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张裕B:2017年年度报告(英文版) 下载公告
公告日期:2018-04-23
Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Yantai Changyu Pioneer Wine Co. Ltd.
         2017 Annual Report
              Final 2018-01
             April, 2018
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                                         Contents
I、Important Notice,Contents and Definition ............................................................................. 4
II、Brief Introduction for the Company and Main Financial Indicators .................................. 5
III、Summary of the Company’s Businesses .............................................................................. 10
IV、Management Discussion and Analysis ................................................................................. 14
V、Major issues ............................................................................................................................. 34
VI、Changes in Shares and the Shareholders’ Situation .......................................................... 48
VII、Related Situation of Preferred Shares ............................................................................... 57
VIII、Situation for Directors, Supervisors, Senior Management and Staffs ............................ 58
IX、Corporate Governance .......................................................................................................... 71
X、Related Situation of Corporation Bonds ............................................................................... 81
XI、Financial Report ...................................................................................................................... 82
XII、Reference Document .......................................................................................................... 198
                                  Yantai Changyu Pioneer Wine Co. Ltd. 2017 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
                                            Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
               I. Important Notice, Content 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. Zhou Hongjiang (Chairman of the Company), Mr. Jiang Jianxun (Chief Financial Officer
& Financial Director) assure the truthfulness, accuracy and completeness of the financial
report in the annual report.
Except the following directors, all other directors have personally attended the meeting for
deliberating the annual report.
                                                            Reason for
    Director name with         Director post with                                    Name of
                                                          non-present in
   non-present in person      non-present in person                                 mandatory
                                                              person
Sun Liqiang                   Director                  Business trip            Zhou Hongjiang
Antonio Appignani             Director                  Business trip            Augusto Reina
Wang Shigang                  Independent director      Business trip            Wang Zhuquan
The business plan and target in the report do not represent the earnings forecast of the
Company to 2018. 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.
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 Companys Future Development”
in the chapter four “Management Discussion and Analysis” of this report. We advise
investors to read carefully and pay attention to the investment risks.
The Companys 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. 2017 Annual Report
II. Brief Introduction for the Company and Main Financial Indicators
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
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 name      张裕
Legal Name in English             YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
Abbreviation of English name      CHANGYU
Legal Representative              Mr. Zhou Hongjiang
Registered Address                56 Dama Road, Yantai, Shandong, China
Postal Code
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 Hong
Companys information is disclosed 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
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
4. Registration changes
Organization Code        913700002671000358
                         The business scope determined by the Company when it was
                         established on September 18th, 1997 is production, processing and
                         sales of wine, distilled liquor, healthy liquor, fruit liquor, non-alcohol
                         beverages, fruit jam, packing materials and winemaking machines.
                         On April 17th, 2008, approved by the 2007 shareholders meeting, the
                         Companys business scope is changed to 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 May 12th, 2010, approved
Changes for the main by the 2009 shareholders meeting, the Company changed its business
                         scope to production, processing and sales of wine, distilled liquor,
business of the Company medicated liquor, fruit liquor, non-alcohol beverages, fruit jam,
since it was listed      packing materials and its products, winemaking machines; licensed
                         import and export; external investments according to governmental
(if have)                policies. On September 23rd, 2016, approved by the 2016 annual 1st
                         Interim shareholders meeting, the Company changed its operating
                         scope to wine and fruit wine (bulk wine, processing and filling)
                         production; blending liquor and other blending liquors (grape 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 needs to retrospectively adjust or restate the accounting data of
previous fiscal years.
□Yes   No
                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                                                       More or less than
                                      2017                  2016
                                                                        Last year (%)
Business revenue (CNY)               4,932,545,229       4,717,596,472            4.56%                  4,649,722,368
Net profit attributed to the
shareholders of the listed           1,031,695,056          982,460,488                  5.01%           1,030,073,860
company (CNY)
Net profit attributed to the
shareholders of the listed
company after deducting               986,095,872           941,730,478                  4.71%             993,268,823
the irregular profit and loss
(CNY)
Net cash flows from the
                                      973,243,027           889,911,970                  9.36%           1,143,046,367
operating activities (CNY)
Basic earnings per share
                                              1.51                  1.43                 5.59%                       1.5
(CNY)
Diluted earnings per share
                                              1.51                  1.43                 5.59%                       1.5
(CNY)
Weighted average for
earning rate of net assets                 12.14%               12.55%                  -0.41%                    14.40%
(CNY)
                                                                            More or less than
                                December 31st, 2017 December 31st, 2016                           December 31st, 2015
                                                                             Last year (%)
Total assets (CNY)                 12,536,755,208       11,528,077,971                   8.75%         10,344,211,461
Net Assets attributed to the
shareholders of the listed           8,906,342,299       8,209,010,989                   8.49%           7,564,099,003
company (CNY)
       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
       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
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
     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
                                 st                 nd                    rd
                                1 Quarter          2 Quarter             3 Quarter            4th Quarter
   Business revenue             1,896,586,469       870,511,728          1,030,899,920        1,134,547,112
   Net profit attributed to
   the shareholders of the         516,634,494         153,434,560        146,115,408      215,510,594
   listed company
   Net profit attributed to
   the shareholders of the
   listed company after            512,684,945         140,221,430        138,825,432      194,364,065
   deducting irregular
   profits and losses
   Net cash flows from             384,358,508           36,001,811       386,267,511      166,615,197
   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
     Available □Not available
                                                                                              Unit:CNY
                     Item                         2017           2016              2015          Explanation
Profits and losses on disposal of
non-current assets, including the provision     -222,586            14,719           136,061
for asset impairment write-off part
Government grants included in the current
profits and losses (except for those
recurring government grants that are
                                               47,638,384      49,130,643        38,952,919
closely related to the entity's operation, in
line with related regulations and have
proper basis of calculation)
Other non-operating income and
non-operating expenses except the              13,999,251        4,656,972        9,071,448
aforementioned items
Less: Income tax effect                       13,072,324       13,072,324 11,355,391
      Minority shareholders' equity (after
      taxes)
Total                                          45,599,184      40,730,010 36,805,037                    --
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
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 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. 2017 Annual Report
                                          III. Summary of the Company’s Businesses
1. Main businesses during the report period
Whether the Company needs to follow the disclosure requirement of special business
No.
During the report period, the Companys 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
Companys 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 during the report period
                                 The fixed assets increased by13.79% compared with the initial stage, owing that parts of construction in
          Fixed asset
                                 process have been transferred to fixed asset during the report period.
                                 The intangible assets increased by 35.48% compared with the initial stage, owing that Via Indómita, S.A.,
    Intangible asset         Via Dos Andes, S.A. and Bodegas Santa Alicia SpA purchased by the Companys subsidiary Indomita Wine
                                 Company Chile, SpA have been included in the consolidation range during the report period.
                                 The construction in process decreased by 23.78% compared with the initial stage, owing to parts of
    Construction in process
                                 construction have been transferred to fixed asset during the report period.
                                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
       (2) Main overseas assets situation
       Available       □Not available
                                                                                                                                            Unit:CNY
                                                                                   Control                       Proportion of
                                                                                                                                            Whether there are
                     Formation                                  Operation        measures for     Earning      overseas assets in
Details of assets                    Assets scale   Location                                                                             significant impairment
                      reasons                                    mode          safeguarding of   condition    the Companys net
                                                                                                                                                  risks
                                                                                asset security                      assets
                                                                                The Company
                                                                                participates in
                                                                                   making
 Hacienda Y                                                                       important
  Vinedos           Acquisition of                             Independent        decisions
                                     515,135,463     Spain                                       7,701,416                    5.61%                  No
 Marques Del           equity                                    operation    through board of
  Atrio. SL                                                                     directors and
                                                                                appoints CFO
                                                                                 on financial
                                                                                 management
                                                                                The Company
                                                                                participates in
                                                                                   making
Indomita Wine                                                                     important
                    Founding of                                Independent
Company Chile,                       481,333,962     Chile                        decisions     31,458,952                    5.24%                  No
                    joint venture                                operation
    SpA                                                                       through board of
                                                                                directors and
                                                                                appoints CFO
                                                                                 on financial
                                                                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                                                                  management
                                                                                The Company
Francs Champs        Founding of                                               directly appoints
                                                               Independent
Participations           sole        232.909,654   France                            senior        -4,142,035                     2.54%                  No
                                                                 operation
SAS                 proprietorship                                              executives on
                                                                                 management
Other explanation                    No.
       3. Analysis of core competitiveness
       Whether the Company needs 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
       companys 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 Companys 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
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
and has possessed comparative superiority in the future competition.
Sixthly, the Company has a relatively respect motivation system. Most of Companys
employees indirectly hold the Companys equity through controlling shareholders. There are
high consistency between employee benefits and shareholders benefits, in favor of motivating
employees to create value for shareholders.
Seventhly, the Company has set up flexible and efficient decision-making mechanism. The
Companys core management team always maintains a working style of unity and
cooperation and flexible and efficient decision-making mechanism, which makes the
Company can deal with market changes more calmly.
Eighthly, the global production capacity layout has been basically completed. The Company
has completed production capacity layout in China, France, Chile, Spain, Australia and other
major wine producing countries in the world, enabling making better use of global
high-quality raw material resources, capital, talents and advanced production processes and
technologies to provide consumers with diversified quality products and better serve
consumers.
All in all, the Company has built up a strong core competitive edge and obtained and
maintained a relatively dominant position in the future predictable market competition.
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                    IV. Management Discussion and Analysis
1. Summarization
In 2017, influenced by the slowdown of domestic economic growth, the overall domestic
wine industry was relatively stable and the demand in wine maintained the growth
momentum with small amplitude, but the impact from imported wine became ever more
severe and entire domestic wine brands were weak; owing to significant decrease in
production of international and domestic wine-making grapes, the price of bulk wine
increased by a large margin; based on environmental protection and governance factors, the
cost of packing materials continued increasing; with the investment projects gradually
putting into operation, the depreciation of fixed assets increased. Above-mentioned adverse
factors brought bigger challenges for the Company to achieve sustained and steady growth.
Facing quite a lot of external disadvantages, the Company insisted in taking the market as the
center, insisted the development strategy of “Focus on middle-and-high level, Focus on high
quality, Focus on big product”, comprehensively implemented the development strategy of
same importance between wine and brandy, optimized product structure and market layout,
accelerated the development of new product and did best to promote product sales, achieving
good results and realizing business income of CNY4932.55million with an increase of 4.56%
compared with last year and net profit of CNY1031.69 million belonging to the parent
companys shareholders with an increase of 5.01% compared with last year.
2. Analysis of main business
(1) summarization
Whether or not the same as the disclosed summarization in operation situation discussion and
analysis?
□Available Not available
                           Increase or decrease
                           of the end of the
Description                                     Cause of significant changes
                           period over the end
                           of last year
Operating revenue          4.56%                   Mainly because of increase in sales volume
Operating cost             6.08%                   Mainly because of increase in sales volume
                                                   Mainly because of year-on-year increase in
Sales expense              1.54%                   wage & welfare, advertising promotion fee in
                                                   Mainly because of year-on-year increase in
Management expense         10.01%
                                                   depreciation cost and office expense in 2017
                                                   Mainly because of increase in expenses for
R&D investment             0.34%
                                                   technology research and development in
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                                    Mainly because of decrease in loan interest
Financial expense           -15.38%
                                                    expenditure
Net amount of cash flow
                                                    Mainly because of increase in received cash
generated in operating 9.36%
                                                    from product sales and rendering of service
activities
Net amount of cash flow                             Mainly because of increase in fixed term
generated in investment -19.31%                     deposit at least three months and cash used to
activities                                          acquire overseas enterprise
Net amount of cash flow                             Mainly because of decrease in received cash
generated in capital-raising -494.03%               from loan, pledge loan security deposit and
activities                                          interest
Review and summary of the process of the Companys early-disclosed development strategy
and business plan during the report period
During the report period, the Company realizes the business income of CNY4.93255billion
with an increase of 4.56% compared with last year, exceeding the target fixed at the
beginning of the year of realizing business income no less than CNY4.9billion. Facing to the
unfavorable business environment, the Company insists the development trend of “Focus on
middle and high level, Focus on high quality, Focus on big product”, fully implement the
development strategy of same importance between wine and brandy, pushes hard on
harmonious development of multi-liquor, which played an important part in realizing the
increase in the business income.
The main work during the report period is shown as followed:
Firstly, the Company further integrated and perfected marketing system, accelerated new
products launch in market, energetically developed E-business and export business and
strengthened the management in market, achieving good results. During the report period, the
Company optimized and integrated middle-and-low channel and B-category supermarket
semi-direct supply company as well as distributors selling Castel, Noble Dragon or other
main products, pushed out new products, such as 9th-generation Noble Dragon, new
Zuishixian, Reserve five-star brandy and Cabernet Sauvignon dry white wine and so on,
strived to expand E-business and export business and intensified the punishment to fleeing
goods, effectively protecting distributors interest and realizing various degrees of increase in
brandy, imported wine and other liquor as well as online sales and export business.
Secondly, 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 carried out 44 technology research, obtained 3 scientific and
technological achievements at ministerial and provincial level, newly applied and obtained
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
authorization of 8 national patent. The Company undertook three projects about Yantai
scientific and technological development plan, including “Selection Research and
Development Application of New Strain about Premium and Characteristic Grape Variety
Cabernet Gernischt in Yantai Producing Region”, which passed result authentication and
acceptance       of    China      National  Light    Industry     Council and     Yantai
Science and Technology Bureau and reached international advanced level. “Establishment
and Application of Quality Evaluation and Control System about Premium Wine-making
Grape Material and Wine” won first prize of China General Chamber of Commerce
scientific and technological progress. The Company perfected quality control system,
strengthened supervision, inspection and punishment degree, reinforced monitoring in key
quality safety indicators, making product quality steadily improve. 2015 Golden-label
Icewine of Changyu Golden Icewine Valley won special gold medal in 2017 IWSC. 2014
Merlot dry red wine of Xinjiang Changyu Balboa Family won gold medal in 2017 Decanter
Asia Wine Awards.
Thirdly, informatization construction was steadily promoted and the market service ability of
production system had a bigger improvement. The Company completed the construction of
projects, such as first-phase ERP informatization of SAP and order production system of
chateau wine and so on; fully implement the order production mode of chateau wine, shortened
production cycle, reduced fund occupation and intensified management in the logistics link of
chateau wine, effectively preventing the overstock of products; further standardized
submission procedure of production and sales plan, assuring the timely grasp in the
implementation situation of order and improving the level of market service ability of
production system.
Fourthly, the procurement of raw materials, such as grapes, was completed successfully and
the management in grape base was further strengthened. The Company comprehensively
accomplished the procurement plan of raw material, such as grapes, and further deepened
sort management and sort acquisition in grape base, making scientific and normative
management in grape base reach a higher level; perfected grape purchase policy, improving
the stable development of grape base; improved grape purchase standard and promoted raw
material quality; actively introduced new grape variety, conducted selection and improvement
work, cultivated a lot of new varieties, enriching the variety resource for future product
development; took series of technology research and promotion work on how to improve raw
material quality in self-supporting base and organized orchardist to take professional training
on grape planting technology for many times, improving their level of grape planting and
management.
Fifthly, the Company continued promoting internationalization strategy and steadily
implemented overseas acquisition. This company, together with LAMBO SpA, establishes a
joint venture enterprise Indomita Wine Company Chile, SpA (Chinese name: 智利魔狮葡萄
酒简式股份公司, for short “Indomita Wine”). After establishment, as transferee, Indomita
Wine acquires 100% equity of all three subsidiaries under Chile Bethwines. In addition, the
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Company reached the agreement in acquiring 80% equity of Kilikanoon Estate Pty Ltd in
Australia with transferor.
(2) Revenue and cost
 Composition of operating incomes
                                                                                          Unit: CNY
                           2017
                                  Proportion                           Proportion      Year-on-year
                                      in                                   in           increase or
                  Amount                             Amount
                                  operating                            operating       decrease (%)
                                   incomes                              incomes
    Total
  operation    4,932,545,229      100%          4,717,596,472          100%            4.56%
   revenue
Industry-classified
Industry of
liquor and
               4,932,545,229      100%          4,717,596,472                 100% 4.56%
alcoholic
beverage
Product-classified
Wine           3,829,326,556      77.63%        3,700,806,317          78.45%          3.47%
Brandy         989,889,728        20.07%        905,687,936            19.20%          9.30%
Others         113,328,945        2.30%         111,102,219            2.36%           2.00%
Area-classified
Domestic       4,497,288,066      91.18%        4,437,302,746          94.06%          1.35%
Abroad         435,257,163        8.82%         280,293,726            5.94%           55.29%
 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
                                                               operating operating    gross
                                                                 income    cost       profit
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                                                                                       rate
Industry-classified
Industry
of liquor
and          4,932,545,229       1,671,592,279          66.11%      4.56%          6.08%         -0.49%
alcoholic
beverage
Product-classified
Wine         3,829,326,556       1,266,391,452          66.93%      3.47%          5.11%         -0.52%
Brandy       989,889,728         352,328,968            64.41%      9.30%          10.85%        -0.50%
Area-classified
Domestic 4,497,288,066           1,378,672,642          69.34%      1.35%          0.48%         0.26%
Under the situation that the statistical caliber of the Companys main business data was
adjusted during the report period, the Companys 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           2017               2016               Year-on-year
                                                                                    increase   or
                                                                                    decrease (%)
                Sales volume   Ton            104,016            98,958             5.11%
Wine
                Production     Ton            97,620             99,784             -2.17%
                Sales volume   Ton            39,130             40,171             -2.59%
Brandy
                Production     Ton            37,666             43,262             -12.93%
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
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                                                                          Unit: CNY
Sector    Project       2017                        2016                                Year-on-yea
                        Amount        Proportio     Amount              Proportio       r increase or
                                      n in the                          n in the        decrease
                                      operating                         operating       (%)
                                      cost (%)                          cost (%)
          Blending
                        711,224,945   56.16%        692,570,791         57.49%          -1.32%
          liquor
          Packing
                        395,026,889   31.19%        372,613,924         30.93%          0.27%
          material
Wine
          Wages         47,843,744    3.78%         44,895,195          3.73%           0.05%
          manufactu
                        112,295,874   8.87%         94,704,442          7.86%           1.01%
          ring cost
          Blending
                        204,764,927   58.12%        187,495,081         58.99%          -0.87%
          liquor
          Packing
                        117,982,142   33.49%        105,943,197         33.33%          0.15%
          material
Brandy
          Wages         9,678,688     2.75%         11,965,588          3.76%           -1.02%
          manufactu
                        19,903,211    5.65%         12,441,839          3.91%           1.73%
          ring cost
    Whether there are changes of consolidation scope during the report period
   Yes     □No
   During the report period, this company, together with LAMBO SpA, establishes a joint
   venture enterprise Indomita Wine Company Chile, SpA (for short “Indomita Wine”). This
   company holds 85% equity of Indomita Wine. After establishment, as transferee, Indomita
   Wine acquires 100% equity of all three subsidiaries under Chile Bethwines. Indomita Wine
   and its subsidiaries all are included in the consolidate scope.
   During the report period, this company newly establishes Sales & Marketing Company of
   Yantai Changyu Pioneer Wine Company Limited with the registered capital of CNY5million
   and the business scope of wholesale business and retail business. This newly established
   company is included in the consolidate scope.
    Major changes or adjustments of the Company’s products or services during the
   report period
   □Available      Not available
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
 Information of major customers and major suppliers
The Companys important customers
The total sales amount of the top five
                                          167,081,822                  173,506,000
customers(CNY)
The proportion that total sales amount of
                                                                       3.68%
the top five customers accounting for the 3.39%
annual total sales amount(%)
The proportion that sales amount of the
related party in the total sales amount of
                                           0%                          0%
the top five customers accounting for the
annual total sales amount(%)
Information on the Companys 5 biggest customers
                                                     Sales Amount            Proportion in Total Sales for
No.     Customer Name
                                                     (CNY)                 the year(%)
    Yukoon Information Technology Company
1                                              39,959,376.81                 0.81%
    Limited in Foshan city
    Huahaipengcheng Liquor Company Limited
2                                              35,624,317.46                 0.72%
    in Zhuhai city
    Haikou Heshunxin Trading Company
3                                              32,472,435.94                 0.66%
    Limited
    Changyuexin Trading Company Limited in
4                                              29,920,506                    0.61%
    Shenzhen city
5       Fengxiang grocery store in Huian town  29,105,185.83                 0.59%
Total                                          167,081,822                   3.39%
Other situation explanation of major customers
□Available Not available
Information on the Companys important suppliers
The total purchase amount of the top 5 suppliers                                 452,349,552
The proportion of the total purchase amount of the top 5 suppliers in the annual
                                                                                 30.02%
purchase amount
Purchase amount of the related party in total purchase amount of the top five five
                                                                                 10.90%
suppliers accounting for annual total purchase amount(%)
Information on the Companys top 5 biggest suppliers
                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                                  Purchase Amount         Proportion in Total Purchase
No.         Supplier Name
                                                  (CNY)                   for the year(%)
1           Yantai Shenma Packaging Co., Ltd. 145,872,001                 9.68%
2           Yantai Changyu Glass Co.,Ltd.         117,731,881             7.81%
            Liquan    Sales   Department       of 93,275,802
3                                                                         6.19%
            Shandong Yantai Winery Co.,Ltd.
