YANTAI CHANGYU PIONEER
WINE COMPANY LIMITED
2010 Annual Report
2011.04.09
1
Content
I. IMPORTANT……………………………………………………………………………… 3
II. KEY COMPANY DATA OF RECORD …………………..……………………..…. .. 4
III. SUMMARY OF ACCOUNTING AND FINANCIAL INFORMATION…….……. 5
IV. CHANGES IN SHARE CAPITAL AND SHAREHOLDERS ………………...... . 6
V. DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND STAFF….. … 10
VI. CORPORATE GOVERNANCE STRUCTURE…………………..…….……..…. …. 14
VII. BRIEF INTRODUCTION TO THE SHAREHOLDERS’ MEETING………….…. 16
VIII BOARD OF DIRECTOR’S REPORT……………….…………………………….. .. 16
IX. BOARD OF SUPERVISOR’S REPORT……………………..………….………….. 25
X. MAJOR ISSUES…………………………………………………………..…………….. 26
XI. FINANCIAL REPORT………………..………………………..…………………….. .. 31
XII. REFERENCE DOCUMENTS……………………………….. ..…………………….. .. 140
2
I. Important
The Board of Directors，the Board of Supervisors and directors, supervisors &
senior management 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.
No director, supervisor or senior manager declares to have dissidence or to be
unable to guarantee the truthfulness, accuracy and completeness of the
information contained in this report.
Except the independent director Mr. Ju Guoyu, who could not attend the meeting
for being out on business trip, and the director Mr. Antonio Appignani, who also
could not attend the meeting because of the sickness, the other 11 directors all
attend the Board of Directors’ meeting, take part in the deliberation and vote for
the 2010 annual report. Mr. Ju Guoyu and Mr. Antonio Appignani respectively
entrust Mr. Wang Zhuquan and Mr. Augusto Reina to take vote instead of them.
Ernst & Young Hua Ming provides the audit report with standard and unreserved
audit advice.
Mr. Sun Liqiang (Chairman of the Company), Mr. Leng Bin (Chief Financial
Officer) and Mr. Jiang Jianxun (Financial Manager) assure the truthfulness and
completeness of the financial report in the annual report.
The reader is advised that this report has been prepared originally in Chinese. In
the event of a conflict between this report and the original Chinese version or
difference in interpretation between the versions of the report, the Chinese
language report shall prevail.
3
II. KEY COMPANY DATA OF RECORD
1. Legal Name in Chinese: 烟台张裕葡萄酿酒股份有限公司
Legal Name in English: Yantai Changyu Pioneer Wine Company Limited
2. Legal Representative: Sun Liqiang
3. Secretary to the Board of Directors: Qu Weimin
Contact Address: 56 Dama Road, Yantai City, Shandong Province, the PRC
Telephone: 0086-535-6633658
Facsimile: 0086-535-6633639
E-Mail: quwm@changyu.com.cn
Authorized Representative of the Securities Affairs: Li Tingguo
Contact Address: 56 Dama Road, Yantai City, Shandong Province, the PRC
Telephone: 0086-535-6633656
Facsimile: 0086-535-6633639
E-Mail: stock@changyu.com.cn
4. Registered Address: 56 Dama Road, Yantai City, Shandong Province, the PRC
Office Address: 56 Dama Road, Yantai City, Shandong Province, the PRC
Postal Code: 264000
Web Site: http://www.changyu.com.cn
Mailbox: webmaster@changyu.com.cn
5. Publications: The newspapers in which the Company’s information is disclosed:
“China Securities Newspaper” and “Securities Times” in the PRC
“Hong Kong Commercial Daily” outside the PRC
Web Site for carrying the report: http://www.cninfo.com.cn
Annual Report kept at: BOD Office of the Company
6. Place of listing of the Shares: Shenzhen Stock Exchange
Abbreviation of the Shares: Changyu A, Changyu B
Code Number of the Shares: 000869, 200869
7. Other information of the Company:
The first registration date: September 18th, 1997
The original place of registration: the Business Administration Bureau of Shandong
Province
The registration amendment date: June 23rd , 2006
The registration amendment place: the Business Administration Bureau of Shandong
Province
The business license number: 3700001806012
The registration number of revenue: 37060216500338-1 in State Taxation Bureau
370601267100035 in Local Taxation Bureau
The organization code: 26710003-5
The accountant appointed by the Company: Ernst & Young Hua Ming Certified Public
Accounts Co. Ltd.
The office address of the Chinese accountant appointed by the Company: Level 17, Ernst
& Young Tower, Oriental Plaza, Beijing
4
III. SUMMARY OF ACCOUNTING AND FINANCIAL INFORMATION
1. Summary of Financial Information for the Report Period
Unit：CNY
Item Amount
Business profit 1,907,241,238
Total profit 1,929,649,598
Net profit attributed to the shareholders of the company 1,434,218,328
Net profit attributed to the shareholders of the company after deducting the 1,375,218,809
irregular profit and loss
Net cash flows from the operating activities 1,289,922,042
Note: The item and involved amount after deducting the irregular profit and loss
Unit: CNY
Item 2010
Gain on disposal of non-current assets, including the reversal of accrued impairment provision (436,922)
Tax return or relief ultra vires approved, without formal documented or occasionally happened 5,354,701
Government grant accounted in profit and loss this year (except for those that closely related to the
operation, under national laws or in accordance with certain criteria) 17,289,537
Gain on fair value change of trading financial assets and trading financial liabilities, gain on disposal
of trading financial assets, trading financial liabilities and available for sale financial assets 900,000
Reversal of unpaid advertising fee 55,718,673
Other non-operating income and expenses 201,044
Amount affected on CIT (19,756,758)
Amount affected on non-controlling interest (270,756)
Total 58,999,519
2. Differences in Net Profit and Net Asset under the PRC Accounting Standards and
International Accounting Standards
The net profit and net asset of the Company in 2010 was respectively CNY1,434,218,328 and
CNY3,839,708,341 according to the PRC Accounting Standards by Ernst & Young Hua Ming. During the report
period, there were no differences between the PRC Accounting Standards and the International Accounting
Standards, so there were no differences for the net profit and the net asset confirmed according to the PRC
Accounting Standards and the International Accounting Standards.
3. Principal Accounting and Financial Information for the Preceding Three Years of the
Report Period
Unit：CNY
More or less
Item 2010 2009 than last year 2008
(%)
Business revenue 4,982,943,397 4,199,403,351 18.66 3,453,442,314
Total profit 1,929,649,598 1,499,254,984 28.71 1,183,248,986
Net profit attributed to the
shareholders of the listed 1,434,218,328 1,127,328,843 27.22 894,620,794
company
Net profit attributed to the
shareholders of the listed 1,375,218,809 1,106,795,279 24.25 887,340,775
company after deducting the
5
irregular profit and loss
Basic earnings per share 2.72 2.14 27.10 1.70
Diluted earnings per share 2.72 2.14 27.10 1.70
Basic earnings per share after
deducting the irregular profit and 2.61 2.10 24.29 1.68
loss
Overall sharing for the return rate 37.35 37.10 0.25 35.17
of net assets (%)
Weighted average for the return 41.57 41.17 0.40 38.26
rate of net assets (%)
Overall sharing for the return rate
of net assets (%) after deducting 35.82 36.43 -0.61 34.88
the irregular profit and loss
Weighted average for the return
rate of net assets (%) after 39.86 40.42 -0.56 37.95
deducting the irregular profit and
loss
Net cash flows from the operating 1,289,922,042 1,359,587,515 -5.12% 1,251,046,530
activities
Net cash flows per Share from the 2.45 2.58 -5.04% 2.37
operating activities
More or less
End of 2010 End of 2009 than last year End of 2008
(%)
Total assets 5,983,377,253 5,364,160,798 11.54% 4,060,932,580
Total shareholders’ equity (minor 3,839,708,341 3,038,226,013 26.38% 2,543,633,170
shareholders’ equity excluded)
Net assets per share attributed to
the shareholders of the listed 7.28 5.76 26.39% 4.82
company
IV. CHANGES IN SHARE CAPITAL AND SUBSTANTIAL SHAREHOLDERS
1. Changes in Share Capital
Unit: share’0000
Amount before this change Change Amount after this
(+ -) change
Allot Distribute Transfer other
Percentage Sub Percentage
Amount new bonus capital to share others Amount
% total %
share share capital
1. Limited shares 23,939 45.40 -2,636 -2,636 21,303 40.40
(1)State Shares
(2) State legal person share
(3)Other domestic corporate 23,939 45.40 -2,636 -2,636 21,303 40.40
share
--- domestic legal 23,939 45.40 -2,636 -2,636 21,303 40.40
person share
---domestic natural person
share
(4) foreign held share
---overseas legal person
share
6
--- overseas natural person
share
2. Unlimited shares 28,789 54.60 2,636 2,636 31,425 59.60
(1)CNY common share 10,941 20.75 2,636 2,636 13,577 25.75
(2)Foreign share listed in 17,848 33.85 17,848 33.85
PRC
(3) Foreign share listed
overseas
Total shares 52,728 100.00 52,728 100.00
2. Changes in Limited Shares
Unit: share’0000
Shareholder’s Name Numbers for the Numbers of Numbers of Numbers for the Reasons for Releasing date for
limited shares on releasing the increasing the limited shares on limiting the the limited shares
Jan.1st, 2010 limited shares in limited shares in Dec.31st,2010 shares
2010 2010
Yantai Changyu Group 23,939 2,636 0 21,303 Share structure April 1st , 2010
Co. Ltd. reform
Total 23,939 2,636 0 21,303 -
3. Information about the Issuance and Listing of Stocks
(1) The Company did not issue new stocks within preceding three years by the end of report period.
(2) During the report period, the Company’s total shares, the structure of shares and the structure of assets and
liabilities were not changed because of distribution of dividends in the form of shares, increase of capital
stock, allocation, re-issuance of stocks, disclosed issuance of stocks, enforcement of title warrants,
implementation of stock equity incentive plan, business merger, transfer of company’s transferable debentures
to stocks, decrease of registered capital, listing of internal shares, issuance of bonds or other causes.
(3) The Company didn’t issue any internal stocks.
4. Shareholders’ Introduction
(1) The total number and top 10 shareholders at the end of report period
Total amount of Shareholders 21,966 Shareholders including 16,172 shareholders with A shares, 5,794 shareholders with
B shares
The top 10 shareholders
Name of Shareholders The character of the shareholders Percentage Number of Number of Lien or
(%) shares hold limited listing frozen
shares shares
Domestic non-state-owned legal
YANTAI CHANGYU GROUP CO. LTD. 50.40 265,749,120 213,021,120 0
person
HTHK/CMG FSGUFP-CMG FIRST Foreign shareholder
3.85 20,284,304 0 0
STATE CHINA GROWTH FD
GAO-LING FUND, L.P. Foreign shareholder 3.13 16,514,607 0 0
BBH BOS S/A FIDELITY FD-CHINA Foreign shareholder
1.79 9,448,397 0 0
FOCUS FD
GOVERNMENT OF SINGAPORE INV. Foreign shareholder
0.86 4,552,945 0 0
CORP. –A/C “C”
UBS (LUXEMBOURG) S.A Foreign shareholder 0.86 4,543,836 0 0
CHINA UNIVERSAL GROWTH FOCUS Domestic non-state-owned
EQUITY SECURITIES INVESTMENT 0.73 3,823,079 0 0
FUND legal person
MIXED SAFE RETURN OF THE Domestic non-state-owned
GREAT WALL SECURITIES 0.71 3,750,371 0 0
INVESTMENT FUND legal person
7
HTHK-MANULIFE CHINA VALUE
Foreign shareholder 0.68 3,579,270 0 0
FUND
BBH LUX-FIDELITY
Foreign shareholder 0.65 3,438,803 0 0
FUNDS-EMERGING MARKETS FUND
The top 10 Shareholders of unlimited shares
Name of Shareholders Number of unlimited shares held Type of Shares
YANTAI CHANGYU GROUP CO. LTD. 52,728,000 A share
HTHK/CMG FSGUFP-CMG FIRST STATE CHINA B share
20,284，304
GROWTH FD
GAO-LING FUND, L.P. 16，514,607 B share
BBH BOS S/A FIDELITY FD-CHINA FOCUS FD 9,448,397 B share
GOVERNMENT OF SINGAPORE INV. CORP. –A/C “C” 4,552,945 B share
UBS (LUXEMBOURG) S.A 4,543,836 B share
CHINA UNIVERSAL GROWTH FOCUS EQUITY A share
SECURITIES INVESTMENT FUND 3,823,079
MIXED SAFE RETURN OF THE GREAT WALL A share
SECURITIES INVESTMENT FUND 3,750,371
HTHK-MANULIFE CHINA VALUE FUND 3，579,270 B share
BBH LUX-FIDELITY FUNDS-EMERGING MARKETS B share
3，438,803
FUND
The explanation for the relationship and accordant In the top 10 shareholders, Yantai Changyu Group Company Limited has
action of the top 10 shareholders no associated relationship with the other 9 listed shareholders, and the
relationship between the other shareholders is unknown.
(2) Introduction for the holding shareholders and the actual controllers
1) Legal holding shareholder
Name of the legal holding shareholder: Yantai Changyu Group Company Limited (hereafter called Changyu
Group).
Legal representative: Mr. Sun Liqiang
Registered capital: CNY 50 million
Establishment date: April 27th, 1997
Business scope: wine, healthy liquor, distillating liquor, drinks, production, distribution, the plant of primary
products and the import & export business under permission.
2) Legal actual controllers
Changyu Group is actually controlled by four parties: Yantai Yuhua Investment & Development Co., Ltd, ILLVA
Saronno Investment Italy, International Finance Corporation and State-owned Assets Supervision and
Administration Commission of Yantai Municipal Government (hereafter called SASAC Yantai). The situation of
the four parties is as following:
① Name of the legal holding shareholder: Yantai Yuhua Investment & Development Co. Ltd
Legal representative: Mr. Jiang Hua
Registered capital: CNY 387,995,100
Establishment date: October 28th, 2004
Business scope: Under state permission, property investment, tenancy of machine and facility, wholesale and
retail of construction material, chemical products (chemical hazard products excluded), hardware, and
electronical products , grape plant.
The holding shareholder of Yantai Yuhua Investment & Development Co. Ltd. is Yantai Yusheng Investment &
Development Co. Ltd., which was established on October 27th 2004 with legal representative Mr. Sun Jian,
registered capital CNY 67.333 million and business scope of property investment under the state permission.
② Name of the legal holding shareholder: ILLVA Saronno Investment Italy
Legal representative: Mr. Augusto Reina
Registered capital: EUR 5,160,000
Establishment date: January 24th, 2005 (its name is changed from ARCHIMEDE SRL)
Business scope: The company’s operating scope includes receiving the investments and dividends that Italian or
overseas businesses provide or distributed to other companies; controlling the use of and dealing with and buying
8
or selling and disposing the corporate stocks, public stocks and individual stocks; providing capital and technical
coordination to the company’s joint ventures and performing the duties of a controlling party; engaging in the
activities in terms of providing financial assistance, technical and R&D and occupational training, shareholding
affairs, organizing the storage of raw materials and warehousing of final products upon the precondition that it is
helpful for the joint ventures and in order to realize the final operation goals; production and sales of food
products, alcoholic and nonalcoholic products as well as any other related industrial, commercial, financial and
tertiary activities via subsidiary companies and joint ventures or directly by itself; conducting business activities
in the fields of acid food and agriculture.
③ Name of the legal holding shareholder: International Finance Corporation
Registered address: 2121 Pennsylvania Avenue, N.W. Washington DC 20433, USA
Registered capital: USD 2.36 billion
Registered date: 1956
Business scope: International Finance Corporation is one of the members of World Bank, mainly dedicated to
investing in private sectors of developing countries while providing technical support and consultation service.
The corporation is a multilateral financial institution that ranks first in the world in terms of providing capital
stock and loans to developing countries. Its purpose is to promote sustainable investments of private sectors of
developing countries in order to alleviate poverty and improve people’s life.
④State-owned Assets Supervision and Administration Commission of Yantai Municipal Government
3) The change for the holding shareholders and the actual controllers
During the report period, there is no any change for the holding shareholders and the actual controllers.
4) Introduction for property right and control relations between the Company and its actual controllers
Changyu Group and 27 persons for medium-level of the Company
100%
Yantai Yusheng Investment & Development Co. , Ltd.. Changyu Group and 46 common staff of the Company
O
U J F G U T
E H
S A R . E 62.22% 37.78%
R
A P A K R
M
A N A . C
N C 5%
N O
REINA REINA REINA REINA
AUGUSTO RICCARDO MARINA LODOVICO
E Y U
N
T
24% 6% 5% 5% 5% R
25% 25% 25% 25%
I
E
S
IFC 55% Yantai Yuhua Investment & Development
Illva Saronno Investment SASAC Yantai
& DEVELOPMENT Co Ltd
10% 45% 33% 12%
current shareholders for A share Changyu Group current shareholders for B share
15.75% 50.40% 33.85%
the Company
9
（3） The other legal shareholders holding over 10% of the Company’s share
Except Yantai Changyu Group Company Limited, there are no any other legal shareholders holding 10% or over
of the Company’s share.
（4） Share holding of top 10 limited stockholders and limitation conditions
Unit: share
No. Limited Shareholders’ Limited shares Date of listing Newly added Limitation conditions
name held by them tradable shares
1. From the day of being granted the
right of circulation on stock
market as March 21st,2006,
Changyu Group will not
transact or transfer its
shareholding in the Company
within 36 months
2. Within 12 months as from the
day of the expiry of the afore-said
promising period, the amount of
the former non-circulating stock
Yantai March
that Changyu Group may list for
1 Changyu 213,021,120 21st 213,021,120
transaction at Stock Exchange
Group Co., Ltd 2011
can’t be over 5% of its total and
within 24 months after that, can’t
be over 10% of its total.
3. Changyu Group also promised to
propose over the shareholders’
meetings 2005, 2006 and 2007 to
distribute the Company’s profit in
cash no less than 65% of the
distributable profit realized in the
same year and ensure to vote for
aye for this proposal.
V. DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND STAFF
1. The basic information of directors, supervisors and senior management
(1)Information for the change of share holding and salary of directors, supervisors and senior management
The salary for the independent directors is paid according to the resolution of Shareholder’s 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 Evaluation and Incentives Scheme for Senior
Managemen of the Company which is passed during the Board of Director’s meeting.
Shares hold Shares hold Reason Total Salary drew Whether or not
NAME POST SEX AGE Term at the at the ends for from the company draw the salary
for Post beginning of the year change during the report from shareholder’s
of the year period company and other
related company
Sun Liqiang Chairman to the M 63 2010.05.13— 0 0 --- 103.37 NO
Board of Directors 2013.05.12
10
Zhou Vice-chairman to M 46 2010.05.13— 0 0 --- NO
Hongjiang the Board of 2013.05.12
103.37
Directors and
general manager
Leng Bin Director and M 48 2010.05.13— 0 0 --- NO
vice-general 2013.05.12 73.15
manager
Qu Weimin Director, M 53 2006.12.07— 0 0 --- NO
Vice-general 2009.12.06
manager and 73.56
Secretary to the
Board of Directors
Chen Jizong Director M 35 2010.05.13— 0 0 --- 0 NO
2013.05.12
Augusto Reina Director M 70 2010.05.13— 0 0 --- NO
0
2013.05.12
Aldino Director M 58 2010.05.13— 0 0 --- NO
0
Marzorati 2013.05.12
Antonio Director M 72 2010.05.13— 0 0 --- NO
0
Appignani 2013.05.12
Jean Paul Director M 61 2010.05.13— 0 0 --- NO
0
Pinard 2013.05.12
Geng Zhaolin Independent M 68 2006.12.07— 0 0 --- NO
5
Director 2009.12.06
Ju Guoyu Independent M 64 2006.12.07— 0 0 ----- NO
5
Director 2009.12.06
Xiao Wei Independent M 50 2010.09.01— 0 0 ----- NO
5
Director 2013.05.12
Wang Zhuquan Independent M 46 2010.05.13— 0 0 -- NO
5
Director 2013.05.12
Fu Mingzhi Chairman for the M 57 2010.05.13— 0 0 --- NO
Board of 2013.05.12 73.55
supervisors
Zhang Hongxia supervisor F 54 2010.05.13— 0 0 --- NO
53.88
2013.05.12
Jiang Jinqiang Supervisor M 38 2010.05.13— 0 0 --- 0 NO
2013.05.12
Yang Ming Vice-general M 52 --- 0 0 --- 65.40 NO
manager
Li Jiming Chief Engineer M 44 --- 0 0 --- 73.33 NO
Jiang Hua Vice-general M 47 --- 0 0 --- 67.90 NO
manager
Sun Jian Vice-general M 44 --- 0 0 --- 65.99 NO
manager
Jiang Jianxun Finance manager M 44 --- 0 0 --- 44.40 NO
Total 0 0 --- 817.90 ---
(2) Information of directors, supervisors who hold posts in shareholder’ s Company
Name Name of shareholder Post in shareholder’s company Term for the post Paid by shareholder’s
company or not
Sun Liqiang Yantai Changyu Group Chairman of the Board of 2009.10.28—2013.10.27 No
Company LTD Directors and general manager
11
Zhou Hongjiang Yantai Changyu Group Vice chairman of the Board of 2009.10.28—2013.10.27 No
Company LTD Directors
Fu Mingzhi Yantai Changyu Group Director and vice general 2009.10.28—2013.10.27 No
Company LTD manager
Leng Bin Yantai Changyu Group Director 2009.10.28—2013.10.27 No
Company LTD
Chen Jizong Yantai Changyu Group Director 2009.10.28—2013.10.27 No
Company LTD
Augusto Reina Yantai Changyu Group Director 2009.10.28—2013.10.27 No
Company LTD
Aldino Marzorati Yantai Changyu Group Director 2009.10.28—2013.10.27 No
Company LTD
Antonio Appignani Yantai Changyu Group Director 2009.10.28—2013.10.27 No
Company LTD
Jean Paul Pinard Yantai Changyu Group Director 2009.10.28—2013.10.27 No
Company LTD
2. Principal Working Experiences of Incumbent Directors, Supervisors and Senior Managers
(1) Members of the Board of Directors
Mr. Sun Liqiang, Chairman, is a college graduate and senior economist. Now he is the representative of
Eleventh National People’s Congress, Chairman and General manager of Changyu Group. He began serving as
chairman of the Company on September 18, 1997 and has held the position ever since.
Mr. Zhou Hongjiang, is a mastership graduate and senior engineer. He began serving as general manager of the
Company on December 28, 2001 and as Director, Vice Chairman and General Manager of the Company on
May 20, 2002.
Mr. Leng Bin, Director, is a postgraduate and senior accountant and now is the Director of Changyu Group. He
began serving as a director of the Company on June 15, 2000.
Mr. Qu Weimin, holds a bachelor of engineering and is a senior economist. He began serving as Director,
Deputy General Manager and concurrently as Secretary of the board of directors of the Company on September
18, 1997.
Mr. Chen Jizong, is a university graduate, holds the qualifications of statistician and accountant, now is the
vice deputy of property management department of SASAC Yantai and the director of Changyu Group. He
began serving as a director of the Company on May 13th 2010.
Mr. Augusto Reina is 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 this company since April 27th , 2006.
Mr. Aldino Marzorati, a university graduate, is 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 this company since April 27th , 2006.
Mr. Antonio Appignani, a university graduate, 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. He has
been director of this company since April 27th, 2006.
Mr. Jean-Paul Pinard, a doctor in economics and finance, began to serve as director of the Bureau of
Agriculture of International Finance Corporation under World Bank from 2001, and retired in 2007, now is
the director of Changyu Group. He has been director of this company since December 7th, 2006.
Mr. Geng Zhaolin, is a postgraduate and senior engineer. He previously served as Vice Director of the China
12
Foods Standardization Technology Committee, executive director of China Foods Technology Institute,
counselor of China Association of Wine Industry. He began serving as an independent director of the Company
on May 20th, 2002.
Mr. Ju Guoyu, is a professor and doctorate tutor. He previously served as President of Economic Institute of
Peking University and Vice President of the Economic Society of Beijing Municipality, independent director of
Tibet Jin Zhu Co., Ltd and Guangdong Guanhao Scientific Technology Co., Ltd. He began serving as
independent director of the Company on September 24th, 2003.
Mr. Wang Zhuquan, is the doctor for administration (accountancy), holds the qualifications of registered
accountant and valuator, now is the professor, master and Phd Supervisor, vice dean of Administration Institute,
dean of Accountancy Department under Ocean University of China. He began serving as independent director
of the Company on September 7th, 2007.
Mr. Xiao Wei, is a postgraduate and lawyer, and now is the partner of Jun He Law Offices. He began serving as
independent director of the Company on September 1st, 2010.
(2) Members of the Board of Supervisors
Mr. Fu Mingzhi, is a university graduate and senior economist. Currently he is the Director and Deputy General
Manager of Changyu Group. He began serving as a Chairman to Board of Supervisors of the Company on
April 27th, 2006.
Ms. Zhang Hongxia, is a college graduate and senior accountant. She is presently Director of the Auditing
Office of Changyu Group. She began serving as supervisor of the Company on September 18, 1997.
Mr. Jiang Jinqiang, is a university graduate, holds the qualifications of registered accountant and valuator, now
is the full-time supervisor of SASAC Yantai and was the director of Changyu Group before. He began serving
as supervisor of the Company on May 13th, 2010.
(3) Other senior managers
Mr. Yang Ming, is a university graduate and applied researcher. He began serving as Deputy General
Manager of the Company on August 12, 1998.
Mr. Li Jiming, is a doctoratoral graduate and applied researcher. He began serving as Chief Engineer of the
Company on September 14, 2001.
Mr. Jiang Hua, is a postgraduate and engineer. He began serving as Deputy General Manager of the Company
on September 14, 2001.
Mr. Sun Jian, holds an MBA and is an assistant engineer. He began serving as Deputy General Manager of the
Company on March 22, 2006.
Mr. Jiang Jianxun, holds an MBA and is an accredited accountant. He began serving as Financial Manager of
the Company on May 20, 2002.
3.Changes of Directors, Supervisors and Senior Management
During the report period, it is reviewed and proved by 2009 Shareholders’ Meeting that the Company engages Mr.
Chen Jizong, Mr. Sun Liqiang, Mr. Zhou Hongjiang, Mr. Leng Bin, Mr. Qu Weimin, Mr. Augusto Reina, Mr.
Aldino Marzorati, Mr. Antonio Appignani and Mr. Jean-Paul Pinard as the directors of the 5th Session of Board of
Directors, Mr. Wang Zhuquan is appointed as the independent director of the 5th Session of Board of Directors,
Mr. Fu Mingzhi and Ms. Zhang Hongxia are engaged as the supervisors of the 4th Session of Board of
Supervisors. It is also deliberated and passed by 2010 2nd temporary shareholders’ meeting 2010 that Mr. Xiao
Wei is appointed as the independent director of the 5th Session of Board of Directors. Apart from this, there is no
any change for the directors, supervisors and senior management.
