YANTAI CHANGYU PIONEER WINE COMPANY LIMITED The 3rd Quarter Report of 2011 1. Important 1.1 The Board of Directors, board of Supervisors, directors, supervisors, senior managers of the Company collectively and individually accept full responsibility for the truthfulness, accuracy and completeness of the information contained in this report and confirm that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading. 1.2 No directors, supervisors or senior managers can not ensure the truthfulness, accuracy and completeness, or have any dissidence to this report. 1.3 All directors attended the Board of Directors’ meeting to deliberate this report. 1.4 The 3rd quarter report of 2011 has not been audited. 1.5 The chairman of the Board of Directors Mr. Sun Liqiang, the chief accountant Mr. Leng Bin and the chief of accounting department Mr. Jiang Jianxun assure the truth and integrity of the financial and accounting statement in this report. 1 2. THE BASIC INFORMATION OF THE COMPANY 2.1 Main accountant data and Financial index Unit: CNY Sep. 30, 2011 Dec.31, 2010 More or less (%) Total assets 6,591,289,170.00 5,983,377,253.00 10.16% Owner’s equity attributed to shareholders of listing 4,353,930,792.00 3,839,708,341.00 13.39% company Share capital (share) 527,280,000.00 527,280,000.00 0.00% Net asset per share attributed to shareholders of 8.26 7.28 13.46% listing company More or less More or less compared July to Sep., compared with Jan. to Sep., with same 2011 same period of 2011 period of last last year (%) year (%) Total operation revenue 1,323,654,951.00 21.58% 4,413,676,519.00 23.61% Net profit attributed to shareholders of listing 386,784,180.00 29.44% 1,263,739,296.00 41.77% company Net cash flow from operating - - 1,187,905,246.00 35.26% activities Net cash flow per share from - - 2.25 34.73% operating activities Basic earnings per Share 0.73 28.07% 2.40 42.01% Diluted earnings per Share 0.73 28.07% 2.40 42.01% Weighted average rate of net 9.27% 0.14% 30.85% 3.62% assets return Weighted average rate of net assets return after deducting 9.17% 0.04% 30.70% 3.60% irregualr profit and loss Item for irregular profit and loss (√ ) applicable Unit: CNY Item for irregular profit and loss Amount Remark Profit and loss on non-current assets disposing -99,865.00 Government grant accounted in profit and loss this year (except for those that closely related to the 8,066,639.00 operation, under national laws or in accordance with certain criteria) Except the hedging business related to normal operation of the Company, the profit and loss on 52,122.00 fair value from holding trading financial assets and 2 liabilities, proceeds from disposition of trading financial assets and liabilities, and salable financial assets profit and loss from other non-business activities 971,401.00 Effect index for the income tax -2,391,156.00 effect index for minority shareholders’ equity -66.00 Total 6,599,075.00 - 2.2 The total number of the shareholders and top 10 shareholders with unlimited shares at the end of the report period Unit: share Total number of shareholders Totally 14295 shareholders, including 9083 shareholders for A share, 5212 shareholders for B share The top 10 shareholders with unlimited shares Name of Shareholders Number of Type of unlimited shares shares YANTAI CHANGYU GROUP CO.,LTD. 265,749,120 A share GAOLING FUND,L.P. 18,397,894 B share HTHK/CMG FSGUFP-CMG FIRST STATE CHINA GROWTH FD 16,536,643 B share BBH BOS S/A FIDELITY FD - CHINA FOCUS FD 10,373,597 B share GOVERNMENT OF SINGAPORE INV. CORP.- A/C "C" 7,335,741 B share UBS (LUXEMBOURG) S.A. 4,543,836 B share BBH LUX-FIDELITY FUNDS-EMERGING MARKETS FUND 4,528,086 B share MIXED SAFE RETURN OF THE GREAT WALL SECURITIES 4,176,210 A share INVESTMENT FUND CHINA UNIVERSAL GROWTH FOCUS SECURITIES-ORIENTED 3,814,835 A share CAPITAL FUND HTHK-MANULIFE CHINA VALUE FUND 3,556,383 B share 3. MAJOR ISSUES 3.1 The great change and reasons on main accountant data and financial Index (√ ) applicable At end of report period, the Company’s notes receivable increased by 192.99% mainly due to the growth of exchange drafts receivable from the bank from Jan. till Sept. 2011. The 3 interests receivable increased by 131.66% because of the rise of time deposit interest. Other accounts receivable increased by 493.41% mainly due to growth of payment for land margin and imprest for raw materials. The salary payable dropped by 45.09% because of payment of staff wages and bonus. Other payables increased by 82.93% thanks to the rise of deposits received from customer and payable advertising expenses. From Jan. to Sept. 2011, the financial expenses dropped by 64.72% due to the increase of time deposit interest. 