funds
Receivables          173,062,628       1.50%         197,795,091        1.91%         -0.41% -
Inventory          2,248,609,740      19.51%       2,260,852,964       21.86%         -2.35% -
Investment
                                         0%                                 0%             0% -
real estate
Long-term
equity                                   0%                                 0%             0% -
investments
                                                                                            Significant
                                                                                            increase in
Fixed assets       4,683,187,493      40.62%       3,089,245,185       29.86%        10.76% the book
                                                                                            value of
                                                                                            fixed assets
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                                                       compared
                                                                                       with the
                                                                                       beginning
                                                                                       of the year,
                                                                                       owing that
                                                                                       parts of
                                                                                       construction
                                                                                       projects
                                                                                       have
                                                                                       transferred
                                                                                       to fixed
                                                                                       asset during
                                                                                       the report
                                                                                       period.
                                                                                       Significant
                                                                                       decrease in
                                                                                       the book
                                                                                       value of
                                                                                       construction
                                                                                       projects
                                                                                       compared
                                                                                       with the
                                                                                       beginning
Constructio
                                                                                       of the year,
n         in    1,346,281,737    11.68%      2,005,990,308       19.39%         -7.71%
                                                                                       owing to
progress
                                                                                       parts of
                                                                                       construction
                                                                                       projects
                                                                                       have
                                                                                       transferred
                                                                                       to fixed
                                                                                       asset during
                                                                                       the report
                                                                                       period.
Short-term                                                                             No major
                  662,388,882     5.75%       665,581,921         6.43%         -0.68%
borrowings                                                                             changes
Long-term                                                                              No major
                   49,140,555     0.43%         71,686,629        0.69%         -0.26%
borrowings                                                                             changes
(2) Measuring assets and Liabilities at Fair Value
□Available    Not available
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
(3) Assets rights restricted situation up to the end of report period
① In order to ensure the Company and Yantai Economic and Technological Development
Zone Management Council to fulfill debtors obligation, Yantai Changyu Wine Research and
Development Company Limited plans to provide bank receipt of self-owned
CNY46.1million and 365,052.7 ㎡ land with an estimated valuation of CNY127.7684million
to China Agricultural Development Key Construction Fund Company Limited as guarantee
for the debt amount of CNY119.84million including original capital of CNY107million
invested by China Agricultural Development Key Construction Fund Company Limited.
② In order to ensure Yantai Changyu Wine Research and Development Company Limited
and Yantai Economic and Technological Development Zone Management Council to fulfill
debtors obligation, the Company plans to provide two real estate used for warehouse and
office to China Agricultural Development Key Construction Fund Company Limited as
guarantee to provide joint liability for the payment of Yantai Changyu Wine Research and
Development Company Limited and Yantai Economic and Technological Development Zone
Management Council for the debt amount of guarantee is CNY221.76million, including
original capital of CNY198million invested by China Agricultural Development Key
Construction Fund Company Limited. The first real estate provided by the Company as
guarantee locates on Shixue Road in Zhifu District, whose land area, total building area and
the estimated value is respectively 34,888 ㎡ , 10,071.04 ㎡ and CNY42.6514million; the
second real estate locates in the western grape hill factory on Dahaiyang Road in Zhifu
District Yantai, whose land area, total building area and the estimated value is respectively
176,074 ㎡, 89,571.29 ㎡ and CNY330.898million.
                                                                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
          5. Investment situation
          (1) Overall situation
          Available          □Not available
          Investment amount during the                Investment amount of the same
                                                                                                         Variation
              report period (CNY)                        period of last year (CNY)
                 929,180,000.00                               842,060,000.00                              10.35%
          (2) Situation of acquired main equity investments during the report period
          □Available        Not available
                                                                                                                                                                               Unit: CNY
          (3) Situation of main ongoing non-equity investments during the report period
          Available          □Not available
                                                                                                                                                                                    Unit: CNY
Project         Investment    Whether      Involved     Investment    Accumulated actual
                                                                                     Capital Process     Estimated profit   Accumulated        Reasons            Disclosure      Disclosure
name            mode          it           sectors      Amount        investment      source   of                           realized           for                date (if        index (if
                              belongs                   during this   amount up                project                      profit up          unreached          have)           have)
                              to fixed                  report period to the end                                            to the end         planning
                              assets                                  of the report                                         of the             schedule
                              investment                              period                                                report             and
                                                                                                                            period             estimated profit
                                                                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Yantai          Self-         Yes   Liquor and                                 Owned                                               2016.04.29        http://www.cninfo.com.cn/
Changyu         constructed         alcoholic                                  funds                                                                 cninfo-new/
International                       beverage                                                                                                         disclosure/szse_main/
Wine City                           sector       349,500,000   1,023,130,000           95%    —   —             —                                 bulletin_detail/true/
Blending and                                                                                                                                         1202265203?
Cooling                                                                                                                                              announceTime=2016-04-29
Center
Yantai          Self-         Yes   Liquor and                                 Owned                                               2016.04.29
Changyu         constructed         alcoholic                                  funds
International                       beverage
                                                 295,000,000    776,690,000            95%    —   —             —
Wine City                           sector
Bottling
Center
Yantai          Self-         Yes   Liquor and                                 Owned                                               2016.04.29
Changyu         constructed         alcoholic                                  funds
International                       beverage
                                                 199,452,000    398,892,000            100%   —   —             —
Wine City                           sector
Logistics
Center
Changyu Vine    Self-         Yes   Liquor and                                 Owned                                               2016.04.29
and Wine        constructed         alcoholic                                  funds
                                                  15,000,000    105,760,000            55%    —   —             —
Research                            beverage
Institute                           sector
Treasure        Self-         Yes   Liquor and                                 Owned                                               2016.04.29
Wine Chateau    constructed         alcoholic                                  funds
                                                  31,000,000     78,990,000            55%    —   —             —
                                    beverage
                                    sector
Koyac Brandy    Self-         Yes   Liquor and    13,928,000    111,928,000    Owned   50%    —   —             —               2016.04.29
                                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Chateau           constructed         alcoholic                                  funds
                                      beverage
                                      sector
Greening          Self-         Yes   Liquor and                                 Owned                                                    2016.04.29
Investment        constructed         alcoholic                                  funds
                                                    25,300,000     25,300,000                 100%   —   —             —
                                      beverage
                                      sector
Yantai            Self-         Yes   Liquor and                                 Owned                                   Suspend          2016.04.29
international     constructed         alcoholic                                  funds                                   implementation
                                                            0               0                  0%    —   —
Wine City                             beverage
Tourism project                       sector
Pioneer           Self-         Yes   Liquor and                                 Owned                                   Suspend          2016.04.29
Monopoly          constructed         alcoholic                                  funds                                   implementation
                                                            0      45,140,000                 60%    —   —
Shop                                  beverage
                                      sector
Total             —            —    —           929,180,000   2,565,830,000   —      —          —   —             --               --
                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
 (4) Financial assets investment
  Security investment situation
 □Available     Not available
 There is no security investment for the Company during the report period.
  Derivatives investment
 □Available     Not available
 There is no entrust financing for the Company during the report period.
 (5) The usage situation of the raised capital
 □Available     Not available
 There is no usage situation of the raised capital for the Company during the report period.
 (6) Sale of major assets and equities
  Sale of major assets
 □Available     Not available
 There is no sale of major assets during the report period.
  Sale of major equities
 □Available     Not available
 (7) Analysis to the major holding and joint stock companies
 Available       □Not available
  Situation of main subsidiaries and joint stock companies affecting over 10% of the
  Company’s net profit
                                                                              Unit: CNY
Company Company Main            Registered Total    Net      Operation Operation Net
name       type      business   capital    asset    asset    revenue   profit      Profit
Xinjiang Subsidia To plant
                                CNY 75 157,135, 128,532, 118,253,4 14,648,47 11,561,9
Tianzhu ry           grape,
                                million         133      045        96         4
Winery               produce
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Co., Ltd.              and sell
                       grape
                       juice, bulk
                       wine and
                       fruit wine
Yantai                 To
Changyu                research,
-Castel                produce
Wine                   and sell
Chateau     Subsidia   wine and      USD 5       290,33      79,426,      102,588,      18,037,9       13,184,
Co.         ry         sparkling     million      0,975          494           593            53
LTD.                   wine as
                       well as the
                       tourism
                       service
Langfang
            Joint
Castel-                To produce USD
            stock                                46,418,     36,184,      41,948,3      1,690,04       731,20
Changyu                and sell   6,108,81
            compan                                   915         983            91             2
Wine Co.               wine       8
            y
LTD.
Chateau     Subsidia   To
Changyu     ry         research,
                                     CNY
AFIP                   produce                   590,66      158,55       178,662,      40,183,8       29,417,
Global                 and sell                   2,821       1,404            315            18
                                     million
                       brandy and
                       wine
Chateau     Subsidia
Liaoning    ry                    CNY
                       To produce                65,785,     51,928,      43,742,4       -5,846,1      -5,895,
Changyu                           26.30
                       ice wine                      268         324            12            20
Ice Wine                          million
Co., Ltd.
Dicot       Subsidia   To produce
Partners,   ry         and operate EUR2.38
                                                 465,37      122,96       281,328,       -16,244,      -7,484,
S.L.                   o wine and 5732mill
                                                  6,681       1,191            100           067
                       other       ion
                       liquor
 Acquisition and disposal of subsidiaries during the report period
 □Available     Not available
 Information of main holding and joint stock companies
 No
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
(8) Main part situation of the special purpose being controlled by the Company
□Available       Not available
(9) Expectation for the Company’s future development
On the basis of our limited experience and special skills, we make the following estimation of the
wine sector and the Company’s future development:
(1)The sector competition setup and development trend
In 2017, under the slowdown effect of national macroscopic economy growth, the operation
situation of the Company will become more severe, plus the change of the alcohol consumption
environment, leading to difficulties in selling high-end products; Consumers tend to be more
rational, which requires Changyu to make more efforts in improving the cost performance of
products; Owing that influx of plenty of imported wines would further compress the domestic
wine market shares and the new channels such as E-commerce cause great impact on the
traditional sales channels, the competition in the domestic wine industry will still be fierce at
present and in the future long time; Raw material cost, freight and depreciation expense and other
expenses are likely to increase, bringing big pressure to the Company’s profitability. But in the
long run, thanks to increase in their income, more and more people would pursue health and
fashion life mode and the people would be in more favor of wines which fit quite well with the
trend of consumption, ceaselessly stimulating the demands for premium wine. This decides that
the Chinese wine industry owns a huge market development potential, especially that brandy and
wine with high price ratio might have a faster growth. In such a case of long-term coexistence of
opportunities and challenges, those enterprises that possess strong brand influence and marketing
ability, catch the opportunities, actively take adjustments, make full use of newly emerging and
traditional sales channels, timely satisfy the consumers’ demands and provide products with high
price ratio will have the opportunity to be the final winner of competition and then form a new
structure of the future Chinese wine market.
(2)The Company’s development strategy
The Company will continue adhering to the strategy of focusing on wine while fully developing
various products, actively expand the scope of consumption field and marketing mode,
industriously develop middle-and--high-end wines and brandy, strengthen the marketing level of
imported wine and strive to provide consumers with a rich variety of products in high price ratio.
(3) Management plan in new year
In 2017, the Company will try its best to realize business income of not less than CNY4.9 billion
and control the main operating costs and three period expenses below CNY3.5 billion.
(4) The measures the Company will take
In order to better catch the opportunities and face the challenges, the Company will take full
advantage of self-owned advantages, adhere to market-orientation, take profit evaluation as a
means, regard innovations and key work as drives, insist in management and implementation and
would pay attention to following aspects in 2017:
Firstly, the Company will stick to market-orientation, further enhance the construction of
marketing system, optimize the product mix and improve marketing capacity. The Company will
optimize distributor structure of wines such as Changyu Castel, Changyu AFIP and Jiebaina etc,
accelerate marketing system construction of three western chateaux, promote steady growth of
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
sales volume in middle-and-high-level products; will complete upgrade of Brandy products,
further expand Brandy market coverage and increase marketing investment of
middle-and-high-level brandy product in order to ensure the continuous and rapid grow of brandy;
will strengthen marketing effort of middle-and-low-end products and acquired overseas
enterprises’ product and endeavor to develop Zuishixian, Grappie and imported products to Big
Product; will continue enhancing newly-emerging business including direct-supply and
e-commerce etc, enlarging input of e-commerce business and accelerating the development of
e-commerce business; will intensify product price management so as to improve profit ability;
will standardize business of VIP custom-made product and improve service level; will positively
take various measures to enhance market competitiveness of Pioneer Monopoly Shop.
Secondly, the Company will focus on informationization of production system, comprehensively
improve management level and reduce business risk. The Company will build an intelligentialized
manufacturing system to realize systematic control in overall process of production and logistics
as well as the seamless joint of various links including the generation of sales order,
decomposition of production plan, operation on production line, storage and logistics links, build
an efficient and flexible production mode, support “various varieties, small quantity” production
and “order business flexibility”, improve production efficiency and meet the quickly changed
market need; will continue perfecting and implementing the management control and assessment
method of salary per ton, bulk wine consumption and controlled expense, make centralized
purchasing in bulk raw material to reduce production cost and improve production efficiency; will
further perfect capital management system, improve financing mode and reduce capital cost.
Thirdly, the Company will further enhance the management of grape base and reinforce the
guarantee capability of grape material. The Company will integrate the layout of domestic and
foreign raw material resource to form the advantage complementation of domestic and foreign
raw material in the aspects of quality, quantity and price and so on and to ensure the stable supply
of premium raw material; will actively carry out the classification management, classification
processing and pricing in bases special for brandy; will improve grape pricing mechanism and
guide the grape bases to produce as the need; will further enhance the management level of
self-supporting bases and improve the quality of wine grape through increasing the soil fertility
and adopting advanced cultivation technology; will perfect the management system of tracing
grape bases by winemakers to improve the management level and grape quality of bases; will
perfect profit assessment method of bases and enhance the profitability of self-supporting bases;
will further increase contractual base area per contractor, enahnce popularizing rate of
mechanization plantation, improve plantation efficiency and reduce raw material cost.
Fourthly, in order to speed up the pace of internationalization, the Company will continue seeking
for target enterprise in major wine regions, such as Australia and Chile, in order to realize the
comprehensive layout in global major wine regions; will reinforce the management of acquired
enterprise and achieve continuous and rapid development in overseas market in the mean time of
enlarging Chinese market business.
Fifthly, the company will steadily push construction of investment projects forward, reinforce
project management, scientifically arrange construction process and strive for putting into
production on time. The Company will continue conducting construction of various project in
Yantai Changyu International Wine City(Changyu Industry park),do the equipment
commissioning and finishing touches well, intensify project cost audit and auditing of final
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
settlement, strictly control project investment amount and ensure that all projects could be built
and put into operation according to the scheduled process and quality.
(5) Potential risks
A) Risks in price fluctuation of raw materials
Grapes are the Company’s main raw materials. The grape’s yield and quality are affected to a
certain extent by the natural factors such as drought, wind, rain, frost and snow. These force
majeure factors greatly influence the quantity and price of the grapes in this Company orders and
add the uncertainty to the Company’s production and operation. Therefore, the Company will
lower the risks that are likely to affect grape quality and result in price fluctuation by means of
expanding the self-run vineyards, strengthening the vineyard management and optimizing the
layout of vineyards.
B) Risks in uncertainty of market input and output
To cope with the cutthroat market competition and to meet the needs for market development, the
Company has input more and more capital in the market and the sales expense has taken up a
higher percentage point in the business revenue. The input-output ratio will affect the Company’s
operating results to a great extent and the risk that some investments may not reach the
expectations is likely to occur. Therefore, the Company will strengthen market research and
analysis, enhance market forecast accuracy and continue to perfect the input-output evaluation
system to ensure the investments in market to be satisfactory as expected.
C) Risks in product transport
The Company’s products are fragile and sent to different places all over the world, mostly by sea,
railway and expressway. The peak season of sales is usually in cold winter and close to the spring
festival when market has a great demand. At that time, the natural and human factors such as
serious shortage of transport capacity resulting from busy flow of people and goods, wind, snow,
freezing as well as traffic accidents make the transport departments difficult to send products to
markets in time and safely. As a result, it makes this Company have to face the risks of missing
the peak season of sales. Therefore, the Company will adopt all methods possible like making
precise sales prediction and well designed connection of production and sales, reasonably
arranging production and transport means and making use of more available warehouses in
different places to lower these kinds of risks.
D) Risks in investment faults
According to the plan, currently the Company has finished the production layout at home, and the
next step is to pay more attention to the overseas merge and acquisition in the same industry.
Currently, Yantai Changyu International Wine City (namely Yantai Changyu Industrial Park) has
those features such as the big investment amount, long-term construction period and many
uncertain factors; more unforeseeable factors for the overseas merge and acquisition projects in
the progress of M&A, it is difficult to make sure the fair and reasonable transaction price, the
integration and management after M&A is also hard. Under the influence of uncertain factors for
individual projects, It leads to have the risks of facing with the investment amount out of budget
or hardly taking back the expected investment earnings. The Company will take an adequate
argument and scientific decision-making for investment projects, try hard to reduce and avoid
investment risks.
10. The Company’s receptions, studies, communications and visits
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
 Available        □Not available
                       Reception method   Reception object type        Basic information
Reception Time
                                                                       index of studies
2016.05.05             Field survey       Institution                  -
2016.05.12             Field survey       Individual                   -
2016.05.26             Field survey       Individual                   -
2016.06.24             Field survey       Individual                   -
Number of              4of
Reception
Number of
received institution
Number
of received
individual
Number of other        0
object
Whether disclose,      No
reveal or betray
no-public
import information
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                    V. Major issues
1. The Company’s common stock profit distribution and increasing equity with capital
reserve
Promulgation, implementation or adjustment of common stock profit distribution policies
especially cash dividends policies during the report period
Available □Not available
Deliberated and passed by the 2015 Stockholders’ Meeting convened on 26th May, 2016 by
the Company, the Company’s 2015 annual profit distribution scheme is shown as follows:
based on total 685,464,000 shares (including 453,460,800 A shares and 232,003,200 B shares)
up to 31st December, 2015, the Company would pay cash dividend to all shareholders
registered on the share registration day: CNY5 in cash per ten shares. This time the Company
would neither dispatch bonus shares nor increase equity with capital reserve.
On 1st July, 2016, the Company published the Implementation Announcement of 2015
Annual Equity Distribution on China Securities Journal, Securities Times and
www.cninfo.com.cn, determining that the share registration day and the ex-dividend day of A
Share was respectively on 6th July, 2016 and on 7th July, 2016; the last trading day, the share
registration day and the ex-dividend day of B Share was respectively on 6th July, 2016, on
11th July, 2016 and on 7th July.
This time the dispatching objects contain all A Share holders registered at China Securities
Depository and Clearing Corporation Limited Shenzhen Company after closing of Shenzhen
Stock Exchange on the afternoon of 6th July, 2016 and all B Share holders registered at
China Securities Depository and Clearing Corporation Limited Shenzhen Company after
closing of Shenzhen Stock Exchange on the afternoon of 11th July, 2016. This dispatching
has already been completed in July 2016.
Special explanation
Whether it is in accordance with the requirements of the regulation in the Articles           Yes
of Association and the resolution of shareholders
Whether the distribution standard and proportion is clear and definite                        Yes
Whether the relative decision process and mechanism is complete                               Yes
Whether the independent directors perform their responsibilities and play the roles.          Yes
Whether the small and middle shareholders have the chance to express their                    Yes
advices and appeals, as well as their lawful right and interest is in an enough
protection.
Whether it is legal and transparent for the condition and process while adjusting             Yes
and amending the cash dividends distribution policy.
The Company’s plan (preliminary scheme) of common stock profit distribution and
increasing equity with capital reserve in the recent three years (including the report period).
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
       The Company’s profit distribution in 2014 is as following: Because the left amount of legal
       earned surplus reserve reaches 50% of registered capital, while making profit distribution, the
       legal earned surplus reserve will be not drawn. Based on the Company’s 685,464,000 shares
       at total up to December 31, 2014, we plan to pay CNY 4.4 in cash as dividends for every ten
       share (including tax) to the Company’s all shareholders, totaling up to CNY 301.60416
       million accounted for 30.85% of net profits CNY977.707711 million attributable to
       shareholders of parent company in the consolidated statements. The retained and
       undistributed profit of CNY 676.103551 million will be reserved for distribution in the next
       year.
       The Company’s preliminary scheme of profit distribution plan in 2015 is as following:
       Because the left amount of legal earned surplus reserve reaches 50% of the registered capital,
       while making profit distribution, the legal earned surplus reserve will not be drawn. Then
       based on the Company’s 685,464,000 shares at total up to December 31, 2015, we plan to pay
       CNY 5 in cash as dividends for every ten shares (including tax) to the Company’s all
       stockholders, totaling up to CNY 342.732 million, accounting for 33.27% of the net profit
       CNY 1030.07386 million attributable to the shareholders of the parent company in the
       consolidated statement, the retained and undistributed profit of CNY 687.34186 million will
       be reserved for the distribution of next year.
       The Company’s profit distribution plan in 2016 is as following: Because the left amount of
       legal earned surplus reserve reaches 50% of the registered capital, while making profit
       distribution, the legal earned surplus reserve will not be drawn. Then based on the
       Company’s 685,464,000 shares at total up to December 31, 2016, we plan to pay CNY 5 in
       cash as dividends for every ten shares (including tax) to the Company’s all stockholders,
       totaling up to CNY 342.732 million, accounting for 34.89% of the net profit CNY
       982.460488 million attributable to the shareholders of the parent company in the consolidated
       statement, the retained and undistributed profit of CNY 639.728488 million will be reserved
       for the distribution of next year.
       The Company’s common stock cash dividend record in recent three years (including the
       report period)
                                                                                     Unit: CNY
                           Net            profit Proportion in the Amount of cash Proportion of cash
                           belonging to the net profit belonging dividends in other dividends in other
             Amount     of
                           listed company’s to        the     listed ways          ways
Year      of cash dividend
                           stockholders in the company’s
distribution (including
                           consolidated          stockholders in the
             tax)
                           statement of the consolidated
                           distribution year statement (%)
2016           342,732,000         982,460,488               34.89%               0                0%
2015           342,732,000       1,030,073,860               33.27%               0                0%
2014           301,604,160         977,707,711               30.85%               0                0%
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
During the report period the Company earned profit, the profit of the parent company that
could be distributed to common stock shareholders was positive but without proposing
common stock cash dividend distribution.
□Available       Not available
2. The Company’s preliminary scheme of profit distribution and preliminary scheme of
increasing equity with capital reserve
Available      □Not available
Number of sending bonus shares per ten shares (share)
Number of dividend payout per ten shares (CNY) (including tax)
Number of transferring per ten shares(share)
The cardinal number of the capital stocks for the preliminary distribution
                                                                                    685,464,000
scheme (shares)
Total cash dividend distribution(CNY)(including tax)                              342,732,000
Distributable profit (CNY)                                                          982,460,488
The proportion of cash dividend distribution in the total profit distribution              100%
Cash dividend
If the Company’s development is in growth stage and major capital expenditure is arranged,
while making profit distribution, the proportion of cash dividends should takes up no less
than 20% in this profit distribution
Detailed explanation for the preliminary scheme of profit distribution or increasing equity
with capital reserve
According to the audit result from Deloitte Hua Yong, the net profit belonging to the parent
company’s stockholders in the consolidated statement is CNY982.460488million, the net
profit of the parent company in financial statement is CNY1830.574470 million in 2016.
According to PRC accounting standard, the situation for the attributable profit of
consolidation and parent company in 2016 is as following:
                                                                                      Unit: CNY
                                                  Consolidation            Parent company
    Undistributable profit at the end the year          6,620,118,562          7,360,234,545
   Including: net profit in 2016                          982,460,488             1,830,574,470
   Distributable profit carried over to the             5,980,390,074             5,872,392,075
   beginning of the year
   Distribution for 2015 dividend                         342,732,000               342,732,000
   Withdrawing for the legal earned surplus                             0
   reserve
According to regulation of 157th item in the Articles of Association, which is that the
Company can distribute dividends either in cash or by stock, the profit to be distributed each
year is not less than 25% of the distributable profit realized in the same year and the
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
    accumulated sum of profit to be distributed in cash in the next three years is not less than
    30% of the yearly average distributable profit to be realized in the next three years,
    meanwhile, considering the large amount on the capital expenditure in 2017, under the
    condition of not influencing the normal production and operation, the Company put forward
    preliminary scheme on profit distribution in 2016 as following:
    Because the left amount of legal earned surplus reserve reaches 50% of the registered capital,
    while making profit distribution, the legal earned surplus reserve will not be drawn. Then
    based on the Company’s 685,464,000 shares at total up to December 31, 2016, we plan to pay
    CNY 5 in cash as dividends for every ten shares (including tax) to the Company’s all
    stockholders, totaling up to CNY 342.732 million, accounting for 34.89% of the net profit
    CNY 982.460488million attributable to the shareholders of the parent company in the
    consolidated statement, the retained and undistributed profit of CNY 639.728488 million will
    be reserved for the distribution of next year. The cash dividend for the shareholders of B
    share listed overseas was paid in Hongkong dollar according to the middle rate between CNY
    and Hongkong dollar issued by the People’s Bank of China on the first working day after the
    resolution date of 2016 shareholders’ meeting.
    3. Implementation of commitments
        (1) Commitments that the Company’s actual controllers, shareholders, related parties,
    acquirers and the Company and other related commitment parties have implemented during
    the report period and have not implemented up to the end of the report period
    Available       □Not available
                   Commitment                 Commitment            Commitment           Commitment Implementat
Commitments                   Commitment type
                   party                      content               time                 period     ion
Commitments at
                       -                                -                                     -                -
share reform
Commitments
made in
acquisition            -                                -                                     -                -
report or equity
changes report
Commitments at
asset                  -                                -                                     -                -
restructuring
                   Yantai      Solve horizontal   Non-horizontal 18thMay 1997                              Has been
Commitments at Changyu         competition        competition                                              performing
                                                                                         Forever
the initial public Group Co.                                                                               strictly
offering or        Ltd.
refinancing        Yantai      Clear the purpose According to
                                                                                                           Has been
                   Changyu     of brand royalty Trademark
                                                                    18 May 1997 Forever
                                                                        th
                                                                                                           performing
                   Group Co.                     License
                                                                                                           strictly
                   Ltd.                          Contract, the
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                               Company will
                                               pay trademark
                                               royalty for the
                                               ‘‘Changyu’’
                                               products of
                                               Yantai
                                               Changyu
                                               Group Co., Ltd
                                               every year,
                                               Yantai
                                               Changyu
                                               Group Co., Ltd
                                               will use
                                               trademark
                                               royalty to
                                               advertise
                                               ‘‘Changyu’’
                                               trademarks and
                                               Contracted
                                               products in this
                                               contract.
Equity incentive
                     -              -              -                                      -                -
commitments
Commitments at
middle and
small                -              -                                                      -                -
                                                     -
shareholders of
the Company
Commitment       Yes
under timely
implementation
or not
Whether or not No
to have specific
reasons of the
unimplemented
commitment and
next steps(if
any)
       (2) The Company should make a statement on the achieved original profit forecast of
       assets or projects and its reason if there is profit forecast of Company’s assets or
       projects and the report period is still in the profit forecast period
       □Available   Not available
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
4. Non-business capital occupying of listed company by controlling shareholder and its
related parties
□Available       Not available
There are no non-business capitals occupying of listed company by controlling shareholder
and its related parties during the report period.
5. Explanation of Non-standard Audit Report given by accounting firm in the report
period from board of directors, board of supervisors and independent directors (if
have)
□Available       Not available
6. Compared with the previous year’s financial report, explanation for the changes of
accounting policy, accounting estimation and accounting method
□Available Not available
There are no changes of accounting policy, accounting estimation and accounting method
during the report period.
7. During the report period, the situation explanation for the correction of major accounting
errors which need to be retrospect and restated.
□Available Not available
There is no situation for the correction of major accounting errors which need to be retrospect and
restated.
8. Compared with the previous year’s financial report, explanation for the changes of
the consolidated statements scope.
Available         □Not available
For the scope of consolidated financial statement in this year, please see Notes VIII \"Equity
in other entities\" in detail. For detail of changes in the scope of consolidated financial
statement in this year, please see Notes VII \"Change in consolidation scope\".
9. The appointment and dismissal of certified public accountants
Currently appointed accounting firm
                                           Deloitte Hua Yong Certified Public Accountants Co., Ltd.
Domestic accounting        firm     name
                                           (special general partnership)
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Reward for domestic accounting firm
(CNY‘0000)
Consecutive period for the audit
services of domestic accounting Firm
Name of Certified public accountant
for the audit services of domestic Li Xu, Li Yangang
accounting Firm
Overseas accounting firm name (if
                                     -
have)
Reward for overseas accounting firm
(CNY‘0000) (if have)
Consecutive period for the audit
                                     -
services of overseas accounting Firm
Name of Certified public accountant
for the audit services of overseas -
accounting Firm
Whether or not to dismiss the accounting firm during the report period
□Yes  No
To employ internal control audit accounting firms, financial adviser or sponsor.
Available □Not available
The Company employs Deloitte Hua Yong Certified Public Accountants Co., Ltd. (special
general partnership) as 2016 internal control audit accounting firms.
10. Face of suspension and termination of listing after the disclosure of annual report
□Available Not available
11. Bankruptcy reorganization
□Available Not available
There is no bankruptcy reorganization during the report period.
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
12. Material litigation and arbitration
□Available     Not available
There are no material litigation and arbitration during the report period.
13. Penalty and rectification
□Available Not available
There are no penalties or rectifications during the report period.
14. Credit of the Company, holding shareholders and actual controllers
□Available     Not available
15. Implementation of the Company’s equity inventive plan, employee stock ownership plan
or other employee incentive measures
□Available     Not available
There are no implementation of the Company’s equity inventive plan, employee stock ownership
plan and other employee incentive measures.