4           Xinjiang Yuyuan Liquor Co.,Ltd.       54,619,361              3.62%
            152   regiment    of     the   eighth 40,850,506
5                                                                         2.71%
            agriculture production division
Total                                             452,349,552             30.02%
Other situation explanation of main customers
□Available       Not available
(3) Costs
                                                                                            Unit: CNY
                                                                Year-on-year           Explanation of
                            2017                2016            increase or            significant
                                                                decrease (%)           changes
                                                                                       Mainly because
                                                                                       of year-on-year
                                                                                       increase       in
                                                                                       wage           &
Sales expense        1,272,522,443         1,253,260,668        1.54%
                                                                                       welfare,
                                                                                       advertising
                                                                                       promotion fee
                                                                                       in 2017
                                                                                       Mainly because
                                                                                       of year-on-year
Management                                                                             increase       in
                     340,781,958           309,783,548          10.01%
expense                                                                                depreciation
                                                                                       cost and office
                                                                                       expense in 2017
                                                                                       Mainly because
Financial                                                                              of decrease in
                     18,590,259            21,968,859           -15.38%
expense                                                                                loan interest
                                                                                       expenditure
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
(4) Research and development expenditure
□Available     Not available
(5) Cash flow
                                                                                          Unit: CNY
                                                                                             Year-on-year
                Item                          2017                        2016                 increase or
                                                                                              decrease (%)
    Subtotal of cash inflow in
                                      4,965,586,341            4,525,609,466                9.72%
    operating activities
    Subtotal of cash outflow in
                                      3,992,343,314            3,635,697,496                9.81%
    operating activities
     Net amount of cash flow
                                      973,243,027              889,911,970                  9.36%
 generated in operating activities
    Subtotal of cash inflow in
                                      216,678,355              112,952,925                  91.83%
       investment activities
    Subtotal of cash outflow in
                                      1,036,886,116            800,394,471                  29.55%
       investment activities
     Net amount of cash flow
                                      -820,207,761             -687,441,546                 -19.31%
 generated in investment activities
    Subtotal of cash inflow in
                                      1,064,892,130            1,191,567,445                -10.63%
     capital-raising activities
    Subtotal of cash outflow in
                                      1,307,993,557            1,232,491,837                6.13%
     capital-raising activities
     Net amount of cash flow
    generated in capital-raising      -243,101,427             -40,924,392                  -494.03%
              activities
   Net increase of cash and cash
                                      -76,053,030              164,700,643                  -146.18%
            equivalents
Explanation of main influence factors contributing to great changes in related data on
year-on-year basis
□Available     Not available
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Explanation on the causes of the major differences between the net cash flow generated by
the Companys operating activities and this years 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 2017            At the end of 2016
                                   Proportio                     Proportio Proportion
                                                                                      Explanation
                                   n in the                      n in the increase or
                                                                                      on    major
              Amount               total     Amount              total     decrease
                                                                                      changes
                                   assets                        assets    (%)
                                   (%)                           (%)
Monetary
              1,402,522,509        11.19%   1,391,517,607        12.07%       -0.88%        -
funds
Receivables   263,796,355          2.1%     173,062,628          1.50%        0.6%          -
Inventory     2,473,614,046        19.73%   2,248,609,740        19.51%       0.22%         -
Investment
              18,467,989           0.15%                         0%           0.15%         -
real estate
Long-term
equity        0                    0%                            0%           0%            -
investments
                                                                                            Mainly
                                                                                            because
                                                                                            parts of
                                                                                            construction
Fixed assets 5,329,083,969         42.51%   4,683,187,493        40.62%       1.89%         projects
                                                                                            have been
                                                                                            transferred
                                                                                            to fixed
                                                                                            asset
                                                                                            Mainly
                                                                                            because
Constructio
                                                                                            parts of
n         in 1,026,141,569         8.19%    1,346,281,737        11.68%       -3.49%
                                                                                            construction
progress
                                                                                            projects
                                                                                            have been
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                                                                          transferred
                                                                                          to fixed
                                                                                          asset
Short-term
              714,434,286       5.70%     662,388,882          5.75%        -0.05%        -
borrowings
Long-term
              156,125,854       1.25%     49,140,555           0.43%        0.82%         -
borrowings
(2) Measuring assets and Liabilities at Fair Value
□Available     Not available
(3) Assets rights restricted situation up to the end of report period
During this report period, the Company has no asset sealed up, distrained or frozen. For
information about asset mortgage and pledge, please refer to  (announcement number: 2016-Temporary 021) and  (announcement number: 2017-Temporary 015) disclosed on China Securities
Journal, Securities Times and CNINFO (http://www.cninfo.com.cn/) respectively on
December 22nd, 2016 and December 12th, 2017.
                                                                                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 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)
                  634,882,100.00                 929,180,000.00                                                       -31.67%
  (2) Situation of acquired main equity investments during the report period
  Available       □Not available
                                                                                                                                                                               Unit: CNY
Invested     Main business     Investment    Investment    Shareholding Capital Partner   investment    Product Progress      Estimated    Investment      Whether      Disclosure Disclosure
corporate                      mode          amount        ratio       source             horizon       type    up to         earnings     profit          or not       date (if   index (if
name                                                                                                            balance                    or loss         involve in have)        have)
                                                                                                                sheet date                 during the      litigation
                                                                                                                                           report period
Indomita     Wine and other Newly            274,248,114   85%         Self-    LAMBO 50 years          Wine    All           15,000,000   26,740,109      no           May 26th, Please refer to
Wine         alcoholic drink   established                             owned SpA                                acquisition                                             2017        disclosed on
                                                                                                                                                                                    China Securities Journal,
                                                                                                                                                                                   Securities Times and
                                                                                                                                                                                   CNINFO
                                                                                                                                                                                   (http://www.cninfo.com.cn/)
                                                                                                                                                                                   on May 26th, 2017
Total                                        274,248,114                                                                      15,000,000   26,740,109
                                                                                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
            (3) Situation of main ongoing non-equity investments during the report period
            Available          □Not available
                                                                                                                                                                                          Unit: CNY
                                                                                                                                                        Reasons                          Disclosure
                                                                                                                                      Accumulated
                               Whether                                    Accumulated actual                                                            for                              index (if
                                                                                                                                      realized
                               it                                        investment                                                                     unreached                        have)
                                                         Investment Amount                               Process                      profit up                            Disclosure
Project          Investment belongs         Involved                     amount up             Capital                                                  planning
                                                         during this                                     of        Estimated profit   to the end                           date (if
name             mode          to fixed     sectors                      to the end            source                                                   schedule
                                                         report period                                   project                      of the                               have)
                               assets                                    of the report                                                                  and
                                                                                                                                      report
                               investment                                 period                                                                        estimated profit
                                                                                                                                      period
Yantai                                                                                                                                                                                   Please refer to
Changyu                                                                                                                                                                                   disclosed on
                                            sector
Cooling                                                                                                                                                                                   China Securities Journal,
Center                                                                                                                                                                                   Securities Times and
Yantai                                                                                                                                                                                   CNINFO
Changyu                                     Liquor and                                                                                                                                   (http://www.cninfo.com.cn/)
International    Self-                      alcoholic                                          Owned                                                                                     on April 22nd, 2017
                               Yes                         110,000,000         886,690,000               100%      —                 —                —                 2017.04.22
Wine City        constructed                beverage                                           funds
Bottling                                    sector
Center
Yantai                                      Liquor and
                 Self-                                                                         Owned
Changyu                        Yes          alcoholic        16,315,200        415,207,200               100%      —                 —                —                 2017.04.22
                 constructed                                                                   funds
International                               beverage
                                                                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Wine City                                sector
Logistics
Center
Changyu Vine                             Liquor and
and Wine             Self-               alcoholic                                  Owned
                                   Yes                 10,000,000    115,760,000            60%    —   —                —              2017.04.22
Research             constructed         beverage                                   funds
Institute                                sector
                                         Liquor and
Treasure             Self-               alcoholic                                  Owned
                                   Yes                 31,000,000    109,990,000            60%    —   —                —              2017.04.22
Wine Chateau         constructed         beverage                                   funds
                                         sector
                                         Liquor and
Koya Brandy          Self-               alcoholic                                  Owned
                                   Yes                 23,770,000    135,698,000            55%    —   —                —              2017.04.22
Chateau              constructed         beverage                                   funds
                                         sector
                                         Liquor and
Greening             Self-               alcoholic                                  Owned
                                   Yes                 27,805,700     53,105,700            100%   —   —                —              2017.04.22
Investment           constructed         beverage                                   funds
                                         sector
Maintenance &
                                         Liquor and
reconstruction
                     Self-               alcoholic                                  Owned
project of Roullet                 Yes                         0               0            0%                                            2017.04.22
                     constructed         beverage                                   funds
Fransac chateau in
                                         sector
Cognac, France
Total                —            —    —           354,380,000   2,875,070,000   —      —     —   —                --              --
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2017 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    Subsidiary   To plant                                                                                15,531,5
Tianzhu                  grape,        CNY75mil          101,588,      95,443,1     116,555,58
                                                                                                    20,036,552
Winery                   produce and   lion                      381           87
Co., Ltd.                sell
                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                          grape juice,
                          bulk wine
                          and fruit
                          wine
Yantai       Subsidiary   To research,
Changyu-                  produce and
Castel                    sell   wine     USD5milli        255,474,     80,408,4                                9,859,10
                                                                                    68,964,230   2,038,551
Wine                      and sparking    on                 006          05
Chateau                   wine,tourist
Co., Ltd                  service
Langfang
Castel-      Joint
                          To produce      USD              40,702,2     34,568,3                                -1,616,63
Changyu      stock                                                                  39,165,527   -1,226,621
                          and sell wine   6,108,818                55          46
Wine Co.     company
LTD.
Chateau      Subsidiary   To research,
Changyu                   produce and     CNY642,7         695,747,     621,784,    145,103,20                  17,475,6
                                                                                                 25,301,360
AFIP                      sell brandy     50                    324          281            0
Global                    and wine
Chateau      Subsidiary
Liaoning
                          To produce      CNY59.68         64,141,7     53,170,0                                1,241,69
Changyu                                                                             49,643,396    2,038,551
                          ice wine        73million                17          22
Ice Wine
Co., Ltd.
Dicot        Subsidiary   To produce
Partners,                 and operate     EUR2,385,        515,135,     126,769,    281,007,16                  2,000,68
                                                                                                 -1,816,304
S.L.                      wine and        732                   463          123            7
                          other liquor
Indomita     Subsidiary   To produce
Wine                      and operate     USD47.19         481,333,     354,103,    157,953,46                  28,791,6
                                                                                                 23,047,447
Company                   wine and        million               962          792            7
Chile, SpA                other liquor
Acquisition and disposal of subsidiaries during the report period
□Available Not available
Information of main holding and joint stock companies
No
(8) Main part situation of the special purpose being controlled by the Company
□                   Not available
(9) Expectation for the Company’s future development
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
On the basis of our limited experience and special skills, we make the following estimation of the
wine sector and the Companys future development:
(1) The sector competition setup and development trend
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 Companys 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 addition, with the increased consumption by domestic middle class,
“drink less, drink good, drink healthily” will become future tendency and wine will keep
continuous and rapid development trend in China. 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 Companys development strategy
The Company will insist the development direction of “Focus on middle-and-high level, Focus on
high quality, Focus on big product”, comprehensively implement the development strategy of
same importance between wine and brandy, endeavour to promote the harmonious development
of various liquor; 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 2018, the Company will try its best to realize business income of not less than CNY5.2 billion
and control the main operating costs and three period expenses below CNY3.7 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, intensify internal adjustment
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
and reformation degree, enlarge subsidiaries autonomous right in operation, increase enterprise
vitality, implement the performance assessment mode of mainly focusing on profit, pay attention
to following aspects in 2018 in order to achieve the annual operation target:
Firstly, the Company will insist the development direction of focusing on middle-and-high-level
products, focusing on high quality and focusing on big product. Based on product Characteristics,
the Company will further clear brand positioning of wine, brandy and imported liquor and insist in
focusing on the strategy of developing middle-and-high-level products. The Company will further
perfect quality management traceability system and actively promote the construction of product
quality traceability informatization system; build raw material base in premium wine-making
grape region including France, Chile and Australia and so on in order to improve the scientific
management level of domestic base and to assure the stable supply of premium bulk wine; take
international advanced level as benchmarking, confirmedly promote high quality strategy,
improve internal quality and external appearance of products in order to achieve the
comprehensive transcendence to major competitive products. The Company will centralize
resources to make several big products at different levels, through which the Company could
promote the continuous improvement of the Companys brand awareness and influence.
Secondly, the Company will reform sales system to build new sales system that could adapt to
development requirement. The Company will further perfect the relatively-independent sales
system construction of wine, brandy and imported liquor to promote comprehensive development
of various liquor; through downsizing staff and improving efficiency, perfecting salary system and
other measures, increase the salary of sales personnel, improve their work enthusiasm and
stimulate the market vitality; strengthen system construction of backbone distributor, build unified
customer complaint system facing distributors and customers, improve their internal motivation in
selling Changyu products; focus on brand image of “Internationalization, High Quality”, actively
develop the export business and improve brand influence.
Thirdly, the Company will carry out order mode and promote informatization system construction
for production and sales plan. The Company will accelerate the informatization system
construction, roundly promote order-driven mode, build the company into a smart factory,
significantly improve the market service capacity of production system, reduce the inventory scale
and fund occupation, thoroughly sole the problem of disconnection between production and sales.
Fourthly, the Company will strengthen finance governance to perfect evaluation system whose
principal line is profit. The Company will establish the assessment system taking profit as main
line to improve profitability; strengthen profit assessment in self-supporting grape base, perfect
the budget management of various expense and control operating cost; optimize the Companys
analysis system of consolidated statement and financial assessment to improve supervision
efficiency of financial assessment; continue reinforcing the management of major expense and
consumption level; actively strive for project loan and policy-based fund loan to reduce loan cost;
reinforce tax planning and reduce tax bearing level.
Fifthly, the Company will reinforce supervision and administration function to improve
management level of overseas acquired enterprise. The Company will faithfully strengthen
operation management of overseas asset to assure the healthy operation of overseas acquired
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
enterprise; improve the positivity of overseas management team and build overseas acquired
enterprise to be “International Marketing Platform”, “Grape Resource Platform” and “Technology
Communication Platform” through series measures, such as reinforcing the third-party audit and
perfecting enthusiasm policy and so on.
Sixthly, the Company will reasonably delegate power to lower levels and reinforce monitoring
simultaneously to improve enthusiasm of subsidiaries. Meanwhile the Company delegates more
autonomy in management to subsidiaries, the C will also reinforce supervision to ensure that the
subsidiaries could maintain right development direction and operation trajectory.
Seventhly, the Company will steadily promote the construction of investment projects to assure
the project quality. The Company will accelerate to complete the commissioning work of
production lines in research and development center, improve production stability and give full
play to high efficiency of production lines; accelerate to promote putting Tinlot chateau and Koya
chateau into operation; complete the construction of second-phase SAP project in Changyu
industrial park (Yantai Changyu international wine city).
(5) Potential risks
A) Risks in price fluctuation of raw materials
Grapes are the Companys main raw materials. The grapes 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 Companys 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 Companys
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 Companys 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
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
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, Changyu industrial park (Yantai Changyu international wine city) 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
Activity registration form about receptions, studies, communications and visits during the report
period
□Available     Not available
There is no receptions, studies, communications and visits activities during the report period.
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 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 2016 Stockholders Meeting convened on June 15th, 2017 by
the Company, the Companys 2016 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 December 31st, 2016, 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.
Total amount of shares has not changed since the disclosure of the distribution plan to the
implementation period.
On July 4th, 2017, the Company published the Implementation Announcement of 2016 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 July 10th, 2017 and on July 11th, 2017; the last trading day, the share
registration day and the ex-dividend day of B Share was respectively on July 10th, 2017, on
July 13th, 2017 and on July 11th, 2017. Total amount of shares on the share registration day
and the ex-dividend day is 685,464,000 shares (including 453,460,800 A shares and
232,003,200 B shares). This time the dispatching objects contain all A Share shareholders
registered at China Securities Depository and Clearing Corporation Limited Shenzhen
Company after closing of Shenzhen Stock Exchange in the afternoon of July 10th, 2017 and
all B Share shareholders registered at China Securities Depository and Clearing Corporation
Limited Shenzhen Company after closing of Shenzhen Stock Exchange in the afternoon of
July 13th, 2017.
This dispatching has already been completed in mid-July 2017. The profit distribution
scheme implemented this time is consistent with the scheme deliberated and passed by the
stockholders meeting. The implementation of the profit distribution scheme for this time is
not more than two months after the shareholders' meeting passing it.
                       Special explanation for the cash dividends policy
Whether it is in accordance with the requirements of the regulation in the Articles          Yes
of Association and the resolution of shareholders
Whether the distribution standard and proportion is clear and definite                       Yes
Whether the relevant decision process and mechanism is complete                              Yes
Whether the independent directors perform their responsibilities and play the roles          Yes
Whether the small and middle shareholders have the chance to express their                   Yes
advices and appeals, as well as their lawful right and interest is in an enough
protection
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
    Whether it is legal and transparent for the condition and process while adjusting            Yes
    and amending the cash dividends policy
    The Companys scheme (preliminary scheme) of common stock profit distribution and
    increasing equity with capital reserve in the recent three years (including the report period)
    The Companys profit distribution scheme in 2015 is as following: Because the left amount of
    legal earned surplus reserve reaches 50% of registered capital, while making profit distribution,
    the legal earned surplus reserve will not be drawn. Based on the Companys 685,464,000
    shares at total up to December 31st, 2015, we plan to pay CNY5 in cash as dividends for every
    ten share (including tax) to the Companys all shareholders, totaling up to CNY342,732,000
    accounted for 33.27% of net profits CNY1,030,073,860 attributable to shareholders of parent
    company in the consolidated statements. The retained and undistributed profit of
    CNY687,341,860 will be reserved for distribution in the next year.
    The Companys profit distribution scheme 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 be not drawn. Based on the Companys
    685,464,000 shares at total up to December 31st, 2016, we plan to pay CNY5 in cash as
    dividends for every ten shares (including tax) to the Companys all stockholders, totaling up
    to CNY342,732,000 accounting for 34.89% of the net profit CNY982,460,488 attributable to
    the shareholders of the parent company in the consolidated statement, the retained and
    undistributed profit of CNY639,728,488 will be reserved for the distribution of next year.
    The Companys profit distribution scheme in 2017 is as following: Because the left amount of
    legal earned surplus reserve reaches 50% of the registered capital, while making profit
    distribution, the legal earned surplus reserve will not be drawn. Based on the Companys
    685,464,000 shares at total up to December 31st, 2017, we plan to pay CNY5 in cash as
    dividends for every ten shares (including tax) to the Companys all stockholders, totaling up to
    CNY342,732,000, accounting for 33.22% of the net profit CNY1,031,695,056 attributable to
    the shareholders of the parent company in the consolidated statement, the retained and
    undistributed profit of CNY688,963,056 will be reserved for the distribution of next year.
         The Companys common stock cash dividend record in recent three years (including the
         report period)
                                                                                             Unit: CNY
                                                      Proportion in the net
                             Net profit belonging to
                                                       profit belonging to
               Amount of      the listed companys                            Amount of cash Proportion of cash
  Year of                                             the listed companys
              cash dividend stockholders in the                             dividends in other dividends in other
distribution                                           stockholders in the
             (including tax) consolidated statement                               ways               ways
                                                           consolidated
                             of the distribution year
                                                          statement (%)
2017            342,732,000            1,031,695,056                33.22%                   0                0%
2016            342,732,000              982,460,488                34.89%                   0                0%
2015            342,732,000            1,030,073,860                33.27%                   0                0%
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 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 preliminary scheme.
□                Not available
2. The Company’s preliminary scheme of profit distribution and preliminary scheme of
increasing equity with capital reserve for the report period
Available      □Not available
Number of sending bonus shares per ten shares (share)
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
Attributable profit(CNY)                                                         1,031,695,056
The proportion of cash dividend distribution in the total profit distribution              100%
                                Cash dividend distribution this time
If the Companys 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 Certified Public Accountants Co., Ltd,
the net profit belonging to the parent companys stockholders in the consolidated statement in
2017 is CNY1,031,695,056 and the net profit of the parent company in financial statement in
2017 is CNY793,598,010.
According to PRC accounting standard, the situation for attributable profits of the
consolidation and the parent company in 2017 as following:
                                                                                      Unit: CNY
                                                        Consolidation       Parent company
     Undistributed profits at the end the year            7,309,081,618        7,811,100,555
     Including: net profits in 2017                       1,031,695,056          793,598,010
     Undistributed profit carried forward of the          6,620,118,562        7,360,234,545
     beginning of the year
     Distribution of 2016 dividends                         342,732,000          342,732,000
     Withdrawal legal surplus reserve                     7,309,081,618        7,811,100,555
According to regulation of 157th item in the Articles of Association, which is that “the
Company can distribute dividends either in cash or by stock, the profit to be distributed each
year is not less than 25% of the distributable profit realized in the same year and the
accumulated sum of profit to be distributed in cash in the last three years is not less than 30%
of the yearly average distributable profit to be realized in the last three years”. Meanwhile,
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
         considering the large amount on the capital expenditure in 2018, under the condition of not
         influencing the normal production and operation, the Company put forward preliminary
         scheme on profit distribution in 2017 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 Companys 685,464,000 shares at total up to December 31st, 2017, we plan to
         pay CNY 5 in cash as dividends for every ten shares (including tax) to the Companys all
         stockholders, totaling up to CNY342,732,000, accounting for 33.22% of the net profit
         CNY1,031,695,056 attributable to the shareholders of the parent company in the consolidated
         statement; the retained undistributed profit of CNY688,963,056 will be reserved for the
         distribution of next year. The cash dividend distributed to shareholders of domestic listed
         foreign shares (B share) is paid in Hongkong dollar converted based on the the middle rate
         between CNY and Hongkong dollar issued by the Peoples Bank of China on the first
         working day after the resolution date of 2017 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 Commitment
  Commitments                                                                           Implementation
                       party        type          content            time      period
Commitments at
share reform
Commitments
made in
acquisition report
or equity changes
report
Commitments at
                        -                            -                                   -                    -
asset restructuring
                      Yantai
                                   Solve                                                                   Has been
                     Changyu                   Non-horizontal
Commitments at                  horizontal                    May 18th, 1997            Forever           performing
                     Group Co.                 competition
the initial public             competition                                                                  strictly
                       Ltd.
offering or
                               Clear the use   According to
refinancing
                               of trademark    Trademark
                      Yantai      royalty      License
                                                                                                           Has been
                     Changyu                   Contract, the              th
                                                                 May 18 , 1997          Forever           performing
                     Group Co.                 trademark
                                                                                                            strictly
                       Ltd.                    royalty of
                                               Changyu and
                                               other
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                             trademarks
                                             paid by the
                                             Company to
                                             Yantai
                                             Changyu
                                             Group Co., Ltd
                                             ever year is
                                             mainly used
                                             for advertising
                                             Changyu and
                                             other
                                             trademarks and
                                             this contract
                                             products by
                                             Yantai
                                             Changyu
                                             Group Co.,
                                             Ltd.
Equity incentive
commitments
Commitments at
middle and small
shareholders of
the Company
Commitment
under timely
                   Yes
implementation or
not
Whether or not to
have specific
reasons of the
                   No
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
         4. Non-business capital occupying of listed company by controlling shareholder and its
         related parties
                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
□Available     Not available
There are no non-business capitals occupying of listed company by controlling shareholder
and its related parties during the report period.