3.2 Analysis and explanation on the situation, impact and solution of other major issues 3.2.1 non-standard comment ( √ ) not applicable 3.2.2 The information about the Company to offer capital to its controlling shareholder or any related party, or provide any guarantee outside in violation of regulations ( √ ) not applicable 3.2.3 The signing and fulfillment of major contracts for daily operations ( √ ) not applicable 3.2.4 Others ( √ ) not applicable 3.3 The execution of promised issues by the company, shareholders and actual controller The promise from the listing company, and its directors, supervisors, senior managers, the shareholders holding shares more than 5%, actual controller and other related party during or extended to the report period. ( √ )applicable Promised issue Promisee Promised content Execution Promise for capital Changyu (1) The shares of the Company held by Group Company will not It has already reform Group be listed and transferred within 36 months from the date for been fulfilled. obtaining the listing right or March 21st, 2006. (2) Within 12 months at the expiration of the guaranteed period mentioned above, the proportion for shares sold out as non-listed shares initially through stock exchange in total shares of Group Company is less than 5%, and 10% for that within 24 months at the expiration of the guaranteed period. (3) Group Company also promised to submit the proposal in its shareholders’ meeting 2005, 2006 and 2007 which suggest the cash dividends proportion as more than 65% of distributable profits made in same year, and guarantee to approve of the proposal during the meeting. Promise in No No No acquisition report or equity change report 4 Promise for No No No significant assets reform Promise on shares Changyu no competition within the industry It is always in issuing Group strict performance. Other promises Changyu The Company has well noted the Securities Law, Administration It is fulfilling including additional Group Methods of Takingover Listed Companies, Guidance on now. promises Releasing the Limited Shares Transfer of the Listed Companies and the relative business rules of Shenzhen Stock Exchange, and will strictly obey the relevant provisions of above documents, faithfully carry out the commitments and bear the corresponding legal responsibility, when in the future reducing the holding of the shares with releasing restrictions on sale price in this time. 3.4 Warning and explanation for the estimation on the possible loss of total net profit in the period from the beginning of this year to the end of the next report period or the great change comparing with same period of last year. ( √ ) not applicable 3.5 Other major issues 3.5.1 Securities investment ( √ ) applicable Unit: CNY item type Code Ab. Initial Share Book value at Proportion on Profit and investment quantity end of report total securities loss during (CNY) (share) period investment (%) report period 1 - - - 0.00 0 0.00 0.00% 0.00 Other securities investment 0.00 - 0.00 0.00% 0.00 by end of report period Profit and loss on securities - - - - 52,122.00 sold during report period Total 0.00 - 0.00 100% 52,122.00 Information on securities investment During report period, the Company gained the yield of CNY52,122 from selling the allotted IPO shares. 