16. Significant related transactions
(1) Related transactions in relation to routine operations
Available       □Not available
Detailed information about the Company’s 2016 annual routine related transactions, please
refer to Notes X \"Related party and Related Transaction\" in the Financial Statement of the
report in detail, or could also look up the Company’s related temporary announcement
according to the following index.
Disclosure website of major related transactions’ temporary reports for related query
Name of                           Disclosure       date    of Website of disclosure of
Temporary announcement            temporary announcement temporary announcement
Announcement of 2017
                                                              Cninf
annual routine related            April 22, 2017
                                                              (http://www.cninfo.com.cn)
transaction
Announcement of 2016
                                                              Cninf
annual routine related            April 29,2016
                                                              (http://www.cninfo.com.cn)
transaction
                                                                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
(2) Related transactions in relation to acquisition and sales of assets or equity
□Available     Not available
There are no related transactions in relation to acquisition or sales of assets or equity during the report period.
(3) Related transactions in relation to common foreign investment
□Available Not available
There are no related transactions in relation to common foreign investment during the report period.
(4) Related current credit and debt
Available       □Not available
Whether or not to exist non-operating related credit and debt
□Yes     No
(5) Other major related transactions
□Available     Not available
17. Major and important contracts and execution results
(1) Trusteeship, contract and leasehold issues
 Trusteeship situation
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
□Available     Not available
There is no trusteeship situation during the report period.
 Contract situation
Available       □Not available
Contract situation description
During the report period, about the Company’s contract operation situation, please see ‘‘1. The structure of Enterprise group’’ in
Annex 8 ‘‘Rights and interests of other subject’’ in the financial report of this report.
Project in gains and losses for the Company to achieve more than 10% of the total profit
□Available     Not available
There are no contract projects in gains and losses for the Company to achieve more than 10% of the total profit during the report period.
 Leasehold situation
Available       □Not available
Leasehold situation description
On 1st January 2012, the Company renewed the Space Lease Agreement with the controlling shareholder Changyu Group, the Company leased
the space with 57749.77 square meters located at 174 Shihuiyao Road, Zhifu District,Yantai City and the space with 3038 square meters located
at 56 Dama Road, Zhifu District, Yantai City, which are all under the name of controlling shareholder. The rent of the above spaces per year is
CNY 5.858 million with a period of 5 years from 1st January 2012 to 31st December 2016.
Project in gains and losses for the Company to achieve more than 10% of the total profit
                                                                                                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
   □Available           Not available
   There are no leasehold projects in gains and losses for the Company to achieve more than 10% of the total profit during the report period.
   (2) Major guarantee
   Available            □Not available
    Guarantee situation
                                                                                                                                                                            Unit: CNY’0000
                       External guarantee of the Company and its subsidiaries(excluding guarantee to subsidiaries)
                    Disclosure date of
                                                                                                                                  Whether      or
                    related                            Actual date of   Actual                                     Whether or
Guarantee object                         Guarantee                                       Guarantee     Guarantee                   not belong to
                    announcement                       occurrence (date guarantee                                  not complete
name                                     quota                                           type          Period                      related-party
                    about guarantee                    of agreement)    amount                                     implement
                                                                                                                                   guarantee
                    quota
Yantai Economic
and Technological
                                                                                         Mortgage;
Development         2016.12.22                   34160 2016.12.21                34160                 10years     No             No
                                                                                         Pledge
Zone Management
Council.
Total of the external guarantee quota                                   Total of the actual external
approved during the report period                                34160 guarantee amount during
(A1)                                                                    the report period (A2)
Total of the external guarantee quota                            34160 Balance of the actual
                                                                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
approved by the end of the report                                            external guarantee by the
period (A3)                                                                  end of the report period
                                                                             (A4)
                                                   Guarantee between the Company and subsidiaries
                    Disclosure date of                                                                                    Whether Whether        or
                    related                               Actual date of     Actual                                       or not      not belong to
Guarantee object                           Guarantee                                        Guarantee         Guarantee
                    announcement                          occurrence (date guarantee                                      complete    related-party
name                                       quota                                            type              Period
                    about guarantee                       of agreement)      amount                                       implemen guarantee
                    quota                                                                                                 t
Yantai Changyu
Pioneer Wine                                                                                Joint liability
                    2016.10.31             10,000         2016.11.05         10,000                           2years      No         Yes
Sales Limited                                                                               assurance
Company
Yantai Changyu
                                                                                            Mortgage;
Pioneer Wine        2016.12.22             11,984         2016.12.21         11,984                           10years     No         Yes
                                                                                            Pledge
Company Limited
Yantai Changyu
                                                                                            Joint liability
Wine Research
                    2016.12.22             72,176         2016.12.21         72,176         assurance;        10years     No         No
and Development
                                                                                            Mortgage
Company Limited
                                                                             Total of the actual
Total of the guarantee quota approved
                                                                             guarantee amount for
to subsidiaries during the report                                   82,176                                                                  32,176
                                                                             subsidiaries during the
period (B1)
                                                                             report period (B2)
Total of the guarantee quota approved                                        Balance of the actual
                                                                    82,176                                                                  32,176
to subsidiaries by the end of the report                                     guarantee for subsidiaries
                                                                                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
period (B3)                                                                 by the end of the report
                                                                            period (B4)
                                                        Guarantee between subsidiaries
                    Disclosure date of                                                                               Whether
                                                                                                                                Whether      or
                    related                            Actual date of       Actual                                   or not
Guarantee object                           Guarantee                                       Guarantee     Guarantee               not belong to
                    announcement                       occurrence (date guarantee                                    complete
name                                       quota                                           type          Period                  related-party
                    about guarantee                    of agreement)        amount                                   implemen
                                                                                                                                 guarantee
                    quota                                                                                            t
                                                                            Total of the actual
Total of the guarantee quota approved
                                                                            guarantee amount for
to subsidiaries during the report                                       0
                                                                            subsidiaries during the
period (C1)
                                                                            report period (C2)
                                                                            Balance of the actual
Total of the guarantee quota approved
                                                                            guarantee for subsidiaries
to subsidiaries by the end of the report                                0
                                                                            by the end of the report
period (C3)
                                                                            period (C4)
                                  Total of the Company’s guarantee amount(Total of above three major items)
                                                                            Total of the actual
Total of the approved guarantee quota                                       guarantee amount during
                                                                116,336                                                                 66,336
during the report period(A1+B1+C1)                                        the report period
                                                                            (A2+B2+C2)
Total of the approved guarantee quota                                       Balance of the actual
by the end of the report period                                 116,336 guarantee by the end of the                                     66,336
(A3+B3+C3)                                                                report period(A4+B4+C4)
The proportion of Actual total guarantee amount (A4+B4+C4) in the
                                                                                                                                          8.08%
Company’s net asset
                                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Among :
The amount of guarantee for shareholders, actual controllers and their
related parties(D)
The amount of debt guarantee for the guaranteed objects whose
asset-liability ratio is more than 70% directly or indirectly(E)
Total amount of guarantee that exceeds 50% of net assets(F)
Total amount of the above-mentioned three items(D+E+F)
Explanation for undue guarantees that have happened warranty
liability or may take joint payback liabilities during the report period   No
(if have)
Explanation for violating due process to provide external guarantee
                                                                           No
(if have)
   Specific explanation on adopting complex guarantee type
   No.
    Illegal external guarantee
   □Available            Not available
   There is no illegal guarantee situation during the report period.
   (3) Entrusting others to manage cash assets
    Financial management entrustment
   □Available            Not available
                                                                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
There is no financial management entrustment during the report period.
 Loan entrustment
□Available     Not available
There is no loan entrustment during the report period.
(4) Other important contracts
□Available     Not available
There are no other important contracts during the report period.
18.Social Responsibility
(1)Precise poverty
①Summary of annual precise poverty
No.
②Working condition of Listed company’s annual precise poverty
No.
③Subsequent precise poverty plan
No.
(2)Other social responsibility
Please see “China Securities Newspaper” , “Securities Times” and 2016 Annual Social Responsibility Report disclosed on www.cninfo.com.cn .
The listed company and its subsidiaries are whether or not to belong to the heavy pollution industry stipulated by the state environmental
protection department.
                                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
□Yes    No
Whether or not to public social responsibility
Yes      □No
                                                        Enterprise social responsibility
Enterprise property      Whether     including Whether      including Whether          including Standard of disclosure
                         environmental         social information        information          in Domestic standard      Foreign standard
                         information                                     governance aspect
Private                  Yes                   Yes                       Yes                     Listed      Company other
                                                                                                 social responsibility
                                                                                                 guidance
Detail explaination
1. Whether the Company has passed Environment Management System                     Yes.
Certification(ISO14001)
2. Expenditure of environment protection in the firm-year(CNY‘0000)
3.Emission reduction performance of three wastes ‘waste gas, waste water and       All discharges with standards
waste residues’ for the Company
4.Investment of employee career development ability for improvement of employee     220
knowledge and technology
5. Social public donation
19. Other Major issues
□Available Not available
There are no other major issues need to be explained during the report period.
20. Major issues of Company’s subsidiaries
□Available     Not available
                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                  VI. Changes in Shares and the Shareholders’ Situation
1. Changes in shares
(1) Changes in shares
                                                                                                                              Unit: share
                         Amount before this change                                   Change (+, -)                     Amount after this change
                                                                               Transfer
                                              Percentage Allot   Distribute    other                                                      Percentage
                         Amount                          new     bonus share   capital to others Sub total             Amount             %
                                              %          share                 share
                                                                               capital
1、Unrestricted shares          685,464,000       100%                                                                    685,464,000           100%
(1)、A shares                   453,460,800     66.15%                                                                    453,460,800         66.15%
(2)、B shares                   232,003,200     33.85%                                                                    232,003,200         33.85%
2、Total shares                 685,464,000       100%                                                                    685,464,000           100%
Cause of share change
□Available Not available
Approval of share change
□Available Not available
Transfer of changed shares
□Available Not available
                                                                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
The influence of share change on the financial indicators such as basic earnings per share, diluted earnings per share of the latest year and the
latest period, net asset per share belonging to the Company’s common shareholders, etc.
□Available Not available
Other contents the Company thinks necessary or securities regulatory departments ask to make public.
□Available Not available
(2) Changes in restricted shares
□Available     Not available
2. Securities issuance and listing situation
(1) Securities issuance (exclude preferred share) during report period
□Available     Not available
(2) Explanation of change in Company’s total shares and shareholding structure and change in Company’s assets and liability structure
□Available     Not available
(3) Current employee shares
□Available     Not available
                                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
3. Situation for shareholders and the actual controllers
(1) The number of shareholders of the Company and the shareholdings
                                                                                                                                          Unit:share
                                                                                                       Total number of preferred
                             Total      number       of            Total number of preferred
                                                                                                       shareholder recovering
                             shareholders by the end of            shareholder recovering
Total shareholders in                                                                                  voting power by the end of
                      41,984 last month before the 42,254          voting power by the end 0
the report period                                                                                      last month before the
                             disclosure day of the                  ofreport period (if have)
                                                                                                       disclosure day of the annual
                             annual report                          (see note 8)
                                                                                                       report (if have) (see note 8)
                                Shareholders holding more than 5% or the top 10 shareholders holding situation
                                                                                                    Number                 Pledged or frozen
                                                                                        Changes
Name               of                                Percentag Shares held until the during the of            Number of
                      Character of shareholders      e         end of the report period report      restricte unrestricted
Shareholders                                         (%)                                                                   Share status Amount
                                                                                                    d         shares
                                                                                        period
                                                                                                    shares
YANTAI
                 Domestic       non-state-owned                                                                    345,473,85
CHANGYU GROUP                                          50.40%             345,473,856 0
                 legal person
CO. LTD.
GAOLING          Foreign legal person
                                                           3.11%            21,300,919 0                           21,300,919
FUND,L.P.
CHINA            State-owned legal person
SECURITIES                                                 2.32%            15,924,155 -73,300                     15,924,155
FINANCE CORP
BBH    BOS   S/A
FIDELITY FD - Foreign legal person                         2.22%            15,241,826 -334,300                    15,241,826
CHINA FOCUS FD
TIANAN           Domestic       non-state-owned            1.16%             7,939,166 7,939,166                     7,939,166
                                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
PROPERTY        legal person
INSURANCE CO.,
LTD—BAOYING
NO.1
NORGES BANK     Foreign legal person                       0.96%                 6,584,748 886,296                       6,584,748
GUOTAI JUNAN
SECURITIES(HONG Foreign legal person                       0.78%                 5,321,478 651,906                       5,321,478
KONG) LIMITED
CENTRAL HUIJIN
ASSET
                State-owned legal person                   0.69%                 4,761,200 0                             4,761,200
MANAGEMENT
LTD.
BBH A/C
VANGUARD
EMERGING        Foreign legal person                       0.55%                 3,788,487 72,700                        3,788,487
MARKETS STOCK
INDEX FUND
FIDELITY CHINA
SPECIAL         Foreign legal person                       0.55%                 3,779,202 0                             3,779,202
SITUATIONS PLC
Strategic investors or legal result of the placement of new
                                                            No
shares to become a top 10 shareholders(if have)(see note 3)
                                                            Among the top 10 shareholders, Yantai Changyu Group Company Limited has no
The explanation for the associated relationship and
                                                            associated relationship or accordant action relationship with the other 9 listed shareholders,
accordant action
                                                            and the relationship among the other shareholders is unknown.
                                                    The top 10 shareholders with unrestricted shares
Name of Shareholders                                                               Number of unrestricted Type of share
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                                                   shares held until the end of
                                                                                                                Type of share           Amount
                                                                                   the year
YANTAI CHANGYU GROUP CO. LTD.                                                                     345,473,856 A                            345,473,856
GAOLING FUND,L.P.                                                                                  21,300,919 B                              21,300,919
CHINA SECURITIES FINANCE CORP                                                                      15,924,155 A                              15,924,155
BBH BOS S/A FIDELITY FD - CHINA FOCUS FD                                                           15,241,826 B                              15,241,826
TIANAN PROPERTY INSURANCE CO., LTD—BAOYING NO.1                                                     7,939,166 A                              7,939,166
NORGES BANK                                                                                          6,584,748 B                              6,584,748
GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED                                                            5,321,478 B                              5,321,478
CENTRAL HUIJIN ASSET MANAGEMENT LTD.                                                                 4,761,200 A                              4,761,200
BBH A/C VANGUARD EMERGING MARKETS STOCK INDEX FUND                                                   3,788,487 B                              3,788,487
FIDELITY CHINA SPECIAL SITUATIONS PLC                                                                3,779,202 B                              3,779,202
The explanation for the associated relationship and accordant action of the top 10 Among the top 10 shareholders, Yantai Changyu Group Company
shareholders with unrestricted shares, the the associated relationship and Limited has no associated relationship or accordant action
accordant action between the top 10 shareholders with unrestricted shares and the relationship with the other 9 listed shareholders, and the relationship
top 10 shareholders                                                                among the other shareholders is unknown.
Explanation for the top 10 shareholders who involved in financing activities and The top 10 shareholders do not involve in financing activities and
stock trading business (if have)(see note 4)                                       stock trade business.
Whether or not the Company’s top 10 common shareholders and shareholders with unrestricted shares take agreed repurchase trading during the
report period
□Yes      No
There is no agreed repurchase trading taken by the Company’s top 10 common shareholders and shareholders with unrestricted shares during the
report period.
(2) Situation for the controlling shareholders of the Company
Property of holding shareholders
Type of holding shareholders: Legal representative
                                                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                   Legal             Establishment Organization
  Name of controlling shareholder                                                                   Main business
                                                   representative    date          code
                                                                                                   Production and distribution of wine,
                                                                                                   healthy liquor, distilled liquor and
                                                                                    91370600265645 non-alcohol beverages, planting of
  Yantai Changyu Group Co. Ltd.                    Sun Liqiang       1997.04.27
                                                                                    8244           agricultural products and export
                                                                                                   business under the scope of
                                                                                                   permission.
  Equity situation for the other domestic listed
  companies controlled or shared by the
                                                   No.
  controlling shareholders during the report
  period
  Changes in the controlling shareholder during the report period
  □Available     Not available
  There are no changes in the controlling shareholder during the report period.
  (3) Situation for the actual controllers of the Company
  Property of actual controllers: domestic other institutions; foreign other institutions
  Type of actual controllers: Legal representative
Name        of     actual Legal           Establishment Organization
                                                                     Main business
controllers               representative date           code
                                                                     Under state permission, property investment, tenancy of machine and facility,
Yantai Yuhua Investment
                          Jiang Hua       2004.10.28 76779294-7 wholesale and retail of construction material, chemical products (chemical
& Development Co. Ltd
                                                                     hazard products excluded), hardware and electronical products, grape
                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                                plantation.
                                                                Directly or indirectly conduct the production and distribution of food
ILLVA Saronno Holding Augusto                                   products (alcoholic products included) as well as industrial, commercial,
                                     1984.07.25    -
Spa                   Reina                                     financial and service activities of any other kinds through joint-stock
                                                                companies and organizations
                                                                International Finance Corporation is one of the members of World Bank,
                                                                mainly dedicated to investment in private sectors of developing countries
International   Finance Philippe LE                             while providing technical support and consultation service. The corporation
Corporation             HOUEROU 1956.07.25         -           is a multilateral financial institution that ranks first in the world in terms of
                                                                providing capital stock and loans to developing countries. Its purpose is to
                                                                promote sustainable investments of private sectors of developing countries in
                                                                order to alleviate poverty and improve people’s life.
                                                                Operating management of state-owned property right (stock right) authorized
                                                                by State-owned Assets Supervision and Administration Commission of
                                                                Yantai Municipal Government; Financing, investment and operating
                                                                management of government projects, such as strategic investment and
                                                                industrial investment and so on; Capital operation (including acquisition,
                                                                reintegration and transfer, etc) of state-owned property right and state-owned
                                                                stock right within the scope of authorization; Venture capital investment
Yantai          Guofeng
                                                                business; Agency of venture capital investment business of other venture
Investment Holdings Co., Chen Dianxin 2009.02.12   00426068-6
                                                                investment enterprises or individuals; Participation in the establishment of
Ltd
                                                                venture capital investment enterprises and venture capital investment
                                                                management consultant institutions; Investment and financing service
                                                                business; Investment and financing consultant business; Other business
                                                                authorized by State-owned Assets Supervision and Administration
                                                                Commission of Yantai Municipal Government.(Projects need to be
                                                                authorized in accordance with the law could carry out business activities only
                                                                after the approval of relevant departments )
                                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Equity situation for the
other domestic listed
companies controlled by No
the actual controller
during the report period
  Changes of the actual controllers during the report period
  □Available     Not available
  There are no changes in actual controllers during the report period.
  Introduction for property right and control relations between the Company and its actual controllers
                                                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                                                       Yantai Guofeng Investment
                                                           Illva Saronno Holding Spa   Holdings Co., Ltd
Actual controller controls the Company through a trust or other asset management ways
□Available    Not available
(4) Other institutional shareholders holding more than 10% shares
                                                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
□Available     Not available
(5) Shares reduction situations of holding shareholders, actual controllers, restructuring side and other commitment subjects
□Available     Not available
                                             VII. Related Situation of Preferred Shares
□Available     Not available
There are no preferred shares during the report period.
                                                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                         VIII. Situation for Directors, Supervisors, Senior Management and Staff
1. Changes in shareholdings of directors, supervisors and senior management
                                                                                  Shares Increased
                                                                                                   Decreased
                                                         Beginning Ending held at the shares                    Other     Shares held at
                                                                                                     shares
   Name              Post            Status   Gender Age date of the date of the beginning during             changes of the end of the
                                                                                                   during the
                                                            post        post       of the   the               shares held    period
                                                                                                     period
                                                                                   period  period
              Chairman to the      present
Sun Liqiang   Board of Directors             M       69   1997.09.18 2019.05.27          0           0             0             0
                                   incumbent
              Vice-chairman to
Zhou          the Board of         present
Hongjiang     Directors and                  M       52   2002.05.20 2019.05.27          0           0             0             0
                                   incumbent
              General manager
              Director and         present
Leng Bin      Vice-general                   M       54   2000.08.22 2019.05.27          0           0             0             0
              manager              incumbent
              Director,
              Vice-general         present
Qu Weimin     manager and                    M       59   1997.09.18 2019.05.27          0           0             0             0
              Secretary to the     incumbent
              Board of Directors
                                   present
Zhang Ming    Director                         M     43   2016.05.26 2019.05.27          0           0             0             0
                                   incumbent
                                   leaving the
Chen Jizong   Director                         M     41   2013.05.14 2016.05.26          0           0             0             0
                                   post
Augusto       Director                        M
Reina                              present           76   2006.12.07 2019.05.27          0           0             0             0
                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                               incumbent
Aldino                         present
Marzorati    Director                      M   64   2006.12.07 2019.05.27    0          0             0             0
                               incumbent
Antonio                        present
Appignani    Director                      M   78   2006.12.07 2019.05.27    0          0             0             0
                               incumbent
                               present
Dai Hui      Director                      F   51   2010.09.01 2019.05.27    0          0             0             0
                               incumbent
             Independent       leaving the
Xiao Wei     director                      M   56   2010.09.01 2016.05.26    0          0             0             0
                               post
Wang         Independent       present
Zhuquan      director                      M   51   2014.05.23 2019.05.27    0          0             0             0
                               incumbent
                               Present
Wang Shigang Independent
             director                      M   51   2011.05.10 2019.05.27    0          0             0             0
                               incumbent
             Independent       Present
Luo Fei      director                      M   64   2016.09.23 2019.05.27    0          0             0             0
                               incumbent
             Independent       Present
Liu Yan      director                      F   43   2016.09.23 2019.05.27    0          0             0             0
                               incumbent
Kong         Chairman to the   present
Qingkun      Board of                    M     44   2013.05.14. 2019.05.27   0          0             0             0
             Supervisors       incumbent
                               present
Zhang Lanlan Supervisor                    F   47   2013.05.14. 2019.05.27   0          0             0             0
                               incumbent
                               present
Liu Zhijun   Supervisor                    M   36   2016.05.26 2019.05.27    0          0             0             0
                               incumbent
                               leaving the
Guo Ying     Supervisor                    F   42   2013.05.14. 2016.05.26   0          0             0             0
                               post
             Vice-general      present
Yang Ming    manager                       M   58   1998.08.12      -        0          0             0             0
                               incumbent
Li Jiming    Chief engineer    present     M   50   2001.09.14      -        0          0             0             0
                                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                incumbent
             Vice-general       present
Jiang Hua    manager                      M      53    2001.09.14   -    0          0             0             0
                                incumbent
             Vice-general       present
Sun Jian     manager                      M      50    2006.03.22   -    0          0             0             0
                                incumbent
                                present
Jiang Jianxun Finance manager             M      50    2002.05.20   -    0          0             0             0
                                incumbent
Total                --              --     --    --       --       --   0          0             0             0
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
2. Changes in the Company’s directors, supervisors and senior management
Available      □Not available
     Name          Position              Type                          Date              Reason
                             Leaving the post owing to
 Chen Jizong     Director    expiration of the term of          2016.05.26                   -
                             office
                             Leaving the post owing to
                 Independe
 Xiao Wei                    expiration of the term of          2016.05.26                   -
                 nt director
                             office
                             Leaving the post owing to
 Guo Ying        Supervisor expiration of the term of           2016.05.26                   -
                             office
3. Situation for work experience
The professional background, main work experiences and present positions of the Company’s
directors, supervisors and senior management
(1) Members of Board of Directors
Mr. Sun Liqiang, male, 69, Chinese, with college degree, senior economist, began serving as
chairman of the Company from 18th September, 1997 and has held the position ever since.
Now, he concurrently is party secretary, chairman and general manager of Changyu Group.
He was representative of the 10th and 11th National People’s Congress.
Mr. Zhou Hongjiang, male, 52, Chinese, with doctor degree, senior engineer, began serving
as director, vice-chairman and general manager of the Company from 20th May, 2002 and has
held the position ever since. Now, he concurrently is vice chairman of Changyu Group and
the representative of the 12th National People’s Congress. He was vice general manager of the
Company and general manager of the Sale Company.
Mr. Leng Bin, male, 54, Chinese, with master degree, senior accountant, began serving as
director of the Company from 15th June, 2000 and has held the position ever since. Now, he
concurrently is director of Changyu Group. He was chief accountant and certified accountant
of Yantai Radio Regulatory Commission and vice section chief and section chief of Yantai
Audit Bureau.
Mr. Qu Weimin, male, 59, Chinese, bachelor of engineering,senior economist, began serving
as director, vice general manager and concurrently as secretary to the board of directors of the
Company from 18th September, 1997 and has held the position ever since. He worked at
Yantai Commission for Restructuring the Economic System and Research Office of Yantai
Government and has 20 years of experience in the aspect of macroeconomic study and
enterprise operation and management.
Mr. Zhang Ming, male, 43, Chinese, with bachelor degree, senior engineer, is now chairman
of Yantai Guofeng Investment Holding Co., Ltd. He was planner of Yantai Synthetic Leather
General Factory, plan specialist of business department, deputy section chief of plan and
statistic section in assets management department and section chief of plan and statistic
section in assets management department in Yantai Wanhua Synthetic Leather Group Co.,
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Ltd, risk control section chief of Yantai Guofeng Investment Holding Co., Ltd. and
concurrently director and vice general manager of Yantai Guoyu Finance Lease Co., Ltd, vice
general manager and secretary to the board of directors of Wanhua Efficient Technology
Group Co., Ltd. and general manager of Yantai State-owned Asset Management Co., Ltd.
Mr. Augusto Reina, male, 76, Italian, is now serving as chief executive officer of several
companies including Illva Saronno Holding SpA and Illva Saronno Investment SRL, member
of the board of directors of Barberini Spa, director of Federvini (Italian Alcohols Production
and Export Association), director of Istituto Del Liquore (Wine Research Institute), director
of Assovini (Sicily Viniculture and Wine Production Association) and director of Changyu
Group. He has been director of the Company since 27th April, 2006.
Mr. Aldino Marzorati, male, 64, Italian, with bachelor degree, is now the general manager of
Illva Saronno Holding SpA and director of the board of directors of some branches under the
group company and the director of Changyu Group. He has been director of the Company
since 27th April, 2006.
Mr. Antonio Appignani, male, 78, Italian, with bachelor degree, is vice chairman of Italian
Business Consultation Committee, chief of Professional Ethics Committee, teacher of
vocational training course of Industrial and Commercial Consultation Committee, member of
Economic and Commercial Committee of the public university “G. D Annunzio” and
concurrently serving as member of the board of directors of different companies and member
of the board of directors of several companies under Illva Group and the director of Changyu
Group.
Ms. Dai Hui, female, 51, Chinese, MBA, is now consultant of IFC, director of Changyu
Group Company and director of Listed Company. She was former project manager of
Government Loan Enlending Department in China FOTIC (staying in Beijing), former
manager assistant of High Net Worth Center in First Pacific Bank (staying in Hongkong),
representative of Rabobank Beijing Office (staying in Beijing) and chief representative of
Rabobank Beijing Office (staying in Beijing).
Mr. Wang Shigang, male, 51, Chinese, MBA and Certified Public Accountant, is now the
board chairman of Shandong Tianhengxin Construction Cost Consultation Co. Ltd.. He
previously served as independent director of the Company. He acts as the independent
director again from 14th May, 2013.
Mr. Wang Zhuquan, male, 51, Chinese, doctor of management (accountancy), first batch of
national accounting academic leading personals of Financial Department, the entrant of
accountant master cultivation project of Financial Department, outstanding teacher of
Shandong province, Government Special Allowance expert, acted as independent director
from 13th May, 2010 to 12th May, 2013. Now he is the professor and the doctoral supervisors
of the Ocean University of China as well as independent director of the some listed
companies which could be exemplified as Qingdao DoubleStar Co., Ltd. He acts as the
independent director of the Company again from 23rd May, 2014.
Mr. Luo Fei, male, 64, Chinese, with doctor degree, visiting scholar of University of Toronto,
doctoral supervisors, Government Special Allowance expert, first batch of trans-century
subject (academic) leading personals of Financial Department. He successively served as the
dean of accounting college in Zhongnan University of Economics and the dean of accounting
college in Zhongnan University of Economics and Law. He focuses on the study of financial
accounting, cost accounting, financial management, and so on. He has worked in companies
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
for many years and has practical working experience with companies. Now he is serving as
independent director of the Company.
Ms. Liu Yan, female, 43, Chinese, with master degree, was honored as national outstanding
lawyer in 2005. Her main practice areas include issuing and listing of domestic and foreign
stocks, merger and acquisition and foreign investment. She now is the partner of Tian Yuan
Law Firm and serving as independent director of the Company.
(2) Members of board of supervisors
Mr. Kong Qingkun, male, 44, Chinese, MBA and economist, served as the section member of
production department in the healthy liquor branch office, clerk and vice director of general
manager office. He now is director of general manager office.
Ms. Zhang Lanlan, female, with bachelor degree and economist, served as vice-manager of
the Company’s import/export company, manager of import department. She now is director
of board of directors’ office.
Mr. Liu Zhijun, male, 36, Chinese, with bachelor degree, worked in foreign fund section of
Economy and Trade Bureau in Longkou economic development zone, served as news section
member of propaganda department in Longkou Municipal Committee, member of
propaganda and mass work section, member of planning section, vice-director member of
programming development and enterprise distribution section, vice-director member and
deputy chief of programming development section. He now is supervisor of the Company.
(3) Other senior managers
Mr. Yang Ming, male, 58, Chinese, with bachelor degree, application researcher, has been
serving as vice general manager of the Company since 12th August, 1998.
Mr. Li Jiming, male, 50, Chinese, with doctor degree, application researcher, has been
serving as chief engineer of the Company since 14th September, 2001.
Mr. Jiang Hua, male, 53, Chinese, with master degree, senior engineer, has been serving as
vice general manager of the Company since 14th September, 2001.