5. Explanation of Non-standard Audit Report given by accounting firm in the report
period from board of directors, board of supervisors and independent directors (if
have)
□Available     Not available
6. Compared with the last year’s financial report, explanation for the changes of
accounting policy, accounting estimation and accounting method
Available       □Not available
In accordance with related regulation of Ministry of Finance, the Company plans to change
the accounting policy about “Government Grants”. Detailed information is shown as follows:
Before the change: The Company executes 《Accounting Standard for Business Enterprises
No. 16 - Government Grants》 involved in 《Notification of Ministry of Finance on Printing
and Distributing 38 Items of Specific Standards Including 》(Cai Kuai [2006] No.3) printed and distributed by
Ministry of Finance on February 15th, 2006. Hereby, the Company classifies received
government grants into “Non-operating Income” on the basis of benefit period.
After the change: The Company executes《Accounting Standard for Business Enterprises No.
16 - Government Grants》(Cai Kuai [2017] No.15) formulated by Ministry of Finance. For the
rest unchanged parts, the Company will still execute relevant standards and regulations
published by Ministry of Finance on February 15th, 2006. Hereby, the accounting treatment in
government grants will be divided into three classes: firstly, loan interest subsidy offsets
“Financial Expense”; secondly, it is classified into “Other Income”; thirdly, those that are not
relevant with operating activity are classified into “Non-operating Income”.
7. The situation explanation for the correction of major accounting errors which need to
be retrospect and restated during the report period
□Available Not available
There is no situation for the correction of major accounting errors which need to be retrospect and
restated.
8. Compared with the last year’s financial report, explanation for the changes of the
consolidated statements scope
Available       □Not available
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
               th
(1) On May 11 , 2017, this company, together with LAMBO SpA signed Agreement among
Shareholders and Price Adjustment Agreement, establishes a joint venture enterprise
Indomita Wine Company Chile, SpA (Chinese name: 智利魔狮葡萄酒简式股份公司, for
short “Indomita Wine”) with an investment of USD4,190,000. This Company offers
USD40,110,000, holding 85% equity of Indomita Wine. After establishment, as transferee,
Indomita Wine offers USD47,190,000, acquiring 100% equity of all three subsidiaries under
Chile Bethwines. On July 1st, 2017, this Company completed all the prerequisites regarding
share purchase, obtaining the control of three subsidiaries under Chile Bethwines. During the
report period, Indomita Wine and its subsidiaries all are included in the consolidate scope.
(2) On January 18th, 2017, this company newly establishes Sales & Marketing Company of
Yantai Changyu Pioneer Wine Company Limited with the registered capital of CNY5million
and the business scope of wholesale business and retail business. This newly established
company is included in the consolidate scope during the report period.
9. The appointment and dismissal of certified public accountants
Currently appointed accounting firm
                                                    Deloitte Hua Yong Certified Public Accountants
Domestic accounting firm        name
                                                    Co., Ltd. (special general partnership)
Remuneration for domestic accounting firm
(CNY0000)
Consecutive period for the audit services of
domestic accounting firm
Name of certified public accountant for the audit
                                                                                      Li Xu, Li Yangang
services of domestic accounting firm
Consecutive period for the certified public
accountants audit services of domestic                                                                  -
accounting firm
Overseas accounting firm name (if have)
Remuneration for overseas accounting firm
(CNY0000) (if have)
Consecutive period for the audit services of
                                                                                                        -
overseas accounting firm (if have)
Name of certified public accountant for the audit
                                                                                                        -
services of overseas accounting firm (if have)
Consecutive period for the certified public                                                             -
accountants audit services of overseas
accounting firm (if have)
Whether or not to dismiss the accounting firm during the report period
□Yes  No
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
To employ internal control audit accounting firms, financial adviser or sponsor.
□Available Not available
10. Face of suspension and termination of listing after the disclosure of annual report
□Available     Not available
11. Bankruptcy reorganization
□Available     Not available
There is no bankruptcy reorganization during the report period.
12. Material litigation and arbitration
□Available     Not available
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 Companys equity inventive plan, employee stock ownership
plan and other employee incentive measures during the report period.
16. Significant related transactions
(1) Related transactions in relation to daily operations
Available □Not available
                                                                                                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Related       Relationship     Type          Content          Pricing       Price            Amount          Proportion       Approved      Whether        Clearing    Available       Disclosure    Disclosur
party                                                         principle                      (CNY0000)       accounting       transaction   exceed         form        market price    date          e index
                                                                                                             for amount       quota         approved                   of    similar
                                                                                                             of     similar   (CNY0000)     transaction                transactions
                                                                                                             transactions                   quota
                                               Purchase
  Yantai       Controlled        Purchase         and
 Shenma        by the same             and    commission      Agreement         Determined                                                                                             April 26th,
                                                                                               14,587             8.71%         18,000           No            Cash         No                            -
Packaging         parent       commission     processing          pricing   by agreement
Co., Ltd.       company         processing      packing
                                               materials
  Yantai                         Licensed
                                             Licensed use
Changyu           Parent          use of                      Agreement         Determined                                                                                             April 26th,
                                             of trademark                                       7,289             100%           7,605           No            Cash         No                            -
Group Co.       company         intangible                        pricing   by agreement
                                               and patent
   Ltd.                            assets
Total                                                         -             -                21,876          --               25,605        -              -           -               -             -
Details of the return of large sales                          No
Actual performance of the estimated total amount for          In 2017, the estimated amount for daily operations related transactions of the Company is CNY331.3million and the actual amount incurred    for
daily operations related transactions by category that will   daily operations related transactions is CNY273.55million.
occur during this period.
Reason for the deference between transaction price and        No
market reference price
     (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.
                                                Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
(3) Related transactions in relation to common foreign investment
□Available     Not available
There are no related transactions in relation to common foreign investment during the report
period.
(4) Related current credit and debt transactions
Available       □Not available
Whether or not existing non-operating related credit and debt transactions
□Yes     No
There are no non-operating related credit and debt transactions during the report period.
(5) Other major related transactions
□Available     Not available
There are no other major related transactions during the report period.
17. Major and important contracts and execution results
(1) Trusteeship, contract and leasehold issues
 Trusteeship situation
□Available Not available
There is no trusteeship situation during the report period.
 Contract situation
Available □Not available
Contract situation description
During the report period, about the Companys 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
                                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
           Leasehold situation description
           On January 1st, 2017, the Company renewed the Space Lease Agreement with the controlling
           shareholder Changyu Group. The Company leased the space with 15196.94 square meters
           located at 174 Shihuiyao Road, Zhifu District,Yantai City. The rent per year is CNY1.4645
           million with a rental period of 5 years from January 1st, 2017 to December 31st, 2021. On
           January 1st, 2017, the Companys subordinate Sales&Marketing Co. of Yantai Changyu
           Pioneer Wine Company Limited. Brand Sales Department renewed the Space Lease
           Agreement with the controlling shareholder Changyu Group, leasing the space with 42552.83
           square meters located at 1 Jichang 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 CNY4.3935million
           with a rental period of 5 years from January 1st, 2017 to December 31st, 2021.
           On July 1st, 2017, this company signed a house-leasing contract with Yantai Shenma
           Packaging Company Limited. According to this contract, since July 1st, 2017, this company
           leased property to Yantai Shenma Packaging Company Limited for a business purpose with
           the annual rent of CNY1,626,880. This contract expires on June 30th, 2022.
           Project in gains and losses for the Company to achieve more than 10% of the total profit
           □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: CNY0000
                          External guarantee of the Company and its subsidiaries(excluding guarantee to subsidiaries)
                    Disclosure date of
                                                                                                                                      Whether or
                         related                      Actual date of      Actual                                     Whether 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                                     implementation
                                                                                                                                        guarantee
                          quota
Yantai Economic
and Technological                                                                      Mortgage;
Development             2016.12.22          34160       2016.12.21           34160                        10years         No              No
Zone Management                                                                         Pledge
Council.
                                                                       Total of the actual external
Total of the external guarantee quota
                                                                     0 guarantee amount during the
approved during the report period (A1)
                                                                       report period (A2)
                                                                      Balance of the actual
Total of the external guarantee quota
                                                                      external guarantee by the
approved by the end of the report period                        34160
                                                                      end of the report period
(A3)
                                                                      (A4)
                                            Guarantee situations between the Company and subsidiaries
                  Disclosure date of                                                                                                  Whether or
                                                Actual date of            Actual                                     Whether or not
Guarantee object       related       Guarantee                                         Guarantee         Guarantee                    not belong to
                                               occurrence (date          guarantee                                      complete
     name        announcement about   quota                                              type             Period                      related-party
                                                of agreement)             amount                                     implementation
                   guarantee quota                                                                                                      guarantee
Sales &                                                                                Joint liability
Marketing               2016.10.31          10,000      2016.11.05           10,000      assurance
                                                                                                          2 years         No              Yes
Company of
                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Yantai Changyu
Pioneer Wine
Company Limited
Yantai Changyu                                                                             Mortgage;
Pioneer Wine             2016.12.22          11,984        2016.12.21          11,984                       10 years         No              Yes
Company Limited                                                                             Pledge
Yantai Changyu                                                                                Joint
Wine Research                                                                               liability
                         2016.12.22          72,176        2016.12.21          72,176                       10 years         No              Yes
and Development                                                                            assurance;
Company Limited                                                                            Mortgage
                                                                                              Joint
Kilikanoon Estate
                         2017.12.12           7100         2018.01.09          7100         liability        1 year          No              Yes
Pty Ltd
                                                                                           assurance
                                                                         Total of the actual guarantee
Total of the guarantee quota approved to
                                                                         amount for subsidiaries
subsidiaries during the report period                              7,100
                                                                         during the report period
(B1)
                                                                         (B2)
                                                                         Balance of the actual
Total of the guarantee quota approved to
                                                                         guarantee for subsidiaries by
subsidiaries by the end of the report                             89,276                                                                        82,176
                                                                         the end of the report period
period (B3)
                                                                         (B4)
                                                       Guarantee situations between subsidiaries
                    Disclosure date of
                                                                                                                                        Whether      or
                    related                             Actual date of Actual                                          Whether 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                                        implementation
                                                                                                                                         guarantee
                    quota
                                                                          Total of the actual guarantee
Total of the guarantee quota approved
                                                                          amount for subsidiaries
to subsidiaries during the report period                                0
                                                                          during the report period
(C1)
                                                                          (C2)
                                                                          Balance of the actual
Total of the guarantee quota approved
                                                                          guarantee for subsidiaries by
to subsidiaries by the end of the report                                0
                                                                          the end of the report period
period (C3)
                                                                          (C4)
                                    Total guarantee amount of the Company(Total of above three major items)
                                                                         Total of the actual guarantee
Total of the approved guarantee quota
                                                                   7,100 amount during the report
during the report period(A1+B1+C1)
                                                                         period(A2+B2+C2)
Total of the approved guarantee quota                                    Balance of the actual
by the end of the report period                                  123,436 guarantee by the end of the                                          116,336
(A3+B3+C3)                                                             report period(A4+B4+C4)
The proportion of actual total guarantee amount (A4+B4+C4)
                                                                                                                                               13.06%
accounting for the Companys net asset
Among :
The amount of guarantee for shareholders, actual controllers and their related
parties(D)
The amount of debt guarantee for the guaranteed objects whose asset-liability
ratio is more than 70% directly or indirectly(E)
Total amount of guarantee of the part that exceeds 50% of net assets(F)       0
Total amount of the above-mentioned three items(D+E+F)
Explanation for undue guarantees that have happened warranty liability or
                                                                                No
may take joint payback liabilities during the report period
Explanation for violating due process to provide external guarantee             No
           Specific explanation on adopting complex guarantee type
           No.
                                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
 Illegal external guarantee
□Available     Not available
There is no illegal guarantee situation during the report period.
(3) Entrusting others to manage cash assets
 Financial management entrustment
□Available     Not available
There is no financial management entrustment during the report period.
 Loan entrustment
□Available     Not available
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
                                                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
(1) Social responsibility performance
Please see 2017 Annual Social Responsibility Report disclosed on China Securities Newspaper, Securities Times and www.cninfo.com.cn by the
Company.
(2) Targeted poverty alleviation social responsibility performance
① Targeted poverty plan
No
② Summary of annual targeted poverty
No.
③ Targeted poverty effectiveness
No
④ Subsequent targeted poverty plan
No
(3) Environmental protection related situation
Whether the listed company and its subsidiaries belong to major polluters published by the environmental protection department
No
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. 2017 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                   capital to others Sub total            Amount
                                              %                  bonus share                                                             %
                                                         share                 share
                                                                               capital
1、Unrestricted shares          685,464,000 100.00%                                                                      685,464,000 100.00%
(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                 685,464,000 100.00%                                                                      685,464,000 100.00%
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. 2017 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 Companys 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. 2017 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
                      48,966 last month before the 44,606         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
                                                                                                    of         Number of
                                                   Percentage Shares held until the during the
Name of Shareholders Character of shareholders     (%)         end of the report period report      restricte unrestricted Share
                                                                                                                                       Amount
                                                                                                    d          shares      status
                                                                                        period
                                                                                                    shares
YANTAI                                             50.40%      345,473,856              0           0          345,473,856 -
                     Domestic non-state-owned
CHANGYU GROUP
                     legal person
CO. LTD.
GAOLING              Foreign legal person          3.08%       21,090,219               -210,700    0          21,090,219 -
FUND,L.P.
CHINA                State-owned legal person      2.32%       15,924,155               0           0          15,924,155 -
SECURITIES
FINANCE CORP
BBH     BOS     S/A                                2.22%       15,241,826               0           0          15,241,826 -
                     Foreign legal person
FIDELITY FD -
                                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
CHINA FOCUS FD
GUOTAI JUNAN           Foreign legal person           1.00%       6,881,493                1,560,015 0             6,881,493 -
SECURITIES(HONG
KONG) LIMITED
FIDELITY                                              0.89%       6,100,762                3,800,769 0             6,100,762 -
PURITAN TRUST:
FIDELITY SERIES
                       Foreign legal person
INTRINSIC
OPPORTUNITIES
FUND
CENTRAL HUIJIN                                        0.69%       4,761,200                0             0         4,761,200 -
ASSET
                       State-owned legal person
MANAGEMENT
LTD.
VANGUARD                                              0.55%       3,788,487                0             0         3,788,487 -
EMERGING
                       Foreign legal person
MARKETS STOCK
INDEX FUND
FIDELITY CHINA                                        0.55%       3,779,202                0             0         3,779,202 -
SPECIAL                Foreign legal person
SITUATIONS PLC
NORGES BANK            Foreign legal person           0.52%       3,558,797                -3,025,951 0            3,558,797 -
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.
                                                                                                  Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                                   The top 10 shareholders with unrestricted shares
                                                                                   Number of unrestricted Type of share
Name of Shareholders                                                               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.                                                                                  21,090,219 B                              21,090,219
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
GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED                                                            6,881,493 B                               6,881,493
FIDELITY PURITAN TRUST: FIDELITY SERIES INTRINSIC                                                    6,100,762 B                               6,100,762
OPPORTUNITIES FUND
CENTRAL HUIJIN ASSET MANAGEMENT LTD.                                                                 4,761,200 A                               4,761,200
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
NORGES BANK                                                                                          3,558,797 B                               3,558,797
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 Companys 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 Companys top 10 common shareholders and shareholders with unrestricted shares during the
report period.
                                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
(2) Situation for the controlling shareholders of the Company
Property of holding shareholders: Property of holding main body undefined
Type of holding shareholders: Legal representative
                                               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
                                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
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                                            wholesale and retail of construction material, chemical products (chemical
                         Jiang Hua      2004.10.28    76779294-7
& Development Co. Ltd                                              hazard products excluded), hardware and electronical products, grape
                                                                   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 peoples 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
Yantai          Guofeng                                            industrial investment and so on; Capital operation (including acquisition,
Investment Holdings Co., Chen Dianxin 2009.02.12      00426068-6 reintegration and transfer, etc) of state-owned property right and state-owned
Ltd                                                                stock right within the scope of authorization; Venture capital investment
                                                                   business; Agency of venture capital investment business of other venture
                                                                   investment enterprises or individuals; Participation in the establishment of
                                                                   venture capital investment enterprises and venture capital investment
                                                                   management consultant institutions; Investment and financing service
                                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                                                         business; Investment and financing consultant business; Other business
                                                                         authorized by State-owned Assets Supervision and Administration
                                                                         Commission of Yantai Municipal Government.(Projects need to be
                                                                         authorized in accordance with the law could carry out business activities only
                                                                         after the approval of relevant departments )
Equity situation for the
other domestic listed
companies controlled by 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. 2017 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
□Available    Not available
(5) Shares reduction situations of holding shareholders, actual controllers, restructuring side and other commitment subjects
                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
□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. 2017 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                                  M       70   1997.09.18 2019.05.27          0            0            0             0
              Board of Directors   incumbent
              Vice-chairman to
Zhou          the Board of         present
                                             M       53   2002.05.20 2019.05.27          0            0            0             0
Hongjiang     Directors and        incumbent
              General manager
              Director and         present
Leng Bin      Vice-general                   M       55   2000.08.22 2019.05.27          0            0            0             0
              manager              incumbent
              Director and         present
Qu Weimin     Secretary to the               M       60   1997.09.18 2019.05.27          0            0            0             0
              Board of Directors   incumbent
                                   present
Zhang Ming    Director                         M     44   2016.05.26 2019.05.27          0            0            0             0
                                   incumbent
                                   leaving the
Chen Jizong   Director                         M     42   2013.05.14 2016.05.26          0            0            0             0
                                   post
Augusto                            present
              Director                         M     77   2006.12.07 2019.05.27          0            0            0             0
Reina                              incumbent
                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Aldino                         present
             Director                      M   65   2006.12.07 2019.05.27        0            0            0             0
Marzorati                      incumbent
Antonio                        present
             Director                      M   79   2006.12.07 2019.05.27        0            0            0             0
Appignani                      incumbent
                               leaving the
Dai Hui      Director                      F   52   2010.09.01 2017.06.15        0            0            0             0
                               post
                               present
Wei Anning   Director                      M   54   2017.06.15 2019.05.27        0            0            0             0
                               incumbent
Wang         Independent       present
                                           M   52   2014.05.23 2019.05.27        0            0            0             0
Zhuquan      director          incumbent
                               Present
Wang Shigang Independent                   M   52   2011.05.10 2019.05.27        0            0            0             0
             director          incumbent
             Independent       Present
Luo Fei                                    M   65   2016.09.23 2019.05.27        0            0            0             0
             director          incumbent
             Independent       Present
Liu Yan                                    F   44   2016.09.23 2019.05.27        0            0            0             0
             director          incumbent
             Chairman to the   present
Kong         Board of                    M     45   2013.05.14. 2019.05.27       0            0            0             0
Qingkun                        incumbent
             Supervisors
                               present
Zhang Lanlan Supervisor                    F   48   2013.05.14. 2019.05.27       0            0            0             0
                               incumbent
                               present
Liu Zhijun   Supervisor                    M   37   2016.05.26 2019.05.27        0            0            0             0
                               incumbent
Sun Jian     Vice-general      present     M   51   2006.03.22 -             0       0            0            0
             manager           incumbent
             Vice-general      present
Yang Ming                                  M   59   1998.08.12      -            0            0            0             0
             manager           incumbent
Li Jiming    Chief engineer    present     M   51   2001.09.14      -            0            0            0             0
                                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                incumbent
             Vice-general       present
Jiang Hua                                 M      54    2001.09.14    -    0            0            0             0
             manager            incumbent
                                present
Jiang Jianxun Finance manager             M      51    2002.05.20    -    0            0            0             0
                                incumbent
Total                --              --     --    --       --        --   0            0            0             0
                                             Yantai Changyu Pioneer Wine Co. Ltd. 2017 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
 Dai Hui        Director     expiration of the term of         2017.06.15                  -
                             office
3. Situation for work experience
The professional background, main work experiences and present positions of the Companys
directors, supervisors and senior management
(1) Members of Board of Directors
Mr. Sun Liqiang, male, 70, Chinese, with college degree, senior economist, was the
representative of the 10th and 11th National Peoples Congress. From 18th September, 1997 to
10th January, 2018, he had served as chairman of the Company, and concurrently chairman
and general manager of Changyu Group. He has been director of the Company since then to
disclosure day of this report .
Mr. Zhou Hongjiang, male, 53, Chinese, with doctor degree, senior engineer, was the
representative of the 12th National Peoples Congress, vice general manager of the Company
and general manager of the Sale Company. From 20th May, 2002 to 10th January, 2018, he
served as director, vice-chairman and general manager of the Company and concurrently
vice-chairman of Changyu Group. He has been chairman of the Company, chairman and
party secretary of Changyu Group since then to disclosure day of this report; he is the
representative of the 13th National Peoples Congress now.
Mr. Leng Bin, male, 55, Chinese, with master degree, senior accountant, was vice section
chief and section chief of Yantai Audit Bureau, he served as director and vice general
manager of the Company from 15th June, 2000 to 10th January, 2018. He has been director of
the Company, and concurrently general manager and vice party secretary of Changyu Group
since then to disclosure day of this report.
Mr. Qu Weimin, male, 60, Chinese, bachelor of engineering,senior economist, 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, he was vice general manager of the Company. He has
been served as director and concurrently secretary to the board of directors of the Company
since 18th September, 1997.
Mr. Zhang Ming, male, 44, 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.,
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
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
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, 77, 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, 65, 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, 79, 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.
Mr. Wei Anning, male, Chinese, 54, with doctor degree, ever served as agricultural
economist of the World Bank, director of North East Asia Food & Agribusiness Research of
the Rabobank, China CEO of the Fortis Bank Belgium, executive deputy president of the
New Hope Group (Sichuan), president of Shandong Liuhe Group, chairman of the Shandong
Chinwhiz Group. He is good at corporate governance, enterprise development strategy and
equity investments. Now, he is serving as executive director and general manager of
Shanghai Gueva Fund Management Co., Ltd Co., Ltd, executive director of both Ningxia
Gueva Fund Management Co., Ltd and Ningbo Gueva Fund Management Co., Ltd,
independent director of Dachan Food (Asia) Co., Ltd, Orient Securities Co., Ltd and Fortune
SG Fund Management Co., Ltd. Besides, he is also serving concurrently as director of
Xinjiang Kuntai Group Co., Ltd, Jiangsu Financial leasing Co., Ltd and Hangzhou United
Rural Commercial Bank Co., Ltd,. He is serving as director of the Company.
Mr. Wang Shigang, male, 52, 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, 52, 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, 65, Chinese, with doctor degree, visiting scholar of University of Toronto,
doctoral supervisors, Government Special Allowance expert, first batch of trans-century
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
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
for many years and has practical working experience with companies. Now he is serving as
independent director of the Company.
Ms. Liu Yan, female, 44, 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, 45, 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, 48, with bachelor degree and economist, served as vice-manager
of the Companys import/export company, manager of import department. She now is
director of board of directors office.