3.5.2 The Company’s Receptions, Studies and Visits during report period Reception date Reception place Reception way Visitor Main topic and material provided July 5, 2011 Meeting room of Field survey Orient Fund Principal operation, the Company future development July 7, 2011 Meeting room of Field survey Yinhua Fund Principal operation, the Company future development July 14, 2011 Meeting room of Field survey Changjiang Principal operation, the Company Securities future development 5 July 14, 2011 Meeting room of Field survey Huarong Securities Principal operation, the Company future development July 14, 2011 Meeting room of Field survey Congrong Fund Principal operation, the Company future development July 14, 2011 Meeting room of Field survey Shanghai Trust Principal operation, the Company future development July 14, 2011 Meeting room of Field survey Lombarda China Principal operation, the Company Fund future development July 14, 2011 Meeting room of Field survey SWS MU Fund Principal operation, the Company future development July 14, 2011 Meeting room of Field survey National Trust Principal operation, the Company future development Aug.5, 2011 Meeting room of Field survey Flying Tiger Fund Principal operation, the Company future development Aug.12, 2011 Meeting room of Field survey First Trust Fund Principal operation, the Company future development Aug.29,2011 Meeting room of Field survey Ever Bright Securities Principal operation, the Company future development Aug.29,2011 Meeting room of Field survey Guotai Junan Principal operation, the Company Securities future development Sep.1,2011 Meeting room of Field survey Xinhua Assets Principal operation, the Company future development Sep.1,2011 Meeting room of Field survey China AMC Principal operation, the Company future development Sep.2,2011 Meeting room of Field survey Founder Fubon Fund Principal operation, the Company future development Sep.5,2011 Meeting room of Field survey First State Principal operation, the Company Investments future development Sep.7,2011 Meeting room of Field survey Platinum Principal operation, the Company future development Sep.7,2011 Meeting room of Field survey CICC HK Securities Principal operation, the Company future development Sep.8,2011 Meeting room of Field survey NOMURA Principal operation, the Company future development Sep.8,2011 Meeting room of Field survey Sumitomo Mitsui Principal operation, the Company future development Sep.16,2011 Meeting room of Field survey ICBCCS Principal operation, the Company future development Sep.21,2011 Meeting room of Field survey FTS Fund Principal operation, the Company future development Sep.27, 2011 Meeting room of Field survey Broad Peak Principal operation, the Company future development 3.6 Investment on financial derivatives ( √ ) not applicable 3.6.1 Investment on financial derivatives at end of report period 6 ( √ ) not applicable 4. Audit Report Not audited 4.1 Balance Sheet Yantai Changyu Pioneer Wine Co., Ltd. 2011.09.30 Unit: CNY Amount at the end of the report Amount at the beginning of the period year Item Parent Parent Consolidated Consolidated company company amount amount amount amount Current assets: Monetary fund 2,513,214,548 1,651,364,074 2,489,804,162 1,898,488,544 Settlement provisions Placements Financial assets for trade 21,200,000 21,200,000 Notes receivable 92,136,551 22,764,727 31,447,207 12,871,415 Account receivable 120,363,981 12,600,988 100,113,271 11,708,820 Advance money 69,273,210 58,338,771 74,728,756 40,352,558 Premiums receivable Reinsurance receivables Reinsurance contract reserve Interest receivable 22,053,202 22,048,678 9,519,721 9,519,721 Dividend receivable 1,765,637,074 1,765,637,075 Other account receivable 182,098,128 1,774,883,117 30,686,838 1,155,602,622 Financial assets purchased under resale Inventories 1,186,647,843 480,142,627 1,294,406,406 481,049,315 Non-current assets due within one year Other current assets Total current assets 4,206,987,463 5,808,980,057 4,030,706,362 5,375,230,070 Non-current assets: Loans and advances Financial assets for sale Investment held to expiration Long-term account receivable Long-term equity investment 5,000,000 938,617,897 5,000,000 331,907,113 Real estate for investment Fixed assets 1,283,635,150 317,925,554 1,188,081,245 325,016,812 Construction in progress 529,002,301 89,062,493 242,107,575 13,603,659 Project material Liquidation of fixed assets Biological assets for production 38,540,735 9,390,479 37,773,638 10,270,836 7 Oil and gas assets Intangible assets 272,870,301 90,452,025 208,847,847 