4. Staff of the Company
As to December 31st 2010, the total registered staff number of the Company (including the headquarter and main
controlling subsidiary company) was 4,482, including 1,032 production workers, 2,906 sales persons, 110
technicians, 77 financial members, 180 administrative persons. Among the staff members, 1,069 persons were
university graduates, which is 23.83% of the total employees, 1,933 persons were college graduates, which is
43.13% of the total employees, 700 persons were Senior middle school graduates, which is 15.63% of the total
employees, and 780 persons were graduated below senior middle school, which is 17.40% of the total
employees.
All the retired staff’s expenses were paid by social security system, not by the Company.
13
VI. CORPORATE GOVERNANCE STRUCTURE
1. Current Corporate Governance Situation of the Company
The Company has, according to relevant national laws and rules including the “Company Law of the People’s
Republic of China”, “Securities Law of the People’s Republic of China” , “Guidelines on Listed Companies
Internal Control”, “Listing Guidelines at Shenzhen Stock Exchange” and also other laws and rules issued by
CSRC and Shenzhen Stock Exchange, and combining the own actual situation, established Articles of
Associations and other internal governance regulations, constantly improved its legal entity structure and
internal management rules, legally conducted its activities and strengthened the information disclosure. The
Company’s governance structure is in accord with requirements of relevant regulatory documents on listing
company’s governance issued by CSRC.
(1) About shareholders and shareholders’ meeting
The Company has already set up the Deliberation Rules of Shareholders’ Meeting, and convened the
shareholders’ meetings in strict accordance with regulations and rules, made the great effort to provide
convenient conditions for more shareholders to participate the shareholders’ meeting, and ensured all
shareholders especially small and medium shareholders to enjoy same equity and well exercised their rights.
(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.
(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 already carried out the cumulative voting
system. At present, the Company has four independent directors accounting for one third 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.
(4) About supervisor and board of supervisors
The Company strictly elected all supervisors in light of Company Laws and Articles of Associations. At present,
board of supervisors has three people among which one supervisor is representative for staff, the number and
composition of board of supervisor was in accord with requirements of regulations and rules. All supervisors of
the Company could follow the requirement of Rules of Board of Supervisors’ Procedure, insist the principle of
responsibility to all shareholders, seriously perform their duties, effectively supervise and present their
independent opinion on important issues, interrelated deals, financial status, the duty performance of directors
and managers of the Company.
(5) About performance evaluation and incentive system
The Company has established and gradually improved fair and transparent performance evaluation standard and
incentive system for directors, supervisors and senior managers, the engagement of managers was open and
transparent, and accorded with laws and regulations.
(6) About the party with relevant benefit
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’
14
visit and consultation. The Company has also assigned China Securities Newspaper, Securities Times, Honking
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.
2. The Duty Performance of President, Independent Directors and Other Directors
During the report period, all directors of the Company performed their duties and abided by the directors’
conduct standard in accordance with the Company Law and Articles of Associations, followed relevant
requirements of Rules of Board of Directors’ Procedure and made any decision in prudent way, so as to protect
the interests of the Company and all investors also.
The president seriously abided by Company Law and Articles of Associations, promoted the development of
board of directors, carried out the group decision making system of board of directors on the significant
business issues, ensured the science and democracy on the company’s important decisions and avoid mistakes
when making decisions. The Board of Directors effectively guaranteed the right of independent directors and
secretary to board of directors to know any big issues and played an important role on expressing the unique
functions of independent directors and strengthening the quality of the information disclosure.
The Company has four independent directors now, among which one is accounting professionals, one is legal
professionals, one is the expert in wine industry and one is famous economist. During the report period, all
independents could perform their duties in accordance with Articles of Associations, Working Rules for
Independent Directors and other relevant laws and rules, attended the board of directors’ meetings in serious
and responsible attitude, often went to business and production line to direct the work, issued their independent
opinions on significant matters of the company, provided a number of fruitful comments and suggestions,
exerted positive efforts on scientific decision-making by board of directors and protecting the benefits of small
and medium investors. During report period, all independent directors had no objection to proposals of board of
directors and other issues of the Company.
Other directors also strictly obeyed relevant rules, well performed their duties and protected the Company and
also shareholders’ benefit.
3. Information for Personnel, Assets, Finance, Institution and Business Associated with Holding
Shareholders
(1) Personnel arrangement: the Company’s general manager, deputy general managers and other senior officers,
all of whom were paid by the Company 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
system in this regard.
(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. However, due to some issues from the past, the
Company’s assets are as yet incomplete. The intangible assets such as trademark ownership and land title still
held by the controlling shareholders, and the Company will actively negotiate with the controlling shareholder
to rectify those long-standing problems step by step upon the precondition of no infringement on the Company
and shareholders’ interests.
(3) Finance: the Company has independent finance department, chief account and financial staff, and also
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
Company and the functional departments of the controlling shareholder. The Company has its own independent
15
production & business and offices, all functional departments are independent exercise of 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.
4. Formulation and Improvement of Internal Control Rules
During the report period, the Company drew up more comprehensive internal control system in terms of major
investment, related transactions, production & quality management, marketing management, financial
management, performance assessment, information disclosure, subsidiary management and safe & environment
protection etc., which assured the normal production and business activities, efficaciously preventing gross fault
or misconducts and lowering the Company’s operation risks. Please read the detailed information in Self
Evaluation Report on Internal Control.
5. Performance Evaluation and Incentive to Senior Management
The Company has already established a system for evaluation of achievement of senior management and the
related incentive system, which linked the reward with the Company’s benefit, and personal achievement. The
Emolument Committee under Board of Directors assumed the responsibility of stipulating the policy and
appraising the scheme for salaries and rewards. Based on the production and business goals, this committee
examined senior personnel according to their management achievement and index, and took these as basis for
awards or penalties.
VII. BRIEF INTRODUCTION TO THE SHAREHOLDERS’ MEETING
Four shareholders’ meeting was convened by the Company during the report period.
2010 first temporary shareholders’ meeting was held on the morning of April 30th, 2010 in the meeting room of
the Company’s Wine Culture Museum. The meeting notice was published in “China Securities Newspaper”,
“Securities Times” on April 31st, 2010.
2009 shareholders’ meeting was held on May 12th, 2010 in the meeting room of the Company’s Wine Culture
Museum. The meeting notice was published in “China Securities Newspaper”, “Securities Times” on May 13th,
2010.
2010 second temporary shareholders’ meeting was held on the morning of August 31st, 2010 in the meeting room
of the Company’s Wine Culture Museum. The meeting notice was published in “China Securities Newspaper”,
“Securities Times” on September 1st, 2010.
2010 third temporary shareholders’ meeting was held on the morning of September 28th, 2010 in the meeting
room of the Company’s Wine Culture Museum. The meeting notice was published in “China Securities
Newspaper”, “Securities Times” on September 29th, 2010.
VIII. BOARD OF DIRECTOR’S REPORT
1. Discussion and Analysis of Management Team
(1) The review of operations during the report period
① General information of operations during the report period
During the report period, the competition on China wine industry was getting more and more fierce due to
impact from large volume increase of import wines, thus gave much pressure on the Company’s continual and
fast development. Facing such complicated situation outside, the Company insisted on keeping the market as
core target, timely updated the marketing strategy, thus made remarkable achievements, and further confirmed
the leading position of the Company in China wine industry. Following are the change and relative reasons
concerning principal sales, principal profit and net profit of the Company during the report period:
Unit: CNY
Item 2010 2009 More or less than last year(%)
Principal sales 4,982,943,397 4,199,403,351 18.66%
16
Principal profit 1,907,241,238 1,472,056,684 29.56%
Net profit attributed to shareholders of listed company 1,434,218 ,328 1,127,328,843 27.22%
Causes of changes: the increase of principal sales was contributed by the sales revenue growth due to strong
market demand during the report period, and the principal profit increase was caused by growth of principal sales,
while the growth of net profit attributed to shareholders of the listed company was contributed by increase of
principal profit and non-principal income.
②The principal business and its operation
a. Principal business achievements assorted by products and trade type
Unit: CNY’0000
More or less More or less
More or less than
Principal Principal Gross Profit than last year for than last year
Product last year for the
Sales Cost Ratio % the principal for the gross
principal sales %
cost % profit ratio
Wine & alcoholic beverage 489,003 122,404 74.97 18.23 4.56 ↑3.27%
Total 489,003 122,404 74.97 18.23 4.56 ↑3.27%
by product
Wine 406,921 91,322 77.56 20.04 3.50 ↑3.59%
Brandy 64,590 24,725 61.72 11.09 9.36 ↑0.60%
Sparkling Wine 3,404 1,537 54.84 6.81 6.66 ↑0.06%
Health Liquor 14,088 4,820 65.79 6.23 0.90 ↑1.81%
Total 489,003 122,404 74.97 18.23 4.56 ↑3.27%
Related party transaction 946 223 76.38 11.95 10.56 ↑3.47%
b. Principal business achievements assorted by territory distribution
Unit：CNY’0000
District Principal Sales More or less than last year of the principal sales %
The coastal region 424,397 18.44%
The middle region 50,627 20.35%
The western region 23,270 19.10%
Total 498,294 18.66%
c. Business situations of key products taking over 10% of the Company’s sales
The sales of wine and brandy took 10% or more of the Company’s principal business, and the sales revenue, sale
cost and gross profit ratio were set below:
Unit: CNY’0000
Product Name Sales Sale Cost Gross Profit Ratio (%)
Wine 406,921 91,322 77.56
Brandy 64,590 24,725 61.72
During the report period, the Company’s principal business and its structure did not change a lot compared with
that of the last year.
d. Major suppliers and clients
Unit：CNY’0000
Total purchases from the top 5 suppliers 15,326 Proportion of all purchases 15.83%
Total products sold to the top 5 clients 12,565 Proportion of all products sold 2.52%
17
③ The Company’s asset compositions and changes of financial data
Unit: CNY’0000
December 31, 2010 December 31, 2009
More or less of proportion
Entry Proportion in
Proportion in Amount in total assets
Amount total assets
total assets (%)
(%)
Account receivable 10,011 1.67 9,802 1.83 -0.16
Inventory 129,441 21.63 113,124 21.09 0.54
Investable realty 0 0 0 0 0
Long-term equity 500 0.08 1,000 0.19 -0.11
investment
Fixed assets 118,272 19.77 99,679 18.58 1.19
Unfinished project 24,747 4.14 10,937 2.04 2.10
Short-term loans 0 0 22,450 4.19 -4.19
Long-term loans 0 0 1,050 0.20 -0.20
Entry Amount for this year Amount for last year More or less than last year
Operating cost 133,847 109,367 22.38
Overheads 21,801 22,005 -0.93
Finance income 2,897 3,023 -4.17
Income tax 47,545 36,327 30.88
Remark to the main factors causing major changes:
a) The operating cost was increased due to enlargement of business scope, gradual growth of sales volume,
increase of advertisement expenditure, freight and total rewards to sales staff.
b) The overheads in 2010 had no significant changes compared with 2009, which was mainly composed of
salary, social insurance, rental fee, depreciation, amortization and administrative expenses occurred from
daily operation.
c) The decrease on finance income was due to less interest income from bank deposit.
d) The income tax grew from the increase of total profit of the Company.
④ Relevant changes of the Company’s cash flow during report period
Unit: CNY
Entry Amount this year Amount last year Increased or decreased amount %
Cash flow generated from operating activities
Subtotal of cash inflow 6,659,871,434 5,710,668,307 16.62
Subtotal of cash outflow 5,369,949,392 4,351,080,792 23.4%
Net cash flow generated from operating activities 1,289,922,042 1,359,587,515 -5.12
Cash flow generated from investment activities
Subtotal of cash inflow 37,446,595 516,214,080 -92.75
Subtotal of cash outflow 1,458,774,061 266,708,426 446.95
Net cash flow generated from investment activities -1,421,327,466 249,505,654 -669.66
Cash flow generated from financing activities
Subtotal of cash inflow 0 230,000,000 -100.00
Subtotal of cash outflow 868,341,030 633,136,613 37.15
Net cash flow generated from financing activities -868,341,030 -403,136,613 -115.40
Remark to the main factors causing major changes:
a) Due to better operation achievements and enlargement on business scope during the report period, the great
18
change on cash flow from operating activities occurred since the cash inflow and cash outflow increased a
lot, while the net cash flow dropped a little compared with last year because of more growth on cash outflow
than cash inflow from operating activities.
b) The great change on cash flow from investment was caused by decrease on cash outflow and increase of
cash outflow from investment activities due to the growth of time deposit over three months during report
period.
c) The great change on cash flow from financing activities was due to the Company’s payment of
CNY235million for long and short term loan in total during the report period.
⑤ Utilization of the Company’s equipment, market and flow of technicians
During the report period, the Company’s equipment was maintained in good running condition, production ran
smoothly, equipment availability kept high, and no production accidents took place. By means of scientific
planning and meticulous scheduling, the Company not only ensured stable production but also met market
needs and with neither overstocking of products nor serious shortage of supply. There was no change of
technicians and backups, thus no impact on the Company’s operations and management.
⑥ The operations and analysis of major holding and sharing company
Unit: CNY’0000
Sharing Registered Capital Total Assets Net Assets Net Profit
Company Name Business Scope Major Products or Services
Ratio
Yantai To research, produce Dry red wine, dry white
Changyu-Castle Wine 70% and sell wine and wine and sparking wine USD5 million 25,650 11,439 5,457
Chateau Co. LTD. sparkling wine of Changyu-Castle
Longfang Castel- To produce Dry red wine,
49% USD3 million 3,967 2,949 245
Changyu Wine Co. LTD. and sell wine Dry white wine
Yantai Kylin To produce and sell Cork, aluminum cap,
50% USD1.4 million 5,850 4,062 513
Packaging Co. LTD. packaging material PVC capsule and so on.
Chateau Changyu To research, produce
Brandy, premium dry red
AFIP Global 70% and sell brandy and 11,000 17,827 11,765 2,346
wine and white wine
wine
Chateau Liaoning
Changyu Ice Wine 51% To produce ice wine Ice wine 2,630 8,382 3,357 198
Co., Ltd.
Xinjiang Tianzhu To plant grape,
Winery Co., Ltd. produce and sell grape
60% Grape and bulk wine 3000 23,579 14,023 3,280
juice, bulk wine and
fruit wine
During the report period, the net profit from Yantai Changyu-Castel Chateau Co., Ltd., Langfang Castel Changyu
Wine Co., Ltd and Yantai Kylin Packaging Co., ltd. dropped by 14%,60% and 40% respectively compared with
last year, mainly due to the reduction on three companies’ internal settlement price by the Company, the net
profit from Chateau Changyu AFIP Global, Chateau Liaoning Changyu Ice Wine Co., Ltd. and Xinjiang Tianzhu
Winery Co., Ltd increased by 84%, 41% and 2210% respectively thanks to the sales volume growth of three
companies.
⑦ Specific subject under control of the Company
During the report period, the Company neither had any specific subject under its control nor needed to report related data in
a consolidated statement because of existence of a specific subject.
(2) Looking forward to the Company’s Development
① With the continuous improvement of China economy and also the national income level, thanks to people’s
much more attention to health and unremitting pursuit on life fashion, China wine market will still keep fast
development during foreseeable period, especially the middle to high quality wine will witness remarkable sales
increase, which will contribute rather good opportunity for the Company to expand its wine sales. In the same
19
time, since more and more foreign wines march into China market, the sales and varieties of foreign wines might
grow continuously and quickly, also the competitors will continue to expand their production scale, the
competition on China wine market will be much more fierce, that will bring more difficulty on market
development, let marketing costs keep increasing, yet the middle to long-term trend will not change for the
continuous expanding and fast development on the whole China wine market.
Confronting the above disadvantageous situation, the Board of Directors, the Board of Supervisors and entire top
management will consistently act in a diligent, conscientious, realistic and surefooted manner to do their utmost
to fulfill or overfulfill all budgetary targets and create more value for the shareholders.
② The Company’s development strategy and marketing plan
Acknowledging the current situation and considering the Company’s expectations for great potential for middle
to long-term development of China’s wine market, the Company will stick to its strategies of setting wine as its
core product while developing various categories; setting middle-range and high-end products as first priority
while developing all products at different levels, continue to carry on the differentiation policy as market
subdivision and sales by category, strengthen the marketing channels construction, gradually increase the sales
proportion of middle-range and high-end products, and balance the development of all category, so as to improve
the Company’s profit making abilities in a sustainable steady way, and then further increase the market share.
The Company anticipates a turnover not less than CNY 5.8 billion in 2011 and plans to hold the main operating
cost and other three period costs less than CNY 3.6 billion. To realize the abovementioned goals, the Company
will mainly take the following measures:
First, to continue its market focus, strengthen the marketing evaluation and management. The Company will fully
implement all works about marketing channels construction, set up the terminal evaluation system in different
channels, strive to greatly improve the sales amount, sales volume and brand influence power at sales terminals,
develop much more rigorous price management system, reinforce the management on sales expenses and market
order, increase efforts to crack down counterfeit products, continue to enlarge the advertisement in all media so as to
further improve the brand influence power.
Second, to properly increase capital input and continue to improve the production capability. The Company will add
new vineyard base for premium grapes, accelerate the construction of three wineries and chateaux in western China
and also the industrial park at Yantai Economy Technology Development Zone, speed up the technology reform in
old production area at Yantai, improve the production and operation facilities, further enrich the product structures,
improve the product quality and production capability, so as to lay better foundation for middle to long-term
development for the Company.
Third, to strengthen the financial and auditing management, intensify the operation crisis control, effectively push
energy saving and consumption reducing, advance the operation quality and profits. The Company will further adjust
the assessment and evaluation methods for the Three Expenses for production system, the Five Major Expenses for
sales system, the input-output ratio for advertisement expenditure and fixed capital management, improve the
assessment system of economic responsibility, the software development for the financial accounting, analyzing and
managing system, so as to fulfill the integration of finance and business, set up the monitoring system for integration of
auditing, finance and business, implement well the auditing on key expenditures of production & sales system, the
major
technology & investment projects, further raise the staff’s awareness of energy saving, promote technological progress
and lower the energy consumption, and try to reduce the energy consumption on per ton wine by 5% compared with
last year.
Fourth, to improve the management and construction on vineyard base, complete well the purchase on raw materials
such as grape in 2011, thus ensure the good and enough grape supply with proper varieties and fair price, therefore lay
the solid foundation for the Company to fulfill its strategy.
③ The Company’s capital demand and investment plan
In 2011, the total capital expenditure plan is CNY 1,003.12 million in construction of 11 projects, including 7
continued projects with total investment amount CNY684.48million as purchase of offices for sales companies,
the construction of indoor logistics center at Xishan production area, production scope expansion of Chateau
Changyu AFIP Global, the construction of Changyu chateau (temporary name )in Xianyang city of Shanxi
province, purchase of 60ha. land and construction of production base for high quality wine in Shihezi City of
Xinjiang province, the purchase of 110ha. land at Yantai Economy Technology Development Zone and
construction of Changyu (Ningxia) Wine Co., Ltd, 4 new projects with investment amount CNY318.64 million
20
as purchase of new oak barrels, construction of 1000sq.m underground cellar in Xishan production area,
construction of 15000t wine storage tanks in Xishan production area, and the construction of 15000 sq.m cellar
and business club at Yantai Changyu Castel Chateau.
All above projects will be supported by the Company’s own capital.
④ Potential risks and countermeasures
a) Risks of fluctuation of raw material prices
Grapes are the main raw materials for the Company to produce wine. The yield and quality of grapes are closely
related to several natural factors such as drought, rains, snow and frost, which will create impacts on the quantity
and price of grapes purchased by the Company and cause the Company’s production achievement even more
unpredictable. Therefore, the Company will optimize the allocation of vineyards to lower the risks of grape price
by developing new vineyards in Ningxia and Xinjiang as well as extending the area of company vineyards.
b) Risks of input-output ratio uncertainties
Under the circumstances of intensified market competition and needing to meet demands for market penetration,
the Company has to invest more and more in marketing, thus led to high proportion covered by operating cost in
principle sales, the input-output ratio will greatly affect the Company’s achievement, so that some investments
may not yield predicted returns, especially because the impact from world economic crisis is not disappeared to
China economy yet, the unpredictable factors of people’s consumption capability will then increase and thus
generate more market input-output ratio uncertainty. Therefore, the Company will try to enhance the accuracy of
market forecasting through intensified market surveys and analysis, and continue to improve its input-output
assessment system to ensure that investment can reach the predicted goals.
c) Risks in product transport
The Company’s products are fragile yet need to be distributed at home and abroad mainly by sea, railway and
highway. Seasonal conditions during peak sales seasons of Spring Festival must contend with potentially
deficient domestic transport capability due to high transportation demands between passengers and cargo, and
also some natural & unnatural factors such as strong wind, snow, frost and traffic accident etc, which may result
in goods not being transported to the markets on time. To overcome such disadvantages, the Company will make
its efforts to lower those risks through more effective sales prediction linking production to sales, arranging
production and transport strategically, and increasing inventories in the distant markets before the peak sales
season.
d) Risks in investment blunder
According to the scheme, the Company will launch more investment projects in future years with large
investment amount and long construction period for few projects. Although the decision-makers of the Company
fulfilled complete demonstration and made the decision scientifically in strict accordance with relevant
regulations of the Company, few projects might need to increase more investment amount or can not realize the
expected revenue due to different uncertainties.
2. Investment of the Company
(1) The Uses of the Proceeds Collected in the Report Period
The Company made a public offering of 32 million A Shares for capital increase in October of 2000, and
received net proceeds of CNY 613.46 million. By end of report period, the Company actually invested all
proceeds in same projects as disclosed in the Prospectus, and there was no any change on investment project.
Except those projects for improvement of intermediate procedures on production and sales which were difficult
to rationally confirm the benefit, other productive projects all made good benefits.
(2) Projects invested with non-raised capital
During the report period, the Company totally invested self-possessed capital CNY298.38million in the
following seven projects:
Firstly, the purchase of a piece of land of 60 hectares at Shihezi city in Xinjiang province and construction of a
high-end wine production base.
CNY 90million had been totally invested in the project for completion of the 60-hectare land purchase formalities,
construction of demonstrative vineyards of premium wine grapes and the fermentation capability of premium bulk
wine for 10,000t. During report period, the Company has purchased and processed 11000t grapes, and completed
bulk wine fermentation for 7700t.
21
Secondly, the purchase of a piece of land of 110 hectares at Yantai Economic Technological Development Zone.
The Company has already invested CNY1.6million to complete the preparatory work before the project starts,
and obtained the permission notes for project location issued by planning management department.
Thirdly, the purchase of offices for sales companies. The company had spent CNY 23.91million to purchase 19
offices in China by the end of 2010.
Fourthly, construction of Changyu-AFIP Chateau Beijing. During report period, the Company had invested CNY
71.79 million to complete the road paving inside vineyards, the renting of a piece of land of 600mu(40Ha) and the
grape planting.
Fifthly, project of construction of Changyu Chateau (temporary name) in Xianyang City, Sha’anxi Province. In
2010, the Company had actually spent CNY 74.95 million for completion of 800mu(53.3Ha) land rental and the
formalities of 200mu（13.3Ha）land requisition, chateau’s layout, design, geological prospecting, garden design,
ground leveling, greening and grape planting. .
Sixthly, purchase of oak barrel. The Company totally spent CNY 35.38 million to import 3525 oak barrels during
report period.
Seventhly, construction of an indoor logistics center in Xishan production area. During report period, the Company
has invested CNY0.75million for completion of permission notes of project location from planning management
department, examination on workshop facade, geological prospecting and working drawing design.
3. Audits and Changes of Accounting Policies
(1) Audits information
Ernest & Yong Hua Ming audited the Company’s 2010 financial statement and accordingly compiled a standard
auditing report with unreserved audit advice.
(2) Changes of accounting policies
Please read the appendix of financial statement of the Company for any change of accounting policy and
accounting estimation or alteration of accounting error.
4. Information of Routine Work of the Board of Directors
(1) Meetings and resolutions of the Board of Directors
Nine meetings of the Board of Directors were convened during the report period.
①The 1st interim meeting of Board of Directors 2010 was held on Jan. 12th, 2010, the resolution announcement
was published in “China Securities Newspaper”, “Securities Times” on Jan. 13th, 2010.
②The 2nd interim meeting of Board of Directors 2010 was held on March 25th, 2010, the resolution
announcement was published in “China Securities Newspaper”, “Securities Times” on March 26th , 2010.
③The 20th meeting of the 4th-term Board of Directors was held on April 14th, 2010, the resolution announcement
was published in “China Securities Newspaper”, “Securities Times” in the PRC and “Hong Kong Commercial
Daily” on April 16th, 2010.
④The 21st meeting of the 4th-term Board of Directors was held on April 23rd, 2010, “The Proposal of First Quarter
Report of 2010” was deliberated and approved.
⑤The 1st meeting of the 5th-term Board of Directors was held on May 12th, 2010, the resolution announcement
was published in “China Securities Newspaper”, “Securities Times” on May 13th, 2010.
⑥The 2nd meeting of the 5th-term Board of Directors was held on August 5th, 2010, the resolution announcement
was published in “China Securities Newspaper”, “Securities Times” on August 6th, 2010.
⑦The 3rd interim meeting of Board of Directors 2010 was held on Sept. 6th, 2010, the resolution announcement was
published in “China Securities Newspaper”, “Securities Times” on Sept. 7th, 2010.
⑧The 3rd meeting of the 5th-term Board of Directors was held on Oct. 27th, 2010, “The Proposal of Third Quarter
Report of 2010” was deliberated and approved.
⑨The 4th interim meeting of Board of Directors 2010 was held on Dec. 2nd, 2010, the resolution announcement was
published in “China Securities Newspaper”, “Securities Times” on Dec. 3rd, 2010.
(2) Information on the Board of Directors’ execution of the resolutions of shareholders’ meetings
① According to the resolution of 2009 Shareholders’ meeting, the Board of Directors implemented 2009 profit
distribution scheme during the report period, that is, based on the existing 527.28 million shares, the Company
distributed CNY 12 for every 10 shares to all of its shareholders (including tax, or CNY10.80 in cash actually after tax
22
deduction for every 10 shares to A Share’s individual shareholders and investment fund institutions, the tax is not
deducted for B Share’s investors temporarily). On June 30th, 2010, the Company published the “Notice of 2009
Dividend Distribution” in “China Securities Newspaper” and “Securities Times”, fixing the date of July 6th, 2010 as
the registration day of Stock A and the last transaction day of Stock B and the date of July 7th, 2010 as the equity and
interest calculation day. The Company had finished the profit distribution in middle of July 2010.
② The Board of Directors of the Company has revised “Articles of Association” according to the resolutions
of 2009 shareholders’ meeting.
③ The Board of Directors of the Company has retained Ernest & Yong Hua Ming as the auditor in 2010
according to the resolution of 2009 shareholders’ meeting.
④ During the report period, the Board of Directors has performed external investment in accordance with the
power limit on decision-making granted by shareholders’ meeting, and no violation of exceeding the authority
happened.
⑤ During the report period, the Board of Directors has terminated the investment to Evergrowing Bank in
accordance with the resolution of the 3rd interim shareholders’ meeting of 2010.