Mr. Liu Zhijun, male, 37, 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. Sun Jian, male, 51, Chinese, MBA and economist, served as vice general manager of the
Company from 22nd March, 2006 to 10th January, 2018. He has been general manager of the
Company and concurrently director of Changyu Group since then to disclosure day of this
report.
Mr. Yang Ming, male, 59, Chinese, with bachelor degree, application researcher, he served as
vice general manager of the Company from 12th August, 1998 to 28th February, 2018. Since
then, he will not take any position in the company.
Mr. Li Jiming, male, 51, Chinese, with doctor degree, application researcher, has been
serving as chief engineer of the Company since 14th September, 2001 and concurrently
director of Changyu Group.
Mr. Jiang Hua, male, 54, Chinese, with master degree, senior engineer, has been serving as
vice general manager of the Company since 14th September, 2001.
Mr. Jiang Jianxun, male, 51, Chinese, MBA and accountant, served as Financial Manager of
the Company from 20th May, 2002 to 10th January,2018. He has been chief financial officer
of the Company since then to disclosure day of this report.
                                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Post in the shareholders company
  Available        □Not available
                                                                                                                                   Paid by
                                                                                        Beginning date Ending date of
              Name                       Shareholders Company                Post                                               shareholders
                                                                                          of the post     the post
                                                                                                                               company or not
                                                                   Chairman and
Sun Liqiang                          Yantai Changyu Group Co. Ltd. general manager 2013.10.08            2018.01.10           No
Zhou Hongjiang                       Yantai Changyu Group Co. Ltd. Vice chairman        2013.10.08       2018.01.10           No
Li Jiming                            Yantai Changyu Group Co. Ltd. Director             2013.10.08       2022.01.10           No
Sun Jian                             Yantai Changyu Group Co. Ltd. Director             2013.10.08       2022.01.10           No
Zhang Ming                           Yantai Changyu Group Co. Ltd. Director             2013.10.08       2022.01.10           No
Augusto Reina                        Yantai Changyu Group Co. Ltd. Director             2013.10.08       2022.01.10           No
Aldino Marzorati                     Yantai Changyu Group Co. Ltd. Director             2013.10.08       2022.01.10           No
Antonio Appignani                    Yantai Changyu Group Co. Ltd. Director             2013.10.08       2022.01.10           No
Wei Anning                           Yantai Changyu Group Co. Ltd. Director             2017.04.18       2022.01.10           No
                                     Mr. Zhou Hongjiang serves as the position of chairman in the shareholders company from 10 th January,
Explanation for the post in the
                                     2018 to 10th January, 2022. Mr. Leng Bin serves as the position of general manager in the shareholders
shareholders company
                                     company from 10th January, 2018 to 10th January, 2022.
                                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Post at other companies
 Available      □Not Available
                                                                                            Beginning
                                                                                                        Ending date of          Paid by other
              Name                         Others 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.
shareholders company
Disciplinary actions taken by securities regulators in recent 3 years to the Companys 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. 2017 Annual Report
Salary of directors, supervisors and senior management during the report period
                                                                                                                                Unit: CNY0000
                                                                                                                                  Whether get
                                                                                                             Total reward from
                                                                                                                                  reward from
           Name                            Post                   Gender    Age              Status            the Company
                                                                                                                               related parties of
                                                                                                                 before tax
                                                                                                                                 the Company
                            Chairman to the Board of
Sun Liqiang                                                   M                   70 present incumbent                     143.00 No
                            Directors
                            Vice-chairman to the Board of
Zhou Hongjiang                                                M                   53 present incumbent                     143.30 No
                            Directors and general manager
                            Director and vice-general
Leng Bin                                                      M                   55 present incumbent                       97.16 No
                            manager
                            Director and Secretary to the
Qu Weimin                                                     M                   60 present incumbent                       97.70 No
                            Board of Directors
Zhang Ming                  Director                          M                   44 present incumbent                            0 No
Chen Jizong                 Director                          M                   42 leaving the post                             0 No
Augusto Reina               Director                          M                   77 present incumbent                            0 No
Aldino Marzorati            Director                          M                   65 present incumbent                            0 No
Antonio Appignani           Director                          M                   79 present incumbent                            0 No
Dai Hui                     Director                          F                   52 leaving the post                             0 No
Wei Anning                  Director                          M                   54 present incumbent                            0 No
Wang Zhuquan                Independent Director              M                   52 present incumbent                            8 No
Wang Shigang                Independent Director              M                   52 present incumbent                            8 No
                                                                                                Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Luo Fei                     Independent Director             M                  65 present incumbent                            8 No
Liu Yan                     Independent Director             F                  44 present incumbent                            8 No
                            Chairman to the Board of
Kong Qingkun                                                 M                  45 present incumbent                       69.91 No
                            supervisors
Zhang Lanlan                supervisor                       F                  48 present incumbent                       20.02 No
Liu Zhijun                  supervisor                       M                  37 present incumbent                            0 No
Sun Jian                    Vice-general manager             M                  51 present incumbent                       94.79 No
Yang Ming                   Vice-general manager             M                  59 present incumbent                       91.33 No
Li Jiming                   Chief Engineer                   M                  51 present incumbent                       87.17 No
Jiang Hua                   Vice-general manager             M                  54 present incumbent                       89.44 No
Jiang Jianxun               Finance manager                  M                  51 present incumbent                       65.11 No
Total                                        -                    -         -               -                          1,030.93              -
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)                                                                                                 1,536
Incumbent staff number of major subsidiary companies (people)                                                                                     2,504
Total incumbent staff (people)                                                                                                                    4,040
                                                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Total staff getting paid in current period (people)                                                                                                4,040
Retired staff number whose expenses are undertaken by parent
company or subsidiary companies (people)
                                                           Specialty constitution
                                 Category                                                      Number of people (people)
Production staff                                                                                                                                   1,140
Sales staff                                                                                                                                        2,325
Technical staff
Financial staff
Administrative staff
Total                                                                                                                                              4,040
                                                             Education degree
                                 Category                                                           Number (People)
Bachelor and above                                                                                                                                 1,243
Junior College                                                                                                                                     1,670
Technical secondary school
Senior high school and below
Total                                                                                                                                              4,040
(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 staffs remuneration timely. With the increase
                                            Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
of the Companys profitability, the Company steadily improves the staffs remuneration
and welfare, and provides the competitive salary income and development space of
equal opportunity for staff.
(3) Training plan
In order to further improve the employees comprehensive quality and professional skill,
the 2018 training plan for the Companys major employee is shown as follows:
① Senior and Middle-level Managers
1) Commonality training
Professional lecturers would be employed to take intensive class in the company or
through remote internet videos in order to give training for senior administrative staff.
This training would be held once a quarter, 1-2 days for each time.
2) Professional training
Based on their respective work, organize them to attend Entrepreneur High-end Forum
and Summit Meeting and go to domestic and foreign successful enterprise for visit and
study. Attend special training at least twice a year, such as safety, technology, facility,
finance, WSET, tourism etc which are organized by special management department.
Encourage middle-level administrative staff to attend university correspondence,
self-study examination, MBA or other further education for master degree; organize
professional management cadres, involved in human resources, finance, facility, safety
and technology quality etc, to attend vocational qualification examination for
professional certificate.
② Section Chief and Ordinary Staff Members
1) Commonality training
This training would be held twice a year, one day course for each time. Professional
lecturers or university teachers would be employed to give lectures in the company.
Attend training including company culture, regulatory framework and various liquor
products knowledge; reinforce training in the aspect of human resources management.
Organize employee to attend outdoor quality expansion training once a year, one or two
days for each time.
2) Professional training
Based on personnel work, attend special training at least twice a year, such as safety,
technology, facility, finance, tourism, integrated management etc, which are organized
by special management department. Encourage eligible general administrative staff to
attend university correspondence, self-study examination, MBA or other further
education for master degree; organize professional administrative staff, involved in
human resources, finance, facility, safety and technology quality etc, to attend
vocational qualification examination for professional certificate.
③ Marketing Personnel
1) Commonality training
Independently study company internal marketing materials, and training material
including related management system, production knowledge, sales responsibility
system etc.
2) Professional training
                                          Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
Professional lecturers would be employed to the company or through remote internet
videos to give lectures about successful liquor cases, current economic trend research
for domestic and foreign wine industry and other topic in order to take training for
personnel whose level is or above manager assistant in city marketing management
company. This training is once a quarter, one day for each time. Take closed training
for city marketing manager on how to improve marketing skill as well as executive
force of sales policy by inviting the company’s professional management cadre or
employing professional lecturers to give lectures. This training is once a month, one
day for each time. Take training for business controller and other personnel on
successful marketing cases and marketing management philosophy by employing
lecturers in combination with going out to visit and study. This training is once a
quarter and one day for each time.
(4) Labor outsourcing
□Available    Not available
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                             IX. Corporate Governance
1. Current Corporate Governance Situation of the Company
(1) About shareholders and shareholders’ meeting
The Company has set up the Deliberation Rules of Shareholders’ Meeting, and convened the
shareholders meetings in strict accordance with requirements of standard 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 Companys 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
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
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
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 Companys governance system, during the report period, the
Company formulates and improves Quality Management Method for Changyu Products,
Assessment Method of Safety Management, Risk Hierarchical Control Handbook, Daily
‘Zero Hidden Danger’ Report System for Larger and Above Risk Point and Work Safety
Contingency Plan;the Company formulates Opinion of Further Reinforcing Internal Control
Management in Production Process, Finance Accounting and Management Method of
Changyu Self-supporting Grape Base, Opinion about Improving Cork Allocation of Changyu
Products,Opinion about Improvement in Equipment and Facilities Affecting Products’
Internal Quality, Establishment and Implement of Traceability System of Changyu Products’
Quality Safety and so on.
Whether or not there is significant variance between the Companys 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 Companys 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
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
The Companys 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
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
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                          Participation
                                        Convening Disclosure
   Session    Meeting type ratio of                                          Disclosure Index
                                          date       date
                           investors
                                                               http://www.cninfo.com.cn
2016 Annual     Annual
                                                               Notice of 2016 Annual
Shareholders shareholders 61.86%         2017.06.15 2017.06.16
                                                               Shareholders Meeting
  Meeting      meeting
                                                               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 Attendance
                                                                       or not to time for the
                                                                      attend the shareholders
          Required
                     Personal Communication Authorized                 meetings    meeting
  Name attendance                                           Absence
                    attendance attendance attendance                  personally
            time
                                                                          for
                                                                      successive
                                                                         twice
Wang 6              2          4                0
                                                                    0 No
Shigang
Wang 6              2          4                0
                                                                    0 No.
Zhuquan
Luo Fei 6           2          4                0                   0 No.        1
Liu Yan 6           1          4                1                   0 No.        1
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 Companys projects
□Yes     No
During the report period, the independent directors did not raise any objections for the
Companys projects.
(3) Other explanations on independent directors’ performance
Whether or not the independent directors propositions are accepted by the Company
Yes       □No
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
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
 On 23rd March, 2017, 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
Companys 2016 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.
Weve 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 Companys management reported to us as well as the progress of important
events, we believe that we have no objection to the Companys 2016 Annual Financial
Statement preliminarily examined by Deloitte Hua Yong Certified Public Accounts Co., Ltd.
and the preliminary audit opinions of that services.”
 On 20th April 2017, the Board of Directors Audit Committee deliberated and passed 2016
Annual Audit Report, Draft Proposal on 2016 Annual Profit Distribution, Proposal on
Renewal of Contract with the Present Certified Public Accountants firm, 2016 Annual
Self-assessment Report on Internal Control and 2017 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
Companys 7th Session Board of Directors 4th Meeting for deliberation. The meeting reached
the following consensus:
(A) The clean-opinion auditing report on the Companys 2016 Annual Financial Statement
issued by Deloitte Hua Yong Certified Public Accounts Co., Ltd reflects the Companys
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 Companys 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
Companys 2016 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 2017 annual auditor of the
Company. The employment period is one year and the audit will be taken from two aspects
shown as follows.
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
On one hand, it is to take the audit of 2017 annual financial report and issue a Financial Audit
Report. On the other hand, it is to take the audit of 2017 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 Companys 2016 Self-assessment Report on Internal Control has truly and
objectively mirrored out the present standing of the Companys internal control and can
basically ensure the effective implementation of its policies and realization of its strategic
goals.
(E) The Companys 2017 Internal Audit Plan is comparatively perfect and practicable, based
on which the Companys Audit Department will conduct the 2017 annual internal audit.
 On 25th August 2017, the Board of Directors Audit Committee deliberated and passed
2017 Semiannual Report and Proposal on 2017 Semiannual Profit Distribution. The meeting
reached the following consensus:
The Companys 2017 Semiannual Financial Statements reflected the Companys financial
condition, operating results and cash flow truly, objectively and correctly.
As the Company just realized 2016 Annual Profit Distribution Scheme in middle July, we
propose neither to distribute profits for the first half of 2017 nor to increase the Companys
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
Companys 7th Session Board of Directors 5th 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 Companys
directors and senior managers.
 Proposal on 2016 Assessment Results of the Company’s Senior Officers’ Performance was
deliberated and passed by the Board of Directors Emolument Committee on 20th April 2017,
who thought that this document was in compliance with Performance Assessment Methods
for Company’s Senior Executive from 2014 to 2017 approved by the Companys 6th Session
Board of Directors 4th Meeting.
All committee members unanimously agree to submit the above proposals to the Companys
7th Session Board of Directors 4th Meeting for deliberation.
During the report period, the Board of Directors Emolument Committee also examined the
2016 annual payroll records of the directors and the senior managers who receive salaries
from the Company and believes that the salaries of the Companys directors, supervisors and
senior managers received from the Company is strictly assessed and delivered based on the
Companys 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
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
       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 Companys
       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 Companys 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
                                             2018.04.23
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
                                                                                                                        86.03%
for the Companys total assets of
consolidated financial statements
Percentage of unit operating income
included in scope of the assessment
accounting for the Companys operating                                                                                   89.82%
income of consolidated financial
statements
                                             Standards of Defect Identification
      Category                             Financial report                                 Non-financial report
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual 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
                       Companys 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.
                       Companys 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
                       target of achieving truthfulness and integrality
                       cannot be reasonably guaranteed in the
                       financial report;  General defects refer to the
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                          other control defects, which do not constitute
                          the significant and major defects.
Quantitative criterion    For total assets/Owners 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, 2017.
       Disclosure of the internal control audit
                                                        Disclosure
       report
       Disclosure date for the full text of the
                                                        23rd April, 2018
       internal control audit report
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual 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 23rd April, 2018.
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
Explanations on the audit report of internal control issued by the accounting firm is not in
consistency with the self-assessment report of the board of directors
None.
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                  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 reports authorized issue date or failed to pay in full on the
due date.
No.
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                        XI. Financial Report
1. Audit Report
   Type of audit opinion                           Standard unqualified audit opinion
   Date signed on audit report                     19th April, 2018
                                                   Deloitte Hua Yong certified public accountants co.,
   Audit agency name
                                                   Ltd. (special general partnership)
   Certified public accountant's name              Li Xu, Li Yangang
                                         AUDITOR'S REPORT
                                                                  De Shi Bao (Shen) Zi (18) No. P02977
                                                                                          (Page 1 of 6 pages)
   TO THE SHAREHOLDERS OF
   YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
   1. Opinion
   We have audited the financial statements of Yantai Changyu Pioneer Wine Company Limited
   (\"Yantai Changyu Company\"), which comprise the consolidated and Company's balance sheets as at
   31 December 2017, 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
   owners' equity for the year then ended, and the notes to the financial statements.
   In our opinion, the accompanying financial statements of Yantai Changyu Pioneer Wine Company
   Limited is prepared and present fairly, in all material respects, the consolidated and Company's
   financial position as of 31 December 2017, and the consolidated and the Company's results of
   operations and cash flows for the year then ended in accordance with Accounting Standards for
   Business Enterprises.
   2.   Basis for Opinion
    We conducted our audit in accordance with China Standards on Auditing. Our responsibilities
    under those standards are further described in the Auditor's Responsibilities for the Audit of the
    Financial Statements section of our report. We are independent of Yantai Changyu Company in
    accordance with the code of ethics for Chinese Certified Public Accountants, and we have fulfilled
    our other ethical responsibilities in accordance with the Code. We believe that the audit evidence
    we have obtained is sufficient and appropriate to provide a basis for our opinion.
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
3. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial statements of the current period. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. We determine the followings are key audit
matters in need of communication in our report.
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                     AUDITORS REPORT - continued
                                                                  De Shi Bao (Shen) Zi (18) No. P02977
                                                                                    (Page 2 of 6 pages)
3.    Key Audit Matters - continued
The determination of the fair value of identifiable assets and liabilities associated with
business combination
1、Item description
     As disclosed in Notes VII, during the year, the Company through its acquired 100% shares of
     Chile Indomita Wine Group. As disclosed in Notes III-5, the Company need to recognize the
     acquiree's identifiable assets and liabilities which were met the recognition criteria generated
     during the acquisition at their fair value on the acquisition day. As disclosed in Notes IV \"The
     determination of the fair value of identifiable assets and liabilities associated with business
     combination\", during the recognition of the above identifiable assets and liabilities' fair value
     based on the present value of future cash flow, the management of the Company need to
     forecast the cash flow according the growth rate of sales based on future market's supply and
     demand, and considered selecting the appropriate discount rate for discounting, which involved
     the management to exercise significant estimations and judgments. Therefore, we identified the
     determination of the fair value of identifiable assets and liabilities associated with business
     combination as a key audit matter.
2、How our audit addressed the key audit matter
     Our procedures in relation to the key audit matter mainly included:
      (1) Understanding and assessing the appropriateness of the method used by the management
          to Identify and recognize the various identifiable assets and liabilities on the acquisition
          day;
      (2) Understanding and assessing the competence and independence of the valuation
          specialists appointed by the management;
      (3) Using our internal valuation specialists, and reviewing the rationality of the significant
          estimations, (including the growth rate of sales, the discount rate and etc.), used by the
          management and their valuation specialists in the value of various identifiable assets and
          liabilities' fair value.
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                     AUDITORS REPORT - continued
                                                                  De Shi Bao (Shen) Zi (18) No. P02977
                                                                                    (Page 3 of 6 pages)
3.    Key Audit Matters - continued
Valuation of long-term assets' impairment
1、Item description
     As disclosed in Notes VI-12 and 13, some subsidiaries of the Company were sustained loss and
     the cash flow from operating activities were net out and the related assets existed an indication
     of impairment. As at 31 December 2017, the book values of fixed assets and construction in
     progress (\"CIP\") were RMB 928,058,429 and RMB 89,001,307, respectively, and were
     significant in financial statement level. As disclosed in Notes IV \"Impairment of long-term
     assets \", a highly uncertainty existed related to the Company's management to determine the
     recoverable amount based on expected future cash flows, which involved the use of significant
     accounting estimation and judgment on the growth rate of sales, average gross rate, other
     operating expenses of those subsidiaries of the relevant assets (group of assets) and the
     discount rate used in calculation the present value. For the above reasons, we identified the
     valuation of long-term assets' impairment as a key audit matter.
2、How our audit addressed the key audit matter
     Our procedures in relation to the key audit matter mainly included:
      (1) Understanding, assessing and testing the relatively designing, implementing and
          effectiveness of key internal controls over the valuation of book values of the fixed assets
          and CIP;
      (2) Based on our understanding of the business and industry of those subsidiaries, assessing
          the rationality of significant accounting estimation and judgment used by the management
          to forecast the future cash flows during the impairment test, including the growth rate of
          sales, the average gross rate, other operating expenses and the discount rate used in
          calculation the present value;
      (3) Using our internal valuation specialists, reviewing the appropriateness of the future cash
          flows discount model prepared by the management and the rationality of the discount rate
          used;
      (4) Performing the recalculation procedure, checking the accuracy of calculations in the
          discount future cash flows model.
                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                    AUDITORS REPORT - continued
                                                                 De Shi Bao (Shen) Zi (18) No. P02977
                                                                                   (Page 4 of 6 pages)
4. Other Information
The management of Yantai Changyu Pioneer Wine Company Limited is responsible for other
information. The other information comprises the information included in the Yantai Changyu 2017
annual report, but does not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
5. Responsibilities of the Management and Those Charged with Governance for the Financial
   Statements
The management of Yantai Changyu Pioneer Wine Company Limited is responsible for the
preparation and fair presentation of the financial statements in accordance with Accounting Standards
for Business Enterprises, and designing, implementing and maintaining internal control that is
necessary to enable the financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the management is responsible for assessing Yantai Changyu
Companys ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the management either intends to
liquidate Yantai Changyu Company or to cease operations, or have no realistic alternative but to do
so.
Those charged with governance are responsible for overseeing Yantai Changyu Companys financial
reporting process.
6. Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that
includes our opinion solely to you. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with China Standards on Auditing will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                    AUDITORS REPORT - continued
                                                                 De Shi Bao (Shen) Zi (18) No. P02977
                                                                                   (Page 5 of 6 pages)
6.   Auditor's Responsibilities for the Audit of the Financial Statements - continued
As part of an audit in accordance with China Standards on Auditing, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
(1) Identify and assess the risks of material misstatement of the financial statements, whether due to
    fraud or error,      design and perform audit procedures responsive to those risks, and obtain
    audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
    detecting a material misstatement resulting from fraud is higher than for one resulting from error,
    as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
    of internal control.
(2) Obtain an understanding of internal control relevant to the audit in order to design audit
    procedures that are appropriate in the circumstances, but not for the purpose of expressing an
    opinion on the effectiveness of the internal control.
(3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
    estimates and related disclosures made by the management.
(4) Conclude on the appropriateness of the management's use of the going concern basis of
    accounting and, based on the audit evidence obtained, whether a material uncertainty exists
    related to events or conditions that may cast significant doubt on Yantai Changyu Companys
    ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
    required to draw attention in our auditor's report to the related disclosures in the financial
    statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
    based on the audit evidence obtained up to the date of our auditor's report. However, future
    events or conditions may cause the Yantai Changyu Company to cease to continue as a going
    concern.
(5) Evaluate the overall presentation, structure and content of the financial statements (including the
    disclosures), and whether the financial statements represent the underlying transactions and events
    in a manner that achieves fair presentation.
(6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
    business activities within the Yantai Changyu Company to express an opinion on the financial
    statements. We are responsible for the direction, supervision and performance of the group audit.
    We remain solely responsible for our audit opinion.