87,521,064 Development expenditure Goodwill Long-term deferred expenses 106,144,441 106,233,673 Assets of deferred income tax 145,219,564 22,417,777 160,275,366 27,019,769 Other non-current assets 3,889,215 4,158,009 4,351,547 4,538,447 Total non-current assets 2,384,301,707 1,472,024,234 1,952,670,891 799,877,700 Total assets 6,591,289,170 7,281,004,292 5,983,377,253 6,175,107,770 8 Current liabilities: Short-term loan The central bank borrowings Deposits and interbank deposit Borrowing money Financial liabilities for trade Notes payable Accounts payable 231,760,661.00 128,312,099.00 259,022,075.00 165,884,293.00 Advance money 230,232,582.00 309,481,976.00 Financial assets sold under repurchase agreements Handling charges and commission Wage payable 102,626,933.00 95,644,275.00 186,915,812.00 114,351,323.00 Tax payable 535,295,616.00 119,393,610.00 649,365,259.00 122,920,579.00 Interest payable Dividend payable Other accounts payable 872,405,442.00 2,568,538,804.00 476,897,721.00 1,768,065,889.00 Due to reinsurers Insurance contract Acting trading securities Securities underwriting agent Non-current liabilities due within one year Other current liabilities Total current liabilities 1,972,321,234.00 2,911,888,788.00 1,881,682,843.00 2,171,222,084.00 Non-current liabilities: Long-term loan Bond payable Long-term accounts payable Special accounts payable Estimated liabilities Liabilities of deferred income tax 5,286,917.00 5,336,115.00 Other non-current liabilities 120,110,000.00 8,027,001.00 100,213,000.00 8,027,000.00 Total non-current liabilities 125,396,917.00 8,027,001.00 105,549,115.00 8,027,000.00 Total liabilities 2,097,718,151.00 2,919,915,789.00 1,987,231,958.00 2,179,249,084.00 Shareholder rights and interests: Capital stock 527,280,000.00 527,280,000.00 527,280,000.00 527,280,000.00 Capital reserve 560,378,451.00 557,222,454.00 557,222,454.00 557,222,454.00 Less: treasury stock Special Reserve Surplus reserve 295,942,630.00 295,942,630.00 295,942,630.00 295,942,630.00 General risk reserve Undistributed profit 2,970,329,711.00 2,980,643,419.00 2,459,263,257.00 2,615,413,602.00 9 Currency translation differences Total shareholder rights and interests of 4,353,930,792.00 4,361,088,503.00 3,839,708,341.00 3,995,858,686.00 parent company Minority shareholder rights and interests 139,640,227.00 156,436,954.00 Total shareholder rights and interests 4,493,571,019.00 4,361,088,503.00 3,996,145,295.00 3,995,858,686.00 Liabilities and total shareholders rights and 6,591,289,170.00 7,281,004,292.00 5,983,377,253.00 6,175,107,770.00 interests 4.2 Profit Statement for Report Period Yantai Changyu Pioneer Wine Co., Ltd. July-September 2011 Unit: CNY Amount of the report period Amount of the last period Item Consolidated Parent company Consolidated Parent company amount amount amount amount 1. Total operating income 1,323,654,951.00 482,852,156.00 1,088,726,941.00 324,178,221.00 Business income 1,323,654,951.00 482,852,156.00 1,088,726,941.00 324,178,221.00 Interest income Earned premiums Fee and commission income 2. Total operating costs 804,504,127.00 427,755,783.00 669,062,708.00 311,177,549.00 Operating costs 338,905,314.00 359,214,065.00 315,882,520.00 261,728,743.00 Interest expense Fee and commission expense Surrender payment Net claims paid Net provisions for insurance contract Policyholder dividends Reinsurance costs Business tax and associate charges 92,179,444.00 50,117,124.00 73,281,353.00 37,194,718.00 Sales expenses 355,503,448.00 259,583,989.00 Management expenses 27,672,927.00 26,681,117.00 33,933,757.00 28,320,816.00 Financial expenses -9,757,005.00 -8,256,523.00 -13,618,912.00 -16,066,727.00 Assets depreciation loss Add: fair value charge profit (loss is listed with "-") Investment profit (loss is listed with "-") 0.00 294,848,566.00 94,440.00 94,440.00 Including: investment profit for joint-run business and joint venture Exchange gains (loss is listed with "-") 3. Operating profit (loss is listed with "-") 519,150,824.00 349,944,939.00 419,758,673.00 13,095,112.00 Add: Non-operating income 6,374,452.00 143,213.00 3,329,938.00 57,468.00 10 Less: non-operating expenditures 510,121.00 132,019.00 51,756.00 5,186.00 