(3) Summarized report on performance of the auditing committee under the Board of Directors
a) On March 28th, 2010, after the engaged accountants has aired their preliminary opinions, independent
directors as the delegate to the auditing committee discussed with the accountants and made out the written
comments which read “we compared notes in detail with the certified public accountants firm who was
responsible for auditing the Company’s annual financial statements and made detailed explanations of the
problems found during auditing and the items to be adjusted. The Company has made an adjustments to the
items in reference to the certified public accountants’ comments. According to the auditing results we learnt
from the said accountants and the production and sales results in the year that were reported to us by the
Company’s managements as well as the progress of important issues, we came to a conclusion at last that we
have no objection to the Company’s 2009 financial statements preliminarily determined by Ernst & Young Hua
Ming and its preliminary auditing opinions. ”
b)The first meeting of auditing committee was convened on April 13th, 2010, on which the auditing committee
deliberated and approved “The Auditing Report 2009’ issued by Ernest & Young Hua Ming, “The Proposal of
Financial Statement 2009”, “The Proposal on Profit Distribution Plan of 2009”, “The Scheme on Renewal of
Contract with Certified Public Accounts Firm” and “Self Evaluation Report on Internal Control”, and it was
unanimously agreed to submit the abovementioned proposals to the 20th meeting of 4th-term Board of Directors
for deliberation, and the meeting came to a conclusion as following:
① Ernst & Young Hua Ming provided the audit report with unreserved audit advice for the Company’s 2009
financial statement, therefore truly, objectively and accurately reported the Company's financial situation,
operation achievement and cash flow status
② During the report period, the Company kept good financial situation and continued its fast development, the
overheads and finance cost was well controlled, yet the operating cost increased a lot which should be under
proper control.
③ The profit distribution plan proposed by the Company was rational which not only considered the
shareholders’ interests but also took account of the Company’s long-term development.
④The Company’s Self Evaluation Report on Internal Control objectively reported the current situation about
internal control. Thanks to improvement within few years, the Company set up internal control system suitable
for its own operation character which was rather efficient and could ensure the Company to effectively perform
its policies and achieve its target so as to guarantee the standardized operation, continual and healthy
development of the Company, and also protecting all investors’ legal rights.
During the meeting, it was suggested to renew the contract with Ernest & Young Hua Ming as the auditing firm
in 2010 with contract period for one year, auditing expenditure for CNY1.5million including travelling fee and
all operating cost.
c) The second meeting of auditing committee was convened on August 4th, 2010, on which the auditing
committee deliberated and approved “The 2010 Semi-annual Report”, “The Profit Distribution Plan for First
Half of 2010”, and it was unanimously agreed to submit the abovementioned proposals to the 2nd meeting of
5th-term Board of Directors for deliberation, and meeting conclusion was made as following:
① The Company’s financial statement for first half of 2010 truly, objectively and accurately reported the finance
status, operation achievement and cash flow situation.
23
②Since the Company has already implemented the 2009 profit distribution plan in early July 2010, so it was
proposed not to fulfill any profit distribution for first half of 2010, and reserve all the net profit achieved during
report period to the end of 2010. And the auditing committee all considered it was a rather rational proposal.
d) The auditing committee held the third meeting on Dec.22nd, 2010, communicated with certified public
accounts firm on audit arrangement for financial statement of 2010, also deliberated and approved “The Audit
Plan for 2010”.
The auditing committee gave full play to its supervision function during the auditing of the Company’s 2010
financial statements and safeguarded the auditing independency.
(4) Summarized report on performance of the emolument committee under the Board of Directors
The emolument committee under the Board of Directors is responsible for assessment of the performance of the
directors and senior managers who get paid by the Company, and examine the pay policy and scheme on the
Company’s directors and senior managers.
The emolument committee of the Board of Directors held the first meeting on April 14th, 2010 and deliberated
the “ Proposal on 2009 Assessment Results of the Company’s Senior Officers’ Performance”.
During the report period, the emolument committee also inspected the paying fulfillment of the directors and
senior managers who received their salaries in the Company in 2009. It is believed that the assessment on the
salaries of the directors, supervisors and senior managers who get paid by the Company was entirely in
accordance with the Company’s economic responsibility system and the salaries disclosed by the Company were
in conformity with the actually paid amount.
5. Preliminary plan for profit distribution 2010
According to the audit result from Ernst & Young Hua Ming, the Company’s net profit achieved in 2010 is
CNY1,454.2million, and the net profit attributed to the Company’s shareholders is CNY1,434.22million after
deducting minor shareholders’ equity.
The following is the distributable profits of the consolidated and parent company in 2010 according to
Chinese accounting standard:
Unit: CNY
Consolidated Parent company
Distributable profit after tax 2,459,263,257 2,615,413,602
Among which: net profit for 2010 1,434,218,328 1,543,091,633
Distributable profit carried forward from 1,657,780,929 1,705,057,969
beginning of report period
Dividends distribution of 2009 632,736,000 632,736,000
According to Clause 157 of “Articles of Association” that “the Company can distribute by cash or stock, and
the distributed profit every year shall not less than 50% of distributable profit achieved in the same year”, and
in consideration of rather large capital expenditure in 2011, under the circumstances of no influence on the
Company’s output capability expansion and daily normal operation, the Company will submit the following
preliminary plan for profit distribution of 2010 :
The Company will not withdraw legal public reserve fund because the balance of legal public reserve fund has
exceeded 50% of the Company’s registered capital. Based on a total of 527.28 million shares of the Company
registered on December 31st, 2010, the Company plans to pay CNY1.4 in cash for every share as dividends to all
shareholders (including tax, or CNY1.26 in cash actually after tax deduction for every share to A Share’s individual
shareholders and investment fund institutions) , totaling CNY 738.19million, which accounts for 51.47% of total net
profit or CNY1,434.22million attributed to parent company’s shareholders in consolidated financial statements, and
the remaining undistributed profit of CNY696.03million will be reserved for next year.
The cash dividends to the shareholders of Stock B will be paid to the beneficiaries’ accounts in HKD at the
middle rate of CNY to HKD listed by People’s Bank of China on the first working day after the day when the
resolution of shareholders’ meeting 2010 was made.
The information of cash dividend distribution for preceding three years is as following:
Unit: CNY
Cash dividend amount (income Net profit attributed to parent Percentage of net profit attributed to
tax included ) company’s shareholders in parent company’s shareholders in
consolidated financial statements consolidated financial statements
2009 632,736,000 1,127,328,843 56.13%
24
2008 632,736,000 894,620,794 70.73%
2007 580,008,000 635,627,764 91.25%
6. Other Disclosed Information
The newspapers for the Company to disclose information remained the same and still are “China Securities
Newspaper”, “Securities Times” in PRC and “Hong Kong Commercial Daily” at abroad.
IX. BOARD OF SUPERVISOR’ S REPORT
1. Meetings of the Board of Supervisors
Five meetings of the Board of Supervisors were convened during the report period.
The 17h meeting of the 3rd-term Board of Supervisors was held on April 14th, 2010, three proposals were
deliberated and approved including “Proposal on 2009 Annual Report”, “2009 Profit Distribution Scheme ” and
“The Scheme on Renewal of Contract with Certified Public Accounts Firm”.
The 18th meeting of the 3rd-term Board of Supervisors was held on April 23rd, 2010, the proposal as “The
Report of First Quarter 2010” was deliberated and approved.
The 1st meeting of the 4th-term board of supervisors was held on May 12th, 2010, the proposal as “The Election
of Chairman of Board of Supervisors ”was deliberated and approved.
The 2nd meeting of the 4th-term board of supervisors was held on August 5th, 2010, two proposals were
deliberated and approved including “The Report of Semi-annual Report 2010 ” and “The Profit Distribution
Plan for First Half of 2010 ”.
The 3rd meeting of the 4th-term board of supervisors was held on Oct. 27th, 2010, the proposal as “Report of
Third Quarter 2010”
was deliberated and approved.
2. Independent Comments of the Board of Supervisors for Relative Issues 2010
During the report period, the Board of Supervisors of the Company conscientiously performed its duties, was
active in its work, attended all meetings of the board of directors as non-voter, well supervised major issues of
the Company including the routines and resolutions of shareholders’ and Board of Directors’ meetings,
resolutions execution of shareholders’ meeting by board of directors, the operation of all professional
committees under board of directors, the duty performance of top management, and carried out a series of
supervisory and checking activities in the Company’s operations, financial condition, interrelated transactions,
external guarantee, external investment, the use of large own capital and procedures for other important
decision-making. The following comments are hereto written out after careful studies:
(1) During the report period, the operation of the Company was completely in accordance with the Company
Law, Articles of the Association, also relevant policies and statutes of state. The decision-making procedure of
the Company accorded with the law, and the Company had established perfect inner management system.
During the report period, the directors and senior managerial staff of the Company were honest and dedicated to
their work, abided by laws and rules, could conscientiously execute the resolutions of the shareholders’ meetings
and the decisions of the Board of Directors, followed the national laws, rules and the Company-made regulations
while performing their duties, safeguarded the interests of both the Company and all shareholders, and were
found no conducts and behaviors against laws, rules, the company-made regulations or of infringements upon
the interests of the Company.
(2) The Company’s financial management is up to the standards and accounting system is complete. The
Company strictly followed the standards and system, and no Company’s assets were illegally impropriated or
capital was lost. During the report period, the Company’s various expenses were reasonable and rational and
its reserves accorded with the provisions in law, rules and articles of association. The Company’s financial
condition was good and asset quality satisfactory and calculation and confirmation of revenues, outlays and
profits were true and accurate. Ernest & Yong Huaming conducted audits to the Company’s 2010 financial
statements and issued an auditing report with standard and unreserved opinion accordingly. The Board of
Supervisors believes that the report reflected the Company’s financial standing, operating outcomes and cash
flow authentically, objectively and accurately.
(3) No conducts of underground deals and infringements upon shareholders’ interests or of making the losses of
corporate assets were found.
25
(4) The interrelated transactions occurred during the report period were fairly carried out with complete
formalities, which were all for the good of the Company and shareholders.
(5) The Board of Directors and managerial group of the Company fully executed their duties, and made well
achievements on operation.
X．MAJOR ISSUES
1. The Company had no major lawsuit and arbitration over the year
2. The relative issues about bankruptcy and reform
During the report period, the Company had no any bankruptcy and reform activity.
3. The information about holding share equity of other listed company or financial enterprise
During the report period, the Company subscribed new IPO shares and earned the yield of CNY0.9million by
selling all allotted 101 IPO shares, except that, the Company does not hold share equity of other listed company,
or any financial enterprises including commercial bank, securities company, insurance company, trust company
and futures company.
4. Important merger and acquisition, sales of assets
The Company had no merger and acquisition, sales of assets during the report period. And the Company has
already terminated the investment to Evergrowing Bank. No other important merger happened.
5. The performance on share equity incentive scheme
The Company does not constitute or execute any share equity incentive scheme.
6. Significant interrelated deals
1) Interrelated creditor’s rights and liabilities
By the end of report period, among the running capital involved between the Company and its controlling
shareholder’s subsidiary- Yantai Changyu Window of International Vine & Wine City Co., Ltd, CNY102,000 for
wine product sales has not been paid back to the Company. During the report period, no related claim &
obligations occurred among the Company and the controlling shareholder or its subsidiaries, and neither the
controlling party nor its affiliated businesses ever used the Company’s capital for non-operating purpose.
The Company did not provided capital to its controlling shareholder and subsidiary companies during the
report period. The capital circulations among the Company and its controlling shareholder and subsidiary
companies all belong to operating capital flow and the interrelated credits and debts between the Company and
its controlling shareholder will not produce any impact on the Company’s operating results and financial
condition.
In light of the Assignment of Contract on Wine Proceeds of Changyu AFIP Global signed in September 2010
between the Company and Zhongrong International Trust Co., Ltd, the Company assigned the proceeds rights
for specific wines to special fund under Zhongrong International Trust Co., Ltd, and received the payment
CNY80.028 million. This trust scheme was guaranteed unconditionally by the Company’s parent company-
Yantai Changyu Group Co. Ltd. with the guaranteed amount CNY88.2 million and will expire on April, 2012.
The Company and subsidiaries did not offer any guarantee to other legal person or individual.
2) Read the remark of financial statements “8. Relationship between the Interrelated Parties and Their Deals”
for the interrelated deals extended from the previous year(s) to the report period.
7. Major and important contracts and execution results
(1) During the report period, the Company had no guarantee/ pledge-related contracts. It didn’t trust, contract or
26
lease the assets of other companies, and vice versa.
(2) Major guarantee
During the report period, the Company neither had any immature guarantee nor provided any guarantee to any
units including the subsidiary companies of the Company and individuals.
(3) Entrustment on cash assets management
During the report period, the Company did not entrust any other party to manage its cash assets.
8. Issues Promised by the Company
During the report period, the Company’s holding shareholder-Yantai Changyu Group Co., Ltd. made the promise that
Group company has fully understood the requirements of “The Securities Law ”, “The Acquisition Regulations for Listed
Company”, “The Guidance on the Listed Company’s Transfer of Released Restricted Shares ” , and also the relevant
operation rules of Shenzhen Stock Exchange, and will strictly obey those relevant regulations and rules in
above-mentioned documents during the transaction of released restricted shares in the future.
Except Changyu Group, there is no shareholders who held over 5% (including 5%) of the Company’s shares.
9. Information about appointing and dismissing certified public accountants firm
The resolution was passed during the 2009 shareholders’ meeting in which the Company decided to renewal the
contract with Ernest & Yong Huaming to be the auditor for the Company in 2010 for a length of one year. The
annual auditing expenditure totaled up to CNY1.5 million including travel fees and all operating cost.
10. Records of punishments, criticism in the form of circular or open reprimands made by the competent
authorities
During the report period, no punishment records, enquiries, administrative punishment, written criticism, public
reprimand nor investigations were made or filed against this company, its directors, supervisors, senior
managers, stockholders or actual controller by the China Securities Regulatory Commission, securities
exchanges, or other competent authorities, judicial departments or disciplinary inspection departments. Nor
were there any prosecutions or individuals detained for criminal responsibilities.
11. Situation of infraction on stock trading for directors, supervisors, senior management and the
shareholders with holding over 5% stock of the company
During the report period, there was no directors, supervisors, senior management and the shareholders with
holding over 5% stock of the company who disobeyed the rules to transact the stocks of the company.
12. The Company’s Receptions, Studies and Visits
Reception date Reception place Reception way Visitor Main topic and
material provided
Meeting room of Field survey Morgan Stanley
2010.01.05
the Company
Meeting room of Field survey China Galaxy
2010.01.26
the Company Investment
Meeting room of Field survey China Universal Fund
2010.01.26
the Company
Meeting room of Field survey Nomura Securities
2010.01.26
the Company
Meeting room of Field survey China International Principal operation
2010.03.07
the Company Capital Corporation and the future
Meeting room of Field survey Nomura International development of
2010.03.13
the Company the company
27
Meeting room of Field survey Shanghai Shento Assets
2010.03.18 the Company
2010.04.16 Meeting room of Field survey Guotai Junan Securities
the Company
2010.04.25 Meeting room of Field survey China Merchants Bank
the Company
Meeting room of Field survey Haitong Securities
2010.05.12
the Company
2010.05.23 Meeting room of Field survey ICBC Credit Suisse
the Company Asset Management
2010.06.03 Meeting room of Field survey GF Fund Management
the Company
Meeting room of Field survey AVIC securities
2010.06.30
the Company
Meeting room of Field survey Soochow Asset
2010.06.30
the Company Management
Meeting room of Field survey Bosera Asset
2010.06.30
the Company Management
Meeting room of Field survey Penghua Fund
2010.06.30
the Company Management
Meeting room of Field survey GTJA Allianz Fund
2010.07.01
the Company management
Meeting room of Field survey Citic-prudential fund
2010.07.01
the Company management
Meeting room of Field survey Penghua Fund
2010.07.01
the Company Management
Meeting room of Field survey Galaxy Asset
2010.07.01
the Company Management
Meeting room of Field survey Wanjia Asset
2010.07.05
the Company Management
Meeting room of Field survey UBS SDIC Fund
2010.07.05
the Company Management
Meeting room of Field survey Asiaview Capital
2010.07.10
the Company
Meeting room of Field survey Shibei Capital
2010.07.10
the Company
Meeting room of Field survey China Financial Group
2010.07.10
the Company
Meeting room of Field survey Guotai Asset
2010.07.10
the Company Management
Meeting room of Field survey Fortune SGAM Fund
2010.08.01
the Company Management
Meeting room of Field survey Bank of
the Company Communications
2010.08.10
Schroder Fund
Management
Meeting room of Field survey CITIC Securities
2010.08.21
the Company
Meeting room of Field survey Hexi Investment
2010.08.25 the Company
Meeting room of Field survey Fortis Haitong
2010.08.25 the Company Investmwnt
Management
28
Meeting room of Field survey Changjiang Securities
2010.09.02 the Company
Meeting room of Field survey COMGEST
2010.09.07 the Company
Meeting room of Field survey China Merchants Fund
2010.09.08 the Company Management
Meeting room of Field survey Zhonghai Fund
2010.09.09 the Company Management
Meeting room of Field survey Western Securities
2010.09.10 the Company
Meeting room of Field survey Hua An Fund
2010.09.13 the Company Management
Meeting room of Field survey Rongtong Fund
2010.09.17 the Company Management
Meeting room of Field survey Aberdeen Fund
2010.10.14 the Company
Meeting room of Field survey Fuhwa Securities
2010.10.18 the Company Investment Trust
Meeting room of Field survey Everbright Pramerica
2010.11.11 the Company Fund Management
Meeting room of Field survey Fubon Securities
2010.11.16 the Company
Meeting room of Field survey Guoyuan Securities
2010.11.24 the Company
Meeting room of Field survey Wanjia Asset
2010.11.24 the Company Management
Meeting room of Field survey Nanjing Securities
2010.11.24 the Company
Meeting room of Field survey MC China
2010.11.25 the Company
Meeting room of Field survey BNP Paribas Securities
2010.11.25 the Company Services
Meeting room of Field survey GF Fund Management
2010.12.13 the Company
Meeting room of Field survey Galaxy Asset
2010.12.13 the Company Management
Meeting room of Field survey Rongtong Fund
2010.12.13 the Company Management
Meeting room of Field survey China International
2010.12.13 the Company Fund Management
Meeting room of Field survey Hong Yuan Securities
2010.12.13 the Company
Meeting room of Field survey First-trust Fund
2010.12.13 the Company Management
Meeting room of Field survey China International
2010.12.16 the Company Capital Corporation
13. Index for Information Disclosure of the Company
Announcement Publication
Title Publication Address
No. Date
2010-lin 001 Major Issues and Suspension Announcement 2010.01.08 “China Securities
Announcement on Resolution of 1st Interim Meeting of News”, “Securities
2010-lin 002 2010.01.20
Board of Directors’ 2010 Times”, “Hongkong
29
2010-lin 003 The Major Asset Acquisition Plan 2010.01.20 Commercial Daily
2010-lin 004 Announcement on Jiebaina Trademark 2010.01.26
Indicative Announcement on Releasing of Restricted
2010-lin 005 2010.03.30
Shares
Notice of Opening the 1st Interim Shareholders’
2010-lin 006 2010.04.14
Meeting 2010
Announcement on Resolution of 2nd Interim Meeting
2010-lin 007 2010.04.14
of Board of Directors 2010
2010-ding 001 The Summary of 2009 Annual Report 2010.04.16
Announcement on Resolution of 20th
2010-lin 008 2010.04.16
Meeting of 4th Board of Directors
2010-lin 009 Notice of Opening the Shareholders’ Meeting 2009 2010.04.16
Announcement on Resolution of 17th
2010-lin 010 2010.04.16
Meeting of 3rd Board of Supervisors
2010-lin 011 Statement of Independent Director Nominee 2010.04.16
2010-lin 012 Announcement on Routine Related Transaction 2010 2010.04.16
2010-ding 002 Report of First Quarter of 2010 2010.04.26
Announcement on Resolution of 1st Interim
2010-lin 013 2010.05.04
Shareholders’ Meeting 2010
Announcement on Resolution of Shareholders’
2010-lin 014 2010.05.13
Meeting 2009
Announcement on Resolution of 1st
2010-lin 015 2010.05.13
Meeting of 5th Board of Directors
Announcement on Resolution of 1st
2010-lin 016 2010.05.13
Meeting of 4th Board of Supervisors
2010-lin 017 Announcement on Jiebaina Trademark 2010.06.24
Announcement on Implementation of Profit
2010-lin 018 2010.06.30
Distribution 2009
Announcement on Investment to Evergrowing Bank
2010-lin 019 2010.07.22
and Progress on Major Assets Restructuring
2010-ding 003 Summary of Semi-annual Report 2010 2010.08.07
Announcement on Resolution of 2nd
2010-lin 020 2010.08.07
Meeting of 5th Board of Directors
Announcement on Establishment of Yantai Changyu
2010-lin 021 2010.08.07
Wine R&D and Production Co., Ltd.
Announcement on Additional Capital to Build Product
2010-lin 022 2010.08.07
Turnover Center
Notice of Opening the 2nd Interim Shareholders’
2010-lin 023 2010.08.07
Meeting 2010
Announcement on Resolution of the 2nd Interim
2010-lin 024 2010.09.01
Shareholders’ Meeting 2010
Announcement on Resolution of 3rd
2010-lin 025 2010.09.07
Interim Meeting of Board of Directors 2010
Notice of Opening the 3rd
2010-lin 026 2010.09.07
Interim Shareholders’ Meeting 2010
Announcement on Resolution of 3rd
2010-lin 027 2010.09.29
Interim Shareholders’ Meeting 2010
2010-lin 028 Clarification Announcement 2010.09.30
2010-ding 004 Report of Third Quarter of 2010 2010.10.28
Announcement on Reception of Implementation of
2010-lin 029 Corrective Measures Requested by CSRC Shandong 2010.11.02
Bureau
Announcement on Resolution of 4th
2010-lin 030 2010.12.04
Interim Meeting of Board of Directors 2010
30
Rectification Report on Problems Found during Site
2010-lin 031 2010.12.04
Inspection by CSRC Shandong Bureau
All above-mentioned information has also been disclosed in web site of http://www.cninfo.com.cn.
14. Other Major Issues
The Company will not make any financing through the issuance any shares or bonds within the prescient one
year.
XI Financial Report
31
INDEPENDENT AUDITORS’ REPORT
To shareholders of Yantai Changyu Pioneer Wine Company Limited
(A joint stock limited company incorporated in the People’s Republic of China)
We have audited the financial statements of Yantai Changyu Pioneer Wine Company Limited (the
“Company”) and its subsidiaries (collectively the “Group”) set out on pages 3 to 85, which
comprise the consolidated and company balance sheets as at 31 December 2010, and the
consolidated and company income statement, statement of changes in equity and cash flow
statement for the year then ended, and a summary of significant accounting policies and other
explanatory notes.
Directors’ responsibility for the financial statements
The management and the directors of the Company are responsible for the preparation and the
true and fair presentation of these financial statements. This responsibility includes designing,
implementing, maintaining internal control relevant to the preparation and the true and fair
presentation of financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with PRC Standards on Auditing issued by the Chinese
Institute of Certified Public Accountants. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance as to whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of the financial statements, whether
due to fraud or error. In making those risk assessments, the Certified Accountants consider
internal control relevant to the entity’s preparation and true and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An
audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
32
Opinion
In our opinion, the aforementioned financial statements give a true and fair view of the financial
position of the Company and of the Group as at 31 December 2010 and of the management result
of enterprises and cash flows for the year then ended in accordance with Chinese Accounting
Standards.