                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
                                    AUDITORS REPORT - continued
                                                                 De Shi Bao (Shen) Zi (18) No. P02977
                                                                                   (Page 6 of 6 pages)
6.   Auditor's Responsibilities for the Audit of the Financial Statements - continued
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Deloitte Touche Tohmatsu CPA LLP                         Chinese Certified Public Accountant: Li Xu
          Shanghai, China                                                (Engagement partner)
                                                  Chinese Certified Public Accountant: Li Yangang
                                                                                          19, April , 2018
                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2017
ASSETS                                 Notes            Closing balance          Opening balance
                                                             RMB                     RMB
CURRENT ASSETS
 Cash and bank                         VI-1               1,402,522,509           1,391,517,607
 Notes receivable                      VI-2                 244,796,818             210,470,027
 Accounts receivable                   VI-3                 263,796,355             173,062,628
 Prepayments                           VI-4                   2,417,931               2,175,606
 Interest receivable                   VI-5                     240,968                  24,200
 Other receivables                     VI-6                  18,737,454              18,880,800
 Inventories                           VI-7               2,473,614,046           2,248,609,740
 Non-current assets held for sale      VI-8                   2,000,197               2,000,197
 Other current assets                  VI-9                 230,822,759
                                                        _____________               169,522,242
                                                                                 _____________
Total current assets                                      4,638,949,037
                                                        _____________             4,216,263,047
                                                                                 _____________
NON-CURRENT ASSETS
 Available-for-sale financial assets   VI-10                    467,251                 340,263
 Investment properties                 VI-11                 18,467,989                    -
 Fixed assets                          VI-12              5,329,083,969           4,683,187,493
 Construction in progress              VI-13              1,026,141,569           1,346,281,737
 Bearer biological assets              VI-14                201,929,888             201,428,980
 Intangible assets                     VI-15                655,448,897             483,815,080
 Goodwill                              VI-16                128,135,981             121,265,866
 Long-term prepaid expenses            VI-17                230,009,231             162,206,229
 Deferred tax assets                   VI-18                308,121,396             295,937,037
 Other non-current assets              VI-19                       -
                                                        _____________                17,352,239
                                                                                 _____________
Total non-current assets                                  7,897,806,171
                                                        _____________             7,311,814,924
                                                                                 _____________
Total assets                                             12,536,755,208
                                                        _____________            11,528,077,971
                                                                                 _____________
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
CONSOLIDATED BALANCE SHEETS
YEAR ENDED 31 DECEMBER 2017 - continued
LIABILITIES AND EQUITY                           Notes             Closing balance          Opening balance
                                                                        RMB                     RMB
CURRENT LIABILITIES
 Short-term borrowings                          VI-20                 714,434,286              662,388,882
 Notes payable                                  VI-21                        -                  38,900,000
 Accounts payable                               VI-22                 666,442,879              545,231,319
 Receipts in advance                            VI-23                 350,894,156              425,246,421
 Advances from customers                        VI-24                 210,824,234              206,431,734
 Taxes payable                                  VI-25                 145,094,156              144,042,600
 Interest payable                                                         771,250                  563,613
 Deferred income                                VI-26                  16,878,199               11,163,883
 Other payables                                 VI-27                 602,964,319              546,305,310
 Non-current liabilities due within one year    VI-28                 110,954,827
                                                                   _____________                71,799,093
                                                                                            _____________
Total current liabilities                                            2,819,258,306
                                                                   _____________             2,652,072,855
                                                                                            _____________
NON-CURRENT LIABILITIES
 Long-term borrowings                           VI-29                 156,125,854               49,140,555
 Long-term payables                             VI-30                 259,000,000              293,000,000
 Deferred income                                VI-26                  92,918,855              101,775,243
 Deferred tax liabilities                       VI-18                  24,264,203               24,908,410
 Other non-current liabilities                  VI-31                   7,209,312
                                                                   _____________                 7,696,222
                                                                                            _____________
Total non-current liabilities                                         539,518,224
                                                                   _____________               476,520,430
                                                                                            _____________
Total liabilities                                                    3,358,776,530
                                                                   _____________             3,128,593,285
                                                                                            _____________
EQUITY
  Share capital                                 VI-32                  685,464,000             685,464,000
  Capital reserve                               VI-33                  565,955,441             565,955,441
  Other comprehensive income                    VI-34                    3,109,240              (5,259,014)
  Surplus reserve                               VI-35                  342,732,000             342,732,000
  Retained earnings                             VI-36                7,309,081,618
                                                                   _____________             6,620,118,562
                                                                                            _____________
Equity attributable to shareholders
    of the Company                                                   8,906,342,299           8,209,010,989
Non-controlling interests                                              271,636,379
                                                                   _____________               190,473,697
                                                                                            _____________
Total equity                                                         9,177,978,678
                                                                   _____________             8,399,484,686
                                                                                            _____________
Total liabilities and equity                                        12,536,755,208
                                                                   _____________            11,528,077,971
                                                                                            _____________
The accompanying notes form an integral part of these financial statements.
The financial statements on pages 7 to 110 were signed by the following:
   Zhou Hongjiang                           Jiang Jianxun                               Jiang Jianxun
   Legal Representative                Person in Charge of the                       Chief Accountant
                                          Accounting Body
                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2017
ASSETS                               Notes             Closing balance          Opening balance
                                                            RMB                     RMB
CURRENT ASSETS
 Cash and bank                      XIV- 1                559,174,466              269,460,060
 Notes receivable                   XIV- 2                 41,645,203                1,114,200
 Accounts receivable                XIV- 3                  7,805,333                3,326,683
 Prepayments                        XIV- 4                     99,673                  702,647
 Interest receivable                                           76,646                   24,200
 Dividend receivables               XIV- 5                407,495,922              531,819,113
 Other receivables                  XIV- 6                592,274,075            3,582,532,862
 Inventories                        XIV- 7                348,042,053              792,732,418
 Non-current assets held for sale    VI-8                   2,000,197                2,000,197
 Other current assets                                      29,706,058
                                                       _____________                20,085,058
                                                                                _____________
Total current assets                                     1,988,319,626
                                                       _____________             5,203,797,438
                                                                                _____________
NON-CURRENT ASSETS
 Long-term equity investments       XIV- 8               4,511,202,204           1,834,341,541
 Investment properties               VI-11                  18,467,989                    -
 Fixed assets                       XIV- 9                 288,150,901             347,481,417
 Construction in progress           XIV- 10                  6,756,349                 500,000
 Bearer biological assets           XIV- 11                119,572,539             123,036,693
 Intangible assets                  XIV- 12                 69,623,219              72,002,372
 Deferred tax assets                XIV- 13                 28,787,907              26,985,252
 Other non-current assets           XIV- 14              3,718,674,166
                                                       _____________             2,617,457,460
                                                                                _____________
Total non-current assets                                 8,761,235,274
                                                       _____________             5,021,804,735
                                                                                _____________
Total assets                                            10,749,554,900
                                                       _____________            10,225,602,173
                                                                                _____________
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
BALANCE SHEET OF THE COMPANY
YEAR ENDED 31 DECEMBER 2017 - continued
LIABILITIES AND EQUITY                          Notes             Closing balance          Opening balance
                                                                       RMB                     RMB
CURRENT LIABILITIES
 Short-term borrowings                         XIV- 15               600,000,000              500,000,000
 Accounts payable                              XIV- 16                97,833,124              247,568,857
 Advances from customers                       XIV- 17                 6,000,000                6,000,000
 Employee benefits payable                     XIV- 18                70,108,076               70,812,761
 Taxes payable                                 XIV- 19                14,569,690               33,266,225
 Interest payable                                                        652,500                  563,613
 Deferred income                                                       3,953,054                1,767,054
 Other payables                                XIV- 20               544,713,172              368,310,362
 Non-current liabilities due within one year   XIV- 21                      -
                                                                  _____________                29,227,200
                                                                                           _____________
Total current liabilities                                           1,337,829,616
                                                                  _____________             1,257,516,072
                                                                                           _____________
NON-CURRENT LIABILITIES
 Deferred income                                                      12,628,573               19,933,699
 Other non-current liabilities                                         2,577,702
                                                                  _____________                 2,499,403
                                                                                           _____________
Total non-current liabilities                                         15,206,275
                                                                  _____________                22,433,102
                                                                                           _____________
Total liability                                                     1,353,035,891
                                                                  _____________             1,279,949,174
                                                                                           _____________
EQUITY
  Share capital                                 VI-32                 685,464,000             685,464,000
  Capital reserve                              XIV- 22                557,222,454             557,222,454
  Surplus reserve                               VI-35                 342,732,000             342,732,000
  Retained earnings                                                 7,811,100,555
                                                                  _____________             7,360,234,545
                                                                                           _____________
Total equity                                                        9,396,519,009
                                                                  _____________             8,945,652,999
                                                                                           _____________
Total liabilities and equity                                       10,749,554,900
                                                                  _____________            10,225,602,173
                                                                                           _____________
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER 2017
                                                     Notes                    2017
                                                                              RMB                      RMB
I. Revenue                                       VI-37                    4,932,545,229            4,717,596,472
       Less: Cost of sales                      VI-37                    1,671,592,279            1,575,770,979
         Taxes and surcharges                   VI-38                      310,252,023              269,716,646
         Selling expenses                       VI-39                    1,272,522,443            1,253,260,668
         Administrative expenses                VI-40                      340,781,958              309,783,548
          Financial expenses                    VI-41                       18,590,259               21,968,859
         Impairment loss of assets              VI-42                        8,293,553                3,279,266
    Add:   Loss (income) from disposal of assets                              (222,586)                  14,719
                    Other income                 VI-43                       46,038,384
                                                                        ____________                       -
                                                                                                 ____________
II. Operating profit                                                     1,356,328,512            1,283,831,225
      Add: Non-operating income                      VI-44                  17,230,727               55,014,314
      Less: Non-operating expenses                   VI-45                   1,631,476
                                                                        ____________                  1,226,699
                                                                                                 ____________
III. Profit before tax                                                   1,371,927,763            1,337,618,840
      Less: Income tax                               VI-46                 338,134,245
                                                                        ____________                357,029,446
                                                                                                 ____________
IV. Profit for the year                                                  1,033,793,518
                                                                        ____________                980,589,394
                                                                                                 ____________
     (I) Categorized by the nature of continuing operation
     1. Net profit(loss) from continuing operations                      1,033,793,518
                                                                        ____________                980,589,394
                                                                                                 ____________
     (II) Categorized by ownership:
     1. Profit or loss attributable to non-controlling interests              2,098,462               (1,871,094)
     2. Net profit attributable to owners of the Company                 1,031,695,056
                                                                        ____________                982,460,488
                                                                                                 ____________
V. Other comprehensive income (post-tax)                                     9,863,872
                                                                        ____________                  5,615,689
                                                                                                 ____________
       Other comprehensive income attributable
         to shareholders of the Company
       Other comprehensive income
         to be reclassified to profit and loss
         Foreign currency statement translation difference                    8,368,254                5,183,498
       Other comprehensive income attributable
     to non-controlling interest                                             1,495,618
                                                                        ____________                   432,191
                                                                                                 ____________
VI. Total comprehensive income                                           1,043,657,390
                                                                        ____________                986,205,083
                                                                                                 ____________
     Attribute to shareholders of the Company                            1,040,063,310              987,643,986
     Attribute to non-controlling interest of the Company                    3,594,080
                                                                        ____________                 (1,438,903)
                                                                                                 ____________
                                                                        ____________             ____________
VII. Earnings per share
          (I) Basic earnings per share               VI-47                       1.51
                                                                        ____________                      1.43
                                                                                                 ____________
          (II) Diluted earnings per share            VI-47                       N/A                      N/A
                                                                        ____________             ____________
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
INCOME STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2017
                                                Notes                     2017
                                                                          RMB                      RMB
I. Revenue                                      XIV- 23              1,311,256,854            1,415,104,946
     Less: Cost of sales                        XIV- 23              1,165,953,408            1,152,076,500
          Taxes and surcharges                  XIV- 24                 76,570,225              106,469,217
          Administrative expenses               XIV- 25                 80,693,044               85,962,137
          Financial expenses                    XIV- 26                    637,568               34,226,452
     Add:Investment income                      XIV- 27                798,877,905            1,798,129,418
          Loss (income) from disposal of assets                            (29,625)                 111,362
          Other income                                                   5,219,126
                                                                    ____________                       -
                                                                                             ____________
II. Operating Profit                                                  791,470,015             1,834,611,420
          Add: Non-operating income                                       686,646                 7,275,905
     Less: Non-operating expenses                                         335,237
                                                                    ____________                    359,415
                                                                                             ____________
III. Profit before tax                                                791,821,424             1,841,527,910
      Less: Income tax                                                 (1,776,586)
                                                                    ____________                 10,953,440
                                                                                             ____________
IV. Profit for the year                                               793,598,010
                                                                    ____________              1,830,574,470
                                                                                             ____________
     Net profitfrom continuing operations                             793,598,010
                                                                    ____________              1,830,574,470
                                                                                             ____________
V. Total comprehensive income                                         793,598,010             1,830,574,470
                                                                    ____________             ____________
                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER 2017
                                                                     Notes            2017
                                                                                      RMB                      RMB
CASH FLOWS FROM OPERATING ACTIVITIES
 Cash receipts from the sale of goods
   and the rendering of services                                                  4,827,152,526            4,441,041,101
 Receipts of tax refunds                                                             53,196,910               17,860,500
 Other cash receipts relating to operating activities          VI-48(1)              85,236,905
                                                                                 ____________                 66,707,865
                                                                                                          ____________
Sub-total of cash inflows from operating activities                               4,965,586,341
                                                                                 ____________              4,525,609,466
                                                                                                          ____________
  Cash payments for goods purchased and services received                         1,143,840,915              961,128,796
  Cash payments to and on behalf of employees                                       512,777,815              435,621,220
  Payment of various types of taxes                                               1,260,813,596            1,133,232,957
  Other cash payments relating to operating activities         VI-48(2)           1,074,910,988
                                                                                 ____________              1,105,714,523
                                                                                                          ____________
Sub-total of cash outflows from operating activities                              3,992,343,314
                                                                                 ____________              3,635,697,496
                                                                                                          ____________
Net cash flows from operating activities                       VI-49(1)            973,243,027
                                                                                 ____________               889,911,970
                                                                                                          ____________
CASH FLOWS FROM INVESTING ACTIVITIES
 Decrease in term deposits over 3 months                                            205,000,000               98,021,025
 Proceeds from return on investments                                                  4,084,350                7,723,126
 Net cash receipts from disposals of fixed assets,
 intangible assets and other long-term assets                                        7,594,005
                                                                                 ____________                 7,208,774
                                                                                                          ____________
Sub-total of cash inflows from investing activities                                216,678,355
                                                                                 ____________               112,952,925
                                                                                                          ____________
Cash paid for acquisition of properties, plants and equipment,
    intangible assets and other long-term assets                                   435,960,357              704,834,302
  Cash paid for term deposits over 3 months                                        297,000,000               92,021,025
  Cash paid for purchase of available-for-sale financial assets                        129,216                     -
  Cash paid for the purchase subsidiaries and other equity      VI-48(3)           303,796,543
                                                                                 ____________                 3,539,144
                                                                                                          ____________
Sub-total of cash outflows from investing activities                              1,036,886,116
                                                                                 ____________               800,394,471
                                                                                                          ____________
Net cash flows from investing activities                                          (820,207,761)
                                                                                 ____________              (687,441,546)
                                                                                                          ____________
CASH FLOWS FROM FINANCING ACTIVITIES
   Cash receipts from capital contributions                                          48,396,726                      -
    Including: cash receipts from capital contributions
from minority owners of subsidiaries                                                48,396,726                      -
   Cash receipts from borrowings                                                   963,564,600             1,011,089,858
   Other cash received from financing activities               VI-48(4)             52,930,804
                                                                                 ____________                180,477,587
                                                                                                          ____________
Sub-total of cash inflows from financing activities                               1,064,892,130
                                                                                 ____________              1,191,567,445
                                                                                                          ____________
  Cash paid for borrowings                                                         876,502,273              839,962,581
  Cash paid for dividends, profits and interests                                   369,791,284              372,529,256
  Cash paid from other financing activities                    VI-48(5)             61,700,000
                                                                                 ____________                20,000,000
                                                                                                          ____________
Sub-total of cash outflows from financing activities                              1,307,993,557
                                                                                 ____________              1,232,491,837
                                                                                                          ____________
Net cash flows from financing activities                                          (243,101,427)
                                                                                 ____________               (40,924,392)
                                                                                                          ____________
Effect of foreign exchange rate changes
  on cash and cash equivalents                                                       14,013,131                3,154,611
NET DECREASE/( INCREASE ) OF CASH AND CASH EQUIVALENTS                              (76,053,030)             164,700,643
Add: cash and cash equivalents at beginning of the year VI-49(3)                  1,256,942,304
                                                                                 ____________              1,092,241,661
                                                                                                          ____________
CASH AND CASH EQUIVALENTS AT END OF THE YEARVI-49(3)                              1,180,889,274
                                                                                 ____________              1,256,942,304
                                                                                                          ____________
                                                                        Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
CASH FLOW STATEMENT OF THE COMPANY
YEAR ENDED 31 DECEMBER 2017
                                                                      Notes             2017
                                                                                        RMB                      RMB
CASH FLOWS FROM OPERATING ACTIVITIES
 Cash receipts from the sale of goods
   and the rendering of services                                                     984,103,489             1,260,184,309
 Other cash receipts relating to operating activities                                431,983,092
                                                                                   ____________                232,328,473
                                                                                                            ____________
Sub-total of cash inflows from operating activities                                 1,416,086,581
                                                                                   ____________              1,492,512,782
                                                                                                            ____________
  Cash payments for goods purchased and services received                            398,827,772              887,413,606
  Cash payments to and on behalf of employees                                         89,894,049              121,662,409
  Cash payment of various types of taxes                                             207,917,864              132,372,497
  Other cash payment relating to operating activities                                121,377,127
                                                                                   ____________               805,127,368
                                                                                                            ____________
Sub-total of cash outflows from operating activities                                 818,016,812
                                                                                   ____________              1,946,575,880
                                                                                                            ____________
Net cash flows from operating activities                          XIV- 28            598,069,769
                                                                                   ____________              (454,063,098)
                                                                                                            ____________
CASH FLOWS FROM INVESTING ACTIVITIES
   Cash receipts from deposits over 3 months                                          103,000,000               18,021,025
   Cash receipts from return on investments                                           827,218,467            1,530,872,587
   Net cash receipts from disposals of fixed assets,
intangible assets and other long-term assets                                          26,760,929
                                                                                   ____________                 9,705,026
                                                                                                            ____________
Sub-total of cash outflows from investing activities                                 956,979,396
                                                                                   ____________              1,558,598,638
                                                                                                            ____________
 Cash payments to acquire or construct fixed assets, intangible
   assets and other long-term assets                                                  22,527,073               28,351,843
 Cash payments for term deposits over 3 months                                       105,000,000               12,021,025
 Cash payments for subsidiary investment                                             881,056,220
                                                                                   ____________               468,882,418
                                                                                                            ____________
Sub-total of cash outflows from investing activities                                1,008,583,293
                                                                                   ____________               509,255,286
                                                                                                            ____________
Net cash flows from investing activities                                             (51,603,897)
                                                                                   ____________              1,049,343,352
                                                                                                            ____________
CASH FLOWS FROM FINANCING ACTIVITIES
 Cash receipts from borrowings                                                       600,000,000              500,000,000
 Cash inflows from financing activities                                                     -
                                                                                   ____________               135,584,347
                                                                                                            ____________
Sub-total of cash outflows from investing activities                                 600,000,000
                                                                                   ____________               635,584,347
                                                                                                            ____________
  Cash paid for borrowings                                                           530,339,600              764,619,892
Cash paid for dividends, profits and interests                                       360,560,604
                                                                                   ____________               372,039,591
                                                                                                            ____________
Sub-total of Cash outflows from financing activities                                 890,900,204
                                                                                   ____________              1,136,659,483
                                                                                                            ____________
Net cash flows from financing activities                                            (290,900,204)
                                                                                   ____________              (501,075,136)
                                                                                                            ____________
NET INCREASE/(DECREASE) OF CASH
  AND CASH EQUIVALENTS                                                               255,565,668               94,205,118
Add: cash and cash equivalents at beginning of the year           XIV- 29            238,003,198
                                                                                   ____________               143,798,080
                                                                                                            ____________
CASH AND CASH EQUIVALENTS AT END
OF THE YEAR                                                       XIV- 29            493,568,866
                                                                                   ____________               238,003,198
                                                                                                            ____________
                                                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
CONSOLIDATED SATATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2017
                                                           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
                                                       _______           (5,259,014)
                                                                        _______              342,732,000
                                                                                             _______           6,620,118,562
                                                                                                               ________        190,473,697
                                                                                                                               _______           8,399,484,686
                                                                                                                                                 ________
II. Changes for the year
    (I) Total comprehensive income             -              -            8,368,254                       -   1,031,695,056      3,594,080      1,043,657,390
  (II) Owners contributions and reduction in capital
   Non-controlling interests' capital
  contribution (VIII-2)                        -              -                   -                    -                 -       78,236,726         78,236,726
  (II) Profit distribution
    Distributions to
           shareholders (VI-36)      _______   -            -
                                                       _______               -
                                                                        _______                   -
                                                                                             _______            (342,732,000) (668,124)
                                                                                                               ________ _______ ________(343,400,124)
III. Closing balance
            of the current year      685,464,000
                                     _______           565,955,441
                                                       _______            3,109,240
                                                                        _______              342,732,000
                                                                                             _______           7,309,081,618
                                                                                                               ________        271,636,379
                                                                                                                               _______           9,177,978,678
                                                                                                                                                 ________
                                                           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               -              -            5,183,498                       -    982,460,488      (1,438,903)       986,205,083
(II) Profit distribution
    Distributions to
          shareholders (VI-36)            -
                                     _______                -
                                                       _______          _______-                  -
                                                                                             _______            (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
                                                                                                                                                 ________
                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
YEAR ENDED 31 DECEMBER 2017
                                                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
                                                                                       ________          7,360,234,545
                                                                                                         _________          8,945,652,999
                                                                                                                            _________
II. Changes for the year
(I) Total comprehensive income                          -                 -                    -           793,598,010        793,598,010
(II) Profit distribution
    Distributions to shareholders (VI-36)        -
                                                ________              -
                                                                 ________                   -
                                                                                       ________           (342,732,000)
                                                                                                         _________           (342,732,000)
                                                                                                                            _________
III. Closing balance
           of the current year                   685,464,000
                                                ________          557,222,454
                                                                 ________               342,732,000
                                                                                       ________          7,811,100,555
                                                                                                         _________          9,396,519,009
                                                                                                                            _________
                                                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-36)                -
                                                ________              -
                                                                 ________                   -
                                                                                       ________           (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
                                                                                                                            _________
                                                            Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2017
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 2017 the total shares issued by the Company amounts to 685,464,000 shares.