Including: non-current assets disposing loss 4. Total profit ( total loss is listed with "-") 525,015,155.00 349,956,133.00 423,036,855.00 13,147,394.00 Less: income tax expenses 135,767,854.00 14,733,986.00 109,885,157.00 777,948.00 5. Net profit (net loss is listed with "-") 389,247,301.00 335,222,147.00 313,151,698.00 12,369,446.00 Net profit of parent company's owners 386,784,180.00 335,222,147.00 298,823,242.00 12,369,446.00 Minority shareholder profit and loss 2,463,121.00 14,328,456.00 6. EPS Basic EPS 0.73 0.64 0.57 0.02 Diluted EPS 0.73 0.64 0.57 0.02 7. Other comprehensive income 8. Total comprehensive income 389,247,301.00 335,222,147.00 313,151,698.00 12,369,446.00 Total comprehensive income attributed to 386,784,180.00 335,222,147.00 298,823,242.00 12,369,446.00 the equity holders of parent company Total comprehensive income attributed to 2,463,121.00 14,328,456.00 the minority shareholders 11 4.3 Profit Statement from the beginning of the year to the end of the report Period Yantai Changyu Pioneer Wine Co., Ltd. January-September 2011 Unit: CNY Amount of the report period Amount of the last period Parent Parent Item Consolidated Consolidated company company amount amount amount amount 1. Total operating income 4,413,676,519.00 1,363,972,382.00 3,570,612,075.00 1,070,586,358.00 Business income 4,413,676,519.00 1,363,972,382.00 3,570,612,075.00 1,070,586,358.00 Interest income Earned premiums Fee and commission income 2. Total operating costs 2,735,136,722.00 1,251,158,883.00 2,376,585,939.00 1,015,250,570.00 Operating costs 1,088,142,943.00 1,040,634,234.00 1,013,786,924.00 815,856,293.00 Interest expense Fee and commission expense Surrender payment Net claims paid Net provisions for insurance contract Policyholder dividends Reinsurance costs Business tax and associate charges 267,882,176.00 149,277,921.00 217,235,900.00 121,483,072.00 Sales expenses 1,225,397,814.00 1,020,496,402.00 Management expenses 185,158,094.00 93,250,378.00 144,155,917.00 103,650,022.00 Financial expenses -31,444,305.00 -32,003,650.00 -19,089,205.00 -25,738,816.00 Assets depreciation loss Add: fair value charge profit (loss is listed with "-") Investment profit (loss is listed with "-") 52,122.00 1,018,223,250.00 523,547.00 523,547.00 Including: investment profit for joint-run business and joint venture Exchange gains (loss is listed with "-") 3. Operating profit (loss is listed with "-") 1,678,591,919.00 1,131,036,749.00 1,194,549,683.00 55,859,335.00 Add: Non-operating income 10,436,628.00 1,717,494.00 8,353,880.00 266,922.00 Less: non-operating expenditures 1,498,452.00 377,941.00 623,946.00 10,418.00 Including: non-current assets disposing loss 4. Total profit ( total loss is listed with "-") 1,687,530,095.00 1,132,376,302.00 1,202,279,617.00 56,115,839.00 Less: income tax expenses 422,088,477.00 28,954,484.00 296,280,524.00 22,704,525.00 5. Net profit (net loss is listed with "-") 1,265,441,618.00 1,103,421,818.00 905,999,093.00 33,411,314.00 Net profit of parent company's owners 1,263,739,296.00 1,103,421,818.00 891,401,733.00 33,411,314.00 Minority shareholder profit and loss 1,702,322.00 14,597,360.00 6. EPS 12 Basic EPS 2.40 2.09 1.69 0.06 Diluted EPS 2.40 2.09 1.69 0.06 7. Other comprehensive income 3,155,997.00 8. Total comprehensive income 1,268,597,615.00 1,103,421,818.00 905,999,093.00 33,411,314.00 Total comprehensive income attributed to 1,266,895,293.00 1,103,421,818.00 891,401,733.00 33,411,314.00 the equity holders of parent company Total comprehensive income attributed to 1,702,322.00 14,597,360.00 the minority shareholders 13 4.4 Cash Flow Statement from the beginning of the year to the end of the report Period Yantai Changyu Pioneer Wine Co., Ltd. January-September 2011 Unit: CNY Amount of the report period Amount of the last period Parent Parent Item Consolidated Consolidated company company amount amount amount amount 1. Cash flows from operating activities: Cash received from sales of goods and 4,920,595,256.00 1,537,935,335.00 4,091,023,274.00 1,251,535,157.00 rending of services Net increase of customer deposits and interbank deposit Net increase in borrowings from the central bank Net increase of capital borrowed