Mr. Sun Jian, male, 50, Chinese, MBA and economist, has been serving as vice general
manager of the Company since 22nd March, 2006.
Mr. Jiang Jianxun, male, 50, Chinese, MBA and accountant, has been serving as Financial
Manager of the Company since 20th May, 2002.
                                                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Post in the shareholder’s company
  Available        □Not available
                                                                                                                             Paid by
                                                                                   Beginning date Ending date of
              Name                         Shareholder’s Company         Post                                            shareholder’s
                                                                                     of the post     the post
                                                                                                                         company or not
                                                                   Chairman and
Sun Liqiang                          Yantai Changyu Group Co. Ltd. general manager 2013.10.08      2017.10.07           No
Zhou Hongjiang                       Yantai Changyu Group Co. Ltd. Vice chairman   2013.10.08      2017.10.07           No
Li Jiming                            Yantai Changyu Group Co. Ltd. Director        2013.10.08      2017.10.07           No
Sun Jian                             Yantai Changyu Group Co. Ltd. Director        2013.10.08      2017.10.07           No
Chen Jizong                          Yantai Changyu Group Co. Ltd. Director        2013.10.08      2017.10.07           No
Augusto Reina                        Yantai Changyu Group Co. Ltd. Director        2013.10.08      2017.10.07           No
Aldino Marzorati                     Yantai Changyu Group Co. Ltd. Director        2013.10.08      2017.10.07           No
Antonio Appignani                    Yantai Changyu Group Co. Ltd. Director        2013.10.08      2017.10.07           No
Dai Hui                              Yantai Changyu Group Co. Ltd. Director        2014.03.06      2017.10.07           No
Explanation for the post in the
                                     No.
shareholder’s company
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Post at other companies
 Available       □Not Available
                                                                                             Beginning
                                                                                                         Ending date of           Paid by other
              Name                          Other’s company           Post at other company date of the
                                                                                                            the post             company or not
                                                                                                post
                                    Yantai Changyu Zhongya
                                                                   Director and
Leng Bin                            Medicine & Healthy Liquor Co.,                           2012.09.10                         No
                                                                   legal representative
                                    Ltd
Explanation for the post in the
                                    No.
shareholder’s company
Disciplinary actions taken by securities regulators in recent 3 years to the Company’s directors, supervisors and senior management both on the
job and left during the report period
□Available     Not available
4. Salary of directors, supervisors and senior management
Decision-making process, the basis of determination, the actual payment of directors, supervisors and senior management
The salary for the independent directors is paid according to the resolution of shareholders’ meeting. The salary for the chairman, directors with
administration duty, supervisors, managers and other senior management should be paid on basis of the evaluation result according to the
Proposal on Assessment Methods of the Company’s Senior Officers’ Performance from 2014 to 2017 which was passed during the Board of
Directors’ meeting.
                                                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Salary of directors, supervisors and senior management during the report period
                                                                                                                                  Unit: CNY’0000
                                                                                                                                    Whether get
                                                                                                               Total reward from
                                                                                                                                    reward from
           Name                            Post                   Gender    Age              Status              the Company
                                                                                                                                 related parties of
                                                                                                                   before tax
                                                                                                                                   the Company
Sun Liqiang                 Chairman to the Board of          M
                            Directors                                             69 present incumbent                        126.89 No
Zhou Hongjiang              Vice-chairman to the Board of     M
                            Directors and general manager                         52 present incumbent                        126.77 No
Leng Bin                    Director and vice-general         M
                            manager                                               54 present incumbent                          89.39 No
                            Director, Vice-general manager
Qu Weimin                   and Secretary to the Board of     M                   59 present incumbent                          89.11 No
                            Directors
Zhang Ming                  Director                          M                   43 present incumbent                               0 No
Chen Jizong                 Director                          M                   41 leaving the post                                0 No
Augusto Reina               Director                          M                   76 present incumbent                               0 No
Aldino Marzorati            Director                          M                   64 present incumbent                               0 No
Antonio Appignani           Director                          M                   78 present incumbent                               0 No
Dai Hui                     Director                          F                   51 present incumbent                               0 No
Xiao Wei                    Independent Director              M                   56 leaving the post                                5 No
Wang Zhuquan                Independent Director              M                   52 present incumbent                               5 No
Wang Shigang                Independent Director              M                   51 present incumbent                               5 No
                                                                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Luo Fei                     Independent Director             M                  64 present incumbent                             0 No
Liu Yan                     Independent Director             F                  43 present incumbent                             0 No
Kong Qingkun                Chairman to the Board of         M
                            supervisors                                         44 present incumbent                        60.63 No
Zhang Lanlan                supervisor                       F                  47 present incumbent                        19.26 No
Liu Zhijun                  supervisor                       M                  36 present incumbent                             0 No
Guo Ying                    supervisor                       F                  42 leaving the post                              0 No
Yang Ming                   Vice-general manager             M                  58 present incumbent                        85.79 No
Li Jiming                   Chief Engineer                   M                  50 present incumbent                        79.98 No
Jiang Hua                   Vice-general manager             M                  53 present incumbent                        85.62 No
Sun Jian                    Vice-general manager             M                  50 present incumbent                        77.74 No
Jiang Jianxun               Finance manager                  M                  50 present incumbent                        60.49 No
Total                                        -                    -         -                -                            916.67              -
The awarded equity incentives for the directors, supervisors and senior management of the Company during the report period
□Available     Not available
5. Staff of the Company
(1) Staff number, specialty constitution and education degree
Incumbent staff number of parent company (people)                                                                                                  1,625
Incumbent staff number of major subsidiary companies (people)                                                                                      3,002
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Total incumbent staff (people)                                                                                                                       4,627
Total staff getting paid in current period (people)                                                                                                  4,627
Retired staff number whose expenses are undertaken by parent
company or subsidiary companies (people)
                                                           Specialty constitution
                                 Category                                                       Number of people (people)
Production staff                                                                                                                                     1,331
Sales staff                                                                                                                                          2,780
Technical staff
Financial staff
Administrative staff
Total                                                                                                                                                4,627
                                                             Education degree
                                 Category                                                            Number (People)
Bachelor and above                                                                                                                                   1,387
Junior College                                                                                                                                       1,953
Technical secondary school
Senior high school and below
Total                                                                                                                                                4,627
(2) Remuneration policy
The Company builds and improves the remuneration and welfare system, including salary system, incentive mechanism, social security and
health insurance and so on, to make sure that all staff could be insured. In accordance with the law, the Company buys social old-age insurance,
medical insurance, occupational injury insurance, unemployment insurance and maternity insurance, and pay housing fund for staff. Based on
the principle of “distribution according to work, equal pay for equal work”, the Company pays the staff’s remuneration timely. With the increase
of the Company’s profitability, the Company steadily improves the staff’s remuneration and welfare, and provides the competitive salary income
and development space of equal opportunity for staff.
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
(3) Training plan
In order to further improve the employees’ comprehensive quality and professional skill, the
2017 training plan for the Company’s major employee is shown as follows:
① Senior and Middle-level Managers
Firstly, it is commonality training. Training topics related with industrial development,
business orientation and management philosophy would be chosen to open the senior and
middle-level managers’ minds, to promote operation philosophy and also to improve
scientific decision-making capacity and operation capacity. The Company plans to employ
professional lecturers to give lectures in the company or through remote internet videos.
There will be four topics arranged for senior and middle-level managers within the year, one
topic in each quarter and one to two days for each topic.
Secondly, it is professional training. Based on individual work, senior and middle-level
managers would be organized in batches to attend high-end forum and summit of entrepreneur
and to visit domestic and foreign successful enterprises for studying. Middle-level managers
would be encouraged to take participation in MBA and other master degree. The professional
managers related with finance, equipment, safety, technology quality and other professional
fields would be organized to attend vocational qualification test to get vocational qualification
certificate. Senior and middle-level managers would attend special training organized by the
Company’s professional management department for safety, technology, equipment, finance
and tourism and so on, no less than twice a year.
② Section Chief and Ordinary Staff Members
Firstly, it is commonality training. Courses would be arranged in order to improve capability
of management, innovation and execution. In addition, professional lecturers or college
teachers would be employed to give lectures in the company, twice a year and one day for
each time. They would attend commonality trainings about enterprise culture, rules and
regulation and various alcohol products knowledge which should be known and grasped.
Secondly, it is professional training. Professional and responsible senior managers would
choose one book for their subordinate administrative personnel to study on their own. At the
end of the year these administrative personnel should propose suggestion for the Company’s
development on the basis of their own work. Eligible general administrative personnel would
be encouraged to take participation in MBA and other master degree. The professional
administrative personnel related with finance, equipment, safety, technology quality and other
professional fields would be organized to attend vocational qualification test to get vocational
qualification certificate. Based on their undertaking work, they would attend special training
organized by the Company’s professional management department no less than twice a year,
which involve safety, technology, equipment, finance, tourism and comprehensive
management and other special projects.
③ Marketing Personnel
Firstly, it is commonality training. They would study training materials related with the
Company’s management system, product knowledge and sales responsibility system.
Secondly, it is professional training. For personnel whose level is or above manager assistant
in the city marketing management company, the Company would invite professional lecturers
                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
to the company or by means of remote internet video to give lectures about successful cases
and economic situation research in current domestic and foreign wine industry, once a quarter
and one day for each time. For city marketing manager, the Company would strengthen their
training for marketing skills as well as execution ability of the company’s sales policy. The
Company would invite its professional management cadre or employ professional lecturers to
take closed training for these managers, once at the beginning of each month and one day for
each time. For business directors and other personnel, every marketing management company
should be based on the local business and adopt training methods of employing professional
lecturers combined with going outside for visit and learning so as to make all marketing
personnel within its jurisdiction attend training about successful marketing cases and
marketing management philosophy. The frequency of this training is once a quarter and one
day for each time.
(4) Labor outsourcing
□Available    Not available
                             IX. Corporate Governance
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
1. Current Corporate Governance Situation of the Company
(1) About shareholders and shareholders’ meeting
The Company has set up the Deliberation Rules of Shareholders’ Meeting, and convened the
shareholders’ meetings in strict accordance with requirements of standard opinion of
shareholders’ meeting, made the great effort to provide convenient conditions for more
shareholders to participate the shareholders’ meeting, and ensured all shareholders to enjoy
same equity and well exercised their rights. The Company drew great attention to the
communication and exchange with shareholders, actively responded the shareholders’
inquiry and questions, and widely listened to the suggestions and comments from
shareholders.
(2) About the Company and holding shareholder
The Company has independent power on business and self-management, and also be
independent of its holding shareholder on business, staff, assets, organization and finance.
The Board of Directors, Board of Supervisors, management team and also internal
organizations operated independently in the Company. The holding shareholder of the
Company could regulate its activities, no other behavior was found that surpassed the
shareholders’ meeting to directly or indirectly interfere with the decision-making and
business activities of the Company, or occupied any assets of the Company which damaged
the Company’s and medium & small shareholders’ interests.
(3) About the director and board of directors
The Company strictly appoints all directors in light of Company Law and Articles of
Associations. The qualifications of all directors are in line with the requirements of laws and
regulations. In accordance with the requirements of Corporate Governance Guidelines, the
Company has carried out the cumulative voting system. At present, the Company has four
independent directors accounting for about one three of all directors, and the number and
composition of board of directors was basically in accord with requirements of regulations
and also Articles and Associations. All directors of the Company could work in the light of
regulations including Rules of Board of Directors’ Procedure and Working Rules for
Independent Directors, punctually attended board of directors’ and shareholders’ meetings,
actively took part in relevant knowledge training, knew very well about the laws and
regulations concerned, had a deep knowledge and long experience of practitioners, and
performed their duties according to the law and regulations. The Board of Directors
convened the meetings in accordance with related rules and regulations.
(4) About supervisor and board of supervisors
The Company strictly elected all supervisors in light of Company Laws and Articles of
Associations. At present, board of supervisors has three people among which one supervisor
is representative for staff, the number and composition of board of supervisor was in accord
with requirements of regulations and rules. All supervisors of the Company could follow the
requirement of Rules of Board of Supervisors’ Procedure, insist the principle of
responsibility to all shareholders, seriously perform their duties, effectively supervise and
present their independent opinion on important issues, interrelated deals, financial status, the
duty performance of directors and managers of the Company.
(5) About performance evaluation and incentive system
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
The engagement of managers was open and transparent, and accorded with laws and
regulations. The Company has established and gradually improved the performance
evaluation standard and formed efficient incentive system, so as to ensure the salary of staff
to be linked with job performance.
(6) About stakeholders
The Company could fully respect and safeguard the legal rights of the party with relevant
benefit, cooperate actively with the stakeholders, jointly drive the Company to develop
continually and stably, pay great attention to the issues such as local environmental
protection and public utilities etc., and assume full responsibilities for the social
responsibility.
(7) About the information disclosure and transparency
The Company has appointed the secretary to Board of Directors to be responsible for
investor relation management including information disclosure, investor relations
management and reception of shareholders’ visit and consultation. The Company has also
assigned China Securities Newspaper, Securities Times, Honkong Commercial Daily and
web site http://www.cninfo.com.cn/ to disclose information, punctually, accurately and truly
disclosed any information in the light of requirement of relevant laws and rules, and also
ensured all shareholders to have same opportunity to acquire any information.
In order to further perfect the Company’s governance system, during the report period, the
Company formulates and improves Equipment Management Specification of Self-supporting
Base, Assessment Method of Equipment Management in Self-supporting Base, Changyu
Company Construction Opinions of A Level Material Base, Popularized Technology for
Each Company to Improve Internal Quality of Product in 2016, Daily Assessment Method
of Product Quality in 2016 , Monitoring Method of Quality Safety Risk for Changyu
Products,Implementation Instruction about Management and Control of Risks at Different
Levels for Wine Enterprise, Implementation Scheme about Investigation and Treatment of
Hidden Danger for Wine Enterprise,Specification Opinions of Advancing the Accelerated
Resolution of Market Feedback Problems, Management Methods of Preventing
Infringements of Intellectual Property Rights and Management Methods of Litigation
Warning, etc.
Whether or not there is significant variance between the Company’s actual situation of
corporate governance and the normative documents about listed company governance issued
by China Securities Regulatory Commission.
□Yes     No
There is no significant variance between the Company’s actual situation of corporate
governance and the normative documents about listed company governance issued by China
Securities Regulatory Commission.
2. Relative to the controlling shareholder, independence of the Company on business,
personnel, assets, organization and finance
(1) Personnel Arrangement
The Company’s general manager, vice general managers and other senior officers, all of
whom were paid by the Company and did not hold any post in the controlling parties. The
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
 Company was entirely independent in personnel arrangement, conclusion and adjustment of
 labor contracts thanks to its sound and independent system for labor, personal and salary
 management.
 (2) Assets:
 Tangible assets and Intangible assets including trademark, industrial property right and
 non-patent technologies were all clearly divided between the Company and the controlling
 shareholder, and all legal formalities were completed. The Company being a legal
 independent entity consistently conducted business activities legally and provided no
 guarantee in any form with its assets for its shareholders or individuals’ liabilities or any
 other legal persons or natural persons. The Company owns trademarks including “黄金冰谷”,
 “爱斐堡”, “爱菲堡”, “爱斐” and “AFIP”, etc. However, due to some issues from the past,
 the Company permitted to use “Changyu” etc the intangible assets such as part of trademark
 ownership and patent still held by the controlling shareholders.
 (3) Finance
 The Company has independent finance department, chief account and financial staff, and also
 complete, independent and standardized accounting system. The Company has also
 established its own bank accounts, duly and legally paying taxes, workers insurance fund. All
 financial individuals do not hold any concurrent posts in associated companies and are able to
 make financial decisions independently. The Company has its own audit department, which is
 especially responsible for the internal audit work of the Company.
 (4) Offices
 The Company has set up a sound organizational framework, in which the Board of Directors
 and Board of Supervisors operate independently, no superior and subordinate relationship
 exists between the functional departments of the controlling shareholder. The Company has
 its own independent production & business offices, all functional departments are
 independent to exercise their powers and carry out the production and business activities
 independently.
 (5) Operations
 The operations of the Company are independent of the controlling shareholder. The Company
 owns itself completely independent systems covering research and development, accounting,
 workforce and labor, quality control, raw materials purchase, production and sales, and is
 possessed of self-run capabilities, and has neither relationship with the controlling
 shareholder in terms of supply and sales by proxy nor competition with the other.
 3. Situation for Horizontal Competition
 □Available    Not available
 4. Information for the shareholders’ meeting and temporary shareholders’ meeting held
 during the report period
 (1) Information for the shareholders’ meeting during the report period
                             Participation    Convening         Disclosure
Session     Meeting type                                                             Disclosure Index
                               ratio of         date               date
                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                 investors
                                                                                     http://www.cninfo.com.
2015 Annual       Annual                                                             cn
Shareholders’ shareholders’ 62.28%            2016.05.26        2016.05.27         Notice of 2015 Annual
  Meeting        meeting                                                             Shareholders’ Meeting
                                                                                     Resolution
Notice of 2016                                                                       http://www.cninfo.com.
     First                                                                           cn
               Extraordinary
 Extraordinary                                                                       Notice of 2016 First
               Shareholders’ 63.08%            2016.09.23        2016.09.24
Shareholders’                                                                       Extraordinary
                 Meeting
   Meeting                                                                           Shareholders’ Meeting
  Resolution                                                                         Resolution
     (2) Request for convening temporary shareholders’ meeting by priority shareholders
    owing recovered voting right
    □Available    Not available
    5. Performance of independent directors during the report period
    (1) Attendance of independent directors for the board of directors and the shareholders’
    meeting
                    Attendance of independent directors for the board of directors
                                                                                           Whether or not
                                                                                            to attend the
                    Required
                               Personal Communication Authorized                              meetings
       Name        attendance                                                      Absence
                              attendance  attendance  attendance                           personally for
                       time
                                                                                             successive
                                                                                                twice
 Xiao Wei                      4           3                  1                0         0 No
 Wang Shigang                  6           3                  3                0         0 No
 Wang Zhuquan                  6           3                  3                0         0 No.
 Luo Fei                       2           0                  2                0         0 No.
 Liu Yan                       2           0                  2                0         0 No.
 Attendance time of
 independent directors for the
 shareholders’ meeting
 without voting rights
    Explanation for failed to personally   attend the Board of Directors’ meetings for successive
    two times
    No
    (2) Any objections for the Company’s projects from the independent directors
    Whether or not the independent directors raised any objection for the Company’s projects
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
□Yes     No
During the report period, the independent directors did not raise any objections for the
Company’s projects.
(3) Other explanations on independent directors’ performance
Whether or not the independent directors’ propositions are accepted by the Company
Yes       □No
Explanation on acceptance or refusal of the independent directors’ propositions to the
Company
During the report period, some independent directors propose suggestions on prudent
investment in tourism project of Changyu International Wine City. They thought that it is a
higher risk in the current background of slower growth of domestic economy. The Company
accepted the independent directors’ opinions and decided to suspend construction of the project.
6. Performance of the special committees under the Board of Directors during the
report period
(1) Summary report of the Board of Directors’ Audit Committee regarding
performance of duties
 On March 26th , 2016, after the certified public accountants responsible for annual audits
had introduced their preliminary opinions, the independent directors on behalf of the Audit
Committee communicated with them and made written comments which read that “we
communicated in detail with the certified public accountants responsible for auditing of the
Company’s 2015 Annual Report who expounded the main standards, main emphasis audited
field, the problems and the matters necessary to adjust that were found during the auditing.
We’ve noticed that the Company has adjusted the matters as the accountants suggested. On
the basis of our communication results with the accountants, the production and operation
situations that the Company’s management reported to us as well as the progress of important
events, we believe that we have no objection to the Company’s 2015 Annual Financial
Statement preliminarily examined by Deloitte Hua Yong Certified Public Accounts Co., Ltd.
and the preliminary audit opinions of that services.”
 On 27th April 2016, the Board of Directors’ Audit Committee deliberated and passed 2015
Annual Audit Report, Draft Proposal on 2015 Annual Profit Distribution, Proposal on
Renewal of Contract with the Present Certified Public Accountants firm, 2015 Annual
Self-assessment Report on Internal Control and 2016 Internal Audit Plan issued by Deloitte
Hua Yong Certified Public Accounts Co., Ltd.
All of committee members unanimously agree to submit the above proposals to the
Company’s 6th Session Board of Directors 12th Meeting for deliberation. The meeting reached
the following consensus:
(A) The clean-opinion auditing report on the Company’s 2015 Annual Financial Statement
issued by Deloitte Hua Yong Certified Public Accounts Co., Ltd reflects the Company’s
financial condition, operating results and cash flow truly, objectively and correctly.
(B) The profit distribution scheme that the Company formulated is relatively acceptable,
taking the shareholders’ interest into account while paying attention to the Company’s
long-term development.
(C) Considering the strict maintenance of objective and fair standpoint as well as the high
audit quality and reasonable arrangement for audit progress during the process of the
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
Company’s 2015 annual financial audit and internal control audit taken by Deloitte Hua
Yong Certified Public Accounts Co., Ltd, it is proposed that the Company will reappoint
Deloitte Hua Yong Certified Public Accounts Co., Ltd as the 2016 annual auditor of the
Company. The employment period is one year and the audit will be taken from two aspects
shown as follows.
On one hand, it is to take the audit of 2016 annual financial report and issue a Financial Audit
Report. On the other hand, it is to take the audit of 2016 annual internal control and issue an
Internal Control Audit Report.
The annual auditing fee for the above parts is CNY 1.98million, including travel expense and
all service charges.
(D) The Company’s 2015 Self-assessment Report on Internal Control has truly and
objectively mirrored out the present standing of the Company’s internal control and can
basically ensure the effective implementation of its policies and realization of its strategic
goals.
(E) The Company’s 2016 Internal Audit Plan is comparatively perfect and practicable, based
on which the Company’s Audit Department will conduct the 2016 annual internal audit.
 On 25th August 2016, the Board of Directors’ Audit Committee deliberated and passed
2016 Semiannual Report and Proposal on 2016 Semiannual Profit Distribution. The meeting
reached the following consensus:
The Company’s 2016 Semiannual Financial Statements reflected the Company’s financial
condition, operating results and cash flow truly, objectively and correctly.
As the Company just realized 2015 Annual Profit Distribution Scheme in middle July, we
propose neither to distribute profits for the first half of 2016 nor to increase the Company’s
capital stock with accumulated public fund. The net profit made in the first half of this year
will be reserved and distributed at the end of the year. Our Auditing Committee considers the
suggestion to be reasonable.
All of Committee members unanimously agree to submit the above proposals to the
Company’s 7th Session Board of Directors 2nd Meeting for deliberation.
(2) Summary report of the Board of Directors’ Emolument Committee regarding
performance of duties
The Board of Directors’ Emolument Committee is responsible for assessment of the economy
responsibilities of the directors and the senior managers who receive salaries from the
Company and examination of the salary policy and scheme designed for the Company’s
directors and senior managers.
 Proposal on 2015 Assessment Results of the Company’s Senior Officers’ Performance was
deliberated and passed by the Board of Directors’ Emolument Committee on 27th April 2016,
who thought that this document was in compliance with Performance Assessment Methods
for Company’s Senior Executive from 2014 to 2017 approved by the Company’s 6th Session
Board of Directors’ 4th Meeting.
All committee members unanimously agree to submit the above proposals to the Company’s
6th Session Board of Directors 12th Meeting for deliberation.
During the report period, the Board of Directors’ Emolument Committee also examined the
2015 annual payroll records of the directors and the senior managers who receive salaries
from the Company and believes that the salaries of the Company’s directors, supervisors and
senior managers received from the Company is strictly assessed and delivered based on the
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
       Company’s economic responsibility assessment system. The salaries disclosed by the
       Company are in conformity with the actually paid amount.
       7. The work of the Board of Supervisors
       Whether or not the Board of Supervisors found any existence risk to the Company in
       oversight activities during the report period
       □Yes     No
       The Board of Supervisors has no objections to supervision matters during the report period.
       8. Performance Evaluation and Incentive situations of Senior Management
       The Company has already established a sound system for evaluation of achievement of senior
       management and the related incentive system which linked the reward with the Company’s
       benefit and personal achievement. The Emolument Committee under Board of Directors
       assumed the responsibility of stipulating the policy and appraising the scheme for salaries and
       rewards. Based on the Company’s annual business planning goals, this committee examined
       senior personals and also their responsible subsidiaries or departments according to their
       management achievement and index and took these as criterion of awards or penalties.
       During the report period, because of not finishing the annual business plan deliberated and
       passed in the Board of Directors’ meeting at the beginning of the year, the total salaries and
       rewards of the senior management are basically equal to that of last year.
       9. Internal Control
       (1) Specific situations for significant defects of the internal control found during the
       report period
       □Yes       No
       (2) Self-assessment report on internal control
Disclosure date for full text of the
                                           2017.04.22
internal control self-assessment report
Disclosure index for full text of the      2016 Self Assessment Report on Internal Control disclosed on
internal control self-assessment report    China Securities Journal, Securities Times and www.cninfo.com.cn
                                           by the Company on 22nd April, 2017.
Percentage of total unit assets included
in scope of the assessment accounting
                                                                                                                    94.51%
for the Company’s total assets of
consolidated financial statements
Percentage of unit operating income
included in scope of the assessment
                                                                                                                    88.61%
accounting for the Company’s operating
income of consolidated financial
                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
statements
                                          Standards of Defect Identification
       Category                        Financial report                                  Non-financial report
Qualitative criteria   Significant defects: one defect of internal         Significant defects: Any situations listed
                       control, individually or together with other        below appears, it can be regarded as
                       defects, has the reasonable probability to cause    significant defects.  Operation: Unable to
                       the significant misstatements, which can not be     achieve all operation target or key business
                       promptly prevented, or found and corrected          index, widely out of budget in various
                       timely in the financial report. For example:        aspects.  Safety accident effects: Cause no
                       Company’s Directors, Supervisors and Senior        less than one person death, or more than 3
                       Management have fraudulent practices;  The          person serious injuries.  Major negative
                       Company makes corrections for the published         effects: Negative information frequently
                       financial report;  The audit of external            appears in the medias with involving a wide
                       intermediary      agent      finds    significant   scope in the international and national
                       misstatement existing in the current financial      mainstream media.  Environment effects:
                       report, but the Company does not realize it         Create irreparable damages to environment,
                       during the operation process;  Negative             and cause massive public complains.
                       information frequently appears in the medias        Major defects: Any situations listed below
                       with involving a wide scope;                 The    appears, it can be regarded as major defects.
                       Company’s audit committee and internal audit        Operation: Unable to achieve partly
                       department makes an inefficient supervision for     operation target, a big margin out of budget in
                       internal control;  Other situations maybe           various aspects.  Safety accident effects:
                       cause significant misdirection which guides the     Without reaching the person loss or the
                       report users to make the right judgment.            number of serious injury of significant
                       Major defects : The defect of internal control,    defects.  Major negative effects: Negative
                       individually or together with other defects, has    news appears in the media with influencing a
                       the reasonable probability to cause the             wide scope in the provincial mainstream
                       significant misstatements, which can not be         media.  Environment effects: Cause heavy
                       promptly prevented, or found and corrected          environment damages and massive public
                       timely in the financial report, although the        complains, ought to carry out the significant
                       misstatements neither achieves nor exceeds the      remedial measures.
                       importance level but still arising the attention    General defects: Any situations listed below
                       of Board of Directors and management team.          appears, it can be regarded as general defects.
                        Failure to select and apply accounting              Operation: Other effects unable to
                       regulations in accordance with generally            constitute the significant defects or major
                       accepted accounting principles;  Failure to         defects.  Safety accident effects: Personal
                       establish the anti-fraud procedures and control     injury less than the quantitative standards of
                       measures;  Failure to set up corresponding          major defects.  Major negative effects:
                       control mechanism or to carry out and take          Other defects unable to constitute the
                       corresponding compensating control for the          significant defects or major defects. 
                       accounting treatments with irregular and            Environment effects: Other environment
                       special deal;  Negative news appears in the         effects unable to constitute the significant
                       media with influencing a wide scope;  One or        defects or major defects.
                       more defects exist in the control during the
                       process of the ending financial report, and the
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                          target of achieving truthfulness and integrality
                          cannot be reasonably guaranteed in the
                          financial report;  General defects refer to the
                          other control defects, which do not constitute
                          the significant and major defects.
Quantitative criterion    For total assets/Owner’s equity:                  For direct property loss:
                           Significant defects: misstatements ≧1%            Significant defects: More than CNY10
                           Major defects: 0.5%≦misstatements<1%             million
                           General defects: misstatements<0.5%                Major defects: CNY1 million-CNY10
                          For operation revenue:                             million (including 1 million)
                           significant defects: misstatements ≧1%            General defects: Less than CNY1 million
                           Major defects: 0.5%≦misstatements<1%
                           General defects: misstatements<0.5%
                          For pretax profit:
                           Significant defects: misstatements ≧5%
                           Major defects: 2%≦misstatements<5%
                           General defects: misstatements<2%
Number of significant
defect in financial
report
Number of significant
defect in non-financial
report
Number of major
defect in financial
report
Number of major
defect in non-financial
report
       10. Internal control audit report
       Available          □Not available
                                   Audit opinions of the internal control audit report
       We believe that Yantai Changyu Pioneer Wine Co., Ltd. kept effective internal control to financial
       report in all significant aspects in accordance with General Criteria of Company’s Internal Control
       and other related rules on 31st December, 2016.
       Disclosure of the internal control audit
                                                          Disclosure
       report
       Disclosure date for the full text of the           22ndApril, 2017
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
internal control audit report
                                               Internal Control Audit Report disclosed on China
Disclosure index for the full text of the
                                               Securities Journal, Securities Times and
internal control audit report
                                               www.cninfo.com.cn by the Company on 22nd April, 2017.