    Please refer to Note VI-32 in detail.
    The holding company of the Group is Changyu Group Company, which is jointly controlled by
    Yantai GuoFeng Investment Holding Ltd, ILLVA SARONNO HOLDING SPA, International
    Finance Corporation and Yantai Yuhua Investment and Development Company Limited.
    The financial statements have been authorized by the board of directors on 19 April 2018.
    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. 2017 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 2017, 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 2017, financial performance and cash flow in 2017
       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.
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 and Chilean Peso 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.
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
III.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
         continued
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.
         Where the cost of combination exceeds the acquirers interest in the fair value of the acquirees
         identifiable net assets, the difference is treated as an asset and recognised as goodwill, which is
         measured at cost on initial recognition. Where the cost of combination is less than the acquirers
         interest in the fair value of the acquirees identifiable net assets, the acquirer firstly reassesses the
         measurement of the fair values of the acquirees identifiable assets, liabilities and contingent
         liabilities and measurement of the cost of combination. If after that reassessment, the cost of
         combination is still less than the acquirers interest in the fair value of the acquirees identifiable
         net assets, the acquirer recognises the remaining difference immediately in profit or loss for the
         current period.
          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.
          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 the subsidiaries through business combination not involving enterprises under common
          control, the results of operations and cash flows from the acquisition day were properly included
          in the consolidated income statements and consolidated cash flow statements.
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 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
          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.
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.
          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.
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 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
          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.
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.
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING - continued
9      Financial instruments - continued
       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 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. 2017 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
                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
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. 2017 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, the Group assesses the asset individually for 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.
       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.
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       continued
9.     Financial instruments - continued
       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
       The Group believes that the individual receivables are all significant, and the corresponding
       receivables are individually tested for impairment, and individual recognition method is used to
       confirm bad debt provision.
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       continued
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.
       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
       Non-current assets and disposal groups are classified as held for sale category when the Group
       recovers the book value through a sale (including an exchange of nonmonetary assets that has
       commercial substance) rather than continuing use.
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       continued
12. Non-current assets held for sale - continued
       Non-current assets or disposal groups classified as held for sale are required to satisfy the
       following conditions: (1) the asset or disposal group is available for immediate sale in its present
       condition subject only to terms that are usual and customary for sales of such asset or disposal
       group; (2) the sale is highly probable, i.e. the Group has made a resolution about selling plan and
       obtained a confirmed purchase commitment and the sale is expected to be completed within one
       year.
       The Group measures the no-current assets or disposal groups classified as held for sale at the
       lower of their carrying amount and fair value less costs to sell. Where the carrying amount is
       higher than the net amount of fair value less costs to sell, carrying amount should be reduced to
       the net amount of fair value less costs to sell, and such reduction is recognized in impairment loss
       of assets and included in profit or loss for the period. Meanwhile, provision for impairment of
       held-for-sale assets are made. When there is increase in the net amount of fair value of
       non-current assets held for sale less costs to sell at the balance sheet date, the original deduction
       should be reversed in impairment loss of assets recognized after the classification of held-for-sale
       category, and the reverse amount is include in profit or loss for the period.
       Non-current assets held for sale in non-current assets are not subject to depreciation or
       amortization.
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.
       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.
       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.
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       continued
13. Long term equity investments - continued
       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. Investment properties
       Investment property is property held to earn rentals or for capital appreciation or both.
       An investment property is measured initially at cost. Subsequent expenditures incurred for such
       investment property are included in the cost of the investment property if it is probable that
       economic benefits associated with an investment property will flow to the Group and the
       subsequent expenditures can be measured reliably. Other subsequent expenditures are recognised
       in profit or loss in the period in which they are incurred.
       The Group uses the cost model for subsequent measurement of investment property, and adopts a
       depreciationor amortisation policy for the investment property which is consistent with that for
       buildings or land use rights.
       When an investment property is sold, transferred, retired or damaged, the Group recognises the
       amount of any proceeds on disposal net of the carrying amount and related taxes in profit or loss
       for the period.
15. Fixed assets
       15.1 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.
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       continued
15. Fixed assets - continued
       15.1 Recognition criteria for fixed assets - continued
       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.
       15.2 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                                5-30years                     0-5%                    3.2%-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.
       15.3 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.
16. 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.
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       continued
17. 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.
18. Biological assets
       The Group's biological assets are bearer biological assets.
       18.1 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                         -                       5.0%
       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.
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       continued
19. 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.
       Intangible assets with indefinite useful lives are not amortized. 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%
       Except for the above intangible assets with finite useful lives, the Group had also land use right
       and trademark with infinite useful lives. Land use right with infinite useful lives was related to the
       Group acquired Via Indómita, S.A., Via Dos Andes, S.A., and Bodegas Santa Alicia SpA.
       (collectively referred to as the \"Chile Indomita Wine Group\"), which was a permanent ownership
       and held by the Chile Indomita Wine Group according to the relatively Chilean law, therefore
       there was no amortization. Trademark was related to the Group acquired the Chile Indomita Wine
       Group, which had no finite useful lives. The valuation of trademark was based on the trends in the
       market and competitive environment, product cycle, and managing long-term development
       strategy. Those basis indicated the trademark will provide net cash flows to the Group within a
       given period. Because it was hard to predict the period that it would bring economic benefits to
       the Group, the useful lives were uncertain.
       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.
20. 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.Intangible assets with indefinite useful life and intangible assets not yet available for
       use are tested for impairment annually, irrespective of whether there is any indication that the
       assets may be impaired.
       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.
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       continued
20. Impairment of long-term assets - continued
       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.
21. 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
22. Employee benefits
       22.1 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.
       22.2 Accounting treatments of retired benefits
       Retired benefits of the Group are all predetermined provision plan.
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       continued
22. Employee benefits- continued
       22.2 Accounting treatments of retired benefits- continued
       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.
       22.3 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.
23. Revenue
       23.1 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.
       23.2 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.
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III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
24. Government grants
       Government grants are transfer of monetary assets and non-monetary assets from the government
       to the Group at no consideration. 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.
       24.1 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.
       24.2Government 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.
       A government grant related to the Group's daily activities is recognized in other income based on
       the nature of economic activities; a government grant is not related to the Group's daily activities
       is recognized in non-operating income and expenses.
       The Company's government loans with below-market rate of interest are directly paid to the
       Company, and the related low rate interest will write off related borrowing costs . The
       government loans with below-market rate of interest obtained by other subsidiaries of the Group
       are government loans, which is provided by local bureau of finance through bank with
       below-market rate of interest. The actual amount of the loan received by the Group recognized as
       borrowings, and the related borrowing costs are calculated according to the principal of the loan
       and the below-market rate.
25. Deferred tax assets/deferred tax liabilities
       The income tax expenses include current income tax and deferred income tax.
       25.1 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.
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       continued
25.    Deferred tax assets/deferred tax liabilities - continued
       25.2 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.
       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.
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       continued
25.    Deferred tax assets/deferred tax liabilities - continued
       25.3 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.
26. 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.
       26.1. Operating lease accounting methods
       26.1.1 The Group as lessee under operating leases
       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.
       26.1.2 The Group as lessor under operating leases
       Rental income from operating leases is recognised in profit or loss on a straight-line basis over the
       term of the relevant lease. Initial direct costs with more than an insignificant amount are
       capitalised when incurred, and are recognised in profit or loss on the same basis as rental income
       over the lease term. Other initial direct costs with an insignificant amount are charged to profit or
       loss in the period in which they are incurred. Contingent rents are charged to profit or loss in the
       period in which they actually arise.
27. Changes in accounting policies
       The Group started adopting the Accounting Standard for Business Enterprise No.16 - Government
       Grants revised by MoF in 2017 respectively since 28 May 2017 and 12 June 2017 respectively.
       Besides, the financial statements have been prepared under the Notice of the Revised Format of
       Financial Statements for General Business Enterprise (Cai Kuai (2017) No. 30, hereinafter
       referred to as the \"Cai Kuai No.30 Document\") released by the MoF on 25 December 2017.
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
III.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING -
       continued
27.    Changes in accounting policies - continued
       Government grants
       Prior to the implementation of the Accounting Standard for Business Enterprise No.16 -
       Government Grants (revised), the Group did not distinguish whether government grants were
       related to daily activities and were included in non-operating income.After the implementation of
       the Accounting Standard for Business Enterprise No.16 - Government Grants (revised), a
       government grant related to the Group's daily activities is recognized in other income based on the
       nature of economic activities; a government grant is not related to the Group's daily activities is
       recognized in non-operating income.
       The Group has accounted for the above change in accounting policy retrospectively. Such
       changes in accounting policy has no impact on the financial statements for the comparable years.
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.
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2017 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
      Depreciation
      As set out in Note III-15, 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.
      Impairment of long-term 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 growth
      rate of sales , average gross profit , related operating costs and discount rate in order to calculate
      the present value of those cash flows, which has a high uncertainty.
      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.
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2017 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
         Inventory provision based on net realizable value
         The inventories 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.
         The determination of the fair value of identifiable assets and liabilities associated with business
         combination.
         For the cost of business combination, the Group allocates the purchase price based on fair value of
         relatively identifiable assets and liabilities. When the fair value of relatively identifiable assets
         and liabilities are evaluated by the present value of its future cash flows, The management need
         estimate the growth rate of sales based on future market supply and demand to predict cash flows,
         and considered the proper discount rate for calculating, management need use major accounting
         estimates and judgments in the progress.
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%.
         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.
(2) 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.
(3) 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.
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
V. TAXES
1.   The main taxes and tax rate are as follows - continued:
(4) Chile
    Value added tax               VAT is levied at 19% on the invoiced amount after deduction
                                        of eligible input VAT.
    Corporate income tax          The Group is subject to a corporate income tax rate of 25.5%
                                        on its taxable income.
    Other than tax incentives stated in Note V-2, applicable tax rates of the Group in 2017 and 2016
    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 Growing enjoys an exemption of corporate income
    tax.
    Yantai Changyu Grape Growing Co., Ltd.(\" Grape Growing \"), a branch of the Company, whose
    principal activity is grape growing is incorporated in Zhifu District, Yantai City, Shandong
    Province. According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate
    Income Tax Measures for Implementation, Grape Growing 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. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.   Cash and bank
                                                                  Closing balance          Opening balance
                                                                       RMB                     RMB
       Cash                                                               136,973                  117,507
       Bank balance                                                 1,278,397,711            1,240,607,797
       Other currency fund                                            123,987,825
                                                                   ____________                150,792,303
                                                                                            ____________
       Total                                                        1,402,522,509
                                                                   ____________              1,391,517,607
                                                                                            ____________
       At 31 December 2017, the balance of restricted cash of the Group is as follows:
                                                                  Closing balance          Opening balance
                                                                       RMB                     RMB
       The Company's housing fund                                     2,645,410
                                                                   ___________                 2,711,926
                                                                                            ___________
       As at 31 December 2017, 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                                61,700,000               46,100,000
       Refundable deposit for notes payable                                -                  38,900,000
       Deposit for letter of credit                                  57,946,190               25,694,735
       Alipay account balance                                         4,317,635               40,047,367
       Deposit for Company cards                                         14,000                   50,201
       Deposit for ICBC platform                                         10,000
                                                                   ___________                      -
                                                                                            ___________
                                                                    123,987,825
                                                                   ___________               150,792,303
                                                                                            ___________
       As at 31 December 2017, the Group's term deposits with original maturity of more than three
       months when acquired is RMB 95,000,000 with interest rate 1.40%-1.95% (31 December
       2016:RMB3,000,000).
2.   Notes receivable
(1) Categories of notes receivable
                                                                  Closing balance          Opening balance
                                                                       RMB                     RMB
       Bank acceptances                                              244,796,818
                                                                     __________               210,470,027
                                                                                              __________
                                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
2.     Notes receivable - continued
(2) Notes receivable which have been pledged as security at the end of the period
       As at 31 December 2017, there was no pledged notes receivable (31 December 2016: 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                                                                        188,855,843
                                                                                               __________                  198,302,531
                                                                                                                           __________
       As at 31 December 2017, notes endorsed by the Group to other parties which are not yet due at
       the end of the period is RMB 188,855,843 (31 December 2016: RMB 198,302,531). The notes are
       used for payment to suppliers and constructions. The Group believes that due to good reputation
       of bank, the risk of notes not accepting by bank on maturity is very low, 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 2017, no notes receivable were reclassified as accounts receivable due to the
       default of drawer (31 December 2016: 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 for which
         bad debt provision has been
         assessed individually         263,796,355 100.0        -          -  263,796,355 173,062,628 100.0           -          -  173,062,628
                                       ______ ___             ____       ____ ______ ______ ___                     ____       ____ ______
       The normal credit term is one month, which can be extended to one year for certain major
       customers. The accounts receivable are interest-free.
                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
3.      Accounts receivable - continued
(1) Disclosure of accounts receivable by categories - continued
    As at 31 December 2017, ownership restricted accounts receivable is RMB 46,337,062 (31
    December 2016: RMB 30,732,944), referring to Note VI-50.
    The aging analysis is as follows:
                                                                          Closing balance          Opening balance
                                                                               RMB                     RMB
    Within 1 year                                                        263,112,714              172,610,351
    1 to 2 years                                                             683,641
                                                                             __________                   452,277
                                                                                                      __________
                                                                             263,796,355
                                                                             __________               173,062,628
                                                                                                      __________
(2) Recognitions, collections and reversals during the current period:
    As at 31 December 2017, there was no bad debt provision for accounts receivable (31 December
    2016: Nil). There was no bad debt provision made, reversed or written-off by management in
    2017 (2016: Nil).
(3) Top five entities with the largest balances of accounts receivable:
                                                 Relationship                                            Percentage of
               Name                             with the Group         Amount             Aging        total receivables
                                                                        RMB                                    %
    VIA SAN PEDRO TARAPACA S.A.              Third party         18,700,096       Within 1 year            7.1
    Nongongshang Supermarket
          (Group) Co., Ltd                       Third party          10,810,966      Within 1 year           4.1
    DISTRIBUIDORA INTERNACIONAL              Third party           9,999,760      Within 1 year           3.8
    SLIGRO B.V.                              Third party           8,487,591      Within 1 year           3.2
    SAINSBURY'S SUPERMARKETS LTD             Third party           6,511,762
                                                                     ________         Within 1 year           2.5
                                                                                                             ___
                                                                      54,510,175
                                                                     ________                                20.7
                                                                                                             ___
4.    Prepayments
(1)     The aging analysis is as follows:
                                         Closing balance                               Opening balance
                                      Amount            Ratio                       Amount           Ratio
                                       RMB               %                           RMB               %
    Within 1 year               2,417,931
                                    ________                 100.0
                                                            _____                  2,175,606
                                                                                   ________                 100.0
                                                                                                           _____
                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
4.    Prepayments
(2)      As at 31 December 2017, 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                                                          %
         DONELLI VINI S.P.A.                            Third party           370,673       Within 1 year     goods not received           15.3
         Shenzhen Yijia Packaging
           Product Co., Ltd.                            Third party           313,200       Within 1 year     goods not received           13.0
         Shandong Electricity Company
           Yantai branch                                Third party           200,000       Within 1 year    electricity purchase           8.3
         Beijing Aidixi Time International
           Trade Co., Ltd.                              Third party           168,000       Within 1 year     goods not received            6.9
         Yantai Cihang International Freight
           Agent Co., Ltd.                              Third party         121,907
                                                                          _______           Within 1 year    prepaid agency fees            5.0
                                                                                                                                           ___
                                                                           1,173,780
                                                                          _______                                                          48.5
                                                                                                                                           ___
5.    Interest receivable
(1) Categories of interest receivable
                                                                                                Closing balance              Opening balance
                                                                                                     RMB                         RMB
         Interests of term deposits                                                                  240,968
                                                                                                   ________                        24,200
                                                                                                                                ________
(2) Overdue interest
         As at 31 December 2017, there was no overdue interest receivable (31 December 2016: Nil).
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 receivable for which
           bad debt provision has been
           assessed individually          18,737,454 100.0 -
                                         ______ ___ _____                         18,737,454 18,880,800
                                                                            ___- ______ ______ ___ _____100.0 -                           18,880,800
                                                                                                                                    ___- ______
                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
6.     Other receivables- continued
(1)    Disclosure of other receivables by categories- continued
       The aging analysis is as follows:
                                         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      13,214,301     70.5        -          13,214,301     8,204,303     43.5        -        8,204,303
       1 to 2 years        1,937,961     10.3        -           1,937,961     7,715,992     40.8        -        7,715,992
       2 to 3 years        2,273,591     12.2        -           2,273,591     1,929,613     10.2        -        1,929,613
       Over 3 years        1,311,601
                         _______       ____7.0       -
                                                 ______          1,311,601
                                                               _______         1,030,892
                                                                             _______       ____5.5       -
                                                                                                     ______       1,030,892
                                                                                                                _______
       Total              18,737,454
                         _______ ____100.0           -
                                                 ______         18,737,454 18,880,800
                                                               _______ _______ ____   100.0              -   18,880,800
                                                                                                     ______ _______
(2) Accrual, reversal and written-off during the current period
       The Group accrued bed provisions RMB 354,805 for 2017 (2016: bad debt was reversed RMB:
       Nil).
(3) Other receivables written off in the reporting period
       Other receivables were written off RMB 354,805 in 2017. (2016:RMB 7,199,521)。
(4) Disclosure of other receivables by categories
                                                                             Closing balance         Opening balance
                                                                                  RMB                    RMB
       Deposit                                                                  10,075,901              13,191,851
       Petty cash receivable                                                     2,215,146               2,934,424
       Investment fund                                                           2,050,000               2,050,000
       Refund of consumption tax, real estate tax                                2,451,188                 573,586
       Others                                                                    1,945,219
                                                                               __________                  130,939
                                                                                                        _________
                                                                                18,737,454
                                                                               __________               18,880,800
                                                                                                        _________
                                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
6.      Other receivables - continued
(5) Five entities with the largest balances of other receivables
    As at 31 December 2017, 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 Construction
         Industry Association                Construction deposit 7,709,477            Within 2 years          41.1                  -
       Canada Oros Ice-wine Co., Ltd        Foreign investment fund 2,050,000            2-3years              10.9                  -
    Yantai Economic and Technological
       Development Zone Thermal Co., Ltd            Deposit              630,000       Within 1 year            3.4                  -
       Beijing Shanshui Decoration
       Engineering Co.,Ltd.                  Receivables on behalf       465,460       Within 1 year            2.5                  -
                                            of others' electricity fee
       Shanxi Fangyuan Jiangong              Receivables on behalf
         Group Limited                                                   449,337
                                            of others' electricity fee_________        Within 1 year            2.4
                                                                                                              ____                  -
                                                                                                                              _________
                                                                        11,304,274
                                                                       _________                               60.3
                                                                                                              ____                  -
                                                                                                                              _________
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             66,881,090          -           66,881,090             72,011,633              -            72,011,633
    Work in progress      1,568,230,851          -        1,568,230,851          1,253,218,347              -         1,253,218,347
    Finished goods          864,097,497
                              _________       (25,595,392)
                                               _______          838,502,105
                                                              _________                944,806,516
                                                                                     _________           (21,426,756)
                                                                                                          _______           923,379,760
                                                                                                                          _________
                              2,499,209,438
                              _________       (25,595,392)
                                               _______        2,473,614,046
                                                              _________              2,270,036,496
                                                                                     _________           (21,426,756)
                                                                                                          _______         2,248,609,740
                                                                                                                          _________
                                               _______                                                   _______
(2) Inventory provision
                                              Opening balance      Recognized          Reversal          Written off    Closing balance
                                                  RMB                RMB                RMB                 RMB              RMB
    Provision for decline in
          value of inventories                   21,426,756
                                                 _______            8,215,578
                                                                   _______              (276,830)
                                                                                       ______            (3,770,112)
                                                                                                         _______          25,595,392
                                                                                                                          _______
                                                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2017 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
                                                                                                                          _______                              2018 年
         Note: The Company has signed an irrevocable agreement for disposal of fixed assets, with the
         amount of RMB 16,282,224. Because the property rights hadn't been changed, the disposal didn't
         finish by the end of 2017, and the disposal is expected to be completed by 2018.
9.   Other current assets
                                                                                                            Closing balance                      Opening balance
                                                                                                                 RMB                                 RMB
    Prepaid taxes                                                                                            22,911,298                           26,238,092
    Pending deduct VAT on purchase                                                                          206,529,504                          135,316,274
    Prepaid rent                                                                                              1,381,957
                                                                                                                __________                             7,967,876
                                                                                                                                                     __________
                                                                                                                230,822,759
                                                                                                                __________                        169,522,242
                                                                                                                                                 ___________
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                  467,251
                                           _______                -
                                                              _______                    467,251
                                                                                        ______             10,340,263
                                                                                                           _______                    (10,000,000)
                                                                                                                                       _______               340,263
                                                                                                                                                            ______
                                                                                                                                      _______
(2) Available-for-sale financial assets measured at cost
                                                 Carrying amount                                       Provision for impairment losses                Proportion of     Cash
                                                                                                                                                      voting power    dividend
                                                            Decrease         Closing                                                                      in the       for the
       Investee               Opening         Increase                                    Opening        Increase         Decrease         Closing    investee (%)     period
                               RMB             RMB                           RMB           RMB            RMB              RMB              RMB             %           RMB
       Yantai Ding Tao
          Construction and
       Development Co., Ltd
              (Note 1).
       Other(Note 2)          10,000,000             -     (10,000,000)            -      10,000,000             -       (10,000,000)            -        18.0          -
                                                                                                                                                        Less than
       Investee                 340,263         129,216            (2,228)    467,251           -                -                -              -        1%            -
                              10,340,263        129,216    (10,002,228)       467,251     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, 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. The Company has accrued the impairment of RMB 10,000,000 in
                                           Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
the previous year, and the Company write off the equity investment this year.
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
10.    Available-for-sale financial assets - continued
 (2)   Available-for-sale financial assets measured at cost - continued
       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.
11. Investment properties
       Investment properties measured by cost method
                                                                                                Buildings
                                                                                                 RMB
       I. Total original carrying amount
       1. Opening balance                                                                               -
       2. Increase
       Transfer from fixed assets                                                              38,347,283
                                                                                              __________
       3.Closing balance                                                                       38,347,283
                                                                                              __________
       II. Total accumulated depreciation
       1. Opening balance                                                                               -
       2. Increase
       (1) Transfer from fixed assets                                                          19,288,684
       (2) Additions                                                                              590,610
                                                                                              __________
       3. Closing balance                                                                      19,879,294
                                                                                              __________
       III. Total carrying amount
       1. Closing carrying amount                                                              18,467,989
                                                                                              __________
       2. Opening carrying amount                                                                   -
                                                                                              __________
       As at 1 July 2017, the Group changed the own used properties to rent, from then the fixed assets
       recognized as investment properties measured by cost method.