Ernst & Young Hua Ming
Beijing, the People’s Republic of China 7 April 2011
33
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEET
31 December 2010
ASSETS Notes 5 2010 2009
CURRENT ASSETS
Cash and bank (1) 2,489,804,162 2,545,210,286
Bills receivable (2) 31,447,207 38,107,831
Trade receivables (3) 100,113,271 98,022,443
Advances to suppliers (4) 74,728,756 31,885,027
Interest receivable (5) 9,519,721 8,969,343
Other receivables (6) 30,686,839 22,424,303
Inventories (7) 1,294,406,406 1,131,240,892
Other current assets - 1,104,453
Total current assets 4,030,706,362 3,876,964,578
NON-CURRENT ASSETS
Long-term equity investments (8) 5,000,000 10,000,000
Property, plant and equipment (9) 1,188,081,245 996,792,865
Construction in progress (10) 242,107,575 109,372,318
Intangible assets (11) 208,847,847 147,509,555
Biological assets (12) 37,773,638 39,717,396
Long-term prepaid expense (13) 106,233,673 38,956,022
Deferred tax assets (14) 160,275,366 139,267,274
Other non-current assets 4,351,547 5,580,790
Total non-current assets 1,952,670,891 1,487,196,220
Total assets 5,983,377,253 5,364,160,798
34
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED BALANCE SHEET (CONTINUED)
31 December 2010
LIABILITIES AND EQUITY Notes 5 2010 2009
CURRENT LIABILITIES
Short-term loan (16) - 224,500,000
Trade payables (17) 259,022,075 343,079,052
Advances from customers (18) 309,481,976 371,221,002
Employee benefits (19) 186,915,812 176,980,999
Taxes payable (20) 649,365,259 556,959,447
Interest payable (21) - 605,030
Other payables (22) 476,897,721 477,048,092
Total current liabilities 1,881,682,843 2,150,393,622
NON-CURRENT LIABILITIES
Long-term loan (23) - 10,500,000
Deferred tax liability (14) 5,336,115 5,336,115
Other long-term liabilities (24) 100,213,000 23,250,000
Total non-current liabilities 105,549,115 39,086,115
Total liabilities 1,987,231,958 2,189,479,737
EQUITY
Share capital (25) 527,280,000 527,280,000
Capital surplus (26) 557,222,454 557,222,454
Surplus reserve (27) 295,942,630 295,942,630
Retained earnings (28) 2,459,263,257 1,657,780,929
Equity attributable to equity holders
of the company 3,839,708,341 3,038,226,013
Minority interests 156,436,954 136,455,048
Total equity 3,996,145,295 3,174,681,061
Total liabilities and equity 5,983,377,253 5,364,160,798
35
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2010
Notes 5 2010 2009
Revenue (30) 4,982,943,397 4,199,403,351
Less: Cost of sales (30) 1,257,910,216 1,191,669,609
Taxes and surcharges (31) 286,375,938 253,331,114
Selling expenses (32) 1,338,470,218 1,093,674,541
Administrative expenses (33) 218,008,020 220,052,778
Loss for impairment of assets (34) 4,802,933 1,457,541
Add: Financial income (35) 30,232,166
28,965,166
Investment income (36) 2,606,750
900,000
Operating profit 1,907,241,238 1,472,056,684
Add: Non-operating income (37) 25,584,050 28,797,573
Less: Non-operating expenses (38) 3,175,690 1,599,273
Including: losses on disposal
of non-current assets 551,220 5,986
Profit before tax 1,929,649,598 1,499,254,984
Less: Income tax (39) 475,449,364 363,269,516
Profit for the year 1,454,200,234 1,135,985,468
Attributable to equity holders of the
company 1,434,218,328 1,127,328,843
Minority interests 19,981,906 8,656,625
Earnings per share
Basic earnings per share (40)
2.72 2.14
Diluted earnings per share (40) N/A N/A
Comprehensive income 1,454,200,234 1,135,985,468
Attributable to equity holders of the
company 1,434,218,328 1,127,328,843
Attributable to minority interests 19,981,906 8,656,625
36
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED CHANGES IN EQUITY
Year ended 31 December 2010
2010
Attributable to equity holders of the Group
Issued Capital Surplus Retained Minority Total
surplus reserve earnings Subtotal interest
capital
At 1 January 2010 527,280,000 557,222,454 295,942,630 1,657,780,929 3,038,226,013 136,455,048 3,174,681,061
Profit for the year 1,434,218,328 1,434,218,328 1,454,200,234
- - - 19,981,906
Total comprehensive
income - - - 1,434,218,328 1,434,218,328 19,981,906 1,454,200,234
Proposed final dividend
( Notes 5 (28) ) - - - ( 632,736,000) ( 632,736,000) - ( 632,736,000)
At 31 December 2010 527,280,000 557,222,454 295,942,630 2,459,263,257 3,839,708,341 156,436,954 3,996,145,295
2009
Attributable to equity holders of the Group
Issued Capital Surplus Retained Minority
capital surplus reserve earnings Subtotal interest Total
At 1 January 2009 527,280,000 557,222,454 295,942,630 1,163,188,086 2,543,633,170 85,394,360 2,629,027,530
Profit for the year
- - - 1,127,328,843 1,127,328,843 8,656,625 1,135,985,468
Total comprehensive
income - - - 1,127,328,843 1,127,328,843 8,656,625 1,135,985,468
Acquisition of a
subsidiary - - - - - 42,404,063 42,404,063
Proposed final dividend
(Notes 5 (28) ) - - - ( 632,736,000 ) ( 632,736,000) - ( 632,736,000)
At 31 December 2009 527,280,000 557,222,454 295,942,630 1,657,780,929 3,038,226,013 136,455,048 3,174,681,061
37
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2010
Notes 5 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales of goods or rendering
of services 6,554,373,682 5,681,610,588
Cash received form tax refund 5,726,969 3,240,000
Cash received relating to other operating
activities (41) 99,770,783 25,817,719
Cash inflows from operating activities 6,659,871,434 5,710,668,307
Cash paid for goods and services (2,459,887,169 ) (1,932,856,970 )
Cash paid to and on behalf of employees ( 323,612,090 ) ( 272,698,595 )
Cash paid for all types of taxes (1,300,243,322 ) (1,083,358,216 )
Cash paid relating to other operating activities (41) (1,286,206,811 ) (1,062,167,011 )
Cash outflows from operating activities (5,369,949,392 ) (4,351,080,792 )
Net cash flows from operating activities (42) 1,289,922,042 1,359,587,515
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of investments - 15,000,000
Decrease in term deposits over 3 months - 409,320,111
Cash received from return on investments 33,874,239 48,622,460
Cash received from acquisition of a subsidiary - 42,851,536
Proceeds from disposal of property, plant and
equipment 3,572,356 419,973
Cash inflows from investing activities 37,446,595 516,214,080
Cash paid for acquisition of properties, plants
and equipments, intangible assets and other
long-term assets ( 514,446,007 ) ( 266,708,426 )
Increase in term deposits over 3 months ( 944,328,054 ) -
Cash outflows from investing activities (1,458,774,061 ) ( 266,708,426 )
Net cash flows from investing activities (1,421,327,466 ) 249,505,654
38
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CONSOLIDATED CASH FLOW STATEMENT (CONTINUED)
Year ended 31 December 2010
Notes 5 2010 2009
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash received from borrowings - 230,000,000
Cash inflows from financing activities - 230,000,000
Repayment of borrowings ( 235,000,000 ) -
Dividends paid and interest paid ( 633,341,030 ) ( 633,136,613)
Cash outflows from financing activities ( 868,341,030 ) ( 633,136,613)
Net cash flows from financing activities ( 868,341,030 ) ( 403,136,613)
NET INCREASE/(DECREASE) OF CASH
AND CASH EQUIVALENTS ( 999,746,454 ) 1,205,956,556
ADD: CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 1,998,681,278 792,724,722
CASH AND CASH EQUIVALENTS AT END (42)
OF YEAR 998,934,824 1,998,681,278
39
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET
Year ended 31 December 2010
ASSETS Notes 11 2010 2009
CURRENT ASSETS
Cash and bank 1,898,488,544 1,701,195,926
Bills receivables 12,871,415 12,294,221
Trade receivables (1) 11,708,820 13,163,722
Advances to suppliers 40,352,558 19,918,724
Interest receivable 9,519,721 8,969,343
Dividend receivable 1,765,637,075 447,429,274
Other receivables (2) 1,155,602,622 633,416,634
Inventories 481,049,315 467,402,171
Total current assets 5,375,230,070 3,303,790,015
NON-CURRENT ASSETS
Long-term equity investments (3) 331,907,113 229,077,178
Property, plant and equipment 325,016,812 331,281,278
Construction in progress 13,603,659 2,234,216
Intangible assets 87,521,064 90,579,308
Biological assets 10,270,836 11,444,646
Deferred tax assets 27,019,769 26,315,465
Other non-current assets 4,538,447 5,544,630
Total non-current assets 799,877,700 696,476,721
Total assets 6,175,107,770 4,000,266,736
40
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
BALANCE SHEET (CONTINUED)
Year ended 31 December 2010
LIABILITIES AND EQUITY 2010 2009
CURRENT LIABILITIES
Short-term loan - 220,000,000
Trade payables 165,884,293 232,881,603
Employee benefits 114,351,323 112,116,156
Taxes payable 122,920,579 115,867,141
Other payables 1,768,065,889 219,943,753
Interest payable - 605,030
Total current liabilities 2,171,222,084 901,413,683
NON-CURRENT LIABILITIES
Other long-term liabilities 8,027,000 13,350,000
Total non-current liabilities 8,027,000 13,350,000
Total liability 2,179,249,084 914,763,683
EQUITY
Share capital Notes 5 (25) 527,280,000 527,280,000
Capital surplus Notes 5 (26) 557,222,454 557,222,454
Surplus reserve Notes 5 (27) 295,942,630 295,942,630
Retained earnings 2,615,413,602 1,705,057,969
Total equity 3,995,858,686 3,085,503,053
Total liabilities and equity 6,175,107,770 4,000,266,736
41
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
INCOME STATEMENT
Year ended 31 December 2010
Notes 11 2010 2009
Revenue (4) 1,563,030,583 1,282,782,886
Less: Cost of sales (4) 1,278,064,848 957,084,581
Taxes and surcharges 163,100,755 152,142,756
Administrative expenses 132,886,700 131,356,586
Loss for impairment of assets 5,000,000 -
Add: Financial income 26,899,607 34,082,435
Investment income (5) 1,547,676,058 1,152,606,750
Operating Profit 1,558,553,945 1,228,888,148
Add: Non-operating income 860,312 1,545,292
Less: Non-operating expenses 20,228 96,018
Profit before tax 1,559,394,029 1,230,337,422
Less: Income tax 16,302,396 20,645,665
Profit for the year 1,543,091,633 1,209,691,757
Total comprehensive income 1,543,091,633 1,209,691,757
42
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CHANGES IN EQUITY
Year ended 31 December 2010
2010
Capital Surplus Retained
Issued capital surplus reserve earnings Total
At 1 January 2010 527,280,000 557,222,454 295,942,630 1,705,057,969 3,085,503,053
Profit for the year
- - - 1,543,091,633 1,543,091,633
Total comprehensive
income - - - 1,543,091,633 1,543,091,633
Proposed final dividend
(Notes 5 (28)) - - - ( 632,736,000) 632,736,000)
At 31 December 2010 527,280,000 557,222,454 295,942,630 2,615,413,602 3,995,858,686
2009
Capital Surplus Retained
Issued capital surplus reserve earnings Total
At 1 January 2009 527,280,000 557,222,454 295,942,630 1,128,102,212 2,508,547,296
Profit for the year
- - - 1,209,691,757 1,209,691,757
Total comprehensive
income - - - 1,209,691,757 1,209,691,757
Proposed final dividend
(Notes 5 (28)) - - -( 632,736,000) ( 632,736,000)
At 31 December 2009 527,280,000 557,222,454 295,942,630 1,705,057,969 3,085,503,053
43
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CASH FLOW STATEMENT
Year ended 31 December 2010
Notes 11 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from sales of goods or rendering
of services 1,871,259,711 1,520,451,727
Cash received relating to other operating
activities 942,763,825 1,213,604
Cash inflows from operating activities 2,814,023,536 1,521,665,331
Cash paid for goods and services (1,543,857,233) (1,037,814,506)
Cash paid to and on behalf of employees ( 106,822,924) ( 102,031,362)
Cash paid for all types of taxes ( 240,134,877) ( 209,456,392)
Cash paid relating to other operating activities ( 691,116,978) ( 363,667,357)
Cash outflows from operating activities (2,581,932,012) (1,712,969,617)
Net cash flows from operating activities (6) 232,091,524 ( 191,304,286)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of investments - 15,000,000
Decrease in term deposits over 3 months - 392,320,111
Cash received from return on investments 960,903,754 1,159,406,911
Proceeds from disposals of property, plant and
equipment 3,773,563 343,453
Cash inflows from investing activities 964,677,317 1,567,070,475
Cash paid for acquisition of property, plant and
equipment, intangible assets and other
long-term assets ( 38,317,534) ( 9,058,129)
Increase in term deposits over 3 months ( 949,328,054) -
Cash paid for investment ( 107,829,935) ( 60,000,000)
Cash outflows from investing activities (1,095,475,523) ( 69,058,129)
Net cash flows from investing activities ( 130,798,206) (1,498,012,346)
44
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
CASH FLOW STATEMENT (CONTINUED)
Year ended 31 December 2010
Notes 11 2010 2009
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received from bank loan
- 220,000,000
Cash inflows from financing activities
- 220,000,000
Cash paid for debts ( 220,000,000)
-
Dividends paid and interest paid ( 633,341,030) ( 632,736,000)
Cash outflows from financing activities ( 853,341,030) ( 632,736,000)
Net cash flows from financing activities ( 853,341,030) ( 412,736,000)
INCREASE (DECREASE) OF CASH AND
CASH EQUIVALENTS ( 752,047,712) 893,972,060
ADD: CASH AND CASH EQUIVALENTS (7)
AT BEGINNING OF THE YEAR 1,159,666,918 265,694,858
CASH AND CASH EQUIVALENTS AT END OF (7)
THE YEAR 407,619,206 1,159,666,918
45
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
Year ended 31 December 2010
1. 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, sparkling wine, and tonic 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 and tonic
wine.
Pursuant to the approval from the Government of Shandong Province (Luzheng [1997]119),
the Company was reorganized as a joint stock limited company on 10 April 1997. On 23
September 1997, the Company was approved by China Securities Regulatory Commission
(the “CSRC”) ([1997] No. 52) to issue 88,000,000 domestically listed foreign investment
shares (“B shares”) on Shenzhen Stock Exchange. On 18 September 1997, the Company
obtained the business license with the registered number No. 26718011-9.
In October 2000, the Company was approved by CSRC to issue 32,000,000 domestically
listed Shares (“A Shares”). The A shares were listed on Shenzhen Stock Exchange on 26
October 2000.
Pursuant to the share reform notices issued by the Company in February 2006, Changyu
Group Company transferred its 13,977,600 shares to the shareholders of A share of the
Company. After the reform, percentage of equity attributable to Changyu Group Company
decreased from 53.8% to 50.4%. At 31 December 2010, the total shares issued by the
Company amounts to 527,280,000 shares. Please refer to No.25 of Notes 5 in detail.
The holding company of the Group is Changyu Group Company, which was jointly
controlled by Yantai SASAC, ILLVA Saronno Investment Italy, International Finance
Corporation and Yantai Yuhua Investment and Development Company Limited.
The financial statements have been authorized by the board of directors on 7 April 2011.
According to the Company’s articles of association, the financial statements will be
reviewed by shareholders on the shareholder’s meeting.
46
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES
(1) Preparation of financial statements
The financial statements are prepared in according with “Corporate Accounting Standards
– The Principles” which was published by Ministry of Finance in February 2006, and “the
38 specific accounting standards”, its application guide, interpretations for accounting
standards, and other relevant regulations (collectively “CAS”).
The financial statements are prepared on a going concern basis.
Except for certain financial instrument, the measurement basis adopted by the group in
preparing its financial statement is historical cost. Subsequently, if the assets are impaired,
impairment provisions are made in accordance with the relevant accounting standards.
(2) 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 2010, financial performance and cash
flow in 2010 of the Company and the Group.
(3) Accounting year
The accounting year of the Group is from 1 January to 31 December.
(4) Reporting currency
The Group reporting and presentation currency is the Renminbi (“RMB”). Unless
otherwise stated, the unit of the currency is Yuan.
47
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(5) Business combination
A business combination is the bringing together of separate entities or businesses into
one reporting entity, classified into the business combination under common control and
business combination under non common control.
Business combination under common control
A business combination involving entities or businesses under common control is a
business combination in which all of the combining entities or businesses are ultimately
controlled by the same party or parties both before and after the business combination, and
that control is not transitory. The combining entity that obtains control of other combining
entities or businesses is the acquirer, and the other entities involved are the acquirees. The
combination date is when the acquirer effectively obtains the control of the acquirees.
The assets and liabilities obtained by the acquirer shall be measured at carrying amount in
the acquiree's accounts as at the date of combination. Where there is a difference between
the carrying amount of the net assets of the acquiree and the cost of combination, capital
surplus shall be adjusted. Where the capital surplus is not sufficient to offset the value of
the net assets acquired, retained earnings shall be adjusted.
Business combination under non-common control
A business combination involving entities or businesses under non-common control is a
business combination in which all of the combining entities or businesses are not
ultimately controlled by the same party or parties both before and after the business
combination. The combining entity that obtains control of other combining entities or
businesses is the acquirer, and the other entities involved are the acquirees. The
acquisition date is when the acquirer effectively obtains the control of the acquirees.
For business combination under non-common control, the assets and liabilities and
contingent liabilities obtained by the acquirer shall be measured at fair value as at the date
of combination.
Where the cost of combination is greater than the fair value of assets and liabilities and
contingent liabilities, the difference should be recognized as goodwill. Where the cost of
combination is smaller than the fair value of acquiree’s assets and liabilities and
contingent liabilities, and cost of combination should be reevaluated. Where cost of
combination is still smaller than fair value of acquiree’s net assets, the difference should
be recognized in income statement.
48
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(6) Consolidated financial statements
The consolidation scope of consolidated financial statements is determined on the basis of
control. The consolidated financial statements include the financial statements of the
Company and its subsidiaries for the year ended 31 December 2009. The subsidiaries are
entities that are controlled by the Company.
The subsidiaries adopt the same accounting year and accounting policies as the Company
adopted. All intercompany balances, transactions, unrealized gain and loss and dividends
within the Group are eliminated in full on consolidation.
Losses within a subsidiary are attributed to the minority interest even if that results in a
deficit balance. Any changes of minority interest that do not result loss of control is
accounted for as equity transaction.
For the subsidiaries acquired through business combination under non-common control,
their financial performance and cash flow shall be included in the consolidated financial
statements from the combination date, as long as they are under control by the Company. In
preparation of the consolidated financial statements, the subsidiaries’ identifiable assets,
liabilities and contingent liabilities are adjusted by their fair value on the acquisition date.
For the subsidiaries acquired through business combination under common control, their
financial performance and cash flow shall be included in the consolidated financial
statements. When preparing comparative consolidated financial statements, the
pre-combination adjustment of the subsidiary’s financial statements is considered as it has
existed before the business combination from the beginning of the reporting period.
(7) Cash and cash equivalents
Cash comprises cash on hand and demand deposit. Cash equivalents refers to short-term,
highly liquid investments that are readily convertible into known amounts of cash and
which are subject to an insignificant risk of changes in value.
(8) Foreign currency transactions and foreign currencies reporting
For any foreign currency transactions, they are recorded in functional currency.
Transactions in currencies other than the reporting currency are translated into the reporting
currency at the exchange rates prevailing on the transaction dates. Monetary assets and
liabilities denominated in foreign currencies are restated into the reporting currency using
the rates of exchange ruling at the balance sheet date. The exchange gains or losses are
dealt with in the income statement for the year.
49
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(8) Foreign currency transactions and foreign currencies reporting (continued)
The exchange gains or losses arising from foreign currency borrowings in relation to the
acquisition or construction of a fixed asset are accounted for according to the requirements
relating to the capitalization of borrowing costs. Non-monetary items denominated in
foreign currencies which are measured at historical cost are translated using the exchange
rates on their transaction dates. Non-monetary foreign items denominated in foreign
currencies which are measured at fair value are translated using the exchange rates on
balance sheet date, and any difference is recognized in income statement or other
comprehensive income.
Foreign currency cash flows are translated using the spot exchange rate prevailing on the
date that the cash flows occur. The effect of exchange rate changes on cash is separately
presented as an adjustment item in the cash flow statement.
(9) Inventories
Inventories comprise raw materials, work in progress, finished goods and transitory
materials.
The inventories are initially measured at cost. The cost of inventories comprises all costs
of purchase, cost of conversion and other costs. When inventories are sold, the cost of sale
is calculated on a weighted-average basis.
Agricultural products harvested from the company’s biological assets are measured on a
weighted-average basis, which comprises all material, labor and other indirect expense
incurred in producing and gathering the agricultural assets.
Agricultural products harvested are reported in accordance with the CAS 1 Inventories.
The Company adopts perpetual inventory system.
Inventories are measured at the lower of cost and net realizable value at the balance sheet
date. If the cost of inventories is higher than the net realizable value, the impairment of
inventories is accrued and recognized in income statement. If the factors causing any
impairment of the inventories do not exist, where the net realizable value is higher than the
cost, the amount of impairment is reversed and the reversed amount is recognized in the
income statement.
50
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(9) Inventories (continued)
The net realizable value is estimated selling prices in ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale. The net
realizable value is estimated selling prices in ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.
The inventory provision for raw materials is assessed by categories of inventories, where
finished goods are assessed by items. For the homogeneous products which are produced
and sold in the same region and are inseparable from other inventories, the inventory
provision is accrued collectively.
(10) Long term equity investments
Long term equity investments comprise investments in subsidiaries, joint ventures,
associates and any investment whose fair value cannot be reliably measured, with which
the Company cannot exert control, joint control or significant influence over the investee.
The investment is initially measured at cost. For business combination under common
control, the investment cost is recorded at the book value of the acquiree’s equity
acquired. For business combination under non-common control, the investment cost is
recorded at combination cost. Long term equity investments other than business
combination, the investment cost is recorded at cash paid plus any direct expense, tax or
other expenditures associate with the investment, or the fair value of the equity
instruments issued, or value agreed in the investment contract, except for the value agreed
in the investment contract is not a fair market value.
Cost method is adopted for the investments whose fair value cannot be reliably measured,
with which the Group does not exert control, joint control or significant influence over the
investees. Cost method is also adopted for the investments in subsidiaries in the
Company’s balance sheet.
When cost method is adopted, the long term equity investments are measured at its initial
investment cost, except that the initial investment cost contains declared dividend. The
dividend declared by the investee is recorded as investment income in income statement.
Impairment is assessed according to relevant policies.
The invested entities over which the Group has joint control or significant influence are
measured by equity method. Joint control is the contractually agreed sharing of control
over an economic activity, and exists only when the strategic financial and operating
decisions relating to the activity require the unanimous consent of the parties sharing
control. Significant influences refers to the power to participate in making decisions on the
51
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(10) Long term equity investments (continued)
financial and operating of an enterprise but not to control or joint control together with
other parties over the formulation of the policies.
By equity method, where initial cost of investment excesses the fair value of identifiable
net assets of investee, the difference should be recognized in initial investment cost.
Where initial cost of investment is smaller than the fair value of identifiable net assets of
investee, the difference should be recognized in income statement and the investment cost
should be adjusted accordingly.
By equity method, after investment, the Group recognizes the investment profits or losses
and adjusts the book value of the long term equity investment based on the share of the net
profits or losses of the investee. The share of the net profits and losses of the investee
should be recognized at fair value of all identifiable assets in accordance with the
accounting policy and accounting period of the Group, and the inter-company transactions
between the investees and the Group shall be eliminated in proportion to the Group’s
equity interest in the investees after making adjustments on the net profits of the
investees’(the loss shall be recognized in full in case impairment is recognized from the
inter-company transactions). For the investment in associate and joint ventures before the
first time adoption of CAS, the debit balance of the investment differences, if any, also
should be deducted from the investment income. The Group will reduce the book value of
the long term equity investment in accordance with the share of profits or cash dividends
declared to distribute by the invested entities.
The net losses of the invested entity should be recognized until the book value of the long
term equity investment and other long term rights and interests which substantially from
the net investment made to the invested entities are reduced to zero, unless the Group has
the obligation to assume extra losses. Where any change is made to the owner's equity
other than the net profits and losses of the invested entity, the book value of the long term
equity investment are adjusted and be included in the owner's equity. When disposing of a
long term equity investment, the difference between its book value and the proceeds is
recognized in the income statement in the corresponding period.
Details for the impairment test and impairment loss recognition for the long term equity
investments in subsidiaries, associates and joint ventures, please refer to Note 2 (18).
Details for the impairment test and impairment loss recognition for other long term equity
investment, which fair value not available in active market and cannot be reliably
measured, please refer to Note 2 (17).
52
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(11) Biological assets
The biological assets of the Group are vines.
Biological assets should be recognized when and only when:
(i) The Group controls the asset as a result of past events;
(ii) It is probable that future economic benefits associate with the asset will flow to the entity; and
(iii) The cost of the asset can be measured reliably.
Biological assets comprise consumptive biological assets, productive biological assets,
and not for profit biological assets. Biological assets are initially measured at its cost.
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:
Category Estimated useful Estimated residual Annual depreciation
life rate rate
Vines 20 years - 5%
Consumptive biological assets and productive biological assets are measured as at each
balance sheet date. Where reliable evidence shows there is natural disaster, plant diseases,
insect pests, animal disease or change of market demand that make the realizable net value
of any consumptive biological asset or the recoverable amount of any productive
biological asset is lower than its book value, provision or impairment should be
recognized in income statement in according to the difference. Where the factors which
cause any provision of a consumptive biological asset are not exist, the amount of
provision are reversed limited to the provision which has been made. The reversed
amounts are recognized in the income statement of the current period. Impairment on
productive biological assets cannot be reversed.
No provision is made for not for profit biological assets.
The Group evaluates the useful life, expected net salvage value, and the depreciation
method of the property, plant and equipment at the end of each year.
Agricultural produce harvested from the entity’s biological assets are measured at its
weighted-average book value. The book value comprises all material, labor and other
indirect expense occurred in producing and gathering the agricultural assets. Agricultural
produce harvested are reported in accordance with the CAS 1 Inventories.
53
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(11) Biological assets（continued）
When biological assets are sold, lost, dead, or damaged, the carrying amount is recognized
in the income statement after deduction of relevant taxes.
(12) Property, plant and equipment
Property, plant and equipment should be recognized as an asset if, and only if:
(i) It is probable that future economic benefits associated with the item will flow to the
entity; and
(ii) The cost of the item can be measured reliably.
Property, plant and equipments is initially measured at cost. The cost of an item of
property, plant and equipment comprises its purchase price, including import duties and
non-refundable purchase taxes, after deducting trade discounts and rebates; and any costs
directly attributable to bringing the asset to the location and condition necessary for it to
be capable of operating in the manner intended by management.
Depreciation is calculated on a straight line basis. The estimated useful life and residual
value rate are as follows:
Estimated useful Estimated residual Annual depreciation
life rate rate
Buildings 30-40years 5%-40% 2%-3.2%
Machinery 10-20years 5% 4.8%-9.5%
Motor Vehicles 6-12years 5% 7.9%-15.8%
A variety of depreciation rate can be used for different components of an item of property,
plant and equipment according to its different useful lives or nature.
The Group evaluates the useful life, expected net residual value, and the depreciation
method of the property, plant and equipment every year, and makes adjustment where
necessary.
For details of the impairment test and impairment loss recognition for property, plant and
equipment, please refer to Note 2 (18).
54
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(13) Construction in progress
Construction in progress are measured on actual construction costs, including the direct
costs of construction, capitalized borrowing costs during the period of construction and
other expenditures.
Construction in progress is reclassified to the property, plant and equipment when
completed and ready for use.
Details for the impairment test and impairment loss recognition for construction in
progress, please refer to Note 2 (18).
(14) Borrowing costs
Borrowing costs are interest and other costs incurred by the Group in connection with the
borrowing of funds, which includes interests, amortization of discounts or premiums,
ancillary costs, and exchange differences arising from foreign currency borrowings.
Borrowing costs that are directly attributable to the acquisition, construction or production
of a qualifying asset shall be capitalized as part of the cost of that asset. A qualifying asset
is an asset that necessarily takes a substantial period of time to get ready for its intended
use or sale.
The capitalization of borrowing costs as part of the cost of a qualifying asset shall
commence when:
(i) Expenditures of the asset are being incurred;
(ii) Borrowing costs are being incurred; and
(iii) Activities that are necessary to prepare the asset for its intended use of sale are in
progress.
Capitalization of borrowing costs shall cease when all the activities necessary to prepare
the qualifying asset for its intended use of sale are substantially complete. Any borrowing
costs incurred after this should be recognized in income statement.
55
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(14) Borrowing costs (continued)
During the capitalization period, the amount of borrowing costs eligible for capitalization
on a qualifying asset for each accounting period shall be determined by:
(i) The actual borrowing costs incurred on that borrowing during the period less any
investment income on the temporary investment of those borrowing for
specifically purpose borrowing; or
(ii) Applying a capitalization rate to the expenditures on that asset. The capitalization
rate shall be the weighted average of the borrowing coasts applicable to the
borrowings of the entity for general purpose borrowing.
When the acquisition, construction or production of a qualifying asset is abnormally
interrupted before it necessarily takes a substantial period of time to get ready for its
intended use or sale, and the interruption period exceed three months, the capitalization of
borrowing coasts shall be temporally ceased. During the cessation of capitalization, the
borrowing costs should be recognized in income statement, until the construction resume.
56
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(15) Intangible assets
Intangible assets would only be recognized when it can bring economic benefits to the
group and its cost could be reliably measured. The opening balance of such intangible
assets is measured at its cost. For those intangible assets that acquired by merger and
acquisition and its fair value could be reliably measured, their book value would be
measured by its fair value.
The estimated useful lives are determined on the periods during which it can bring
economic benefits to the Group. If the periods cannot be reliably determined, the
intangible assets are classified as intangible assets with indefinite useful life.
The useful lives of the intangible assets are as follows:
Useful life
Land use rights 50 years
Software use rights 5 years
The land use rights obtained by purchase or payment of land lease prepayment are
recorded as intangible assets. For self-constructed buildings, the land use rights and plants
are recorded as intangible assets and property, plant and equipment, respectively.
Purchased buildings are allocated between land use rights and buildings based on actual
payments, and are totally recorded as property, plant and equipment when it is difficult to
allocate.
Intangible assets with finite lives are amortized over the useful life on the straight line
basis. The amortization period and amortization method for an intangible asset with a
finite useful life are reevaluated at each year end.