Opinion type of the internal control audit
                                               Standard without reserved opinion
report
Whether or not exists significant defects in
                                               No
non-financial reports
Whether or not the accounting firm issued non-standard opinions for the audit report of
internal control
□Yes      No
Whether the audit report of internal control issued by the accounting firm is in consistency
with the self-assessment report of the board of directors
Yes       □No
                   X. Related Situation of Corporation Bonds
Whether or not the Company has the corporation bonds issued in public, listed in the stock
exchange, not due on the annual report’s authorized issue date or failed to pay in full on the
due date.
Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
                                        XI. Financial Report
1. Audit Report
   Type of audit opinion                             Standard unqualified audit opinion
   Date signed on audit report                       20th April, 2017
                                                     Deloitte Hua Yong certified public accountants co.,
   Audit agency name
                                                     Ltd. (special general partnership)
   Document No. of audit report                      De Shi Bao (Shen) Zi (17) No. P01956
   Certified public accountant's name                Li Xu, Li Yangang
                                             AUDITOR'S REPORT
TO THE SHAREHOLDERS OF
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
We have audited the accompanying financial statements of Yantai Changyu Pioneer Wine Company
Limited which comprise the consolidated and company's balance sheets as at 31st December 2016, and
the consolidated and company's income statements, the consolidated and company's cash flow
statements and the consolidated and company's statements of changes in shareholders' equity for the
year then ended, and the notes to the financial statements.
1). Management' responsibility for the financial statements
Management of the Company is responsible for the preparation and fair presentation of these financial
statements. This responsibility includes: (1) preparing the financial statements in accordance with
Accounting Standards for Business Enterprises to achieve fair presentation of the financial statements;
(2) designing, implementing and maintaining internal control which is necessary to enable that the
financial statements are free from material misstatement, whether due to fraud or error.
2). Auditor's responsibility
Our responsibility is to express an audit opinion on these financial statements based on our audit. We
conducted our audit in accordance with China Standards on Auditing. China Standards on Auditing
require that we comply with the Code of Ethics for Chinese Certified Public Accountants and plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free from
material misstatement.
An audit involves performing audit procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's judgment,
including the assessment of the risks of material misstatement of the financial statements, whether due
to fraud or error. In making those risk assessments, Certified Public Accountants consider the internal
control relevant to the preparation and fair presentation of the financial statements in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the internal control. An audit also includes evaluating the
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
3). Opinion
In our opinion, the financial statements of Yantai Changyu Pioneer Wine Company Limited present
fairly, in all material respects, the consolidated and company's financial position as of 31st December
2016, and the consolidated and company's results of operations and cash flows for the year then ended
in accordance with Accounting Standards for Business Enterprises.
Deloitte Hua Yong Certified Public Accountants Co., Ltd            Chinese Certified Public Accountant
(Special General Partnership)                                                      Li Xu
Shanghai, China                                                                 Li Yangang
                                                                             20th April, 2017
2. Financial report
   Unit: CNY
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2016
ASSETS                                           Notes              Closing balance          Opening balance
                                                                         RMB                     RMB
CURRENT ASSETS
  Cash and bank                                   VI-1               1,391,517,607             1,285,362,414
  Notes receivable                                VI-2                 210,470,027               113,988,122
  Accounts receivable                             VI-3                 173,062,628               197,795,091
  Prepayments                                     VI-4                   2,175,606                 3,591,098
  Interest receivable                             VI-5                      24,200                 8,019,338
  Other receivables                               VI-6                  18,880,800                46,146,487
 Inventories                                      VI-7               2,248,609,740             2,260,852,964
 Non-current assets held for sale                 VI-8                   2,000,197                      -
  Other current assets                            VI-9                 169,522,242
                                                                    ____________                  48,449,551
                                                                                              ____________
Total current assets                                               4,216,263,047
                                                                    ____________               3,964,205,065
                                                                                              ____________
NON-CURRENT ASSETS
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
  Available-for-sale financial assets   VI-10                340,263                   402,814
  Fixed assets                          VI-11          4,683,187,493             3,089,245,185
  Construction in progress              VI-12          1,346,281,737             2,005,990,308
  Bearer biological assets              VI-13            201,428,980               192,198,283
  Intangible assets                     VI-14            483,815,080               463,899,916
  Goodwill                              VI-15            121,265,866               105,504,426
  Long-term prepaid expenses            VI-16            162,206,229               175,124,167
  Deferred tax assets                   VI-17            295,937,037               302,406,656
  Other non-current assets              VI-18             17,352,239
                                                      ____________                  45,234,641
                                                                                ____________
Total non-current assets                               7,311,814,924
                                                      ____________               6,380,006,396
                                                                                ____________
Total assets                                        11,528,077,971
                                                      ____________             10,344,211,461
                                                                                ____________
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2016 - continued
LIABILITIES AND EQUITY                           Notes             Closing balance          Opening balance
                                                                        RMB                     RMB
CURRENT LIABILITIES
 Short-term borrowings                          VI-19                662,388,882               665,581,921
 Notes payable                                  VI-20                 38,900,000                29,000,000
 Accounts payable                               VI-21                545,231,319               569,278,368
 Receipts in advance                            VI-22                425,246,421               234,566,504
 Employee benefits payable                      VI-23                206,431,734               190,239,451
 Taxes payable                                  VI-24                144,042,600                41,285,107
 Interest payable                                                        563,613                   977,304
 Deferred income                                VI-25                 11,163,883                11,241,873
 Other payables                                 VI-26                546,305,310               509,226,395
 Non-current liabilities due within one year    VI-27                 71,799,093
                                                                   ____________                156,335,647
                                                                                             ____________
Total current liabilities                                         2,652,072,855
                                                                   ____________               2,407,732,570
                                                                                             ____________
NON-CURRENT LIABILITIES
 Long-term borrowings                           VI-28                 49,140,555                71,686,629
 Long-term payables                             VI-29                293,000,000                      -
  Deferred income                               VI-25                101,775,243                69,836,411
  Deferred tax liabilities                      VI-17                 24,908,410                34,350,349
  Other non-current liabilities                 VI-30                  7,696,222
                                                                   ____________                  4,047,476
                                                                                             ____________
Total non-current liabilities                                        476,520,430
                                                                   ____________                179,920,865
                                                                                             ____________
Total liabilities                                                 3,128,593,285
                                                                   ____________               2,587,653,435
                                                                                             ____________
EQUITY
  Share capital                                 VI-31                 685,464,000               685,464,000
  Capital reserve                               VI-32                 565,955,441               565,955,441
  Other comprehensive income                    VI-33                  (5,259,014)             (10,442,512)
  Surplus reserve                               VI-34                 342,732,000               342,732,000
  Retained earnings                             VI-35               6,620,118,562
                                                                   ____________               5,980,390,074
                                                                                             ____________
  Equity attributable to shareholders
    of the Company                                                  8,209,010,989             7,564,099,003
  Non-controlling interests                                           190,473,697
                                                                   ____________                 192,459,023
                                                                                             ____________
Total equity                                                        8,399,484,686
                                                                   ____________               7,756,558,026
                                                                                             ____________
Total liabilities and equity                                     11,528,077,971
                                                                   ____________             10,344,211,461
                                                                                             ____________
The accompanying notes form an integral part of these financial statements.
The financial statements on pages 3 to 100 were signed by the following:
Legal Representative: _________________________________
Person in Charge of the Accounting Body: _________________
Chief Accountant: ____________________________________
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2016
ASSETS                                  Notes          Closing balance          Opening balance
                                                            RMB                     RMB
CURRENT ASSETS
  Cash and bank                         XIV-1             269,460,060               280,818,833
  Notes receivable                      XIV-2               1,114,200                38,429,319
 Accounts receivable                    XIV-3               3,326,683                 2,392,870
 Prepayments                            XIV-4                 702,647                   445,619
  Interest receivable                    VI-5                  24,200                 8,019,338
  Dividend receivable                   XIV-5             531,819,113               788,092,349
  Other receivables                     XIV-6           3,582,532,862             5,734,456,129
 Inventories                            XIV-7             792,732,418               728,173,107
 Non-current assets held for sale       VI-8                2,000,197                      -
  Other current assets                                     20,085,058
                                                       ____________                  22,700,317
                                                                                 ____________
Total current assets                                    5,203,797,438
                                                       ____________               7,603,527,881
                                                                                 ____________
NON-CURRENT ASSETS
  Available-for-sale financial assets    VI-10                   -                         -
  Long-term equity investments          XIV-8           1,834,341,541             1,423,725,152
  Fixed assets                          XIV-9             347,481,417               369,506,014
  Construction in progress              XIV-10                500,000                 7,990,777
  Bearer biological assets              XIV-11            123,036,693               110,961,189
  Intangible assets                     XIV-12             72,002,372                74,381,525
 Deferred tax assets                    XIV-13             26,985,252                37,938,692
  Other non-current assets              XIV-14          2,617,457,460
                                                       ____________                        -
                                                                                 ____________
Total non-current assets                                5,021,804,735
                                                       ____________               2,024,503,349
                                                                                 ____________
Total assets                                          10,225,602,173
                                                       ____________               9,628,031,230
                                                                                 ____________
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2016 - continued
LIABILITIES AND EQUITY                          Notes          Closing balance          Opening balance
                                                                    RMB                     RMB
CURRENT LIABILITIES
  Short-term borrowings                         XIV-15           500,000,000               601,297,447
 Accounts payable                               XIV-16           247,568,857               273,091,182
  Receipts in advance                           XIV-17             6,000,000                      -
  Employee benefits payable                     XIV-18            70,812,761                71,058,615
  Taxes payable                                 XIV-19            33,266,225                19,331,311
  Interest payable                                                   563,613                   977,304
  Deferred income                                                  1,767,054                 1,767,054
  Other payables                                XIV-20           368,310,362               994,821,281
  Non-current liabilities due within one year   XIV-21            29,227,200
                                                               ____________                127,345,600
                                                                                         ____________
Total current liabilities                                       1,257,516,072
                                                               ____________               2,089,689,794
                                                                                         ____________
NON-CURRENT LIABILITIES
 Long-term borrowings                           VI-28                   -                   56,761,600
 Deferred income                                                  19,933,699                21,824,352
 Other non-current liabilities                                     2,499,403
                                                               ____________                  1,944,955
                                                                                         ____________
Total non-current liabilities                                     22,433,102
                                                               ____________                 80,530,907
                                                                                         ____________
Total liability                                                 1,279,949,174
                                                               ____________               2,170,220,701
                                                                                         ____________
EQUITY
  Share capital                                  VI-31            685,464,000               685,464,000
  Capital reserve                               XIV-22            557,222,454               557,222,454
  Surplus reserve                                VI-34            342,732,000               342,732,000
  Retained earnings                                             7,360,234,545
                                                               ____________               5,872,392,075
                                                                                         ____________
Total equity                                                    8,945,652,999
                                                               ____________               7,457,810,529
                                                                                         ____________
Total liabilities and equity                                  10,225,602,173
                                                               ____________               9,628,031,230
                                                                                         ____________
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER 2016
                                                 Notes                   2016
                                                                         RMB                       RMB
I. Revenue                                       VI-36              4,717,596,472             4,649,722,368
    Less: Cost of sales                          VI-36              1,575,770,979             1,512,503,035
          Taxes and surcharges                   VI-37                269,716,646               258,013,524
          Selling expenses                       VI-38              1,253,260,668             1,211,127,163
          Administrative expenses                VI-39                309,783,548               313,968,409
          Impairment loss of assets              VI-40                  3,279,266                 2,823,115
                Financial expenses               VI-41                 21,968,859
                                                                   ____________                  11,287,685
                                                                                             ____________
II. Operating profit                                                1,283,816,506             1,339,999,437
      Add: Non-operating income                  VI-42                 55,172,160                50,065,317
            Including: gains from disposal
                                          of non-current assets                                      157,846
                                                192,945
      Less: Non-operating expenses               VI-43                   1,369,826                 1,904,889
            Including: losses from disposal
                                    of non-current assets                                          143,127
                                                 56,884            ____________              ____________
III. Profit before tax                                              1,337,618,840             1,388,159,865
    Less: Income tax                         VI-44                357,029,446
                                                                   ____________                 357,884,235
                                                                                             ____________
IV. Profit for the year                                              980,589,394
                                                                   ____________               1,030,275,630
                                                                                             ____________
          Attribute to shareholders of the Company                   982,460,488              1,030,073,860
          Minority interest income                                    (1,871,094)                   201,770
                                                                   ____________              ____________
V. Other comprehensive income (post-tax)
      Other comprehensive income attributable
    to shareholders of the Company
      Other comprehensive income
    to be reclassified to profit and loss
      Foreign currency statement translation difference                                            5,183,498
                                              (7,639,241)
      Other comprehensive income attributable
    to minority interest                                             432,191
                                                                   ____________                  (102,535)
                                                                                             ____________
      Other comprehensive income (post-tax)                            5,615,689
                                                                   ____________                 (7,741,776)
                                                                                             ____________
VI. Total comprehensive income
    Attribute to shareholders of the Company                      987,643,986             1,022,434,619
    Attribute to minority interest of the Company                                            (1,438,903)
                                                 99,235            ____________              ____________
       Total comprehensive income                                    986,205,083
                                                                   ____________               1,022,533,854
                                                                                             ____________
VII. Earnings per share
          (I) Basic earnings per share           VI-45                      1.43
                                                                   ____________                       1.50
                                                                                             ____________
         (II) Diluted earnings per share         VI-45                      N/A
                                                                   ____________                       N/A
                                                                                             ____________
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
INCOME STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2016
                                                 Notes                    2016
                                                                          RMB                       RMB
I. Revenue                                      XIV-23               1,415,104,946             1,383,184,483
     Less: Cost of sales                        XIV-23               1,152,076,500             1,154,834,509
           Taxes and surcharges                 XIV-24                 106,469,217               128,127,130
           Administrative expenses              XIV-25                  85,962,137               131,187,795
                 Financial expenses             XIV-26                  34,226,452                18,852,697
            Investment income                   XIV-27               1,798,129,418
                                                                    ____________               1,587,303,643
                                                                                              ____________
II. Operating Profit                                                  1,834,500,058            1,537,485,995
      Add: Non-operating income                                           7,433,751                5,229,734
            Including: gains from disposal
                                          of non-current assets                                       157,846
                                                 160,609
    Less: Non-operating expenses                                        405,899                   921,076
                  Including: losses from disposal
                                               of non-current assets                                 46,484
                                                  44,269             ____________             ____________
III. Profit before tax                                               1,841,527,910             1,541,794,653
    Less: Income tax                                                10,953,440
                                                                    ____________                (11,725,445)
                                                                                              ____________
IV. Profit for the year
           and total comprehensive income                            1,830,574,470
                                                                    ____________               1,553,520,098
                                                                                              ____________
                                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2016
                                                                    Notes             2016
                                                                                      RMB                      RMB
CASH FLOWS FROM OPERATING ACTIVITIES
 Cash receipts from the sale of goods
   and the rendering of services                                                4,441,041,101             5,005,115,064
 Receipts of tax refunds                                                           17,860,500                17,833,465
 Other cash receipts relating to operating activities              VI-46(1)        66,707,865
                                                                                __________                   22,373,016
                                                                                                          __________
Sub-total of cash inflows from operating activities                             4,525,609,466
                                                                                __________                5,045,321,545
                                                                                                          __________
  Cash payments for goods purchased and services received                         961,128,796             1,106,430,193
  Cash payments to and on behalf of employees                                     435,621,220               400,245,285
  Payment of various types of taxes                                             1,133,232,957             1,312,212,563
  Other cash payments relating to operating activities             VI-46(2)     1,105,714,523
                                                                                __________                1,083,387,137
                                                                                                          __________
Sub-total of cash outflows from operating activities                            3,635,697,496
                                                                                __________                3,902,275,178
                                                                                                          __________
Net cash flows from operating activities                           VI-47(1)       889,911,970
                                                                                __________                1,143,046,367
                                                                                                          __________
CASH FLOWS FROM INVESTING ACTIVITIES
 Decrease in term deposits over 3 months                                           98,021,025                58,245,260
 Proceeds from return on investments                                                7,723,126                 9,337,943
 Proceeds from disposal of fixed assets                                             7,208,774
                                                                                __________                    3,373,254
                                                                                                          __________
Sub-total of cash inflows from investing activities                               112,952,925
                                                                                __________                   70,956,457
                                                                                                          __________
  Cash paid for acquisition of properties, plants and equipment,
    intangible assets and other long-term assets                                  704,834,302               775,468,190
  Cash paid for term deposits over 3 months                                        92,021,025                20,000,000
  Cash paid for the purchase subsidiaries and other equity         VI-46(3)       3,539,144                 207,868,406
  Other cash payment relating to investing activities                                    -
                                                                                __________                    5,474,540
                                                                                                          __________
Sub-total of cash outflows from investing activities                              800,394,471
                                                                                __________                1,008,811,136
                                                                                                          __________
Net cash flows from investing activities                                         (687,441,546)
                                                                                __________                 (937,854,679)
                                                                                                          __________
CASH FLOWS FROM FINANCING ACTIVITIES
 Cash receipts from borrowings                                                  1,011,089,858               598,060,185
 Other cash received from financing activities                     VI-46(4)       180,477,587
                                                                                __________                    4,000,000
                                                                                                          __________
Sub-total of cash inflows from financing activities                             1,191,567,445
                                                                                __________                  602,060,185
                                                                                                          __________
  Cash paid for dividends, profits and interests                                  372,529,256               326,060,259
  Cash paid for borrowings                                                        839,962,581               325,272,800
  Cash paid for acquisition minority interest                                            -                      150,000
  Cash paid from other financing activities                        VI-46(5)        20,000,000
                                                                                __________                   28,150,000
                                                                                                          __________
Sub-total of cash outflows from financing activities                            1,232,491,837
                                                                                __________                  679,633,059
                                                                                                          __________
Net cash flows from financing activities                                         (40,924,392)
                                                                                __________                 (77,572,874)
                                                                                                          __________
Effect of foreign exchange rate changes
  on cash and cash equivalents                                                      3,154,611                 4,150,573
NET INCREASE OF CASH AND CASH EQUIVALENTS                                         164,700,643              131,769,387
Add: cash and cash equivalents at beginning of the year            VI-47(3)     1,092,241,661
                                                                                __________                  960,472,274
                                                                                                          __________
CASH AND CASH EQUIVALENTS AT END OF THE YEAR                       VI-47(3)     1,256,942,304
                                                                                __________                1,092,241,661
                                                                                                          __________
                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
CASH FLOW STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2016
                                                            Notes            2016
                                                                             RMB                      RMB
CASH FLOWS FROM OPERATING ACTIVITIES
 Cash receipts from the sale of goods
   and the rendering of services                                        1,260,184,309             1,407,696,475
 Other cash receipts relating to operating activities                     232,328,473
                                                                        __________                    1,050,628
                                                                                                  __________
Sub-total of cash inflows from operating activities                     1,492,512,782
                                                                        __________                1,408,747,103
                                                                                                  __________
  Cash payments for goods purchased and services received                 887,413,606               944,400,045
  Cash payments to and on behalf of employees                             121,662,409               149,896,172
  Cash payment of various types of taxes                                  132,372,497               191,387,102
  Other cash payment relating to operating activities                     805,127,368
                                                                        __________                1,128,236,602
                                                                                                  __________
Sub-total of cash outflows from operating activities                    1,946,575,880
                                                                        __________                2,413,919,921
                                                                                                  __________
Net cash flows from operating activities                    XIV-28       (454,063,098)
                                                                        __________               (1,005,172,818)
                                                                                                  __________
CASH FLOWS FROM INVESTING ACTIVITIES
 Cash receipts from equity investment                                            -                      350,000
 Cash receipts from deposits over 3 months                                 18,021,025                46,245,260
 Cash receipts from return on investments                               1,530,872,587             1,211,082,256
 Cash receipts from disposals of fixed assets                               9,705,026
                                                                        __________                      190,205
                                                                                                  __________
Sub-total of cash inflows from investing activities                     1,558,598,638
                                                                        __________                1,257,867,721
                                                                                                  __________
  Cash payments for acquisition of fixed assets,
    intangible assets and other long-term assets                           28,351,843                42,104,159
  Cash payments for term deposits over 3 months                            12,021,025                20,000,000
  Cash payments for subsidiary investment                                 468,882,418               325,163,585
  Other cash payment relating to investing activities                           -
                                                                        __________                    5,474,540
                                                                                                  __________
Sub-total of cash outflows from investing activities                      509,255,286
                                                                        __________                  392,742,284
                                                                                                  __________
Net cash flows from investing activities                                1,049,343,352
                                                                        __________                  865,125,437
                                                                                                  __________
CASH FLOWS FROM FINANCING ACTIVITIES
 Cash receipts from borrowings                                            500,000,000               595,268,270
 Cash inflows from financing activities                                   135,584,347
                                                                        __________                         -
                                                                                                  __________
Sub-total of cash inflows from financing activities                      635,584,347
                                                                       __________                  595,268,270
                                                                                                 __________
  Cash paid for dividends, profits and interests                           372,039,591              325,424,652
  Cash paid for borrowings                                                764,619,892
                                                                        __________                  323,051,320
                                                                                                  __________
Sub-total of Cash outflows from financing activities                    1,136,659,483
                                                                        __________                  648,475,972
                                                                                                  __________
Net cash flows from financing activities                                 (501,075,136)
                                                                        __________                 (53,207,702)
                                                                                                  __________
Effect of foreign exchange rate changes
  on cash and cash equivalents                                                      -                  3,807,697
NET INCREASE/(DECREASE) OF CASH
  AND CASH EQUIVALENTS                                                     94,205,118              (189,447,386)
Add: cash and cash equivalents at beginning of the year     XIV-29        143,798,080
                                                                        __________                   333,245,466
                                                                                                  __________
CASH AND CASH EQUIVALENTS AT END OF THE YEAR                XIV-29        238,003,198
                                                                        __________                  143,798,080
                                                                                                  __________
                                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
CONSOLIDATED SATATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2016
                                                            Attributable to shareholders of the Company
                                           Issued         Capital       Other comprehensive        Surplus        Retained       Non-controlling
                                           capital        surplus              income              reserve        earnings          interests          Total
                                            RMB            RMB                  RMB                 RMB            RMB                RMB              RMB
I. Opening balance
       of the current year              _______
                                         685,464,000   _______
                                                        565,955,441         _____
                                                                           (10,442,512)      ________ ________
                                                                                               342,732,000 5,980,390,074         _______
                                                                                                                                  192,459,023      ________
                                                                                                                                                    7,756,558,026
II. Changes for the year
(I) Total comprehensive income
1. Net Profit                                    -              -                -                           -    982,460,488       (1,871,094)       980,589,394
2. Other comprehensive income (VI-33)            -              -            5,183,498                       -           -              432,191         5,615,689
(II) Profit distribution
       Distributions to
          shareholders (VI-35)          _______
                                             -         _______
                                                            -               _____
                                                                              -              ________ ________
                                                                                                   -   (342,732,000)             _______
                                                                                                                                  (546,423)        ________
                                                                                                                                                    (343,278,423)
III. Closing balance
            of the current year
                                        _______
                                         685,464,000
                                                       _______
                                                        565,955,441
                                                                            _____
                                                                            (5,259,014)
                                                                                             ________ ________
                                                                                               342,732,000 6,620,118,562
                                                                                                                                 _______
                                                                                                                                  190,473,697
                                                                                                                                                   ________
                                                                                                                                                    8,399,484,686
                                                            Attributable to shareholders of the Company
                                           Issued         Capital       Other comprehensive        Surplus        Retained       Non-controlling
                                           capital        surplus              income              reserve        earnings          interests          Total
                                            RMB            RMB                  RMB                 RMB            RMB                RMB              RMB
I. Opening balance
       of the current year              _______
                                         685,464,000   _______
                                                        563,139,042        _______ ________ ________
                                                                             (2,803,271) 342,732,000 5,251,920,374               _______
                                                                                                                                  162,740,779      ________
                                                                                                                                                    7,003,192,924
II. Changes for the year
(I) Total comprehensive income
1. Net Profit                                    -              -                -                           -   1,030,073,860          201,770      1,030,275,630
2. Other comprehensive income (VI-33)            -              -           (7,639,241)                      -            -           (102,535)         (7,741,776)
(II) Shareholders investment and
          Divestment
  1. Acquisition subsidiary (VII-1)              -              -                    -                       -           -          32,585,408          32,585,408
  2. Transaction with non-controlling
    interests                                -     2,816,399                     -                       -           -          (2,966,399)          (150,000)
(III) Profit distribution
    Distributions to
             shareholders (VI-35)       _______
                                             -         _______
                                                            -              _______ ________ ________
                                                                                -        -   (301,604,160)                       _______
                                                                                                                                      -            ________
                                                                                                                                                    (301,604,160)
III. Closing balance of
            the current year
                                        _______
                                         685,464,000
                                                       _______
                                                        565,955,441
                                                                           _______ ________ ________
                                                                            (10,442,512) 342,732,000 5,980,390,074
                                                                                                                                 _______
                                                                                                                                  192,459,023
                                                                                                                                                   ________
                                                                                                                                                    7,756,558,026
                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
YEAR ENDED 31 DECEMBER 2016
                                                Issued capital   Capital reserve   Surplus reserve   Retained earnings       Total
                                                    RMB              RMB               RMB                 RMB               RMB
I. Opening balance
     of the current year                         685,464,000
                                                ________          557,222,454
                                                                 ________           342,732,000
                                                                                   ________           5,872,392,075
                                                                                                      _________          7,457,810,529
                                                                                                                         _________
II. Changes for the year
(I) Total comprehensive income                          -                 -                 -         1,830,574,470      1,830,574,470
(II) Profit distribution
    Distributions to shareholders (VI-35)        -
                                                ________              -
                                                                 ________               -
                                                                                   ________            (342,732,000)
                                                                                                      _________           (342,732,000)
                                                                                                                         _________
III. Closing balance
           of the current year                   685,464,000
                                                ________          557,222,454
                                                                 ________           342,732,000
                                                                                   ________           7,360,234,545
                                                                                                      _________          8,945,652,999
                                                                                                                         _________
                                                Issued capital   Capital reserve   Surplus reserve   Retained earnings       Total
                                                    RMB              RMB               RMB                 RMB               RMB
I. Opening balance
     of the current year                         685,464,000
                                                ________          557,222,454
                                                                 ________           342,732,000
                                                                                   ________          4,620,476,137
                                                                                                     _________           6,205,894,591
                                                                                                                         _________
II. Changes for the year
(I) Total comprehensive income                          -                 -                 -         1,553,520,098      1,553,520,098
(II) Profit distribution
    Distributions to shareholders (VI-35)        -
                                                ________              -
                                                                 ________               -
                                                                                   ________            (301,604,160)
                                                                                                      _________           (301,604,160)
                                                                                                                         _________
III. Closing balance
           of the current year                   685,464,000
                                                ________          557,222,454
                                                                 ________           342,732,000
                                                                                   ________           5,872,392,075
                                                                                                      _________          7,457,810,529
                                                                                                                         _________
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2016
I.   CORPORATE INFORMATION
    Yantai Changyu Pioneer Wine Co., Ltd. (the \"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 reorganization carried out by Yantai Changyu Group Co., Ltd. (\"Changyu Group
    Company\"), 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 2016 the total shares issued by the Company amounts to 685,464,000 shares.
    Please refer to Note VI-31 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 authorized by the board of directors on 20 April 2017.
    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 Notes VIII \"Equity in other entities\" in detail.
    For detail of changes in consolidation scope of the year, please refer to Notes VII \"Change in
    consolidation scope\".
II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
1.   Basis of preparation
    The Group has adopted the Accounting Standards for Business Enterprises (\"ASBE\") issued by
    the Ministry of Finance (“MoF”). In addition, the Group has disclosed relevant financial
    information in accordance with Information Disclosure and Presentation Rules for Companies
    Offering Securities to the Public No. 15 - General Provisions on Financial Reporting (Revised in
    2014).
2.   Basis of accounting and principle of measurement
    The Group has adopted the accrual basis of accounting. The Group adopts the historical cost as
    the principle of measurement in the financial statements. Where assets are impaired, provisions
    for asset impairment are made in accordance with relevant requirements.
    Under the historical cost measurement, an asset is measured at the fair value of consideration paid
    in cash and cash equivalents at the date of the purchase. Liability is measured at the value of asset
    received through taking current obligation, the contract value for taking current obligation, or the
    cash and cash equivalents value estimated for repaying debt in daily business activity.
                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
II. BASIS OF PREPARATION OF FINANCIAL STATEMENTS - continued
2.   Basis of accounting and principle of measurement - continued
    Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
    orderly transaction between market participants at the measurement date, regardless of whether
    that price is directly observable or estimated using another valuation technique. Fair value for
    measurement and/or disclosure purposes in these consolidated financial statements is determined
    on such a basis.
    Fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the
    inputs to the fair value measurements are observable and the significance of the inputs to the fair
    value measurement in its entirety, which are described as follows:
    1)   Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or
              liabilities that the entity can access at the measurement date;
    2)   Level 2 inputs are inputs, other than quoted prices included within Level 1, that are
              observable for the asset or liability, either directly or indirectly; and
    3)   Level 3 inputs are unobservable inputs for the asset or liability.
3.   Going concern
    As at 31 December 2016, the Group evaluated the profitability ability in the foreseeable 12
    months and did not notice any event or circumstance that would constitute significant doubt on
    going concern ability of the Group. Therefore, the financial statements have been prepared on a
    going concern basis.
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
1.   Declaration for implementing CAS
    The financial statements are prepared in accordance with CAS, which showing a true and fair
    view of the financial position on 31 December 2016, financial performance and cash flow in 2016
    of the Company and the Group.
2.   Accounting year
    The accounting year of the Group is from 1 January to 31 December of each calendar year.
3.   Business cycle
    Business cycle refers to the period from purchasing assets to be processed to receiving cash or
    cash equivalents by the Company. The business cycle of the Company is 12 months.