                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12. Fixed assets
(1) Details of fixed assets
                                          Buildings               Machinery          Motor Vehicles               Total
                                           RMB                     RMB                   RMB                      RMB
       I. Total original carrying amount
       1. Opening balance                 3,956,177,208          1,969,135,575         29,329,141            5,954,641,924
       2. Increase
       (1)Purchase                            8,762,218            36,809,492           2,867,768               48,439,478
       (2)Transfer from CIP                 545,584,623           239,819,904             105,602              785,510,129
       (3)Acquisition increase (VII-1)       37,209,412            51,877,050                -                  89,086,462
       3. Decrease
       (1) Disposal                            (517,494)           (50,291,728)        (3,613,096)             (54,422,318)
       (2) Transfer to Investment
                  properties (VI-11)        (38,347,283)
                                         ____________                -
                                                             ____________                   -
                                                                                      __________              (38,347,283)
                                                                                                            ____________
       4. Closing balance                4,508,868,684
                                        ____________         2,247,350,293
                                                             ____________              28,689,415
                                                                                      __________            6,784,908,392
                                                                                                            ____________
       II. Total accumulated depreciation
       1. Opening balance                 410,161,600             840,158,129          21,134,702            1,271,454,431
       2. Increase
       (1)Additions                       122,262,189             125,609,728           2,392,486              250,264,403
       3. Decrease
       (1) Disposal                          (491,619)             (42,823,337)        (3,290,771)             (46,605,727)
       (2)Transfer to Investment
                 properties (VI-11)       (19,288,684)
                                        ____________                 -
                                                             ____________                   -
                                                                                      __________              (19,288,684)
                                                                                                            ____________
       4. Closing balance                 512,643,486
                                        ____________           922,944,520
                                                             ____________              20,236,417
                                                                                      __________            1,455,824,423
                                                                                                            ____________
       III. Total carrying amount
       1. Closing carrying amount       3,996,225,198
                                        ____________         1,324,405,773
                                                             ____________               8,452,998
                                                                                      __________            5,329,083,969
                                                                                                            ____________
       2. Opening carrying amount        3,546,015,608
                                        ____________          1,128,977,446
                                                             ____________               8,194,439
                                                                                      __________            4,683,187,493
                                                                                                            ____________
       As at 31 December 2017, fixed assets with ownership restricted are RMB 145,009,923 (31
       December 2016: RMB 68,658,094). Please refer to Notes VI-50 in detail.
       As at 31 December 2017, Classified as available for sale assets are RMB 2,000,197 (31 December
       2016: RMB 2,000,197), there was no temporary idle fixed assets, no fixed assets acquired under
       finance leases, at the end of the period.
(2) Fixed assets through operating lease
                                                                                                            Amount
                                                                                                             RMB
       Machinery                                                                                             265,471
                                                                                                           ________
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
12.    Fixed assets - continued
(3) 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                                  1,643,057,463                   Processing
       Changan Chateau Dormitory building, main building             357,956,446                   Processing
       Beijing Chateau European town, main, service building         193,321,864                   Processing
       Ding Luo Te Chateau main building                              86,444,831                   Processing
       Xinjiang Tianzhu fermentations and storage warehouse           18,413,198                   Processing
       Ice Wine Chateau office building and packing workshop           9,506,188                   Processing
       Jingyang factory fermentation building                          4,481,717                   Processing
       Fermentation centre office, experiment building and workshop    3,824,105                   Processing
       Kylin Packaging finished goods warehouse and workshop           2,487,528                   Processing
       Sales Company office buildings                                  2,045,603
                                                                  ____________                     Processing
                                                               2,321,538,943
                                                               ____________
(4) By the end of 31 December 2017, some subsidiaries of the Company are sustained loss and the cash
      flow from operating activities are net out and the related assets existed an indication of
      impairment. As at 31 December 2017, the book values of fixed assets, which exists an indication
      of impairment, are RMB 928,058,429. The management performs impairment testing for fixed
      assets, which exists an indication of impairment, of the above subsidiaries based on the assets
      belonged group of assets. The recoverable amount of the group of assets is determined by the
      present value of its future cash flows. Future cash flow projections are made based on the recently
      financial budgets for the future 5 years period (projecting period) and the projecting period
      (subsequent period) of 15 years, which are prepared by the management. Discount rate used in
      calculating the use value of the group of assets in future is 12.6%. Other key assumptions include
      the result of operations' forecast of the projecting period, which was estimated according to such
      subsidiaries' growth rate of sales, average gross rate, other operating expenses based on historical
      experience and future trends. The management believes that any reasonable change of the above
      assumptions will not result in the total book value of fixed assets of those subsidiaries exceeding
      its recoverable amount. By the end of 31 December 2017, the management believes there is no
      impairment loss on those fixed assets of the Group.
                                                       Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Construction in progress
(1) Construction in progress:
                                                                Closing balance          Opening balance
                                                                     RMB                     RMB
       R&D Centre (\"Changyu Wine integrational
         Construction\") Project                                    883,731,540             1,227,968,480
       Xianyang Chateau Construction Project                        53,290,036                10,346,598
       Ningxia Chateau Construction Project                         35,711,269                36,717,169
       Shihezi Chateau Construction Project                         25,463,724                30,600,684
       Sales Company construction project                           11,355,685                26,011,600
       Ding Luo Te Chateau Project                                   5,819,246                 4,871,422
       Other companies construction Project                         10,770,069
                                                                 ____________                  9,765,784
                                                                                          ____________
                                                                  1,026,141,569
                                                                 ____________              1,346,281,737
                                                                                          ____________
                                                                                                                                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
13. Construction in progress- continued
(2) Changes in significant construction in progress:
                                                                                                                              Transfer to                                                                             Interest
                                                                                                           Transfer to        Lone-term                                    Total accumulated     Capitalizing        capitalizat
                                                                                           Transfer to     intangible          prepaid            Closing                     Capitalizing          interest            ion
                                              Budge        Opening balance   Addition         PPE            assets            expense            balance       Status          interest       for this period          rate         Financed by
                                              RMB              RMB            RMB            RMB             RMB                RMB                RMB          Status              RMB             RMB                  %
                                                                                                                                                                                                                              Loans from financial
      Changyu Wine integrational                                                                                                                                                                                                  institutions
      Construction\"                        4,505,780,000     1,227,968,480   425,697,814   (689,475,320)                 -   (80,459,434)        883,731,540    71.6            8,427,965            6,138,242       1.2&&4.3     and Self-raised
      Changan Chateau Construction                                                                                                          -
    Project                             620,740,000         10,346,598    73,012,018    (30,068,580)                 -                        53,290,036    106.8                   -                        -        -           Self-raised
      Shihezi Chateau Construction                                                                                                          -
    Project                             780,000,000         30,600,684    27,980,421    (33,117,381)              -                           25,463,724    91.5                    -                        -        -           Self-raised
      Sales Company construction project    161,350,000         26,011,600     5,486,264               -   (20,142,179)                     -     11,355,685    93.4                    -                        -        -           Self-raised
      Ningxia Chateau Construction                                                                                                          -
    Project                             414,150,000         36,717,169    15,097,212    (16,103,112)                 -                        35,711,269    98.6                    -                        -        -           Self-raised
      Ding Luo Te Chateau project           192,400,000          4,871,422     1,212,824       (265,000)                 -                  -      5,819,246    96.3                    -                        -        -           Self-raised
                                                             1,336,515,953   548,486,553   (769,029,393)   (20,142,179)       (80,459,434)      1,015,371,500                   8,427,965            6,138,242
       The interest capitalized in construction in progress is RMB 6,138,242 in 2017(2016: RMB 2,289,723).
(3) By the end of 31 December 2017, some subsidiaries of the Company are sustained loss and the cash flow from operating activities are net out and the related
      assets existed an indication of impairment. As at 31 December 2017, the book values of construction in progress (\"CIP\"), which exists an indication of
      impairment, are RMB 89,001,307. The management performs impairment testing for CIP, which exists an indication of impairment, of the above
      subsidiaries based on the assets belonged group of assets. The key assumptions used by the management during the assessment refer to Note VI-12. By
      the end of 31 December 2017, the management believes there is no impairment loss on those CIP of the Group.
                                                             Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
14. 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                      77,841,960               141,208,504                 219,050,464
       2. Increase
         (1)Cultivated increase                 9,248,294                       -                      9,248,294
       (2) Acquisition increase (VII-1)              -                     1,413,595                   1,413,595
       (3) Transfer to mature assets
                  from immature assets        (74,915,254)
                                              __________                 74,915,254
                                                                        __________                        -
                                                                                                    __________
       3. Closing balance                      12,175,000
                                              __________                217,537,353
                                                                        __________                  229,712,353
                                                                                                    __________
       II. Total accumulated depreciation
       1. Opening balance                                -               17,621,484                   17,621,484
       2. Increase
         (1)Additions                               -
                                              __________                 10,160,981
                                                                        __________                   10,160,981
                                                                                                    __________
       3. losing balance                            -
                                              __________                 27,782,465
                                                                        __________                   27,782,465
                                                                                                    __________
       III. Total net carrying amount
       1. Closing net carrying amount          12,175,000
                                              __________                189,754,888
                                                                        __________                  201,929,888
                                                                                                    __________
       2. Opening net carrying amount          77,841,960               123,587,020                 201,428,980
                                              __________                __________                  __________
       As at 31 December 2017, there is no biological asset with ownership restricted. (31 December
       2016:Nil)
       As at 31 December 2017, there is no indication that biological assets may be impaired, and no
       provision is made. (31 December 2016:Nil)
                                                                      Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOIDATED FINANCIAL STATEMENTS - continued
15. Intangible assets
(1) Intangible assets
                                            Land use rights    Software use rights       Trademark                Total
                                                RMB                  RMB                   RMB                    RMB
       I. Total original carrying amount
       1. Opening balance                491,490,069                52,435,669           15,442,065             559,367,803
       2. Increase
       (1)Purchase                         4,284,653                  330,511               369,910              4,985,074
       (2) Transfer from CIP                    -                  20,142,179                  -                20,142,179
                                          25,956,417
       (3)Acquisition increase(VII-1) __________                      758,395
                                                                __________              143,890,533
                                                                                        ________               170,605,345
                                                                                                             __________
       3. Closing balance                     521,731,139
                                            __________             73,666,754
                                                                __________              159,702,508
                                                                                        ________               755,100,401
                                                                                                             __________
       II. Total accumulated depreciation
       1. Opening balance                      56,803,430           12,548,283            6,201,010              75,552,723
       2. Increase
       (1) Additions                           10,744,342
                                            __________             8,968,458
                                                                __________               4,385,981
                                                                                        ________                24,098,781
                                                                                                             __________
       3. Closing balance                      67,547,772
                                            __________             21,516,741
                                                                __________               10,586,991
                                                                                        ________                99,651,504
                                                                                                             __________
       III. Total carrying amount
       1. Closing carrying amount             454,183,367
                                            __________             52,150,013
                                                                __________              149,115,517
                                                                                        ________               655,448,897
                                                                                                             __________
                                                                                        ________
       2. Opening carrying amount             434,686,639
                                            __________             39,887,386
                                                                __________               9,241,055
                                                                                        ________               483,815,080
                                                                                                             __________
(2) Land use right's location and years are as follows:
       Item                                                                      Closing balance        Opening balance
                                                                                      RMB                   RMB
       In the PRC( within 50 years)                                                  428,226,950          434,686,639
       Out of the PRC (more than 50 years)                                            25,956,417
                                                                                     __________                  -
                                                                                                          __________
                                                                                     454,183,367
                                                                                     __________           434,686,639
                                                                                                          __________
       As at 31 December 2017, land use right with infinite useful lives of the Group, which is a
       permanent ownership and holds by the Indomita Wine according to the relatively Chilean law is
       RMB 25,956,417 (31 December 2016: Nil), therefore there is no amortization.
       By the end of 31 December 2017, trademark with infinite useful lives of the Group is RMB
       143,890,533 (31 December 2016: Nil), which is held by the Indomita Wine. The recoverable
       amount of trademark is determinated based on the present value of the expected future cash flows
       generated by group of assets owns by individual trademark. Future cash flow projections are made
       based on the recently financial budgets for the future 5 years period (projecting period) and
       presume that cash flows after the projecting period (subsequent period). Discount rate used in
       calculating the recoverable amounts is 9.6%. 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 and Indomita Wine. Growth rate of sales in subsequent period are 3%. The Group
       recognizes the trademark with infinite useful lives as intangible assets, the impairment assessment
       of which is made at the end of each reporting year.
                                                                   Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
15. Intangible assets - continued
       The management believes that any reasonable change of the above assumptions will not result in
       the total book value of fixed assets of those subsidiaries exceeding its recoverable amount.
       According to the result of impairment assessment, by the end of 31 December 2017, the
       management believes there is no impairment loss on those trademark with infinite useful lives of
       the Group.
       As at 31 December 2017, the intangible asset with restricted ownership is RMB
       164,051,996(December 31, 2016:RMB 145,937,719), Please refer to Note VI-50 in detail.
16. 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
    Indomita Wine                              -
                                             _________             6,870,115
                                                                  ________               -
                                                                                      ______             6,870,115
                                                                                                       _________
       Total                                  121,265,866
                                             _________             6,870,115
                                                                  ________               -
                                                                                      ______            128,135,981
                                                                                                       _________
       The Group acquired Fransac Sales, Dicot and Mirefleurs and Chile Indomita Wine Group in
       December 2013, September 2015 January 2016 and January 2017respectively, resulting in
       respective goodwill amounting to RMB 13,112,525,RMB 92,391,901, RMB 15,761,440 and
       RMB 6,870,115, which have been allocated to corresponding asset groups for impairment testing.
       The recoverable amount of the group of assets is determined by the present value of its future cash
       flows. Future cash flow projections are made based on the recently financial budgets for the future
       5 years period (projecting period) and presume that cash flows after the projecting period
       (subsequent period). Discount rate used in calculating the recoverable amounts of Fransac Sales,
       Dicot Mirefleurs and Indomita Wine are 10.3%, 8.5% ,10.3% and9.6%
       (2016:10.3%,8.5%,10.3%,N/A) respectively. One key assumption in projecting future cash flows
       is the growth rate of sales in projecting period, which is computed based on the expected growth
       rate of the industry and each group of assets. Growth rate of sales in subsequent period of Fransac
       Sales, Dicot, Mirefleurs and Indomita Wine is 2%, 2%, 2% and 3% (2016: 2%, 2%, 2% and N/A)
       respectively. 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 believes that no impairment provision need to be made
       for goodwill in the reporting period.
                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
17. Long-term prepaid expenses
                                           Opening balance           Increase         Amortization       Closing balance
                                               RMB                    RMB               RMB                   RMB
       Land lease prepayments             57,846,986                    -              (1,481,601)             56,365,385
       Land requisition fee               45,192,900                    -              (1,216,864)             43,976,036
       Greening fee                       54,460,971              80,459,434           (9,292,071)            125,628,334
       Leasehold improvement               1,091,579                 244,847             (463,163)                873,263
       Others                              3,613,793
                                        _________                  1,010,302
                                                                 ________              (1,457,882)
                                                                                      ________                  3,166,213
                                                                                                             _________
                                         162,206,229
                                        _________                 81,714,583
                                                                 ________             (13,911,581)
                                                                                      ________                230,009,231
                                                                                                             _________
                                                                                      ________
       Note: Greening fee for the period increased due to RMB 80,459,434 transfer from CIP. Please
       refer to Notes VI-13 in detail.
18. 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) Deferred tax assets:
                                                  Closing balance                            Opening balance
                                         Temporary            Deferred tax           Temporary
                                         differences              assets             differences      Deferred tax assets
                                            RMB                   RMB                   RMB                 RMB
      Unrealized profit from intra
                                           618,591,681             154,647,920          676,375,006           169,093,751
        - company transactions
      Unpaid bonus                          94,462,722              23,671,611          154,895,784            38,723,946
      Retirement benefit                    27,980,857               6,995,214           13,115,948             3,278,987
      Asset impairment provision            25,595,392               6,398,848           31,426,756             7,856,689
      Deductable losses                    345,639,059              88,584,337          176,273,380            44,068,345
      Deferred income                      109,797,054              24,285,203          112,939,126            25,230,521
      Assets impairment loss                   684,622                 184,848                    -                     -
      Accrued rebate                        13,413,655               3,353,415           30,739,192             7,684,798
                                         1,236,165,042             308,121,396        1,195,765,192           295,937,037
(2) Deferred tax liabilities
                                                Closing balance                             Opening balance
      Item                           Taxable temporary         Deferred          Taxable temporary        Deferred
                                        difference           tax liability       difference         tax liability
                                           RMB                  RMB                     RMB                 RMB
      Revaluation surplus in
    business combination
      not under common
    control                             89,316,823              24,264,203           90,877,162             24,908,410
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
18. Deferred tax assets/liabilities - continued
(3) Deferred tax assets and liabilities not recognized
                                                                    Closing balance          Opening balance
                                                                         RMB                     RMB
       Deductable losses                                               150,320,039
                                                                       __________              135,957,252
                                                                                               __________
(4) Deductable losses not recognized as deferred tax assets will expire in:
                                                                    Closing balance          Opening balance
                                                                         RMB                     RMB
       2019                                                              7,311,273               7,311,273
       2020                                                             45,960,766              45,960,766
       2021                                                             82,685,213              82,685,213
       2022                                                             14,362,787
                                                                       __________                     -
                                                                                               __________
                                                                       150,320,039
                                                                       __________              135,957,252
                                                                                               __________
19. Other non-current assets
                                                                    Closing balance          Opening balance
                                                                         RMB                     RMB
       Receivable from transfer of biological assets                        -
                                                                       _________                17,352,239
                                                                                                _________
20. Short-term borrowings
                                                                    Closing balance          Opening balance
                                                                         RMB                     RMB
       Credit loans                                                    648,494,624              631,655,938
       Mortgaged loans                                                  65,939,662
                                                                       __________                30,732,944
                                                                                                __________
                                                                       714,434,286
                                                                       __________               662,388,882
                                                                                                __________
                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
20. Short-term borrowings - continued
       As at 31 December 2017, short-term borrowings detail were as follows:
                                                                          Nature of        Interest rate        Year ended
                          Loans amount       Exchange rate   RMB           interest         in contract        Interest rate
                                                                                                %                    %
       Credit loans (RMB)      600,000,000      1.0000     600,000,000     Floating   1 year LPR- 0.39(Note 1)         3.92
       Credit loans (EUR))         991,759      7.8023       7,738,003       Fixed            1.00~4.42               1.00~4.42
       Credit loans (EUR)          198,841      7.8023       1,551,421     Floating    2.10 + Euribor(Note 2)          1.77
       Credit loans (USD)        6,000,000      6.5342      39,205,200       Fixed               3.00                  3.00
       Mortgaged loans (EUR)     5,938,898      7.8023      46,337,062       Fixed            0.50~0.95               0.50~0.95
       Mortgaged loans (USD)     3,000,000      6.5342      19,602,600
                                                         _________           Fixed            3.50~3.64               3.50~3.64
                                                           714,434,286
                                                         _________
      Note 1: LPR is the basic interest rate of the People's Bank of China.
      Note 2:     Euribor is Euro Interbank Offered Rate
       As at 31 December 2017, mortgaged loans were Hacienda y Vinedos Marques del Atrio, S.L.U (\"
       Atrio \") factoring of accounts receivable from Banco de Sabadell, S.A. etc. EUR 5,938,898
       (translated as RMB 46,337,062)(31 December 2016:RMB 30,732,944). Mortgaged loans were
       Indomita Wine mortaged Peso 3,242,627,000 (translated as RMB 34,390,191) fixed assets from
       BBVA bank USD 3,000,000(translated as RMB 19,602,600)( December 31, 2016:Nil)
21. Notes payable
                                                                             Closing balance               Opening balance
                                                                                  RMB                          RMB
       Bank acceptances                                                              -
                                                                                _________                    38,900,000
                                                                                                             _________
       As at 31 December 2017, there is no due notes payable unpaid (31 December 2016: Nil).
22. Accounts payable
      The aging analysis of accounts payable are as follows
                                                                             Closing balance               Opening balance
                                                                                  RMB                          RMB
      Within 1 year                                                             664,020,176                  544,128,280
      1 to 2 years                                                                2,051,592                    1,103,039
      2 to 3 years                                                                  371,111
                                                                                __________                          -
                                                                                                             __________
                                                                                666,442,879
                                                                                __________                   545,231,319
                                                                                                             __________
                                                                 Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
23. Advances from customers
       The aging analysis of advances from customers are as follows
                                                                            Closing balance        Opening balance
                                                                                 RMB                   RMB
       Within 1 year                                                          340,025,690             419,382,071
       1 to 2 years                                                             7,072,254               2,046,166
       2 to 3 years                                                               381,463                 108,748
       Over 3 years                                                             3,414,749
                                                                              __________                3,709,436
                                                                                                      __________
                                                                              350,894,156
                                                                              __________              425,246,421
                                                                                                      __________
24. Employee benefits payable
(1) Employee benefits payable as follows:
                                         Opening balance         Increase           Decrease         Closing balance
                                             RMB                  RMB                RMB                  RMB
       Short-term payroll                  193,300,619         439,517,529        (450,272,864)        182,545,284
       Post-demission benefits
        - predetermined provision plan          15,167           49,975,671        (49,692,745)             298,093
       Termination benefits                 13,115,948
                                          _________              27,677,115
                                                               _________           (12,812,206)
                                                                                  _________             27,980,857
                                                                                                      _________
                                           206,431,734
                                          _________             517,170,315
                                                               _________          (512,777,815)
                                                                                  _________            210,824,234
                                                                                                      _________
(2) Employee benefits payable:
                                         Opening balance         Increase           Decrease         Closing balance
                                             RMB                  RMB                RMB                  RMB
       Salaries and bonus                  197,486,176         390,256,786        (402,728,644)        185,014,318
       Staff benefit                           622,735          14,139,321         (12,645,581)          2,116,475
       Staff welfare                           257,249          20,336,922         (20,069,855)            524,316
       Includes:
         Medical insurance                    257,249            18,018,716        (17,751,649)           524,316
               Injury insurance                  -                1,499,042         (1,499,042)              -
               Maternity insurance               -                  819,164           (819,164)              -
       Housing fund                            37,672            10,993,230        (10,991,646)            39,256
       Union fee and education fee          2,593,009
                                          _________               3,304,360
                                                               _________            (3,837,138)
                                                                                  _________             2,060,231
                                                                                                      _________
       Total                               200,996,841
                                          _________             439,030,619
                                                               _________          (450,272,864)
                                                                                  _________            189,754,596
                                                                                                      _________
       Less: Non-current liabilities        7,696,222
                                          _________                                                     7,209,312
                                                                                                      _________
       Short-term payroll                  193,300,619
                                          _________                                                    182,545,284
                                                                                                      _________
                                                              Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
24. Employee benefits payable - continued
(3) Predetermined provision plan
                                   Opening balance          Increase             Decrease          Closing balance
                                       RMB                   RMB                  RMB                   RMB
       Pension                         14,978              48,834,066           (48,551,453)            297,591
       Unemployment insurance
                                       _____                1,141,605
                                                           ________              (1,141,292)
                                                                                ________
                                                                                                       ______
                                       15,167
                                       _____                49,975,671
                                                           ________             (49,692,745)
                                                                                ________                298,093
                                                                                                       ______
                                                                                ________
       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 12%-32% and 0.5%-3% 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 48,834,066 and RMB 1,141,605 (2016: RMB 38,404,278 and
       RMB 1,663,062) respectively into pension insurance and unemployment insurance. As at 31
       December 2017, the Group has unpaid pension and unemployment insurance of RMB 297,591
       and RMB 502 respectively (31 December 2016: RMB 14,978 and RMB 189), 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.