Intangible assets with indefinite lives are assed for impairment every year whenever there
is an indication that the intangible asset may be impaired. If there is evidence that the
useful lives of the intangible assets are finite, the change in the useful life assessment from
infinite to finite is accounted for on a prospective basis.
For details for the impairment test and impairment loss recognition for intangible assets,
please refer to Note 2 (18).
57
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(16) Long term prepaid expenses
Long term prepaid expenses are amortized over the useful economic life on a straight line
basis.
Amortization period:
Land requisition fee 50 years
Land Lease prepayment 50 years
Others 50 years
(17) Financial instruments
Financial instruments refer to the contracts whereby the financial assets of an enterprise
are formed, and whereby the financial liabilities or right instruments of any other entity
are formed.
Recognition and derecognizing of financial instruments
The Group recognizes the financial assets or financial liabilities as it contracted in
financial instruments agreements.
If a financial asset meets any of the following requirements, it is derecognized:
(i) If the contractual rights for collecting the cash flow of the said financial asset are
terminated; or
(ii) Transferred the ownership of receive the cash flow form financial assets, or with
the responsibility of transferred all cash flow received form financial assets to the
third parties; And (a) actually transferred out all the risk and reward related to the
financial assets, or (b) actually neither remained nor transferred out almost of the
risk and reward of financial assets, but lost the control of the financial assets.
A financial liability is derecognized when the obligation under the liability is discharged
or cancelled or expires. When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as a derecognizing of
the original liability and a recognition of a new liability, and the difference between the
respective carrying amounts is recognized in the income statement.
58
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(17) Financial instruments (continued)
In a regular way purchase or sale financial instrument, the financial instrument should be
recognized or derecognized on transaction date. A regular way purchase or sale is a
purchase or sale of a financial asset under a contract whose terms require delivery of the
asset within the time frame established generally by regulation of convention in the
marketplace concerned. Transaction date is the date that the Group commits to purchase or
disposal a financial instrument.
Classification and measurement of financial assets
Financial assets are classified when they are initially recognized, including financial assets
at fair through profits or losses, held to maturity investments, loans and receivables and
available for sale financial assets, and hedging instrument. Financial assets initially
recognized at fair value. For financial assets measured at fair value through profits or
losses, the transaction expenses thereof are directly included in the current profits or
losses; for other categories of financial assets and financial liabilities, the transaction
expenses thereof are included in the initial costs.
Subsequent measurement of financial assets depends on its classification:
Financial assets at fair value through profits and losses
Financial assets at fair value through profit or loss include financial assets held for trading
and financial assets designated upon initial recognition as at fair value through profit or
loss. Financial assets are classified as held for trading if they meet any of the following
requirements: (i) The financial assets being acquired mainly for the purpose of selling or
repurchase in the near future; (ii) Forming a part of the identifiable combination of
financial instruments, which are managed in a centralized way, and for which there is
objective evidence that the enterprise will manage the combination by way of short term
profit making in the near future; (iii) Being a derivative instrument. Theses financial
assets are subsequently measured at fair value, and all the realized and unrealized profits
and losses are included in profits and losses of the current year. Gains or losses on these
financial assets are recognized in the income statement whenever they are realized or not
realized. Dividend or interest associate with financial instrument which measured at fair
value and changes recorded in income statement, should be recorded in income statement.
59
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(17) Financial instruments (continued)
Held to maturity investments
Non derivative financial assets with fixed or determinable payments and fixed maturity are
classified as held to maturity when the Group has the positive intention and ability to hold
to maturity. Held to maturity investments are subsequently measured at carried
amortized cost using the effective interest method. Gains and losses are recognized in
the income statement when the investments are derecognized or impaired, as well as
through the amortization.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. Such assets are subsequently carried at
amortized cost using the effective interest method. Gains and losses are recognized in the
income statement when the loans and receivables are derecognized or impaired, as well as
through the amortization process.
Available for sale financial assets
Available for sale financial assets are non-derivative financial that are initially designated
as available for sale or are not classified into any of the other three categories. After initial
recognition, available for sale financial assets are measured at fair value, with gains or
losses recognized as capital surplus reserve until the investment is derecognized or until
the investment is determined to be impaired, at which time the cumulative gain or loss
previously reported in equity are recognized in the income statement. Amortized cost is
calculated taking into account any discount or premium on acquisition and includes fees
that are an integral part of the effective interest rate and transaction costs. Interest and
dividends earned are recoded as interest income and dividend income, respectively and are
recognized in the income statement.
Available for sale financial assets which have no quoted price and fair value cannot be
reliably measured are measured at cost.
60
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(17) Financial instruments (continued)
Classification and measurement of financial liabilities
Financial liabilities are classified into financial liabilities at fair through profits and losses,
other financial liabilities and hedging instrument when they are initially recognized. For
financial liabilities at fair through profits and losses, the transaction expenses thereof are
directly included in the current profits or losses, while the transaction expenses of other
financial liabilities are include in the initially recognized amounts.
Subsequent measurement of financial liability depends on its classification:
Financial liabilities at fair value through profits and losses
Financial liabilities at fair through profits and losses include transaction financial
liabilities, and the designated financial liabilities measured at fair value upon initial
recognition, and whose variation is recognized in the income statement of the current year.
Financial liabilities that meet any of the following requirements are classified as
transaction financial liabilities: (i) The financial liability being undertaken mainly for the
purpose of selling or repurchase in the near future; (ii) Forming a part of the identifiable
combination of financial instruments, which are managed in a centralized way, and for
which there is objective evidence that the enterprise will manage the combination by way
of short term profit making in the near future; (iii) Being a derivative instrument. Theses
financial liabilities are subsequently measured at fair value, and all the realized and
unrealized profits and losses are recognized in the income statement of the current year.
Other financial liabilities
The financial liabilities are subsequently measured at amortized cost by adopting effective
interest rate method.
Fair value of financial instruments
The fair value of investments that are actively traded in organized financial markets is
determined by reference to quoted market prices. For investments where there is no active
market, fair value is determined using valuation techniques. Such techniques include using
recent arm’s length market transactions; reference to the current market value of another
instrument, which is substantially the same; a discounted cash flow analysis; option
pricing models and other valuation models.
61
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(17) Financial instruments (continued)
Impairment of financial assets
The Group assesses at each balance sheet date whether there is any objective evidence that
a financial asset or a group of financial assets is impaired. Positive evidences refer to those
occurred after the initial recognition, have effect on estimated future cash flows of the
financial assets, and can be measured reliably.
Assets carried at amortized cost
If there is objective evidence that an impairment loss on financial assets carried at
amortized cost has been incurred, the amount of the loss is measured as the difference
between the assets’ carrying amount and 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 after taking into account of the collateral over these
balances.
The Group first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant. If it is determined that objective evidence
of impairment exists for an individually assessed financial asset, the impairment losses are
recognized in the income statement of the current year. Not individually significant
financial assets are assessed individually or collectively included in a group of financial
assets with similar credit risk characteristics. Assets that are individually assessed for
impairment and for which an impairment loss is or continues to be recognized are not
included in a collective assessment of impairment.
If, in a subsequent period, the amount of impairment loss decreases and the decrease can
be related objectively to an event occurring after the impairment was recognized, the
previously recognized impairment loss is reversed. Any subsequent reversal of an
impairment loss is recognized in the income statement, to the extent that the carrying
value of asset does not exceed its amortized cost at the reversal date.
62
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(17) Financial instruments (continued)
Available for sale financial assets
When a decline in the fair value of an available for sale financial asset has been
recognized directly in equity and there is objective evidence that the asset is impaired the
accumulative loss that had been recognized directly in capital surplus are removed from
equity and recognized in profit or loss of the current period. The amount of the cumulative
loss that is removed from equity and recognized in the income statement is be the
difference between the acquisition cost (net of any principal repayment and amortization)
and current fair value, less any impairment loss on that financial asset previously
recognized in the income statement.
Impairment losses on debt instruments are reversed through the profits or losses, if the
increase in fair value of the instrument can be objectively related to an event occurring
after the impairment, loss was recognized in the income statement. Impairment losses on
equity instruments classified as available for sale are not reversed through the income
statement. Fair value increase after impairment is recognized in comprehensive income.
Financial assets carried at cost
If there is objective evidence that the financial assets have been impaired, the amount of
the impairment loss is measured as the difference between the carrying amount of the
financial asset and the present value of estimated future cash flows discounted at the
current market rate of return for a similar financial asset, and recognized in the income
statement of the current year. Such impairment losses are not reversed.
The impairment on long term equity investment which are measured by employing cost
method in accordance with CAS2 Long term equity investments, have no quoted market
price in an active market and the fair value cannot be reliably measured are recorded
according to the aforesaid requirements.
Transfers of financial assets
If the Group has transferred substantially all the risks and rewards of the asset and waived
the control of the asset, the asset is derecognized. If the Group has retained substantially
all the risks and rewards of the asset, the assets are not de recognized.
Where the Group has neither transferred nor retained substantially all the risks and
rewards of the asset, if the Group waived the control of the assets, the financial assets are
derecognized and the assets and liabilities are recognized accordingly; if the Group did not
waive the control of the assets, the financial assets are recognized to the extent of the
Group's continuing involvement in the asset, and the liabilities are recognized accordingly.
63
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(18) Impairment of assets
Impairments on assets other than inventories, deferred tax, financial assets and long
term equity investments without quoted market price in active market the fair value cannot
be reliably measured are determined according to the following methods:
On each balance sheet date, the Group made assessment on whether or not there is any
indication of potential asset impairment. If there is any evidence that indicates the
possibility of asset impairment, the recoverable amount of the asset is being estimated.
Independent of whether there are indication of potential impairment, the goodwill from an
enterprise merger and intangible assets whose useful lives are indefinite are subjected to
impairment testing each year. Intangible assets which are not ready to use also need
perform impairment test every year.
The recoverable amount of an asset is the higher of the asset's or cash generating unit's
value in use and its fair value less costs to sell, and is determined for an individual asset. If
it is difficult to determine the recoverable amount individually, the recoverable amount is
determined for the cash generating unit to which the asset belongs. Cash generating unit is
determined as the asset generate cash inflows that are largely independent of those from
other assets or groups of assets.
An impairment loss is recognized only if the carrying amount of an asset exceeds its
recoverable amount. An impairment loss is charged to the income statement and
provision is made accordingly.
For the purpose of impairment testing, goodwill acquired in a business combination is,
from the acquisition date, allocated to each of the Group's cash generating units, or groups
of cash generating units, that are expected to benefit from the synergies of the
combination, and not larger than the reportable segment determined by the Group.
64
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(18) Impairment of assets (continued)
When conducting impairment testing on relevant cash generating units or groups of cash
generating units that have related goodwill, if there is any evidence indicating that
impairment of the cash generating units or groups of units has occurred, the Company
first carries out impairment testing on the cash generating units or groups of units
excluding goodwill, calculating the recoverable amount, comparing it with the
corresponding carrying amount and recognizing any resulting impairment loss. Then
impairment testing are conducted on the cash generating units or groups of units with
goodwill included, the carrying amount of these cash generating units or combinations of
cash generating units (including the carrying amount of the goodwill allocated thereto)
compared to the recoverable amount; if the recoverable amount of said cash generating
units or groups of units is below the carrying amount thereof, the impairment loss are first
deducted from the carrying amount of the corporate assets and goodwill which have been
allocated to the cash generating unit or group of units, and then deducted from the carrying
amount of the remaining assets pro rata with goodwill excluded from consideration.
After a loss of asset impairment has been recognized, it is not be reversed in future
accounting periods.
(19) Contingent liabilities
Besides the contingent consideration or liabilities through merger and acquisition,
contingent liabilities should be recognized when and only when:
(i) The group has a present obligation as a result of a past event;
(ii) It is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation; and
(iii) A reliable evaluation can be made of the obligation.
The contingent liabilities are measured at the best estimate of the expenditure required to
settle the present obligation at the balance sheet date, taking into consideration of the risks,
uncertainties and time value of money. The book value of contingent liabilities is reviewed
at each balance sheet date. Whether there is any objective evidence indicating that the
book value cannot reflect the best estimated amount, adjustments should be make to the
book value.
The acquiree’s contingent liabilities through business combination is initial recognized at
fair value, and its subsequent measurement is recognized at the higher of estimated value
and the initial cost less any accumulated amortization.
65
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(20) Revenue
Revenue is recognized when it is probable that the economic benefits will flow to the
Group and when the revenue can be measured reliably, on the following bases:
Revenue from the sale of goods
When the significant risks and rewards of ownership have been transferred to the buyer,
provided that the Group maintains neither managerial involvement to the degree usually
associated with ownership, nor effective control over the goods sold, and cost of sales can
be measured reliably. The amount of revenue arising on sale of goods is determined by
agreement between the entity and the buyer or user of the asset. It is measured at the fair
value of the consideration received or receivable.
Rendering of service
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 all the following conditions are satisfied:
(i) The amount of revenue can be measured reliably;
(ii)It is probable that the economic benefit associated with the transaction will flow to the
entity;
(iii) The stage of completion of the transaction at the reporting date can be measured
reliably; and
(iv) The costs incurred for the transaction and the costs to complete the transaction can
be measured reliably.
Interest income
Interest income is measured based on the borrowing periods and actual interest rate.
(21) Leases
Leases that substantially transfer all the rewards and risks of ownership of assets are
accounted for as finance leases, otherwise are accounted for as operating leases.
As an operating lessee
Rental expenses under the operating leases are charged to related costs of the assets or the
income statement on a straight line basis over the lease period.
66
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(22) Employee benefits
Employee benefits refer to all kinds of remunerations and other relevant reimbursements
made by the Group to its employees in exchange for services of employees. During
accounting periods wherein an employee renders services to the Group, the Group
recognized the benefits payable as a liability. The benefits payable which will be matured
over 1 year are discounted when it is material.
Medical insurance, pensions, unemployment insurance, other social insurance and housing
fund are recorded as cost of relevant assets or expenses for the relevant period.
If an Group terminates the labor relationship with any employee prior to the expiration of
the relevant labor contract or makes a severance package proposal with the purpose of
enticing the employees to willingly accept such a termination, the Group recognized the
contingent liabilities to be incurred due to severance pay, and recorded them in income
statement of the current period.
The treatment for the early retirement planning is on the same basis to that of the
termination benefits. The salaries and the social insurance expenses for the periods from
the employee’s termination of service and the normal retirement of these staffs are
recognized as employee benefits payable when meeting the aforesaid retirement benefits
recognition requirements, and recognized to income statement of relevant period.
(23) Profit distribution
The cash dividends would be recognized as liability after General Meeting of
stockholders’ meeting‘s approval.
(24) Income tax
Income tax comprises current and deferred tax. Income tax is recognized in the income
statement, except for goodwill arises from business combination, or transactions directly
recorded in equity of which the related income is recorded in equity.
The Group recognizes the income tax assets or liabilities related to current period and
prior period by calculating the expected payable or refundable amount in accordance with
the tax law.
Deferred tax is provided on balances sheet approach on all temporary differences between
tax basis and accounting basis at each balance sheet date.
67
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(24) Income tax (continued)
Deferred tax liabilities are recognized for all taxable temporary difference, except:
(i) Where the deferred tax liability arises from goodwill or the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss; and
(ii) In respect of taxable temporary differences associated with interests in subsidiaries,
associates and joint ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will
not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carry forward
of unused tax credits and unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences, and the carry
forward of unused tax credits and unused tax losses can be utilized except:
(i) Where the deferred tax asset relating to the deductible temporary differences arises
from the initial recognition of an asset or liability in a transaction that is not a
business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
(ii) In respect of deductible temporary differences associated with interests in subsidiaries,
associates and joint ventures, deferred tax assets are only recognized to the extent
that it is probable that the temporary differences will reverse in the foreseeable
future and taxable profit will be available against which the temporary differences
can be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
to the period when the asset is realized or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the balance sheet date.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and
reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilized. At each reporting date,
the entity re-assesses unrecognized deferred tax assets. The entity recognizes a previously
unrecognized deferred tax asset to the extent that it has become probable that future
taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right
exists to set off current tax assets against current tax liabilities and the deferred taxes relate
to the same taxable entity and the same taxation authority.
68
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(25) Government grants
Government grants refers to monetary or non monetary assets received by an enterprise
from the government, but excludes capital invested in the Group by the government that
gives the government ownership rights. Government grants are recognized where there is
reasonable assurance that the grant will be received and all attaching conditions will be
complied with. Monetary grants are measured on the basis of the amount received or the
amount receivable. Non monetary grants are measured based on the fair value of relevant
assets, where fair value cannot be measure reliably, the grants are measured based on
nominal amount. Where the grant relates to an asset, the fair value is credited to a deferred
income account and is released to the income statement over the expected useful life of the
relevant asset by equal annual installments. Grant which measured at nominal amount,
should be recorded in income statement.
(26) Related party relationships
Related party relationships can be defined as the entity is under control, joint control or
significant influence by another entity or two or more than two entities are under the
control, joint control by the same entity.
(27) Significant accounting judgments and accounting estimates
Preparing financial statements requires management make judgment and estimates, which
could affect the amount of revenue, expense, asset, liabilities and the disclosure of
contingent liabilities. However, those uncertainties of estimate may cause significant
adjustment on the book value of assets and liabilities.
Estimation uncertainty
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.
69
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(27) Significant Accounting Judgments and Accounting Estimates (continued)
Estimation uncertainty (continued)
Deferred tax assets
Deferred tax assets are recognized for all unused tax losses to the extent that it is probable
that taxable profit will be available against which the losses can be utilized. Significant
management judgment is required to determine the amount of deferred tax assets that can
be recognized, based upon the likely timing and level of future taxable profits together
with future tax planning strategies.
Depreciation
As set out in Note 2 (12), 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 property, plant
and equipment. This estimate is based on the historical experience of the actual useful
lives of property, plant and equipment 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. When there is evidence indicating
the useful lives of intangible assets with indefinite useful lives becomes finite, the useful
lives should be estimated and the intangible assets should be accounted for in accordance
with the standards for the intangible assets with finite useful lives.
70
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING
ESTIMATES (CONTINUED)
(27) Significant Accounting Judgments and Accounting Estimates (continued)
Estimation uncertainty (continued)
Impairment of biological assets
As set out in Note 2 (11), the Group examined the consumptive biological assets
and productive biological assets at each balance sheet date. If any reliable
evidence shows that the realizable net value of any consumptive biological asset or the
recoverable amount of any productive biological asset is lower than its book value due to
natural disaster, plant diseases and insect pests, animal disease or change of market
demand, the Group, on the
basis of the difference between the realizable net value or the recoverable amount and the
book value, make provision for the loss on decline in value of or for the impairment of the
biological asset and are recorded it in the profits and losses of the current period. The
aforesaid realizable net value and recoverable amount is determined according to the CAS
1 Inventories and CAS 8 Asset Impairment, respectively.
Impairment of non-current assets
As set out in Note 2 (18), 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 assts group), the
fair value of the assets cannot be reliably estimated. When the management make
estimation on the expected future cash flows from the asset or cash generating unit,
estimates should be made on choosing a suitable production volume, selling price and
related operating costs discount rate in order to calculate the present value of those cash
flows. When recoverable amounts are undertaken, management may use all available for
use information, including the forecast on production volume, selling price and related
operating costs in reasonable and supportable assumptions.
Estimated provision for trade receivables
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.
71
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ACCOUNTING ESTIMATES (CONTINUED)
(27) Significant Accounting Judgments and Accounting Estimates (continued)
Estimation uncertainty (continued)
Inventory provision based on net realizable value
The inventory are measured on the lower of carrying value and net realizable value, and
provision should be made for impairment on obsolete and slow moving inventories. The
group will reassess whether the net realizable value is lower than the carrying cost at the
end of each year.
3. TAXES
(1) The main taxes and tax rate are as follows:
Value added tax VAT is levied at 17% on the invoiced amount after
deduction of eligible input VAT.
Consumption tax Consumption tax of the tonic wine is levied at quantity
and certain tax rate of gross turnover, namely levied at
20% of total turnover and RMB1000 per ton. For all
other product, consumption tax is levied on gross
revenue at rates ranging from 10% to 20%.
Business tax The Group is subject to a business tax of 5% on its
taxable revenue.
City development tax Levied at 7% of total business tax payment.
Corporate income tax The Group is subject to a corporate income tax rate of
25% on its taxable income.
(2) Tax incentives and relative permit
A subsidiary of the Company, Liaoning Changyu Ice Wine Chateau Co., Ltd. which is a
productive foreign-invested enterprise was incorporated in Huanren Manzu Autonomous
County. In accordance with PRC Income Tax of Foreign Investment and Foreign
Enterprises and Notice of the State Council’s Implementation of the Transitionally
Preferential Policies (GuoFa [2007] permit No.39), the productive foreign-invested
company, from the first profit-making year, exempts from corporate income tax in 2007
and 2008, and enjoys a favorable corporate income tax rate of 12.5% from 2009 to 2011.
72
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
3. TAXES (continued)
(2) Tax incentives and relative permit (continued)
Ningxia Changyu Grape Growing Co., Ltd., a subsidiary of the Group, whose principal
activity is grape growing is incorporated in Ningxia Huizu Autonomous Region.
According to clause 27 of PRC Corporate Income Tax and clause 86 of PRC Corporate
Income Tax Measures for Implementation, Ningxia Changyu Grape Growing Co., Ltd.
enjoys an exemption of corporate income tax.
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS
(1) Particulars of the subsidiaries
Name Place and date Legal Business nature Registered Principle Incorporate
of registration represe- capital activities code
ntative
Subsidiary acquired from a business combination: under non-common control
Xinjiang Tianzhu Wine 11 April 2006 Zhou Manufacturing RMB Production and 787 604 261
Co.,Ltd.(Xinjiang Tianzhu) Shihezi , Xinjiang, Hongjiang 75,000,000 sales of wine
China
Subsidiaries acquired by establishment:
Yantai Changyu Pioneer Vehicular 1 December 1992 Zhang Transportation RMB Transportation 165 031 729
Transport Yantai, Shandong, Lixian 300,000 service
Co., Ltd. (“Vehicular China
Transportation”)
Beijing Changyu Sales and 14 July 1998 Sun Sales RMB Sales of wine 634 377 029
Distribution Co., Ltd. (“Beijing Beijing, China Liqiang 500,000
Sales”)
Yantai Kylin Packaging Co., Ltd 29 September 1999 Yang Manufacturing USD Production of 863 052 455
(“Kylin Packaging”) (a) Yantai, Shandong, Ming 1,900,000 packaging
China materials
Yantai Changyu-Castel Wine 3 September 2001 Sun Manufacturing USD Production and 730 682 613
Chateau Co., Ltd. Yantai, Shandong, Liqiang 5,000,000 sales of wine
(“Changyu Chateau”) (b) China
Changyu (Jingyang) Pioneer 5 December 2001 Cai Manufacturing RMB Production and 732 663 643
Wine Co., Ltd. (“Jingyang Wine”) Jingyang, Shanxi, Jianshe 1,000,000 sales of wine
China
Yantai Changyu Pioneer Wine Sales 24 December 2001 Jiang Sales RMB Sales of wine 746 576 380
Co., Ltd. (“Sales Company”) Yantai, Shandong, Hua 8,000,000
China
Langfang Development Zone 1 March 2002 Mige Manufacturing USD Production and 735 624 56X
Castel-Changyu Wine Co., Ltd Lanfang , Hebei, Balu 3,000,000 sales of wine
(“Langfang Castel”) (c) China
73
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
Name Place and date Legal Business nature Registered Principle Incorporate
of registration represe-nta capital activities code
tive
Changyu (Jingyang) 8 April 2002 Zhou Sales RMB Sales of wine 735 379 154
Pioneer Wine Sales Co. Jingyang, Mingqiang 1,000,000
Ltd. (“Jingyang Sales”) Shanxi, China
Langfang Changyu Pioneer 19 April 2002 Liu Sales RMB Sales of wine 737 388 150
Wine Sales Co.,Ltd. Langfang, Wanqiang 1,000,000
(“Langfang Sales”). Hebei, China
Shanghai Changyu Sales 28 April 2003 Zhou Sales RMB Sales of wine 749 571 075
and Distribution Co. Shanghai, China Hongjiang 1,000,000
Ltd.(“Shanghai Sales”)
Beijing Changyu AFIP 27 October 2005 Sun Manufacturing RMB Production and 780 953 469
Wine Chateau Co., Ltd Beijing, China Liqiang 110,000,000 sales of wine
(“Beijing Chateau”)
Yantai Changyu Wine Sales 9 January 2006 Jiang Sales RMB Sales of wine 783 487 627
Co., Ltd.( “Wines Sales”) Yantai, Hua 5,000,000
Shandong,
China
Yantai Changyu Pioneer 29 September Zhou Sales RMB Import and 780 766 161
International Co. 2005 Yantai, Hongjiang 5,000,000 export of wine and
Ltd.(“Pioneer Shandong, technology
International”) China
Hangzhou Changyu Wine 14 June 2006 Jiang Sales RMB Whole-sale and retail of 788 283 631
Sales Co., Ltd.(“Hangzhou Hangzhou, Hua 500,000 packaging food
Changyu”) Zhejinag, China
Ningxia Changyu 16 November Shao Planting RMB Plant and 788 200 410
Grape-Growing Co. 2006 Chunsheng 1,000,000 purchase of
Ltd.(“Ningxia Growing”) Yinchuang, grape
Ningxia, China
Huanren Changyu National 16 November Leng Sales RMB Sales of wine, healthy 794 822 179
Wines Sales Co. 2006 Bin 2,000,000 liquor, liqueur ，
Ltd.(“National Wines”) Huanren, non-alcohol beverages
Liaoning, China
Liaoning Changyu Ice Wine 3 April 2003 Zhou Manufacturing RMB Production and 747 128 301
Chateau Co., Ltd.(“Ice Benxi, Liaoning, Hongjiang 26,300,000 sales of ice wine
Chateau”) (d) China
Yantai Development Zone 4 December Zhou Sales RMB Whole-sale and retail of 796 183 411
Changyu Trade Co., 2006 Hongjiang 5,000,000 wine
Ltd.(“Development Zone Yantai,
Trade”) Shandong,
China
Shenzhen Changyu Wine 17 July 2007 Lin Sales RMB Whole-sale and retail of 664 195 20X
Marketing Ltd.(“Shenzhen Futian, Pu 500,000 wine
Marketing”) Shenzhen, China
74
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
Name Place and Legal Business Registered Principle activities Incorporate
date of represe-nta nature capital code
registration tive
Yantai Changyu 27 March 2007 Zhou Sales RMB Whole-sale and retail of 660 176 044
Trading Company Yantai, Shandong, Hongjiang 5,000,000 wine
(“Changyu Trading”) China
Beijing AFIP Meeting 4 December 2007 Sun Services RMB Meeting service, foods, 669 926 612
Center (“Meeting Miyun, Beijing , Hongbo 500,000 accommodation, tourism
Center”) China and sales of souvenir
Beijing AFIP Tourism 4 June 2008 Liu Tourism RMB Tourism and culture 676 627 372
and Culture Company Miyun, Beijing , Shilu 500,000 communication,
(“AFIP Tourism”) China development of tourist
resources, meeting service
Qing Tong Xia 17 November Cai Sales RMB Whole-sale and retail of 694 334 151
Changyu Wine 2009 Jianshe 500,000 wine
Qing Tong Xia ,
Marketing Ltd. Ningxia, China
(“Qing Tong Xia
Sales)
Shihezi Changyu 2 April 2010 Sun Manufacturing RMB Manufacturing and sales of 552 414 949
Wine Chateau Co., Shihezi, Xinjiang, Liqiang 2,000,000 wine
Ltd.(“ Shihezi China
Chateau”)
Ningxia Changyu 25 April 2008 Li Manufacturing RMB Manufacturing and sales of 670 408 275
Pioneer Wine Co., Yinchuan, Jiming 1,000,000 wine, packing material,
Ltd. (“Ningxia Ningxia, China plant, process and purchase
Wine”) of grapes
75
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
Name Place and Legal Business Registered Principle Incorporate
date of representative nature capital activities code
registration
Ningxia Changyu 26 April 2010 Zhou Manufacturing RMB Wine / packaging 694 349 740
Wine Chateau Co., Yinchuan, Hongjiang 2,000,000 manufacturing,
Ltd. (“ Ningxia Ningxia, tourism
Chateau”) China
XianYang Changyu 12April 2010 Sun Manufacturing RMB Tourism and wine 552 180 142
Chateau Co., Xianyang, Liqiang 2,000,000 manufacturing
Ltd.(“ Xianyang Shanxi, China
Chateau”)
Yantai Changyu 29 March Sun Manufacturing RMB Research and 555 235 76X
Wine Research and 2010 Liqiang 500,000,000 development of
Development Co., Yantai, winery
Ltd. (Development Shandong
Centre) (e) China
76
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
Equity interest owned
by the Company
Name Paid in capital Direct Indirect Voting Consolidated Non-controlli
at 31 December power financial ng interest
2010 statements
Subsidiary acquired in business combination :under non-common control
Xinjiang Tianzhu RMB 60% - 60% Yes RMB
60,000,000 56,093,912
Subsidiaries acquired by establishment:
Vehicular Transportation RMB 100% - 100% Yes -
300,000
Beijing Sales RMB 70% 30% 100% Yes -
500,000
Kylin Packaging (a) RMB 50% - 62.5% Yes RMB
7,783,813 20,308,838
Changyu Chateau (b) RMB 70% - 100% Yes RMB
28,968,100 12,174,645
Jingyang Wine RMB 90% 10% 100% Yes -
1,000,000
Sales Company RMB 90% 10% 100% Yes -
8,000,000
Langfang Castel (c) RMB 49% - 100% Yes RMB
12,142,200 12,640,000
Jingyang Sales RMB 10% 90% 100% Yes -
1,000,000
77
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
Equity interest owned
by the Company
Name Paid in capital Direct Indirect Voting Consolidate Non-controlling
at 31 December power financial interest
2010 statements
Langfang Sales RMB 10% 90% 100% Yes -
1,000,000
Shanghai Sales RMB 30% 70% 100% Yes -
1,000,000
Beijing Chateau RMB 70% - 70% Yes RMB
77,000,000 35,293,868
Wines Sales RMB 90% 10% 100% Yes -
5,000,000
Pioneer International RMB 70% 30% 100% Yes -
5,000,000
Hangzhou Changyu RMB - 100% 100% Yes -
500,000
Ningxia Growing RMB 100% - 100% Yes -
1,000,000
National Wines RMB 100% - 100% Yes -
2,000,000
Ice Chateau (d) RMB 51% - 100% Yes RMB
13,413,000 16,959,292
Development Zone Trade RMB - 100% 100% Yes -
5,000,000
Shenzhen Marketing RMB - 100% 100% Yes -
500,000
78
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
Equity interest owned
by the Company
Name Paid in Direct Indirect Voting Consolidate Non-control
capital at 31 power financial ling interest
December statements
2010
Changyu Trading RMB - 100% 100% Yes -
5,000,000
Meeting Center RMB - 100% 100% Yes -
500,000
AFIP Tourism RMB 70% - 70% Yes RMB
350,000 2,966,399
Ningxia Wine RMB 100% - 100% Yes -
1,000,000
Qing tong xia Sales RMB 100% 100% Yes -
500,000
Shihezi Chateau RMB 100% - 100% Yes -
2,000,000
Ningxia Chateau RMB 100% - 100% Yes -
2,000,000
Xianyang Chateau RMB 100% - 100% Yes -
2,000,000
Development Centre (e) RMB 99% - 99% Yes -
100,000,000
79
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
4. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS (continued)
(1) Particulars of the subsidiaries (continued)
(a) Kylin Packaging is a Sino-foreign joint venture. Pursuant to the agreement, the
Company has invested USD950,000 (about RMB7,783,813), accounting for 50% of
Kylin’s equity interest. By 31 December 2010, the Company has completed the
capital contribution. For the Company have over half of the voting power and
therefore has the power to control its strategic operating, investing and financing
policies, the financial statements of Kylin Packaging are consolidated in the
Group’s financial statements.