                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
4.   Reporting 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. The Company's foreign subsidiary chooses Currency
    Euro as its functional currency on the basis of the primary economic environment in which it
    operates. The Company adopts RMB to prepare its financial statements.
5.   Business combination
    5.1Business combinations not involving enterprises under common control and goodwill
    A business combination not involving enterprises under common control is a business
    combination in which all of the combining enterprises are not ultimately controlled by the same
    party or parties before and after the combination.
    The cost of combination is the aggregate of the fair values, at the acquisition date, of the assets
    given, liabilities incurred or assumed, and equity securities issued by the acquirer in exchange for
    control of the acquiree.       The intermediary expenses incurred by the acquirer in respect of
    auditing, legal services, valuation and consultancy services, etc. and other associated
    administrative expenses attributable to the business combination are recognised in profit or loss
    when they are incurred.
    Qualified identifiable assets, liabilities and contingent liabilities obtained by acquirer in the
    acquisition are measured using fair value at the acquisition date.
    The cost of combination exceeds the acquirer's interest in the fair value of the acquiree's
    identifiable net assets, the difference is treated as an asset and recognised as goodwill, which is
    measured at cost on initial recognition. Within the 12 month after acquisition, adjustment for the
    provisional recognised value will be regarded as the recognition and measurement at acquisition
    date.
    At the end of the year for acquisition, if the fair value for qualified identifiable assets, liabilities
    and contingent liabilities can be determined temporarily, temporally determined fair value will be
    recognised as consideration for recognition and measurement of acquisition.
    Goodwill arising on a business combination is measured at cost less accumulated impairment
    losses, and is presented separately in the consolidated financial statements. It is tested for
    impairment at least at the end of each year.
6.   Preparation of consolidated financial statements
    6.1 Preparation of consolidated financial statements
    The scope of consolidation in the consolidated financial statements is determined on the basis of
    control. Control is the power to govern the financial and operating policies of an enterprise so as
    to obtain benefits from its operating activities. The Group will re-evaluate if changes in relevant
    facts and circumstances results in changes in relevant factors involved in the above definition of
    control.
                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
6.   Preparation of consolidated financial statements - continued
    6.1 Preparation of consolidated financial statements - continued
    Consolidation of subsidiary starts from the control on the subsidiary by the Group and ends at the
    loss of control on the subsidiary by the Group.
    For a subsidiary disposed of by the Group, the operating results and cash flows before the date of
    disposal (the date when control is lost) are included in the consolidated income statement and
    consolidated statement of cash flows, as appropriate.
    The significant accounting policies and accounting periods adopted by the subsidiaries are
    determined based on the uniform accounting policies and accounting periods set out by the
    Company.
    All significant intra-group balances and transactions are eliminated on consolidation.
    The portion of subsidiaries' equity that is not attributable to the Company is treated as
    non-controlling interests and presented as \"non-controlling interests\" in the consolidated balance
    sheet within shareholders' equity. The portion of net profits or losses of subsidiaries for the period
    attributable to non-controlling interests is presented as \"non-controlling interests\" in the
    consolidated income statement below the net profit line item.
    When the amount of loss for the period attributable to the non-controlling shareholders of a
    subsidiary exceeds the non-controlling shareholders' portion of the opening balance of owners'
    equity of the subsidiary, the excess amount are still allocated against non-controlling interests.
    For the transaction that Purchase minority interest or disposal part of the equity does not loss the
    control of the subsidiaries, it should treated as equity transaction, and adjust the equity attributable
    to shareholders and minority interest in order to reflex the changes of equity in subsidiaries. The
    difference between minority interest adjustment and fair value of received/paid consideration will
    adjust in capital reserve, and if capital reserve is not enough for offset, will adjust surplus reserve.
7.   Cash and cash equivalents
    Cash comprises cash on hand and deposits that can be readily withdrawn on demand. Cash
    equivalents are the Group's short-term, highly liquid investments that are readily convertible to
    known amounts of cash and which are subject to an insignificant risk of changes in value.
8.   Translation of transactions and financial statements denominated in foreign currencies
    8.1 Transactions denominated in foreign currencies
    A foreign currency transaction is recorded, on initial recognition, by applying the spot exchange
    rate on the date of the transaction.
                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
8.   Translation of transactions and financial statements denominated in foreign currencies - continued
    8.1 Transactions denominated in foreign currencies - continued
    At the balance sheet date, foreign currency monetary items are translated into RMB using the spot
    exchange rates at the balance sheet date. Exchange differences arising from the differences
    between the spot exchange rates prevailing at the balance sheet date and those on initial
    recognition or at the previous balance sheet date are recognised in profit or loss for the period,
    except that (1) exchange differences related to a specific-purpose borrowing denominated in
    foreign currency that qualify for capitalisation are capitalised as part of the cost of the qualifying
    asset during the capitalisation period; (2) exchange differences related to hedging instruments for
    the purpose of hedging against foreign currency risks are accounted for using hedge accounting;
        (3) exchange differences arising from available-for-sale non-monetary items denominated in
    foreign currencies and changes in the carrying amounts of available-for-sale monetary items are
    recognised as other comprehensive income and included in capital reserve.
    Foreign currency non-monetary items measured at historical cost are translated to the amounts in
    functional currency at the spot exchange rates on the dates of the transactions and the amounts in
    functional currency remain unchanged. Foreign currency non-monetary items measured at fair
    value are re-translated at the spot exchange rate on the date the fair value is determined.
    Difference between the re-translated functional currency amount and the original functional
    currency amount is treated as changes in fair value (including changes of exchange rate) and is
    recognised in profit and loss or as other comprehensive income included in capital reserve.
    8.2 Translation of financial statements denominated in foreign currencies
    For the purpose of preparing the consolidated financial statements, financial statements of a
    foreign operation are translated from the foreign currency into RMB using the following method:
    assets and liabilities on the balance sheet are translated at the spot exchange rate prevailing at the
    balance sheet date; shareholders' equity items except for retained earnings are translated at the
    spot exchange rates at the dates on which such items arose; all items in the income statement as
    well as items reflecting the distribution of profits are translated at the spot exchange rates on the
    dates of the transactions; the opening balance of retained earnings is the translated closing balance
    of the previous year's retained earnings; the closing balance of retained earnings is calculated and
    presented on the basis of each translated income statement and profit distribution item. The
    difference between the translated assets and the aggregate of liabilities and shareholders' equity
    items is separately presented as the exchange differences arising on translation of financial
    statements denominated in foreign currencies of other comprehensive income under the
    shareholders' equity in the balance sheet.
    Cash flows arising from a transaction in foreign currency and the cash flows of a foreign
    subsidiary are translated at the spot exchange rate on the date of the cash flows. The effect of
    exchange rate changes on cash and cash equivalents is regarded as a reconciling item and
    presented separately in the cash flow statement as \"effect of exchange rate changes on cash and
    cash equivalents\".
    The opening balances and the comparative figures of previous year are presented at the translated
    amounts in the previous year's financial statements.
                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
9.   Financial instruments
    Financial assets and financial liabilities are recognised when the Group becomes a party to the
    contractual provisions of the instrument. Financial assets and financial liabilities are initially
    measured at fair value. For other financial assets and financial liabilities, transaction costs are
    included in their initial recognised amounts.
    9.1 Effective interest method
    The effective interest method is a method of calculating the amortised cost of a financial asset or a
    financial liability (or a group of financial assets or financial liabilities) and of allocating the
    interest income or interest expense over the relevant period, using the effective interest rate. The
    effective interest rate is the rate that exactly discounts estimated future cash flows through the
    expected life of the financial asset or financial liability or, where appropriate, a shorter period to
    the net carrying amount of the financial asset or financial liability.
    When calculating the effective interest rate, the Group estimates future cash flows considering all
    contractual terms of the financial asset or financial liability (without considering future credit
    losses), and also considers all fees paid or received between the parties to the contract giving rise
    to the financial asset and financial liability that are an integral part of the effective interest rate,
    transaction costs, and premiums or discounts, etc.
    9.2 Classification, recognition and measurement of financial assets
    On initial recognition, the Group's financial assets are classified into one of the four categories,
    including financial assets at fair value through profit or loss, held-to-maturity investments, loans
    and receivables, and available-for-sale financial assets. All regular way purchases or sales of
    financial assets are recognised and derecognised on a trade date basis. Financial assets of the
    Group are loans and receivables and available-for-sale financial assets.
    9.2.1 Loans and receivables
    Loans and receivables are non-derivative financial assets with fixed or determinable payments
    that are not quoted in an active market. Financial assets classified as loans and receivables by
    the Group include cash and bank, notes receivable, accounts receivable, interest receivable and
    other receivables.
    Loans and receivables are subsequently measured at amortised cost using the effective interest
    method. Gain or loss arising from derecognition, impairment or amortisation is recognised in
    profit or loss.
    9.2.2 Available-for-sale financial assets
       Available-for-sale financial assets include non-derivative financial assets that are designated on
       initial recognition as available for sale, and financial assets that are not classified as financial
       assets at fair value through profit or loss, loans and receivables or held-to-maturity investments.
       For investments in equity instruments that do not have a quoted market price in an active market
       and whose fair value cannot be reliably measured, they are measured at cost.
                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
9.   Financial instruments - continued
    9.3 Impairment of financial assets
    The Group assesses at each balance sheet date the carrying amounts of financial assets other than
    those at fair value through profit or loss. If there is objective evidence that a financial asset is
    impaired, the Group determines the amount of any impairment loss. Objective evidence that a
    financial asset is impaired is evidence that, arising from one or more events that occurred after the
    initial recognition of the asset, the estimated future cash flows of the financial asset, which can be
    reliably measured, have been affected.
    Objective evidence that a financial asset is impaired includes the following observable events:
       (1)   Significant financial difficulty of the issuer or obligor;
       (2)   A breach of contract by the borrower, such as a default or delinquency in interest or
               principal payments;
       (3)   The Group, for economic or legal reasons relating to the borrower's financial difficulty,
               granting a concession to the borrower;
       (4)   It becoming probable that the borrower will enter bankruptcy or other financial
               reorganisations;
       (5)   The disappearance of an active market for that financial asset because of financial
               difficulties of the issuer;
       (6)   Upon an overall assessment of a group of financial assets, observable data indicates that
               there is a measurable decrease in the estimated future cash flows from the group of
               financial assets since the initial recognition of those assets, although the decrease cannot
               yet be identified with the individual financial assets in the group. Such observable data
               includes:
               - Adverse changes in the payment status of borrower in the group of assets;
               - Economic conditions in the country or region of the borrower which may lead to a
                       failure to pay the group of assets;
       (7)   Significant adverse changes in the technological, market, economic or legal environment in
               which the issuer operates, indicating that the cost of the investment in the equity
               instrument may not be recovered by the investor;
       (8)   A significant or prolonged decline in the fair value of an investment in an equity instrument
               below its cost;
       (9)   Other objective evidence indicating there is an impairment of a financial asset.
       - Impairment of financial assets measured at amortised cost
    If financial assets carried at amortised cost are impaired, the carrying amounts of the financial
    assets are reduced to the present value of estimated future cash flows (excluding future credit
    losses that have not been incurred) discounted at the financial asset's original effective interest
    rate. The amount of reduction is recognised as an impairment loss in profit or loss. If,
    subsequent to the recognition of an impairment loss on financial assets carried at amortised cost,
    there is objective evidence of a recovery in value of the financial assets which can be related
    objectively to an event occurring after the impairment is recognised, the previously recognised
    impairment loss is reversed. However, the reversal is made to the extent that the carrying
    amount of the financial asset at the date the impairment is reversed does not exceed what the
    amortised cost would have been had the impairment not been recognised.
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
9.   Financial instruments - continued
    9.3 Impairment of financial assets - continued
       - Impairment of financial assets measured at amortised cost - continued
    For a financial asset that is individually significant, the Group assesses the asset individually for
    impairment. For a financial asset that is not individually significant, the Group assesses the asset
    individually for impairment or includes the asset in a group of financial assets with similar credit
    risk characteristics and collectively assesses them for impairment. If the Group determines that
    no objective evidence of impairment exists for an individually assessed financial asset (whether
    significant or not), it includes the asset in a group of financial assets with similar credit risk
    characteristics and collectively reassesses them for impairment. Assets for which an impairment
    loss is individually recognised are not included in a collective assessment of impairment.
        - Impairment of available for sale assets measured at cost
    If an impairment loss has been incurred on an investment in unquoted equity instrument (without
    a quoted price in an active market) whose fair value cannot be reliably measured, or on a
    derivative financial asset that is linked to and must be settled by delivery of such an unquoted
    equity instrument, the carrying amount of the financial asset is reduced to the present value of
    estimated future cash flows discounted at the current market rate of return for a similar financial
    asset. The amount of reduction is recognised as an impairment loss in profit or loss. The
    impairment loss on such financial asset is not reversed once it is recognised.
    9.4 Transfer of financial assets
    The Group derecognises a financial asset if one of the following conditions is satisfied: (1) the
    contractual rights to the cash flows from the financial asset expire; or (2) the financial asset has
    been transferred and substantially all the risks and rewards of ownership of the financial asset is
    transferred to the transferee; or (3) although the financial asset has been transferred, the Group
    neither transfers nor retains substantially all the risks and rewards of ownership of the financial
    asset but has not retained control of the financial asset.
    For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the
    difference between (1) the carrying amount of the financial asset transferred; and (2) the sum of
    the consideration received from the transfer and any cumulative gain or loss that has been
    recognised in other comprehensive income, is recognised in profit or loss.
    9.5 Classification, recognition and measurement of financial liabilities
    Debt and equity instruments issued by the Group are classified into financial liabilities or equity
    on the basis of the substance of the contractual arrangements and definitions of financial liability
    and equity instrument.
    On initial recognition, financial liabilities are classified into financial liabilities at fair value
    through profit or loss and other financial liabilities. The financial liabilities in group are other
    financial liabilities, including short-term borrowings, notes payable, account payables, interest
    payables, other payables, non-current liabilities due within one year and long-term payables etc.
                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
9.   Financial instruments - continued
    9.5 Classification, recognition and measurement of financial liabilities - continued
    9.5.1 Other financial liabilities
    Other financial liabilities are subsequently measured at amortised cost using the effective interest
    method, with gain or loss arising from derecognition or amortisation recognised in profit or loss.
    9.6 Derecognition of financial liabilities
    The Group derecognises a financial liability (or part of it) only when the underlying present
    obligation (or part of it) is discharged.
    When the Group derecognises a financial liability or a part of it, it recognises the difference
    between the carrying amount of the financial liability (or part of the financial liability)
    derecognised and the consideration paid (including any non-cash assets transferred or new
    financial liabilities assumed) in profit or loss.
    9.7 Offsetting financial assets and financial liabilities
    Where the Group has a legal right that is currently enforceable to set off the recognised financial
    assets and financial liabilities, and intends either to settle on a net basis, or to realise the financial
    asset and settle the financial liability simultaneously, a financial asset and a financial liability shall
    be offset and the net amount is presented in the balance sheet. Except for the above circumstances,
    financial assets and financial liabilities shall be presented separately in the balance sheet and shall
    not be offset.
    9.8 Equity instruments
    An equity instrument is any contract that evidences a residual interest in the assets of the Group
    after deducting all of its liabilities. The Group does not recognise any changes in the fair value of
    equity instruments. The equity instruments transaction expenses deducted from equity.
       The Group treats distribution to equity instrument holders as profit distributions. Shareholder
       equity is not affected by share dividend distributed.
10. Accounts Receivable
    10.1 Receivables that are individually significant and for which bad debt provision is individually
    assessed
    A receivable that exceeds RMB 3,000,000 is deemed as an individually significant receivable by
    the Group.
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
10. Accounts Receivable - continued
       10.1 Receivables that are individually significant and for which bad debt provision is individually
       assessed - continued
       For receivables that are individually significant, the Group assesses the receivables individually
       for impairment. For a financial asset that is not impaired individually, the Group includes the asset
       in a group of financial assets with similar credit risk characteristics and collectively assesses them
       for impairment. Receivables for which an impairment loss is individually recognised are not
       included in a collective assessment of impairment.
       10.2 Receivables that are not individually significant but for which bad debt provision is
       individually assessed
       For receivables that are not individually significant but for which bad debt provision is
       individually assessed, when objective evidence suggests that the Group cannot collect receivables
       in accordance with original clauses, the Group would recognize impairment loss and provide bad
       debts according to the difference between carrying amount and present value of future cash flows.
11. Inventories
       11.1 Categories of inventories
       The Group's inventories mainly 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 expenditures incurred in bringing the inventories to their present
       location and condition.
       11.2 Valuation method of inventories upon delivery
       The actual cost of inventories upon delivery is calculated using the weighted average method.
       Agricultural products harvested are reported in accordance with the CAS 1 Inventories.
       11.3 Basis for determining net realisable value of inventories and provision methods for decline in
       value of inventories
       At the balance sheet date, inventories are measured at the lower of cost and net realisable value.
       If the net realisable value is below the cost of inventories, a provision for decline in value of
       inventories is made. Net realisable value is the estimated selling price in the ordinary course of
       business less the estimated costs of completion, the estimated costs necessary to make the sale and
       relevant taxes. Net realisable value is determined on the basis of clear evidence obtained, and
       takes into consideration the purposes of holding inventories and effect of post balance sheet
       events.
       Provision for decline in value of other inventories is made based on the excess of cost of
       inventory over its net realisable value on an item-by-item basis.
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III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
11. Inventories - continued
       11.3 Basis for determining net realisable value of inventories and provision methods for decline in
       value of inventories - continued
       After the provision for decline in value of inventories is made, if the circumstances that
       previously caused inventories to be written down below cost no longer exist so that the net
       realisable value of inventories is higher than their cost, the original provision for decline in value
       is reversed and the reversal is included in profit or loss for the period.
       11.4 Inventory count system
       The perpetual inventory system is maintained for stock system.
       11.5 Amortisation method for low cost and short-lived consumable items and packaging materials
       Packaging materials and low cost and short-lived consumable items are amortised using the
       immediate write-off method.
12. Non-current assets held for sale
       A certain non-current asset of the Group (excluding deferred tax asset) is accounted for as
       non-current asset held for sale if all of the following conditions are satisfied at the same time: the
       non-current asset can be disposed immediately at its current state solely based on the general
       terms for disposal of similar non-current assets; a resolution has been made for the disposal of the
       non-current asset; an irrevocable transfer agreement has been entered into with the transferee; and
       it is highly probable that the transfer will be completed within one year. Non-current assets held
       for sale are not depreciated or amortized, and are measured at the lower of the carrying amount
       and the fair value less costs to sell.
13. Long term equity investments
       13.1 Basis for determining control, joint control and significant influence
       Control is the power to govern the financial and operating policies of an entity so as to obtain
       benefits from its activities. Joint control is the contractually agreed sharing of control over an
       economic activity, and exists only when the strategic financial and operating policy decisions
       relating to the activity require the unanimous consent of the parties sharing control. Significant
       influence is the power to participate in the financial and operating policy decisions of the investee
       but is not control or joint control over those policies. When determining whether an investing
       enterprise is able to exercise control or significant influence over an investee, the effect of
       potential voting rights of the investee (for example, warrants and convertible debts) held by the
       investing enterprises or other parties that are currently exercisable or convertible shall be
       considered.
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
13. Long term equity investments - continued
       13.2 Determination of initial investment cost
       For a long-term equity investment acquired not involving enterprises under common control, the
       investment cost of the long-term equity investment is the cost of acquisition. Where the acquiree's
       equity is obtained at stages through multiple deals and finally a business combination not
       involving enterprises under common control is achieved, the deals are accounted for considering
       whether they are respectively attributable to \"a package deal\": where the deals are attributable to
       \"a package deal\", the deals are treated as deals to obtain control.
       Audit fee, legal services, consulting fees and other related management costs in acquisition are
       expensed in profits and losses when happened.
       Other long-term equity investments acquired from other than acquisitions are recognised using
       original cost.
       13.3 Subsequent measurement and recognition of profit or loss
       13.3.1 Long-term equity investment accounted for using the cost method
       The Group accounts for long-term equity investment using the cost method.              A subsidiary is an
       investee that is controlled by the Group.
       Under the cost method, a long-term equity investment is measured at initial investment cost.
       Long-term equity investment is adjusted when capital is added or recollected. Investment income
       is recognised in the period in accordance with the attributable share of cash dividends or profit
       distributions declared by the investee.
       13.4 Disposal of long-term equity investments
       On disposal of a long term equity investment, the difference between the proceeds actually
       received and receivable and the carrying amount is recognised in profit or loss for the period.
14. Fixed assets
       14.1 Recognition criteria for fixed assets
       Fixed assets are tangible assets that are held for use in the production or supply of goods or
       services, for rental to others, or for administrative purposes, and have useful lives of more than
       one accounting year. A fixed asset is recognised only when it is probable that economic benefits
       associated with the asset will flow to the Group and the cost of the asset can be measured reliably.
       Fixed assets are initially measured at cost.
       Subsequent expenditures incurred for the fixed asset are included in the cost of the fixed asset and
       if it is probable that economic benefits associated with the asset will flow to the Group and the
       subsequent expenditures can be measured reliably.         Meanwhile the carrying amount of the
       replaced part is derecognised. Other subsequent expenditures are recognised in profit or loss in
       the period in which they are incurred.
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
14. Fixed assets - continued
       14.2 Depreciation of each category of fixed assets
       A fixed asset is depreciated over its useful life using the straight-line method since the month
       subsequent to the one in which it is ready for intended use. The useful life, estimated net
       residual value rate and annual depreciation rate of each category of fixed assets are as follows:
                                                Estimated               Estimated                   Annual
                                                useful life            residual rate            depreciation rate
       Buildings                               20-40years                  0-5%                      2.4%-5.0%
       Machinery                                5-20years                  0-5%                     4.8%-20.0%
       Motor Vehicles                           4-12years                  0-5%                     7.9%-25.0%
       Estimated net residual value assumes the situation where a fixed asset expire for its estimated
       useful life and is in its expected final status. Estimated net residual value is the amount that the
       Group can obtain from the disposal less expected disposal fees.
       14.3 Other explanations
       If a fixed asset is upon disposal or no future economic benefits are expected to be generated from
       its use or disposal, the fixed asset is derecognised. When a fixed asset is sold, transferred, retired
       or damaged, the amount of any proceeds on disposal of the asset net of the carrying amount and
       related taxes is recognised in profit or loss for the period.
       The Group reviews the useful life and estimated net residual value of a fixed asset and the
       depreciation method applied at least once at each financial year-end, and account for any change
       as a change in an accounting estimate.
15. Construction in progress
       Construction in progress is measured at its actual costs.          The actual costs include various
       construction expenditures during the construction period, borrowing costs capitalised before it is
       ready for intended use and other relevant costs. Construction in progress is not depreciated.
       Construction in progress is transferred to a fixed asset when it is ready for intended use.
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
16. Borrowing costs
       Borrowing costs directly attributable to the acquisition, construction or production of qualifying
       asset are capitalised when expenditures for such asset and borrowing costs are incurred and
       activities relating to the acquisition, construction or production of the asset that are necessary to
       prepare the asset for its intended use or sale have commenced. Capitalisation of borrowing costs
       ceases when the qualifying asset being acquired, constructed or produced becomes ready for its
       intended use or sale. Capitalisation of borrowing costs is suspended during periods in which the
       acquisition, construction or production of a qualifying asset is suspended abnormally and when
       the suspension is for a continuous period of more than 3 months. Capitalisation is suspended until
       the acquisition, construction or production of the asset is resumed. Other borrowing costs are
       recognised as an expense in the period in which they are incurred. Where funds are borrowed
       under a specific-purpose borrowing, the amount of interest to be capitalized is the actual interest
       expense incurred on that borrowing for the period less any bank interest earned from depositing
       the borrowed funds before being used on the asset or any investment income on the temporary
       investment of those funds.
17. Biological assets
       17.1 Bearer biological assets
       Bearer biological assets are biological assets, for example, held for the production of agricultural
       produce, provision of services or rental, Bearer biological assets in the Group are vines. A bearer
       biological asset is initially measured at cost. The cost of a bearer biological asset self-grown or
       self-bred comprises those costs necessarily incurred and directly attributable to the asset before
       the asset becomes available for its intended production and operating purposes, and any
       borrowing cost meeting the capitalisation criteria.
       The Group charge deprecation for productive biological assets which satisfy expected production,
       and record the deprecation in balance sheet and income statement. The Group uses straight line
       method to calculate the deprecation, and details as follows:
                                               Estimated               Estimated                   Annual
       Category                                useful life            residual rate            depreciation rate
       Vines                                    20 years                     -                         5%
       The Group evaluates the useful life and expected net salvage value by considering the normal
       producing life of the bearer biological assets.
       The Group reviews the useful life and estimated net residual value of bearer biological assets and
       the depreciation method applied at least once at each financial year-end, and account for any
       change as a change in an accounting estimate.
       On the sale, identification of any shortages during stocktaking, death or damage of biological
       asset, the proceeds on disposal net of the carrying amount and relevant taxes is recognised in
       profit or loss for the current period.
                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
18. Intangible assets
       Intangible assets include land use rights, software, etc.
       An intangible asset is measured initially at cost method. When an intangible asset with a finite
       useful life is available for use, its original cost less net residual value and any accumulated
       impairment losses is amortised over its estimated useful life using the straight-line method. The
       useful lives of the intangible assets are as follows:
                                                                                          Annual
       Item                              Useful life         Net residual value     amortization rate
       Land use rights                  40-50 years                      -                        2.0%-2.5%
       Software                          5-10 years                      -                       10.0%-20.0%
       Trademark                          10 years                       -                          10.0%
       For an intangible asset with a finite useful life, the Group reviews the useful life and amortisation
       method at the end of the period, and makes adjustments when necessary.
19. Impairment of long-term assets
       The Group and the Company review the impairment status of long-term equity investments, fixed
       assets, construction in progress, bearer biological asset and intangible assets with finite useful life
       at the end of each year. If the assets exist impairment, the Group estimates the recoverable amount
       of the assets.
       Recoverable amount is estimated on individual basis. If it is not practical to estimate the
       recoverable amount of an individual asset, the recoverable amount of the asset group to which the
       asset belongs will be estimated. The recoverable amount of an asset is the higher of its fair value
       less costs of disposal and the present value of the future cash flows expected to be derived from
       the asset.
       If recoverable amount of assets is less than book value, the difference is recognised as impairment
       provision and expensed in current period.
       Goodwill is tested for impairment at least at the end of each year. For the purpose of impairment
       testing, goodwill is considered together with the related assets group (s), i.e., goodwill is
       reasonably allocated to the related assets group (s) or each of assets group (s) expected to benefit
       from the synergies of the combination. An impairment loss is recognised if the recoverable
       amount of the assets group or sets of assets groups (including goodwill) is less than its carrying
       amount. The impairment loss is firstly allocated to reduce the carrying amount of any goodwill
       allocated to such assets group or sets of assets groups, and then to the other assets of the group
       pro-rata on the basis of the carrying amount of each asset (other than goodwill) in the group.
       The impairment is recognised in profit or loss for the period in which it is incurred and will not be
       reversed in any subsequent period.
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
20. Long term prepaid expenses
      Long term prepaid expenses of the Group are amortized over the following period:
                                                                                          Amortization period
      Land requisition fee                                                                              50 years
      Land lease prepayment                                                                             50 years
      Greening fee                                                                                    5-20 years
      Leasehold improvement                                                                             3-5years
      Others                                                                                             3 years
21. Employee benefits
      21.1 Short-term employee benefits
      In an accounting period in which an employee has rendered service to the Group, the Group
      recognises the actual employee benefits for that service as a liability. The employee benefits of
      the Group are either included in cost of related assets or charged to profit or loss in the period
      when they are incurred. Non-monetary employee benefits are measured at fair value.
      Social insurances such as medical insurance, injury insurance and pregnancy insurance, housing
      funds, labor union and employee education fees paid by the Group for employees, are recognised
      as relevant liability in the period in which the employees provide service, in accordance with the
      regulated recognition basis and percentage. The related expenditures are either included in cost of
      related assets or charged to profit or loss in the period when they are incurred.
      21.2 Accounting treatments of retired benefits
      Retired benefits of the Group are all predetermined provision plan.
      In the period in which the employees provide service, the Group recognise liability in accordance
      with the amounts to be paid calculated according to the predetermined provision plan, and the
      related expenditures are either included in cost of related assets or charged to profit or loss in the
      period when they are incurred.
      21.3 Accounting treatments of termination benefits
      When providing termination benefits to employees, the Group recognise employee benefits
      payroll resulting from termination benefits at the earlier of: the Group cannot unilaterally
      withdraw from the termination plan or the redundancy offer; the Group recognise relevant costs
      and expenses related to the payment of termination benefits in reconstructuring.
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
22. Revenue
      22.1 Revenue from sale of goods
      Revenue from sale of goods is recognised when the Group has transferred to the buyer the
      significant risks and rewards of ownership of the goods. The Group retains neither continuing
      managerial involvement to the degree usually associated with ownership nor effective control
      over the goods sold. The amount of revenue can be measured reliably and it is probable that the
      associated economic benefits will flow to the Group. The associated costs incurred or to be
      incurred can be measured reliably.
      22.2 Revenue from rendering of services
      When the outcome of a transaction involving the rendering of services can be estimated reliably,
      revenue associated with the transaction shall be recognized by reference the stage of completion
      of the transaction at the reporting date. The outcome of a transaction can be estimated reliably.
      When the outcome of the transaction involving the rendering of services cannot be estimated
      reliably, revenue is recognised only to the extent of the costs incurred that will be recoverable,
      and the costs incurred are recognised as expenses for the period. When it is not probable that the
      costs incurred will be recovered, revenue is not recognised.
23. Government grants
      Government grants are transfer of monetary assets and non-monetary assets from the government
      to the Group at no consideration. The income is accounted for as either a government grant related
      to an asset or a government grant related to income based on its nature.