from other financial institutions Cash received from the original insurance contract Net cash received from reinsurance business Net increase in insured deposits and investments Net increase in disposal of financial assets Interest charges, fees and commissions Net increase in capital borrowed Net increase in repurchase operations funds Tax refund received 41,557,598.00 21,324,431.00 33,952,254.00 17,233,683.00 Other cash received related to operating 133,851,070.00 115,430,573.00 161,601,597.00 543,116,584.00 activities Subtotal of cash flows of operating 5,096,003,924.00 1,674,690,339.00 4,286,577,125.00 1,811,885,424.00 activities Cash paid for goods and services 1,314,943,260.00 1,092,998,349.00 1,286,066,891.00 920,237,925.00 Net increase in loans and advances Net increase on central bank and interbank Cash payments on the original insurance contract Cash on payment of interest, fee and commissions Cash dividends paid to policyholders Cash paid to and on behalf of employees 273,280,810.00 153,344,175.00 253,054,341.00 148,846,328.00 Cash paid for taxes and expenses 1,490,785,472.00 327,912,380.00 1,038,949,523.00 243,163,188.00 Other cash paid related to operating 829,089,136.00 229,601,960.00 830,256,153.00 19,802,466.00 14 activities Sub-total of cash outflows of operating 3,908,098,678.00 1,803,856,864.00 3,408,326,908.00 1,332,049,907.00 activities Net cash flow from operating activities 1,187,905,246.00 -129,166,525.00 878,250,217.00 479,835,517.00 2. Cash flow from investing activities: Cash received from return of investment Fixed deposit with the term of over 3 213,562,493.00 213,562,493.00 months Cash received from obtaining investment 52,122.00 988,297,873.00 523,547.00 447,952,821.00 profit Cash received from interest income 29,925,376.00 29,925,376.00 8,995,699.00 8,995,699.00 Net cash received from disposal of fixed assets, intangible assets and other 519,564.00 519,204.00 long-term assets Net cash received from disposal of branch and other business unit Other cash received related to investing activities Subtotal of cash flows of investment 244,059,555.00 1,232,304,946.00 9,519,246.00 456,948,520.00 activities Cash paid to acquire fixed assets, intangible 471,230,763.00 172,055,526.00 315,401,701.00 22,986,608.00 assets and other long-term assets Fixed deposit with the term of over 3 5,829,054.00 10,829,054.00 months Cash for investment 200,258,004.00 106,000,000.00 Net increase in secured loans Net cash paid to acquire branch and other business unit Other cash paid related to investment activities Subtotal of cash outflows of investment 471,230,763.00 372,313,530.00 321,230,755.00 139,815,662.00 activities Net cash flow from investing activities -227,171,208.00 859,991,416.00 -311,711,509.00 317,132,858.00 3. Cash flow from financing activities Cash received from acquiring investment 14,288,361.00 Including: cash received from acquiring minority shareholders investment by branch Cash received from acquiring loans 80,162,653.00 Cash received from issuance of bonds Other cash received related to financing activities Subtotal cash flows of financing activities 14,288,361.00 80,162,653.00 Cash paid to pay debts 106,500,000.00 224,500,000.00 220,000,000.00 15 Cash paid to distribute dividend, profit or 738,192,000.00 738,192,000.00 641,034,421.00 634,514,850.00 pay interest Including: dividend and profit paid to minority shareholders by branch Other cash paid related to financing activities Subtotal of cash outflows of financing 738,192,000.00 844,692,000.00 865,534,421.00 854,514,850.00 activities Net cash flow from financing activities -723,903,639.00 -764,529,347.00 -865,534,421.00 -854,514,850.00 4. Influences of exchange rate fluctuation on cash and cash equivalents 5. Net Increase in cash and cash 236,830,399.00 -33,704,456.00 -298,995,713.00 -57,546,475.00 equivalents Add: balance at the beginning of the 998,934,825.00 407,619,206.00 1,998,681,278.00 1,159,666,918.00 period of cash and cash equivalents 6. Balance at the end of the period of cash 1,235,765,224.00 373,914,750.00 1,699,685,565.00 1,102,120,443.00 and cash equivalents Yantai Changyu Wine Poineer Co., Ltd. Board of Director October 27th , 2011 16