25. Taxes payable
                                                                         Closing balance        Opening balance
                                                                              RMB                   RMB
       Value added tax                                                     35,681,696               23,496,328
       Consumption tax                                                     44,961,022               30,361,471
       Corporation income tax                                              38,834,293               69,388,730
       Urban land use tax                                                   2,645,687                2,651,262
       Individual income tax                                                7,805,917                7,811,301
       City construction tax                                                5,669,280                4,248,115
       Property tax                                                         4,647,644                1,071,223
       Others                                                               4,848,617
                                                                          __________                 5,014,170
                                                                                                   __________
                                                                          145,094,156
                                                                          __________               144,042,600
                                                                                                   __________
26. Deferred income
                                                                         Closing balance        Opening balance
                                                                              RMB                   RMB
       Government grants
    Current liabilities                                                16,878,199              11,163,883
    Non-current liabilities                                            92,918,855
                                                                          __________              101,775,243
                                                                                                  __________
                                                                          109,797,054
                                                                          __________              112,939,126
                                                                                                  __________
                                                                                    Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
26. Deferred income - continued
       Government grants:
                                                                                                Recognized in                      Related to
                                                             Opening            Addition     non-operating income     Closing     Assets/Income
                                                                                                /other income
                                                               RMB               RMB                RMB                RMB            RMB
       Wine base liquor brewage project                       6,174,300                -           (1,434,900)        4,739,400      Assets
       Shihezi chateau project funds                         11,556,600                -           (2,280,000)        9,276,600      Assets
       Xinjiang Industrial Rejuvenation and
       Technological Reconstruction Project                  18,486,000               -            (1,422,000)       17,064,000      Assets
       Special support for infrastructure facilities               -             5,300,000               -            5,300,000      Assets
       Ningxia industry revitalization and
         technology reconstruction funds                      4,381,000                -           (3,295,000)        1,086,000      Assets
       Wine grape subsidies                                     376,000                -             (376,000)             -        Income
       Modern agriculture grape production
         development subsidies                                  259,200               -              (259,200)             -        Income
       Tourism Promotion Project                                   -               600,000           (600,000)             -        Income
       Modern service industry special                             -               500,000           (500,000)             -        Income
       Tourism Development Fund Subsidy Project                    -               500,000               -              500,000     Income
       Marketing reward                                            -               500,000           (500,000)             -        Income
       Support enterprise development special funds                -            10,200,000               -           10,200,000     Income
       (Huanren) wine production construction funds           4,000,000               -              (400,000)        3,600,000      Assets
       Wine electronic tracking system
          specific funds                                      3,859,365                -             (667,054)        3,192,311      Assets
       Miyun Propaganda Department transfer                   1,777,890                -             (888,945)          888,945      Assets
       Wine industry specific funds                             930,000                -             (186,000)          744,000      Assets
       Shandong Peninsula Blue Economic
          Area construction funds                            10,000,000                -           (2,000,000)        8,000,000      Assets
       863 Program subsidy funds for scientific research        343,090                -             (343,090)             -        Income
       Information system construction
          project technology funds                            4,060,000              -               (580,000)        3,480,000      Assets
       Integration projects subsidies                            28,800              -                (28,800)             -        Income
       Cross-border e-Business projects subsidies             1,485,797              -               (783,182)          702,615     Income
       Red wine phenolics research projects funds               295,601              -                (11,000)          284,601     Income
       Grape base construction project                        1,040,000              -               (520,000)          520,000      Assets
       Water pollution abatement project                        133,733           300,000            (113,601)          320,132     Income
       Infrastructure construction project                    1,468,750           500,000            (125,000)        1,843,750      Assets
       Industrial development support project                41,000,000              -             (4,100,000)       36,900,000      Assets
       Subsidy for updating of economic and energy-saving
       technology                                             1,283,000
                                                            _______              -
                                                                            _______               (128,300)
                                                                                                _______               1,154,700
                                                                                                                    _______          Assets
       Total                                                112,939,126      18,400,000          (21,542,072)       109,797,054
                                                            _______         _______             _______             _______
       Less: Non-current liabilities due within one year     11,163,883
                                                            _______                                                  16,878,199
                                                                                                                    _______
       Other non-current liabilities                        101,775,243                                              92,918,855
                                                            _______                                                 _______
       As at 31 December 2017, 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. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
27. Other payables
(1) Natures of other payables are as follows
                                                                            Closing balance           Opening balance
                                                                                 RMB                      RMB
       Payable to dealer deposit                                              139,710,963               128,539,352
       Payables for equipment and construction                                130,706,777                77,261,072
       Payables for transportation                                             27,847,092                36,690,764
       Royalty fee                                                             77,208,929                78,572,540
       Advertising costs                                                      118,834,960                79,414,075
       Withholding promotion costs                                             13,413,655                30,739,192
       Capital increment from minority intere                                       -                    29,847,320
       Employee deposit                                                        13,327,132                16,296,186
       Deposits from suppliers                                                  3,082,595                 2,206,379
       Payables for contracting fee                                            38,070,571                31,011,929
       Others                                                                  40,761,645
                                                                              __________                 35,726,501
                                                                                                        __________
                                                                              602,964,319
                                                                              __________                546,305,310
                                                                                                        __________
(2)    Description of significant other payables aged more than one year
       Company                                                          Amount                      Reasons
                                                                         RMB
       Beijing Qinglang agriculture science and technology
         development limited company (\"Beijing Qinglang\")               16,461,930          Payables for contracting fee
       Yantai De'an Investment Company Limited (\"Yantai De'an\")         6,708,174
                                                                     _________              Payables for contracting fee
                                                                       23,170,104
                                                                     _________
28. Non-current liabilities due within one year
                                                                            Closing balance           Opening balance
                                                                                 RMB                      RMB
       Long-term borrowings due within one year                                 76,954,827                59,799,093
       Long-term payables due within one year                                   34,000,000
                                                                               __________                 12,000,000
                                                                                                         __________
                                                                               110,954,827
                                                                               __________                 71,799,093
                                                                                                         __________
       As at 31 December 2017, Long-term borrowings due within one year refers to Note VI-29,
       Long-term payables due within one year refers to Note VI-30.
                                                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
29. Long-term borrowings
                                                                                                    Closing balance                Opening balance
                                                                                                         RMB                           RMB
      Credit loan                                                                                       68,182,310                     40,304,811
      Mortgaged loan                                                                                     6,693,544                      8,835,744
      Guaranteed loan                                                                                   81,250,000
                                                                                                       __________                            -
                                                                                                                                      __________
                                                                                                       156,125,854
                                                                                                       __________                      49,140,555
                                                                                                                                      __________
      As at 31 December 2017, loans detail is as follows:
                                                                                  Nature                           Year-end       Due within    Due over
                                 Loans amount    Exchange rate    Amount         of interest    Interest rate    borrowing rate    one year     one year
                                                                   RMB                               %                %
      Guaranteed loan (RMB) (Note) 100,000,000     1.0000        100,000,000   Floating        5 year LPR- 0.9         4.28        18,750,000   81,250,000
      Credit loan (EUR)             15,838,703     7.8023        123,578,309       Fixed          1.00-2.53       1.00-2.53        55,395,999   68,182,310
      Mortgaged loan (EUR)(Note)    1,217,894     7.8023      9,502,372
                                                            _______                Fixed              1.80            1.80         2,808,828 6,693,544
                                                                                                                                  ______ _______
                                                            233,080,681                                                                  156,125,854
                                                                                                                                  76,954,827
                                                            _______                                                               ______ _______
      Note: As at 31 December 2017, The secured loan is the long-term loan borrowed by the company
            for R&D Centre credit guarantee, RMB 100,000,000 (31 December 2016:Nil), mortgaged
            loans were Atrio using fixed assets EUR 4,264,170 (translated as RMB 33,270,334) as
            collateral for loans from Popular Espaol, EUR 1,217,894 (translated as RMB 9,502,372),
            (31 December 2016: RMB 27,517,168).
30. Long-term payables
                                                                                                   Closing balance                 Opening balance
                                                                                                        RMB                            RMB
      Agricultural Development
      Fund of China(\"CADF\")                                                                            259,000,000
                                                                                                       __________                     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(Financial discount loan). The group
      take this investment as long-term payables, which measured in amortized cost. The Group
      repays the principal of RMB12,000,000 in 2017. Refer to Note VI-50 for details of mortgaged
      and pledged assets.
                                                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
30. Long-term payables - continued
                                                                 Termination date
       Long-term payables Yield rate         Investment date      of repayment         Due within 1 year         Due after 1 year     Mortgaged and pledged assets
            RMB                                                                             RMB                      RMB
          77,000,000             1.2%       12 January 2016        24 December 2025          10,000,000            67,000,000         Cash and bank and intangible assets
         198,000,000             1.2%       29 February 2016        28 February 2026         22,000,000           176,000,000         Cash and bank fixed assets
                                                                                                                                        and intangible assets
    ______
         18,000,000              1.2%         16 June 2016           22 May 2026            ______
                                                                                              2,000,000           ______
                                                                                                                   16,000,000         Cash and bank
    293,000,000                                                                          34,000,000           259,000,000
    ______                                                                              ______                ______
31. Other non-current liabilities
                                                                                                               Closing balance              Opening balance
                                                                                                                    RMB                         RMB
       Employee benefit                                                                                           7,209,312
                                                                                                                 _________                        7,696,222
                                                                                                                                                 _________
       As at 31 December 2017, employee benefit represents deposit from bonus accrued for managers
       and above. According to the bonus payment schedule of 2017, the bonus is expected to be paid
       during 2019 to 2021.
32. 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
                                                                                                                                                       _________
33. 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
                                                                                                                                                       _________
34. Other comprehensive income
       2017                                                                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                      (5,259,014)       9,863,872            -                  -            8,368,254       1,495,618             3,109,240
         Foreign currency statement
         translation difference                 (5,259,014)       9,863,872           -                     -           8,368,254       1,495,618            3,109,240
                                               ______             _____             ____                  ____          _____           _____              ______
                                                               Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
35. Surplus reserve
                                   Opening balance         Increase               Decrease           Closing balance
                                       RMB                  RMB                    RMB                    RMB
       Statutory surplus reserve     342,732,000
                                    _________                 -
                                                           ______                    -
                                                                                  ______                342,732,000
                                                                                                       _________
       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 2017.
       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.
36. Retained earnings
                                                                        Closing balance          Opening balance
                                                                             RMB                     RMB
       Retained earnings brought forward                                  6,620,118,562            5,980,390,074
       Profit attributable to shareholders of the Company                 1,031,695,056              982,460,488
       Less: Dividends paid in respect prior year's profit                 (342,732,000)
                                                                         ____________               (342,732,000)
                                                                                                  ____________
       Retained earnings carried forward                                  7,309,081,618
                                                                         ____________              6,620,118,562
                                                                                                  ____________
(1) Appropriation to surplus reserve by subsidiaries
       As at 31 December 2017, the balance of the Group's unappropriated profits include appropriation
       to surplus reserve by subsidiaries amounting to RMB 51,994,942 (31 December 2016: RMB
       71,360,640).
(2) Cash dividends approved by general meeting
       According to the annual general meeting on 15 June 2017, 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 19 April 2018, on the basis of
       685,464,000 issued shares in 2017, 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. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
37. Operating income and costs
      Operating income is analysed as follows:
                                                                           2017
                                                                           RMB                      RMB
      Principal operating income                                      4,856,168,699            4,646,909,704
      Other operating income                                             76,376,530
                                                                     ____________                 70,686,768
                                                                                              ____________
                                                                      4,932,545,229
                                                                     ____________              4,717,596,472
                                                                                              ____________
      Operating cost is analysed as follows:
                                                                           2017
                                                                           RMB                      RMB
      Principal operating cost                                        1,645,690,616            1,552,022,043
      Other operating cost                                               25,901,663
                                                                     ____________                 23,748,936
                                                                                              ____________
                                                                      1,671,592,279
                                                                     ____________              1,575,770,979
                                                                                              ____________
      The operating income for the Group is mainly from the sales of wine, brandy and sparkling wine.
      In 2017, Over 91% (2016: over 94%) of the sales generated in PRC.
38. Taxes and surcharges
                                                                           2017
                                                                           RMB                      RMB
      Consumption tax                                                  177,879,324              161,411,393
      Business Tax                                                            -                   1,358,414
      City construction tax                                             52,247,915               46,375,109
      Education fee and surcharges                                      35,831,575               33,975,886
      Property tax                                                      23,113,211                8,221,152
      Land use tax                                                      11,874,984                9,146,595
      Stamp tax                                                          3,945,731                2,659,421
      Others                                                             5,359,283
                                                                       __________                 6,568,676
                                                                                                __________
                                                                       310,252,023
                                                                       __________               269,716,646
                                                                                                __________
      For detail standards of tax rate please refer to Notes V.
                                                     Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
39. Selling expenses
                                                                     2017
                                                                     RMB                      RMB
       Advertising costs                                          560,533,714              536,552,061
       Salary and employee benefit                                272,148,620              258,845,366
       Freight                                                    139,218,637              135,375,515
       Trademark fee                                               72,838,612               74,125,038
       Warehouse leasing expenses                                  53,075,132               73,141,275
       Depreciation cost                                           34,963,089               29,477,270
       Labor fee                                                   29,744,563               29,411,296
       Travelling expenses                                         27,709,534               27,589,397
       Water and electricity fee                                   11,247,163                8,160,610
       Security and sanitation fee                                  9,020,885                4,244,698
       Packing cost                                                 7,163,930                5,651,814
       Taxes                                                        6,771,337                4,418,811
       Office allowance                                             6,165,561                6,166,163
       Business entertainment                                       4,403,750                3,871,778
       Amortization of low-value consumables                        4,028,573                2,039,574
       Renovation costs                                               463,163               25,292,999
       Others                                                      33,026,180
                                                               ____________                 28,897,003
                                                                                        ____________
                                                                1,272,522,443            1,253,260,668
                                                               ____________             ____________
40. Administrative expense
                                                                     2017
                                                                     RMB                      RMB
       Salary and employee benefit                               106,342,126               98,464,931
       Depreciation                                               71,558,307               45,605,723
       Contracting fee                                            21,162,623               20,635,049
       Maintenance fee                                            21,665,024               18,625,443
       Administrative expenses                                    22,173,925               15,829,574
       Amortization                                               22,438,364               14,795,181
       Rental fees                                                12,414,249               10,702,734
       Service fee                                                12,118,257                5,194,426
       Greening fee                                               10,667,941               11,509,618
       Security and sanitation fee                                 6,317,723                5,889,095
       Entertainment fee                                           5,470,001                7,253,858
       Travelling expenses                                         4,747,256                4,961,661
       Other taxes                                                   288,907               10,169,607
       Fire charge                                                      -                  10,923,600
       Others                                                     23,417,255
                                                                 __________                29,223,048
                                                                                          __________
                                                                 340,781,958
                                                                 __________               309,783,548
                                                                                          __________
                                                         Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
41. Financial income
                                                                         2017
                                                                         RMB                      RMB
       Interest income                                               (9,168,772)             (15,397,901)
       Exchange loss (income)                                          (182,610)               7,632,532
       Interest expenses                                             32,233,729               30,120,902
       Less: Capitalization of interests                              6,138,242                2,289,723
       Bank charges                                                   1,846,154
                                                                    __________                 1,903,049
                                                                                             __________
                                                                     18,590,259
                                                                    __________                21,968,859
                                                                                             __________
42. Impairment loss of assets
                                                                         2017
                                                                         RMB                      RMB
       Inventory impairment                                           7,938,748                3,279,266
       Impairment losses from other receivables                         354,805
                                                                    __________                      -
                                                                                             __________
                                                                      8,293,553
                                                                    __________                 3,279,266
                                                                                             __________
43. Other income
                                                  2017                   2016          Assets/income related
                                                  RMB                    RMB
       Industrial development support project 4,100,000                      -                   Assets
       Ningxia industry revitalization and
         technology reconstruction funds       3,295,000                     -                   Assets
       Project funds                           2,280,000                     -                   Assets
       Shandong Peninsula Blue Economic
         Area construction funds               2,000,000                  -                       Assets
       Others                                  6,352,199                  -                       Assets
       Tax refund                             17,765,560                  -                      Income
       Others                                 10,245,625
                                              _________                   -
                                                                     _________                   Income
                                              46,038,384
                                              _________                   -
                                                                     _________
                                                          Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
44. Non-operation income
                                                                                             Recognized in
                                                                                             extraordinary
                                                2017                      2016               profit and loss
                                                RMB                       RMB                    RMB
      Government grants                        1,600,000              49,130,643                1,600,000
      Penalty income                           7,993,571               2,617,684                7,993,571
      Others                                   7,637,156
                                              _________                3,265,987
                                                                      _________                 7,637,156
                                                                                               _________
                                              17,230,727
                                              _________               55,014,314
                                                                      _________                17,230,727
                                                                                               _________
      Government grants recognized in the income statement is as follows:
                                                                                             Assets/income
                                                2017                      2016                  related
                                                RMB                       RMB
      Major projects support fund                     -                 7,040,888                 Assets
      Small and medium enterprises
    support fund                                -                  4,138,304                   Assets
      Tax refund                                    -                 17,860,500                  Income
      Others                                   1,600,000
                                              _________               20,090,951
                                                                      _________                   Income
                                               1,600,000
                                              _________               49,130,643
                                                                      _________
45. Non-operation expenses
                                                                                             Recognized in
                                                                                             extraordinary
                                                2017                      2016               profit and loss
                                                RMB                       RMB                    RMB
      Compensation and penalty loss              347,528                 618,190                  347,528
      Donation                                   294,899                 305,080                  294,899
      Others                                     989,049
                                              _________                  303,429
                                                                      _________                   989,049
                                                                                               _________
                                               1,631,476
                                              _________                1,226,699
                                                                      _________                 1,631,476
                                                                                               _________
46. Income tax
                                                                          2017
                                                                          RMB                      RMB
      Current income tax                                              330,784,002              360,001,766
      Deferred income tax                                               7,350,243
                                                                      __________                (2,972,320)
                                                                                               __________
                                                                      338,134,245
                                                                      __________               357,029,446
                                                                                               __________
                                                           Yantai Changyu Pioneer Wine Co. Ltd. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
46. Income tax - continued
       Reconciliation between income tax expenses and profits is as follows:
                                                                           2017
                                                                           RMB                      RMB
       Profit before tax                                              1,371,927,763            1,337,618,840
       Income tax expense at statutory tax rate 25% (2016:25%)          342,981,941              334,404,710
       Effect of different tax rates applied by certain subsidiaries     (9,459,223)              (7,350,239)
       Impact of tax exemptions                                            (141,598)                    -
       Changes in opening balances of deferred tax
       liabilities due to tax rate adjustment                            (1,342,916)               (1,992,564)
       Unrecognised deductable loss                                       3,590,697                20,671,303
       Utilisation of deductable losses which were not
       recognised previously                                             (6,157,735)                   -
       Reversal of recognized deductible losses                                -                  2,895,497
       Non-deductible expenses                                            7,550,095               6,892,488
       Others                                                             1,112,984
                                                                     ____________                 1,508,251
                                                                                              ____________
       Income tax expenses at the Group's effective tax rate           338,134,245
                                                                     ____________               357,029,446
                                                                                              ____________
47. 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.
                                                                           2017
                                                                           RMB                      RMB
       Earnings
         Consolidated profit attributable to ordinary
           shareholders of the Company                                1,031,695,056
                                                                     ____________               982,460,488
                                                                                              ____________
       Shares
         Weighted average number of outstanding
           ordinary shares                                             685,464,000
                                                                     ____________               685,464,000
                                                                                              ____________
       Basic earnings per share                                               1.51                     1.43
                                                                     ____________             ____________
       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. 2017 Annual Report
VI. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
48. Notes to consolidated cash flow statement
(1) Cash received relating to other operating activities:
                                                                              2017
                                                                              RMB                      RMB
       Government grants                                                  20,930,752               19,347,985
       Interest income                                                     3,839,079                2,808,735
       Penalty income                                                      7,993,571                2,617,684
       Refundable deposits of notes payable                               46,900,000               38,130,000
       Others                                                              5,573,503
                                                                          _________                 3,803,461
                                                                                                   _________
                                                                          85,236,905
                                                                          _________                66,707,865
                                                                                                   _________
(2) Cash paid relating to other operating activities:
                                                                              2017
                                                                              RMB                      RMB
       Selling expenses                                                   956,902,163              942,936,949
       General and administrative expenses                                107,905,766              113,297,901
       Refundable deposits of notes payable                                 8,000,000               47,030,000
       Others                                                               2,103,059
                                                                        ____________                 2,449,673
                                                                                                 ____________
                                                                         1,074,910,988
                                                                        ____________              1,105,714,523
                                                                                                 ____________
(3) Cash paid for the purchase subsidiaries and other equity:
                                                                              2017
                                                                              RMB                      RMB
       Cash paid for acquisition of Indomita Wine                        318,867,650                         -
       Less: cash and cash equivalents for Indomita
                    Wine at acquisition date                               15,071,107                      -
       Cash paid investment f

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