      A government grant is recognised only when the Group can comply with the conditions attaching
      to the grant and the Group will receive the grant. Monetary government grants are measured by
      the amount received or receivable.
      23.1 Government grant related to an asset
      A government grant related to an asset is recognised as deferred income, and evenly amortised to
      profit or loss over the useful life of the related asset.
      23.2 Government grant related to income
      For a government grant related to income, if the grant is a compensation for related expenses or
      losses to be incurred in subsequent periods, the grant is recognised as deferred income, and
      recognised in profit or loss over the periods in which the related costs are recognised. If the grant
      is a compensation for related expenses or losses already incurred, the grant is recognised
      immediately in profit or loss for the period.
                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued
24. Deferred tax assets/deferred tax liabilities
       The income tax expenses include current income tax and deferred income tax.
       24.1 Current income tax
       At the balance sheet date, current income tax liabilities (or assets) for the current and prior periods
       are measured at the amount expected to be paid (or recovered) according to the requirements of
       tax laws.
       24.2 Deferred tax assets and deferred tax liabilities
       For temporary differences between the carrying amounts of certain assets or liabilities and their
       tax base, or between the nil carrying amount of those items that are not recognised as assets or
       liabilities and their tax base that can be determined according to tax laws, deferred tax assets and
       liabilities are recognised using the balance sheet liability method.
       Deferred tax is generally recognised for all temporary differences. Deferred tax assets for
       deductible temporary differences are recognised to the extent that it is probable that taxable
       profits will be available against which the deductible temporary differences can be utilised.
       However, for temporary differences associated with the initial recognition of goodwill and the
       initial recognition of an asset or liability arising from a transaction (not a business combination)
       that affects neither the accounting profit nor taxable profits (or deductible losses) at the time of
       transaction, no deferred tax asset or liability is recognised.
       For deductible losses and tax credits that can be carried forward, deferred tax assets are
       recognised to the extent that it is probable that future taxable profits will be available against
       which the deductible losses and tax credits can be utilised.
       Deferred tax liabilities are recognised for taxable temporary differences associated with
       investments in subsidiaries and associates, and interests in joint ventures, except where the Group
       is able to control the timing of the reversal of the temporary difference and it is probable that the
       temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
       deductible temporary differences associated with such investments and interests are only
       recognised to the extent that it is probable that there will be taxable profits against which to utilise
       the benefits of the temporary differences and they are expected to reverse in the foreseeable
       future.
       At the balance sheet date, deferred tax assets and liabilities are measured at the tax rates,
       according to tax laws, that are expected to apply in the period in which the asset is realised or the
       liability is settled.
                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
        - continued
24. Deferred tax assets/deferred tax liabilities - continued
       24.2 Deferred tax assets and deferred tax liabilities - continued
       Current and deferred tax expenses or income are recognised in profit or loss for the period, except
       when they arise from transactions or events that are directly recognised in other comprehensive
       income or in shareholders' equity, in which case they are recognised in other comprehensive
       income or in shareholders' equity; and when they arise from business combinations, in which case
       they adjust the carrying amount of goodwill.
       At the balance sheet date, the carrying amount of deferred tax assets is reviewed and reduced if it
       is no longer probable that sufficient taxable profits will be available in the future to allow the
       benefit of deferred tax assets to be utilised. Such reduction in amount is reversed when it
       becomes probable that sufficient taxable profits will be available.
       24.3 Net off of income taxes
       When the Group has a legal right to settle on a net basis and intends either to settle on a net basis
       or to realise the assets and settle the liabilities simultaneously, current tax assets and current tax
       liabilities are offset and presented on a net basis.
       When the Group has a legal right to settle current tax assets and liabilities on a net basis, and
       deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation
       authority on either the same taxable entity or different taxable entities which intend either to settle
       current tax assets and liabilities on a net basis or to realise the assets and liabilities simultaneously,
       in each future period in which significant amounts of deferred tax assets or liabilities are expected to
       be reversed, deferred tax assets and deferred tax liabilities are offset and presented on a net basis.
25. Leases
       Leases are classified as finance leases whenever the terms of the lease transfer substantially all the
       risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
       Operating lease accounting methods
       Operating lease payments are recognised on a straight-line basis over the term of the relevant
       lease, and are either included in the cost of related asset or charged to profit or loss for the period.
       Initial direct costs incurred are charged to profit or loss for the period.
                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
IV. CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
      ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES
     In the application of accounting policies as set out in Note III, the Group is required to make
     judgments, estimates and assumptions about the carrying amounts of items in the financial
     statements that cannot be measured accurately, due to the internal uncertainties of the operating
     activities. These judgments, estimates and assumptions are based on historical experience of the
     Group's management as well as other factors that are considered to be relevant. Actual results
     may differ from these estimates.
     The Group periodically review the judgments, estimates and assumptions above on a going
     concern basis.      For those changes in accounting policies that only affect current financial
     statements, the influences are recognized in current period. For those changes in accounting
     policies that affect both current and future financial statements, the influences are recognized in
     both current and prospective periods.
     Significant accounting judgments and accounting estimates
     The following are key assumptions for after balance sheet date event and other factors of
     uncertain estimation. They may cause material adjustment on balance sheet in following
     accounting period.
     Deferred tax assets
     Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that
     taxable profit will be available against which the losses can be utilized. Significant management
     judgment is required to determine the amount of deferred tax assets that can be recognized, based
     upon the likely timing and level of future taxable profits together with future tax planning
     strategies.
     Depreciation
     As set out in Note III-14, the depreciation is calculated on the straight line basis to write-off the
     cost of each item of fixed assets to its residual value over its estimated useful life. The Group's
     management determines the estimated useful lives for its fixed assets. This estimate is based on
     the historical experience of the actual useful lives of fixed assets of similar nature and functions.
     If the previous estimates have significant changes, and depreciation expenses will be adjusted in
     the future periods.
     Useful life of intangible assets
     The estimated useful lives of the intangible assets are determined based on the historical
     experience of the actual useful lives of intangible assets of similar nature and functions as well as
     considering the contractual rights and statutory rights applicable to the intangible assets.
     When the estimated useful lives of finite intangible assets are shortened or extended, the
     amortization periods should be adjusted accordingly.
                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
IV.      CRITICAL JUDGMENTS IN APPLYING ACCOUNTING POLICIES AND KEY
         ASSUMPTIONS AND UNCERTAINTIES IN ACCOUNTING ESTIMATES - continued
         Significant accounting judgments and accounting estimates - continued
         Impairment of non-current assets
         The Group assesses whether the recoverable amount is lower than the book value. If there are
         any indicators that the book value of non-current assets cannot be fully recoverable, impairment
         losses should be recorded.
         The recoverable amount is the higher of an asset's fair value less costs to sell and the present value
         of the future cash flows expected to be derived from an asset. As it is difficult for the Group to
         obtain the quoted market price of the assets (or assets group), the fair value of the assets cannot be
         reliably estimated. When the management make estimation on the expected future cash flows
         from the asset or cash generating unit, estimates should be made on choosing a suitable
         production volume, selling price and related operating costs discount rate in order to calculate the
         present value of those cash flows. When recoverable amounts are undertaken, management may
         use all available for use information, including the forecast on production volume, selling price
         and related operating costs in reasonable and supportable assumptions.
         Estimated provision for accounts receivable
         A provision for impairment of trade receivables is established when there is objective evidence
         that the Group will not be able to collect all amounts due according to the original terms of
         receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
         bankruptcy are considered indicators that the trade receivable is impaired. The provision is
         reassessed at the end of each year.
         Inventory provision based on net realizable value
         The inventory are measured on the lower of carrying value and net realizable value, and provision
         should be made for impairment on obsolete and slow moving inventories. The group will
         reassess whether the net realizable value is lower than the carrying cost at the end of each year.
V. TAXES
1.    The main taxes and tax rate are as follows:
(1) China
         Value added tax               VAT is levied at 6% and 17% on the invoiced amount after
                                        deduction of eligible input VAT.
         Consumption tax               The consumption tax of the group is levied on gross revenue
                                         at rates ranging from 10% to 20%.
         Business tax                  The Group is subject to a business tax of 5% on its taxable revenue.
         City development tax          Levied at 7% of total business tax payment.
         Corporate income tax          The Group is subject to a corporate income tax rate of 25%
                                         on its taxable income.
                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
V. TAXES - continued
(2) China - continued
    As approved by the State Council, according to \"Circular on Nationwide Implementation of Pilot
    for Change from Business Tax to VAT\" (Cai Shui [2016] No.36), since 1 May 2016, all the
    business tax payers engaged in construction, real estate, finance and living services etc. are
    included in the scope of pilot and pay VAT instead of business tax (the \"change from business tax
    to VAT\"). Thereinto, the VAT rate for living services industry is 6%. The Group has been paying
    VAT instead of business tax for its revenue from tour, accommodation, catering etc. since the
        \"change from business tax to VAT\".
(3) France
         Value added tax                  VAT is levied at 19.6% on the invoiced amount after deduction
                                            of eligible input VAT.
         Corporate income tax             The Group is subject to a corporate income tax rate of 33%
                                            on its taxable income.
(4) Spain
         Value added tax                  VAT is levied at 21% on the invoiced amount after deduction
                                            of eligible input VAT.
         Corporate income tax             The Group is subject to a corporate income tax rate of 28%
                                            on its taxable income.(2015:30%)
         Other than tax incentives stated in Note V-2, applicable tax rates of the Group in 2016 and 2015
         are all stated as above.
2.   Tax incentives and relative permit
         Ningxia Changyu Grape Growing Co., Ltd.(\"Ningxia Growing\"), a subsidiary of the Group,
         whose principal activity is grape growing is incorporated in Ningxia Huizu Autonomous Region.
         According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate Income
         Tax Measures for Implementation, Ningxia Changyu Grape Growing Co., Ltd. enjoys an
         exemption of corporate income tax.
         Xinjiang Tianzhu Co., Ltd (\"Xinjiang Tianzhu\"), a subsidiary of the Company, is an enterprise of
         wine production and sales incorporated in Shihezi city, Xinjiang Weizu Autonomous. In
         accordance with the Notice on Tax Policy Issues concerning Further Implementation of the
         Western China Development Strategy (Cai Shui [2011] No.58), Xinjiang Tianzhu is qualified to
         enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential
         rate of 15% for the period from 2015 to 2020.
         Xinjiang Babao Baron Chateau Co., Ltd. (\"Shihezi Chateau\"), a subsidiary of the Company, is an
         enterprise of wine production and sales incorporated in Shihezi city, Xinjiang Weizu Autonomous.
         In accordance with the Notice on Tax Policy Issues concerning Further Implementation of the
         Western China Development Strategy (Cai Shui [2011] No.58), Shihezi Chateau is qualified to
         enjoy preferential taxation policies, which means it can pay corporate income tax at a preferential
         rate of 15% for the period from 2015 to 2020.
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.   Cash and bank
                                                                   Closing balance          Opening balance
                                                                        RMB                     RMB
       Cash                                                               117,507                   179,488
       Bank balance                                                 1,240,607,797             1,103,705,354
       Other currency fund                                            150,792,303
                                                                   ____________                 181,477,572
                                                                                             ____________
       Total                                                        1,391,517,607
                                                                   ____________               1,285,362,414
                                                                                             ____________
       At 31 December 2016, the balance of restricted cash of the Group is as follows:
                                                                   Closing balance          Opening balance
                                                                        RMB                     RMB
       The Company's housing fund                                      2,711,926
                                                                   ____________                  2,643,181
                                                                                             ____________
                                                                       2,711,926
                                                                   ____________                  2,643,181
                                                                                             ____________
       As at 31 December 2016, the Group's other monetary assets is as follows:
                                                                   Closing balance          Opening balance
                                                                        RMB                     RMB
       Research and Development Co., Ltd
       (“R&D Centre”) pledged deposit                               46,100,000               151,100,000
       Refundable deposit for notes payable                           38,900,000                30,000,000
       Deposit for letter of credit                                   25,694,735                   370,000
       Alipay account balance                                         40,047,367                      -
       Company cards deposit guarantee                                    50,201
                                                                   ____________                      7,572
                                                                                             ____________
                                                                     150,792,303
                                                                   ____________                181,477,572
                                                                                             ____________
       As at 31 December 2016, the balance of restricted of the alipay account is RMB 18,118,441 (31
       December 2015: RMB: Nil).
       As at 31 December 2016, the Group's overseas cash and bank deposit is RMB 16,080,618 (31
       December 2015: RMB 6,019,640).
       As at 31 December 2016, The Group's term deposits with original maturity of more than three
       months when acquired is RMB 3,000,000 (31 December 2015: RMB 9,000,000) with interest rate
       1.65%.
                                                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
2.
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2.   Notes receivable
(1) Categories of notes receivable
                                                                                                     Closing balance              Opening balance
                                                                                                          RMB                         RMB
       Bank acceptances                                                                               210,470,027
                                                                                                      __________                   113,988,122
                                                                                                                                    _________
(2) Notes receivable which have been pledged as security at the end of the period:
       As at 31 December 2016, there was no pledged notes receivable (31 December 2015: Nil).
(3) Notes endorsed by the Group to other parties which are not yet due at the end of the period
                                                                                                     Closing balance              Opening balance
                                                                                                          RMB                         RMB
       Bank acceptances                                                                               198,302,531
                                                                                                      __________                    84,677,596
                                                                                                                                    _________
       As at 31 December 2016, notes endorsed by the Group to other parties which are not yet due at
       the end of the period is RMB 198,302,531 (31 December 2015: RMB 84,677,596). The notes are
       used for payment to suppliers. The Group believes that due to good reputation of bank, the risk of
       notes not accepting by bank on maturity is very low, and almost all the risks and rewards on
       ownership of the notes receivable have been transferred to the supplier, therefore derecognise the
       note receivables endorsed. If the bank is unable to pay the notes on maturity, according to the
       relevant laws and regulations of China, the Group would undertake limited liability for the notes.
(4) Notes receivable reclassified to accounts receivable due to the drawers' inability to settle the note on
      maturity
       As at 31 December 2016, no notes receivable were reclassified as accounts receivable due to the
       default of drawer (31 December 2015: Nil).
3.   Accounts receivable
(1) Disclosure of accounts receivable by categories:
                                                              Closing balance                                         Opening balance
                                                                      Bad debts         Carrying                              Bad debts        Carrying
                                                  Amount               provision        amount             Amount             provision        amount
                                             Amount Proportion Amount           Ratio   Amount        Amount Proportion Amount         Ratio   Amount
                                              RMB        %         RMB           %       RMB           RMB        %       RMB           %       RMB
       Accounts receivable that are
         individually significant and
         for which bad debt provision
         has been assessed individually      75,230,493   43.5        -           -     75,230,493    74,538,738   37.7       -          -     74,538,738
       Accounts receivable that are
         not individually significant but
         for which bad debt provision
         has been assessed individually     ______ ___
                                             97,832,135  56.5      ____
                                                                     -        ____ ______ ______ ___
                                                                                -   97,832,135 123,256,353  62.3           ____
                                                                                                                             -        ____ ______
                                                                                                                                        -  123,256,353
       Total
                                            ______ ___
                                            173,062,628 100.0        -
                                                                   ____       ____ ______ ______ ___
                                                                                -  173,062,628 197,795,091 100.0             -
                                                                                                                           ____       ____ ______
                                                                                                                                        -  197,795,091
                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
3.     Accounts receivable - continued
(1)    Disclosure of accounts receivable by categories: - continued
       The normal credit term is one month, which can be extended to one year for certain major
       customers. The accounts receivable are interest-free.
       As at 31 December 2016, ownership restricted accounts receivable is RMB 30,732,944 (31
       December 2015: 23,880,775), referring to Note VI-48.
       The aging analysis is as follows:
                                                                      Closing balance          Opening balance
                                                                           RMB                     RMB
       Within 1 year                                                    172,610,351               197,653,190
       1 to 2 years                                                         452,277
                                                                        __________                    141,901
                                                                                                  __________
                                                                        173,062,628
                                                                        __________                197,795,091
                                                                                                  __________
(2) Recognitions, collections and reversals during the current period:
       As at 31 December 2016, there was no bad debt provision for accounts receivable (31 December
       2015: Nil). There was no bad debt provision made, reversed or written-off by management in
       2016 (2015: Nil).
(3) Top five entities with the largest balances of accounts receivable:
                                                Relationship                                         Percentage of
       Name                                    with the Group     Amount              Aging        total receivables
                                                                   RMB                                     %
       DIA Market                               Third party     13,687,807        Within 1 year            7.9
       Nongongshang Supermarket
         (Group) Co., Ltd                       Third party      13,625,761       Within 1 year           7.9
       Wal-Mart (China) Investment Co., Ltd.    Third party       6,416,066       Within 1 year           3.7
       Fujian Minhou glorison Co., Ltd          Third party       6,025,970       Within 1 year           3.5
       Suguo Supermarket Co., Ltd               Third party       5,731,598
                                                                ________          Within 1 year           3.3
                                                                                                         ___
                                                                 45,487,202
                                                                ________                                 26.3
                                                                                                         ___
                                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
4.    Prepayments
(1)      The aging analysis is as follows:
                                                   Closing balance                             Opening balance
                                                Amount            Ratio                      Amount          Ratio
                                                 RMB               %                          RMB              %
         Within 1 year                         2,175,606                 100.0               3,096,223                   86.2
         1 to 2 years                               -
                                              ________                  _____-                 494,875
                                                                                            ________                     13.8
                                                                                                                       _____
                                               2,175,606
                                              ________                   100.0
                                                                        _____                3,591,098
                                                                                            ________                    100.0
                                                                                                                       _____
(2)      As at 31 December 2016, the top 5 of prepayments were as follows:
                                                                                                   Reason            Percentage of
                                             Relationship                                         for being          total advances
                                            with the Group     Amount            Aging           outstanding          to suppliers
                                                                RMB                                                         %
         Shandong Electricity Company
           Yantai branch                     Third party         502,670   Within 1 year     electricity purchase         23.1
         DONELLIVINI S.P.A                   Third party         367,148   Within 1 year     goods not received           16.9
         Xinjiang Hua Xing Glass Co., Ltd    Third party         116,267   Within 1 year     goods not received            5.3
         Shanghai Zi Ri Packing Co., Ltd     Third party         104,832   Within 1 year     goods not received            4.8
         Chongqing Hao Sheng glass
            incorporated company             Third party         93,456
                                                             ________      Within 1 year      goods not received          4.3
                                                                                                                         ___
                                                               1,184,373
                                                             ________                                                    54.4
                                                                                                                         ___
5.    Interest receivable
(1) Categories of interest receivable
                                                                                    Closing balance            Opening balance
                                                                                         RMB                       RMB
         Interests of term deposits                                                         24,200
                                                                                         ________                   8,019,338
                                                                                                                    ________
(2) Overdue interest
         As at 31 December 2016, there was no overdue interest receivable (31 December 2015: Nil).
                                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
6.    Other receivables
(1) Disclosure of other receivables by categories
                                                                Closing balance                                             Opening balance
                                                                        Bad debts            Carrying                               Bad debts             Carrying
                                                    Amount               provision           amount              Amount             provision             amount
                                               Amount Proportion Amount           Ratio      Amount         Amount Proportion Amount         Ratio        Amount
                                                RMB        %         RMB           %          RMB            RMB        %       RMB           %            RMB
    Other receivables that are
          individually significant and
          for which bad debt provision
          has been assessed individually        7,417,220     39.3       -           -        7,417,220     32,390,931   60.7   (7,199,521)     22.2      25,191,410
    Other receivables that are
          not individually significant but
          for which bad debt provision
          has been assessed individually      ______ ___ _____
                                               11,463,580  60.7 -                ___- ______ ______ ___ _____
                                                                                       11,463,580 20,955,077  39.3    -                        ___- ______
                                                                                                                                                     20,955,077
    Total
                                              ______ ___ _____
                                               18,880,800 100.0 -
                                                                                 ___- ______ ______ ___ (7,199,521)
                                                                                       18,880,800 53,346,008 100.0
                                                                                                                   _____                       ___ ______
                                                                                                                                                14.0 46,146,487
                                                           Closing balance                                              Opening balance
                                                                   Bad debts              Carrying                               Bad debts              Carrying
                                                  Amount           provision              amount                 Amount          provision              amount
                                             Amount   Proportion    Amount                Amount            Amount   Proportion   Amount                Amount
                                              RMB         %          RMB                   RMB               RMB         %          RMB                  RMB
    Within 1 year                    8,204,303            43.5         -               8,204,303       36,271,669      68.0              -          36,271,669
    1 to 2 years                     7,715,992            40.8         -               7,715,992        2,725,644       5.1              -           2,725,644
    2 to 3 years                     1,929,613            10.2         -               1,929,613        6,840,476      12.8              -           6,840,476
    Over 3 years                   _______
                                         1,030,892          ____5.5   _______
                                                                           -             _______
                                                                                           1,030,892      _______
                                                                                                            7,508,219    ____
                                                                                                                           14.1      _______
                                                                                                                                      (7,199,521)      _______
                                                                                                                                                           308,698
         Total                          18,880,800 100.0 -                                18,880,800 53,346,008 100.0 (7,199,521) 46,146,487
                                       _______ ____ _______                              _______ _______ ____ _______ _______
(2) Accrual, reversal and written-off during the current period
    No bad debt accrued or reversed in 2016 (2015: bad debt was reversed RMB: Nil).
(3) Other receivables written off in the reporting period
    Other receivables were written off RMB 7,199,521 in 2016. (2015: Nil).
(4) Disclosure of other receivables by categories
                                                                                                          Closing balance               Opening balance
                                                                                                               RMB                          RMB
    Deposit                                                                                              13,191,851                       27,424,926
    Investment fund                                                                                            -                           7,199,521
    Petty cash receivable                                                                                 2,934,424                        6,679,122
    Refund of consumption tax, real estate tax                                                              573,586                          635,482
    Others                                                                                                2,180,939
                                                                                                            __________                        11,406,957
                                                                                                                                              _________
                                                                                                             18,880,800
                                                                                                            __________                        53,346,008
                                                                                                                                              _________
                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
6.      Other receivables - continued
(5) Top five entities with the largest balances of other receivables
         As at 31 December 2016, the top 5 of other receivables are as follows:
                                                                                                             Percentage of total       Bad debt
                                                       Nature                Amount            Aging          other receivables        Amount
                                                                              RMB                                     %                 RMB
          Yantai Development Zone
          Finance Bureau                        Construction deposit          7,417,220    Within 2 years           39.3                     -
          Yantai Development Zone Construction
          Industry Association                  Construction deposit          2,151,300    Within 3 years           11.4                     -
          Canada Oros Ice-wine Co., Ltd        Foreign investment fund        2,050,000      1-2 years              10.9                     -
           Shandong Electricity Company
           Yantai branch                         Electricity deposit          1,385,200      2-3years                7.3                     -
         Yantai Economic and Technological
         Development Zone Thermal Co., Ltd             Deposit            ________
                                                                              500,000       Over 1 years           ___2.6             _______
                                                                                                                                           -
                                                                            13,503,720                              71.5                   -
                                                                          ________                                 ___                _______
7.    Inventories
(1) Disclosure of inventories by categories
                                                      Closing balance                                       Opening balance
                                                                          Net carrying                                             Net carrying
                                      Balance             Provision         amount          Balance           Provision              amount
                                       RMB                  RMB              RMB             RMB                RMB                   RMB
         Raw material                 72,011,633               -            72,011,633       89,256,433         -                 89,256,433
         Work in progress          1,253,218,347               -         1,253,218,347    1,247,023,301         -              1,247,023,301
         Finished goods              944,806,516
                                   _________           (21,426,756)
                                                        _______            923,379,760
                                                                         _________          942,720,720 (18,147,490)
                                                                                          _________ _______                      924,573,230
                                                                                                                               _________
                                   2,270,036,496       (21,426,756)
                                   _________                    2,248,609,740 2,279,000,454 _______
                                                        _______ _________ _________ (18,147,490)
                                                        _______                                                                2,260,852,964
                                                                                                                               _________
(2) Inventory provision
                                                  Opening balance              Increase             Decrease                Closing balance
                                                      RMB                       RMB                  RMB                         RMB
         Finished goods                              18,147,490
                                                    ________                   3,279,266
                                                                              _______                 -
                                                                                                  ________                    21,426,756
                                                                                                                             ________
                                                                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
8.   Non-current assets held for sale
                                                                                                                            Expected                      Expected
                                                       Closing balance                  Fair value                        disposal fees                 disposal time
                                                            RMB                           RMB                                 RMB
    Zhen Shan Tun Department                           2,000,197
                                                          ________                     16,282,224
                                                                                        _______                            3,878,560
                                                                                                                           ______                     Within 1 year
                                                                                        _______                             ______
    Note: The Company has signed an irrevocable agreement for disposal of fixed assets, with the
    amount of RMB 16,282,224, according to which the disposal is expected to be completed in 2017.
9.   Other current assets
                                                                                                             Closing balance                      Opening balance
                                                                                                                  RMB                                 RMB
    Prepaid taxes                                                                                            26,238,092                             28,201,991
    Pending deduct VAT on purchase                                                                          135,316,274                              3,580,354
    Prepaid rent                                                                                              7,967,876
                                                                                                                __________                              16,667,206
                                                                                                                                                       __________
                                                                                                                169,522,242
                                                                                                                __________                              48,449,551
                                                                                                                                                       __________
10. Available-for-sale financial assets
(1) Available-for-sale financial assets
                                                       Closing balance                                                              Opening balance
                                     Amount             Impairment Carrying amount                            Amount                 Impairment Carrying amount
                                      RMB                  RMB          RMB                                    RMB                      RMB          RMB
    Available-for-sale
          equity instruments
          measured at cost        10,340,263
                                _________              (10,000,000)
                                                        _______                  340,263
                                                                                ______                        10,402,814
                                                                                                            _________                (10,000,000)
                                                                                                                                      _______                    402,814
                                                                                                                                                                ______
                                                         _______                                                                       _______
(2) Available-for-sale financial assets measured at cost
                                              Carrying amount                                 Provision for impairment losses                  Proportion of
                                                                                                                                             voting power in    Cash dividend
    Investee               Opening      Increase   Decrease     Closing      Opening          Increase      Decrease         Closing     the investee (%)   for the period
                                RMB          RMB        RMB          RMB          RMB              RMB           RMB              RMB                                RMB
    Yantai Ding Tao
    Construction and
    Development Co., Ltd
        (Note 1).              10,000,000        -           -     10,000,000    10,000,000             -             -         10,000,000        18.0                -
    Other(Note 2)             402,814        -      (62,551)      340,263           -               -             -                -      Less than 1%            -
                               10,402,814        -      (62,551)   10,340,263    10,000,000             -             -         10,000,000
    Note 1: An impairment provision amounting to RMB 10,000,000 has been made by the Company
    for the balance of the carrying amount of the equity investment in Yantai Dingtao Construction
    and Development Co., Ltd. As the fair value of the investee which is an unlisted company cannot
    be measured reliably, the Company measured such available-for-sale financial asset at cost.
    Note 2: the Group holding equity ratios of investment companies are less than 1%. Investment
    companies are all unlisted companies, and their fair value cannot be measured reliably, therefore,
    the Group uses cost method to measure these available-for-sale financial assets.
                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Fixed assets
(1) Details of fixed assets
                                               Buildings       Machinery           Motor Vehicles              Total
                                                RMB             RMB                    RMB                     RMB
       I. Total original carrying amount
       1. Opening balance                    2,647,418,685    1,498,619,150           28,457,393            4,174,495,228
       2. Increase
       (1)Purchase                               6,350,850       33,119,747            4,341,981               43,812,578
       (2)Transfer from CIP                  1,300,071,628      442,163,898              817,566            1,743,053,092
       (3)Acquisition increase                   5,935,266        2,114,634                 -                   8,049,900
       3. Decrease
       Disposal                                      -           (6,881,854)         (4,287,799)              (11,169,653)
       Classified as Non-current
       assets held for sale (VI-8)             (3,599,221)
                                            __________              -
                                                             __________                  -
                                                                                    ________                 (3,599,221)
                                                                                                          __________
       4. Closing balance                    3,956,177,208
                                            __________        1,969,135,575
                                                             __________              29,329,141
                                                                                    ________               5,954,641,924
                                                                                                          __________
       II. Total accumulated depreciation
       1. Opening balance                      336,439,433      725,768,456           23,042,154            1,085,250,043
       2. Increase
       Additions                                75,321,191      120,291,861            2,165,958              197,779,010
       3. Decrease
       Disposal                                          -       (5,902,188)         (4,073,410)               (9,975,598)
       Classified as Non-current
       assets held for sale (VI-8)             (1,599,024)
                                            __________               -
                                                             __________                   -
                                                                                    ________                 (1,599,024)
                                                                                                          __________
       4. Closing balance                      410,161,600
                                            __________          840,158,129
                                                             __________              21,134,702
                                                                                    ________               1,271,454,431
                                                                                                          __________
       III. Total carrying amount
       1. Closing carrying amount            3,546,015,608
                                            __________        1,128,977,446
                                                             __________               8,194,439
                                                                                    ________               4,683,187,493
                                                                                                          __________
       2. Opening carrying amount            2,310,979,252
                                            __________          772,850,694
                                                             __________               5,415,239
                                                                                    ________               3,089,245,185
                                                                                                          __________
       As at 31 December 2016, fixed assets with ownership restricted are RMB 68,658,094 (31
       December 2015: 18,405,000). Please refer to Notes VI-48 in detail.
     As at 31 December 2016, Classified as available for sale assets are RMB 2,000,197 (31 December
2015:Nil), there was no temporary idle fixed assets, no fixed assets leased under finance leases , no
leased out under operating leases and no held for sale at the end of the period.