(b) Changyu Chateau is a Sino-foreign joint venture established by the Company and a
foreign investor. Pursuant to an operation contract signed by the Company,
Changyu Chateau and the foreign investor, the Company is entrusted to manage
Changyu Chateau and therefore has the full power to control its strategic operating,
investing and financing policies. The operation agreement will terminate at 31 Dec
2012.
(c) Langfang Castel is a Sino-foreign joint venture established by the Company and a
foreign investor. Pursuant to the agreement signed by the Company, Langfang
Castel and the foreign investor, the Company is entrusted to manage Langfang
Castel and therefore has the full power to control its strategic operating, investing
and financing policies, therefore the financial statements of Langfang Castel are
consolidated in the Group’s financial statements. The operation agreement will
terminate at 31 Dec 2012.
(d) Ice Chateau is a Sino-foreign joint venture established by the Company and a
foreign investor. Pursuant to the agreement signed by the Company, Ice Chateau
and the foreign investor, the Company is entrusted to manage Ice Chateau and
therefore has the full power to control its strategic operating, investing and
financing policies. The operation agreement will terminate at 31 Dec 2016.
(e) Development centre is a joint venture established by the Company and Shandong
Yantai Brewing Co., Ltd. The registered capital for development centre is
RMB500,000,000. According to the investment agreement, the company would
contribute RMB495,000,000 while the Shandong Yantai Brewing Co., Ltd would
contribute the rest RMB5,000,000. Up to 31 December 2010, the first stage
contribution of RMB100,000,000 has been contributed solely by the Company.
(2) Changes in the scope of consolidated financial statement
Except for those newly established subsidiaries, the scope of consolidated financial
statements was same with last year.
80
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Cash and bank
2010 2009
Cash on hand 89,425 218,086
Cash at bank 2,466,052,613 2,521,339,000
Other monetary assets 23,662,124 23,653,200
2,489,804,162 2,545,210,286
At 31 December 2010, the balance of restricted cash of the Group is RMB2,462,124,
which is the company’s housing fund (31 December 2009：RMB2,449,848).
At 31 December 2010, the Group has no overseas cash and bank deposit (31 December
2009：Nil).
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term
time deposits are made for varying periods of between three months to one year, based on
the demands of the Group.
At 31 December 2010, The Group’s term deposits with original maturity of more than
three months when acquired is RMB1,488,407,214 (31 December 2009: RMB544,079,160)
with interest rates ranging from 1.91%-2.75%, which will mature from 3 months to 1 year.
(2) Bills receivable
2010 2009
Bank acceptance bills 31,447,207 38,107,831
At 31 December 2010, there was no pledged bills receivable (31 December 2009: Nil), and
no bills receivable were reclassified as accounts receivable due to the default of drawer (31
December 2009: Nil).
At 31 December 2010, the top five bills receivable endorsed to third parties but not yet
matured is as follows (31 December 2009: RMB1,000,000):
2010
Drawer Issuing date Maturity date Amount
Wuhan Hexiang Co.,Ltd 29/11/2010 28/2/2011 1,500,000
Wuhan Tongchuang Co.,Ltd 24/11/2010 24/2/2011 1,000,000
Wuhu Licheng Co.,Ltd 16/12/2010 16/6/2011 1,000,000
Langfang Anjia Co.,Ltd 23/12/2010 13/6/2011 1,000,000
Tangshan Zhijing Co.,Ltd 23/11/2010 23/2/2011 900,000
5,400,000
81
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(2) Bills receivable (continued)
At 31 December 2009, the bill endorsed but not expired is as follows:
Drawer Issuing date Maturity date Amount
Inner Mongolia
Baogang Ganglian Co., Ltd. 7/3/2009 1/2/2010 1,000,000
At 31 December 2010, there was no notes receivable discounted to obtain short-term loan.
(31 December 2009: Nil).
(3) Trade receivables
The normal credit term is one month, which can be extended to three months for certain
major customers. The trade receivables are interest free.
The aged analysis is as follows:
2010 2009
Within 1 year 100,113,271 98,022,443
At 31 December 2010, there was no bad debt provision for trade receivables (31
December 2009: Nil). There was no bad debt provision made or reversed by the
management in 2010 (2009: Nil).
2010 2009
Balance Provision Balance Provision
Amount % Amount % Amount % Amount
%
Individually
significant 37,472,999 37.4 - - 47,841,785 48.8 - -
Individually
insignificant 62,640,272 62.6 - - 50,180,658 51.2 - -
100,113,271 100.0 - 98,022,443 100.0 -
At 31 December 2010, there were no trade receivables due from shareholders with voting
rights of 5% or above. (31 December 2009: Nil)
82
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) Trade receivables (continued)
At 31 December 2010, the particulars of top 5 trade receivables are as follows:
Relationship Amount Aging Percentage
with the of total
Group receivables
%
First Third party 9,369,211 Within 1 year 9.4
Second Third party 6,767,820 Within 1 year 6.8
Third Third party 6,434,578 Within 1 year 6.4
Fourth Third party 6,216,172 Within 1 year 6.2
Fifth Third party 4,365,619 Within 1 year 4.4
33,153,400 33.2
At 31 December 2009, the particulars of top 5 trade receivables are as follows:
Relationship with Amount Aging Percentage of
the Group total
receivables %
First Third party 8,396,320 Within 1 year 8.6
Second Third party 7,573,193 Within 1 year 7.7
Third Third party 7,191,107 Within 1 year 7.3
Fourth Third party 6,068,277 Within 1 year 6.2
Fifth Third party 3,790,528 Within 1 year 3.9
33,019,425 33.7
83
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) Trade receivables (continued)
At 31 December 2010, trade receivables from related parties are as following:
Relationship with Group Amount Percentage of total
receivables %
Yantai Changyu Under the control of the 120,322 0.1
International Window same parent company
of the Wine City
Company Limited
At 31 December 2009, trade receivables from related parties are as following:
Relationship with Group Amount Percentage of total
receivables %
Yantai Changyu Under the control of the 114,900 0.1
Travelling Co., Ltd same parent company
84
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) Advances to suppliers
The aged analysis is as follows:
2010 2009
Balance % Balance %
Within 1 year 74,728,756 100.0 31,885,027 100.0
At 31 December 2010, the particulars of top 5 advances to suppliers are as follows:
Relationship Amount Aging Reseason for being Percentage of
with the outstanding total advances
Group to suppliers
%
First Third party 22,453,121 Within 1 year goods not received 30.0
Second Third party 5,952,642 Within 1 year goods not received 8.0
Third Third party 5,615,367 Within 1 year goods not received 7.5
Fourth Third party 5,259,570 Within 1 year goods not received 7.0
Fifth Third party 3,528,000 Within 1 year goods not received 4.7
42,808,700 57.2
At 31 December 2009, the particulars of top 5 advances to suppliers are as follows:
Relationship Amount Aging Reseason for being Percentage
with the outstanding of total
group advances to
suppliers
%
First Third party 4,853,239 Within 1 year goods not received 15.2
Second Third party 3,501,650 Within 1 year goods not received 11.0
Third Third party 3,000,000 Within 1 year goods not received 9.4
Fourth Third party 3,000,000 Within 1 year goods not received 9.4
Fifth Third party 2,917,610 Within 1 year goods not received 9.2
17,272,499 54.2
At 31 December 2010, there were no advances paid to the shareholders with voting rights
of 5% or above (31 December 2009: Nil).
85
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) Interest receivable
2010
Opening Increase Decrease Closing
balance balance
Bank fixed deposits 8,969,343 12,234,345 (11,683,967) 9,519,721
interest
2009
Opening Closing
balance Increase Decrease balance
Bank fixed deposits
interest 19,176,250 21,751,738 (31,958,645) 8,969,343
At 31 December 2010, there was no overdue interest (31 December 2009: Nil).
86
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) Other receivables
The aging analysis is as follows:
2010 2009
Within 1 year 20,568,664 18,634,887
1 to 2 years 9,911,712 86,571
2 to 3 years 47,524 3,238,702
Over 3 years 8,158,939 8,464,143
38,686,839 30,424,303
Less: bad debts provision for other receivables ( 8,000,000 ) ( 8,000,000 )
30,686,839 22,424,303
2010 2009
Balance Bad debts Balance Bad debts
provision provision
Amount % Amount % Amount % Amount %
Individually
significant and
Provision 11,048,886 28.6 8,000,000 72.4 11,584,743 38.1 8,000,000 69.1
Individually
insignificant 27,637,953 71.4 - - 18,839,560 61.9 - -
38,686,839 100.0 8,000,000 30,424,303 100.0 8,000,000
At 31 December 2010 and 2009, the bad debts provision for individually significant
balances is as follows:
Balance Bad debts Percentage Reason for provision
provision
Tiantong The de
Security Co., btor is in the process
Ltd. 8,000,000 8,000,000 100% of liquidation
At 31 December 2010, there were no other receivables due from shareholders with voting
rights of 5% or above (31 December 2009: Nil).
87
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(6) Other receivables (continued)
At 31 December 2010, the particulars of top 5 other receivables are as follows:
Relationship Amount Percentage of
with the total other
Group receivables
%
First Third party 3,120,600 1 year-2 years 8.1
Second Third party 1,412,546 Within 1 year 3.6
Third Third party 1,227,280 Within 1 year 3.2
Fourth Third party 1,036,364 Within 1 year 2.7
Fifth Third party 1,000,000 Within 1 year 2.6
7,796,790 20.2
At 31 December 2009, the particulars of top 5 other receivables are as follows:
Relationship Amount Percentage of
with the total other
Group receivables
%
First Third party 3,120,600 Within 1 year 10.3
Second Third party 846,762 Within 1 year 2.8
Third Third party 534,996 Within 1 year 1.8
Fourth Third party 437,263 Within 1 year 1.4
Fifth Third party 375,000 Within 1 year 1.2
5,314,621 17.5
At 31 December 2010, there was no other receivable due from related parties (31
December 2009: Nil).
88
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) Inventories
2010 2009
Balance Provision Net carrying Balance Provision Net carrying
amount amount
Raw
material 59,385,786 - 59,385,786 78,468,949 - 78,468,949
Finished
goods 538,480,066 10,077,620 528,402,446 493,924,195 10,274,687 483,649,508
Work in
progress 706,618,174 - 706,618,174 569,122,435 - 569,122,435
1,304,484,026 10,077,620 1,294,406,406 1,141,515,579 10,274,687 1,131,240,892
Analysis of inventory provision is as follows:
2010 Opening Decrease Closing
balance balance
Finished goods 10,274,687 ( 197,067 ) 10,077,620
Opening Increase Closing
2009 Balance Balance
Finished goods 8,817,146 1,457,541 10,274,687
At 31 December 2010, the carrying amount of inventory with restrictions in ownership is
RMB13,524,960, which was due to the Company has transferred the related right of profit
to a specialized trust fund established by Zhong Rong International Trust Co., Ltd. Please
also refer to Notes 5 (24).
2010
Proportion of reversal to
closing balance of
Balance Basis for provision Reason for reversal inventory
Expected damage ra Calculation based on
Finished te from daily handli the expected damage rate
Goods 538,480,066 ng from daily handling 0.03%
There was no reversal of inventory provision in 2009.
89
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) Long-term equity investment
2010
Initial cost Opening Movement Closing Equity Voting Provision
balance for the year balance interest power
% %
Cost Method:
Yantai Dingtao Construction a
Development Co., Ltd.
(“Yantai Dingtao”) 10,000,000 10,000,000 ( 5,000,000) 5,000,000 18 18 5,000,000
10,000,000 10,000,000 (5,000,000) 5,000,000 5,000,000
2009
Initial Cost Opening Movement Closing Equity Voting
Balance for the year Balance Interest Power Provision
% %
Cost Method:
Yantai Dingtao Construction a
Development Co., Ltd.
10,000,000 10,000,000 - 10,000,000 18 18 -
10,000,000 10,000,000 - 10,000,000 -
At 31 December 2010 and 2009, the initial investment to Yantai Dingtao is
RMB10,000,000, and the Group holds 18% of its equity interests.
90
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) Property, plant and equipment
2010 Opening Increase Decrease Closing
balance balance
Cost:
Buildings 698,714,336 117,389,989 ( 3,323,510) 812,780,815
Machineries
and equipments 737,132,083 148,327,144 ( 9,552,076) 875,907,151
Motor vehicles 2,331,133
1,453,334,825 268,048,266 (12,875,586) 1,708,507,505
Accumulated
depreciation:
Buildings 108,526,523 21,550,526 ( 435,511) 129,641,538
Machineries
and equipments 336,801,458 49,063,099 ( 8,430,797) 377,433,760
Motor vehicles 11,213,979 2,136,983 ( -) 13,350,962
456,541,960 72,750,608 ( 8,866,308) 520,426,260
Net carrying
amount:
Buildings 590,187,813 95,839,463 ( 2,887,999) 683,139,277
Machineries
and equipments 400,330,625 99,264,045 ( 1,121,279) 498,473,391
Motor vehicles 6,274,427 194,150 ( -) 6,468,577
996,792,865 195,297,658 ( 4,009,278) 1,188,081,245
91
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) Property, plant and equipment (continued)
2009 Opening Increase Decrease Closing
balance balance
Cost:
Buildings 495,533,405 203,180,931 - 698,714,336
Machineries
and equipments 619,780,868 117,771,847 (420,632) 737,132,083
Motor vehicles 14,408,16 3,080,246 -
1,129,722,433 324,033,024 (420,632) 1,453,334,825
Accumulated
depreciation:
Buildings 92,094,253 16,432,270 - 108,526,523
Machineries
and equipments 299,734,197 37,436,051 (368,790) 336,801,458
Motor vehicles 9,664,848 1,549,131 - 11,213,979
401,493,298 55,417,452 (368,790) 456,541,960
Net carrying
amount:
Buildings 403,439,152 186,748,661 - 590,187,813
Machineries
and equipments 320,046,671 80,335,796 ( 51,842) 400,330,625
Motor vehicles 4,743,312 1,531,115 - 6,274,427
728,229,135 268,615,572 ( 51,842) 996,792,865
Depreciation for 2010 is RMB72,750,608 (2009: RMB 55,417,452). In 2010, the value of
property, plant and equipment transferred from construction in progress is
RMB189,903,490 (2009: RMB248,443,966).
At 31 December 2010, the book value of property, plant and equipment with ownership
restricted is nil (31 December 2009: RMB1,439,022).
At 31December 2010, no property, plant and equipment are idle, held for disposal or under
finance or operating lease (31 December 2009: Nil).
92
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) Property, plant and equipment (continued)
At 31 December 2010, buildings without property certificate are as follows:
Reason for not receiving
property certificates
Fermentation Centre Office Tower and Workshop waiting for completion report
Xinjiang Tianzhu Fermentation and Storage Workshop waiting for completion report
Kylin Packaging Finish Goods Warehouse and Workshop waiting for completion report
Changyu Chateau Main Building waiting for completion report
Ice Wine Chateau Office Building and Packing Workshop waiting for completion report
Beijing Chateau European Town waiting for completion report
Beijing Chateau Office Town waiting for completion report
Beijing Chateau Production Factory waiting for completion report
Sales Company Province Offices Processing
(11) Construction in progress
2010 2009
West Mountain Factory Project 2,985,201 -
Sparkling Wine Reconstruction Project - 2,234,216
Cabernet Centre Project 7,619,532 -
Fermentation Centre Reconstruction Project 2,998,926 -
Beijing Chateau 3000 Ton Production Line Project 30,000,000 -
Beijing Chateau Project 19,468,392 11,714,331
Ice Wine Chateau Factory Project - 3,119,556
Ningxia United Workshop 3,380,801 60,394,418
Xinjiang Tianzhu Workshop Reconstruction
Project 17,878,259 9,179,267
Jingyang ferment project 15,048,365 9,271,105
Plants for Jingyang Sales 33,737,780 13,459,425
Shihezi Chateau Construction Project 85,455,488 -
Ningxia Chateau Construction Project 11,271,515 -
Xianyang Chateau Construction Project 10,458,506 -
Development Centre Construction Project 1,804,810
-
242,107,575 109,372,318
93
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) Construction in progress (continued)
2010 Budget Opening Addition Transferred Closing Financed Accumulated
balance to property, balance by expenditure
plant and /budget
equipment %
Red Wind Club 15,000,000 - 5,307,768 5,307,768 ) - - 35.4
West Mountain Factory
Project 40,000,000 - 2,985,201 - 2,985,201 Self-raised 7.5
Sparkling Wine
Reconstruction Project 45,000,000 2,234,216 - 2,234,216 ) - Self-raised 129.6
Cabernet Centre Project 21,000,000 - 7,619,532 - 7,619,532 Self-raised 36.3
Fermentation Centre
Reconstruction Project 3,300,000 - 2,863,872 ( 2,863,872) - Self-raised 86.8
Fermentation centre
Machinery 5,000,000 - 3,165,682 (166,756) 2,998,926 Self-raised 63.3
Beijing Chateau 3000 Ton
Production Line Project 92,500,000 - 30,000,000 - 30,000,000 Self-raised 32.4
Beijing Chateau Display
Project 30,000,000 - 38,001,066 ( 38,001,066) - Self-raised 126.7
Beijing Chateau Project 305,750,000 11,714,331 23,410,240 (15,656,179) 19,468,392 Self-raised 140.1
Ice Wine Chateau Factory
Project 20,910,000 3,119,556 11,708 ( 3,131,264) - Self-raised 102.2
Ningxia United Workshop 58,700,000 60,394,418 29,216,851 ( 86,230,468) 3,380,801 Self-raised 95.3
Xinjiang Tianzhu Workshop
Reconstruction Project 37,570,000 9,179,267 10,123,072 ( 1,424,080) 17,878,259 Self-raised 78.5
Jingyang ferment project 26,000,000 9,271,105 5,777,260 - 15,048,365 Self-raised 61.6
Plants for Jingyang Sales
53,000,000 13,459,425 20,278,355 - 33,737,780 Self-raised 111.5
Shihezi Chateau
Construction Project 540,000,000 - 120,343,309 34,887,821) 85,455,488 Self-raised 21.1
Ningxia Chateau
Construction Project 15,000,000 - 11,271,515 - 11,271,515 Self-raised 75.1
Xianyang Chateau
Construction Project 250,000,000 - 10,458,506 - 10,458,506 Self-raised 4.2
Development Centre
Construction Project 165,000,000 - 1,804,810 - 1,804,810 Self-raised 1.1
109,372,318 322,638,747 (189,903,490) 242,107,575
94
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) Construction in progress (continued)
2009 Budget Opening Addition Transferred Closing Financed Accumulated
balance to property, balance by expenditure
plant and /budget
equipment %
Sparkling Wine
Reconstruction Project 42,000,000 8,263,910 -( 6,029,694 ) 2,234,216 Self-raised 129.6
Beijing AFIP Chateau
Project 256,250,000 98,880,689 84,275,462 (171,441,820 ) 11,714,331 Self-raised 132.4
Ice Wine Chateau
Workshop Project 24,000,000 1,754,791 21,292,132( 19,927,367 ) 3,119,556 Self-raised 102.1
Ningxia United Workshop 162,200,000 26,079,028 47,642,850 ( 13,327,460) 60,394,418 Self-raised 45.5
Ningxia ferment project 29,210,425 19,512,297 9,698,128 ( 29,210,425) - Self-raised 100.0
Xin Jiang Tian Zhu
Reconstruction project 29,000,000 - 15,004,929 ( 5,825,662) 9,179,267 Self-raised 51.7
Jingyang Ferment
Workshop Reconstruction 23,540,000 - 9,271,105 - 9,271,105 Self-raised 39.4
Vineyard Reconstruction
Project 2,681,538 - 2,681,538 ( 2,681,538) - Self-raised 100.0
Sales Company Plant 18,381,767 - 13,459,425 - 13,459,425 Self-raised 73.2
154,490,715 203,325,569 (248,443,966) 109,372,318
There was no capitalized interest in 2010 (in 2009: Nil).
At 31 December 2010, there is no provision was made for the constructions in process (31
December 2009: Nil).
95
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) Intangible assets
2010 Opening Increase Decrease Closing
balance balance
Cost:
Land use right 155,444,429 65,428,069 - 220,872,498
Software use right 3,480,000 3,480,000
158,924,429 65,428,069 - 224,352,498
Accumulated amortization
Land use right 10,022,874 3,393,777 - 13,416,651
Software use right 1,392,000 696,000 - 2,088,000
11,414,874 4,089,777 - 15,504,651
Net carrying amount:
Land use right 145,421,555 62,034,292 - 207,455,847
Software use right 2,088,000 ( 696,000) - 1,392,000
147,509,555 61,338,292 - 208,847,847
2009 Opening Increase Decrease Closing
Balance balance
Cost:
Land use right 105,515,923 49,928,506 - 155,444,429
Software use right 3,480,00 3,480,000
108,995,923 49,928,506 - 158,924,429
Accumulated amortization
Land use right 6,872,997 3,149,877 - 10,022,874
Software use right 696,000 696,000 - 1,392,000
7,568,997 3,845,87 - 11,414,874
Net carrying amount:
Land use right 98,642,926 46,778,629 - 145,421,555
Software use right 2,784,000 ( 696,000) - 2,088,000
101,426,926 46,082,629 - 147,509,555
The amortization of intangible assets in 2010 is RMB4,089,777 (2009: RMB3,845,877).
At 31 December 2010, there was no land use right with restricted ownership (31 December
2009: RMB8,882,146).
96
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) Biological assets
2010 2009
Opening balance 39,717,396 40,675,990
Addition from self-cultivation 2,156,974 59,800
Amortization ( 4,100,732) ( 1,018,394)
Closing balance 37,773,638 39,717,396
At 31 December 2010, no ownership of the biological asset is restricted (31 December 2009:
Nil).
The productive biological assets are vines. The vines may suffer from scourge, plant
diseases and insect pests, market demand and other risk factors, which lead to impairment
on assets. The Group will adopt effective procedures to prevent plant diseases and insect
pests, and strengthen the management of trees and soils to safeguard the biological assets.
Except for the addition during 2010, the rest biological assets of the Group had reached
their intended production status and thus had been amortised from 2009.
At 31 December 2010, there is no indication that biological assets may be impaired, and
no provision was made (31 December 2009: Nil).