                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
11. Fixed assets - continued
(2) Fixed assets of which certificates of title have not been obtained
       As at 31 December 2016, buildings without property certificate are as follows:
                                                                                                 Reasons why certificates
                                                                             Amount          of title have not been obtained
                                                                              RMB
       Research and Development Co, Ltd Industry Production Centre       1,210,828,009                 Processing
       Changan Chateau Dormitory building, main building                   265,374,545                 Processing
       Xinjiang Shihezi Chateau factory building                           256,782,251                 Processing
       Beijing Chateau European town, main, service building               220,650,663                 Processing
       Ding Luo Te Chateau main building                                    90,847,654                 Processing
       Sales Company office buildings                                       21,896,020                 Processing
       Xinjiang Tianzhu fermentations and storage warehouse                 19,057,557                 Processing
       Ice Wine Chateau office building and packing workshop                 9,814,003                 Processing
       Jingyang factory fermentation building                                4,389,119                 Processing
       Fermentation centre office, experiment building and workshop          3,994,837                 Processing
       Kylin Packaging finished goods warehouse and workshop                 2,578,206                 Processing
                                                                        __________
                                                                        2,106,212,864
                                                                        __________
12. Construction in progress
(1) Construction in progress
                                                                            Closing balance          Opening balance
                                                                                 RMB                     RMB
       R&D Centre (“Changyu Wine integrational
    Construction”) Project                                              1,227,968,480            1,799,097,086
       Ningxia Chateau Construction Project                                     36,717,169               13,709,767
       Shihezi Chateau Construction Project                                     30,600,684               28,105,618
       Sales Company construction project                                       26,011,600               55,645,386
       Xianyang Chateau Construction Project                                    10,346,598               61,308,522
       Ding Luo Te Chateau Project                                               4,871,422                5,000,221
       AFIP plaza reconstruction project                                         3,713,945                3,659,245
       Jingyang Wine fermentation workshop
          reconstruction project                                                2,331,559                  997,645
       Other companies construction project                                     2,299,684                  973,216
       Huanren factory construction project                                       920,596               29,502,825
       The Company's reconstruction project                                       500,000
                                                                            ____________                 7,990,777
                                                                                                     ____________
                                                                             1,346,281,737
                                                                            ____________              2,005,990,308
                                                                                                     ____________
                                                                                                                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Construction in progress - continued
(2) Changes in significant construction in progress:
                                                                                                                  Transfer to                                Total accumulated    Capitalizing            Interest
                                                                Opening                          Transfer to      intangible          Closing                   Capitalizing         interest          capitalization
                                                  Budget        balance         Addition            PPE             assets            balance       Status         interest      for this period            rate         Financed by
                                                  RMB            RMB             RMB               RMB              RMB                RMB           %               RMB             RMB                     %
                                                                                                                                                                                                                         Loans from
       R&D Centre (“Changyu Wine                                                                                                                                                                                         financial
       integrational Construction”) Project                                                                                                                                                                             institutions
                                               4,505,780,000   1,799,097,086   1,003,719,738   (1,574,848,344)                  -   1,227,968,480   62.2          2,289,723           2,289,723             1.2         and Self-raised
    Changan Chateau Construction
       Project                                  620,740,000      61,308,522      17,783,086      (68,745,010)               -         10,346,598    95.0                   -                       -         -             Self-raised
       Sales Company construction project       161,350,000      55,645,386      11,407,602      (27,335,730)    (13,705,658)         26,011,600    90.0                   -                       -         -             Self-raised
       Shihezi Chateau Construction Project     780,000,000      28,105,618      14,565,801      (12,070,735)               -         30,600,684    87.9                   -                       -         -             Self-raised
       Ningxia Chateau Construction
       Project                                  414,150,000       13,709,767      31,819,787       (8,812,385)              -          36,717,169   95.0                  -                   -              -             Self-raised
       Ding Luo Te Chateau project              192,400,000        5,000,221       4,468,303       (4,597,102)              -           4,871,422   95.7                  -                   -              -             Self-raised
       Huanren factory construction project      31,000,000       29,502,825       4,319,991      (32,902,220)              -             920,596   95.0                  -                   -              -             Self-raised
                                                               1,992,369,425   1,088,084,308   (1,729,311,526)   (13,705,658)       1,337,436,549                 2,289,723           2,289,723
       The interest capitalized in construction in progress is 2,289,723 in 2016(2015: Nil).
(3) As at 31 December 2016, there was no indication of impairment, therefore no provision was made.
                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Bearer biological assets
       Bearer biological assets are Vines, which measured in cost method.
                                               Immature                   Mature
                                            biological assets        biological assets                  Total
                                                 RMB                      RMB                           RMB
       I. Total original carrying amount
       1. Opening balance                    132,806,510               70,761,347                   203,567,857
       2. Increase
       (1) Purchase                               751,300                       -                        751,300
       (2) Cultivated increase                 18,737,361                       -                     18,737,361
       (3) Acquisition increase                 1,519,808                    250,080                   1,769,888
       (4) Transfer to mature assets
                  from immature assets       (70,197,077)
                                             __________                  70,197,077
                                                                         _________                        -
                                                                                                    __________
       3. Decrease
       (1) Disposal                            (5,775,942)
                                              __________                      -
                                                                         _________                   (5,775,942)
                                                                                                    __________
       4. Closing balance                     77,841,960
                                              __________              141,208,504
                                                                        _________                   219,050,464
                                                                                                    __________
       II. Total accumulated depreciation
       1. Opening balance                             -                  11,369,574                   11,369,574
       2. Increase
       Additions                                    -
                                              __________                  6,251,910
                                                                         _________                    6,251,910
                                                                                                    __________
       3. Closing balance                           -
                                              __________                 17,621,484
                                                                         _________                   17,621,484
                                                                                                    __________
       III. Total net carrying amount
       1. Closing net carrying amount          77,841,960
                                              __________              123,587,020
                                                                        _________                   201,428,980
                                                                                                    __________
       2. Opening net carrying amount         132,806,510
                                              __________                 59,391,773
                                                                         _________                  192,198,283
                                                                                                    __________
       As at 31 December 2016, there was no biological asset with ownership restricted.
       As at 31 December 2016, there was no indication that biological assets may be impaired, and no
       provision was made.
                                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
14. Intangible assets
(1) Intangible asset
                                             Land use rights     Software use rights       Trademark                 Total
                                                 RMB                   RMB                   RMB                     RMB
       I. Total original carrying amount
       1. Opening balance                      467,605,436             37,653,788           15,237,653              520,496,877
       2. Increase
       (1)Purchase                             23,884,633            1,076,223               201,924               25,162,780
       (2)Transfer from CIP                          -              13,705,658                  -                  13,705,658
       (3)Acquisition increase                       -
                                            __________                    -
                                                                 __________                    2,488
                                                                                          ________                      2,488
                                                                                                                __________
       3. Closing balance                      491,490,069
                                            __________              52,435,669
                                                                 __________                15,442,065
                                                                                          ________                 559,367,803
                                                                                                                __________
       II. Total accumulated depreciation
       1. Opening balance                        46,649,712             9,826,191              121,058               56,596,961
       2. Increase
       Additions                               10,153,718
                                            __________               2,722,092
                                                                 __________                 6,079,952
                                                                                          ________                 18,955,762
                                                                                                                __________
       3. Closing balance                      56,803,430
                                            __________              12,548,283
                                                                 __________                 6,201,010
                                                                                          ________                 75,552,723
                                                                                                                __________
       III. Total carrying amount
       1. Closing carrying amount              434,686,639
                                            __________              39,887,386
                                                                 __________                 9,241,055
                                                                                          ________                 483,815,080
                                                                                                                __________
       2. Opening carrying amount              420,955,724
                                            __________              27,827,597
                                                                 __________                15,116,595
                                                                                          ________                 463,899,916
                                                                                                                __________
       As at 31 December 2016, the intangible asset with restricted ownership was RMB 145,937,719,
       Please refer to Note VI-48 in detail.
(2)    Land use right without ownership certificate
       As at 31 December 2016, details of land use right without ownership certificates are listed as
       below:
                                                                        Carrying amount                       Reasons
                                                                             RMB
       A-49 Residential Community of
       Yantai Development Zone                                             23,690,000
                                                                           __________                       In progress
15. Goodwill
       Investee                                Opening balance         Increase             Decrease         Closing balance
                                                   RMB                  RMB                  RMB                  RMB
       Etablissements Roullet
         Fransac (“Fransac Sales”)              13,112,525               -                    -              13,112,525
       Dicot Partners, S.L (“ Dicot ”)          92,391,901               -                    -              92,391,901
       Societe Civile Argricole Du Chateau
         De Mirefleurs (“Mirefleurs”)               -
                                                _________            15,761,440
                                                                     ________                  -
                                                                                            ______            15,761,440
                                                                                                             _________
       Total                                     105,504,426
                                                _________             15,761,440
                                                                      ________                 -
                                                                                            ______            121,265,866
                                                                                                             _________
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
15. Goodwill - continued
      The Group acquired Fransac Sales, Dicot and Mirefleurs in December 2013, September 2015 and
      January 2016 respectively, resulting in respective goodwill amounting to RMB 13,112,525,RMB
      92,391,901 and RMB 15,761,440, which have been allocated to corresponding asset groups for
      impairment testing.
      The recoverable amount of an asset group is determined based on the present value of expected
      future cash flows. Future cash flow projections are made based on financial budgets approved by
      management covering a 5-year period (projecting period) and presume that cash flows after the
      projecting period (subsequent period) remain unchanged. According to the corporate financial
      structure and local corporate income tax rate, discount rate used in calculating the recoverable
      amounts of Fransac Sales, Dicot and Mirefleurs are 10.3%. 8.5% and 10.3% (2015: 8.8%, 7.5%,
      N/A). respectively. One key assumption in projecting future cash flows is the growth rate in
      projecting period, which is computed based on the expected growth rate of the industry. Growth
      rate of sales in subsequent period is 2%. Management of the Group believes that any reasonable
      changes in the above assumptions will not cause book values of these subsidiaries exceeds their
      recoverable amounts.
      According to the assessment, the Group confirms that no impairment provision need to be made
      for goodwill in the reporting period.
16. Long-term prepaid expenses
                                   Opening balance     Increase         Amortization        Closing balance
                                       RMB              RMB               RMB                    RMB
      Land lease prepayments          59,328,587            -            (1,481,601)           57,846,986
      Land requisition fee            46,409,764            -            (1,216,864)           45,192,900
      Greening fee                    34,229,777      25,363,472         (5,132,278)           54,460,971
      Leasehold improvement           23,957,390       1,871,939        (24,737,750)            1,091,579
      Others                          11,198,649
                                    _________          1,532,588
                                                     ________            (9,117,444)
                                                                         ________               3,613,793
                                                                                             _________
                                     175,124,167
                                    _________         28,767,999
                                                     ________           (41,685,937)
                                                                         ________             162,206,229
                                                                                             _________
                                                                         ________
                                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
17. Deferred tax assets/liabilities
       Deferred tax assets and deferred tax liabilities are not related to income tax of the same tax
       authorities of the same tax subjects, thus not presented with the net amount after netting.
(1) Recognised deferred tax assets not presented at the net amount after offset:
                                                     Closing balance                           Opening balance
                                              Temporary            Deferred tax         Temporary         Deferred tax
                                              differences             assets            differences          assets
                                                 RMB                  RMB                  RMB               RMB
       Unrealized profit from intra
                                                   676,375,006       169,093,751          691,741,084         172,935,271
         - company transactions
       Unpaid bonus                                154,895,784        38,723,946          133,017,447          33,254,362
       Retirement benefit                           13,115,948         3,278,987           16,147,369           4,036,842
       Asset impairment provision                   31,426,756         7,856,689           35,347,011           8,836,753
       Deductable losses                           176,273,380        44,068,345          265,793,269          66,448,318
       Deferred income                             112,939,126        25,230,521          81,078,284           16,895,110
       Accrued Rebate                               30,739,192         7,684,798                    --                 ---
                                                 1,195,765,192       295,937,037        1,223,124,464         302,406,656
(2) Recognised deferred tax liabilities not presented at the net amount after offset:
                                                 Closing balance                             Opening balance
                                      Taxable temporary         Deferred          Taxable temporary        Deferred
       Item                              difference           tax liability          difference          tax liability
                                            RMB                  RMB                    RMB                 RMB
       Revaluation surplus in
         business combination
       Not under common                  90,877,162              24,908,410          117,475,753           34,350,349
         control
(3) Deferred tax assets and liabilities not recognized:
                                                                                Closing balance          Opening balance
                                                                                     RMB                     RMB
       Deductable losses                                                          135,957,252
                                                                                  __________                41,690,051
                                                                                                            _________
(4) Deductable losses not recognized as deferred tax assets will expire in:
                                                                                Closing balance          Opening balance
                                                                                     RMB                     RMB
       2019                                                                         7,311,273                     -
       2020                                                                        45,960,766               41,690,051
       2021                                                                        82,685,213
                                                                                  __________                      -
                                                                                                            _________
                                                                                  135,957,252
                                                                                   _________                41,690,051
                                                                                                            _________
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
18. Other non-current assets
                                                                    Closing balance           Opening balance
                                                                         RMB                      RMB
       Receivable from transfer of biological assets                  17,352,239                17,137,746
       Prepaid investment fund for Mirefleurs                                -                  22,622,355
       Others                                                                 -
                                                                      __________                 5,474,540
                                                                                                _________
                                                                      17,352,239
                                                                      __________                45,234,641
                                                                                                _________
19. Short-term borrowings
                                                                    Closing balance           Opening balance
                                                                         RMB                      RMB
       Credit loans                                                   631,655,938               640,290,788
       Mortgaged loans                                                 30,732,944
                                                                      __________                 25,291,133
                                                                                                __________
                                                                      662,388,882
                                                                      __________                665,581,921
                                                                                                __________
       As at 31 December 2016, short-term borrowings detail were as follows:
                            Loans amount      Exchange rate      RMB              Nature of        Interest rate
                                                                                   interest             %
       Credit loans (RMB)    600,000,000         1.0000       600,000,000          Floating       3.48%~3.92%
       Credit loans (EUR)      4,332,394         7.3068        31,655,938           Fixed         0.89%~1.65%
       mortgaged loans (EUR)   4,206,074         7.3068        30,732,944
                                                              ________              Fixed         0.90%~1.80%
                                                              662,388,882
                                                              ________
                                                              ________
       As at 31 December 2016, mortgaged loans were Dicot Partners, S.L (“ Dicot ”) factoring of
       accounts receivable from Banco de Sabadell, S.A. etc. EUR 4,206,074 (translated as RMB
       30,732,944)(31 December 2015:RMB 23,880,775). There was no mortgage loans with fixed
       assets in 31 December 2016 (31 December 2015:RMB 1,410,358).
20. Notes payable
                                                                    Closing balance           Opening balance
                                                                         RMB                      RMB
       Bank acceptances                                                38,900,000
                                                                       _________                29,000,000
                                                                                                _________
       As at 31 December 2016, there was no due notes payable unpaid (31 December 2015: Nil). Notes
       payable are all due within one year.
                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
21. Accounts payable
       The aging analysis of accounts payable are as follows
                                                                        Closing balance         Opening balance
                                                                             RMB                    RMB
       Within 1 year                                                      544,128,280              567,791,049
       1 to 2 years                                                         1,103,039
                                                                          __________                 1,487,319
                                                                                                   __________
                                                                          545,231,319
                                                                          __________               569,278,368
                                                                                                   __________
22. Advances from customers
       The aging analysis of advances from customers are as follows
                                                                        Closing balance         Opening balance
                                                                             RMB                    RMB
       Within 1 year                                                      419,382,071              229,993,684
       1 to 2 years                                                         2,046,166                  286,001
       2 to 3 years                                                           108,748                  530,799
       Over 3 years                                                         3,709,436
                                                                          __________                 3,756,020
                                                                                                   __________
                                                                          425,246,421
                                                                          __________               234,566,504
                                                                                                   __________
23. Employee benefit payable
(1) Employee benefit payable as follows:
                                         Opening balance     Increase            Decrease         Closing balance
                                             RMB              RMB                 RMB                  RMB
       Short-term payroll                  174,061,906     410,151,564        (390,912,851)         193,300,619
       Post-demission benefits
        - predetermined provision plan          30,176       40,067,340        (40,082,349)               15,167
       Termination benefits                 16,147,369
                                          _________          1,594,599
                                                           _________           (4,626,020)
                                                                              _________              13,115,948
                                                                                                   _________
                                           190,239,451
                                          _________         451,813,503
                                                           _________          (435,621,220)
                                                                               _________            206,431,734
                                                                                                   _________
                                                                              _________
                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
      23. Employee benefit payable - continued
(2) Employee benefit payable:
                                        Opening balance     Increase            Decrease         Closing balance
                                            RMB              RMB                 RMB                  RMB
    Salaries and bonus                174,767,931     375,367,681        (352,486,022)         197,649,590
    Staff benefit                         179,078      11,865,885         (11,422,228)             622,735
    Staff welfare                         268,019      15,065,068         (15,075,838)             257,249
    Includes:
          Medical insurance                  268,019        12,691,920       (12,702,690)             257,249
          Injury insurance                      -            1,342,010        (1,342,010)                -
          Maternity insurance                   -            1,031,138        (1,031,138)                -
    Housing fund                          47,318        10,313,104       (10,322,750)              37,672
    Union fee and education fee        2,847,036
                                         _________           3,263,856
                                                          _________           (3,517,883)
                                                                             _________              2,593,009
                                                                                                  _________
    Total                             178,109,382
                                         _________         415,875,594
                                                          _________          (392,824,721)
                                                                              _________            201,160,255
                                                                                                  _________
                                                                             _________
    Less: Non-current liabilities      4,047,476
                                         _________                                                  7,696,222
                                                                                                  _________
    Short-term payroll                174,061,906
                                         _________                                                 193,300,619
                                                                                                  _________
(3) Predetermined provision plan
                                        Opening balance     Increase            Decrease         Closing balance
                                            RMB              RMB                 RMB                  RMB
    Pension                             29,995         38,404,278        (38,419,295)             14,978
    Unemployment insurance
                                            _____          1,663,062
                                                          ________            (1,663,054)
                                                                              ________
                                                                                                     _____
                                            30,176
                                            _____          40,067,340
                                                          ________           (40,082,349)
                                                                              ________               15,167
                                                                                                     _____
                                                                              ________
    The Group participates in pension insurance and unemployment insurance plans established by
    government institution. According to those plans, the Group pays pension and unemployment
    insurance each month on the basis of 14%-21% and 1%-2% last period salary respectively. Apart
    from these monthly expenses, the Group does not bear any further payment obligation. This year
    the Group should pay RMB 38,404,278 and RMB 1,663,062 (2015: RMB 29,499,285 and RMB
    1,648,525) respectively into pension insurance and unemployment insurance. As at 31 December
    2016, the Group has unpaid pension and unemployment insurance of RMB 14,978 and RMB 189
    respectively (31 December 2015: RMB 29,995 and RMB 181), which is due to the pension
    insurance and unemployment insurance plan at the end of the reporting period. These payments
    have been paid after the end of the reporting period.
                                           Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
24. Taxes payable
                                                 Closing balance          Opening balance
                                                      RMB                     RMB
      Value added tax                              23,496,328              (45,821,559)
      Consumption tax                              30,361,471                 18,638,837
      Business tax                                        -                      509,491
      Corporation income tax                       69,388,730                 49,020,665
      Urban land use tax                            2,651,262                  2,812,536
      Individual income tax                          7,811,301                 6,587,254
      City construction tax                          4,248,115                 4,197,401
      Property tax                                   1,071,223                   855,668
      Others                                         5,014,170
                                                   __________                  4,484,814
                                                                             __________
                                                   144,042,600
                                                   __________                 41,285,107
                                                                             __________
25. Deferred income
                                                 Closing balance          Opening balance
                                                      RMB                     RMB
         Government grants
         Current liabilities                       11,163,883                11,241,873
         Non-current liabilities                  101,775,243
                                                  __________                 69,836,411
                                                                             _________
                                                  112,939,126
                                                  __________                 81,078,284
                                                                             _________
                                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
      25. Deferred income - continued
    Government grants
                                                                                                 Recognized in                        Related to
                                                               Opening        Addition        non-operating income     Closing       Assets/Income
                                                                RMB            RMB                   RMB                RMB
    Wine base liquor brewage project                         7,609,243          -               (1,434,943)          6,174,300      Assets
    Shihezi chateau project funds                           13,836,600          -               (2,280,000)         11,556,600      Assets
           reconstruction specific funds                        19,908,000          -               (1,422,000)         18,486,000      Assets
    Ningxia industry revitalization and
           technology reconstruction funds                       7,676,000          -               (3,295,000)          4,381,000       Assets
    Wine grape subsidies                                       470,000          -                  (94,000)            376,000      Income
    Modern agriculture grape production
           development subsidies                                  324,000           -                  (64,800)           259,200       Income
    WuYouYiXin industrial cluster specific funds               60,000           -                  (60,000)           -    000       Assets
    Agricultural technology subsidies                         822,000           -                 (822,000)              -          Income
    Industry revitalization and technology
          (Huanren) wine production construction funds           4,000,000          -                      -             4,000,000      Assets
    Wine electronic tracking system
           specific funds                                        4,526,419          -                 (667,054)          3,859,365      Assets
    Miyun Propaganda Department transfer                     2,666,835          -                 (888,945)          1,777,890      Assets
    Wine industry specific funds                               930,000          -                      -               930,000      Assets
    Shandong Peninsula Blue Economic
           Area construction funds                              10,000,000          -                      -            10,000,000       Assets
    863 Program subsidy funds for scientific research           59,890       283,200                   -               343,090      Income
    Information system construction
           project technology funds                              4,640,000          -                 (580,000)          4,060,000       Assets
    Integration projects subsidies                              28,800          -                      -                28,800      Income
    Cross-border e-Business projects subsidies               1,660,497       125,100              (299,800)          1,485,797      Income
    Red wine phenolics research projects funds                 300,000          -                   (4,399)            295,601      Income
    Grape base construction project                          1,560,000          -                 (520,000)          1,040,000       Assets
    Water pollution abatement project                             -          200,000               (66,267)            133,733      Income
    Infrastructure construction project                          -         1,500,000              (31,250)           1,468,750       Assets
    Industrial development support project                       -        41,000,000                  -             41,000,000       Assets
    Subsidy for updating of economic and energy-saving
    technology                                           _______-        ______
                                                                               1,283,000         _______ -           _______
                                                                                                                        1,283,000       Assets
    Total
                                                             _______
                                                               81,078,284
                                                                             ______
                                                                              44,391,300
                                                                                                 _______
                                                                                                  (12,530,458)
                                                                                                                     _______
                                                                                                                      112,939,126
    Less: Non-current liabilities due within one year    _______
                                                               11,241,873                                            _______
                                                                                                                       11,163,883
    Other non-current liabilities
                                                             _______
                                                               69,836,411
                                                                                                                     _______
                                                                                                                      101,775,243
    As at 31 December 2016, the Group recognise current liability for deferred income to be
    accounted in profit or loss within one year, and recognise non-current liability for deferred income
    to be accounted in profit or loss over one year.
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
26. Other payables
(1) Natures of other payables are as follows
                                                                   Closing balance          Opening balance
                                                                        RMB                     RMB
       Deposit from distributors                                    128,539,352               114,475,163
       Payables for equipment and construction                       77,261,072                92,580,929
       Payables for transportation                                   36,690,764                29,713,956
       Royalty fee                                                   78,572,540                86,001,287
       Advertising costs                                             79,414,075                76,818,144
       Accrued rebate                                                30,739,192                      -
       Capital increment from minority interest (Note)               29,847,320                22,522,636
       Employee deposit                                              16,296,186                16,078,904
       Deposits from suppliers                                        2,206,379                 5,644,909
       Payables for contracting fee                                  31,011,929                32,936,900
       Others                                                        35,726,501
                                                                    __________                 32,453,567
                                                                                              __________
                                                                    546,305,310
                                                                    __________                509,226,395
                                                                                              __________
(2)    Description of significant other payables aged more than one year
       Company                                                        Amount                       Reasons
                                                                       RMB
       Beijing Qinglang agriculture science and technology
         development limited company                                23,983,072     unfinished capital increment(Note)
       Beijing Qinglang agriculture science and technology          11,074,240            Payables for contracting fee
         development limited company
       Yantai De'an Investment Company Limited                        5,864,248   unfinished capital increment (Note)
       Yantai De'an Investment Company Limited                      4,729,122
                                                                 _________                Payables for contracting fee
                                                                   45,650,682
                                                                 _________
       Note: Unfinished capital increment is the investment fund from minority shareholders for the
       subsidiary of the Company. As at 31 December 2016, capital increment procedures have not
       finished.
27. Non-current liabilities due within one year
                                                                   Closing balance          Opening balance
                                                                        RMB                     RMB
       Long-term borrowings due within one year                      59,799,093               156,335,647
       Long-term payables due within one year                        12,000,000
                                                                    __________                       -
                                                                                               _________
                                                                      71,799,093
                                                                     __________                156,335,647
                                                                                               __________
       As at 31 December 2016, Long-term borrowings due within one year refers to Note VI-28,
       Long-term payables due within one year refers to Note VI-29.
                                                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
28. Long-term borrowings
                                                                                                         Closing balance                         Opening balance
                                                                                                              RMB                                    RMB
      Credit loan                                                                                            40,304,811                               66,868,836
      Mortgaged loan                                                                                          8,835,744
                                                                                                           ___________                                 4,817,793
                                                                                                                                                    ___________
                                                                                                             49,140,555
                                                                                                           ___________                                71,686,629
                                                                                                                                                    ___________
      As at 31 December 2016, loans detail is as follows:
                                  Loans amount         Exchange rate      RMB               Nature                Interest rate             Due within           Due over
                                                                                           of interest                 %                     one year            one year
      Credit loans (EUR)             4,000,000            7.3068        29,227,200         Floating                  3.70%                   29,227,200                -
      Credit loans (EUR)             1,200,724            7.3068         8,773,451         Floating              1.75%-2.10%                 7,261,465            1,511,987
      Credit loans (EUR)             8,139,378            7.3068        59,472,805           Fixed               1.00%-4.42%                20,679,980           38,792,824
      Mortgaged loans (EUR)          1,569,249            7.3068       ______
                                                                        11,466,192           Fixed                   2.10%             _______
                                                                                                                                             2,630,448       _______
                                                                                                                                                                  8,835,744
                                                                       ______
                                                                       108,939,648
                                                                                                                                       _______
                                                                                                                                         59,799,093
                                                                                                                                                             _______
                                                                                                                                                               49,140,555
      Note: As at 31 December 2016, mortgaged loans were Atrio using fixed assets EUR 3,765,967
      (translated as RMB 27,517,168) as collateral for loans from Popular Espaol, EUR 1,569,249
      (translated as RMB 11,466,192), (31 December 2015: RMB 6,068,519).
29. Long-term payables
                                                                                                         Closing balance                         Opening balance
                                                                                                              RMB                                    RMB
      Agricultural Development
      Fund of China(\"CADF\")                                                                               293,000,000
                                                                                                          __________                                      -
                                                                                                                                                     _________
      In 2016, RMB 305,000,000 from CADF was invested in R&D Centre, CADF accounted for
      37.9% of the registered capital. According to the investment agreement, CADF will recovery
      investment funds over 10 years, the investment income received equal to 1.2% of the remaining
      unpaid principal per annum. In addition to the fixed income, CADF will no longer enjoy other
      profits or bear the loss of R&D Centre .Therefore although the investment in R&D Centre,
      nominally equity investment, is actually a debt investment. The group take this investment as
      long-term payables, which measured in amortized cost. Refer to Note VI-48 for details of
      mortgaged and pledged assets.
    Long-term payables                                              Termination date     Due within 1 year           Due after 1 year            Mortgaged and pledged assets
             RMB             Yield rate          Investment date         of repayment               RMB                    RMB
          87,000,000           1.2%              12 January 2016       24 December 2025          10,000,000                 77,000,000 Cash and bank and intangible assets
         198,000,000           1.2%              29 February 2016       28 February 2026                 -                 198,000,000 Fixed assets and intangible assets
    ______
          20,000,000           1.2%              16 June 2016           22 May 2026         _______
                                                                                                  2,000,000           _______
                                                                                                                            18,000,000                     Cash and bank
    ______
         305,000,000                                                                        _______
                                                                                              12,000,000              _______
                                                                                                                        293,000,000
                                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
30. Other non-current liabilities
                                                                                                    Closing balance            Opening balance
                                                                                                         RMB                       RMB
       Employee benefit                                                                                   7,696,222
                                                                                                         _________                   4,047,476
                                                                                                                                    _________
     As at 31 December 2016, employee benefit represents deposit from bonus accrued for managers and
above. According to the bonus payment schedule of 2016, the bonus is expected to be paid during 2018
to 2020.
31. Share capital
                                                Opening balance                   Increase                    Decrease                Closing balance
                                                    RMB                            RMB                         RMB                         RMB
       Unrestricted shares
         A shares                                     453,460,800                    -                           -                         453,460,800
         B shares                                     232,003,200
                                                     _________                       -
                                                                                  ______                         -
                                                                                                              ______                       232,003,200
                                                                                                                                          _________
       Total of unrestricted shares
         and total shares                             685,464,000
                                                     _________                       -
                                                                                  ______                         -
                                                                                                              ______                       685,464,000
                                                                                                                                          _________
32. Capital reserve
                                                Opening balance                   Increase                    Decrease                Closing balance
                                                    RMB                            RMB                         RMB                         RMB
       Share premium                                 560,038,853                       -                            -                     560,038,853
       Other                                           5,916,588
                                                     _________                       -
                                                                                  ______                         -
                                                                                                              ______                        5,916,588
                                                                                                                                          _________
       Total                                          565,955,441
                                                     _________                       -
                                                                                  ______                         -
                                                                                                              ______                       565,955,441
                                                                                                                                          _________
33. Other comprehensive income
       2016                                                          Less: last year other                    Post-tax       Post-tax
                                                         Before-tax comprehensive income      Less:         attributable   attributable
                                     Opening balance      amount      in P/L current year  tax expense       to parent        to NCI         Closing balance
       Other comprehensive
         income to be reclassified
         to profit and loss           (10,442,512)        5,615,689           -                 -            5,183,498      432,191           (5,259,014)
       Foreign currency statement
         translation difference
                                        ____
                                      (10,442,512)
                                                         _____
                                                         5,615,689
                                                                           ____
                                                                             -
                                                                                            ____
                                                                                              -
                                                                                                            _____
                                                                                                            5,183,498
                                                                                                                            ____
                                                                                                                            432,191
                                                                                                                                               _____
                                                                                                                                              (5,259,014)
34. Surplus reserve
                                                Opening balance                   Increase                    Decrease                Closing balance
                                                    RMB                            RMB                         RMB                         RMB
       Statutory surplus reserve                      342,732,000
                                                     _________                       -
                                                                                  ______                         -
                                                                                                              ______                       342,732,000
                                                                                                                                          _________
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
     34. Surplus reserve - continued
       In accordance with the Company Law of the People's Republic of China and the Articles of
       Association of the Company, the Company is required to appropriate 10% of the net profit to the
       statutory surplus reserve until the accumulated balance of the statutory surplus reserve reaches
       50% of the registered share capital. The Company does not appropriate net profit to the surplus
       reserve in 2016.
       The Company can appropriate discretionary surplus reserve after appropriation of the statutory
       surplus reserve. Discretionary surplus reserve can be utilized to offset the deficit or increase the
       share capital after approval.
35. Retained earnings
                                                                     Closing balance          Opening balance
                                                                          RMB                     RMB
       Retained earnings brought forward                              5,980,390,074             5,251,920,374
       Profit attributable to shareholders of the Company               982,460,488             1,030,073,860
       Less: Dividends paid in respect prior year's profit            (342,732,000)
                                                                     ____________               (301,604,160)
                                                                                               ____________
       Retained earnings carried forward                              6,620,118,562
                                                                     ____________               5,980,390,074
                                                                                               ____________
(1) Appropriation to surplus reserve by subsidiaries
       As at 31 December 2016, the balance of the Group's unappropriated profits include appropriation
       to surplus reserve by subsidiaries amounting to RMB 71,360,640 (31 December 2015: RMB
       54,946,701).
(2) Cash dividends approved by general meeting
       According to the annual general meeting on 26 May 2016, dividends distribution plan has been
       made. On the basis of 685,464,000 issued share capital, RMB 5.0 (including taxes) for every 10
       shares was distributed to shareholders, in total RMB 342,732,000 cash dividends.
(3) Profit distribution decided after the balance sheet date
       According to a proposal of the board of directors approved on 20 April 2017, on the basis of
       685,464,000 issued shares in 2016, cash dividends of RMB 5.0 (including taxes) for every 10 share
       will be distributed to all the shareholders. The aggregate amount of cash dividend is RMB
       342,732,000. The above proposal regarding dividends distribution is yet to be approved in a
       shareholders' meeting.
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
36. Operating income and costs
       Operating income is analysed as follows:
                                                                           2016
                                                                           RMB                       RMB
       Principal operating income                                     4,646,909,704             4,589,025,348
       Other operating income                                            70,686,768
                                                                     ____________                  60,697,020
                                                                                               ____________
                                                                      4,717,596,472
                                                                     ____________               4,649,722,368
                                                                                               ____________
       Operating cost is analysed as follows:
                                                                           2016
                                                                           RMB                       RMB
       Principal operating cost                                       1,552,022,043             1,484,994,084
       Other operating cost                                              23,748,936
                                                                     ____________                  27,508,951
                                                                                               ____________
                                                                      1,575,770,979
                                                                     ____________               1,512,503,035
                                                                                               ____________
       The operating income for the Group is mainly from the sales of wine, brandy and sparkling wine.
       In 2016, Over 94% (2015: over 98%) of the sales generated in PRC.
37. Taxes and surcharges
                                                                           2016
                                                                           RMB                       RMB
       Consumption tax                                                 161,411,393               160,472,712
       Business Tax                                                      1,358,414                 3,613,680
       City construction tax                                            46,375,109                50,491,173
       Education fee and surcharges                                     33,975,886                36,625,254
       Property tax                                                      8,221,152                      -
       Land use tax                                                      9,146,595                      -
       stamp tax                                                         2,659,421                      -
       Others                                                            6,568,676
                                                                       __________                  6,810,705
                                                                                                 __________
                                                                       269,716,646
                                                                       __________                258,013,524
                                                                                                 __________
       For detail standards of tax rate please refer to Notes V.
                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
38. Selling expenses
                                                              2016
                                                              RMB                       RMB
       Advertising costs                                  536,552,061               547,276,390
       Salary and employee benefit                        258,845,366               237,132,890
       Freight                                            135,375,515               124,662,391
       Trademark fee                                       74,125,038                83,734,976
       Warehouse leasing expenses                          73,141,275                70,352,917
       Depreciation cost                                   29,477,270                18,866,370
       Labor fee                                           29,411,296                25,367,133
       Travelling expenses                                 27,589,397                25,946,093
       Renovation costs                                    25,292,999                19,140,522
       Water and electricity fee                            8,160,610                 5,344,561
       Office allowance                                     6,166,163                 6,794,673
       Packing cost                                         5,651,814                 5,090,563
       Security and sanitation fee                          4,244,698                 3,617,320
       Business entertainment                               3,871,778                 2,227,544
       Greening fee                                         3,651,567                 2,993,204
       Property management fee                              3,320,577                 4,487,152
       Others                                              28,383,244
                                                        ____________                 28,092,464
                                                                                  ____________
                                                         1,253,260,668
                                                        ____________               1,211,127,163
                                                                                  ____________
39. General and administrative expense
                                                              2016
                                                              RMB                       RMB
       Salary and employee benefit                         98,464,931                90,478,250
       Depreciation                                        45,605,723                38,123,017
       Contracting fee                                     20,635,049                19,144,698
       Maintenance fee                                     18,625,443                15,686,214
       Administrative expenses                             15,829,574                16,772,528
       Amortization                                        14,795,181                12,129,490
       Greening fee                                        11,509,618                15,154,393
       Fire charge                                         10,923,600                      -
       Leasing expenses                                    10,702,734                 9,190,948
       Property tax, stamp duty and other taxes            10,169,607                28,441,366
       Entertainment fee                                    7,253,858                 5,660,174
       Security and sanitation fee                          5,889,095                 6,573,075
       Service fee                                          5,194,426                14,878,018
       Travelling expenses                                  4,961,661                 5,018,296
       Others                                              29,223,048
                                                          __________                 36,717,942
                                                                                    __________
                                                          309,783,548
                                                          __________                313,968,409
                                                                                    __________
                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
40. Loss on impairment of assets
                                                                        2016
                                                                        RMB                       RMB
       Inventory impairment                                           3,279,266
                                                                      ________                2,823,115
                                                                                             _________
41. Financial income
                                                                        2016
                                                                        RMB                       RMB
       Interest income                                             (15,397,901)             (16,778,280)
       Exchange loss                                                  7,632,532                4,349,534
       Less: Interest expenses                                       27,831,179               21,957,762
             Bank charges                                              1,903,049
                                                                    __________                 1,758,669
                                                                                             __________
                                                                     21,968,859
                                                                    __________                11,287,685
                                                                                             __________
42. Non-operation income
                                                                                            Recognized in
                                                                                            extraordinary
                                                 2016                   2015                profit and loss
                                                 RMB                    RMB                     RMB
       Gains on disposal of non-current assets    157,846                192,945                  157,846
       Including: gain on disposal of plant
                    property and equipment        157,846               192,945                  157,846
       Government grants                       49,130,643            38,952,919               49,130,643
       Penalty income                           2,617,684             7,246,157                2,617,684
       Others                                   3,265,987
                                               _________              3,673,296
                                                                     _________                 3,265,987
                                                                                              _________
                                              55,172,160
                                              _________              50,065,317
                                                                     _________                55,172,160
                                                                                              _________
                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
42. Non-operation income - continued
      Government grants recognized in the income statement is as follows:
                                                                                            Assets/income
                                                2016                    2015                   related
                                                RMB                     RMB
      Major projects support fund              7,040,888              7,134,819              Assets related
      Small and medium enterprises
    support fund                           4,138,304              4,107,054              Assets related
      Tax refund                              17,860,500             17,833,465             Income related
      Others                                  20,090,951
                                              _________               9,877,581
                                                                     _________              Income related
                                              49,130,643
                                              _________              38,952,919
                                                                     _________
43. Non-operation expenses
                                                                                            Recognized in
                                                                                            extraordinary
                                                2016                    2015                profit and loss
                                                RMB                     RMB                     RMB
      Loss on disposal of non-current assets      143,127                 56,884                  143,127
       Including: losses from disposal
                               of fixed assets    143,127                56,884                  143,127
      Compensation and penalty loss               618,190             1,102,893                  618,190
      Donation                                    305,080               288,009                  305,080
      Others                                      303,429
                                               _________                457,103
                                                                     _________                   303,429
                                                                                              _________
                                               1,369,826
                                              _________               1,904,889
                                                                     _________                 1,369,826
                                                                                              _________
44. Income tax
                                                                        2016
                                                                        RMB                       RMB
      Current income tax                                            360,001,766              407,380,757
      Deferred income tax                                            (2,972,320)
                                                                    __________               (49,496,522)
                                                                                             __________
                                                                    357,029,446
                                                                    __________                357,884,235
                                                                                              __________
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued
44. Income tax - continued
       Reconciliation between income tax expenses and profits is as follows:
                                                                           2016
                                                                           RMB                       RMB
       Profit before tax                                              1,337,618,840             1,388,159,865
       Income tax expense at statutory tax rate 25% (2015:25%)          334,404,710               347,039,966
       Effect of different tax rates applied by certain subsidiaries     (4,829,468)               (3,509,042)
       Special tax incentives for oversea subsidiaries                   (2,520,771)                      -
       Changes in opening balances of deferred tax
       liabilities due to tax rate adjustment                            (1,992,564)                    -
       Unrecognised deductable loss                                       20,671,303              10,422,513
       Reversal of recognized deductible losses                            2,895,497                    -
       Non-deductible expenses                                             6,892,488               3,930,798
       Others                                                              1,508,251
                                                                     ____________                       -
                                                                                               ____________
       Income tax expenses at the Group's effective tax rate           357,029,446
                                                                     ____________                357,884,235
                                                                                               ____________
45. Basic and dilutive earnings per share
       The calculation of basic earnings per share is based on the consolidated profit attributable to
       ordinary shareholders of the Company during the year and the weighted average number of
       outstanding ordinary shares.
                                                                           2016
                                                                           RMB                       RMB
       Earnings
         Consolidated profit attributable to ordinary
           shareholders of the Company                                 982,460,488
                                                                     ____________               1,030,073,860
                                                                                               ____________
       Shares
         Weighted average number of outstanding
           ordinary shares                                             685,464,000
                                                                     ____________                685,464,000
                                                                                               ____________
       Basic earnings per share                                               1.43
                                                                     ____________                       1.50
                                                                                               ____________
       The Company does not have potential dilutive ordinary shares.
       From the balance sheet date to the date of approval of this report, there are no subsequent events
       which would affect the numbers of the weighted average number of outstanding of ordinary
       shares.
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
46. Notes to consolidated cash flow statement
(1)    Cash received relating to other operating activities:
                                                                           2016
                                                                           RMB                       RMB
       Government grants                                                19,347,985                9,774,028
       Interest income                                                   2,808,735                1,679,535
       Penalty income                                                    2,617,684                7,246,157
       Refundable deposits of notes payable                             38,130,000                     -
       Others                                                            3,803,461
                                                                        _________                 3,673,296
                                                                                                 _________
                                                                        66,707,865
                                                                        _________                22,373,016
                                                                                                 _________
(2)    Cash paid relating to other operating activities:
                                                                           2016
                                                                           RMB                       RMB
       Selling expenses                                                942,936,949               949,202,920
       General and administrative expenses                             113,297,901               110,003,182
       Refundable deposits of notes payable                             47,030,000                20,000,000
       Others                                                            2,449,673
                                                                     ____________                  4,181,035
                                                                                               ____________
                                                                      1,105,714,523
                                                                     ____________               1,083,387,137
                                                                                               ____________
(3)    Cash paid for the purchase subsidiaries and other equity:
                                                                           2016
                                                                           RMB                       RMB
       Cash paid for acquisition of Dicot                                        -               190,148,125
       Less: cash and cash equivalents for Dicot
                    at acquisition date                                       -                    4,902,074
       Prepaid investment fund for Mirefleurs                          3,540,923                  22,622,355
       Less: cash and cash equivalents for Mirefleurs
                    at acquisition date                                    1,779
                                                                       __________                      -
                                                                                                 __________
                                                                       3,539,144
                                                                       __________                207,868,406
                                                                                                 __________
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
46. Notes to consolidated cash flow statement – continued
(4)    Cash received relating to other financing activities:
                                                                           2016
                                                                           RMB                       RMB
       Pledged borrowing deposits and interest                         135,584,347                       -
       Received government grants related to assets                     43,783,000                  4,000,000
       Interest income from restricted deposits of
       R&D Centre                                                        1,110,240
                                                                       __________                      -
                                                                                                 __________
                                                                       180,477,587
                                                                       __________                  4,000,000
                                                                                                 __________
(5)    Cash paid relating to other financing activities:
                                                                           2016
                                                                           RMB                       RMB
       Time deposits pledged of long-term borrowings of
       R&D Centre                                                       20,000,000                26,100,000
       Canada Oros investment fund return                                     -
                                                                       __________                  2,050,000
                                                                                                 __________
                                                                        20,000,000
                                                                       __________                 28,150,000
                                                                                                 __________
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
47. Supplementary information to consolidated cash flow statement
(1)    Supplementary information to consolidated cash flow statement
                                                                          2016
                                                                          RMB                       RMB
       Cash flows from operating activities
    calculated by adjusting the net profit:
          Net profit                                                   980,589,394             1,030,275,630
          Add: Loss for impairment of assets                             3,279,266                 2,823,115
              Depreciation of fixed assets                             197,779,010               163,322,504
              Amortization of intangible assets                         18,955,762                13,163,757
              Amortization of Biological assets                          6,251,910                 1,708,554
              Amortization of long-term prepaid expenses                41,685,937                32,050,283
              Gains on disposal of property
                 plant and equipment                                       (14,719)                 (136,061)
              Finance expense                                            25,919,561                 6,516,142
              Decrease/ (increase) in deferred tax assets                 6,469,619             (48,219,833)
              Decrease in deferred tax liabilities                      (9,441,939)               (1,276,689)
              Decrease in inventories                                    18,897,985                 3,921,192
              Increase in operating receivables                      (737,321,198)             (175,316,875)
              Increase in operating payables                           336,861,382
                                                                    ____________                 114,214,648
                                                                                              ____________
       Net cash flows from operating activities                       889,911,970
                                                                    ____________               1,143,046,367
                                                                                              ____________
(2) Significant investing and financing activities not involving cash receipts and payments.
                                                                    Closing balance          Opening balance
                                                                         RMB                     RMB
       Payment of intangible assets and other
       long-term assets by bank acceptances                           503,817,808
                                                                    ____________                158,702,666
                                                                                              ____________
(3)    Cash and cash equivalent
                                                                    Closing balance          Opening balance
                                                                         RMB                     RMB
       Closing balance of cash and bank                              1,391,517,607             1,285,362,414
       Less:
         Restricted bank deposits                                       2,711,926                 2,643,181
         Restricted other monetary funds                              128,863,377               181,477,572
         Deposit with a period of over three months                     3,000,000
                                                                    ____________                  9,000,000
                                                                                              ____________
       Closing balance of cash and cash equivalents                  1,256,942,304
                                                                    ____________               1,092,241,661
                                                                                              ____________
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
47.    Supplementary information to consolidated cash flow statement - continued
(3)    Cash and cash equivalent - continued
                                                                 Closing balance          Opening balance
                                                                      RMB                     RMB
       Cash                                                      1,256,942,304            1,092,241,661
       Including: Cash on hand                                         117,507                  179,488
                            Bank deposits on demand              1,256,824,797
                                                                  ___________             1,092,062,173
                                                                                            __________
       Closing balance of cash and cash equivalents              1,256,942,304
                                                                  ___________             1,092,241,661
                                                                                            __________
48. Assets with restriction of ownership
                                                                 Closing balance          Opening balance
                                                                      RMB                     RMB
       Cash and bank                                               131,575,303               184,120,753
       Account receivable                                           30,732,944                23,880,775
       Fixed assets                                                 68,658,094                18,405,000
       Intangible assets                                           145,937,719
                                                                   __________                       -
                                                                                             __________
       As at 31 December 2016, cash and bank balances with restriction of ownership as follows:
                                                                 Closing balance          Opening balance
                                                                      RMB                     RMB
       Pledged time deposits for R&D Centre                         46,100,000               151,100,000
       Refundable deposits of notes payable                         38,900,000                30,000,000
       Refundable deposits of letter of credit                      25,694,735                   370,000
       Balance in Alipay account                                    18,118,441                      -
       The Company’s housing fund                                   2,711,926                 2,643,181
       Margin for entity card                                           50,201
                                                                  ___________                      7,572
                                                                                             __________
       Total                                                       131,575,303
                                                                  ___________                184,120,753
                                                                                             __________
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
48.     Assets with restriction of ownership - continued
    Among the aforementioned items, the amount of RMB 18,118,441 which is the blocked balances
    of goods payment in Alipay account can be unlocked after 15 days.
    As at 31 December 2016, the amount of accounts receivable with restricted ownership is EUR
    4,206,074 (translated as RMB 30,732,944) , which refers to       accounts receivable Atrio
    conducted for factoring from Banco de Sabadell, S.A. etc.
    As at 31 December 2016, the net carrying amount of fixed assets that the Company has pledged
    for long-term borrowings and long-term accounts payables is RMB 68,658,094.
    As at 31 December 2016, the net carrying amount of intangible assets with restricted ownership is
    RMB 145,937,719, which mainly refers to the land use rights that Company has pledged for
    long-term borrowings.
45. Foreign monetary items
(1) Foreign monetary items
      The foreign monetary items located within China are as follows:
                                               Closing foreign          Exchange            Closing translated
                                              currency balance            rate                RMB balance
    Cash and bank
         EUR                                         77,487               7.3068                    566,182
         HKD                                            215               0.8945
                                                __________               ______                 __________
    Long-term borrowings due within one year
          EUR                                    4,000,000
                                              __________                  7.3068
                                                                         ______                  29,227,200
                                                                                                __________
(2) Overseas business entities
    The Company’s overseas subsidiaries determine bookkeeping currency based on the primary
    economic environment. The bookkeeping base currency of Atrio and Francs Champs
    Participations SAS (“Francs Champs”) are all in Euro, and Atrio and Francs Champs have no
    foreign monetary items at the year end.
                                                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VII.     CHANGE IN CONSOLIDATION SCOPE
1.     Business combination under different control
(1)      Business combination under different control in current period
           Name of         Equity                             Equity            Equity                                          Revenue from      Net profit from
                                           Equity                                           Acquisition       Basis of
          acquisition    acquisition                      acquisition ratio   acquisition                                      acquisition date   acquisition date
                                       acquisition cost                                        date        acquisition date
           company          date                                (%)             method                                           to year end        to year end
                                                                                                           Finish payment
          Mirefleurs    1 Jan 2016     EUR 3,816,000            100           Purchase      1 Jan 2016                         RMB 8,016,542       RMB 807,079
                                                                                                          and acquire equity
          Other detail information:
          Pursuant to the Equity Transfer Agreement entered into between the Group and Vignobles et
          Domaines Castel S.L (\"VDC S.L.\") on 12 May 2015, the Group acquired 100% shares held by
          VDC S.L in Mirefleurs by cash consideration of EUR 3,816,000 (equivalent to RMB 26,163,278).
          As at 31 December 2015, the Company satisfied the prerequisite for the entire equity transfer. As
          at 1 January 2016, the Company obtained the control over the financial and operating policies of
          Mirefleurs through allocation of directors based on the Articles of Association of the Company.
          The Company invested EUR 3,330,000 (equivalent to RMB22,622,355) for the advanced
          payment on 24 November 2015 and EUR 486,000 (equivalent to RMB3,540,923) for the
          remaining payment in December 2016.
(2) Consideration and Goodwill
          Consideration
                                                                                                                                          Mirefleurs
                                                                                                                                           RMB
          Cash                                                                                                                           26,163,278
          Total consideration                                                                                                            26,163,278
          Less: acquired provisional value of net assets                                                                                 10,401,838
                                                                                                                                        __________
          Goodwill                                                                                                                       15,761,440
                                                                                                                                        __________
                                                                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VII.      CHANGE IN CONSOLIDATION SCOPE - continued
1.        Business combination under different control - continued
(3) Recognised assets and liabilities of mergee at acquisition date
                                                                                                                                               Mirefleurs
                                                                                                                                  Fair value        Book value
                                                                                                                                at acquisition date at acquisition
          date
                                                                                                                                             RMB                            RMB
          Assets
          Cash and bank                                                                                                               1,779                                1,779
          Accounts receivable                                                                                                         3,555                                3,555
          Other receivables                                                                                                          62,151                               62,151
          Inventories                                                                                                             9,934,027                            9,934,027
          Other current assets                                                                                                    1,191,401                            1,191,401
          Fixed assets                                                                                                            8,049,900                            8,049,900
          Biological assets                                                                                                       1,769,888                            1,769,888
          Intangible assets                                                                                                           2,488
                                                                                                                              ____________                                 2,488
                                                                                                                                                                   ____________
          Total assets                                                                                                           21,015,189
                                                                                                                              ____________                            21,015,189
                                                                                                                                                                   ____________
          Liabilities
          Accounts payable                                                                                                          911,071                              911,071
          Other payables                                                                                                          9,378,334                            9,378,334
          Employee compensation payable                                                                                             323,946
                                                                                                                              ____________                               323,946
                                                                                                                                                                   ____________
          Total liabilities                                                                                                      10,613,351
                                                                                                                              ____________                            10,613,351
                                                                                                                                                                   ____________
          Net assets                                                                                                             10,401,838                           10,401,838
          Less:Non-controlling interests                                                                                              -
                                                                                                                              ____________                                  -
                                                                                                                                                                   ____________
          Acquired net assets                                                                                                    10,401,838
                                                                                                                              ____________                            10,401,838
                                                                                                                                                                   ____________
2.     Change in consolidation scope due to other reasons (new established subsidiaries)
          Name                                      Place and date of registration   Legal representative   Business nature    Registered capital   Principal activities       Incorporate code
          Guangzhou Changyu Pioneer                 22 July 2015                      Wang, Hongshan            Sales          RMB 10,000,000       Wholesale trade        91440105347476120M
            Sales Co. Ltd (“Lanzhou Pioneer”) *   Guangzhou Guangdong, China
          *             As at 31 December 2015, these subsidiaries had completed registration but paid share
                        capital in 2016, therefore they are included in the consolidation scope of the Group in
                        2016.
                                                                                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2016 Annual Report
VIII. INTERESTS IN OTHER ENTITIES
1.   Structure of the Group
                                                                                                                                              Equity interest owned
                                                                                                                                                by the company
                            Name                                   Address                    Place of registration             Nature        Direct        Indirect              Acquisition method
     Xinjiang Tianzhu (a)                                   Shihezi, Xinjiang, China        Shihezi, Xinjiang, China        Manufacturing      60%             -       Subsidiary acquired in business combination
                                                                                                                                                                               under non-common control
     Fransac Sales                                              Cognac, France                  Cognac, France                 Trading           -           100%      Subsidiary acquired in business combination
                                                                                                                                                                               under non-common control
     Mirefleurs                                                Bordeaux, France                Bordeaux, France                Trading                       100%      Subsidiary acquired in business combination
                                                                                                                                                                               under non-common control
     Atrio (b)                                                  Navarra, Spain                  Navarra, Spain                  Sales          75%                     Subsidiary acquired in business combination
                                                                                                                                                                               under non-common control
     Beijing Changyu Sales and distribution Co., Ltd            Beijing, China                  Beijing, China                  Sales         100%             -         Subsidiaries acquired by establishment
     (\"Beijing Sales\")
     Yantai Kylin Packaging Co., Ltd.                      Yantai, Shandong, China         Yantai, Shandong, China          Manufacturing     100%             -         Subsidiaries acquired by establishment
     (\"Kylin Packaging\")
     Yantai Changyu-Castel Wine Chateau Co., Ltd           Yantai, Shandong, China         Yantai, Shandong, China          Manufacturing      70%             -         Subsidiaries acquired by establishment
     (\"Changyu Chateau\") (c)
     Changyu (Jingyang) Wine Co., Ltd.                     Xianyang, Shanxi, China         Xianyang, Shanxi, China          Manufacturing      90%           10%         Subsidiaries acquired by establishment
     (\"Jingyang Wine\")
     Yantai Changyu Pioneer Wine Sales Co., Ltd.           Yantai, Shandong, China         Yantai, Shandong, China              Sales         100%             -         Subsidiaries acquired by establishment
     (\"Sales Company\")
     Langfang Development Zone Castel-Changyu Wine           Lanfang, Hebei, China           Lanfang, Hebei, China          Manufacturing      39%           10%         Subsidiaries acquired by establishment
     Co., Ltd (\"Langfang Castel\") (d)
     Changyu (Jingyang) Wine Sales Co., Ltd.               Xianyang, Shanxi, China         Xianyang, Shanxi, China              Sales          10%           90%         Subsidiaries acquired by establishment
     (\"Jingyang Sales”)
     Langfang Changyu Pioneer Wine Sales Co., Ltd            Lanfang, Hebei, China           Lanfang, Hebei, China              Sales          10%           90%         Subsidiaries acquired by establishment
     (\"Langfang Sales\")
     Shanghai Changyu Sales and distribution Co.,              Shanghai, China                 Shanghai, China                  Sales          30%           70%         Subsidiaries acquired by establishment
     Ltd. (\"Shanghai Sales\")
     Beijing Changyu AFIP Agriculture development            Miyun, Beijing, China           Miyun, Beijing, China              Sales            -           100%        Subsidiaries acquired by establishment
     Co., Ltd (\"Agriculture Development\")
     Beijing Chateau (e)                                       Beijing, China                  Beijing, China               Manufacturing      70%             -         Subsidiaries acquired by establishment
     Yantai (\"Beijing Chateau\") Changyu Wine Sales         Yantai, Shandong, China         Yantai, Shandong, China             Sales           90%           10%         Subsidiaries acquired by establishment
     Co., Ltd. (\"Wines Sales\")
     Yantai Changyu Pioneer International Co., Ltd.        Yantai, Shandong, China         Yantai, Shandong, China              Sales          70%           30%         Subsidiaries acquired by establishment
     (\"Pioneer International\")
     Hangzhou Changyu Wine Sales Co., Ltd.                Hangzhou, Zhejiang, China       Hangzhou, Zhejiang, China             Sales            -           100%        Subsidiaries acquired by establishment
     (\"Hangzhou Changyu\")
     Ningxia Growing                                      Yinchuang, Ningxia, China       Yinchuang, Ningxia, China            Planting       100%             -         Subsidiaries acquired by establishment
     Huanren Changyu National Wines Sales Co., Ltd.        Benxi, Liaoning, China          Benxi, Liaoning, China               Sales         100%             -         Subsidiaries acquired by establishment
     (\"National Wines\")
     Liaoning Changyu Ice Wine Chateau Co., Ltd.            Benxi, Liaoning, China          Benxi, Liaoning, China          Manufacturing      51%             -         Subsidiaries acquired by establishment
     (\"Ice Chateau\") (f)
     Yantai Development Zone Changyu Trading Co.,          Yantai, Shandong, China         Yantai, Shandong, China              Sales            -           100%        Subsidiaries acquired by establishment
     Ltd (\"Development Zone Trading\")
     Shenzhen Changyu Wine Marketing Ltd.                Shenzhen, Guangdong, China      Shenzhen, Guangdong, China             Sales            -           100%        Subsidiaries acquired by establishment
     (\"Shenzhen Marketing\")
     Yantai Changyu Fushan Trading                         Yantai, Shandong, China         Yantai, Shandong, China              Sales            -           100%        Subsidiaries acquired by establishment
     Company(\"Fushan Trading\")
     Beijing AFIP Meeting Center (\"Meeting Center\")          Miyun, Beijing, China           Miyun, Beijing, China             Service           -           100%        Subsidiaries acquired by establishment
     Beijing AFIP Tourism and Culture (“AFIP                Miyun, Beijing, China           Miyun, Beijing, China             Tourism           -           100%        Subsidiaries acquired by establishment
     Tourism\")
     Ni ngxi a Wi ne Co.L t d. (\"Ni ngx ia Wi ne \").       Yinchuan, Ningxia, China        Yinchuan, Ningxia, China         Manufacturing     100%             -         Subsidiaries acquired by establishment
     Yantai Changyu DingLuoTe Chateau.                     Yantai, Shandong China          Yantai, Shandong China            Retail and        65%           35%         Subsidiaries acquired by establishment
     (\"Ding Luo Te Chateau\")                                                                                                   Sales
     Qing Tong Xia Changyu Wine Marketing                Qing Tong Xia, Ningxia, China   Qing Tong Xia, Ningxia, China         Sales             -           100%        Subsidiaries acquired by establishment
     Ltd(\"Qing Tong Xia Sales\")
     Shihezi Chateau                                       Shihezi, Xinjiang, China        Shihezi, Xinjiang, China         Manufacturing     100%             -         Subsidiaries acquired by establishment
     Ningxia Moser 15th Changyu Wine Chateau Co.,          Yinchuan, Ningxia, China        Yinchuan, Ningxia, China         Manufacturing     100%             -         Subsidiaries acquired by establishment
     Ltd. (\" Ningxia Chateau\")
     Shanxi Changyu Rina Castle Chateau Co., Ltd.          Xianyang, Shanxi, C

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