(13) Long-term prepaid expenses
2010 Opening Increase Amortization Closing
balance balance
Land lease prepayments 19,029,488 47,141,762 872,017 65,299,233
Land requisition fee 17,921,630 20,885,587 322,937 38,484,280
Others 2,004,904 591,696 146,440 2,450,160
38,956,022 68,619,045 1,341,394 106,233,673
2009 Opening Increase Amortization Closing
Balance balance
Land lease prepayments 19,380,988 - 351,500 19,029,488
Land requisition fee - 18,314,837 393,207 17,921,630
Others 2,071,607 39,088 105,791 2,004,904
21,452,595 18,353,925 850,498 38,956,022
97
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) Deferred tax assets/liabilities
Deferred tax assets and liabilities are presented separately:
Deferred tax assets and liabilities recognized:
2010 2009
Deferred tax assets
Unrealized profit from intra-company transactions 110,184,929 89,817,849
Unpaid bonus 36,072,822 30,985,074
Retirement benefit 6,725,237 11,192,840
Asset impairment provision 5,769,405 4,568,672
Deductable losses 1,383,138 2,423,353
Start-up costs 139,835 279,486
160,275,366 139,267,274
Deferred tax liabilities
Business combination under non-common control 5,336,115 5,336,115
Deferred tax assets and liabilities not recognized:
Deductable losses 24,719,043 27,938,505
Deductable losses not recognized for deferred tax assets will expire in:
2011 5,491,212 8,710,674
2012 85,340 85,340
2013 64,997 64,997
2014 19,077,494 19,077,494
24,719,043 27,938,505
98
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) Deferred tax assets/liabilities (continued)
Temporary differences from assets and liabilities that resulting in such differences are as
follows:
2010 2009
Deductible temporary difference
Inter-company sales unrealized profit 440,739,716 359,271,396
Unpaid bonus 144,291,288 123,940,296
Early retirement benefit 26,900,948 44,771,360
Provision for impairment 23,077,620 18,274,688
Deductible loss 5,532,552 9,693,412
Preliminary expense 559,340 1,117,944
641,101,464 557,069,096
2010 2009
Taxable temporary difference
Fair value adjustment in business
combination 21,344,460 21,344,460
99
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(15) Provision for impairment of assets
2010
Opening Closing
balance Accrual Reversal balance
Bad debt provision 8,000,000 - - 8,000,000
Inventory 10,274,687 - (197,067 ) 10,077,620
provision
Impairment of
long-term
investment - 5,000,000 - 5,000,000
18,274,687 5,000,000 (197,067 ) 23,077,620
2009
Opening Closing
balance Accrual balance
Bad debt provision 8,000,000 - 8,000,000
Inventory provision 8,817,146 1,457,541 10,274,687
16,817,146 1,457,541 18,274,687
(16) Short-term loans
2010 2009
Secured loan - 4,500,000
Unsecured loan - 220,000,000
- 224,500,000
At 31 December 2009, the interest rates of the above mentioned loans are from 4.78
%-5.4 %. For the movement of the pledged assets, please refer to Note 5 (29).
At 31 December 2010, the Group has no unpaid overdue short-term loan (31 December
2009: Nil).
100
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(17) Trade payables
The trade payables are interest free. The Group is normally granted a credit period of no
more than three months from its suppliers.
2010 2009
Within 1 year 259,022,075 343,079,052
At 31 December 2010, the Group has no outstanding balance payable to related parties or
shareholders with voting rights of 5% or above (31 December 2009: Nil).
At 31 December 2010, the Group has no significant outstanding balances aged more than
one year (31 December 2009: Nil).
(18) Advances from customers
2010 2009
Within 1 year 309,481,976 371,221,002
As at 31 December 2010, the Group has no outstanding balance is payable to the related
parties or shareholders with voting rights of 5% or above (31 December 2009: Nil).
101
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(19) Employee benefit 31 December 2010
Opening Increase Decrease Closing
balance balance
Salaries and bonus 97,044,478 325,313,609 (299,553,200 ) 122,804,887
Staff benefit - 6,349,210 ( 6,349,210 ) -
Staff welfare 2,895,754 18,400,313 ( 18,273,728 ) 3,022,339
Includes: Medical insurance 588,777 5,167,075 ( 5,156,965 ) 598,887
Pension 2,101,580 12,576,562 ( 12,478,733 ) 2,199,409
Unemployment
insurance 96,560 499,757 ( 514,649 ) 81,668
Injury insurance 105,868 114,667 ( 82,771 ) 137,764
Maternity insurance 2,969 42,252 ( 40,610 ) 4,611
Housing fund 389,545 3,571,417 ( 3,530,362 ) 430,600
Union fee and education fee 2,288,240 4,454,300 ( 1,097,852 ) 5,644,688
Termination benefits 44,771,363 - ( 13,518,866 ) 31,252,497
Other allowances 29,591,619 ( 5,848,586 )
17,768 23,760,801
176,980,999 358,106,617 (348,171,804 ) 186,915,812
31 December 2009
Opening Closing
balance Increase Decrease balance
Salaries and bonus 53,230,543 278,390,877 (234,576,942 ) 97,044,478
Staff benefit - 8,303,237 ( 8,303,237 ) -
Staff welfare 7,855,995 11,777,294 ( 16,737,535 ) 2,895,754
Includes: Medical insurance 2,730,109 1,469,081 ( 3,610,413 ) 588,777
Pension 4,447,021 10,009,738 ( 12,355,179 ) 2,101,580
Unemployment
insurance 555,723 193,924 ( 653,087 ) 96,560
Injury insurance 64,628 103,498 ( 62,258 ) 105,868
Maternity insurance 58,514 1,053 ( 56,598 ) 2,969
Housing fund 1,464,029 3,449,836 ( 4,524,320 ) 389,545
Union fee and education fee 2,839,358 1,410,718 ( 1,961,836 ) 2,288,240
Termination benefits 55,838,433 - ( 11,067,070 ) 44,771,363
Other allowances 30,621,189 1,466,414 ( 2,495,984 ) 29,591,619
151,849,547 304,798,376 (279,666,924 ) 176,980,999
102
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(19) Employee benefits (continued)
At 31 December 2010, no payment of any employee benefits was delayed (December
2009: Nil).
In 2010, the amount of union fee and education fee paid was RMB 1,097,852 (in 2009:
RMB1,961,836). The amount of termination benefit paid was RMB 13,518,866 (in 2009:
RMB11,067,070). No non-monetary benefit was distributed in 2010 (2009: Nil).
(20) Taxes payable
2010 2009
Value added tax 20,867,507 70,436,105
Consumption tax 36,964,290 41,009,401
Business tax 346,375 265,448
Corporation income tax 567,303,677 425,211,960
Urban land use tax 744,172 -
Individual income tax 7,434,054 6,570,739
City construction tax 8,449,064 6,756,307
Property tax 1,715,820 -
Others 5,540,300 6,709,487
649,365,259 556,959,447
(21) Interest payable
2010 2009
Interest of short-term bank loan - 605,030
103
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(22) Other payables
2010 2009
Advertising expenses payable 190,122,855 232,011,818
Distributors deposit payable 135,052,781 126,114,730
Equipment and construction payable 50,072,081 34,987,670
Royalty fee 41,640,572 17,219,809
Deposits from suppliers 4,326,760 6,111,395
Others 55,682,672 60,602,670
476,897,721 477,048,092
At 31 December 2010, the balance due to the shareholders with voting right of 5% or
above is as follows:
2010 2009
Royalty fee payable to parent company 41,640,572 17,219,809
At 31 December 2010, significant outstanding balances aged over than one year are as
follows:
Amount payable Reasons for
outstanding
Deposits from suppliers 4,326,760 Deposits
Deposits from distributors 89,335,801 Deposits
93,662,561
There was no repayment of the above balances after the balance sheet date.
104
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(23) Long-term bank Loan
All the long-term bank loans have been repaid at the beginning of 2010.
At 31 December 2010, no unpaid matured long-term loan (December 2009: Nil).
For the movement of the pledged assets, please refer to Note 5 (29).
(24) Other long-term liabilities
2010 2009
Employee benefit (1) 20,185,000 23,250,000
Trust scheme (2) 80,028,000
-
100,213,000 23,250,000
(1) The other long-term liability represented bonus accrued for management at 31
December 2010. According to the bonus payment schedule, the bonus is expected to
be paid from 2012 to 2014.
(2) In September 2010, The Company and Zhong Rong International Trust Co., Ltd.
entered into "Profit transfer agreement on the wine of Changyu AFIP", pursuant to
which the Company has transferred right to the profit generated by certain type of
wine to a specialized trust fund established by Zhong Rong International Trust Co.,
Ltd and received RMB80,028,000. This contract was guaranteed by Yantai Changyu
Group Company. The specialized trust fund will end in April 2012.
105
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(25) Share capital
2010 Opening Movement Closing
balance balance
Issue capital Share Other Total
premium
account
Restricted shares
Shares held by domestic investors
Including：
Shares held by non-state owned legal
persons 239,385,120 - - ( 26,364,000) ( 26,364,000) 213,021,120
Total of restricted shares
239,385,120 - - ( 26,364,000) ( 26,364,000) 213,021,120
Unrestricted shares
A Shares 109,430,880 - - 26,364,000 26,364,000 135,794,880
B Shares
178,464,000 - - - - 178,464,000
Total of unrestricted shares
287,894,880 - - 26,364,000 26,364,000 314,258,880
Total shares
527,280,000 - - - - 527,280,000
2009 Opening Movement Closing
balance balance
Issue capital Share Other Total
premium
account
Restricted shares
e Shares held by domestic investors
Including：
Shares held by non-state owned
legal persons 265,749,120 - - ( 26,364,000) ( 26,364,000) 239,385,120
Total of restricted shares 265,749,120 ( 26,364,000) ( 26,364,000) 239,385,120
- -
Unrestricted shares
A Shares 83,066,880 - - 26,364,000 26,364,000 109,430,880
B Shares 178,464,000 - - - - 178,464,000
Total of unrestricted shares 261,530,880 26,364,000 287,894,880
- - 26,364,000
Total shares 527,280,000 527,280,000
- - - -
Restricted shares of 26,364,000 (2009: 26,364,000) held by Yantai Changyu Group Co.,Ltd.,
5% of total shares issued, were released since 1 April 2010 (2009: 25 March 2009).
(26) Capital surplus
At 31 December of 2010 and 2009, the balance of capital surplus represented share
premium.
106
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(27) Surplus reserve
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 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.
Since 31 December 2006, the statutory surplus reserve of the Company has reached 50% of
the registered share capital. Pursuant to the resolution of the board of directors of the
Company, no appropriation of statutory surplus reserve since 2007.
(28) Retained earnings
2010 2009
Retained earnings brought forward 1,657,780,929 1,163,188,086
Add: profit attributable to
shareholders of the Company 1,434,218,328 1,127,328,843
Less: dividends of ordinary shares ( 632,736,000) ( 632,736,000)
Retained earnings carried forward 2,459,263,257 1,657,780,929
Pursuant to the resolution of board of directors held on 7 April 2011, a cash dividend of
RMB1.40 per share (based on the total share of 527,280,000) totaling RMB738,192,000 is
proposed and subject to the approval of the Annual General Meeting.
(29) Assets with restriction of ownership
2010 Opening Balance Decrease Closing balance
Assets as collateral
Property, plant
and equipment 1,439,022 ( 1,439,022) - (i)
Intangible assets 8,882,146 ( 8,882,146) - (i)
10,321,168 (10,321,168) -
Opening Balance Increase Decrease Closing balance
Restricted assets due to other reasons
Cash at bank 2,449,848 59,974 (47,698) 2,462,124 (ii)
Inventory - 13,524,960 - 13,524,960 (iii)
2,449,848 13,584,934 ( 47,698) 15,987,084
107
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(29) Assets with restriction of ownership (continued)
2009 Opening Balance Increase Closing balance
Assets as collateral
Property, plant
and equipment - 1,439,022 1,439,022 (i)
Intangible assets - 8,882,146 8,882,146 (i)
- 10,321,168 10,321,168
Opening Balance Increase Decrease Closing balance
Restricted assets due to other reasons
Cash at bank 2,449,118 99,714 (98,984) 2,449,848 (ii)
(i) At 31 December 2009, the book value of Property, Plant and Equipment with
ownership restricted is RMB 1,439,022 , and intangible assets is RMB8,882,146,which
was pledged to obtain a short-term bank loan RMB 4,500,000 for one year and a long
term bank loan BMB 10,500,000 for 2-3 years. All the bank loans have been repaid in
2010.
(ii) At 31 December 2010, the restricted deposit is the group’s housing fund.
(iii) At 31 December 2010, inventory with restriction in ownership was due to the group
has transferred the related right of profit to a specialized trust fund established by Zhong
Rong International Trust Co., Ltd. Please also refer to Note 5 (24).
(30) Operating income and costs
Operating income is as follows:
2010 2009
Revenue 4,946,381,708 4,169,171,608
Other operating income 36,561,689 30,231,743
4,982,943,397 4,199,403,351
2010 2009
Cost of sales 1,246,290,445 1,182,061,575
Other operating expenses 11,619,771 9,608,034
1,257,910,216 1,191,669,609
The operating income for the group is mainly from the sales of wine, brandy, sparking wine and
tonic wine. Over 99% of the sales generated in PRC.
108
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(30) Operating income and costs (continued)
Operating income from top five customers in 2010 is as follows:
Amount Percentage of
total operating
incomes %
First 29,352,577 0.6
Second 25,886,223 0.5
Third 23,565,699 0.5
Fourth 23,516,666 0.5
Fifth 23,326,067 0.5
125,647,232 2.6
Operating income from top five customers in 2009 is as follows:
Percentage of
Amount total operating
incomes %
First 39,512,553 0.9
Second 35,932,551 0.9
Third 33,201,687 0.8
Fourth 25,902,916 0.6
Fifth 24,299,141 0.6
158,848,848 3.8
Operating income is analyzed as follows:
2010 2009
Sales of goods 4,946,381,708 4,169,171,608
Rendering services 36,561,689 30,231,743
4,982,943,397 4,199,403,351
109
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(31) Taxes and surcharges
2010 2009
Consumption tax 192,626,509 179,231,155
Business Tax 3,541,419 1,269,068
City construction tax 56,345,553 45,906,636
Education fee and surcharges 33,045,631 26,391,396
Others 816,826 532,859
286,375,938 253,331,114
(32) Selling expenses
2010 2009
Advertising costs 776,928,026 632,941,883
Freight 139,440,780 111,439,665
Salary and employee benefit 190,266,613 161,682,500
Trademark fee 96,975,246 83,387,685
Warehouse leasing expenses 30,184,352 26,925,363
Travelling expenses 17,952,447 18,463,050
Commission 8,957,329 8,461,286
Expenses incurred for Wine
festival 10,410,350 5,813,738
Others 67,355,075 44,559,371
1,338,470,218 1,093,674,541
The reversal of unpaid advertising expense of RMB55,718,673 was included in the selling
expenses (2009: nil).
110
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(33) General and administrative expense
2010 2009
Salary and employee benefit 46,549,783 66,904,392
Insurance fee 23,550,518 27,511,703
Leasing expenses 10,862,402 7,683,097
Depreciation 17,879,147 11,238,048
Amortization 9,513,903 4,816,773
Administrative expenses 14,320,518 15,646,929
Travelling expenses 4,580,694 4,324,952
Entertainment fee 3,548,986 3,986,977
Property tax, stamp duty and other 9,732,151 7,621,777
taxes
Maintenance fee 2,437,416 3,636,092
Management fee 4,514,810 4,625,860
Others 70,517,692 62,056,178
218,008,020 220,052,778
(34) Loss for impairment of assets
2010 2009
Inventory provision/(write-off) ( 197,067) 1,457,541
Impairment of long-term investment 5,000,000
-
4,802,933 1,457,541
(35) Financial income
2010 2009
Interest income 32,295,374 34,344,339
Less: interest expenses - ( 1,005,643 )
Bank charges ( 3,330,208) ( 3,106,530 )
28,965,166 30,232,166
111
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(36) Investment income
2010 2009
Investment income from held-to-maturity
investment - 1,050,750
Investment income gained from disposal
of financial assets held for trading 900,000 1,556,000
900,000 2,606,750
As of 31 December 2010, there was no significant restriction on the remittance of
investment income to the investor.
(37) Non-operation income
2010 2009
Gains on disposal of non-current assets 114,298 374,118
Including: gain on disposal of plant property
and equipments 114,298 374,118
Government grants 22,644,238 22,318,815
Gain on acquisition of subsidiary - 3,606,094
Penalty income 276,024 32,731
Others 2,549,490 2,465,815
25,584,050 28,797,573
Government grants recognized in the income statement is as follows:
2010 2009
Funds to support major projects 15,792,069 14,831,931
Funds to support Small and Medium
Enterprises - 3,850,000
Tax refund 5,726,969 3,240,000
Others 1,125,200 396,884
22,644,238 22,318,815
112
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(38) Non-operation expenses
2010 2009
Loss on disposal of non-current assets 551,220 5,986
Including: loss on disposal of property, plant
and equipments 551,220 5,986
Donation 2,333,667 55,970
Others 290,803 1,537,317
3,175,690 1,599,273
(39) Income tax
2010 2009
Current income tax 496,457,456 410,585,996
Deferred income tax ( 21,008,092 ) ( 47,316,480 )
475,449,364 363,269,516
Reconciliation between income tax expenses and profits is as follows:
2010 2009
Profit before tax 1,929,649,598 1,499,254,984
25% 25%
Income tax applied PRC statutory income tax rate 482,412,400 374,813,746
Effect of different tax rates applied by certain
subsidiaries ( 9,237,208 ) ( 13,498,630 )
Tax losses not recognized - 5,388,607
Non-taxable income ( 3,519,517) (4,201,733)
Non-deductable expenses 5,793,689 2,549,525
Effect on utilization of deductable losses of prior
years - ( 1,781,999 )
Tax expenses applied the actual
tax rate of the Group 475,449,364 363,269,516
113
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(40) Earnings per share
The calculation of basic earnings per share is based on the consolidated profit
attributable to ordinary equity shareholders of the Company during the year and the
weighted average ordinary shares in issue.
2010 2009
Earnings
Consolidated profit attributable to
ordinary equity shareholders of the
Company 1,434,219,328 1,127,328,843
Shares
Weighted average number of ordinary
shares issued 527,280,000 527,280,000
Basic earnings per share 2.72 2.14
Diluted earnings per share N/A N/A
The company does not have dilutive potential 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
ordinary shares issued.
(41) Notes to consolidated cash flow statement
Cash received relating to other operating activities:
2010 2009
Government grants 16,917,269 19,078,631
Deposits received from trust scheme 80,028,000 -
Others 2,825,514 6,739,088
99,770,783 25,817,719
Cash paid relating to other operating activities:
2010 2009
Selling expenses 1,142,340,990 913,414,232
General and administrative expenses 110,764,518 101,670,230
Others 33,101,3 47,082,549
1,286,206,811 1,062,167,011
114
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(42) Supplementary information to consolidated cash flow statement
(i) Supplementary information to consolidated cash flow statement
Cash flows from operating activities calculated by adjusting the net profit:
2010 2009
Net profit 1,454,200,235 1,135,985,468
Less: Gain on acquisition of a subsidiary - 3,606,094
Add: Loss for impairment of assets 4,802,933 1,457,541
Depreciation 72,750,608 54,890,457
Intangible assets amortization 4,089,777 3,737,791
Biological assets amortization 4,100,732 1,018,394
Amortization of long term prepaid 1,341,392 850,498
expenses
Losses/(gain) on disposal of property, 436,922 ( 368,132 )
plant and equipment
Finance costs ( 32,295,374) ( 33,338,696 )
Investment income ( 900,000) ( 2,606,750 )
Increase in deferred tax assets ( 21,008,092) ( 47,316,480 )
Increase in inventories ( 162,968,447) ( 126,073,684 )
Increase in operating receivables ( 48,160,002) ( 49,620,254 )
Increase in operating payables
13,531,356 424,577,456
Net cash flows from operating activities 1,289,922,042 1,359,587,515
(ii) Information of subsidiary acquired
2010 2009
Consideration - 60,000,000
Cash and cash equivalents paid - 60,000,000
Less：Cash and cash equivalents owned
by the subsidiary - 102,851,536
Net cash acquired of the subsidiary - 42,851,536
Net asset acquired of the subsidiary - 106,010,156
Current assets - 126,903,333
Non-current assets - 70,202,694
Current liabilities - 78,639,770
Non-current liabilities - 12,456,101
115
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(42) Supplementary information to consolidated cash flow statement (continued)
(iii) Cash and cash equivalents
2010 2009
Cash 998,934,824 1,998,681,278
Including：
Cash on hand 89,425 218,086
Bank deposits on demand 977,645,399 1,977,259,840
Other monetary capital on demand 21,200,000 21,203,352
Closing balance of cash and
cash equivalents 998,934,824 1,998,681,278
116
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
6. RELATED PARTY AND RELATED PARTY TRANSACTIONS
(1) Parent company
Name ofType of Place ofLegal Scope ofRegistered Percentage Percentage incorporate
parent enterprise registration representative business capital of shares of votingCode
company rights
Changyu Limited Yantai Sun Manufacturing 50,000,000 50.4% 50.4% 265 645 824
Group Company Liqiang
Company
During the year ended 31 December 2010, there is no change in parent company’s
registered capital, interest shares or percentage of voting rights.
(2) Subsidiaries
Please refer to Note 4 (1).
(3) Other related parties
Nature of related parties Incorporate code
Yantai Changyu Travelling
Company Limited Fellow subsidiary 258 258 654
Yantai Changyu International
Window of the Wine City
Company Limited Fellow subsidiary 672 208 146
(4) Significant related party transactions
(i) Purchases from and sales to related parties
Purchase form related parties
2010 2009
Yantai Changyu Travelling Co. Ltd. 1,728,709 3,616,396
Yantai Changyu International Window of the
Wine City Company Limited 3,807 148,440
1,732,516 3,764,836
All related party transactions are based on the negotiated price.
In 2010, purchase from related parties accounted for less than 1% of the Group’s total
purchae (2009: less than 1%).
117
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
6. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)
(4) Significant related party transactions (continued)
(i) Purchases from and sales to related parties
Sales to related parties
2010 2009
Yantai Changyu Travelling Co. Ltd. 5,731,398 6,547,801
Yantai Changyu International Window of the
Wine City Company Limited 3,730,560 1,897,582
9,461,958 8,445,383
All related party transactions are based on the negotiated price.
In 2010, sales to related parties accounted for less than 1% of the Group’s total sales (2009:
less than 1%).
(ii) Property leased from related parties
2010 Note Assets leased Beginning date Ending date Rental Expense
Changyu Group (a) Warehouse and office 2007/1/1 2011/12/31 6,383,000
Company building
2009 Note Assets leased Beginning Date Ending Date Rental Expense
Changyu Group (a) Warehouse and office 2007/1/1 2011/12/31 6,383,000
Company building
(a) Pursuant to a patents implementation license dated 28 November 2006, starting
from 1 January 2007, the Company may rent properties from Changyu Group
Company for operation purposes at a basic annual rental of RMB6,383,000, and
the expired date is 31 December 2011. For the year ended 31 December 2010, the
rental expenses payable to Changyu Group Company amounted to RMB6,383,000
(2009: RMB6,383,000).
During 2010, leasing expenses paid to related company accounted for 15.6% of the
Group (during 2009: 18.4%).
118
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
6. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)
(4) Significant related party transactions (continued)
(iii) Other significant related party transactions
Note 2010 2009
Amount Amount
Royalty fee （a） 96,975,246 83,387,685
Patents fee （b） 50,000 50,000
All related party transactions are based on the negotiated price.
(a) Royalty fee
Pursuant to a royalty agreement dated 18 May 1997, starting from 18 September
1997, the Company may use certain trademarks of Changyu Group Company, which
have been registered with the PRC Trademark Office. An annual royalty fee at 2% of
the Group’s annual sales is payable to Changyu Group Company. The license is
effective until the expiry of the registration of the trademarks.
During 2010, royalty fee paid to related company accounted for 100% of the Group
(2009: 100%).
(b) Patents fee
Pursuant to a patents implementation license dated 18 May 1997, starting from 18
September 1997, the Company may use the patents of Changyu Group Company.
The annual patents usage fee payable by the Company to Changyu Group Company
was RMB 50,000. The contract was expired on 20 December 2005. The Company
renewed the contract on 20 August 2006 for 10 years. The annual patents usage fee
payable by the Company to Changyu Group Company remained RMB50,000. For
the year ended 31 December 2010, the patents usage fee payable to Changyu Group
Company amounted to RMB 50,000 (2009: RMB50,000).
During 2010, patent fee paid to related company accounted for 100% of the Group
(2009: 100%).
(iv) Remuneration of the management
2010 2009
Remuneration of the management 10,673,444 10,252,279
119
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
6. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)
(4) Significant related party transactions (continued)
(v) Guarantee provided by related parties
Acceptance of guarantee provided by related parties
Whether the
Amount guarantee has
Notes guaranteed From To ended
Changyu Group
Company （a） 88,236,000 2010-10-25 2012-4-24 No
(a) In 2010, Changyu Group Company has provided guarantee to the Company for the full
responsibility under the trust scheme as mentioned in Note 5 (24) (2) amounting to
RMB88,236,000 (2009: nil).
(5) Balance due from related parties
2010 2009
Trade receivables Balance Provision Balance Provision
Yantai Changyu
Travelling Co. Ltd. - - 114,900 -
Yantai Changyu
International Window
of the Wine City
Company Limited 120,322 - - -
114,900
120,322 - -
The above balances due from related parties are unsecured, interest-free and
have no fixed terms of repayment.
(6)Balance of other payable of the related
parties
2010 2009
Other payable
Royalty fee payable to parent company 41,640,572 17,219,809
The above balance due to related party is unsecured, interest-free and has no fixed terms
of repayment.
120
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
7. CONTINGENT LIABILITIES
The Group and the Company did not have any significant contingent liabilities as at
balance sheet date.
8. COMMITMENT
2010 2009
Capital commitments
Authorized, but not contracted 1,235,076,405 17,030,443
Investment commitments
Contracted, but not provided for 395,000,000 -
At 31 December 2010, all capital commitments in 2009 have been provided for.
9. POST BALANCE SHEET DATE EVENTS
On 7 April 2011, the board of the directors proposed a cash dividend in respect of 2010
issued shares of 527,280,000 of RMB14 per 10 shares, amounting to a total cash dividend
of RMB738,192,000. The proposed dividend is subject to the approval from the Annual
General Meeting.
10. OTHER SIGNIFICANT EVENTS
(1) Lease
As lessee
Significant operating lease: the company has total future minimal lease payments under
non-cancelable contract with lessor are as follow:
2010 2009
Within one year 23,285,671 20,454,169
One year to two years 15,254,576 15,468,241
Two years to three years 5,298,402 3,562,622
Three years and above 12,606,980 12,258,047
56,445,629 51,743,079
121
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
10. OTHER SIGNIFICANT EVENTS (continued)
(2) Segment report
Over 99% of the Group’s revenue is generated from domestic customers, and 100%
assets of the Group are located in mainland China. Since the major customers and
operating activities are located in mainland China, it is not necessary to disclose detailed
geographical segment information. Since all of the businesses of the Group are related to
the manufacturing and sales of wines, it is not necessary to disclose business segment
information.
(3) Financial instrument and risk management
The Group’s instruments are aggregated with cash and bank, bank loans, and so on, which
are mainly used to gain the working capital for the company through the investment
activities. The group has a series of other financial instruments and liabilities due to the
diversification, such as trade receivables, other receivables, trade payables and other
payables.
The financial instruments cause the Company exposure to credit risk, liquidity risk and
market risk.
CLASSIFICATION FOR FINANCIAL INSTRUMENT
On balance sheet date, Company’s financial instruments have following book value:
2010 2009
Financial assets
Loan and receivable Loan and receivable
Cash and bank 2,489,804,162 2,545,210,286
Bills receivable 31,447,207 38,107,831
Trade receivables 100,113,271 98,022,443
Other receivables 30,686,839 22,424,303
Interest receivables 9,519,721 8,969,343
2,661,571,200 2,712,734,206
122
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
10. OTHER SIGNIFICANT EVENTS (CONTINUED)
(3) Financial instrument and risk management (continued)
Financial liabilities
2010 2009
Other financial liability Other financial liability
Trade payables 259,022,075 343,079,052
Other payables 476,897,721 477,048,092
Short-term loan - 224,500,000
Long-term loan - 10,500,000
Interest payable - 605,030
Other long-term liability 80,280,000 -
815,947,796 1,055,732,174
CREDIT RISK
Credit risk arises mainly from the risk that counterparties defaulting on the terms of their
agreements.
The Group only conducts transactions with being authorized and good credit third parties.
In according with Group’s policy, the Group requires sales on credit term only apply to
those third parties who satisfy the credit assessment. In addition, the Group keeps
continuing control on trade receivables and other receivables to ensure that the Group will
not face significant credit risk. For those not using the entity’s functional currency
transactions, unless the Group’s Credit Control Department approval, they are not offered
the credit term of trade.
The Group’s instruments includes cash and bank, trade receivables, other receivables and
hold-to-maturity investments, which their credit risk derived from impairment of their
values caused by counterpart default or poor management of counterpart. The greatest risk
that exposes to the Group is equivalent to these financial assets’ book value.
The Group only conducts transactions with being authorized and good credit third parties,
therefore there is no guaranty for the third parties. Credit risk management focuses on
different clients, geographic areas and industries. Base on nature of the Group’s business,
the credit risk has been spread to a large number of customers therefore the Company has
no significant credit risk.
The Group’s credit risk caused by trade receivables and other receivables are measured in
Note 5 (3) and (6).
123
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
10. OTHER SIGNIFICANT EVENTS (CONTINUED)
(3) Financial instrument and risk management (continued)
As at 31 December 2010, the financial assets aging analysis is as follows:
2010
Total Not overdue Overdue
not impairment Within 1 to 3 3 to 6 Over 6
1month months months Months
Trade receivables 100,113,271 100,113,271 - - - -
Other receivables 30,686,839 30,686,839 - - -
Bills receivable 31,447,207 31,447,207 - - - -
Interest
receivables 9,519,721 9,519,721 - - - -
171,767,038 171,767,038
- - - -
2009
Total Not overdue Overdue
not impairment Within 1 1 to 3 3 to 6 Over 6
month months months months
Trade receivables 98,022,443 98,022,443 - - - -
Other receivables 22,424,303 21,960,160 - - - 464,143
Bills receivable 38,107,831 38,107,831 - - - -
Interest receivables 8,969,343 8,969,343
- - - -
167,523,920 167,059,777 464,143
- - -
124
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
10. OTHER SIGNIFICANT EVENTS (CONTINUED)
(3) Financial instrument and risk management (continued)
LIQUIDITY RISK
Liquidity risk represents the risk for shortage of fund to repay financial liabilities, which
may arise from failure to sell the financial assets at fair value timely, default on
counterparties to pay its liabilities, repay the liabilities in advance or no projected cash
flows from operations can be generated.
The following summarized financial assets and financial liabilities’ aging analysis:
2010
Financial assets
1 to 3 months 3 to 12 months 1 to 5 years Total
Cash and bank 1,332,142,038 1,157,662,124 - 2,489,804,162
Trade receivables 100,113,271 - - 100,113,271
Bills receivable 22,270,232 9,176,975 - 31,447,207
Other receivables 30,686,839 - - 30,686,839
Interest receivables 9,519,721 1,166,839,099 - 9,519,721
1,494,732,101 1,166,839,099 - 2,661,571,200
Financial liability
1 to 3 Months 3 to 12 Months 1 to 5 Years Total
Trade payables 259,022,075 - - 259,022,075
Other payables 139,379,540 337,518,181 - 476,897,721
Other long-term
liability - - 88,236,000 88,236,000
398,401,615 337,518,181 88,236,000 824,155,796
125
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
10. OTHER SIGNIFICANT EVENTS (CONTINUED)
(3) Financial Instrument and risk management (continued)
LIQUIDITY RISK (continued)
The Group raise fund mainly through increase shares. The Group’s financial liabilities are
mainly arisen from advance from customers directly from operation, trade payables, and
other payables due in 3 months (except deposit). The financial liabilities’ book value is
equal to their fair value. The Group believes that the Group could cash the financial
liabilities to generate funds to pay off matured financial liabilities. Therefore, there is no
significant liquidity risk.
2009
Financial assets
1 to 3 Months 3 to 12 Months 1 to 5 Years Total
Cash and bank 2,319,258,085 225,952,201 - 2,545,210,286
Bills receivable 10,942,889 27,164,942 - 38,107,831
Trade receivables 98,022,443 - - 98,022,443
Other receivables 22,424,303 - - 22,424,303
Interest receivables 8,969,343 - - 8,969,343
2,459,617,063 253,117,143 - 2,712,734,206
Financial liability
1 to 3 Months 3 to 12 Months 1 to 5 Years Total
Short term loan - 235,259,000 - 235,259,000
Long term loan - - 11,958,000 11,958,000
Trade payables 343,079,052 - - 343,079,052
Other payables 350,933,362 126,114,730 - 477,048,092
Interest payable 605,030 - - 605,030
694,617,444 361,373,730 11,958,000 1,067,949,174
126
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
10. OTHER SIGNIFICANT EVENTS (CONTINUED)
(3) Financial instrument and risk management (continued)
MARKET RISK
Market risk represents the fair value of financial instruments or the present value of future
cash flows may vary by the market price. Market risk includes interest rate risk, foreign
currency risk and other pricing risk.
INTEREST RATE RISK
Interest rate risk represents the fair value of financial instruments of the present value cash
flows may vary by the change of interest rate.
The earnings and cash flow from operating activities are generally independent with
fluctuation of market interest rate, and there were no significant interest bearing assets and
liabilities except for cash in bank. The company believes that the Group has no significant
concentration of interest rate risks, and no interest rate swaps are designated to hedge
against interest rate risks.
FOREIGN CURRENCY RISK
Foreign currency risk represents the risks on fluctuation of fair value of financial
instruments or the future cash flow as a result of the fluctuation in foreign exchange.
The group has no significant concentration of foreign currency risk because its business is
principally conducted in PRC and all transactions are denominated in RMB.
FAIR VALUE
Fair value refers to the value that two parties would voluntarily accept in an arm length
transaction. The following methods and hypothesizes are used for the calculation of fire
value.
Since the aging for cash and bank, trade receivables, other receivables, accounts payables
and other payables is not much their fair value are deemed to be the same as the book
value.
The Group’s instruments are aggregated with cash and bank, trade receivables, other
receivables, accounts payables and other payables where their book value equivalent to
their fair value. On 31 December 2010, except restricted bank deposit (Refer to Note 5 (1)),
the Company states that the Group has no other restricted for cashing financial
instrument .The Group has no other financial instrument should be impaired or accrued
provision, except those have been impaired or accrued provision.
127
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
11. NOTES TO COMPANY FINANCIAL STATEMENTS
(1) Trade receivables
The normal credit term of trade receivables is one month, which can be extended to three
months for certain major customers. The trade receivables are interest free.
The ageing analysis is as follows:
2010 2009
Within 1 year 11,708,820 13,163,722
At 31 December 2010, there was no account receivable provision (31 December 2009:
Nil). There was no bad debt provision accrued or reversed by the management in 2010 (31
December 2009: Nil)
2010 2009
Amount % Provision Amount % Provision
Individually significant 10,535,769 90.0 - 13,163,722 100.0 -
Individually insignificant 1,173,051 10.0 - - - -
11,708,820 100.0 13,163,722 100.0
As at 31 December 2010, there was no account receivable due from the Company’s
shareholders with voting rights of 5% or above (31 December 2009: Nil).
As at 31 December 2010, the particulars of top 5 account receivables amount are as
follows:
Relationship Amount Aging Ratio of total
with the receivables %
group
First Third party 6,216,172 Within 1 year 53.1
Second Third party 4,319,597 Within 1 year 36.9
Third Third party 996,882 Within 1 year 8.5
Fourth Third party Within 1 year 1.5
176,169
11,708,820 100.0
128
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(1) Trade receivables (continued)
As at 31 December 2009, the particulars of top 5 account receivable amount are as
follows:
Relationship
with the Ratio of total
group Amount Aging receivables %
First Third party 7,573,194 Within 1 year 57.5
Second Third party 3,790,528 Within 1 year 28.8
Third Third party 1,800,000 Within 1 year 13.7
13,163,722 100.0
At 31 December 2010, no outstanding balance was due from related parties (31 December
2009: Nil).
(2) Other receivables
The aging analysis is as follows:
2010 2009
Bad debt Account Book Bad debt Account
Book Value Provision Balance Value Provision Balance
Within 1 year 877,461,750 - 877,461,750 303,587,507 - 303,587,507
1 to 2 years 277,992,300 - 274,992,300 325,731,990 - 325,731,990
2 to 3 years 46,707 - 46,707 3,632,994 - 3,632,994
Over 3 years 8,101,865 8,000,000 101,865 8,464,143 8,000,000 464,143
1,163,602,622 8,000,000 1,155,602,622 641,416,634 8,000,000 633,416,634
2010 2009
Amount % Bed debt % Amount % Bed debt %
provision provision
Individually significant
and provision 1,162,026,156 99.9 8,000,000 0.7 610,311,334 95.1 8,000,000 1.3
Individually insignificant 1,576,466 0.1 - - 31,105,300 4.9 - -
1,163,602,622 100.0 8,000,000 641,416,634 100.0 8,000,000
129
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(2) Other receivables (continued)
The provision of bad debts for other receivable has no change in 2010 (2009 Nil).
As at 31 December 2010, there was no other receivable due from the shareholders with
voting rights of 5% or above. (31 December 2009: Nil)
As at 31 December 2010, the particulars of top 5 other receivables amount are as follows:
Relationship Amount Aging Percentage of
with the group total
advances to
suppliers %
First related party 414,607,102 Within 1 year 35.6
Second related party 211,345,055 Within 1 year 18.2
Third related party 164,126,000 Within 1 year 14.1
Fourth related party 83,328,400 Within 1 year 7.1
Fifth related party 80,969,908 Within 1 year 7.0
954,376,465 82.0
As at 31 December 2009, the particulars of top 5 other receivables amount are as follows:
Relationship Amount Aging Percentage of
with the group total
advances to
suppliers %
First related party 324,566,508 Within 1 year 50.6
Second related party 150,658,194 Within 1 year 23.4
Third related party 50,283,910 Within 1 year 7.9
Fourth related party 37,644,733 Within 1 year 5.9
Fifth related party 35,573,246 Within 1 year 5.6
598,726,591 93.4
At 31 December 2010, the balance of other receivables from related parties is
RMB954,376,465, approximately 82.0% of total other receivables. These were all from
subsidiaries of the Company (2009: the balance of other receivable from related parties is
RMB598,726,591, 93.4% of total other receivables).
130
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(3) Long-term equity investment
2010 Cost Opening Movement Closing Share Voting Cash
balance for the year Bbalance holding power Dividends for
% % the year
Cost Method:
Xinjiang Tianzhu 60,000,000 60,000,000 60,000,000 60 60 -
Vehicular 300,000 300,000 - 300,000 100 100 -
Transportation
Kylin Packaging 7,783,813 5,953,878 1,829,935 7,783,813 50 62.5 -
Changyu Chateau 28,968,100 28,968,100 - 28,968,100 70 100 355,540,340
AFIP Tourism 350,000 350,000 - 350,000 70 70 -
Pioneer International 3,500,000 3,500,000 - 3,500,000 70 100 14,015,767
Ningxia Growing 1,000,000 1,000,000 - 1,000,000 100 100 -
National Wines 2,000,000 2,000,000 - 2,000,000 100 100 124,052,032
Ice Chateau 13,413,000 13,413,000 - 13,413,000 51 100 -
Beijing Chateau 77,000,000 77,000,000 - 77,000,000 70 70 -
Sales Company 7,200,000 7,200,000 - 7,200,000 90 100 958,438,619
Langfang Sales 100,000 100,000 - 100,000 10 100 24,037,718
Langfang Castel 12,142,200 12,142,200 - 12,142,200 49 100 27,810,566
Wines Sales 4,500,000 4,500,000 - 4,500,000 90 100 -
Shanghai Sales 300,000 300,000 - 300,000 30 100 -
Beijing Sales 350,000 350,000 - 350,000 70 100 -
Jingyang Sales 100,000 100,000 - 100,000 10 100 27,071,101
Jingyang Wine 900,000 900,000 - 900,000 90 100 15,809,914
Ningxia Wine 1,000,000 1,000,000 - 1,000,000 100 100 -
Yantai Dingtao 10,000,000 10,000,000 ( 5,000,000) 5,000,000 18 18
Ningxia Chateau 2,000,000 - 2,000,000 2,000,000 100 100
-
Shihezi Chateau 2,000,000 - 2,000,000 2,000,000 100 100 -
Xianyang Chateau 2,000,000 - 2,000,000 2,000,000 100 100 -
Development centre 100,000,000 - 100,000,000 100,000,000 100 100
336,907,113 229,077,178 102,829,935 331,907,113 1,546,776,057
During 2010, there was no significant restriction on the remittance of fund from the
invested entities to the Company.
At 31 December 2010, an impairment provision of RMB5,000,000 was provided for Yantai
Dingtao (31 December 2009：nil).
131
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(4) Revenue and cost of sales
Revenue is as follows:
2010 2009
Income from principal activities 1,563,030,583 1,280,473,503
Other operating income - 2,309,383
1,563,030,583 1,282,782,886
Cost of sales is as follows:
2010 2009
Cost from principal activities 1,278,064,848 955,688,175
Other operating cost - 1,396,406
1,278,064,848 957,084,581
In 2010, revenue derived from top 5 customers are as follows:
Amount Percentage of total
revenue
%
First 1,423,750,722 91.1
Second 13,330,260 0.9
Third 0.4
6,994,875
Fourth 0.2
2,954,169
Fifth 2,160,790 0.1
1,449,190,816 92.7
In 2010, top 5 customers of the Company are all subsidiaries.
132
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(4) Revenue and cost of sales (continued)
In 2009, revenue derived from top 5 customers are as follows:
Percentage of total
Amount revenue
%
First 1,241,670,695 96.8
Second 13,438,739 1.0
Third 10,438,913 0.8
Fourth 9,942,227 0.8
Fifth 3,368,185 0.3
1,278,858,759 99.7
In 2009, top 5 customers of the Company are all subsidiaries.
Revenue are analyzed as follows:
2010 2009
Sales of goods 1,563,030,583 1,280,473,503
Rendering of services - 2,309,383
1,563,030,583 1,282,782,886
(5) Investment income
2010 2009
Long –term equity investment income
accounted for using the cost method 1,546,776,057 1,150,000,000
Investment income gained during the year
which the Company held financial
assets held-to-maturity - 1,050,750
Investment income gained from disposal
of financial assets held for trading 900,000 1,556,000
1,547,676,057 1,152,606,750
133
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(5) Gain on investment (continued)
Among the long-term equity investment income accounted for using the cost method,
any investee with investment income accounting for more than 5% of the Company’s
total profit are as follows:
Subsidiaries 2010 2009
Changyu Chateau 355,540,340 -
National Wines 124,052,032 -
Sales Company 958,438,619 1,150,000,000
1,438,030,991 1,150,000,000
At 31 December 2010, there was no significant restriction on the remittance of investment
income to the Company.
134
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Year ended 31 December 2010
11. NOTES TO COMPANY FINANCIAL STATEMENTS (CONTINUED)
(6) Supplement to cash flow statement
Cash flows from operating activities calculated by adjusting the net profit:
2010 2009
Net profit 1,543,091,633 1,209,691,757
Add: Depreciation 34,321,889 32,473,315
Impairment provision 5,000,000 -
Intangible assets amortization 3,058,244 3,069,076
Biological assets amortization 1,173,810 293,452
Losses on disposal of property, plant and ( 100,916 ) ( 331,688 )
equipments
Finance costs ( 28,408,967 ) ( 35,242,044 )
Investment income ( 1,547,676,057 ) ( 1,152,606,750 )
Increase in deferred tax assets ( 704,304 ) ( 11,365,115 )
Increase in inventories ( 13,647,144 ) ( 28,465,549 )
Increase in operating receivables ( 1,247,040,826 ) ( 293,343,206 )
Increase in operating payables 1,483,024,162 84,522,466
Net cash flows from operating activities 232,091,524 ( 191,304,286 )
(7) Cash and cash equivalents
2010 2009
Cash and bank 407,619,206 1,159,666,918
Including: Cash on hand 46,647 46,731
Bank deposits on demand 386,372,559 1,138,420,187
Other monetary capital on demand 21,200,000 21,200,000
407,619,206 1,159,666,918
12. COMPARATIVE FIGURE
Some of the comparative figures have been restated to conform to the presentation
requirements for the current year.
135
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
SUPPLEMENTARY INFORMATION FOR FINANCIAL STATEMENT
Year ended 31 December 2010
1. DETAILS OF NON-RECURRING PROFIT AND LOSS
2010
Loss on disposal of non-current assets, including
reversal of accrued impairment provision ( 436,922)
Tax refund or exemption that is either non-recurring
or without proper approval 5,726,969
Government grants credited in profit and loss
(except for those recurring government grants that are
closely related to the entity's operation, in line with related regulations
and have proper basis of calculation) 16,917,269
Gains on fair value change and disposal of trading financial assets
and financial liabilities, except for those from hedgings
that are closely related to the entity's principal operations 900,000
Reversal of unpaid advertisement fee 55,718,673
Other non-operating income and expense 201,044
79,027,033
Corporate income tax (19,756,758)
Attributable to minority interests ( 270,756)
58,999,519
The Group’s Non-operating profit and loss on non-recurring items are recognized in
accordance with the regulations of the "public offering of securities of the Company
Disclosure Explanatory Notice No. 1 - non-recurring profit and losses" (SFC [2008] No.
43).
All non-operation income and non-operation expenses are non-operating profit in
2010.Please refer to Note 5 (37) and (38).
A-1
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
SUPPLEMENTARY INFORMATION FOR FINANCIAL STATEMENT (continued)
Year ended 31 December 2010
2. RETRUN ON NET ASSETS AND EARNINGS PRE SHARE
2010 Weighted average Basic earnings
return on net assets per share (RMB)
(%)
Net profit attributable to shareholders of the
Company 41.57 2.72
Net profit attributable to shareholders of the
Company deduct incidental profits 39.86 2.61
There are no potential dilutive shares outstanding.
2009 Weighted average Basic earnings
return on net assets per share
(%) (RMB)
Net profit attributable to shareholders of the
Company 41.17 2.14
Net profit attributable to shareholders of the
Company deduct incidental profits 40.42 2.10
There is no potential dilutive share outstanding.
A-2
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
SUPPLEMENTARY INFORMATION FOR FINANCIAL STATEMENT (continued)
Year ended 31 December 2010
3. VARIANCE ANALYSIS
Analysis on items with fluctuation more than 30% (inclusive) in consolidated financial
statements or balance greater than 5% (inclusive) of the total assets at the balance sheet
date or amount greater than 10% (inclusive )of gross profit of the reporting period.
(1) The balance of cash and bank as at 31 December 2010 was RMB2,489,804,162, which
decreased by 2% compared with the balance at 31 December 2009. The decrease was
due to the increased cash outflow from operating activities in line with the new
construction investment for new chateau and remolding of existing property plant and
equipment projects.
(2) The balance of advance to suppliers as at 31 December 2010 was RMB74,728,756,
which increased by 134% compared with the balance at 31 December 2009. The
increase was due to the increased productivities which results in the increase of
prepayment of goods and construction cost.
(3) The balance of inventory as at 31 December 2010 was RMB1,294,406,406, which
increased by 14% as compared with that of 31 December 2009. The increase was
mainly due to the increase in purchase of semi-products and raw materials as a result of
the sales expansion and more stock of finish good in the year end due to the sales of the
sales company increased rapidly in current year.
(4) The balance of long term investment at 31 December 2010 is RMB5,000,000，
decreasing by 50% as compared with 31 December 2009. The decrease was mainly due
to the Group accrued long term investment provision RMB5,000,000 in current.
(5) The balance of property, plant and equipment as at 31 December 2010 was
RMB1,188,081,245, increasing by 19% as compared with that of 31 December 2008.
The increase was mainly due to many projects in progress were completed and
transferred to property, plant and equipment, and the Group made significant
investment in machineries to keep up with the development in production capability
during current year.
(6) The balance of construction in progress as at 31 December 2010 was RMB242,107,575,
increasing by 121% as compared with that of 31 December 2009, which was mainly
due to the construction work in the newly founded subsidiaries namely, Ningxia
Chateau, Shihezi Chateau and Xianyang Chateau. The construction of production line
and the construction project of Beijing AFIP Chateau also contribute to the increase of
construction in progress.
(7) The balance of intangible assets as at 31 December 2010 was RMB208,847,847,
increasing by 42% as compared with that of 31 December 2009, which was mainly due
to the addition of land use right in subsidiaries.
(8) The balance of long-term prepaid expenses was RMB106,233,673 as at 31 December
2010 which increased more than 173% compared with that of 31 December 2009. The
increase was mainly due to the increased land expropriation fee of Beijing AFIP
chateau and Xianyang chateau as well as the increased land leasing fee for Beijing AFIP
chateau.
(9) The balance of deferred tax assets as at 31 December 2010 was RMB160,275,366,
which increased by 15% compared with the balance at 31 December 2009. The increase
was due to the accrued but not paid bonus and non-realized profit offset from
inter-group sales.
A-3
YANTAI CHANGYU PIONEER WINE COMPANY LIMITED
SUPPLEMENTARY INFORMATION FOR FINANCIAL STATEMENT (continued)
Year ended 31 December 2010
3. VARIANCE ANALYSIS (CONTINUED)
(10) The balance of short term loan as at 31 December 2010 was nil, which decreased by
100% compared with the RMB224,500,000 at 31 December 2009. This is because the
group has repaid those short term loan which they borrowed for the purpose of
production and daily operation back in 2009.
(11) The balance of trade payables was RMB259,022,075 as at 31 December 2010,
decreasing by 25% as compared with that of 31 December 2009. The decrease was
mainly due to the group hasn’t paid some the trade payable during current year.
(12) The balance of advance from customers as at 31 December 2010 was RMB309,481,976,
which decreased by 17% compared with the balance at 31 December 2009. The
decrease was mainly due to the group managed to deliver the product more prompt
which shortened the days of advance from customers.
(13) -The balance of taxes payable was RMB649,365,259 as at 31 December 2010,
increasing by 17% as compared with that of 31 December 2009. The increase was
mainly attributable to income taxes payable in line with the increase in gross profit and
value added tax increased for the selling peak season in end of 2010.
(14) The balance of other payables was RMB476,897,721as at 31 December 2010, only
slightly fluctuated as compared with that of 31 December 2009. The balance mainly
consists of propaganda of advertising expense payable and the deposit from selling
agencies.
(15) The balance of long term loan was nil as at 31 December 2010, decreasing 100% as
compared with RMB10,500,000 balance 31 December 2009. The company’s subsidiary
already repaid the long term loan ahead of time which they borrowed to meet its
operating needs in 2009.
(16) The balance of other long term liabilities was RMB100,213,000 as at 31 December
2009, increased by 331% compared with 31 December 2009. This is mainly due to the
company’s futures of wine for which they received the payment from the trust fund
before the actual settlement of the wine.
(17) The balance of issued capital was RMB527,280,000 as at 31 December 2010 with no
fluctuation as compared with that of 31 December 2009.
(18) The balance of capital surplus was RMB557,222,454 as at 31 December 2010, with no
fluctuation as compared with that of 31 December 2009.
(19) The balance of surplus reserve was RMB295,942,629 as at 31 December 2010, and no
fluctuation as compared with that of 31 December 2009. As at 31 December 2006, the
statutory surplus reserve fund has accounted to the 50% of the issued capital, so no
appropriation of net profit is made to surplus reserve.
(20) The balance of retained earnings was RMB2,459,263,257 at 31 December 2010,
increasing by 48% as compared with that of the year 2009. This is mainly due to the
increasing of group’s retained earnings.
A-4
3. VARIANCE ANALYSIS (CONTINUED)
(21) The operating income for the year ended 31 December 2010 was RMB4,982,943,397,
increasing by 19% as compared with that of the year 2009. The increase was mainly
contributed by the continuously stable growth in sales of wine, champagne and
brandy. The operating cost the year ended 31 December 2010 was
RMB1,257,910,216, increasing by about 6% as compared with that of year 2009. The
increase was mainly due to the increase in sales revenue and the cost increased
accordingly.
(22) The tax surcharges for the year ended 31 December 2010 was RMB286,375,938,
increasing 13% as compared with that of year 2009. The increasing mainly
contributes by the increasing of sales revenue.
(23) The selling expense for the year ended 31 December 2010 was RMB1,338,470,218,
increasing by 22% as compared with that of the year 2009. The increase was mainly
due to the operating scale enlargement, the increase in promotion fee together with
the increase in salary and bonus of sales clerk.
(24) The general and administrative expense for the year ended 31 December 2010 was
RMB218, 008,020, with no obvious fluctuation as compared with that of the year
2009. The increase was mainly due to the increase of salary and welfare, leasing fee,
depreciation, amortization, and office allowance.
(25) The non-operating income for the year ended 31 December 2010 was
RMB25,584,050, decreased of 11% compared with year 2009. The increase was
mainly due to the addition of governmental grant.
(26) The income tax is RMB475,449,364, increasing by 31% compared with 2009. The
increase was mainly due to the increase in revenue together with the increase in
profit before tax.
(27) The balance of minority equity was RMB19,981,906 in 2010, increasing by 131%
compared with 2009. The increase was mainly due to the addition of profit of
non-fully owned subsidiary.
XII. Reference Documents
(1)The original of annual report autographed by the chairman.
(2)The financial statements autographed and signed by the chairman, chief accountant and
accountants in charge.
(3)The Prospectus and Public Offering Announcement for Stock B in 1997, the Prospectus and
The Shares’ Change & Public Offering Announcement for Stock A in 2000.
(4) The originals of all documents and announcements that the company made public during
the report period in the newspapers designated by China Securities Regulatory Commission.
Yantai Changyu Pioneer Wine Company Limited
Board of Directors
April 9th, 2011
140
